Washington Real Estate Investment Trust
 
 
First Quarter 2015
 
 
 
 
Supplemental Operating and Financial Data
 
 
Contact:
 
1775 Eye Street, NW
 
 
Tejal R. Engman
 
 Suite 1000
 
 
Director of Investor Relations
 
Washington, DC 20006
 
 
E-mail: tengman@washreit.com
 
(202) 774-3200
 
 
 
 
(301) 984-9610 fax
 
 
 
 
 
 
 
 



Company Background and Highlights
First Quarter 2015


Washington Real Estate Investment Trust ("Washington REIT") is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington, DC region. Washington REIT has a diversified portfolio with investments in office, retail, and multifamily properties and land for development.

First Quarter 2015 Highlights

•
Generated Core Funds from Operations (FFO) of $0.38 per fully diluted share for the quarter, a 5.6% or $0.02 increase over first quarter 2014
•
Achieved same-store Net Operating Income (NOI) growth of 3.1% and cash NOI growth of 7.2% over first quarter 2014
•
Improved overall same-store physical occupancy to 92.9%, 270 basis points higher than the first quarter of 2014
•
Executed new and renewal commercial leases totaling 318,000 square feet at an average GAAP rental rate increase of 15.3% over in-place rents for new leases and an average GAAP rental rate increase of 7.2% over in-place rents for renewal leases
•
Sold Country Club Towers, a Class B apartment building located in Arlington, Virginia, for $37.8 million
•
Reaffirmed 2015 Core FFO guidance of $1.66 to $1.74 per fully diluted share

Washington REIT signed commercial leases totaling 318,000 square feet, including 72,000 square feet of new leases and 246,000 square feet of renewal leases. New leases had an average rental rate increase of 15.3% over expiring lease rates and an average lease term of 8.0 years. Commercial tenant improvement costs were $50.12 per square foot and leasing commissions and incentives were $39.54 per square foot for new leases. Renewal leases had an average rental rate increase of 7.2% over expiring lease rates and an average lease term of 5.1 years. Commercial tenant improvement costs were $2.85 per square foot and leasing commissions and incentives were $4.76 per square foot for renewal leases.

On March 20th, 2015, Washington REIT sold Country Club Towers, a 159,000 square foot Class B high-rise of 227 apartments located in Arlington, Virginia for $37.8 million or $166,520 per unit. Washington REIT acquired the property in 1969 for $2.9 million. The sale was structured as a reverse-1031 exchange transaction in connection with the Spring Valley Retail Center acquisition.

As of March 31, 2015, Washington REIT owned a diversified portfolio of 55 properties totaling approximately 7 million square feet of commercial space and 2,826 residential units, and land held for development. These 55 properties consist of 25 office properties, 17 retail centers and 13 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE: WRE).









Company Background and Highlights
First Quarter 2015

Net Operating Income Contribution by Sector - First Quarter 2015

Certain statements in our earnings release and on our conference call are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, the potential for federal government budget reductions, changes in general and local economic and real estate market conditions, the timing and pricing of lease transactions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2014 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.




Supplemental Financial and Operating Data

Table of Contents
March 31, 2015
 
 
 
Schedule
Page
Key Financial Data
 
 
 
 
 
 
 
Capital Analysis
 
 
 
 
 
Portfolio Analysis
 
 
 
 
 
 
Growth and Strategy
 
 
 
Tenant Analysis
 
 
 
 
 
 
Appendix
 
 
 




Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
OPERATING RESULTS
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Real estate rental revenue
$
74,856

 
$
74,359

 
$
73,413

 
$
72,254

 
$
68,611

Real estate expenses
(29,208
)
 
(25,911
)
 
(25,914
)
 
(25,528
)
 
(26,342
)
 
45,648

 
48,448

 
47,499

 
46,726

 
42,269

Real estate depreciation and amortization
(25,275
)
 
(24,503
)
 
(24,354
)
 
(24,401
)
 
(22,753
)
Income from real estate
20,373

 
23,945

 
23,145

 
22,325

 
19,516

Interest expense
(15,348
)
 
(15,183
)
 
(15,087
)
 
(14,985
)
 
(14,530
)
Other income
192

 
191

 
192

 
219

 
223

Acquisition costs
(16
)
 
(663
)
 
(69
)
 
(1,933
)
 
(3,045
)
Gain on sale of real estate
30,277

 
—

 
—

 
570

 
—

General and administrative
(6,080
)
 
(5,981
)
 
(4,523
)
 
(4,828
)
 
(4,429
)
Income (loss) from continuing operations
29,398

 
2,309

 
3,658

 
1,368

 
(2,265
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale
—

 
—

 
—

 
—

 
546

(Loss) gain on sale of real estate
—

 
—

 
—

 
(288
)
 
106,273

(Loss) income from discontinued operations
—

 
—

 
—

 
(288
)
 
106,819

 
 
 
 
 
 
 
 
 
 
Net income
29,398

 
2,309

 
3,658

 
1,080

 
104,554

Less: Net loss from noncontrolling interests
108

 
21

 
10

 
7

 
—

Net income attributable to the controlling interests
$
29,506

 
$
2,330

 
$
3,668

 
$
1,087

 
$
104,554

Per Share Data:
 
 
 
 
 
 
 
 
 
Net income
$
0.43

 
$
0.03

 
$
0.05

 
$
0.02

 
$
1.56

Fully diluted weighted average shares outstanding
68,191

 
67,065

 
66,790

 
66,761

 
66,701

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
Real estate expenses
39.0
%
 
34.8
%
 
35.3
%
 
35.3
%
 
38.4
 %
General and administrative
8.1
%
 
8.0
%
 
6.2
%
 
6.7
%
 
6.5
 %
Ratios:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
2.6
x
 
2.8
x
 
2.9
x
 
2.7
x
 
2.5
x
Income from continuing operations/Total real estate revenue
39.3
%
 
3.1
%
 
5.0
%
 
1.9
%
 
(3.3
)%
Net income /Total real estate revenue
39.4
%
 
3.1
%
 
5.0
%
 
1.5
%
 
152.4
 %

4



Medical Office Portfolio
(In thousands)
(Unaudited)

 
 
Three Months Ended
Income from Medical Office Portfolio (1):
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Real estate rental revenue
$
—

 
$
—

 
$
—

 
$
—

 
$
892

Real estate expenses
—

 
—

 
—

 
—

 
(346
)
 
—

 
—

 
—

 
—

 
546

Real estate depreciation and amortization
—

 
—

 
—

 
—

 
—

Interest expense
—

 
—

 
—

 
—

 
—

Income from operations of Medical Office Portfolio (1)
—

 
—

 
—

 
—

 
546

(Loss) gain on sale of real estate
—

 
—

 
—

 
(288
)
 
106,273

Income from discontinued operations
$
—

 
$
—

 
$
—

 
$
(288
)
 
$
106,819

(1) Medical Office Portfolio (Transactions III and IV):
Medical Office - Woodburn Medical Park I and II, and Prosperity Medical Center I, II and III
 
Washington REIT entered into four separate contracts with a single buyer to sell all of the held for sale properties (collectively, the "Medical Office Portfolio") for a combined sales price of $500.8 million. The first two separate sale transactions of its medical office portfolio closed on November 21 and November 22, 2013 for an aggregate sales price of $307.2 million. The second two sales transactions closed on January 21, 2014 for an aggregate sales price of $193.6 million.

5



Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Assets
 
 
 
 
 
 
 
 
 
Land
$
543,247

 
$
543,546

 
$
519,859

 
$
519,859

 
$
472,056

Income producing property
1,932,908

 
1,927,407

 
1,867,752

 
1,853,982

 
1,784,850

 
2,476,155

 
2,470,953

 
2,387,611

 
2,373,841

 
2,256,906

Accumulated depreciation and amortization
(649,279
)
 
(640,434
)
 
(620,279
)
 
(600,171
)
 
(581,644
)
Net income producing property
1,826,876

 
1,830,519

 
1,767,332

 
1,773,670

 
1,675,262

Development in progress, including land held for development
65,656

 
76,235

 
99,500

 
83,970

 
68,963

Total real estate held for investment, net
1,892,532

 
1,906,754

 
1,866,832

 
1,857,640

 
1,744,225

Cash and cash equivalents
40,025

 
15,827

 
8,571

 
23,009

 
62,080

Restricted cash
13,095

 
10,299

 
9,496

 
11,369

 
107,039

Rents and other receivables, net of allowance for doubtful accounts
60,215

 
59,745

 
58,135

 
55,583

 
52,736

Prepaid expenses and other assets
117,367

 
121,082

 
116,345

 
112,548

 
109,092

Total assets
$
2,123,234

 
$
2,113,707

 
$
2,059,379

 
$
2,060,149

 
$
2,075,172

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
747,335

 
$
747,208

 
$
747,082

 
$
746,956

 
$
746,830

Mortgage notes payable
419,250

 
418,525

 
413,330

 
406,975

 
404,359

Lines of credit
30,000

 
50,000

 
5,000

 
—

 
—

Accounts payable and other liabilities
65,447

 
54,318

 
64,153

 
59,719

 
56,804

Advance rents
14,471

 
12,528

 
12,211

 
13,172

 
14,688

Tenant security deposits
8,892

 
8,899

 
8,625

 
8,686

 
8,402

Total liabilities
1,285,395

 
1,291,478

 
1,250,401

 
1,235,508

 
1,231,083

Equity
 
 
 
 
 
 
 
 
 
Preferred shares; $0.01 par value; 10,000 shares authorized
—

 
—

 
—

 
—

 
—

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
681

 
678

 
667

 
666

 
666

Additional paid-in capital
1,191,123

 
1,184,395

 
1,153,344

 
1,152,647

 
1,151,353

Distributions in excess of net income
(356,531
)
 
(365,518
)
 
(347,724
)
 
(331,373
)
 
(312,417
)
Total shareholders' equity
835,273

 
819,555

 
806,287

 
821,940

 
839,602

Noncontrolling interests in subsidiaries
2,566

 
2,674

 
2,691

 
2,701

 
4,487

Total equity
837,839

 
822,229

 
808,978

 
824,641

 
844,089

Total liabilities and equity
$
2,123,234

 
$
2,113,707

 
$
2,059,379

 
$
2,060,149

 
$
2,075,172

Total Debt / Total Market Capitalization
0.39
:1
 
0.39
:1
 
0.41
:1
 
0.40
:1
 
0.42
:1

6



Funds from Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Funds from operations(1)
 
 
 
 
 
 
 
 
 
Net income
$
29,398

 
$
2,309

 
$
3,658

 
$
1,080

 
$
104,554

Real estate depreciation and amortization
25,275

 
24,503

 
24,354

 
24,401

 
22,753

Gain on sale of real estate (classified as continuing operations)
(30,277
)
 
—

 
—

 
(570
)
 
—

Discontinued operations:
 
 
 
 
 
 
 
 
 
Loss (gain) on sale of real estate
—

 
—

 
—

 
288

 
(106,273
)
Funds from operations (FFO)
24,396

 
26,812

 
28,012

 
25,199

 
21,034

Severance expense
1,001

 
582

 
394

 
576

 
48

Relocation expense
64

 
764

 
—

 
—

 
—

Acquisition and structuring expenses
234

 
663

 
69

 
1,933

 
3,045

Core FFO (1)
$
25,695

 
$
28,821

 
$
28,475

 
$
27,708

 
$
24,127

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(108
)
 
(53
)
 
(44
)
 
(17
)
 
(295
)
 
 
 
 
 
 
 
 
 
 
FFO per share - basic
$
0.36

 
$
0.40

 
$
0.42

 
$
0.38

 
$
0.31

FFO per share - fully diluted
$
0.36

 
$
0.40

 
$
0.42

 
$
0.38

 
$
0.31

Core FFO per share - fully diluted
$
0.38

 
$
0.43

 
$
0.43

 
$
0.41

 
$
0.36

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
68,141

 
67,002

 
66,738

 
66,732

 
66,701

Average shares - fully diluted (for FFO and FAD)
68,191

 
67,065

 
66,790

 
66,761

 
66,750

(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FFO and Core FFO.
(2)  Adjustment to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.


7



Funds Available for Distribution
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Funds available for distribution(1)
 
 
 
 
 
 
 
 
 
FFO
$
24,396

 
$
26,812

 
$
28,012

 
$
25,199

 
$
21,034

Tenant improvements and incentives
(3,730
)
 
(7,103
)
 
(7,649
)
 
(9,612
)
 
(5,300
)
Leasing commissions
(1,606
)
 
(7,800
)
 
(1,323
)
 
(1,721
)
 
(1,239
)
Recurring capital improvements
(689
)
 
(1,811
)
 
(1,720
)
 
(1,610
)
 
(888
)
Straight-line rent, net
407

 
(1,087
)
 
(658
)
 
(723
)
 
(353
)
Non-cash fair value interest expense
35

 
33

 
32

 
30

 
195

Non-real estate depreciation and amortization
938

 
1,578

 
994

 
904

 
872

Amortization of lease intangibles, net
768

 
729

 
704

 
677

 
239

Amortization and expensing of restricted share and unit compensation
1,826

 
1,134

 
1,307

 
1,429

 
1,041

Funds available for distribution (FAD)
22,345

 
12,485

 
19,699

 
14,573

 
15,601

Non-share-based severance expense
196

 
546

 
313

 
517

 
48

Relocation expense
81

 
85

 
—

 
—

 
—

Acquisition and structuring expenses
234

 
663

 
69

 
1,933

 
3,045

Core FAD (1)
$
22,856

 
$
13,779

 
$
20,081

 
$
17,023

 
$
18,694

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(108
)
 
(53
)
 
(44
)
 
(17
)
 
(295
)
 
 
 
 
 
 
 
 
 
 
FAD per share - basic
$
0.33

 
$
0.19

 
$
0.29

 
$
0.22

 
$
0.23

FAD per share - fully diluted
$
0.33

 
$
0.19

 
$
0.29

 
$
0.22

 
$
0.23

Core FAD per share - fully diluted
$
0.33

 
$
0.20

 
$
0.30

 
$
0.25

 
$
0.28

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
68,141

 
67,002

 
66,738

 
66,732

 
66,701

Average shares - fully diluted (for FFO and FAD)
68,191

 
67,065

 
66,790

 
66,761

 
66,750

(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FAD and Core FAD.
(2)  Adjustment to the numerators for FAD and Core FAD per share calculations when applying the two-class method for calculating EPS.


8



Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(In thousands)
(Unaudited)
 

 
Three Months Ended
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
29,506

 
$
2,330

 
$
3,668

 
$
1,087

 
$
104,554

Add:
 
 
 
 
 
 
 
 
 
Interest expense, including discontinued operations
15,348

 
15,183

 
15,087

 
14,985

 
14,530

Real estate depreciation and amortization, including discontinued operations
25,275

 
24,503

 
24,354

 
24,401

 
22,753

Income tax expense
—

 
—

 
46

 
71

 
—

Non-real estate depreciation
103

 
793

 
113

 
180

 
193

Less:
 
 
 
 
 
 
 
 
 
    Net gain on sale of real estate
(30,277
)
 
—

 
—

 
(282
)
 
(106,273
)
Adjusted EBITDA
$
39,955

 
$
42,809

 
$
43,268

 
$
40,442

 
$
35,757

 
 
 
 
 
 
 
 
 
 
(1) Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain on sale of real estate, real estate impairment, gain/loss on extinguishment of debt and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, and the cost of debt or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure.



9



Long Term Debt Analysis
($'s in thousands)
 

 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
$
419,250

 
$
418,525

 
$
413,330

 
$
406,975

 
$
404,359

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds and notes
747,335

 
747,208

 
747,082

 
746,956

 
746,830

Credit facility
30,000

 
50,000

 
5,000

 
—

 
—

Unsecured total
777,335

 
797,208

 
752,082

 
746,956

 
746,830

Total
$
1,196,585

 
$
1,215,733

 
$
1,165,412

 
$
1,153,931

 
$
1,151,189

 
 
 
 
 
 
 
 
 
 
Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
5.2
%
 
5.2
%
 
5.3
%
 
5.3
%
 
5.4
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
 
4.9
%
Credit facilities
1.4
%
 
1.4
%
 
1.4
%
 
—
%
 
—
%
Unsecured total
4.7
%
 
4.7
%
 
4.8
%
 
4.9
%
 
4.9
%
Average
4.9
%
 
4.9
%
 
5.0
%
 
5.0
%
 
5.0
%

Note: The current balances outstanding of the secured and unsecured fixed rate bonds and notes are shown net of discounts/premiums of $4.1 million and $2.7 million, respectively.


    

10


Long Term Debt Maturities
(in thousands, except average interest rates)
 
, except per share data)
 
Future Maturities of Debt
Year
Secured Debt
 
Unsecured Debt
 
Credit Facilities
 
Total Debt
 
Avg Interest Rate
2015
$
—

 
$
150,000

 
$
—

 
$
150,000

 
5.4%
2016
161,300

 
—

 
30,000

 
191,300

 
4.5%
2017
150,903

 
—

 
—

 
150,903

 
5.9%
2018
—

 
—

 
—

 
—

 
 
2019
31,280

 
—

 
—

 
31,280

 
5.4%
2020
—

 
250,000

 
—

 
250,000

 
5.1%
2021
—

 
—

 
—

 
—

 
 
2022
44,517

 
300,000

 
—

 
344,517

 
4.0%
2023
—

 
—

 
—

 
—

 
 
2024
—

 
—

 
—

 
—

 
 
2025
—

 
—

 
—

 
—

 
 
Thereafter
—

 
50,000

 
—

 
50,000

 
7.4%
Scheduled principal payments
$
388,000

 
$
750,000

 
$
30,000

 
$
1,168,000

 
4.9%
Scheduled amortization payments
27,190

 
—

 
—

 
27,190

 
4.7%
Net discounts/premiums
4,060

 
(2,665
)
 
—

 
1,395

 
 
Total maturities
$
419,250

 
$
747,335

 
$
30,000

 
$
1,196,585

 
4.9%
Weighted average maturity =4.6 years

11



Debt Covenant Compliance
 

 
Unsecured Notes Payable
 
Unsecured Line of Credit #1
($100.0 million)
 
Unsecured Line of Credit #2
($400.0 million)
 
Quarter Ended March 31, 2015
 
Covenant
 
Quarter Ended March 31, 2015
 
Covenant
 
Quarter Ended March 31, 2015
 
Covenant
% of Total Indebtedness to Total Assets(1)
43.9
%
 
≤ 65.0%
 
 N/A

 
N/A
 
 N/A

 
N/A
Ratio of Income Available for Debt Service to Annual Debt Service
3.0

 
            ≥ 1.5
 
 N/A

 
N/A
 
 N/A

 
N/A
% of Secured Indebtedness to Total Assets(1)
15.2
%
 
≤ 40.0%
 
 N/A

 
N/A
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.8

 
            ≥ 1.5
 
 N/A

 
N/A
 
 N/A

 
N/A
Tangible Net Worth(3)
 N/A

 
N/A
 

$930.3 million

 
≥ $702.6 million
 
$931.5 million

 
≥ $701.1 million
% of Total Liabilities to Gross Asset Value(5)
 N/A

 
N/A
 
55.6
%
 
≤ 60.0%
 
55.6
%
 
≤ 60.0%
% of Secured Indebtedness to Gross Asset Value(5)
 N/A

 
N/A
 
17.9
%
 
≤ 35.0%
 
17.9
%
 
≤ 35.0%
Ratio of EBITDA(4) to Fixed Charges(6)
 N/A

 
N/A
 
2.37

 
             ≥ 1.50
 
2.37

 
             ≥ 1.50
Ratio of Unencumbered Pool Value(7) to Unsecured Indebtedness
 N/A

 
N/A
 
2.25

 
             ≥ 1.67
 
2.25

 
             ≥ 1.67
Ratio of Unencumbered Net Operating Income to Unsecured Interest Expense
 N/A

 
N/A
 
3.37

 
             ≥ 2.00
 
3.37

 
             ≥ 2.00
Ratio of Investments(8) to Gross Asset Value(5)
 N/A

 
N/A
 
3.2
%
 
≤ 15.0%
 
3.2
%
 
≤ 15.0%
 
 
 
 
 
 
 
 
 
 
 
 
(1) Total Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(2) Total Unencumbered Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from unencumbered properties from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(3) Tangible Net Worth is defined as shareholders equity less accumulated depreciation at the commitment start date plus current accumulated depreciation.
(4) EBITDA is defined in our debt covenants as earnings before minority interests, depreciation, amortization, interest expense, income tax expense, and extraordinary and nonrecurring gains and losses.
(5) Gross Asset Value is calculated by applying a capitalization rate to the annualized EBITDA(4) from the most recently ended quarter, excluding EBITDA from disposed properties and current quarter acquisitions. To this amount, the purchase price of current quarter acquisitions, cash and cash equivalents and development in progress is added.
(6) Fixed Charges consist of interest expense, principal payments, ground lease payments and replacement reserve payments.
(7) Unencumbered Pool Value is calculated by applying a capitalization rate of 7.50% to the net operating income from unencumbered properties owned for the entire quarter. To this we add the purchase price of unencumbered acquisitions during the current quarter.
(8) Investments is defined as development in progress, including land held for development, plus budgeted development costs upon commencement of construction, if any.

12


        

Capital Analysis
(In thousands, except per share amounts)
 
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
$
68,126

 
$
67,819

 
$
66,663

 
$
66,636

 
$
66,630

Market Price per Share
27.63

 
27.66

 
25.38

 
25.98

 
23.88

Equity Market Capitalization
$
1,882,321

 
$
1,875,874

 
$
1,691,907

 
$
1,731,203

 
$
1,591,124

 
 
 
 
 
 
 
 
 
 
Total Debt
$
1,196,585

 
$
1,215,733

 
$
1,165,412

 
$
1,153,931

 
$
1,151,189

Total Market Capitalization
$
3,078,906

 
$
3,091,607

 
$
2,857,319

 
$
2,885,134

 
$
2,742,313

 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
0.39
:1
 
0.39
:1
 
0.41
:1
 
0.40
:1
 
0.42
:1
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
2.9x

 
1.1x

 
1.2x

 
1.1x

 
0.8x

Debt Service Coverage Ratio(2)
2.4x

 
2.6x

 
2.7x

 
2.5x

 
2.3x

 
 
 
 
 
 
 
 
 
 
Dividend Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dividends Paid
$
20,519

 
$
20,124

 
$
20,019

 
$
20,042

 
$
20,092

Common Dividend per Share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO per share basis)
78.9
%
 
69.8
%
 
69.8
%
 
73.2
%
 
83.3
%
Payout Ratio (Core FAD per share basis)
90.9
%
 
150.0
%
 
100.0
%
 
120.0
%
 
107.1
%
Payout Ratio (FAD per share basis)
90.9
%
 
157.9
%
 
103.4
%
 
136.4
%
 
130.4
%
 
 
 
 
 
 
 
 
 
 
(1) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations attributable to the controlling interests plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized.
(2) Debt service coverage ratio is computed by dividing Adjusted EBITDA (see page 9) by interest expense and principal amortization.


13



Same-Store Portfolio Net Operating Income (NOI) Growth & Rental Growth
2015 vs. 2014
 

 
Three Months Ended March 31,
 
 
 
Rental Rate
 
2015
 
2014
 
% Change
 
Growth
Cash NOI:
 
 
 
 
 
 
 
Multifamily
$
7,658

 
$
7,546

 
1.5
%
 
(2.4
)%
Office
23,672

 
21,663

 
9.3
%
 
2.2
 %
Retail
10,983

 
10,258

 
7.1
%
 
2.2
 %
Overall Same-Store Portfolio (1)
$
42,313

 
$
39,467

 
7.2
%
 
1.2
 %
 
 
 
 
 
 
 
 
NOI:
 
 
 
 
 
 
 
Multifamily
$
7,657

 
$
7,656

 
—
%
 
(2.4
)%
Office
22,536

 
21,837

 
3.2
%
 
(0.2
)%
Retail
10,920

 
10,373

 
5.3
%
 
2.8
 %
Overall Same-Store Portfolio (1)
$
41,113

 
$
39,866

 
3.1
%
 
—
 %

(1)  Non same-store properties were:
Acquisitions:
Multifamily - Yale West
Office - The Army Navy Club Building and 1775 Eye Street, NW
Retail - Spring Valley Retail Center
Development/Redevelopment:
Multifamily - The Maxwell
         Office - Silverline Center
Sold properties classified as continuing operations:
Multifamily - Country Club Towers
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Sold properties classified as discontinued operations:
Medical Office - The Medical Office Portfolio (see Supplemental Definitions on page 31 for list of properties included in the Medical Office Portfolio)


14



Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended March 31, 2015
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
13,529

 
$
36,751

 
$
15,473

 
$
—

 
$
65,753

Non same-store - acquired and in development (1)
2,502

 
5,744

 
857

 
—

 
9,103

Total
16,031

 
42,495

 
16,330

 
—

 
74,856

Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,872

 
14,215

 
4,553

 
—

 
24,640

Non same-store - acquired and in development (1)
1,406

 
2,928

 
234

 
—

 
4,568

Total
7,278

 
17,143

 
4,787

 
—

 
29,208

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
7,657

 
22,536

 
10,920

 
—

 
41,113

Non same-store - acquired and in development (1)
1,096

 
2,816

 
623

 
—

 
4,535

Total
$
8,753

 
$
25,352

 
$
11,543

 
$
—

 
$
45,648

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
7,657

 
$
22,536

 
$
10,920

 
$
—

 
$
41,113

Straight-line revenue, net for same-store properties
—

 
627

 
26

 
—

 
653

FAS 141 Min Rent
1

 
47

 
(35
)
 
—

 
13

Amortization of lease intangibles for same-store properties
—

 
462

 
72

 
—

 
534

Same-store portfolio cash NOI
$
7,658

 
$
23,672

 
$
10,983

 
$
—

 
$
42,313

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
8,753

 
$
25,352

 
$
11,543

 
$
—

 
$
45,648

Depreciation and amortization
(4,519
)
 
(16,786
)
 
(3,699
)
 
(271
)
 
(25,275
)
General and administrative
—

 
—

 
—

 
(6,080
)
 
(6,080
)
Interest expense
(2,422
)
 
(2,965
)
 
(237
)
 
(9,724
)
 
(15,348
)
Other income
—

 
—

 
—

 
192

 
192

Acquisition costs
—

 
—

 
—

 
(16
)
 
(16
)
    Gain on sale of real estate
—

 
—

 
—

 
30,277

 
30,277

Net income
1,812

 
5,601

 
7,607

 
14,378

 
29,398

Net loss attributable to noncontrolling interests
—

 
—

 
—

 
108

 
108

Net income attributable to the controlling interests
$
1,812

 
$
5,601

 
$
7,607

 
$
14,486

 
$
29,506

(1)  For a list of non-same-store properties and held for sale and sold properties, see page 14 of this Supplemental.
 
 

15



Same-Store Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended March 31, 2014
 
Multifamily
 
Office
 
Medical Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
13,291

 
$
36,201

 
$
—

 
$
14,591

 
$
—

 
$
64,083

Non same-store - acquired and in development (1)
1,631

 
2,863

 
—

 
34

 
—

 
4,528

                         Total
14,922

 
39,064

 
—

 
14,625

 
—

 
68,611

 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,635

 
14,364

 
—

 
4,218

 
—

 
24,217

Non same-store - acquired and in development (1)
780

 
1,332

 
—

 
13

 
—

 
2,125

                         Total
6,415

 
15,696

 
—

 
4,231

 
—

 
26,342

 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio
7,656

 
21,837

 
—

 
10,373

 
—

 
39,866

Non same-store - acquired and in development (1)
851

 
1,531

 
—

 
21

 
—

 
2,403

                          Total
$
8,507

 
$
23,368

 
$
—

 
$
10,394

 
$
—

 
$
42,269

 
 
 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
7,656

 
$
21,837

 
$
—

 
$
10,373

 
$
—

 
$
39,866

Straight-line revenue, net for same-store properties
3

 
(412
)
 
—

 
(134
)
 
—

 
(543
)
FAS 141 Min Rent
(113
)
 
57

 
—

 
(46
)
 
—

 
(102
)
Amortization of lease intangibles for same-store properties
—

 
181

 
—

 
65

 
—

 
246

Same-store portfolio cash NOI
$
7,546

 
$
21,663

 
$
—

 
$
10,258

 
$
—

 
$
39,467

 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
 
 
Total NOI
$
8,507

 
$
23,368

 
$
—

 
$
10,394

 
$
—

 
$
42,269

Depreciation and amortization
(4,626
)
 
(14,595
)
 
—

 
(3,269
)
 
(263
)
 
(22,753
)
General and administrative
—

 
—

 
—

 
—

 
(4,429
)
 
(4,429
)
Interest expense
(1,888
)
 
(2,558
)
 
—

 
(256
)
 
(9,828
)
 
(14,530
)
Other income
—

 
—

 
—

 
—

 
223

 
223

Acquisition costs
—

 
—

 
—

 
—

 
(3,045
)
 
(3,045
)
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
Income from operations of properties sold or held for sale (1)
—

 
—

 
546

 
—

 
—

 
546

Gain on sale of real estate classified as discontinued operations
—

 
—

 
—

 
—

 
106,273

 
106,273

Net income
1,993

 
6,215

 
546

 
6,869

 
88,931

 
104,554

Net income attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Net income attributable to the controlling interests
$
1,993

 
$
6,215

 
$
546

 
$
6,869

 
$
88,931

 
$
104,554

(1)  For a list of non-same-store properties and held for sale and sold properties, see page 14 of this Supplemental.
 
 

16



Net Operating Income (NOI) by Region
 
 
 
 
Washington REIT Portfolio
 
 
 
 
 
 
 
 
Percentage of GAAP NOI
 
 
 
Q1 2015
 
 
DC
 
 
 
Multifamily
5.7
%
 
 
Office
26.5
%
 
 
Retail
2.2
%
 
 
 
34.4
%
 
 
Maryland
 
 
 
Multifamily
2.6
%
 
 
Office
9.6
%
 
 
Retail
16.2
%
 
 
 
28.4
%
 
 
Virginia
 
 
 
Multifamily
10.8
%
 
 
Office
19.5
%
 
 
Retail
6.9
%
 
 
 
37.2
%
 
 
 
 
 
 
Total Portfolio
100.0
%
 



17



Same-Store and Overall Physical Occupancy Levels by Sector

 

 
 
Physical Occupancy - Same-Store Properties (1)
Sector
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Multifamily
 
94.1
%
 
94.0
%
 
94.2
%
 
94.3
%
 
92.5
%
Office
 
91.2
%
 
92.1
%
 
91.8
%
 
90.6
%
 
86.9
%
Retail
 
94.7
%
 
94.5
%
 
94.4
%
 
94.2
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
92.9
%
 
93.2
%
 
93.1
%
 
92.6
%
 
90.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical Occupancy - All Properties
Sector
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Multifamily
 
89.5
%
 
93.8
%
 
94.3
%
 
93.7
%
 
92.2
%
Office
 
86.7
%
 
86.9
%
 
87.1
%
 
86.2
%
 
83.7
%
Retail
 
94.7
%
 
94.4
%
 
94.4
%
 
94.2
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
89.5
%
 
90.5
%
 
90.7
%
 
90.1
%
 
88.4
%

(1) Non same-store properties were:
Acquisitions:
Multifamily - Yale West
Office - The Army Navy Club Building and 1775 Eye Street, NW
Retail - Spring Valley Retail Center
Development/Redevelopment:
Multifamily - The Maxwell
         Office - Silverline Center
Sold properties classified as continuing operations:
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Multifamily - Country Club Towers

18



Same-Store Portfolio and Overall Economic Occupancy Levels by Sector
 
 
 
Economic Occupancy - Same-Store Properties(1)
Sector
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Multifamily
 
94.9
%
 
94.2
%
 
94.4
%
 
93.3
%
 
91.6
%
Office
 
92.1
%
 
92.8
%
 
92.5
%
 
90.4
%
 
88.2
%
Retail
 
93.8
%
 
94.9
%
 
94.9
%
 
93.9
%
 
92.9
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
93.1
%
 
93.5
%
 
93.4
%
 
91.7
%
 
89.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Occupancy - All Properties
Sector
 
3/31/2015
 
12/31/2014
 
9/30/2014
 
6/30/2014
 
3/31/2014
Multifamily
 
88.4
%
 
94.2
%
 
94.1
%
 
92.6
%
 
91.6
%
Office
 
86.5
%
 
86.8
%
 
87.0
%
 
86.0
%
 
85.4
%
Retail
 
93.5
%
 
94.5
%
 
94.9
%
 
93.9
%
 
92.9
%
Medical Office
 
—
%
 
—
%
 
—
%
 
—
%
 
87.4
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
88.2
%
 
89.8
%
 
90.0
%
 
88.9
%
 
88.2
%

(1)  Non same-store properties were:
Acquisitions:
    Multifamily - Yale West
    Office - The Army Navy Club Building and 1775 Eye Street
    Retail - Spring Valley Shopping Center
Development/Redevelopment:
     Multifamily - The Maxwell
     Office - Silverline Center
Sold properties classified as continuing operations:
Multifamily - Country Club Towers
Retail - 5740 Columbia Road (parcel at Gateway Overlook)
Sold properties classified as discontinued operations:
Medical Office/Office - The Medical Office Portfolio (see Supplemental Definitions on page 31 for list of properties included in the Medical Office Portfolio)


19


Disposition Summary
 
March 31, 2015
($ in thousands)
0,
012
Disposition Summary
 
 
 
 
 
 
 
 
 
 
 
 
Disposition Date
 
Property Type
 
# of units
 
Contract Sales Price
 
GAAP Gain
Country Club Towers
 
March 20, 2015
 
Multifamily
 
227

 
$
37,800

 
$
30,277




20


Development/Re-Development Summary
 
March 31, 2015
($ in thousands)

Property and Location
Total Rentable Square Feet
or # of Units
Anticipated Total Cost
Cost to Date
Draws on Construction Loan to Date
 Construction Completion Date
Leased %
Development Summary
 
 
 
 
 
 
The Maxwell Apartments, Arlington, VA
163 units & 2,200 square feet retail
$
49,904

$
46,845

$
29,535

fourth quarter 2014
28.8%
 
 
 
 
 
 
 
Re-Development Summary
 
 
 
 
 
 
Silverline Center,Tysons, VA
529,000 square feet
$
35,000

$
28,866

N/A

first quarter 2015
61.7%

21



Commercial Leasing Summary - New Leases
 
 
1st Quarter 2015
 
4th Quarter 2014
 
3rd Quarter 2014
 
2nd Quarter 2014
 
1st Quarter 2014
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
61,141
 
 
92,349
 
 
37,852
 
 
69,367
 
 
43,243
 
      Retail Centers
10,853
 
 
10,965
 
 
10,408
 
 
32,191
 
 
29,527
 
Total
71,994
 

103,314
 

48,260
 
 
101,558
 
 
72,770
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
7.5
 
 
8.5
 
 
7.4
 
 
5.8
 
 
7.3
 
      Retail Centers
11.0
 
 
9.2
 
 
9.8
 
 
10.2
 
 
9.6
 
Total
8.0
 
 
8.6
 
 
7.9
 
 
7.1
 
 
8.2
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
31.43

 
$
33.14

 
$
30.37

 
$
31.66

 
$
31.50

 
$
32.62

 
$
31.14

 
$
32.00

 
$
28.65

 
$
30.53

            Retail Centers
41.57

 
41.85

 
34.95

 
35.52

 
36.96

 
37.29

 
22.59

 
23.39

 
25.27

 
25.96

Total
$
32.96

 
$
34.45

 
$
30.85

 
$
32.07

 
$
32.68

 
$
33.63

 
$
28.24

 
$
29.08

 
$
27.28

 
$
28.68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
35.39

 
$
32.49

 
$
38.39

 
$
34.43

 
$
33.77

 
$
30.68

 
$
35.71

 
$
33.40

 
$
32.53

 
$
29.86

            Retail Centers
52.79

 
46.99

 
41.82

 
37.65

 
43.69

 
38.76

 
22.07

 
21.36

 
30.77

 
27.66

Total
$
38.01

 
$
34.68

 
$
38.75

 
$
34.77

 
$
35.91

 
$
32.43

 
$
30.79

 
$
29.04

 
$
31.81

 
$
28.97

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
12.6
%
 
(2.0
)%
 
26.4
%
 
8.8
%
 
7.2
%
 
(5.9
)%
 
14.7
 %
 
4.4
 %
 
13.6
%
 
(2.2
)%
            Retail Centers
27.0
%
 
12.3
 %
 
19.7
%
 
6.0
%
 
18.2
%
 
4.0
 %
 
(2.3
)%
 
(8.7
)%
 
21.7
%
 
6.5
 %
Total
15.3
%
 
0.7
 %
 
25.6
%
 
8.4
%
 
9.9
%
 
(3.6
)%
 
9.0
 %
 
(0.1
)%
 
16.6
%
 
1.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
Tenant Improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
3,255,324

 
$
53.24

 
$
4,609,137

 
$
49.91

 
$
1,499,573

 
$
39.62

 
$
2,330,006

 
$
33.59

 
$
1,955,769

 
$
45.23

Retail Centers
353,335

 
32.56

 
120,600

 
11.00

 
162,180

 
15.58

 
1,616,068

 
50.20

 
38,923

 
1.32

Subtotal
$
3,608,659

 
$
50.12

 
$
4,729,737

 
$
45.78

 
$
1,661,753

 
$
34.43

 
$
3,946,074

 
$
38.86

 
$
1,994,692

 
$
27.41

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
2,092,175

 
$
34.22

 
$
3,328,304

 
$
36.04

 
$
1,345,301

 
$
35.54

 
$
1,512,211

 
$
21.80

 
$
1,207,798

 
$
27.93

Retail Centers
754,661

 
69.53

 
275,428

 
25.12

 
291,731

 
28.03

 
300,287

 
9.33

 
388,220

 
13.15

Subtotal
$
2,846,836

 
$
39.54

 
$
3,603,732

 
$
34.88

 
$
1,637,032

 
$
33.92

 
$
1,812,498

 
$
17.84

 
$
1,596,018

 
$
21.93

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
5,347,499

 
$
87.46

 
$
7,937,441

 
$
85.95

 
$
2,844,874

 
$
75.16

 
$
3,842,217

 
$
55.39

 
$
3,163,567

 
$
73.16

Retail Centers
1,107,996

 
102.09

 
396,028

 
36.12

 
453,911

 
43.61

 
1,916,355

 
59.53

 
427,143

 
14.47

Total
$
6,455,495

 
$
89.66

 
$
8,333,469

 
$
80.66

 
$
3,298,785

 
$
68.35

 
$
5,758,572

 
$
56.70

 
$
3,590,710

 
$
49.34


22



Commercial Leasing Summary - Renewal Leases
 
 
1st Quarter 2015
 
4th Quarter 2014
 
3rd Quarter 2014
 
2nd Quarter 2014
 
1st Quarter 2014
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
135,134
 
 
575,499
 
 
44,214
 
 
109,686
 
 
60,108
 
      Retail Centers
111,342
 
 
45,084
 
 
170,568
 
 
10,645
 
 
27,100
 
Total
246,476
 
 
620,583
 
 
214,782
 
 
120,331
 
 
87,208
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
4.8
 
 
6.1
 
 
7.4
 
 
4.8
 
 
7.0
 
      Retail Centers
5.4
 
 
6.8
 
 
5.1
 
 
4.3
 
 
3.3
 
Total
5.1
 
 
6.1
 
 
5.6
 
 
4.8
 
 
5.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
35.26

 
$
36.79

 
$
35.87

 
$
37.53

 
$
32.89

 
$
35.79

 
$
33.89

 
$
35.42

 
$
32.71

 
$
35.31

            Retail Centers
16.14

 
16.71

 
33.21

 
35.65

 
13.65

 
13.86

 
45.12

 
47.17

 
27.54

 
30.66

Total
$
26.63

 
$
27.72

 
$
35.67

 
$
37.39

 
$
17.61

 
$
18.37

 
$
34.89

 
$
36.46

 
$
31.26

 
$
34.05

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
37.98

 
$
35.99

 
$
37.25

 
$
35.44

 
$
44.95

 
$
41.11

 
$
36.12

 
$
34.39

 
$
37.02

 
$
34.06

            Retail Centers
17.06

 
16.64

 
40.26

 
37.30

 
14.67

 
14.47

 
50.91

 
48.51

 
30.92

 
30.08

Total
$
28.53

 
$
27.25

 
$
37.46

 
$
35.57

 
$
20.90

 
$
19.95

 
$
37.42

 
$
35.64

 
$
35.36

 
$
33.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
7.7
%
 
(2.2
)%
 
3.9
%
 
(5.6
)%
 
36.7
%
 
14.9
%
 
6.6
%
 
(2.9
)%
 
13.2
%
 
(3.6
)%
            Retail Centers
5.7
%
 
(0.4
)%
 
21.2
%
 
4.6
 %
 
7.4
%
 
4.4
%
 
12.8
%
 
2.8
 %
 
12.3
%
 
(1.9
)%
Total
7.2
%
 
(1.7
)%
 
5.0
%
 
(4.9
)%
 
18.7
%
 
8.6
%
 
7.3
%
 
(2.3
)%
 
13.1
%
 
(3.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
 
Total Dollars
 
$ per Sq Ft
Tenant Improvements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
550,948

 
$
4.08

 
$
14,952,993

 
$
25.98

 
$
595,757

 
$
13.47

 
$
1,897,016

 
$
17.29

 
$
896,712

 
$
14.92

Retail Centers
152,391

 
1.37

 
33,370

 
0.74

 
—

 
—

 
—

 
—

 
—

 
—

Subtotal
$
703,339

 
$
2.85

 
$
14,986,363

 
$
24.15

 
$
595,757

 
$
2.77

 
$
1,897,016

 
$
15.76

 
$
896,712

 
$
10.28

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
929,511

 
$
6.88

 
$
9,087,273

 
$
15.79

 
$
532,789

 
$
12.05

 
$
1,517,271

 
$
13.83

 
$
1,318,800

 
$
21.94

Retail Centers
243,602

 
2.19

 
192,343

 
4.27

 
51,270

 
0.30

 
27,278

 
2.56

 
32,300

 
1.19

Subtotal
$
1,173,113

 
$
4.76

 
$
9,279,616

 
$
14.96

 
$
584,059

 
$
2.72

 
$
1,544,549

 
$
12.84

 
$
1,351,100

 
$
15.49

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,480,459

 
$
10.96

 
$
24,040,266

 
$
41.77

 
$
1,128,546

 
$
25.52

 
$
3,414,287

 
$
31.12

 
$
2,215,512

 
$
36.86

Retail Centers
395,993

 
3.56

 
225,713

 
5.01

 
51,270

 
0.30

 
27,278

 
2.56

 
32,300

 
1.19

Total
$
1,876,452

 
$
7.61

 
$
24,265,979

 
$
39.11

 
$
1,179,816

 
$
5.49

 
$
3,441,565

 
$
28.60

 
$
2,247,812

 
$
25.77


23



10 Largest Tenants - Based on Annualized Commercial Income
 
March 31, 2015
Tenant
Number of Buildings
 
Weighted Average Remaining Lease Term in Months
 
 Percentage of Aggregate Portfolio Annualized Commercial Income
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Occupied Square Feet
World Bank
1
 
69

 
5.83
%
 
210,354

 
3.29
%
Advisory Board Company
2
 
50

 
3.71
%
 
199,762

 
3.12
%
Booz Allen Hamilton, Inc.
1
 
130

 
2.74
%
 
222,989

 
3.48
%
Engility Corporation
2
 
30

 
2.51
%
 
134,126

 
2.10
%
Squire Patton Boggs (USA) LLP
1
 
25

 
2.38
%
 
110,566

 
1.73
%
Epstein, Becker & Green, P.C.
1
 
21

 
1.33
%
 
53,427

 
0.83
%
George Washington University
2
 
17

 
1.26
%
 
69,775

 
1.09
%
General Services Administration
3
 
44

 
1.25
%
 
52,282

 
0.82
%
Hughes Hubbard & Reed LLP
1
 
35

 
1.16
%
 
53,208

 
0.83
%
Alexandria City School Board
1
 
170

 
1.16
%
 
84,693

 
1.32
%
Total/Weighted Average
 
 
68

 
23.33
%
 
1,191,182

 
18.61
%



24



Industry Diversification
 
March 31, 2015
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Professional, Scientific, and Technical Services
$
73,026,558

 
37.29
%
 
2,131,421

 
33.34
%
Credit Intermediation and Related Activities
18,642,990

 
9.52
%
 
333,617

 
5.22
%
Religious, Grantmaking, Civic, Professional, and Similar Organizations
11,908,916

 
6.08
%
 
325,290

 
5.09
%
Food Services and Drinking Places
8,922,061

 
4.56
%
 
286,065

 
4.47
%
Educational Services
8,161,222

 
4.17
%
 
274,371

 
4.29
%
Food and Beverage Stores
6,704,465

 
3.42
%
 
336,922

 
5.27
%
Ambulatory Health Care Services
5,662,057

 
2.89
%
 
178,062

 
2.79
%
Executive, Legislative, and Other General Government Support
5,495,646

 
2.81
%
 
155,732

 
2.44
%
Furniture and Home Furnishings Stores
4,677,679

 
2.39
%
 
224,718

 
3.51
%
Health and Personal Care Stores
3,933,578

 
2.01
%
 
107,853

 
1.69
%
Securities, Commodity Contracts, and Other Financial Investments and Related Activities
3,605,128

 
1.84
%
 
98,694

 
1.54
%
Personal and Laundry Services
3,511,237

 
1.79
%
 
110,080

 
1.72
%
Sporting Goods, Hobby, Book, and Music Stores
3,329,735

 
1.70
%
 
201,827

 
3.16
%
Electronics and Appliance Stores
3,103,831

 
1.58
%
 
169,094

 
2.64
%
Broadcasting (except Internet)
2,980,042

 
1.52
%
 
70,672

 
1.11
%
Miscellaneous Store Retailers
2,906,753

 
1.48
%
 
151,640

 
2.37
%
Administrative and Support Services
2,802,928

 
1.43
%
 
77,162

 
1.21
%
Publishing Industries (except Internet)
2,796,818

 
1.43
%
 
79,659

 
1.25
%
Clothing and Clothing Accessories Stores
2,482,900

 
1.27
%
 
128,378

 
2.01
%
General Merchandise Stores
2,319,459

 
1.18
%
 
265,366

 
4.15
%
Amusement, Gambling, and Recreation Industries
2,110,815

 
1.08
%
 
116,418

 
1.82
%
Nursing and Residential Care Facilities
1,837,275

 
0.94
%
 
66,810

 
1.04
%
Telecommunications
1,602,618

 
0.82
%
 
41,334

 
0.65
%
Real Estate
1,412,944

 
0.72
%
 
42,334

 
0.66
%
Social Assistance
1,227,766

 
0.63
%
 
48,098

 
0.75
%
Merchant Wholesalers, Durable Goods
1,096,358

 
0.56
%
 
32,539

 
0.51
%


25



Industry Diversification (continued)
 
March 31, 2015
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Chemical Manufacturing
918,560

 
0.47
%
 
20,036

 
0.31
%
Building Material and Garden Equipment and Supplies Dealers
912,397

 
0.47
%
 
29,470

 
0.46
%
Insurance Carriers and Related Activities
771,524

 
0.39
%
 
23,678

 
0.37
%
Merchant Wholesalers, Nondurable Goods
771,297

 
0.39
%
 
48,208

 
0.75
%
Motor Vehicle and Parts Dealers
646,701

 
0.33
%
 
36,832

 
0.58
%
Construction of Buildings
643,231

 
0.33
%
 
21,127

 
0.33
%
Transportation Equipment Manufacturing
558,973

 
0.29
%
 
19,864

 
0.31
%
Other
4,344,733

 
2.22
%
 
140,048

 
2.19
%
Total
$
195,829,195

 
100.00
%
 
$
6,393,419

 
100.00
%


26



Lease Expirations
 
March 31, 2015
Year
 
Number of Leases
 
Rentable Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent *
 
Average Rental Rate
 
Percent of Annualized Rent *
Office:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
63

 
305,979

 
7.15
%
 
$
10,254,032

 
$
33.51

 
5.98
%
2016
 
105

 
432,535

 
10.10
%
 
16,846,971

 
38.95

 
9.83
%
2017
 
85

 
544,548

 
12.72
%
 
21,230,055

 
38.99

 
12.39
%
2018
 
83

 
439,033

 
10.26
%
 
16,471,622

 
37.52

 
9.61
%
2019
 
86

 
629,283

 
14.70
%
 
25,743,960

 
40.91

 
15.02
%
2020 and thereafter
 
211

 
1,929,805

 
45.07
%
 
80,809,466

 
41.87

 
47.17
%
 
 
633

 
4,281,183

 
100.00
%
 
$
171,356,106

 
40.03

 
100.00
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
34

 
123,490

 
5.41
%
 
$
3,266,188

 
26.45

 
6.07
%
2016
 
32

 
189,116

 
8.29
%
 
4,564,363

 
24.14

 
8.49
%
2017
 
47

 
259,120

 
11.36
%
 
6,920,126

 
26.71

 
12.87
%
2018
 
42

 
367,573

 
16.11
%
 
5,364,037

 
14.59

 
9.97
%
2019
 
38

 
172,103

 
7.54
%
 
5,096,493

 
29.61

 
9.48
%
2020 and thereafter
 
131

 
1,170,416

 
51.29
%
 
28,571,486

 
24.41

 
53.12
%
 
 
324

 
2,281,818

 
100.00
%
 
$
53,782,693

 
23.57

 
100.00
%
Total:
 
 
 
 
 
 
 
 
 
 
 
 
2015
 
97

 
429,469

 
6.54
%
 
13,520,220

 
31.48

 
6.01
%
2016
 
137

 
621,651

 
9.47
%
 
21,411,334

 
34.44

 
9.51
%
2017
 
132

 
803,668

 
12.25
%
 
28,150,181

 
35.03

 
12.50
%
2018
 
125

 
806,606

 
12.29
%
 
21,835,659

 
27.07

 
9.70
%
2019
 
124

 
801,386

 
12.21
%
 
30,840,453

 
38.48

 
13.70
%
2020 and thereafter
 
342

 
3,100,221

 
47.24
%
 
109,380,952

 
35.28

 
48.58
%
 
 
957

 
6,563,001

 
100.00
%
 
$
225,138,799

 
34.30

 
100.00
%
 
 
 
* Annualized Rent is equal to the rental rate effective at lease expiration (cash basis) multiplied by 12.
 
 

27



Schedule of Properties
 
March 31, 2015
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Office Buildings
 
 
 
 
 
 
 
 
1901 Pennsylvania Avenue
 
Washington, DC
 
1977
 
1960
 
101,000

51 Monroe Street
 
Rockville, MD
 
1979
 
1975
 
223,000

515 King Street
 
Alexandria, VA
 
1992
 
1966
 
75,000

6110 Executive Boulevard
 
Rockville, MD
 
1995
 
1971
 
200,000

1220 19th Street
 
Washington, DC
 
1995
 
1976
 
104,000

1600 Wilson Boulevard
 
Arlington, VA
 
1997
 
1973
 
166,000

Silverline Center
 
Tysons, VA
 
1997
 
1972/1986/1999
 
529,000

600 Jefferson Plaza
 
Rockville, MD
 
1999
 
1985
 
113,000

Wayne Plaza
 
Silver Spring, MD
 
2000
 
1970
 
99,000

Courthouse Square
 
Alexandria, VA
 
2000
 
1979
 
116,000

One Central Plaza
 
Rockville, MD
 
2001
 
1974
 
267,000

1776 G Street
 
Washington, DC
 
2003
 
1979
 
263,000

West Gude Drive
 
Rockville, MD
 
2006
 
1984/1986/1988
 
276,000

Monument II
 
Herndon, VA
 
2007
 
2000
 
208,000

2000 M Street
 
Washington, DC
 
2007
 
1971
 
231,000

2445 M Street
 
Washington, DC
 
2008
 
1986
 
290,000

925 Corporate Drive
 
Stafford, VA
 
2010
 
2007
 
133,000

1000 Corporate Drive
 
Stafford, VA
 
2010
 
2009
 
136,000

1140 Connecticut Avenue
 
Washington, DC
 
2011
 
1966
 
183,000

1227 25th Street
 
Washington, DC
 
2011
 
1988
 
135,000

Braddock Metro Center
 
Alexandria, VA
 
2011
 
1985
 
353,000

John Marshall II
 
Tysons, VA
 
2011
 
1996/2010
 
223,000

Fairgate at Ballston
 
Arlington, VA
 
2012
 
1988
 
142,000

The Army Navy Club Building
 
Washington, DC
 
2014
 
1912/1987
 
108,000

1775 Eye Street, NW
 
Washington, DC
 
2014
 
1964
 
185,000

Subtotal
 
 
 
 
 
 
 
4,859,000


28



Schedule of Properties (continued)
 
March 31, 2015
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Retail Centers
 
 
 
 
 
 
 
 
Takoma Park
 
Takoma Park, MD
 
1963
 
1962
 
51,000

Westminster
 
Westminster, MD
 
1972
 
1969
 
150,000

Concord Centre
 
Springfield, VA
 
1973
 
1960
 
76,000

Wheaton Park
 
Wheaton, MD
 
1977
 
1967
 
74,000

Bradlee Shopping Center
 
Alexandria, VA
 
1984
 
1955
 
171,000

Chevy Chase Metro Plaza
 
Washington, DC
 
1985
 
1975
 
49,000

Montgomery Village Center
 
Gaithersburg, MD
 
1992
 
1969
 
197,000

Shoppes of Foxchase
 
Alexandria, VA
 
1994
 
1960/2006
 
134,000

Frederick County Square
 
Frederick, MD
 
1995
 
1973
 
227,000

800 S. Washington Street
 
Alexandria, VA
 
1998/2003
 
1955/1959
 
47,000

Centre at Hagerstown
 
Hagerstown, MD
 
2002
 
2000
 
332,000

Frederick Crossing
 
Frederick, MD
 
2005
 
1999/2003
 
295,000

Randolph Shopping Center
 
Rockville, MD
 
2006
 
1972
 
82,000

Montrose Shopping Center
 
Rockville, MD
 
2006
 
1970
 
145,000

Gateway Overlook
 
Columbia, MD
 
2010
 
2007
 
220,000

Olney Village Center
 
Olney, MD
 
2011
 
1979/2003
 
199,000

Spring Valley Retail Center
 
Washington, DC
 
2014
 
1941/1950
 
75,000

Subtotal
 
 
 
 
 
 
 
2,524,000



29



Schedule of Properties (continued)
 
March 31, 2015
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET (1)
Multifamily Buildings / # units
 
 
 
 
 
 
 
 
3801 Connecticut Avenue / 307
 
Washington, DC
 
1963
 
1951
 
178,000

Roosevelt Towers / 191
 
Falls Church, VA
 
1965
 
1964
 
170,000

Park Adams / 200
 
Arlington, VA
 
1969
 
1959
 
173,000

Munson Hill Towers / 279
 
Falls Church, VA
 
1970
 
1963
 
258,000

The Ashby at McLean / 256
 
McLean, VA
 
1996
 
1982
 
274,000

Walker House Apartments / 212
 
Gaithersburg, MD
 
1996
 
1971/2003
 
157,000

Bethesda Hill Apartments / 195
 
Bethesda, MD
 
1997
 
1986
 
222,000

Bennett Park / 224
 
Arlington, VA
 
2007
 
2007
 
214,000

Clayborne / 74
 
Alexandria, VA
 
2008
 
2008
 
60,000

Kenmore Apartments / 374
 
Washington, DC
 
2008
 
1948
 
268,000

The Paramount / 135
 
Arlington, VA
 
2013
 
1984
 
140,000

Yale West / 216
 
Washington, DC
 
2014
 
2011
 
173,000

The Maxwell / 163
 
Washington, DC
 
2014
 
2014
 
143,000

Subtotal (2,826 units)
 
 
 
 
 
 
 
2,430,000

TOTAL
 
 
 
 
 
 
 
9,813,000

(1) Multifamily buildings are presented in gross square feet.

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Supplemental Definitions
 
March 31, 2015
Adjusted EBITDA (a non-GAAP measure) is earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities.
Annualized base rent ("ABR") is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.
Debt service coverage ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.
Debt to total market capitalization is total debt divided by the sum of total debt plus the market value of shares outstanding at the end of the period.
Earnings to fixed charges ratio is computed by dividing earnings attributable to the controlling interest by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense (excluding interest expense from discontinued operations), including amortized costs of debt issuance, plus interest costs capitalized.
Economic occupancy is calculated as actual real estate rental revenue recognized for the period indicated as a percentage of gross potential real estate rental revenue for that period. We determine gross potential real estate rental revenue by valuing occupied units or square footage at contract rates and vacant units or square footage at market rates for comparable properties. We do not consider percentage rents and expense reimbursements in computing economic occupancy percentages.
Funds from operations ("FFO") is defined by The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) in an April, 2002 White Paper as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) associated with sales of property and impairment of depreciable real estate, plus real estate depreciation and amortization. We consider FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. FFO is a non-GAAP measure.
Core Funds From Operations ("Core FFO") is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) expenses related to acquisition and structuring activities, (3) executive transition costs and severance expense related to corporate reorganization and related to executive retirements or resignations, (4) property impairments not already excluded from FFO, as appropriate, and (5) relocation expense. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Funds Available for Distribution ("FAD") is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles , (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, as appropriate. FAD is included herein, because we consider it to be a measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Core Funds Available for Distribution ("Core FAD") is calculated by adjusting FAD for the following items (which we believe are not indicative of the performance of Washington REIT’s operating portfolio and affect the comparative measurement of Washington REIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties, (3) non-share-based severance expense related to corporate reorganization and related to executive retirements or resignations, (4) property impairments not already excluded from FAD, as appropriate, and (5) relocation expense. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FAD serves as a useful, supplementary measure of Washington REIT’s ability to incur and service debt, and distribute dividends to its shareholders. Core FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Net Operating Income (“NOI”) is a non-GAAP measure defined as real estate rental revenue less real estate expenses. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain on sale, if any), plus interest expense, depreciation and amortization, general and administrative expenses, acquisition costs, real estate impairment and gain or loss on extinguishment of debt. We also present NOI on a cash basis ("Cash NOI") which is calculated as NOI less the impact of straightlining of rent and amortization of market intangibles. We provide NOI as a supplement to net income calculated in accordance with GAAP. As such, it should not be considered an alternative to net income as an indication of our operating performance. It is the primary performance measure we use to assess the results of our operations at the property level.

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The Medical Office Portfolio consists of every medical property, as well as undeveloped land, 4661 Kenmore Ave, and two office properties, Woodholme Center and 6565 Arlington Boulevard. We entered into four separate purchase and sale agreements. Transaction I of the Medical Office Portfolio sale and purchase agreement consists of medical office properties (2440 M Street, 15001 Shady Grove Road, 15505 Shady Grove Road, 19500 at Riverside Park formerly Lansdowne Medical Office Building, 9707 Medical Center Drive, CentreMed I and II, 8301 Arlington Boulevard, Sterling Medical Office Building, Shady Grove Medical Village II, Alexandria Professional Center, Ashburn Farm Office Park I, Ashburn Farm Office Park II, Ashburn Farm Office Park III and Woodholme Medical Office Building) and two office properties (6565 Arlington Boulevard and Woodholme Center). Transaction II of the Medical Office Portfolio purchase and sale agreement consist of undeveloped land (4661 Kenmore Ave). Transaction III of the Medical Office Portfolio purchase and sale agreement consists of medical office properties (Woodburn Medical Park I and Woodburn Medical Park II). Transaction IV of the Medical Office Portfolio purchase and sale agreement consists of a medical office properties (Prosperity Medical Center I and II, and Prosperity Medical Center III).
Physical occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period.
Recurring capital expenditures represent non-accretive building improvements and leasing costs required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to "operating standard."
Rent increases on renewals and rollovers are calculated as the difference, weighted by square feet, of the net ABR due the first month after a term commencement date and the net ABR due the last month prior to the termination date of the former tenant's term.
Same-store portfolio properties include all stabilized properties that were owned for the entirety of the current and prior reporting periods, and exclude properties under redevelopment or development and properties purchased or sold at any time during the periods being compared. We define redevelopment properties as those for which we expect to spend significant development and construction costs on existing or acquired buildings pursuant to a formal plan which has a current impact on operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. Redevelopment and development properties are included in the same-store pool upon completion of the redevelopment or development, and the earlier of achieving 90% occupancy or two years after completion.
Same-store portfolio net operating income (NOI) growth is the change in the NOI of the same-store portfolio properties from the prior reporting period to the current reporting period.

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