Washington Real Estate Investment Trust
 
 
First Quarter 2016
 
 
 
 
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 2016


Washington Real Estate Investment Trust ("Washington REIT") is a self-administered 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 2016 Highlights

•
Generated Core Funds from Operations (FFO) of $0.42 per fully diluted share for the first quarter, a 10.5% or $0.04 increase over first quarter of 2015
•
Achieved same-store Net Operating Income (NOI) growth of 2.5%, with same-store rental growth of 2.7%, over first quarter 2015
•
Improved overall portfolio physical occupancy to 90.6%, 110 basis points higher than first quarter of 2015 and 40 basis points higher than fourth quarter 2015
•
Executed new and renewal commercial leases totaling 265,000 square feet at an average rental rate increase of 31.9% over in-place rents for new leases and an average rental rate increase of 16.0% over in-place rents for renewal leases
•
Entered into contracts with an institutional buyer to sell all six of its suburban Maryland office assets for $240 million and has one suburban Maryland multifamily asset to be placed on the market later this year
•
Has an additional suburban office asset currently in the market and is evaluating investor interest
•
Under contract to acquire Riverside Apartments, a 1,222 unit apartment community with potential to create value through the renovation of approximately 850 units and on-site density to develop approximately 550 additional units, for $244.75 million
•
Continues to plan to pay down approximately $100 million of net debt this year
•
Reaffirmed 2016 Core FFO guidance of $1.70 - $1.77 per fully diluted share


Of the 265,000 square feet of commercial leases signed, there were 44,000 square feet of new leases and 221,000 square feet of renewal leases. New leases had an average rental rate increase of 31.9% over expiring lease rates and a weighted average lease term of 8.3 years. Commercial tenant improvement costs were $40.31 per square foot and leasing commissions and incentives were $33.23 per square foot for new leases. Renewal leases had an average rental rate increase of 16.0% from expiring lease rates and a weighted average lease term of 7.6 years. Commercial tenant improvement costs were $34.34 per square foot and leasing commissions and incentives were $37.65 per square foot for renewal leases.

In the first quarter, Washington REIT prepaid without penalty a $51.0 million 5.79% mortgage note on John Marshall II .The Company also purchased a $32.2 million variable rate secured loan on The Maxwell from an outside lender. Washington REIT funded by cash and using proceeds from draws on its line of credit. The Company plans to net pay down approximately $100 million of debt this year and to term out debt in the second half of the year.

As of March 31, 2016, Washington REIT owned a diversified portfolio of 54 properties, totaling approximately 7 million square feet of commercial space and 3,258 multifamily units, and land held for development. These 54 properties consist of 25 office properties, 16 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 2016

Net Operating Income Contribution by Sector - First Quarter 2016




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. Forward-looking statements include statements in this earnings release preceded by, followed by or that include the words “believe,” “expect,” “intend,” “anticipate,” “potential,” “project,” “will” and other similar expressions. 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 2015 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, 2016
 
 
 
Schedule
Page
Key Financial Data
 
 
 
 
 
 
Capital Analysis
 
 
Long Term Debt Analysis
 
 
 
Portfolio Analysis
 
 
 
 
 
 
Tenant Analysis
 
 
 
 
 
 
Appendix
 
 
 




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

 
 
Three Months Ended
OPERATING RESULTS
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Real estate rental revenue
$
77,137

 
$
79,102

 
$
78,243

 
$
74,226

 
$
74,856

Real estate expenses
(28,734
)
 
(27,688
)
 
(28,109
)
 
(27,229
)
 
(29,208
)
 
48,403

 
51,414

 
50,134

 
46,997

 
45,648

Real estate depreciation and amortization
(26,038
)
 
(28,808
)
 
(29,349
)
 
(25,503
)
 
(25,275
)
Income from real estate
22,365

 
22,606

 
20,785

 
21,494

 
20,373

Interest expense
(14,360
)
 
(15,012
)
 
(14,486
)
 
(14,700
)
 
(15,348
)
Other income
39

 
162

 
163

 
192

 
192

Acquisition costs
(154
)
 
(119
)
 
(929
)
 
(992
)
 
(16
)
Real estate impairment
—

 
—

 
—

 
(5,909
)
 
—

Gain on sale of real estate
—

 
59,376

 
—

 
1,454

 
30,277

Loss on extinguishment of debt
—

 
—

 
—

 
(119
)
 
—

General and administrative
(5,511
)
 
(4,918
)
 
(4,953
)
 
(4,306
)
 
(6,080
)
Net income (loss)
2,379

 
62,095

 
580

 
(2,886
)
 
29,398

Less: Net loss from noncontrolling interests
5

 
38

 
67

 
340

 
108

Net income (loss) attributable to the controlling interests
$
2,384

 
$
62,133

 
$
647

 
$
(2,546
)
 
$
29,506

Per Share Data:
 
 
 
 
 
 
 
 
 
Net income (loss)
$
0.03

 
$
0.91

 
$
0.01

 
$
(0.04
)
 
$
0.43

Fully diluted weighted average shares outstanding
68,488

 
68,371

 
68,305

 
68,176

 
68,191

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
Real estate expenses
37.3
%
 
35.0
%
 
35.9
%
 
36.7
 %
 
39.0
%
General and administrative
7.1
%
 
6.2
%
 
6.3
%
 
5.8
 %
 
8.1
%
Ratios:
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
3.0
x
 
3.1
x
 
3.2
x
 
3.0
x
 
2.7
x
Income from continuing operations/Total real estate revenue
3.1
%
 
78.5
%
 
0.7
%
 
(3.9
)%
 
39.3
%
Net income /Total real estate revenue
3.1
%
 
78.5
%
 
0.8
%
 
(3.4
)%
 
39.4
%

4



Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Assets
 
 
 
 
 
 
 
 
 
Land
$
561,256

 
$
561,256

 
$
572,880

 
$
542,654

 
$
543,247

Income producing property
2,095,306

 
2,076,541

 
2,074,425

 
1,966,612

 
1,932,908

 
2,656,562

 
2,637,797

 
2,647,305

 
2,509,266

 
2,476,155

Accumulated depreciation and amortization
(714,689
)
 
(692,608
)
 
(677,480
)
 
(670,103
)
 
(649,279
)
Net income producing property
1,941,873

 
1,945,189

 
1,969,825

 
1,839,163

 
1,826,876

Development in progress, including land held for development
27,313

 
36,094

 
35,256

 
35,314

 
65,656

Total real estate held for investment, net
1,969,186

 
1,981,283

 
2,005,081

 
1,874,477

 
1,892,532

Investment in real estate held for sale, net
—

 
—

 
5,010

 
—

 
—

Cash and cash equivalents
23,575

 
23,825

 
21,012

 
22,778

 
40,025

Restricted cash
9,889

 
13,383

 
12,544

 
13,705

 
13,095

Rents and other receivables, net of allowance for doubtful accounts
63,863

 
62,890

 
62,306

 
61,577

 
60,215

Prepaid expenses and other assets
118,790

 
109,787

 
117,167

 
112,852

 
112,165

Other assets related to properties sold or held for sale
—

 
—

 
278

 
—

 
—

Total assets
$
2,185,303

 
$
2,191,168

 
$
2,223,398

 
$
2,085,389

 
$
2,118,032

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
743,475

 
$
743,181

 
$
742,971

 
$
593,755

 
$
743,477

Mortgage notes payable
333,853

 
418,052

 
418,400

 
418,637

 
417,906

Lines of credit
215,000

 
105,000

 
195,000

 
185,000

 
30,000

Accounts payable and other liabilities
56,348

 
45,367

 
54,131

 
50,281

 
65,447

Dividend Payable
—

 
20,434

 
—

 
—

 
—

Advance rents
11,589

 
12,744

 
10,766

 
13,733

 
14,471

Tenant security deposits
9,604

 
9,378

 
9,225

 
9,053

 
8,892

Liabilities related to properties sold or held for sale
—

 
—

 
329

 
—

 
—

Total liabilities
1,369,869

 
1,354,156

 
1,430,822

 
1,270,459

 
1,280,193

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

 
—

 
—

 
—

 
—

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
683

 
682

 
682

 
682

 
681

Additional paid-in capital
1,193,750

 
1,193,298

 
1,192,202

 
1,191,594

 
1,191,123

Distributions in excess of net income
(376,041
)
 
(357,781
)
 
(399,421
)
 
(379,577
)
 
(356,531
)
Accumulated other comprehensive loss
(4,225
)
 
(550
)
 
(2,288
)
 
—

 
—

Total shareholders' equity
814,167

 
835,649

 
791,175

 
812,699

 
835,273

Noncontrolling interests in subsidiaries
1,267

 
1,363

 
1,401

 
2,231

 
2,566

Total equity
815,434

 
837,012

 
792,576

 
814,930

 
837,839

Total liabilities and equity
$
2,185,303

 
$
2,191,168

 
$
2,223,398

 
$
2,085,389

 
$
2,118,032

Total Debt / Total Market Capitalization
0.39
:1
 
0.41
:1
 
0.44
:1
 
0.40
:1
 
0.39
:1

5



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

 
 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Funds from operations(1)
 
 
 
 
 
 
 
 
 
Net (loss) income
$
2,379

 
$
62,095

 
$
580

 
$
(2,886
)
 
$
29,398

Real estate depreciation and amortization
26,038

 
28,808

 
29,349

 
25,503

 
25,275

Gain on sale of depreciable real estate
—

 
(59,376
)
 
—

 
—

 
(30,277
)
NAREIT funds from operations (FFO)
28,417

 
31,527

 
29,929

 
22,617

 
24,396

Loss on extinguishment of debt
—

 
—

 
—

 
119

 
—

Real estate impairment
—

 
—

 
—

 
5,909

 
—

Loss (gain) on sale of non depreciable real estate
—

 
—

 
50

 
(1,454
)
 
—

Severance expense
460

 
—

 
—

 
—

 
1,001

Relocation expense
—

 
—

 
—

 
26

 
64

Acquisition and structuring expenses
259

 
189

 
1,034

 
1,264

 
234

Core FFO (1)
$
29,136

 
$
31,716

 
$
31,013

 
$
28,481

 
$
25,695

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(90
)
 
(180
)
 
(47
)
 
(80
)
 
(108
)
 
 
 
 
 
 
 
 
 
 
NAREIT FFO per share - basic
$
0.41

 
$
0.46

 
$
0.44

 
$
0.33

 
$
0.36

NAREIT FFO per share - fully diluted
$
0.41

 
$
0.46

 
$
0.44

 
$
0.33

 
$
0.36

Core FFO per share - fully diluted
$
0.42

 
$
0.46

 
$
0.45

 
$
0.42

 
$
0.38

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
68,301

 
68,204

 
68,186

 
68,176

 
68,141

Average shares - fully diluted (for FFO and FAD)
68,488

 
68,371

 
68,305

 
68,375

 
68,191

(1)  See "Supplemental Definitions" on page 27 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.


6



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

 
 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Funds available for distribution(1)
 
 
 
 
 
 
 
 
 
NAREIT FFO
$
28,417

 
$
31,527

 
$
29,929

 
$
22,617

 
$
24,396

Non-cash loss on extinguishment of debt
—

 
—

 
—

 
119

 
—

Tenant improvements and incentives
(1,543
)
 
(6,792
)
 
(5,231
)
 
(3,417
)
 
(3,730
)
Leasing commissions
(1,015
)
 
(2,426
)
 
(1,714
)
 
(1,149
)
 
(1,606
)
Recurring capital improvements
(908
)
 
(3,296
)
 
(1,326
)
 
(737
)
 
(689
)
Straight-line rent, net
(683
)
 
(533
)
 
(680
)
 
(538
)
 
407

Non-cash fair value interest expense
42

 
41

 
38

 
36

 
35

Non-real estate depreciation and amortization
950

 
980

 
938

 
1,123

 
938

Amortization of lease intangibles, net
943

 
925

 
913

 
970

 
768

Amortization and expensing of restricted share and unit compensation
1,519

 
1,123

 
863

 
1,195

 
1,826

Funds available for distribution (FAD)
27,722

 
21,549

 
23,730

 
20,219

 
22,345

Gain on sale of real estate
—

 
—

 
50

 
(1,454
)
 
—

Non-share-based severance expense
39

 
—

 
—

 
—

 
196

Relocation expense
—

 
—

 
—

 
26

 
81

Acquisition and structuring expenses
259

 
189

 
1,034

 
1,264

 
234

Real estate impairment
—

 
—

 
—

 
5,909

 
—

Core FAD (1)
$
28,020

 
$
21,738

 
$
24,814

 
$
25,964

 
$
22,856

 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(90
)
 
(180
)
 
(47
)
 
(80
)
 
(108
)
 
 
 
 
 
 
 
 
 
 
FAD per share - basic
$
0.40

 
$
0.31

 
$
0.35

 
$
0.30

 
$
0.33

FAD per share - fully diluted
$
0.40

 
$
0.31

 
$
0.35

 
$
0.29

 
$
0.33

Core FAD per share - fully diluted
$
0.41

 
$
0.32

 
$
0.36

 
$
0.38

 
$
0.33

 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
Average shares - basic
68,301

 
68,204

 
68,186

 
68,176

 
68,141

Average shares - fully diluted (for FFO and FAD)
68,488

 
68,371

 
68,305

 
68,375

 
68,191

(1)  See "Supplemental Definitions" on page 27 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.

7



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

 
Three Months Ended
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
Net income (loss)
$
2,379

 
$
62,095

 
$
580

 
$
(2,886
)
 
$
29,398

Add:
 
 
 
 
 
 
 
 
 
Interest expense
14,360

 
15,012

 
14,486

 
14,700

 
15,348

Real estate depreciation and amortization
26,038

 
28,808

 
29,349

 
25,503

 
25,275

Income tax expense
—

 
65

 
41

 
28

 
—

Real estate impairment
—

 
—

 
—

 
5,909

 
—

Non-real estate depreciation
152

 
149

 
168

 
178

 
103

Severance expense
460

 
—

 
—

 
—

 
1,001

Relocation expense
—

 
—

 
—

 
26

 
64

Acquisition and structuring expenses
259

 
189

 
1,034

 
1,264

 
234

Less:
 
 
 
 
 
 
 
 
 
    Net (gain) loss on sale of real estate
—

 
(59,376
)
 
50

 
(1,454
)
 
(30,277
)
    Loss on extinguishment of debt
—

 
—

 
—

 
119

 
—

Adjusted EBITDA
$
43,648

 
$
46,942

 
$
45,708

 
$
43,387

 
$
41,146

 
 
 
 
 
 
 
 
 
 
(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, severance expense, relocation expense, acquisition and structuring expenses, gain from non-disposal activities and allocations to noncontrolling interests. 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.



8



Long Term Debt Analysis
($'s in thousands)
 

 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
$
333,853

 
$
418,052

 
$
418,400

 
$
418,637

 
$
417,906

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
594,411

 
594,164

 
594,002

 
593,755

 
743,477

Term loans
149,064

 
149,017

 
148,969

 
—

 
—

Credit facility
215,000

 
105,000

 
195,000

 
185,000

 
30,000

Unsecured total
958,475

 
848,181

 
937,971

 
778,755

 
773,477

Total
$
1,292,328

 
$
1,266,233

 
$
1,356,371

 
$
1,197,392

 
$
1,191,383

 
 
 
 
 
 
 
 
 
 
Weighted Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Conventional fixed rate
5.4
%
 
5.2
%
 
5.2
%
 
5.2
%
 
5.2
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.7
%
 
4.7
%
 
4.7
%
 
4.7
%
 
4.9
%
Term loans (1)
2.7
%
 
2.7
%
 
2.7
%
 
—
%
 
—
%
Credit facility
1.4
%
 
1.4
%
 
1.2
%
 
1.2
%
 
1.4
%
Unsecured total
3.7
%
 
4.0
%
 
3.7
%
 
3.9
%
 
4.7
%
Weighted Average
4.1
%
 
4.4
%
 
4.2
%
 
4.4
%
 
4.9
%
 
 
 
 
 
 
 
 
 
 
(1) Washington REIT entered into an interest rate swap to swap from a LIBOR plus 110 basis points floating interest rate to a 2.72% all-in fixed interest rate commencing October 15, 2015.
 
 
 
 
 
 
 
 
 
 
Note: The current debt balances outstanding are shown net of discounts, premiums and unamortized debt costs (see page 10 of this Supplemental).



    

9


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
2016
$
81,029

 
$
—

 
$
—

 
$
81,029

 
5.7%
2017
150,903

 
—

 
—

 
150,903

 
5.9%
2018
—

 
—

 
—

 
—

 
 
2019
31,280

 
—

 
215,000

(1) 
246,280

 
1.9%
2020
—

 
250,000

 
—

 
250,000

 
5.1%
2021
—

 
150,000

(2) 
—

 
150,000

 
2.7%
2022
44,517

 
300,000

 
—

 
344,517

 
4.0%
2023
—

 
—

 
—

 
—

 
 
2024
—

 
—

 
—

 
—

 
 
2025
—

 
—

 
—

 
—

 
 
2026
—

 
—

 
—

 
—

 
 
Thereafter
—

 
50,000

 
—

 
50,000

 
7.4%
Scheduled principal payments
$
307,729

 
$
750,000

 
$
215,000

 
$
1,272,729

 
4.1%
Scheduled amortization payments
22,598

 
—

 
—

 
22,598

 
4.7%
Net discounts/premiums
4,217

 
(2,264
)
 
—

 
1,953

 
 
Loan costs, net of amortization
(691
)
 
(4,261
)
 
—

 
(4,952
)
 
 
Total maturities
$
333,853

 
$
743,475

 
$
215,000

 
$
1,292,328

 
4.1%
Weighted average maturity =4.5 years
(1) Maturity date for credit facility may be extended for up to two additional 6-month periods at Washington REIT's option.
(2) Washington REIT entered into an interest rate swap to swap from a LIBOR plus 110 basis points floating interest rate to a 2.72% all-in fixed interest rate commencing October 15, 2015.

10



Debt Covenant Compliance
 
 
Unsecured Notes Payable
 
Unsecured Line of Credit
($600.0 million)
 
Quarter Ended March 31, 2016
 
Covenant
 
Quarter Ended March 31, 2016
 
Covenant
% of Total Indebtedness to Total Assets(1)
44.6
%
 
≤ 65.0%
 
 N/A

 
N/A
Ratio of Income Available for Debt Service to Annual Debt Service
3.3

 
            ≥ 1.5
 
 N/A

 
N/A
% of Secured Indebtedness to Total Assets(1)
11.5
%
 
≤ 40.0%
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.4

 
            ≥ 1.5
 
 N/A

 
N/A
% of Net Consolidated Total Indebtedness to Consolidated Total Asset Value(3)
 N/A

 
 N/A
 
41.7
%
 
≤ 60.0%
Ratio of Consolidated Adjusted EBITDA(4) to Consolidated Fixed Charges(5)
 N/A

 
 N/A
 
2.94

 
             ≥ 1.50
% of Consolidated Secured Indebtedness to Consolidated Total Asset Value(3)
 N/A

 
 N/A
 
11.0
%
 
≤ 40.0%
% of Consolidated Unsecured Indebtedness to Unencumbered Pool Value(6)
 N/A

 
 N/A
 
37.7
%
 
≤ 60.0%
Ratio of Unencumbered Adjusted Net Operating Income to Consolidated Unsecured Interest Expense
 N/A

 
 N/A
 
3.98

 
             ≥ 1.75
 
 
 
 
 
 
 
 
(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) Consolidated Total Asset Value is the sum of unrestricted cash plus the quotient of applying a capitalization rate to the annualized NOI from the most recently ended quarter for each asset class, excluding NOI from disposed properties, acquisitions during the past 6 quarters, development, major redevelopment and low occupancy properties. To this amount, we add the purchase price of acquisitions during the past 6 quarters plus values for development, major redevelopment and low occupancy properties.
(4) Consolidated Adjusted EBITDA is defined as earnings before noncontrolling interests, depreciation, amortization, interest expense, income tax expense, acquisition costs, extraordinary, unusual or nonrecurring transactions including sale of assets, impairment, gains and losses on extinguishment of debt and other non-cash charges.
(5) Consolidated Fixed Charges consist of interest expense excluding capitalized interest and amortization of deferred financing costs, principal payments and preferred dividends, if any.
(6) Unencumbered Pool Value is the sum of unrestricted cash plus the quotient of applying a capitalization rate to the annualized NOI from unencumbered properties from the most recently ended quarter for each asset class excluding NOI from disposed properties, acquisitions during the past 6 quarters, development, major redevelopment and low occupancy properties. To this we add the purchase price of unencumbered acquisitions during the past 6 quarters and values for unencumbered development, major redevelopment and low occupancy properties.

11



Capital Analysis
(In thousands, except per share amounts)
 
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
$
68,326

 
$
68,191

 
$
68,180

 
$
68,162

 
$
68,126

Market Price per Share
29.21

 
27.06

 
24.93

 
25.95

 
27.63

Equity Market Capitalization
$
1,995,802

 
$
1,845,248

 
$
1,699,727

 
$
1,768,804

 
$
1,882,321

 
 
 
 
 
 
 
 
 
 
Total Debt
$
1,292,328

 
$
1,266,233

 
$
1,356,371

 
$
1,197,392

 
$
1,191,383

Total Market Capitalization
$
3,288,130

 
$
3,111,481

 
$
3,056,098

 
$
2,966,196

 
$
3,073,704

 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
0.39
:1
 
0.41
:1
 
0.44
:1
 
0.40
:1
 
0.39
:1
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
1.2x

 
5.1x

 
1.0x

 
0.8x

 
2.9x

Debt Service Coverage Ratio(2)
2.8x

 
2.9x

 
2.9x

 
2.7x

 
2.5x

 
 
 
 
 
 
 
 
 
 
Dividend Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Dividends Declared
$
20,644

 
$
20,493

 
$
20,491

 
$
20,500

 
$
20,519

Common Dividend Declared per Share
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO per share basis)
71.4
%
 
65.0
%
 
66.7
%
 
71.4
%
 
78.9
%
Payout Ratio (Core FAD per share basis)
73.2
%
 
93.8
%
 
83.3
%
 
78.9
%
 
90.9
%
 
 
 
 
 
 
 
 
 
 
(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. The earnings to fixed charges ratios for the three months ended December 31, 2015, June 30, 2015 and March 31, 2015 include gains on the sale of real estate of $59.4 million, $1.5 million and $30.3 million, respectively.
(2) Debt service coverage ratio is computed by dividing Adjusted EBITDA (see page 8) by interest expense and principal amortization.


12



Same-Store Portfolio Net Operating Income (NOI) Growth & Rental Rate Growth
2016 vs. 2015
 

 
Three Months Ended March 31,
 
 
 
Rental Rate
 
2016
 
2015
 
% Change
 
Growth
Cash Basis:
 
 
 
 
 
 
 
Multifamily
$
8,019

 
$
7,843

 
2.2
 %
 
(0.2
)%
Office
24,698

 
24,652

 
0.2
 %
 
1.4
 %
Retail
10,653

 
10,847

 
(1.8
)%
 
3.4
 %
Overall Same-Store Portfolio (1)
$
43,370

 
$
43,342

 
0.1
 %
 
1.4
 %
 
 
 
 
 
 
 
 
GAAP Basis:
 
 
 
 
 
 
 
Multifamily
$
8,007

 
$
7,841

 
2.1
 %
 
(0.3
)%
Office
24,409

 
23,463

 
4.0
 %
 
3.6
 %
Retail
10,974

 
11,011

 
(0.3
)%
 
3.2
 %
Overall Same-Store Portfolio (1)
$
43,390

 
$
42,315

 
2.5
 %
 
2.7
 %

(1)  Non same-store properties were:
Acquisitions:
Multifamily - The Wellington
Development/Redevelopment:
Multifamily - The Maxwell
         Office - Silverline Center and The Army Navy Club Building
Sold properties classified as continuing operations:
Multifamily - Country Club Towers and Munson Hill
Retail - Montgomery Village Center


13



Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Three Months Ended March 31, 2016
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
13,679

 
$
39,339

 
$
15,380

 
$
—

 
$
68,398

Non same-store - acquired and in development (1)
4,260

 
4,479

 
—

 
—

 
8,739

Total
17,939

 
43,818

 
15,380

 
—

 
77,137

Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,672

 
14,930

 
4,406

 
—

 
25,008

Non same-store - acquired and in development (1)
1,581

 
2,145

 
—

 
—

 
3,726

Total
7,253

 
17,075

 
4,406

 
—

 
28,734

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
8,007

 
24,409

 
10,974

 
—

 
43,390

Non same-store - acquired and in development (1)
2,679

 
2,334

 
—

 
—

 
5,013

Total
$
10,686

 
$
26,743

 
$
10,974

 
$
—

 
$
48,403

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
8,007

 
$
24,409

 
$
10,974

 
$
—

 
$
43,390

Straight-line revenue, net for same-store properties
11

 
(428
)
 
(116
)
 
—

 
(533
)
FAS 141 Min Rent
1

 
190

 
(254
)
 
—

 
(63
)
Amortization of lease intangibles for same-store properties
—

 
527

 
49

 
—

 
576

Same-store portfolio cash NOI
$
8,019

 
$
24,698

 
$
10,653

 
$
—

 
$
43,370

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
10,686

 
$
26,743

 
$
10,974

 
$
—

 
$
48,403

Depreciation and amortization
(5,403
)
 
(16,783
)
 
(3,609
)
 
(243
)
 
(26,038
)
General and administrative
—

 
—

 
—

 
(5,511
)
 
(5,511
)
Interest expense
(2,243
)
 
(2,527
)
 
(216
)
 
(9,374
)
 
(14,360
)
Other income
—

 
—

 
—

 
39

 
39

Acquisition costs
—

 
—

 
—

 
(154
)
 
(154
)
Net income
3,040

 
7,433

 
7,149

 
(15,243
)
 
2,379

Net loss attributable to noncontrolling interests
—

 
—

 
—

 
5

 
5

Net income attributable to the controlling interests
$
3,040

 
$
7,433

 
$
7,149

 
$
(15,238
)
 
$
2,384

(1)  For a list of non-same-store properties and held for sale and sold properties, see page 13 of this Supplemental.
 
 

14



Same-Store 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
$
13,616

 
$
38,612

 
$
15,479

 
$
—

 
$
67,707

Non same-store - acquired and in development (1)
2,415

 
3,883

 
851

 
—

 
7,149

                         Total
16,031

 
42,495

 
16,330

 
—

 
74,856

 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
5,775

 
15,149

 
4,468

 
—

 
25,392

Non same-store - acquired and in development (1)
1,503

 
1,994

 
319

 
—

 
3,816

                         Total
7,278

 
17,143

 
4,787

 
—

 
29,208

 
 
 
 
 
 
 
 
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
7,841

 
23,463

 
11,011

 
—

 
42,315

Non same-store - acquired and in development (1)
912

 
1,889

 
532

 
—

 
3,333

                          Total
$
8,753

 
$
25,352

 
$
11,543

 
$
—

 
$
45,648

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
7,841

 
$
23,463

 
$
11,011

 
$
—

 
$
42,315

Straight-line revenue, net for same-store properties
1

 
557

 
8

 
—

 
566

FAS 141 Min Rent
1

 
164

 
(240
)
 
—

 
(75
)
Amortization of lease intangibles for same-store properties
—

 
468

 
68

 
—

 
536

Same-store portfolio cash NOI
$
7,843

 
$
24,652

 
$
10,847

 
$
—

 
$
43,342

 
 
 
 
 
 
 
 
 
 
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 income 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 13 of this Supplemental.
 
 

15



Net Operating Income (NOI) by Region
 
 
 
 
 
 
 
Percentage of NOI
 
 
 
Q1 2016
 
 
DC
 
 
 
Multifamily
5.6
%
 
 
Office
24.9
%
 
 
Retail
1.5
%
 
 
 
32.0
%
 
 
Maryland
 
 
 
Multifamily
2.5
%
 
 
Office
11.0
%
 
 
Retail
14.3
%
 
 
 
27.8
%
 
 
Virginia
 
 
 
Multifamily
14.0
%
 
 
Office
19.3
%
 
 
Retail
6.9
%
 
 
 
40.2
%
 
 
 
 
 
 
Total Portfolio
100.0
%
 



16



Same-Store Portfolio and Overall Physical Occupancy Levels by Sector

 
 
 
Physical Occupancy - Same-Store Properties (1), (2)
Sector
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Multifamily (calculated on a unit basis)
 
95.3
%
 
94.4
%
 
93.5
%
 
95.1
%
 
94.2
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
94.5
%
 
94.3
%
 
93.2
%
 
94.3
%
 
93.6
%
Office
 
90.6
%
 
90.4
%
 
90.7
%
 
90.8
%
 
90.5
%
Retail
 
91.2
%
 
91.5
%
 
95.4
%
 
94.1
%
 
95.4
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
91.7
%
 
91.6
%
 
92.5
%
 
92.6
%
 
92.5
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Physical Occupancy - All Properties (2)
Sector
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Multifamily (calculated on a unit basis)
 
95.2
%
 
93.9
%
 
92.6
%
 
92.3
%
 
90.2
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
94.5
%
 
93.4
%
 
92.3
%
 
91.7
%
 
89.5
%
Office
 
87.8
%
 
87.6
%
 
87.8
%
 
87.6
%
 
86.7
%
Retail
 
91.2
%
 
91.5
%
 
94.4
%
 
92.9
%
 
94.7
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
90.6
%
 
90.2
%
 
90.7
%
 
90.0
%
 
89.5
%
(1)  Non same-store properties were:
Acquisitions:
Multifamily - The Wellington
Development/Redevelopment:
Multifamily - The Maxwell
         Office - Silverline Center and The Army Navy Club Building
Sold properties classified as continuing operations:
Multifamily - Country Club Towers and Munson Hill Towers
Retail - Montgomery Village Center
 
(2) Physical occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period, except for the rows labeled "Multifamily (calculated on a unit basis)," on which physical occupancy is calculated as occupied units as a percentage of total available units as of the last day of that period..


17



Same-Store Portfolio and Overall Economic Occupancy Levels by Sector
 
 
 
Economic Occupancy - Same-Store Properties(1)
Sector
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Multifamily
 
94.4
%
 
94.5
%
 
95.0
%
 
95.7
%
 
94.8
%
Office
 
90.1
%
 
91.4
%
 
91.1
%
 
91.0
%
 
90.7
%
Retail
 
89.7
%
 
92.0
%
 
93.5
%
 
94.0
%
 
94.4
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
90.9
%
 
92.2
%
 
92.4
%
 
92.6
%
 
92.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Occupancy - All Properties
Sector
 
3/31/2016
 
12/31/2015
 
9/30/2015
 
6/30/2015
 
3/31/2015
Multifamily
 
93.9
%
 
93.2
%
 
92.7
%
 
90.6
%
 
88.4
%
Office
 
86.9
%
 
88.3
%
 
87.7
%
 
87.2
%
 
86.5
%
Retail
 
89.7
%
 
91.1
%
 
92.3
%
 
92.9
%
 
93.5
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
89.0
%
 
90.0
%
 
89.8
%
 
89.0
%
 
88.2
%

(1)  Non same-store properties were:
Acquisitions:
Multifamily - The Wellington
Development/Redevelopment:
Multifamily - The Maxwell
         Office - Silverline Center and The Army Navy Club Building
Sold properties classified as continuing operations:
Multifamily - Country Club Towers and Munson Hill Towers
Retail - Montgomery Village Center


18



Commercial Leasing Summary - New Leases
 
 
1st Quarter 2016
 
4th Quarter 2015
 
3rd Quarter 2015
 
2nd Quarter 2015
 
1st Quarter 2015
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
32,249
 
 
220,374
 
 
93,389
 
 
57,693
 
 
61,141
 
      Retail Centers
11,777
 
 
—
 
 
74,102
 
 
35,095
 
 
10,853
 
Total
44,026
 

220,374
 

167,491
 
 
92,788
 
 
71,994
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
7.7
 
 
6.5
 
 
6.8
 
 
6.8
 
 
7.5
 
      Retail Centers
9.8
 
 
0.0
 
 
10.2
 
 
9.6
 
 
11.0
 
Total
8.3
 
 
6.5
 
 
8.3
 
 
7.8
 
 
8.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
30.91

 
$
31.78

 
$
32.57

 
$
33.76

 
$
27.72

 
$
28.67

 
$
36.35

 
$
38.06

 
$
31.43

 
$
33.14

            Retail Centers
11.93

 
12.04

 
—

 
—

 
22.32

 
22.77

 
23.77

 
25.30

 
41.57

 
41.85

Total
$
25.83

 
$
26.50

 
$
32.57

 
$
33.76

 
$
25.33

 
$
26.06

 
$
31.59

 
$
33.23

 
$
32.96

 
$
34.45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
40.60

 
$
36.84

 
$
39.45

 
$
36.62

 
$
36.46

 
$
33.53

 
$
41.61

 
$
38.11

 
$
35.39

 
$
32.49

            Retail Centers
16.22

 
14.45

 
—

 
—

 
27.61

 
26.14

 
28.17

 
26.42

 
52.79

 
46.99

Total
$
34.08

 
$
30.85

 
$
39.45

 
$
36.62

 
$
32.55

 
$
30.26

 
$
36.53

 
$
33.69

 
$
38.01

 
$
34.68

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
31.4
%
 
15.9
%
 
21.1
%
 
8.5
%
 
31.6
%
 
17.0
%
 
14.5
%
 
0.2
%
 
12.6
%
 
(2.0
)%
            Retail Centers
35.9
%
 
20.0
%
 
—
%
 
—
%
 
23.7
%
 
14.8
%
 
18.5
%
 
4.4
%
 
27.0
%
 
12.3
 %
Total
31.9
%
 
16.4
%
 
21.1
%
 
8.5
%
 
28.5
%
 
16.1
%
 
15.6
%
 
1.4
%
 
15.3
%
 
0.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
1,571,632

 
$
48.73

 
$
13,946,572

 
$
63.29

 
$
4,775,584

 
$
51.14

 
$
2,209,271

 
$
38.29

 
$
3,255,324

 
$
53.24

Retail Centers
203,276

 
17.26

 
—

 
—

 
5,220,923

 
70.46

 
592,351

 
16.88

 
353,335

 
32.56

Subtotal
$
1,774,908

 
$
40.31

 
$
13,946,572

 
$
63.29

 
$
9,996,507

 
$
59.68

 
$
2,801,622

 
$
30.19

 
$
3,608,659

 
$
50.12

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,250,549

 
$
38.78

 
$
7,960,650

 
$
36.12

 
$
4,556,279

 
$
48.79

 
$
1,809,746

 
$
31.37

 
$
2,092,175

 
$
34.22

Retail Centers
212,402

 
18.04

 
—

 
—

 
1,649,704

 
22.26

 
592,483

 
16.88

 
754,661

 
69.53

Subtotal
$
1,462,951

 
$
33.23

 
$
7,960,650

 
$
36.12

 
$
6,205,983

 
$
37.05

 
$
2,402,229

 
$
25.89

 
$
2,846,836

 
$
39.54

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
2,822,181

 
$
87.51

 
$
21,907,222

 
$
99.41

 
$
9,331,863

 
$
99.93

 
$
4,019,017

 
$
69.66

 
$
5,347,499

 
$
87.46

Retail Centers
415,678

 
35.30

 
—

 
—

 
6,870,627

 
92.72

 
1,184,834

 
33.76

 
1,107,996

 
102.09

Total
$
3,237,859

 
$
73.54

 
$
21,907,222

 
$
99.41

 
$
16,202,490

 
$
96.73

 
$
5,203,851

 
$
56.08

 
$
6,455,495

 
$
89.66


19



Commercial Leasing Summary - Renewal Leases
 
 
1st Quarter 2016
 
4th Quarter 2015
 
3rd Quarter 2015
 
2nd Quarter 2015
 
1st Quarter 2015
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
193,275
 
 
42,033
 
 
191,599
 
 
71,112
 
 
135,134
 
      Retail Centers
27,243
 
 
32,594
 
 
53,415
 
 
95,048
 
 
111,342
 
Total
220,518
 
 
74,627
 
 
245,014
 
 
166,160
 
 
246,476
 
Weighted Average Term (yrs)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
7.1
 
 
6.6
 
 
2.8
 
 
3.9
 
 
4.8
 
      Retail Centers
11.6
 
 
3.3
 
 
4.4
 
 
5.8
 
 
5.4
 
Total
7.6
 
 
5.1
 
 
3.1
 
 
4.9
 
 
5.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
36.53

 
$
38.93

 
$
35.61

 
$
37.12

 
$
35.23

 
$
37.43

 
$
30.91

 
$
33.07

 
$
35.26

 
$
36.79

            Retail Centers
24.53

 
26.67

 
21.30

 
22.56

 
23.21

 
23.72

 
17.57

 
18.54

 
16.14

 
16.71

Total
$
35.04

 
$
37.42

 
$
29.36

 
$
30.76

 
$
32.61

 
$
34.44

 
$
23.28

 
$
24.76

 
$
26.63

 
$
27.72

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
40.55

 
$
37.12

 
$
37.01

 
$
34.12

 
$
31.37

 
$
30.29

 
$
32.43

 
$
31.37

 
$
37.98

 
$
35.99

            Retail Centers
41.49

 
35.39

 
25.08

 
23.50

 
26.63

 
26.10

 
22.49

 
21.25

 
17.06

 
16.64

Total
$
40.66

 
$
36.90

 
$
31.80

 
$
29.49

 
$
30.34

 
$
29.38

 
$
26.75

 
$
25.58

 
$
28.53

 
$
27.25

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
11.0
%
 
(4.7
)%
 
3.9
%
 
(8.1
)%
 
(11.0
)%
 
(19.1
)%
 
4.9
%
 
(5.1
)%
 
7.7
%
 
(2.2
)%
            Retail Centers
69.2
%
 
32.7
 %
 
17.8
%
 
4.2
 %
 
14.7
 %
 
10.0
 %
 
28.0
%
 
14.6
 %
 
5.7
%
 
(0.4
)%
Total
16.0
%
 
(1.4
)%
 
8.3
%
 
(4.1
)%
 
(7.0
)%
 
(14.7
)%
 
14.9
%
 
3.3
 %
 
7.2
%
 
(1.7
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
6,945,781

 
$
35.94

 
$
1,580,078

 
$
37.59

 
$
580,967

 
$
3.03

 
$
423,589

 
$
5.96

 
$
550,948

 
$
4.08

Retail Centers
626,200

 
22.99

 
—

 
—

 
36,540

 
0.68

 
39,183

 
0.41

 
152,391

 
1.37

Subtotal
$
7,571,981

 
$
34.34

 
$
1,580,078

 
$
21.17

 
$
617,507

 
$
2.52

 
$
462,772

 
$
2.79

 
$
703,339

 
$
2.85

Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
7,501,476

 
$
38.82

 
$
1,021,344

 
$
24.30

 
$
744,977

 
$
3.89

 
$
368,593

 
$
5.19

 
$
929,511

 
$
6.88

Retail Centers
802,685

 
29.47

 
59,302

 
1.82

 
119,946

 
2.25

 
199,976

 
2.10

 
243,602

 
2.19

Subtotal
$
8,304,161

 
$
37.65

 
$
1,080,646

 
$
14.48

 
$
864,923

 
$
3.53

 
$
568,569

 
$
3.43

 
$
1,173,113

 
$
4.76

Tenant Improvements and Leasing Commissions and Incentives
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
14,447,257

 
$
74.76

 
$
2,601,422

 
$
61.89

 
$
1,325,944

 
$
6.92

 
$
792,182

 
$
11.15

 
$
1,480,459

 
$
10.96

Retail Centers
1,428,885

 
52.46

 
59,302

 
1.82

 
156,486

 
2.93

 
239,159

 
2.51

 
395,993

 
3.56

Total
$
15,876,142

 
$
71.99

 
$
2,660,724

 
$
35.65

 
$
1,482,430

 
$
6.05

 
$
1,031,341

 
$
6.22

 
$
1,876,452

 
$
7.61


20



10 Largest Tenants - Based on Annualized Commercial Income
 
March 31, 2016
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
 
57

 
5.47
%
 
210,354

 
3.31
%
Advisory Board Company
2
 
38

 
3.66
%
 
199,878

 
3.15
%
Engility Corporation
1
 
18

 
2.55
%
 
134,126

 
2.11
%
Squire Patton Boggs (USA) LLP (1)
1
 
13

 
2.41
%
 
110,566

 
1.74
%
Booz Allen Hamilton, Inc.
1
 
118

 
2.29
%
 
222,989

 
3.51
%
Epstein, Becker & Green, P.C.
1
 
153

 
1.37
%
 
55,318

 
0.87
%
General Services Administration
3
 
32

 
1.24
%
 
52,282

 
0.82
%
Hughes Hubbard & Reed LLP
1
 
23

 
1.18
%
 
53,208

 
0.84
%
Alexandria City School Board
1
 
158

 
1.18
%
 
84,693

 
1.33
%
Cozen O'Connor
1
 
1

 
1.14
%
 
36,574

 
0.58
%
Total/Weighted Average
 
 
64

 
22.49
%
 
1,159,988

 
18.26
%

(1) The spaced leased to Squire Patton Boggs (USA) LLP is currently subleased to Advisory Board Company, who has signed an extension to make the lease coterminous with the remaining Advisory Board Company leases expiring on May 31, 2019.

21


Industry Diversification
 
March 31, 2016
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Office:
 
 
 
 
 
 
 
Professional, Scientific, and Technical Services
$
77,039,685

 
50.72
%
 
2,225,451

 
52.66
%
Finance and Insurance
18,842,660

 
12.40
%
 
425,920

 
10.08
%
Other Services (except Public Administration/Government)
12,824,606

 
8.44
%
 
337,032

 
7.97
%
Information (Broadcasting, Publishing, Telecommunications)
8,348,215

 
5.49
%
 
210,070

 
4.97
%
Health Care and Social Assistance
8,014,608

 
5.28
%
 
268,196

 
6.34
%
Educational Services
6,163,385

 
4.06
%
 
194,949

 
4.61
%
Public Administration (Government)
5,756,584

 
3.79
%
 
160,345

 
3.79
%
Wholesale Trade
4,883,016

 
3.21
%
 
119,735

 
2.83
%
Administrative and Support and Waste Management and Remediation Services
2,784,947

 
1.83
%
 
74,805

 
1.77
%
Manufacturing
1,857,643

 
1.22
%
 
54,123

 
1.28
%
Real Estate and Rental and Leasing
1,716,854

 
1.13
%
 
50,384

 
1.19
%
Accommodation and Food Services
1,514,319

 
1.00
%
 
41,612

 
0.98
%
Other
2,179,154

 
1.43
%
 
64,780

 
1.53
%
Total
$
151,925,676

 
100.00
%
 
4,227,402

 
100.00
%
 
 
 
 
 
 
 
 
Retail:
 
 
 
 
 
 
 
Wholesale Trade
$
26,655,443

 
57.83
%
 
1,484,598

 
71.22
%
Accommodation and Food Services
6,892,126

 
14.95
%
 
225,147

 
10.80
%
Finance and Insurance
4,127,775

 
8.96
%
 
56,299

 
2.70
%
Other Services (except Public Administration/Government)
3,283,917

 
7.12
%
 
102,268

 
4.91
%
Arts, Entertainment, and Recreation
1,782,327

 
3.87
%
 
103,649

 
4.97
%
Health Care and Social Assistance
1,173,799

 
2.55
%
 
31,602

 
1.52
%
Manufacturing
533,904

 
1.16
%
 
17,547

 
0.84
%
Educational Services
415,209

 
0.90
%
 
25,598

 
1.23
%
Information (Broadcasting, Publishing, Telecommunications)
350,495

 
0.76
%
 
8,347

 
0.40
%
Other
876,011

 
1.90
%
 
29,350

 
1.41
%
Total
$
46,091,006

 
100.00
%
 
2,084,405

 
100.00
%
 
 
 
 
 
 
 
 

22



Lease Expirations
 
March 31, 2016
Year
 
Number of Leases
 
Rentable Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent *
 
Average Rental Rate
 
Percent of Annualized Rent *
Office:
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
79

 
253,470

 
5.55
%
 
$
9,798,345

 
$
38.66

 
5.30
%
2017
 
94

 
600,182

 
13.13
%
 
23,025,813

 
38.36

 
12.46
%
2018
 
91

 
457,959

 
10.02
%
 
17,193,036

 
37.54

 
9.30
%
2019
 
89

 
702,098

 
15.36
%
 
27,141,033

 
38.66

 
14.69
%
2020
 
86

 
572,154

 
12.52
%
 
24,304,548

 
42.48

 
13.15
%
2021 and thereafter
 
225

 
1,984,814

 
43.42
%
 
83,313,537

 
41.98

 
45.10
%
 
 
664

 
4,570,677

 
100.00
%
 
$
184,776,312

 
40.43

 
100.00
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
14

 
66,633

 
3.04
%
 
$
2,183,992

 
32.78

 
4.10
%
2017
 
44

 
256,212

 
11.70
%
 
6,901,420

 
26.94

 
12.95
%
2018
 
38

 
336,934

 
15.38
%
 
4,966,988

 
14.74

 
9.32
%
2019
 
32

 
158,213

 
7.22
%
 
4,477,053

 
28.30

 
8.40
%
2020
 
37

 
407,969

 
18.62
%
 
7,363,213

 
18.05

 
13.82
%
2021 and thereafter
 
122

 
964,686

 
44.04
%
 
27,400,923

 
28.40

 
51.41
%
 
 
287

 
2,190,647

 
100.00
%
 
$
53,293,589

 
24.33

 
100.00
%
Total:
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
93

 
320,103

 
4.73
%
 
11,982,337

 
37.43

 
5.03
%
2017
 
138

 
856,394

 
12.67
%
 
29,927,233

 
34.95

 
12.57
%
2018
 
129

 
794,893

 
11.76
%
 
22,160,024

 
27.88

 
9.31
%
2019
 
121

 
860,311

 
12.72
%
 
31,618,086

 
36.75

 
13.28
%
2020
 
123

 
980,123

 
14.50
%
 
31,667,761

 
32.31

 
13.30
%
2021 and thereafter
 
347

 
2,949,500

 
43.62
%
 
110,714,460

 
37.54

 
46.51
%
 
 
951

 
6,761,324

 
100.00
%
 
$
238,069,901

 
35.21

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

23



Schedule of Properties
 
March 31, 2016
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Office Buildings
 
 
 
 
 
 
 
 
515 King Street
 
Alexandria, VA
 
1992
 
1966
 
75,000

Courthouse Square
 
Alexandria, VA
 
2000
 
1979
 
118,000

Braddock Metro Center
 
Alexandria, VA
 
2011
 
1985
 
348,000

1600 Wilson Boulevard
 
Arlington, VA
 
1997
 
1973
 
169,000

Fairgate at Ballston
 
Arlington, VA
 
2012
 
1988
 
141,000

Monument II
 
Herndon, VA
 
2007
 
2000
 
207,000

925 Corporate Drive
 
Stafford, VA
 
2010
 
2007
 
134,000

1000 Corporate Drive
 
Stafford, VA
 
2010
 
2009
 
136,000

Silverline Center
 
Tysons, VA
 
1997
 
1972/1986/1999/2014
 
529,000

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

51 Monroe Street
 
Rockville, MD
 
1979
 
1975
 
223,000

6110 Executive Boulevard
 
Rockville, MD
 
1995
 
1971
 
203,000

600 Jefferson Plaza
 
Rockville, MD
 
1999
 
1985
 
113,000

One Central Plaza
 
Rockville, MD
 
2001
 
1974
 
268,000

West Gude Drive
 
Rockville, MD
 
2006
 
1984/1986/1988
 
277,000

Wayne Plaza
 
Silver Spring, MD
 
2000
 
1970
 
99,000

1901 Pennsylvania Avenue
 
Washington, DC
 
1977
 
1960
 
101,000

1220 19th Street
 
Washington, DC
 
1995
 
1976
 
103,000

1776 G Street
 
Washington, DC
 
2003
 
1979
 
266,000

2000 M Street
 
Washington, DC
 
2007
 
1971
 
231,000

2445 M Street
 
Washington, DC
 
2008
 
1986
 
290,000

1140 Connecticut Avenue
 
Washington, DC
 
2011
 
1966
 
183,000

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

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

1775 Eye Street
 
Washington, DC
 
2014
 
1964
 
186,000

Subtotal
 
 
 
 
 
 
 
4,866,000


24



Schedule of Properties (continued)
 
March 31, 2016
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
Retail Centers
 
 
 
 
 
 
 
 
Bradlee Shopping Center
 
Alexandria, VA
 
1984
 
1955
 
171,000

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

800 S. Washington Street
 
Alexandria, VA
 
1998/2003
 
1955/1959
 
46,000

Concord Centre
 
Springfield, VA
 
1973
 
1960
 
76,000

Gateway Overlook
 
Columbia, MD
 
2010
 
2007
 
220,000

Frederick County Square
 
Frederick, MD
 
1995
 
1973
 
227,000

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

Centre at Hagerstown
 
Hagerstown, MD
 
2002
 
2000
 
332,000

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

Randolph Shopping Center
 
Rockville, MD
 
2006
 
1972
 
82,000

Montrose Shopping Center
 
Rockville, MD
 
2006
 
1970
 
145,000

Takoma Park
 
Takoma Park, MD
 
1963
 
1962
 
51,000

Westminster
 
Westminster, MD
 
1972
 
1969
 
150,000

Wheaton Park
 
Wheaton, MD
 
1977
 
1967
 
74,000

Chevy Chase Metro Plaza
 
Washington, DC
 
1985
 
1975
 
50,000

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

Subtotal
 
 
 
 
 
 
 
2,327,000



25



Schedule of Properties (continued)
 
March 31, 2016
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET (1)
Multifamily Buildings / # units
 
 
 
 
 
 
 
 
Clayborne / 74
 
Alexandria, VA
 
2008
 
2008
 
60,000

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

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

The Paramount / 135
 
Arlington, VA
 
2013
 
1984
 
141,000

The Maxwell / 163
 
Arlington, VA
 
2014
 
2014
 
139,000

The Wellington / 711
 
Arlington, VA
 
2015
 
1960
 
842,000

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

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

Bethesda Hill Apartments / 195
 
Bethesda, MD
 
1997
 
1986
 
225,000

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

3801 Connecticut Avenue / 307
 
Washington, DC
 
1963
 
1951
 
178,000

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

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

Subtotal (3,258 units)
 
 
 
 
 
 
 
3,014,000

TOTAL
 
 
 
 
 
 
 
10,207,000

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

26



Supplemental Definitions
 
March 31, 2016
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, severance expense, relocation expense, acquisition and structuring expenses 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, severance expense, relocation expense, acquisition and structuring expenses 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.
NAREIT Funds from operations ("NAREIT FFO") is defined by 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, impairment of depreciable real estate and real estate depreciation and amortization. We consider NAREIT 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 NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. NAREIT FFO is a non-GAAP measure.
Core Funds From Operations ("Core FFO") is calculated by adjusting NAREIT 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 and gains or losses on sale, not already excluded from NAREIT 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 NAREIT FFO (1) recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream (excluding items contemplated prior to acquisition or associated with development / redevelopment of a property) 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 and gains or losses on sale, 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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Physical occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period. Multifamily unit basis physical occupancy is calculated as occupied units as a percentage of total units 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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