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Company Background and Highlights
Third Quarter 2018

Washington Real Estate Investment Trust ("Washington REIT") owns and operates uniquely positioned real estate assets in the Washington D.C. market. As of September 30, 2018, Washington REIT owned a diversified portfolio of 48 properties, totaling approximately 6.1 million square feet of commercial space and 4,268 multifamily units, and land held for development. These 48 properties consist of 19 office properties, 16 retail centers and 13 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).


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Supplemental Financial and Operating Data

Table of Contents
September 30, 2018
 
 
 
Schedule
Page
Key Financial Data
 
 
 
 
 
 
Capital Analysis
 
 
Long Term Debt Analysis
 
 
 
Portfolio Analysis
 
 
 
 
 
Same-Store Portfolio and Overall Ending Occupancy Levels by Sector
 
Growth and Strategy
 
 
Acquisition and Disposition Summary
 
Development/Redevelopment Summary
Tenant Analysis
 
 
 
 
 
 
 
Appendix
 
 
 





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

 
Nine Months Ended
 
Three Months Ended
OPERATING RESULTS
9/30/2018
 
9/30/2017
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Real estate rental revenue
$
253,989

 
$
243,776

 
$
82,502

 
$
86,606

 
$
84,881

 
$
81,302

 
$
82,819

Real estate expenses
(87,975
)
 
(86,200
)
 
(28,571
)
 
(29,503
)
 
(29,901
)
 
(29,450
)
 
(29,646
)
 
166,014

 
157,576

 
53,931

 
57,103

 
54,980

 
51,852

 
53,173

Real estate depreciation and amortization
(90,119
)
 
(83,271
)
 
(30,272
)
 
(29,878
)
 
(29,969
)
 
(28,785
)
 
(27,941
)
Income from real estate
75,895

 
74,305

 
23,659

 
27,225

 
25,011

 
23,067

 
25,232

Interest expense
(38,647
)
 
(35,634
)
 
(12,499
)
 
(13,321
)
 
(12,827
)
 
(11,900
)
 
(12,176
)
Other income

 
209

 

 

 

 
298

 
84

Gain on sale of real estate
2,495

 

 

 
2,495

 

 
24,915

 

Loss on extinguishment of debt
(1,178
)
 

 

 

 
(1,178
)
 

 

Real estate impairment
(1,886
)
 
(5,000
)
 

 

 
(1,886
)
 
(28,152
)
 
(5,000
)
General and administrative expenses
(16,737
)
 
(16,712
)
 
(5,267
)
 
(5,649
)
 
(5,821
)
 
(5,868
)
 
(5,327
)
Income tax benefit (expense)

 
107

 

 

 

 
(23
)
 

Net income
19,942

 
17,275

 
5,893

 
10,750

 
3,299

 
2,337

 
2,813

Less: Net loss from noncontrolling interests

 
56

 

 

 

 

 
20

Net income attributable to the controlling interests
$
19,942

 
$
17,331

 
$
5,893

 
$
10,750

 
$
3,299

 
$
2,337

 
$
2,833

Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to the controlling interests
$
0.25

 
$
0.22

 
$
0.07

 
$
0.13

 
$
0.04

 
$
0.03

 
$
0.04

Fully diluted weighted average shares outstanding
78,802

 
76,415

 
79,238

 
78,616

 
78,547

 
78,478

 
77,423

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
34.6
%

35.4
%
 
34.6
%
 
34.1
%
 
35.2
%
 
36.2
%
 
35.8
%
General and administrative
6.6
%

6.9
%
 
6.4
%
 
6.5
%
 
6.9
%
 
7.2
%
 
6.4
%
Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
3.9
x
 
4.0
x
 
3.9
x
 
3.9
x
 
3.9
x
 
3.9
x
 
4.0
x
Net income attributable to the controlling interests /
Real estate rental revenue
7.9
%

7.1
%
 
7.1
%
 
12.4
%
 
3.9
%
 
2.9
%
 
3.4
%

4




Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Assets
 
 
 
 
 
 
 
 
 
Land
$
614,659

 
$
614,659

 
$
614,659

 
$
588,025

 
$
615,280

Income producing property
2,239,917

 
2,220,819

 
2,211,529

 
2,113,977

 
2,214,864

 
2,854,576

 
2,835,478

 
2,826,188

 
2,702,002

 
2,830,144

Accumulated depreciation and amortization
(745,829
)
 
(722,423
)
 
(698,450
)
 
(683,692
)
 
(715,228
)
Net income producing property
2,108,747

 
2,113,055

 
2,127,738

 
2,018,310

 
2,114,916

Development in progress, including land held for development
81,765

 
71,522

 
61,712

 
54,422

 
49,065

Total real estate held for investment, net
2,190,512

 
2,184,577

 
2,189,450

 
2,072,732

 
2,163,981

Investment in real estate held for sale, net

 

 
93,048

 
68,534

 
7,011

Cash and cash equivalents
4,810

 
5,952

 
11,510

 
9,847

 
11,326

Restricted cash
1,352

 
2,301

 
2,469

 
2,776

 
1,442

Rents and other receivables, net of allowance for doubtful accounts
74,395

 
73,650

 
71,499

 
69,766

 
73,545

Prepaid expenses and other assets
145,448

 
142,648

 
148,088

 
125,087

 
126,589

Other assets related to properties held for sale

 

 
2,231

 
10,684

 
400

Total assets
$
2,416,517

 
$
2,409,128

 
$
2,518,295

 
$
2,359,426

 
$
2,384,294

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
995,130

 
$
994,778

 
$
994,425

 
$
894,358

 
$
894,103

Mortgage notes payable
60,541

 
93,071

 
93,991

 
95,141

 
96,045

Line of credit
183,000

 
169,000

 
260,000

 
166,000

 
189,000

Accounts payable and other liabilities
63,683

 
57,983

 
64,823

 
61,565

 
66,393

Dividend payable

 

 

 
23,581

 

Advance rents
10,597

 
12,020

 
12,441

 
12,487

 
10,723

Tenant security deposits
9,857

 
9,643

 
9,466

 
9,149

 
9,528

Liabilities related to properties held for sale

 

 
2,385

 
1,809

 
311

Total liabilities
1,322,808

 
1,336,495

 
1,437,531

 
1,264,090

 
1,266,103

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

 

 

 

 

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
798

 
787

 
786

 
785

 
785

Additional paid-in capital
1,526,125

 
1,488,366

 
1,485,765

 
1,483,980

 
1,487,157

Distributions in excess of net income
(450,749
)
 
(432,585
)
 
(419,633
)
 
(399,213
)
 
(377,968
)
Accumulated other comprehensive loss
17,181

 
15,707

 
13,484

 
9,419

 
6,848

Total shareholders' equity
1,093,355

 
1,072,275

 
1,080,402

 
1,094,971

 
1,116,822

Noncontrolling interests in subsidiaries
354

 
358

 
362

 
365

 
1,369

Total equity
1,093,709

 
1,072,633

 
1,080,764

 
1,095,336

 
1,118,191

Total liabilities and equity
$
2,416,517

 
$
2,409,128

 
$
2,518,295

 
$
2,359,426

 
$
2,384,294


5




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

 
Nine Months Ended
 
Three Months Ended
 
9/30/2018
 
9/30/2017
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Funds from operations(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
19,942

 
$
17,275

 
$
5,893

 
$
10,750

 
$
3,299

 
$
2,337

 
$
2,813

Real estate depreciation and amortization
90,119

 
83,271

 
30,272

 
29,878

 
29,969

 
28,785

 
27,941

Gain on sale of depreciable real estate
(2,495
)
 

 

 
(2,495
)
 

 
(23,838
)
 

Real estate impairment
1,886

 
5,000

 

 

 
1,886

 
28,152

 
5,000

NAREIT funds from operations (FFO)
109,452


105,546

 
36,165

 
38,133

 
35,154

 
35,436

 
35,754

Loss on extinguishment of debt
1,178

 

 

 

 
1,178

 

 

Gain on sale of non depreciable real estate

 

 

 

 

 
(1,077
)
 

Structuring expenses

 
319

 

 

 

 

 

Core FFO (1)
$
110,630

 
$
105,865

 
$
36,165

 
$
38,133

 
$
36,332

 
$
34,359

 
$
35,754

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
(432
)
 
(291
)
 
(144
)
 
(144
)
 
(144
)
 
(71
)
 
(107
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NAREIT FFO per share - basic
$
1.39

 
$
1.38

 
$
0.46

 
$
0.48

 
$
0.45

 
$
0.45

 
$
0.46

NAREIT FFO per share - fully diluted
$
1.38

 
$
1.38

 
$
0.45

 
$
0.48

 
$
0.45

 
$
0.45

 
$
0.46

Core FFO per share - fully diluted
$
1.40

 
$
1.38

 
$
0.45

 
$
0.48

 
$
0.46

 
$
0.44

 
$
0.46

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common dividend per share
$
0.90

 
$
0.90

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average shares - basic
78,695

 
76,292

 
79,076

 
78,520

 
78,483

 
78,386

 
77,291

Average shares - fully diluted
78,802

 
76,415

 
79,238

 
78,616

 
78,547

 
78,478

 
77,423

(1)  See "Supplemental Definitions" on page 33 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)

 
Nine Months Ended
 
Three Months Ended
 
9/30/2018
 
9/30/2017
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Funds available for distribution (FAD)(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
NAREIT FFO
$
109,452

 
$
105,546

 
$
36,165

 
$
38,133

 
$
35,154

 
$
35,436

 
$
35,754

Non-cash loss on extinguishment of debt
1,178

 

 

 

 
1,178

 

 

Tenant improvements and incentives
(12,805
)
 
(10,394
)
 
(5,808
)
 
(2,330
)
 
(4,667
)
 
(7,788
)
 
(1,822
)
External and internal leasing commissions capitalized
(2,300
)
 
(5,664
)
 
(957
)
 
(896
)
 
(447
)
 
(1,741
)
 
(1,727
)
Recurring capital improvements
(1,844
)
 
(2,383
)
 
(752
)
 
(469
)
 
(623
)
 
(4,455
)
 
(1,315
)
Straight-line rent, net
(3,384
)
 
(3,142
)
 
(1,058
)
 
(1,123
)
 
(1,203
)
 
(1,238
)
 
(1,187
)
Non-cash fair value interest expense
(651
)
 
(749
)
 
(215
)
 
(217
)
 
(219
)
 
(221
)
 
(223
)
Non-real estate depreciation and amortization of debt costs
2,898

 
2,594

 
997

 
945

 
956

 
943

 
880

Amortization of lease intangibles, net
1,470

 
1,995

 
430

 
420

 
620

 
436

 
560

Amortization and expensing of restricted share and unit compensation
5,064

 
3,561

 
1,694

 
1,830

 
1,540

 
1,211

 
1,245

FAD
99,078

 
91,364

 
30,496

 
36,293

 
32,289

 
22,583

 
32,165

Gain on sale of non-depreciable real estate

 

 

 

 

 
(1,077
)
 

Structuring expenses

 
319

 

 

 

 

 

Core FAD (1)
$
99,078

 
$
91,683

 
$
30,496

 
$
36,293

 
$
32,289

 
$
21,506

 
$
32,165

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)  See "Supplemental Definitions" on page 33 of this supplemental for the definitions of FAD and Core FAD.



7




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

 
Nine Months Ended
 
Three Months Ended
 
9/30/2018
 
9/30/2017
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
19,942

 
$
17,275

 
$
5,893

 
$
10,750

 
$
3,299

 
$
2,337

 
$
2,813

Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
38,647

 
35,634

 
12,499

 
13,321

 
12,827

 
11,900

 
12,176

Real estate depreciation and amortization
90,119

 
83,271

 
30,272

 
29,878

 
29,969

 
28,785

 
27,941

Income tax (benefit) expense

 
(107
)
 

 

 

 
23

 

Real estate impairment
1,886

 
5,000

 

 

 
1,886

 
28,152

 
5,000

Non-real estate depreciation
672

 
414

 
226

 
191

 
255

 
243

 
178

Structuring expenses

 
319

 

 

 

 

 

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of real estate
(2,495
)
 

 

 
(2,495
)
 

 
(24,915
)
 

Loss on extinguishment of debt
1,178

 

 

 

 
1,178

 

 

Adjusted EBITDA
$
149,949

 
$
141,806

 
$
48,890

 
$
51,645

 
$
49,414

 
$
46,525

 
$
48,108

 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)   Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expense 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.



8




Long Term Debt Analysis
($'s in thousands)

 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Mortgage note payable, net
$
60,541

 
$
93,071

 
$
93,991

 
$
95,141

 
$
96,045

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
596,714

 
596,467

 
596,219

 
595,972

 
595,809

Term loans
398,416

 
398,311

 
398,206

 
298,386

 
298,294

Credit facility
183,000

 
169,000

 
260,000

 
166,000

 
189,000

Unsecured total
1,178,130

 
1,163,778

 
1,254,425

 
1,060,358

 
1,083,103

Total
$
1,238,671

 
$
1,256,849

 
$
1,348,416

 
$
1,155,499

 
$
1,179,148

 
 
 
 
 
 
 
 
 
 
Weighted Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Mortgage note payable, net
4.0
%
 
4.5
%
 
4.5
%
 
4.5
%
 
4.5
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.7
%
 
4.7
%
 
4.7
%
 
4.7
%
 
4.7
%
Term loans (1)
2.8
%
 
2.8
%
 
2.6
%
 
2.8
%
 
2.8
%
Credit facility
3.2
%
 
3.0
%
 
2.9
%
 
2.5
%
 
2.2
%
Unsecured total
3.8
%
 
3.8
%
 
3.7
%
 
3.8
%
 
3.8
%
Weighted Average
3.9
%
 
3.9
%
 
3.7
%
 
3.9
%
 
3.8
%
 
 
 
 
 
 
 
 
 
 
(1) Washington REIT has entered into interest rate swaps to effectively fix the floating interest rates on its term loans (see page 10 of this Supplemental)
 
 
 
 
 
 
 
 
 
 
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)
September 30, 2018
, except per share data)chart-8d5e7b67da1358d48a6a01.jpg
 
Future Maturities of Debt
Year
Secured Debt
 
Unsecured Debt
 
Credit Facility
 
Total Debt
 
Avg Interest Rate
2018
$

 
$

 
$

 
$

 

2019

 

 

 

 

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

 
250,000

(3) 
183,000

(1) 
433,000

 
3.0%
Thereafter

 
50,000

 

 
50,000

 
7.4%
Scheduled principal payments
$
44,517

 
$
1,000,000

 
$
183,000

 
$
1,227,517

 
3.8%
Scheduled amortization payments
13,454

 

 

 
13,454

 
4.8%
Net discounts/premiums
2,733

 
(1,286
)
 

 
1,447

 
 
Loan costs, net of amortization
(163
)
 
(3,584
)
 

 
(3,747
)
 
 
Total maturities
$
60,541

 
$
995,130

 
$
183,000

 
$
1,238,671

 
3.9%
Weighted average maturity = 3.9 years

(1) Maturity date for credit facility of March 2023 assumes election of option for two additional 6-month periods.
(2) Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 110 basis points floating interest rate to a 2.72% all-in fixed interest rate through the term loan maturity of March 2021.
(3) Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 110 basis points floating interest rate to a 2.31% all-in fixed interest rate for $150.0 million portion of the of the term loan. For the remaining $100.0 million portion of the term loan, Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 100 basis points floating interest rate to a 3.71% all-in fixed interest rate. The interest rates are fixed through the term loan maturity of July 2023.

10




Debt Covenant Compliance

 
Unsecured Notes Payable
 
Unsecured Line of Credit
and Term Loans
 
Quarter Ended September 30, 2018
 
Covenant
 
Quarter Ended September 30, 2018
 
Covenant
% of Total Indebtedness to Total Assets(1)
40.0
%
 
≤ 65.0%
 
 N/A

 
N/A
Ratio of Income Available for Debt Service to Annual Debt Service
4.2

 
            ≥ 1.5
 
 N/A

 
N/A
% of Secured Indebtedness to Total Assets(1)
2.0
%
 
≤ 40.0%
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.5

 
            ≥ 1.5
 
 N/A

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

 
 N/A
 
34.0
%
 
≤ 60.0%
Ratio of Consolidated Adjusted EBITDA(4) to Consolidated Fixed Charges(5)
 N/A

 
 N/A
 
3.69

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

 
 N/A
 
1.7
%
 
≤ 40.0%
% of Consolidated Unsecured Indebtedness to Unencumbered Pool Value(6)
 N/A

 
 N/A
 
33.7
%
 
≤ 60.0%
Ratio of Unencumbered Adjusted Net Operating Income to Consolidated Unsecured Interest Expense
 N/A

 
 N/A
 
4.48

 
             ≥ 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)
 
 
 
 
 
Three Months Ended
 
 
 
 
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
 
 
 
 
$
79,844

 
$
78,661

 
$
78,636

 
$
78,510

 
$
78,464

Market Price per Share
 
 
 
 
30.65

 
30.33

 
27.30

 
31.12

 
32.76

Equity Market Capitalization
 
 
 
 
$
2,447,219

 
$
2,385,788

 
$
2,146,763

 
$
2,443,231

 
$
2,570,481

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
 
 
 
$
1,238,671

 
$
1,256,849

 
$
1,348,416

 
$
1,155,499

 
$
1,179,148

Total Market Capitalization
 
 
 
 
$
3,685,890

 
$
3,642,637

 
$
3,495,179

 
$
3,598,730

 
$
3,749,629

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
 
 
 
 
0.34
:1
 
0.35
:1
 
0.39
:1
 
0.32
:1
 
0.31
:1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
 
 
 
 
1.4x

 
1.8x

 
1.2x

 
1.2x

 
1.2x

Debt Service Coverage Ratio(2)
 
 
 
 
3.7x

 
3.7x

 
3.6x

 
3.7x

 
3.7x

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend Data
Nine Months Ended
 
Three Months Ended
 
9/30/2018
 
9/30/2017
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Total Dividends Declared
$
71,478

 
$
69,252

 
$
24,057

 
$
23,702

 
$
23,719

 
$
23,581

 
$
23,493

Common Dividend Declared per Share
$
0.90

 
$
0.90

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO basis)
64.3
%
 
65.2
%
 
66.7
%
 
62.5
%
 
65.2
%
 
68.2
%
 
65.2
%
Payout Ratio (Core FAD basis)
72.0
%
 
75.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 ratio for the three months ended June 30, 2018 and December 31, 2017 include gains on the sale of real estate of $2.5M and $24.9 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
2018 vs. 2017

 
Nine Months Ended September 30,
 
 
 
Three Months Ended September 30,
 
 
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Cash Basis:
 
 
 
 
 
 
 
 
 
 
 
Multifamily
$
43,184

 
$
41,933

 
3.0
 %
 
$
14,595

 
$
14,109

 
3.4
%
Office
60,233

 
57,396

 
4.9
 %
 
19,683

 
18,644

 
5.6
%
Retail
35,054

 
34,911

 
0.4
 %
 
12,057

 
11,709

 
3.0
%
Overall Same-Store Portfolio (1)
$
138,471

 
$
134,240

 
3.2
 %
 
$
46,335

 
$
44,462

 
4.2
%
 
 
 
 
 
 
 
 
 
 
 
 
GAAP Basis:
 
 
 
 
 
 
 
 
 
 
 
Multifamily
$
43,177

 
$
41,925

 
3.0
 %
 
$
14,592

 
$
14,106

 
3.4
%
Office
59,686

 
57,309

 
4.1
 %
 
19,423

 
18,662

 
4.1
%
Retail
35,631

 
35,674

 
(0.1
)%
 
12,205

 
11,917

 
2.4
%
Overall Same-Store Portfolio (1)
$
138,494

 
$
134,908

 
2.7
 %
 
$
46,220

 
$
44,685

 
3.4
%

(1)  Non same-store properties were:
Acquisitions:
Office - Watergate 600 and Arlington Tower
Sold properties:
Office - Braddock Metro Center and 2445 M Street
Multifamily - Walker House Apartments


13





Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
Three Months Ended September 30, 2018
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
23,953

 
$
31,652

 
$
16,111

 
$

 
$
71,716

Non same-store (1)

 
10,786

 

 

 
10,786

Total
23,953

 
42,438

 
16,111

 

 
82,502

Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
9,361

 
12,229

 
3,906

 

 
25,496

Non same-store (1)
(64
)
 
3,139

 

 

 
3,075

Total
9,297

 
15,368

 
3,906

 

 
28,571

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
14,592

 
19,423

 
12,205

 

 
46,220

Non same-store (1)
64

 
7,647

 

 

 
7,711

Total
$
14,656

 
$
27,070

 
$
12,205

 
$

 
$
53,931

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
14,592

 
$
19,423

 
$
12,205

 
$

 
$
46,220

Straight-line revenue, net for same-store properties
2

 
(515
)
 
(28
)
 

 
(541
)
FAS 141 Min Rent
1

 
112

 
(170
)
 

 
(57
)
Amortization of lease intangibles for same-store properties

 
663

 
50

 

 
713

Same-store portfolio cash NOI
$
14,595

 
$
19,683

 
$
12,057

 
$

 
$
46,335

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
14,656

 
$
27,070

 
$
12,205

 
$

 
$
53,931

Depreciation and amortization
(8,099
)
 
(18,464
)
 
(3,525
)
 
(184
)
 
(30,272
)
General and administrative

 

 

 
(5,267
)
 
(5,267
)
Interest expense
(834
)
 
(305
)
 
(158
)
 
(11,202
)
 
(12,499
)
Net income (loss)
5,723

 
8,301

 
8,522

 
(16,653
)
 
5,893

Net loss attributable to noncontrolling interests

 

 

 

 

Net income (loss) attributable to the controlling interests
$
5,723

 
$
8,301

 
$
8,522

 
$
(16,653
)
 
$
5,893

 
 
 
 
 
 
 
 
 
 
(1)  For a list of non-same-store properties, see page 13 of this Supplemental.
 
 

14




Same-Store Net Operating Income (NOI) Detail
(In thousands)
 
Three Months Ended September 30, 2017
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
23,388

 
$
30,672

 
$
15,604

 
$

 
$
69,664

Non same-store (1)
845

 
12,310

 

 

 
13,155

                         Total
24,233

 
42,982

 
15,604

 

 
82,819

 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
9,282

 
12,010

 
3,687

 

 
24,979

Non same-store (1)
431

 
4,236

 

 

 
4,667

                         Total
9,713

 
16,246

 
3,687

 

 
29,646

 
 
 
 
 
 
 
 
 
 
Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
14,106

 
18,662

 
11,917

 

 
44,685

Non same-store (1)
414

 
8,074

 

 

 
8,488

                          Total
$
14,520

 
$
26,736

 
$
11,917

 
$

 
$
53,173

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
14,106

 
$
18,662

 
$
11,917

 
$

 
$
44,685

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

 
(958
)
 
(53
)
 

 
(1,010
)
FAS 141 Min Rent
2

 
234

 
(204
)
 

 
32

Amortization of lease intangibles for same-store properties

 
706

 
49

 

 
755

Same-store portfolio cash NOI
$
14,109

 
$
18,644

 
$
11,709

 
$

 
$
44,462

 
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
14,520

 
$
26,736

 
$
11,917

 
$

 
$
53,173

Depreciation and amortization
(7,720
)
 
(16,449
)
 
(3,566
)
 
(206
)
 
(27,941
)
General and administrative

 

 

 
(5,327
)
 
(5,327
)
Interest expense
(981
)
 
(305
)
 
(182
)
 
(10,708
)
 
(12,176
)
Other income

 

 

 
84

 
84

Real estate impairment

 

 

 
(5,000
)
 
(5,000
)
Net income (loss)
5,819

 
9,982

 
8,169

 
(21,157
)
 
2,813

Net income attributable to noncontrolling interests

 

 

 
20

 
20

Net income (loss) attributable to the controlling interests
$
5,819

 
$
9,982

 
$
8,169

 
$
(21,137
)
 
$
2,833

 
 
 
 
 
 
 
 
 
 
(1)  For a list of non-same-store properties, see page 13 of this Supplemental.
 
 

15




Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Nine Months Ended September 30, 2018
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
$
71,168

 
$
95,703

 
$
47,563

 
$

 
$
214,434

Non same-store (1)

 
39,555

 

 

 
39,555

Total
71,168

 
135,258

 
47,563

 

 
253,989

Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
27,991

 
36,017

 
11,932

 

 
75,940

Non same-store (1)
21

 
12,014

 

 

 
12,035

Total
28,012

 
48,031

 
11,932

 

 
87,975

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
43,177

 
59,686

 
35,631

 

 
138,494

Non same-store (1)
(21
)
 
27,541

 

 

 
27,520

Total
$
43,156

 
$
87,227

 
$
35,631

 
$

 
$
166,014

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
43,177

 
$
59,686

 
$
35,631

 
$

 
$
138,494

Straight-line revenue, net for same-store properties
4

 
(1,903
)
 
(218
)
 

 
(2,117
)
FAS 141 Min Rent
3

 
474

 
(509
)
 

 
(32
)
Amortization of lease intangibles for same-store properties

 
1,976

 
150

 

 
2,126

Same-store portfolio cash NOI
$
43,184

 
$
60,233

 
$
35,054

 
$

 
$
138,471

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
43,156

 
$
87,227

 
$
35,631

 
$

 
$
166,014

Depreciation and amortization
(23,872
)
 
(55,112
)
 
(10,577
)
 
(558
)
 
(90,119
)
General and administrative

 

 

 
(16,737
)
 
(16,737
)
Interest expense
(2,761
)
 
(904
)
 
(492
)
 
(34,490
)
 
(38,647
)
Gain on sale of real estate

 

 

 
2,495

 
2,495

    Loss on extinguishment of debt

 

 

 
(1,178
)
 
(1,178
)
Real estate impairment

 

 

 
(1,886
)
 
(1,886
)
Net income (loss)
16,523

 
31,211

 
24,562

 
(52,354
)
 
19,942

Net loss attributable to noncontrolling interests

 

 

 

 

Net income (loss) attributable to the controlling interests
$
16,523

 
$
31,211

 
$
24,562

 
$
(52,354
)
 
$
19,942

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

16




Same-Store Portfolio Net Operating Income (NOI) Detail
(In thousands)
 
 
Nine Months Ended September 30, 2017
 
Multifamily
 
Office
 
Retail
 
Corporate and Other
 
Total
Real estate rental revenue
 
 
 
 
 
 
 
 
 
Same-store portfolio
69,285

 
$
92,630

 
$
46,821

 
$

 
$
208,736

Non same-store (1)
2,552

 
32,488

 

 

 
35,040

Total
71,837

 
125,118

 
46,821

 

 
243,776

Real estate expenses
 
 
 
 
 
 
 
 
 
Same-store portfolio
27,360

 
35,321

 
11,147

 

 
73,828

Non same-store (1)
1,180

 
11,192

 

 

 
12,372

Total
28,540

 
46,513

 
11,147

 

 
86,200

Net Operating Income (NOI)
 
 
 
 
 
 
 
 
 
Same-store portfolio
41,925

 
57,309

 
35,674

 

 
134,908

Non same-store (1)
1,372

 
21,296

 

 

 
22,668

Total
$
43,297

 
$
78,605

 
$
35,674

 
$

 
$
157,576

 
 
 
 
 
 
 
 
 
 
Same-store portfolio NOI (from above)
$
41,925

 
$
57,309

 
$
35,674

 
$

 
$
134,908

Straight-line revenue, net for same-store properties
4

 
(2,740
)
 
(261
)
 

 
(2,997
)
FAS 141 Min Rent
4

 
686

 
(651
)
 

 
39

Amortization of lease intangibles for same-store properties

 
2,141

 
149

 

 
2,290

Same-store portfolio cash NOI
$
41,933

 
$
57,396

 
$
34,911

 
$

 
$
134,240

Reconciliation of NOI to net income
 
 
 
 
 
 
 
 
 
Total NOI
$
43,297

 
$
78,605

 
$
35,674

 
$

 
$
157,576

Depreciation and amortization
(23,009
)
 
(48,070
)
 
(11,578
)
 
(614
)
 
(83,271
)
General and administrative

 

 

 
(16,712
)
 
(16,712
)
Interest expense
(2,939
)
 
(741
)
 
(564
)
 
(31,390
)
 
(35,634
)
Other income

 

 

 
209

 
209

Real estate impairment

 

 

 
(5,000
)
 
(5,000
)
Income tax benefit

 

 

 
107

 
107

Net income (loss)
17,349

 
29,794

 
23,532

 
(53,400
)
 
17,275

Net loss attributable to noncontrolling interests

 

 

 
56

 
56

Net income (loss) attributable to the controlling interests
$
17,349

 
$
29,794

 
$
23,532

 
$
(53,344
)
 
$
17,331

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

17




Net Operating Income (NOI) by Region
 
 
 
 
 
 
 
 
Percentage of NOI
 
 
 
Q3 2018
 
YTD 2018
 
 
DC
 
 
 
 
 
Multifamily
5.4
%
 
5.3
%
 
 
Office
24.3
%
 
27.6
%
 
 
Retail
1.9
%
 
1.8
%
 
 
 
31.6
%
 
34.7
%
 
 
Maryland
 
 
 
 
 
Multifamily
1.5
%
 
1.4
%
 
 
Retail
13.7
%
 
12.8
%
 
 
 
15.2
%
 
14.2
%
 
 
Virginia
 
 
 
 
 
Multifamily
20.3
%
 
19.3
%
 
 
Office
25.8
%
 
24.9
%
 
 
Retail
7.1
%
 
6.9
%
 
 
 
53.2
%
 
51.1
%
 
 
 
 
 
 
 
 
Total Portfolio
100.0
%
 
100.0
%
 



18




Same-Store Portfolio and Overall Ending Occupancy Levels by Sector

 
 
Ending Occupancy - Same-Store Properties (1), (2)
Sector
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Multifamily (calculated on a unit basis)
 
95.3
%
 
95.2
%
 
95.2
%
 
95.0
%
 
94.8
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
95.4
%
 
95.2
%
 
95.4
%
 
94.1
%
 
94.5
%
Office
 
92.1
%
 
92.7
%
 
92.6
%
 
92.0
%
 
91.7
%
Retail
 
94.3
%
 
91.1
%
 
91.1
%
 
91.2
%
 
93.5
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
94.0
%
 
93.3
%
 
93.3
%
 
92.6
%
 
93.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending Occupancy - All Properties (2)
Sector
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Multifamily (calculated on a unit basis)
 
95.3
%
 
95.2
%
 
95.2
%
 
95.0
%
 
94.7
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
95.4
%
 
95.2
%
 
95.4
%
 
94.1
%
 
94.5
%
Office
 
92.7
%
 
93.1
%
 
92.8
%
 
90.1
%
 
93.2
%
Retail
 
94.3
%
 
91.1
%
 
91.1
%
 
91.2
%
 
93.5
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
94.1
%
 
93.4
%
 
93.3
%
 
91.8
%
 
93.8
%
(1)  Non same-store properties were:
Acquisitions:
Office - Watergate 600 and Arlington Tower
Sold properties:
Office - Braddock Metro Center and 2445 M Street
Multifamily - Walker House Apartments
(2)   Ending 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 ending occupancy is calculated as occupied units as a percentage of total available units as of the last day of that period. The occupied square footage for office and retail properties includes temporary lease agreements.

19




Same-Store Portfolio and Overall Average Occupancy Levels by Sector
 
 
Average Occupancy - Same-Store Properties(1) (2)
Sector
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Multifamily (calculated on a unit basis)
 
95.5
%
 
94.8
%
 
95.4
%
 
94.8
%
 
95.3
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
95.6
%
 
94.9
%
 
95.4
%
 
94.8
%
 
95.4
%
Office
 
92.2
%
 
92.5
%
 
92.5
%
 
91.6
%
 
91.4
%
Retail
 
93.2
%
 
91.1
%
 
91.1
%
 
92.2
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
93.8
%
 
93.1
%
 
93.3
%
 
93.0
%
 
93.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Average Occupancy - All Properties (2)
Sector
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Multifamily (calculated on a unit basis)
 
95.5
%
 
94.8
%
 
95.4
%
 
94.8
%
 
95.3
%
 
 
 
 
 
 
 
 
 
 
 
Multifamily
 
95.6
%
 
94.9
%
 
95.4
%
 
94.8
%
 
95.4
%
Office
 
92.5
%
 
93.0
%
 
93.0
%
 
89.8
%
 
93.0
%
Retail
 
93.2
%
 
91.1
%
 
91.1
%
 
92.2
%
 
93.2
%
 
 
 
 
 
 
 
 
 
 
 
Overall Portfolio
 
93.8
%
 
93.2
%
 
93.4
%
 
92.2
%
 
93.9
%
(1)  Non same-store properties were:
Acquisitions:
Office - Watergate 600 and Arlington Tower
Sold properties:
Office - Braddock Metro Center and 2445 M Street
Multifamily - Walker House Apartments

(2) Average occupancy is based on monthly occupied net rentable square footage as a percentage of total net rentable square footage, except for the rows labeled "Multifamily (calculated on a unit basis)," on which average occupancy is based on average monthly occupied units as a percentage of total units. The square footage for multifamily properties only includes residential space. The occupied square footage for office and retail properties includes temporary lease agreements.

20




Acquisition and Disposition Summary


Acquisition
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
Acquisition Date
 
Property Type
 
Square Feet
 
September 30, 2018 Leased Percentage
 
Contract Purchase Price
(in thousands)
Arlington Tower
Arlington, Virginia
 
January 18, 2018
 
Office
 
391,000
 
95
%
 
$
250,000

 
 
 
 
 
 
 
 
 
 
 
 
Dispositions
 
 
 
 
 
 
 
 
 
 
 
 
Location
 
Disposition Date
 
Property Type
 
Square Feet
 
Contract Sales Price
(in thousands)
 
GAAP Gain on Sale
(in thousands)
Braddock Metro Center
Alexandria, Virginia
 
January 19, 2018
 
Office
 
356,000
 
$
93,000

 
$

2445 M Street
Washington, DC
 
June 28, 2018
 
Office
 
292,000
 
101,600

 
2,495

 
 
 
 
 
 
 
648,000
 
$
194,600

 
$
2,495







21




Development/Redevelopment Summary
September 30, 2018

Development
 
 
 
 
 
 
 
 
Property and Location
 
Total Rentable Square Feet or # of Units
 
Anticipated Total Cash Cost (1)     
(in thousands)
 
Cash Cost to Date (1) (in thousands)
 
Initial Occupancy
 
 
 
 
 
 
 
 
 
Trove (Wellington land parcel), Arlington, VA
 
401 units
 
$
122,252

 
$
45,472

 
Phase I - fourth quarter 2019 (2)
 
 
 
 
 
 
 
 
Phase II - third quarter 2020 (2)
 
 
 
 
 
 
 
 
 
Redevelopment
 
 
 
 
 
 
 
 
Property and Location
 
Total Rentable Square Feet or # of Units
 
Anticipated Total Cash Cost (1)     
(in thousands)
 
Cash Cost to Date (1)  (in thousands)
 
Anticipated Construction Completion Date
 
 
 
 
 
 
 
 
 
Spring Valley Village, Washington DC
 
14,000 additional square feet
 
$
5,705

 
$
5,337

 
third quarter 2018 (3)

(1) Represents anticipated/actual cash expenditures, and excludes allocations of capitalized corporate overhead costs and interest.

(2) This development project has two phases: Phase I consists of 203 units and a garage, with garage delivery anticipated in first quarter 2019 and delivery of units anticipated to commence in fourth quarter 2019; Phase II consists of 198 units, with delivery of units anticipated to commence in third quarter 2020.

(3) The new building and site work at Spring Valley Village were substantially completed in October 2018.





22




Multifamily Rental Rate Growth

Year over Year Rental Rate Growth (1)
3rd Quarter 2018
 
2nd Quarter 2018
 
1st Quarter 2018
 
4th Quarter 2017
 
3rd Quarter 2017
 
 
 
 
 
 
 
 
 
 
Overall
2.3
%
 
2.1
%
 
2.0
%
 
2.2
%
 
2.1
%


Average Monthly Rent per Unit
3rd Quarter 2018
 
3rd Quarter 2017
 
% Change
Class A
2,324

 
2,295

 
1.3
%
 
 
 
 
 
 
Class B
1,656

 
1,614

 
2.6
%
 
 
 
 
 
 
Overall
1,762

 
1,722

 
2.3
%

(1) Calculates the change in rental rates for properties owned in both comparative periods.



23




Commercial Leasing Summary - New Leases
 
3rd Quarter 2018
 
2nd Quarter 2018
 
1st Quarter 2018
 
4th Quarter 2017
 
3rd Quarter 2017
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
36,518
 
 
19,709
 
 
26,975
 
 
21,729
 
 
45,318
 
      Retail Centers
17,595
 
 
7,664
 
 
5,737
 
 
11,061
 
 
6,961
 
Total
54,113
 

27,373
 

32,712
 
 
32,790
 
 
52,279
 
Weighted Average Term (years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
5.9
 
 
8.9
 
 
3.7
 
 
5.4
 
 
8.9
 
      Retail Centers
5.8
 
 
9.9
 
 
9.0
 
 
5.3
 
 
6.6
 
Total
5.9
 
 
9.2
 
 
4.6
 
 
5.4
 
 
8.6
 
Weighted Average Free Rent Period (months)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
4.7
 
 
9.0
 
 
3.6
 
 
3.7
 
 
7.2
 
      Retail Centers
1.2
 
 
0.9
 
 
0.6
 
 
2.5
 
 
2.2
 
Total
3.9
 
 
7.0
 
 
3.1
 
 
3.4
 
 
6.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
46.16

 
$
46.17

 
$
36.39

 
$
34.19

 
$
45.79

 
$
47.35

 
$
44.80

 
$
47.40

 
$
51.09

 
$
52.17

            Retail Centers
30.33

 
28.48

 
31.17

 
28.67

 
52.65

 
48.87

 
25.39

 
25.27

 
30.95

 
31.18

Total
$
41.01

 
$
40.42

 
$
34.92

 
$
32.64

 
$
46.99

 
$
47.61

 
$
38.25

 
$
39.94

 
$
48.41

 
$
49.37

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
51.27

 
$
47.84

 
$
37.78

 
$
34.13

 
$
50.14

 
$
48.38

 
$
52.58

 
$
50.19

 
$
61.14

 
$
55.43

            Retail Centers
31.87

 
29.60

 
33.34

 
29.35

 
50.03

 
44.20

 
27.45

 
26.46

 
35.91

 
34.48

Total
$
44.96

 
$
41.91

 
$
36.53

 
$
32.79

 
$
50.12

 
$
47.65

 
$
44.11

 
$
42.19

 
$
57.78

 
$
52.64

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
11.1
%
 
3.6
%
 
3.8
%
 
(0.2
)%
 
9.5
 %
 
2.2
 %
 
17.4
%
 
5.9
%
 
19.7
%
 
6.3
%
            Retail Centers
5.1
%
 
3.9
%
 
7.0
%
 
2.4
 %
 
(5.0
)%
 
(9.6
)%
 
8.1
%
 
4.7
%
 
16.0
%
 
10.6
%
Total
9.6
%
 
3.7
%
 
4.6
%
 
0.4
 %
 
6.7
 %
 
0.1
 %
 
15.3
%
 
5.6
%
 
19.4
%
 
6.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
2,227,661

 
$
61.00

 
$
1,235,164

 
$
62.67

 
$
792,950

 
$
29.40

 
$
1,378,204

 
$
63.43

 
$
3,740,775

 
$
82.55

Retail Centers
339,198

 
19.28

 
73,320

 
9.57

 
393,000

 
68.50

 
54,410

 
4.92

 
244,213

 
35.08

Subtotal
$
2,566,859

 
$
47.44

 
$
1,308,484

 
$
47.80

 
$
1,185,950

 
$
36.25

 
$
1,432,614

 
$
43.69

 
$
3,984,988

 
$
76.23

Leasing Commissions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
631,610

 
$
17.30

 
$
357,109

 
$
18.12

 
$
256,226

 
$
9.49

 
$
312,397

 
$
14.38

 
$
1,299,136

 
$
28.67

Retail Centers
171,582

 
9.75

 
92,092

 
12.02

 
163,272

 
28.46

 
78,751

 
7.12

 
79,597

 
11.43

Subtotal
$
803,192

 
$
14.84

 
$
449,201

 
$
16.41

 
$
419,498

 
$
12.83

 
$
391,148

 
$
11.93

 
$
1,378,733

 
$
26.37

Tenant Improvements and Leasing Commissions
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
2,859,271

 
$
78.30

 
$
1,592,273

 
$
80.79

 
$
1,049,176

 
$
38.89

 
$
1,690,601

 
$
77.81

 
$
5,039,911

 
$
111.22

Retail Centers
510,780

 
29.03

 
165,412

 
21.59

 
556,272

 
96.96

 
133,161

 
12.04

 
323,810

 
46.51

Total
$
3,370,051

 
$
62.28

 
$
1,757,685

 
$
64.21

 
$
1,605,448

 
$
49.08

 
$
1,823,762

 
$
55.62

 
$
5,363,721

 
$
102.60




24




Commercial Leasing Summary - Renewal Leases
 
3rd Quarter 2018
 
2nd Quarter 2018
 
1st Quarter 2018
 
4th Quarter 2017
 
3rd Quarter 2017
Gross Leasing Square Footage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
36,869
 
 
10,603
 
 
69,593
 
 
49,090
 
 
10,531
 
      Retail Centers
11,662
 
 
190,763
 
 
44,759
 
 
11,481
 
 
40,780
 
Total
48,531
 
 
201,366
 
 
114,352
 
 
60,571
 
 
51,311
 
Weighted Average Term (years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
5.7
 
 
5.4
 
 
4.1
 
 
4.4
 
 
5.9
 
      Retail Centers
6.3
 
 
4.9
 
 
5.5
 
 
7.7
 
 
4.4
 
Total
5.9
 
 
4.9
 
 
4.7
 
 
5.0
 
 
4.7
 
Weighted Average Free Rent Period (months)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Office Buildings
5.3
 
 
2.5
 
 
4.0
 
 
0.3
 
 
2.2
 
      Retail Centers
 
 
 
 
 
 
1.5
 
 
 
Total
4.1
 
 
0.5
 
 
2.9
 
 
0.6
 
 
0.8
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental Rate Increases:
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
 
GAAP
 
CASH
      Rate on expiring leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
40.09

 
$
40.79

 
$
42.67

 
$
42.74

 
$
41.34

 
$
41.73

 
$
34.21

 
$
37.14

 
$
47.80

 
$
48.03

            Retail Centers
39.01

 
42.35

 
9.56

 
9.70

 
21.00

 
21.73

 
32.21

 
32.49

 
25.80

 
26.09

Total
$
39.83

 
$
41.16

 
$
11.31

 
$
11.44

 
$
33.38

 
$
33.90

 
$
33.86

 
$
36.34

 
$
30.32

 
$
30.59

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Rate on new leases
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
$
46.63

 
$
43.15

 
$
43.44

 
$
41.08

 
$
43.51

 
$
41.32

 
$
34.14

 
$
32.60

 
$
56.91

 
$
55.80

            Retail Centers
43.83

 
41.65

 
9.74

 
9.65

 
23.61

 
22.55

 
37.18

 
36.07

 
26.49

 
26.28

Total
$
45.96

 
$
42.79

 
$
11.51

 
$
11.31

 
$
35.72

 
$
33.97

 
$
34.67

 
$
33.20

 
$
32.74

 
$
32.34

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      Percentage Increase
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
            Office Buildings
16.3
%
 
5.8
 %
 
1.8
%
 
(3.9
)%
 
5.3
%
 
(1.0
)%
 
(0.2
)%
 
(12.2
)%
 
19.1
%
 
16.2
%
            Retail Centers
12.3
%
 
(1.6
)%
 
1.8
%
 
(0.5
)%
 
12.4
%
 
3.8
 %
 
15.4
 %
 
11.0
 %
 
2.7
%
 
0.7
%
Total
15.4
%
 
3.9
 %
 
1.8
%
 
(1.2
)%
 
7.0
%
 
0.2
 %
 
2.4
 %
 
(8.6
)%
 
8.0
%
 
5.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
1,192,536

 
$
32.35

 
$
484,793

 
$
45.72

 
$
1,085,517

 
$
15.60

 
$
687,818

 
$
14.01

 
$
126,994

 
$
12.06

Retail Centers

 

 
10,000

 
0.05

 
100,000

 
2.23

 

 

 

 

Subtotal
$
1,192,536

 
$
24.57

 
$
494,793

 
$
2.46

 
$
1,185,517

 
$
10.37

 
$
687,818

 
$
11.36

 
$
126,994

 
$
2.47

Leasing Commissions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
484,126

 
$
13.13

 
$
106,904

 
$
10.08

 
$
591,590

 
$
8.50

 
$
303,570

 
$
6.18

 
$
89,452

 
$
8.49

Retail Centers
73,724

 
6.32

 
41,781

 
0.22

 
34,609

 
0.78

 
38,753

 
3.38

 
32,754

 
0.80

Subtotal
$
557,850

 
$
11.49

 
$
148,685

 
$
0.74

 
$
626,199

 
$
5.47

 
$
342,323

 
$
5.65

 
$
122,206

 
$
2.38

Tenant Improvements and Leasing Commissions
 
 
 
 
 
 
 
 
 
 
Office Buildings
$
1,676,662

 
$
45.48

 
$
591,697

 
$
55.80

 
$
1,677,107

 
$
24.10

 
$
991,388

 
$
20.19

 
$
216,446

 
$
20.55

Retail Centers
73,724

 
6.32

 
51,781

 
0.27

 
134,609

 
3.01

 
38,753

 
3.38

 
32,754

 
0.80

Total
$
1,750,386

 
$
36.06

 
$
643,478

 
$
3.20

 
$
1,811,716

 
$
15.84

 
$
1,030,141

 
$
17.01

 
$
249,200

 
$
4.85



25




10 Largest Tenants - Based on Annualized Commercial Income
September 30, 2018
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
 
27

 
5.7
%
 
210,354

 
3.8
%
Atlantic Media, Inc.
1
 
109

 
3.6
%
 
134,084

 
2.4
%
Capital One
5
 
44

 
3.0
%
 
148,742

 
2.7
%
Booz Allen Hamilton, Inc.
1
 
88

 
2.3
%
 
222,989

 
4.0
%
Blank Rome LLP (1)
1
 
15

 
2.1
%
 
67,843

 
1.2
%
Hughes Hubbard & Reed LLP
1
 
117

 
1.6
%
 
59,154

 
1.0
%
FBR Capital Markets & Company
1
 
51

 
1.4
%
 
55,105

 
1.0
%
Epstein, Becker & Green, P.C.
1
 
123

 
1.4
%
 
55,318

 
1.0
%
Promontory Interfinancial Network, LLC
1
 
98

 
1.1
%
 
36,867

 
0.6
%
Morgan Stanley Smith Barney Financing
1
 
29

 
1.1
%
 
49,395

 
0.9
%
Total/Weighted Average
 
 
67

 
23.3
%
 
1,039,851

 
18.6
%

Note: This table excludes short-term leases.

(1) The weighted average remaining lease term for Blank Rome LLP's space includes the effect of a master lease agreement, under which another tenant will assume the majority of Blank Rome LLP's space for an additional 12 months if the space is not leased to another party.



26



Industry Diversification - Office
September 30, 2018
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
$
43,298,567

 
28.81
%
 
1,179,112

 
34.42
%
Finance and Insurance
29,298,989

 
19.49
%
 
595,302

 
17.38
%
Other Services (except Public Administration)
20,198,035

 
13.44
%
 
426,776

 
12.46
%
Legal Services
16,807,533

 
11.18
%
 
320,582

 
9.36
%
Information
15,102,713

 
10.05
%
 
301,170

 
8.79
%
Health Care and Social Assistance
5,672,035

 
3.77
%
 
154,851

 
4.52
%
Public Administration
3,337,882

 
2.22
%
 
74,203

 
2.17
%
Retail Trade
2,903,950

 
1.93
%
 
54,497

 
1.59
%
Miscellaneous:
 
 
 
 
 
 
 
Construction
2,515,287

 
1.67
%
 
67,660

 
1.98
%
Educational Services
2,404,035

 
1.60
%
 
46,679

 
1.36
%
Manufacturing
2,136,770

 
1.42
%
 
33,815

 
0.99
%
Accommodation and Food Services
1,954,645

 
1.30
%
 
52,416

 
1.53
%
Other
4,685,070

 
3.12
%
 
118,128

 
3.45
%
Total
$
150,315,511

 
100.00
%
 
3,425,191

 
100.00
%
Note: Federal government tenants comprise up to 1.4% of annualized base rental revenue.
 
 
 
 
 
 
 
chart-c3680a4567435ffabd0a01.jpg

27



Industry Diversification - Retail
September 30, 2018
Industry Classification (NAICS)
Annualized Base Rental Revenue
 
Percentage of Aggregate Annualized Rent
 
Aggregate Rentable Square Feet
 
Percentage of Aggregate Square Feet
Retail:
 
 
 
 
 
 
 
Retail Trade
$
27,441,364

 
55.32
%
 
1,436,122

 
69.34
%
Accommodation and Food Services
8,300,960

 
16.73
%
 
240,576

 
11.61
%
Finance and Insurance
4,146,250

 
8.36
%
 
51,916

 
2.51
%
Other Services (except Public Administration)
3,695,208

 
7.45
%
 
117,380

 
5.67
%
Arts, Entertainment, and Recreation
2,019,352

 
4.07
%
 
113,993

 
5.50
%
Health Care and Social Assistance
1,540,761

 
3.11
%
 
36,747

 
1.77
%
Miscellaneous:
 
 
 
 
 
 
 
Information
804,706

 
1.62
%
 
18,367

 
0.89
%
Wholesale Trade
471,643

 
0.95
%
 
13,736

 
0.66
%
Educational Services
357,437

 
0.72
%
 
10,713

 
0.52
%
Other
830,422

 
1.67
%
 
31,785

 
1.53
%
Total
$
49,608,103

 
100.00
%
 
2,071,335

 
100.00
%
chart-a6398a990df65f7e96ea01.jpg

28




Lease Expirations
September 30, 2018
Year
 
Number of Leases
 
Rentable Square Feet
 
Percent of Rentable Square Feet
 
Annualized Rent (1)
 
Average Rental Rate
 
Percent of Annualized Rent (1)
Office:
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
15

 
65,119

 
1.87
%
 
$
2,659,553

 
$
40.84

 
1.54
%
2019
 
72

 
500,598

 
14.39
%
 
24,874,201

 
49.69

 
14.43
%
2020
 
51

 
434,708

 
12.49
%
 
20,871,777

 
48.01

 
12.11
%
2021
 
55

 
350,713

 
10.08
%
 
14,500,553

 
41.35

 
8.41
%
2022
 
46

 
437,122

 
12.56
%
 
20,550,106

 
47.01

 
11.92
%
2023 and thereafter
 
201

 
1,691,201

 
48.61
%
 
88,964,863

 
52.60

 
51.59
%
 
 
440

 
3,479,461

 
100.00
%
 
$
172,421,053

 
49.55

 
100.00
%
Retail:
 
 
 
 
 
 
 
 
 
 
 
 
2018
 

 

 
%
 
$

 
$

 
%
2019
 
29

 
89,164

 
4.28
%
 
2,999,465

 
33.64

 
5.51
%
2020
 
39

 
382,590

 
18.36
%
 
7,160,561

 
18.72

 
13.16
%
2021
 
27

 
233,161

 
11.19
%
 
4,301,089

 
18.45

 
7.90
%
2022
 
48

 
308,663

 
14.82
%
 
8,516,351

 
27.59

 
15.65
%
2023 and thereafter
 
143

 
1,069,691

 
51.35
%
 
31,447,781

 
29.40

 
57.78
%
 
 
286

 
2,083,269

 
100.00
%
 
$
54,425,247

 
26.12

 
100.00
%
Total:
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
15

 
65,119

 
1.17
%
 
$
2,659,553

 
$
40.84

 
1.17
%
2019
 
101

 
589,762

 
10.60
%
 
27,873,666

 
47.26

 
12.29
%
2020
 
90

 
817,298

 
14.69
%
 
28,032,338

 
34.30

 
12.36
%
2021
 
82

 
583,874

 
10.50
%
 
18,801,642

 
32.20

 
8.29
%
2022
 
94

 
745,785

 
13.41
%
 
29,066,457

 
38.97

 
12.81
%
2023 and thereafter
 
344

 
2,760,892

 
49.63
%
 
120,412,644

 
43.61

 
53.08
%
 
 
726

 
5,562,730

 
100.00
%
 
$
226,846,300

 
40.78

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



29




Schedule of Properties
September 30, 2018
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
 
LEASED % (1)
 
ENDING OCCUPANCY (1)
Office Buildings
 
 
 
 
 
 
 
 
 
 
 
 
515 King Street
 
Alexandria, VA
 
1992
 
1966
 
74,000

 
95.7
%
 
95.7
%
Courthouse Square
 
Alexandria, VA
 
2000
 
1979
 
119,000

 
91.9
%
 
91.9
%
1600 Wilson Boulevard
 
Arlington, VA
 
1997
 
1973
 
170,000

 
95.3
%
 
95.3
%
Fairgate at Ballston
 
Arlington, VA
 
2012
 
1988
 
144,000

 
92.0
%
 
86.1
%
Arlington Tower
 
Arlington, VA
 
2018
 
1980/2014
 
391,000

 
94.7
%
 
94.7
%
Monument II
 
Herndon, VA
 
2007
 
2000
 
209,000

 
92.0
%
 
86.6
%
925 Corporate Drive
 
Stafford, VA
 
2010
 
2007
 
135,000

 
68.7
%
 
68.7
%
1000 Corporate Drive
 
Stafford, VA
 
2010
 
2009
 
137,000

 
62.9
%
 
62.9
%
Silverline Center
 
Tysons, VA
 
1997
 
1972/1986/1999/2015
 
547,000

 
98.5
%
 
97.2
%
John Marshall II
 
Tysons, VA
 
2011
 
1996/2010
 
223,000

 
100.0
%
 
100.0
%
1901 Pennsylvania Avenue
 
Washington, DC
 
1977
 
1960
 
101,000

 
97.2
%
 
94.5
%
1220 19th Street
 
Washington, DC
 
1995
 
1976
 
102,000

 
99.1
%
 
98.0
%
1776 G Street
 
Washington, DC
 
2003
 
1979
 
262,000

 
100.0
%
 
100.0
%
2000 M Street
 
Washington, DC
 
2007
 
1971
 
231,000

 
94.2
%
 
94.2
%
1140 Connecticut Avenue
 
Washington, DC
 
2011
 
1966
 
186,000

 
93.8
%
 
85.5
%
1227 25th Street
 
Washington, DC
 
2011
 
1988
 
134,000

 
100.0
%
 
100.0
%
Army Navy Building
 
Washington, DC
 
2014
 
1912/1987/2017
 
108,000

 
92.9
%
 
83.4
%
1775 Eye Street, NW
 
Washington, DC
 
2014
 
1964
 
186,000

 
100.0
%
 
100.0
%
Watergate 600
 
Washington, DC
 
2017
 
1972/1997
 
278,000

 
96.7
%
 
96.4
%
Subtotal
 
 
 
 
 
 
 
3,737,000

 
94.2
%
 
92.7
%

(1) The leased and occupied square footage for office and retail properties includes temporary lease agreements.

30




Schedule of Properties (continued)
September 30, 2018
 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
 
LEASED % (1)
 
ENDING OCCUPANCY (1)
Retail Centers
 
 
 
 
 
 
 
 
 
 
 
 
Bradlee Shopping Center
 
Alexandria, VA
 
1984
 
1955
 
172,000

 
97.0
%
 
95.9
%
Shoppes of Foxchase
 
Alexandria, VA
 
1994
 
1960/2006
 
134,000

 
100.0
%
 
100.0
%
800 S. Washington Street
 
Alexandria, VA
 
1998/2003
 
1955/1959
 
46,000

 
92.7
%
 
92.7
%
Concord Centre
 
Springfield, VA
 
1973
 
1960
 
75,000

 
81.9
%
 
81.9
%
Gateway Overlook
 
Columbia, MD
 
2010
 
2007
 
220,000

 
100.0
%
 
97.0
%
Frederick County Square
 
Frederick, MD
 
1995
 
1973
 
228,000

 
92.9
%
 
92.9
%
Frederick Crossing
 
Frederick, MD
 
2005
 
1999/2003
 
295,000

 
98.8
%
 
97.1
%
Centre at Hagerstown
 
Hagerstown, MD
 
2002
 
2000
 
330,000

 
94.9
%
 
94.9
%
Olney Village Center
 
Olney, MD
 
2011
 
1979/2003
 
199,000

 
96.3
%
 
94.2
%
Randolph Shopping Center
 
Rockville, MD
 
2006
 
1972
 
83,000

 
84.4
%
 
84.4
%
Montrose Shopping Center
 
Rockville, MD
 
2006
 
1970
 
147,000

 
96.2
%
 
96.2
%
Takoma Park
 
Takoma Park, MD
 
1963
 
1962
 
51,000

 
100.0
%
 
100.0
%
Westminster
 
Westminster, MD
 
1972
 
1969
 
150,000

 
95.0
%
 
95.0
%
Wheaton Park
 
Wheaton, MD
 
1977
 
1967
 
74,000

 
95.6
%
 
92.3
%
Chevy Chase Metro Plaza
 
Washington, DC
 
1985
 
1975
 
49,000

 
88.5
%
 
88.5
%
Spring Valley Village
 
Washington, DC
 
2014
 
1941/1950
 
79,000

 
84.0
%
 
84.0
%
Subtotal
 
 
 
 
 
 
 
2,332,000

 
95.1
%
 
94.3
%

(1) The leased and occupied square footage for office and retail properties includes temporary lease agreements.


31




Schedule of Properties (continued)
September 30, 2018

 PROPERTIES
 
 LOCATION
 
 YEAR ACQUIRED
 
 YEAR CONSTRUCTED
 
 NET RENTABLE SQUARE FEET
 
LEASED % (1)
 
ENDING OCCUPANCY (1)
Multifamily Buildings / # units
 
 
 
 
 
 
 
 
 
 
 
 
Clayborne / 74
 
Alexandria, VA
 
2008
 
2008
 
60,000

 
97.3
%
 
94.6
%
Riverside Apartments / 1,222
 
Alexandria, VA
 
2016
 
1971
 
1,001,000

 
97.7
%
 
95.0
%
Park Adams / 200
 
Arlington, VA
 
1969
 
1959
 
173,000

 
96.0
%
 
95.5
%
Bennett Park / 224
 
Arlington, VA
 
2007
 
2007
 
215,000

 
97.3
%
 
96.0
%
The Paramount / 135
 
Arlington, VA
 
2013
 
1984
 
141,000

 
97.8
%
 
95.6
%
The Maxwell / 163
 
Arlington, VA
 
2014
 
2014
 
116,000

 
99.4
%
 
96.9
%
The Wellington / 711
 
Arlington, VA
 
2015
 
1960
 
600,000

 
96.5
%
 
95.5
%
Roosevelt Towers / 191
 
Falls Church, VA
 
1965
 
1964
 
170,000

 
97.9
%
 
96.9
%
The Ashby at McLean / 256
 
McLean, VA
 
1996
 
1982
 
274,000

 
97.7
%
 
96.5
%
Bethesda Hill Apartments / 195
 
Bethesda, MD
 
1997
 
1986
 
225,000

 
97.4
%
 
94.9
%
3801 Connecticut Avenue / 307
 
Washington, DC
 
1963
 
1951
 
178,000

 
97.1
%
 
95.8
%
Kenmore Apartments / 374
 
Washington, DC
 
2008
 
1948
 
268,000

 
94.4
%
 
93.3
%
Yale West / 216
 
Washington, DC
 
2014
 
2011
 
173,000

 
96.3
%
 
94.9
%
Subtotal (4,268 units)
 
 
 
 
 
 
 
3,594,000

 
97.0
%
 
95.3
%
TOTAL PORTFOLIO
 
 
 
 
 
 
 
9,663,000

 
 
 
 
 
 
 
 
 

(1) Leased percentage and ending occupancy calculations are based on units for multifamily buildings.

32




Supplemental Definitions
September 30, 2018
Adjusted EBITDA (a non-GAAP measure) is earnings before interest expense, taxes, depreciation, amortization, real estate impairment, casualty gain/loss, gain/loss on sale of real estate, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expense 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.
Average occupancy is based on monthly occupied net rentable square footage as a percentage of total net rentable square footage, except for the rows labeled "Multifamily (calculated on a unit basis)," on which average occupancy is based on average monthly occupied units as a percentage of total units. The square footage for multifamily properties only includes residential space. The occupied square footage for office and retail properties includes temporary lease agreements.
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.
Ending 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 ending occupancy is calculated as occupied units as a percentage of total units as of the last day of that period.
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. Our FFO may not be comparable to FFO reported by other real estate investment trusts. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. 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, casualty gains and losses, 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 performance 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, casualty gains and losses, 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 performance 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.

33



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 or loss on sale, if any), plus interest expense, depreciation and amortization, general and administrative expenses, acquisition costs, real estate impairment, casualty gains and losses, 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 each of NOI and cash NOI as a supplement to net income calculated in accordance with GAAP. As such, neither should be considered an alternative to net income as an indication of our operating performance. They are the primary performance measures we use to assess the results of our operations at the property level.
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 properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property's development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.
Same-store portfolio NOI growth is the change in the NOI of the same-store portfolio properties from the prior reporting period to the current reporting period.
 
Certain statements in our supplemental 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 supplemental 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, changes in general and local economic and real estate market conditions, the potential for federal government budget reductions, the risk of failure to complete contemplated acquisitions and dispositions, 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, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2017 Form 10-K and subsequent Quarterly Reports on Form 10-Q. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.


34