SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED December 31, 1995 COMMISSION FILE NO. 1-6622
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WASHINGTON REAL ESTATE INVESTMENT TRUST
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(Exact name of registrant as specified in its charter)
DISTRICT OF COLUMBIA 53-0261100
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
10400 CONNECTICUT AVENUE, KENSINGTON, MARYLAND 20895
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(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code (301) 929-5900
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of exchange on which registered
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Shares of Beneficial Interest (No Par Value) American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or such shorter period that the
Registrant was required to file such report) and (2) has been subject to such
filing requirements for the past ninety (90) days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
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As of March 15, 1996, 31,751,734 Shares of Beneficial Interest were outstanding
and the aggregate market value of such shares held by non-affiliates of the
registrant was approximately $500,339,936 (based on the closing price of the
stock on March 15, 1996).
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K is incorporated by reference from the Trust's 1996
Notice of Annual Meeting and Proxy Statement.
WASHINGTON REAL ESTATE INVESTMENT TRUST
1995 FORM 10-K ANNUAL REPORT
INDEX
PART I Page
----
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters 11
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 13
Item 8. Financial Statements and Supplementary Data 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15
PART III
Item 10. Directors and Executive Officers of the Registrant 16
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
Signatures 19
2
PART I
ITEM 1. BUSINESS
Washington Real Estate Investment Trust (WRIT or the Trust) is a
self-administered qualified equity real estate investment trust. The Trust's
business consists of the ownership of income-producing real estate properties
principally in the Greater Washington-Baltimore Region. The Trust has a
fundamental strategy of regional focus, diversified property type ownership and
conservative financial management.
WRIT has elected to qualify as a real estate investment trust under the
Internal Revenue Code. Accordingly, WRIT is relieved of federal income taxes
provided that capital gains and at least 95% of its ordinary income are
distributed to shareholders in the form of dividends. Over the last five years
dividends paid per share have been $.99 for 1995, $.92 for 1994, $.89 for 1993,
$.84 for 1992 and $.79 for 1991 . The indicated annualized dividend rate for
1996, based upon the March 29, 1996 dividend, is $1.00.
The Trust has purchased real estate primarily in the Greater
Washington-Baltimore Region because of management's familiarity with the
region, its expected growth and proven stability. The CMSA (Consolidated
Metropolitan Statistical Area) which includes the Greater Washington-Baltimore
region is the nation's fourth largest with a population exceeding 6.9 million.
The region is ranked #1 in the U.S. in median household income and percentage
of population with education at the undergraduate and postgraduate level.
Total non-farm employment in the Washington area has grown 88% from 1.6 million
jobs in 1970 to 3.1 million jobs in 1995, while the percentage of Federal
Government employment in the region has decreased from 38.3% to 15.6%. Since
January 1980, seasonally-adjusted unemployment in the Washington area has
averaged 4.1% with December 1995 unemployment standing at 3.6%.
The Greater Washington-Baltimore region is a leader in the rapidly growing
technology/infocom and biotech/health care industries. It is the center of the
U.S. Space Commerce/Satellite Industry with Comsat, GTE Spacenet, Intelsat and
NASA all located here. The region has the nation's second highest
concentration of technology companies and the third highest concentration of
Biotech companies.
This region is also the headquarters for several of the largest U.S. and
international financial institutions including the World Bank, International
Monetary Fund, Inter-American Development Bank, Export-Import Bank, Federal
National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corp
(Freddie Mac) and the Student Loan Marketing Association (Sallie Mae).
Federal spending cuts nationally have caused Federal contractors to move closer
to their clients in order to retain business. As a result, while Federal
spending decreases nationally, it becomes more concentrated and grows in the
Washington area. Total Federal procurement (outsourcing) decreased 5%
nationally from 1991 to 1994, but has increased in the Washington area by
over 23%. Despite a decrease of 1.7% in national procurement in 1994,
Washington area procurement grew 11%. In 1995, Washington area Federal
procurement grew at 9.2%, about double the national rate. U.S. Department of
Defense procurement, while shrinking nearly 10% nationally, grew 22% from
1991-1994 in the Washington area.
The Trust currently owns a diversified portfolio consisting of twelve shopping
centers, fourteen office buildings, five high-rise apartment buildings and ten
industrial distribution centers. WRIT's principal objective is to invest in
high quality real estate in prime locations and to monitor closely the
management of these properties, including active leasing and ongoing capital
improvement programs. The percentage of total real estate rental revenue by
property group for 1995, 1994 and 1993 and the percent leased as of December
31, 1995 were as follows:
3
ITEM 1. BUSINESS, (continued)
Real Estate Rental Revenue
Percent Leased --------------------------
December 31, 1995 1995 1994 1993
- ----------------- ---- ---- ----
89%* Office buildings 41% 39% 34%
93% Apartment buildings 22% 25% 27%
94% Shopping centers 26% 26% 29%
96% Industrial distribution 11% 10% 10%
---- ---- ----
100% 100% 100%
==== ==== ====
*1901 Pennsylvania Avenue underwent a major renovation in 1995. See discussion
on page 9 regarding office building occupancy levels.
On a combined basis, WRIT's portfolio was 93% occupied in 1995 and 95% in 1994
and 1993.
Total revenue was $52,597,497 for 1995, $45,511,482 for 1994 and $39,375,282
for 1993 . In 1993 through 1995 there were acquisitions of seven office
buildings, two shopping centers and three industrial distribution centers.
These acquisitions were the primary reason for the shifting of each group's
percentage of total revenue. No single tenant accounted for more than 2.05% of
1995 revenue, 2.25% of 1994 or 2.5% of 1993. Various agencies of the U.S.
Government are counted separately and include the Department of Commerce,
Immigration and Naturalization Service, U.S. Postal Service, Social Security
Administration and U.S. Patent Office. All federal government tenants in the
aggregate accounted for less than 4.25% of WRIT's 1995 total revenue. The
larger non-federal government tenants include Sprint Communications, T.J. Maxx,
District of Columbia Metropolitan Police Department, Pepsi Cola, Giant Food,
Crestar Bank, Evans, CVS, Rite-Aid, George Washington University, Montgomery
County, Maryland and the State of Maryland.
As of December 31, 1995, no single property accounted for more than 10% of
total assets or more than 10% of total revenues.
The actual day-to-day property management functions at the properties owned by
the Trust are carried out by an independent management company. WRIT closely
monitors the activities of this company to assure the highest quality of
service and cost effectiveness. No WRIT Trustee or officer is a director or
officer of, or owns any interest in the management company.
The Trust expects to continue investing in additional income producing
property. Philosophically, WRIT management invests only in properties which it
believes will continue to increase in income and value. WRIT's properties
compete for tenants with other properties throughout the respective areas in
which they are located. All properties compete for tenants on the basis of
location, quality and rent charged.
Historically WRIT has acquired 100% ownership in property. However, in 1995
WRIT formed a subsidiary partnership in which WRIT currently owns substantially
all of the partnership interest. As of December 31, 1995, the WRIT partnership
has acquired two properties for cash contributed by WRIT.
WRIT intends to use the WRIT partnership to offer property owners an
opportunity to contribute properties in exchange for WRIT limited partnership
units. Such a transaction will enable property owners to diversify their
holdings and to obtain a tax deferred contribution for WRIT limited partnership
units rather than make a taxable cash sale. To date, no such transactions have
occurred. The terms of the partnership agreement provide that the
partnership's limited partnership units are entitled to distributions
substantially equivalent to the distributions on WRIT shares. A holder of
limited partnership units in the WRIT partnership will be entitled to demand
that the partnership redeem the holder's units upon 10 business days notice.
Upon such demand, WRIT, at its option, may redeem such units for cash or WRIT
shares.
4
ITEM 1. BUSINESS, (continued)
WRIT believes that the WRIT partnership will provide WRIT an opportunity to
acquire real estate assets which might not otherwise have been offered to it.
WRIT makes capital improvements on an ongoing basis to its properties for the
purpose of maintaining and increasing their value. Major improvements and/or
renovations to the properties in 1995 and planned for 1996 are discussed by
property category on pages 7-10.
Further description of the property groups is contained in Item 2, Properties
and in Schedule III. Reference is also made to Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The number of persons employed by the Trust was 28 as of March 15, 1996.
ITEM 2. PROPERTIES
The following schedule lists the Trust's real estate investment portfolio as of
December 31, 1995. The total number of properties is 41.
As of December 31, 1995 the percent leased is the percentage of net rentable
space for which fully executed leases exist and may include signed leases for
space not yet occupied by the tenant.
Cost information is included in Schedule III of this Form 10-K Annual Report.
5
SCHEDULE OF PROPERTIES
Percent
Year Year Net Rentable * Leased
Properties Location Acquired Constructed Square Feet 12/31/95
- -------------------------- ----------------- -------- ----------- ------------ --------
Shopping Centers
- ----------------
Concord Centre Springfield, VA 1973 1960 76,383 92%
Bradlee Alexandria, VA 1984 1955 167,974 100%
Clairmont Salisbury, MD 1976 1965 40,455 68%
Dover Mart Dover, DE 1973 1960 44,044 100%
Chevy Chase Metro Plaza Washington, D.C. 1985 1975 49,893 98%
Prince William Plaza Woodbridge, VA 1968 1967 54,584 68%
Takoma Park Takoma Park, MD 1963 1962 58,811 100%
Westminster Westminster, MD 1972 1969 171,531 90%
Wheaton Park Wheaton, MD 1977 1967 46,716 98%
Montgomery Village Center Gaithersburg, MD 1992 1969 196,464 92%
Shoppes of Foxchase Alexandria, VA 1994 1960 127,564 98%
Frederick County Square Frederick, MD 1995 1973 232,783 100%
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Subtotal 1,267,202
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Office Buildings
- ----------------
The WRIT Building Kensington, MD 1979 1965 65,653 97%
1901 Pennsylvania Avenue Washington, D.C. 1977 1960 97,036 56%
One Metro Square Rockville, MD 1979 1975 206,144 85%
444 N. Frederick Avenue Gaithersburg, MD 1989 1981 65,463 90%
7700 Leesburg Pike Falls Church, VA 1990 1976 122,497 94%
Arlington Financial Center Arlington, VA 1992 1963 51,655 91%
515 King Street Alexandria, VA 1992 1966 78,073 90%
The Lexington Building Rockville, MD 1993 1970 47,751 100%
The Saratoga Building Rockville, MD 1993 1977 58,237 97%
Brandywine Center Rockville, MD 1993 1969 34,982 84%
Tycon Plaza II Vienna, VA 1994 1981 139,938 95%
Tycon Plaza III Vienna, VA 1994 1978 151,594 92%
6110 Executive Boulevard Rockville, MD 1995 1971 198,796 95%
1220 19th Street Washington, D.C. 1995 1976 104,033 90%
---------
Subtotal 1,421,852
---------
Apartment Buildings/ # units
- ----------------------------
Country Club Towers/227 Arlington, VA 1969 1965 276,000 96%
Munson Hill Towers /279 Falls Church, VA 1970 1963 340,000 89%
Park Adams/200 Arlington, VA 1969 1959 210,000 95%
Roosevelt Towers/191 Falls Church, VA 1965 1964 229,000 91%
3801 Connecticut Avenue/307 Washington, D.C. 1963 1951 242,000 94%
---------
Subtotal 1,297,000
---------
Industrial Distribution Centers
- -------------------------------
Pepsi-Cola Distribution Center Forestville, MD 1987 1971 68,750 100%
Capitol Freeway Center Washington, D.C. 1974 1940 145,000 100%
Department of Commerce Springfield, VA 1971 1964 105,000 100%
Fullerton Business Center Springfield, VA 1985 1980 103,339 100%
Ravensworth Center Springfield, VA 1986 1965 29,000 100%
Shirley I-395 Business Center Arlington, VA 1961/1986 1960 112,585 100%
V Street Distribution Center Washington, D.C. 1973 1960 30,753 25%
Charleston Business Center Rockville, MD 1993 1973 85,267 92%
Tech 100 Industrial Park Elk Ridge, MD 1995 1990 167,267 96%
Crossroads Distribution Center Elk Ridge, MD 1995 1987 84,550 100%
---------
Subtotal 931,511
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TOTAL 4,917,565
=========
* Apartment buildings are presented in gross square feet
6
PROPERTY REPOSITIONINGS
Chevy Chase Metro Plaza
In the second quarter of 1995, WRIT completed the renovation and expansion of
Chevy Chase Metro Plaza (formerly known as Jenifer One Center). To accomplish
this, WRIT negotiated the termination of the below-market lease of the Jenifer
Theater, added 11,700 square feet to the property through the addition of a
floor in the double height portion of the former theater and installed an
escalator between the street level and the newly created floor.
T.J. Maxx has leased this newly created floor and the original lower level
floor at a per square foot rate that is double the Jenifer Theater rate. TGI
Friday's has leased the former American Cafe space with occupancy expected by
the third quarter of 1996. The leases for the other tenants in the property
have been extended at substantially increased rental rates. At this time, there
remains only one 934 square foot space vacant in the property. As a result of
these actions, the property's projected operating income will increase by over
60% from pre-renovation full occupancy.
Prince William Plaza
As of January 1, 1995, Prince William Plaza was 72% leased, but only 33%
occupied as Blockbuster and Rite-Aid had vacated their spaces with years
remaining on their leases. While Rite-Aid, with below market rent, and
Blockbuster remained liable for their rent, the vacated stores caused
substantial negative impact on the other tenants in the center.
During 1995, WRIT approached Rite-Aid and negotiated an early termination of
the lease, which included Rite-Aid paying a penalty fee. This former Rite-Aid
space has now been leased to a theater operator at more than 3 times the
previous rent and the Blockbuster space has been leased to another video store.
Additional new leases, along with the remaining in-place tenants has brought
the Center to 96% leased. Prince William Plaza's pro-forma operating income is
expected to be 34% higher than its 1994/1995 average.
1901 Pennsylvania Avenue
During 1995, WRIT completed a major renovation to the 1901 Pennsylvania Avenue
office building. Renovations to the main lobby, elevator cabs, hallways and
restrooms were supplemented by modernizations of the elevator equipment and
mechanical systems and installation of a new roof and solar film on windows.
Asbestos removal in the building is ongoing, concurrent with tenant buildouts.
During 1995, the building was 57% occupied. With the completion of the
renovations in the third quarter, leasing activity has increased. As of
March 15, 1996, the building is 65% leased and negotiations are ongoing
with additional interested potential tenants.
SHOPPING CENTERS
On August 22, 1995 WRIT acquired Frederick County Square, a shopping center,
containing approximately 233,000 rentable square feet of retail space located
on U.S. Route 40 in Frederick, Maryland for an acquisition cost of $13,392,000.
WRIT used $5,640,000 of the net proceeds from the July 1995 public offering
(See Capital Resources and Liquidity) and assumed an existing mortgage of
$7,752,000.
7
SHOPPING CENTERS (continued)
Major improvements during 1995 included:
Chevy Chase Metro Plaza - Installation of an additional floor
containing 11,700 square feet of
rentable area and escalators to the
street level
Prince William Plaza - Parking lot repaving and cosmetic
renovations including new facia,
canopy lights and painting
The Shoppes of Foxchase* - Construction of a retaining wall and
additional parking, repaving and
partial roof replacement
Major improvements planned for 1996 include:
Wheaton Park Shopping Center - Construction of a 25,000 square foot
addition
Frederick County Square* - Parking lot repairs, lights and
upgraded pylons
* These improvements were projected during acquisition due diligence.
Occupancy rates for the Shopping Center Group averaged 97% in 1993 and 1994 and
94% in 1995. The primary reasons for the decreased Shopping Center Group
occupancy level in 1995 were vacancy increases at the Concord and Montgomery
Village Shopping Centers and the property repositionings at Prince William
Plaza and Chevy Chase Metro Plaza. Concord Shopping Center averaged 92%
occupancy during 1995 vs. 100% in 1994 due to lease expirations. Montgomery
Village Center averaged 93% in 1995 vs. 97% in 1994, primarily due to the
bankruptcy of So Fro Fabrics. With the bankruptcy of Evans Jewelers, the
center is 77% leased as of March 15, 1996. Prince William Plaza and Chevy
Chase Metro Plaza underwent significant capital improvements and releasing
during 1995 and are now 96% and 98% leased, respectively.
Most shopping center leases have automatic annual increases based on changes in
the Consumer Price Index or agreed-upon percentages. In addition, these leases
generally contain clauses for reimbursement for real estate taxes and common
area maintenance costs, and some leases provide for contingent rents based on a
percentage of the tenant's gross sales.
OFFICE BUILDINGS
On January 26, 1995 WRIT acquired 6110 Executive Boulevard, containing
approximately 198,000 rentable square feet of office space plus a three-story
parking deck in Rockville, Maryland, for an acquisition cost of $16,515,000.
On November 2, 1995 WRIT acquired 1220 Nineteenth Street, NW, containing
approximately 104,033 rentable square feet and two and-a-half levels
underground parking in Washington, D.C., for an acquisition cost of
$19,169,000.
Major improvements during 1995 included:
1901 Pennsylvania Avenue - A new roof, new spandrels, solar
film on windows, canopies, lobby,
restroom and common hallway
renovations, the replacement of the
elevator controls and asbestos
removal
One Metro Square - Replacement of elevator controls,
plaza level roofs and HVAC equipment
Tycon III* - Roof and HVAC controls replacement
6110 Executive Boulevard* - Roof replacement
8
OFFICE BUILDINGS (continued)
Major improvements planned for 1996 include:
7700 Leesburg Pike - Installation of an energy management
system and the addition of 20,000
square feet of office space, 100%
pre-leased, to be built on top of
the existing structured parking
1901 Pennsylvania Avenue - Installation of an energy management
system, sprinklers and continued
asbestos removal
One Metro Square - A new penthouse roof, replacement of
the energy management system and
sprinkler system
WRIT Building - Installation of an energy management
system
Tycon II* - Installation of an energy management
system and exterior masonry repairs
Tycon III* - Installation of an energy management
system
6110 Executive Boulevard* - Mechanical system replacement,
installation of an energy management
system, lighting retrofit, oil tank
removal, new sprinkler system,
elevator cab renovation, building
caulking and restroom and lobby
renovations
* These improvements were projected during acquisition due diligence.
Occupancy rates for the Office Building Group overall averaged 94% in 1993, 93%
in 1994 and 89% in 1995. The primary reason for the decreased Office Building
Group occupancy level in 1995 was the vacancy at 1901 Pennsylvania Avenue
caused by the previously mentioned major renovations during 1995. However,
excluding 1901 Pennsylvania Avenue, 1995 Office Building Group occupancy
averaged 94%. As of March 15, 1996, 1901 Pennsylvania Avenue is 65% leased, as
compared to its average 1995 level of 57%.
Office building leases generally have a three to five year term. Most leases
have automatic annual increases based on changes in the Consumer Price Index
or agreed-upon percentages and additional pass through reimbursements for
increases in real estate taxes and operating expenses.
APARTMENTS
WRIT's five high-rise apartment buildings are well located and have a combined
total of 1,204 units consisting of efficiency and one, two or three bedroom
apartments. Apartment leases are generally for periods of one year or less.
There is a continuous emphasis on the upgrading of the units, quality of
management and services to residents with the goal to increase resident
retention and to enhance market place acceptance.
Four of the apartment buildings are in nearby northern Virginia with convenient
transportation routes to downtown Washington. 3801 Connecticut Avenue is in
Washington, D.C. and these apartments are subject to the rent control laws of
the District of Columbia. The laws provide landlords with annual rent increases
tied to the rate of inflation subject to an annual maximum of 10% and also
afford landlords the opportunity for additional rent increases as units are
re-rented to new tenants.
Major improvements during 1995 included:
All Apartments - Turnover upgrades (appliances, cabinets,
carpet and wallpaper)
3801 Connecticut Avenue - Replacement of the air conditioning lines and
removal of asbestos in the boiler room
Park Adams - Resurfacing of the pool deck and repair of
the pool lining
9
APARTMENTS (continued)
Major improvements planned for 1996 include:
All Apartments - Continuation of turnover upgrades
3801 Connecticut Avenue - Completion of the replacement of the air
conditioning lines and install energy
management system
Munson Hill Towers - Parking lot/garage repairs
Park Adams - Window repairs, recaulking and/or
replacement, parking lot/garage repairs and
replacement of the elevator controls
Country Club Towers - Install energy management system, window
repairs, recaulking and/or replacement and
parking lot/garage repairs
Roosevelt Towers - Install energy management system and parking
lot/garage repairs
Occupancy rates for the Apartment Group overall averaged 95% in 1993, 97% in
1994 and 96% in 1995.
INDUSTRIAL DISTRIBUTION CENTERS
On May 17, 1995 WRIT acquired a three-building industrial distribution center,
Tech 100 Industrial Park, containing approximately 167,000 rentable square feet
of distribution space in Howard County, Maryland, for an acquisition cost of
$6,830,000. On December 21, 1995 WRIT acquired Crossroads Distribution
Center, containing approximately 85,000 rentable square feet of distribution
space in Howard County, Maryland, for an acquisition cost of $2,840,000.
Major improvements during 1995 included:
Shirley - 395 - New roofing
Pepsi - New roofing
Major improvements planned for 1996 include:
Fullerton - Repaving of the parking lot
Occupancy rates for the Industrial Distribution Center group overall averaged
89% in 1993, 94% in 1994 and 97% in 1995.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Trust's shares have been traded on the American Stock Exchange since 1971
and there are approximately 39,000 shareholders. The Trust's shares were
split 3-for-1 in March, 1981, 3-for-2 in July, 1985, 3-for-2 in December, 1988,
and 3-for-2 in May, 1992.
The high and low sales price for the Trust's shares for 1995 and 1994, by
quarter, and the amount of dividends paid by the Trust are as follows:
Quarterly Share Price Range
---------------------------
Dividends
Quarter Per Share High Low
------- --------- ---- ---
1995
4 $.25 $16 1/8 $14 1/2
3 .25 15 3/4 13 7/8
2 .25 16 1/4 14 1/4
1 .24 16 5/8 15
1994
4 $.23 $18 $14 7/8
3 .23 19 7/8 17
2 .23 21 1/8 17 5/8
1 .23 21 18 5/8
The Trust has historically paid dividends on a quarterly basis and there are
currently no restrictions on the Trust's present or future ability to pay such
dividends. Dividends are normally paid based on the Trust's cash flow from
operating activities. The 1996 indicated annual dividend rate is $1.00 based
on an annualization of the March 29, 1996 dividend.
11
Item 6. Selected Financial Data
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Real estate revenue $52,597,497 $45,511,482 $39,375,282 $34,132,217 $33,311,399
Income before gain on sale of real estate $26,103,329 $23,122,240 $22,506,219 $20,429,264 $18,386,398
Gain on sale of real estate - - $741,217 - -
Net income $26,103,329 $23,122,240 $23,247,436 $20,429,264 $18,386,398
Income before gain on sale of real estate
per share $0.88 $0.82 $0.80 $0.76 $0.74
Net income per share $0.88 $0.82 $0.82 $0.76 $0.74
Total assets $241,783,507 $178,806,110 $162,010,652 $185,673,242 $135,741,092
Lines of credit payable/Short-term bank loan $28,000,000 $18,000,000 - $21,000,000 -
Mortgage payable $7,706,346 - - $1,115,193 $11,329,370
Shareholders' equity $199,734,678 $154,659,100 $157,348,056 $159,026,525 $119,944,265
Cash dividends paid $29,711,993 $25,981,388 $24,380,361 $22,513,368 $19,672,408
Distribution of gain on sale of real estate - - $741,217 - -
Cash dividends paid per share $0.99 $0.92 $0.89 $0.84 $0.79
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REAL ESTATE RENTAL REVENUE: 1995 VERSUS 1994
Total revenues for 1995 increased $7.1 million to $52.6 million from $45.5
million in 1994. The percentage increase in real estate rental revenue from
1994 to 1995 by property type was as follows:
1994/1995
---------
Office Buildings 22%
Apartments 3%
Shopping Centers 16%
Industrial Distribution Centers 20%
During 1995, WRIT's Office Building Group had increases of 22% in revenues and
17.4% in operating income due primarily to the acquisition of the Tycon II and
III office buildings in 1994 and the 6110 Executive Boulevard and 1220 19th
Street office buildings in 1995. The Tycon buildings were 71% occupied at
acquisition in June of 1994 but averaged 94% occupancy during 1995. 6110
Executive Boulevard was acquired by the Trust January 31,1995 and averaged 94%
occupancy during 1995. 1220 19th Street was acquired by the Trust in November,
1995. This property was 90% leased at December 31, 1995.
WRIT's Apartment Group had increases of 3% in revenues and 2% in operating
income during 1995. This increase was the result of a 3% increase in rents
more than offsetting a 3.3% increase in operating expenses and a 1% decrease in
occupancy to 96%. The major cause of the 3.3% increase in operating expenses
was the adoption of a more conservative capitalization policy regarding
repairs, replacements, and improvements.
During 1995, WRIT's Shopping Center Group had increases of 16% in revenues and
operating income due primarily to the repositioning of Chevy Chase Metro Plaza,
as well as the acquisition of the Shoppes of Foxchase in 1994 and Frederick
County Square in 1995.
During 1995, WRIT's Industrial Distribution Center Group had increases of 20%
in revenues and 23% in operating income. This was due primarily to significant
occupancy increases at Shirley - 395 and Fullerton, rental rate increases
averaging 3.1% throughout the group, and the 1995 acquisition of Tech 100
Industrial Park. In December 1995, WRIT acquired Crossroads Distribution
Center, a 100% leased property. Occupancy rates for the Industrial
Distribution Center group overall averaged 97% in 1995.
REAL ESTATE RENTAL REVENUE: 1994 VERSUS 1993
Total revenues for 1994 increased $6.1 million to $45.5 million from $39.4
million in 1993. The percentage increase in real estate rental revenue from
1993 to 1994 by property type was as follows:
1993/1994
---------
Office Buildings 34%
Apartments 4%
Shopping Centers 5%
Industrial Distribution Centers 17%
13
RESULTS OF OPERATIONS - (continued)
The increase of 34% in real estate revenue from 1993 to 1994 for office
buildings was primarily attributable to the acquisitions of the three office
buildings in November 1993 and the two office buildings in June of 1994.
During 1994, WRIT's Apartment Group had increases of 4% in revenues and 7% in
operating income, due to the combination of a 2% increase in rental rates and
an overall increase in occupancy to 97% in 1994 from 95% in 1993, combined with
an increase in operating expenses of only 1%.
During 1994, WRIT's Shopping Center Group had an increase of 5% in revenues and
3% in operating income, due to the acquisition of The Shoppes at Foxchase in
June of 1994.
During 1994, WRIT's Industrial Distribution Center Group had increases of 17%
in revenues and 15% in operating income, due to the acquisition of the
Charleston Business Center in November of 1993 and major occupancy increases at
the Fullerton and Port Royal properties, only slightly offset by a vacancy
increase at the V street property.
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
Real estate operating expenses as a percentage of revenue was 32% for 1995 as
compared to 31% for 1994 and 30% for 1993. This increase is attributable to
the decline in occupancy levels in 1995 and to the fact that operating
expenses as a percentage of revenues are higher for office building properties
than the other property types within the WRIT portfolio. WRIT's percentage of
office buildings within its entire real estate portfolio has increased from 43%
at December 31, 1994 to 47% as of December 31, 1995. This increase is
attributable primarily to the acquisitions of 6110 Executive Boulevard in
January, 1995 and 1220 19th Street in November, 1995.
In 1995, other income (expense) increased from 1994 due to investment earnings
in 1995 on the net proceeds of approximately $48,000,000 from the sale of
3,500,000 shares of beneficial interest. 1995 other income (expense) also
increased as a result of a 1994 charge of $799,571 to other income (expense)
for the sale of a marketable investment security. Also in 1994, there was a
charge to other income (expense) of $271,000 as the result of an audit
assessment by the State of Maryland unclaimed property division.
1995 interest expense was $1,920,479 due to $18,000,000 of advances outstanding
until July 1995 on the line of credit borrowings from 1994 and $44,000,000 of
advances on the lines of credit to finance 1995 acquisitions. $36,000,000 of
repayments on the advances from the lines of credit also occurred in 1995.
WRIT incurred $249,322 of interest expense on the mortgage note payable assumed
in August 1995 for the acquisition of Frederick County Square for a total 1995
interest expense of $2,169,801. Interest expense was $614,162 for 1994 as a
result of advances on the credit commitment for the acquisitions of Tycon
Plaza and The Shoppes of Foxchase. Interest expense for 1993 was $61,462 for
a mortgage which was paid in full in that year.
General and administrative expenses were $3,355,199 for 1995 as compared to
$3,260,870 for 1994 and $2,858,035 for 1993. The majority of the increase for
1995 as compared to 1994 is attributable to personnel additions since June of
1994 and continuing into 1995, partially offset by reduced pension costs and
the completion of severance pay in June, 1995 to WRIT's former Chairman and
Chief Executive Officer, B. Franklin Kahn, who retired in March, 1995. The
majority of the increase for 1994 as compared to 1993 is attributable to
personnel additions and increased shareholder expenses.
14
CAPITAL RESOURCES AND LIQUIDITY
WRIT has utilized the proceeds of share offerings, long-term fixed interest
rate debt, bank lines of credit and cash flow from operations for its capital
needs. External sources of capital will continue to be available to WRIT from
its existing unsecured credit commitments and management believes that
additional sources of capital are available from selling additional shares
and/or the sale of long-term senior notes. The funds raised would be used to
pay off any outstanding advances on our lines of credit and for new
acquisitions and capital improvements.
Cash flow from operating activities totaled $30,987,000 for the year ended
December 31, 1995 including net income of $26,103,000 and depreciation of
$5,084,000. Increases in other assets of $395,000 were due to increases in
rents and other receivables, prepaid real estate taxes and insurance.
Increases in other liabilities was primarily due to increases in tenant
security deposits. The majority of these increases were due to a larger
property portfolio. Rental revenue has been the principal source of funds to
pay WRIT's operating expenses, interest expense and dividends to shareholders.
In 1995, WRIT paid dividends totaling $29,712,000.
Net cash used in investing activities for the year ended December 31, 1995 was
$59,118,000 including 1995 property acquisitions of $50,994,000 and
improvements to real estate of $8,124,000.
On July 25, 1995 WRIT received $48,842,500 from the issuance and sale of
3,500,000 shares. WRIT's other underwriting expenses were $232,600 resulting
in net proceeds received by the Trust of $48,609,900. Approximately
$36,000,000 of the net proceeds were used to repay certain borrowings
outstanding under the Trust's lines of credit resulting from 1994 and 1995
property acquisitions. $6,994,000 of the net proceeds in addition to financing
was used to acquire Frederick County Square and 1220 Nineteenth Street. The
balance of the net proceeds was used to renovate, expand or improve income
producing properties.
WRIT has line of credit commitments in place from commercial banks for up to
$75,000,000. As of January 1, 1995, WRIT had $18,000,000 of borrowings on its
line of credit, which was used for 1994 acquisitions. During 1995, WRIT
acquired five properties for a total of acquisition costs of $58,746,000. WRIT
borrowed $44,000,000 for these acquisitions under its lines of credit, assumed
a mortgage for $7,752,000 and used $6,994,000 of proceeds from its July, 1995
public offering to complete these property acquisitions. During 1995 WRIT
repaid $36,000,000 of line of credit borrowings ($34,000,000 for property
acquisitions and $2,000,000 for property improvements) leaving $28,000,000 due
with a weighted average interest rate of 6.1% and $47,000,000 available for
future borrowings. Line of credit maturities range from July 26, 1996 (subject
to extension until July 25, 1997 at WRIT's option) to January 31, 1999.
Capital improvements of $8,124,000 were completed in 1995, including tenant
improvements. Improvements to WRIT properties in 1994 and 1993 were
approximately $5,787,000 and $4,712,000, respectively. WRIT's 1996 planned
capital improvements total $11,470,000, including $3,234,000 for tenant
improvements.
Management believes that it has the liquidity and the capital resources
necessary to meet all of its known obligations and to make additional property
acquisitions and capital improvements when appropriate to enhance long-term
growth.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data are listed under Item 14(a) and
filed as part of this report on the pages indicated.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
15
PART III
Certain information required by Part III is omitted from this Report in that
the Registrant will file a definitive proxy statement pursuant to Regulation
14A (the "Proxy Statement") not later than 120 days after the end of the fiscal
year covered by this Report, and certain information included therein is
incorporated herein by reference. Only those sections of the Proxy Statement
which specifically address the items set forth herein are incorporated by
reference. Such incorporation does not include the Performance Graph included
in the Proxy Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is hereby incorporated herein by
reference to WRIT's 1996 Annual Meeting Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference to
WRIT's 1996 Proxy Statement.
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
ITEM 14(a) The following documents are filed as a part of this Report:
1. Financial Statements: The following Financial Statements of
Washington Real Estate Investment Trust and Report of Independent
Accountants are included in this report.
Report of Independent Accountants.
Balance Sheets at December 31, 1995 and 1994.
Statements of Income for the years ended December 31, 1995, 1994 and
1993.
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993.
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993.
Notes to Financial Statements.
2. Financial Statement Schedules: The following financial statement
schedules of Washington Real Estate Investment Trust for the periods
indicated are filed as part of this Report and should be read in
conjunction with the Financial Statements of Washington Real Estate
Investment Trust.
Schedule Page
- -------- ----
III Real Estate and Accumulated Depreciation......................................................................31-32
IV Mortgage Note Receivable.........................................................................................33
Supplementary Information: Quarterly Financial Results (unaudited)...............................................34
Schedules not listed above have been omitted because they are not applicable or
are not required or the information to be set forth therein is included in the
Financial Statements or Notes thereto.
3. Exhibits:
3. Declaration of Trust and Bylaws
(a) Declaration of Trust, as amended, *
(b) Bylaws. *
17
ITEM 14(a) (continued)
4.
(a) Credit agreement dated March 1, 1995 between
Washington Real Estate Investment Trust, as borrower,
The First National Bank of Chicago, as Lender, and
The First National Bank of Chicago as Agent.
The Trust is party to other instruments defining the
rights of holders of long-term debt. No such
instrument authorizes an amount of securities in
excess of 10% of the total assets of the Trust. On
request, the Trust agrees to furnish a copy of each
such instrument to the Securities and Exchange
Commission.
10. Management contracts, plans and arrangements
(a) Employment Agreement dated May 11, 1994 with Edmund
B. Cronin, Jr. *
(b) 1991 Incentive Stock Option Plan. *
(c) Nonqualified Stock Option Agreement dated June 27,
1990 with B. Franklin Kahn. *
(d) Nonqualified Stock Option Agreement dated December
14, 1994 with Edmund B. Cronin, Jr. *
(e) Nonqualified Stock Option Agreement dated December
19, 1995 with Edmund B. Cronin, Jr.
23. Consents
(a) Consent of Price Waterhouse LLP
ITEM 14(b)
Reports on Form 8-K: Forms 8-K and 8-K/A were filed on August 22,
1995 with the Securities and Exchange Commission.
* Incorporated herein by reference to the Exhibit of the same designation to
Amendment No. 2 to the Trust's Registration Statement on Form S-3 filed July
17, 1995.
18
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WASHINGTON REAL ESTATE INVESTMENT TRUST
/ s / Edmund B. Cronin, Jr.
By
------------------------------------:
Date: March 28, 1996,
Edmund B. Cronin, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Security and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/ s / Arthur A. Birney Chairman and Trustee March 27, 1996
- -----------------------
Arthur A. Birney
/ s / William N. Cafritz Trustee March 28, 1996
- -------------------------
William N. Cafritz
Benjamin H. Dorsey Secretary and Trustee March 28, 1996
- ------------------
Benjamin H. Dorsey
/ s / David M. Osnos Trustee March 28, 1996
- --------------------
David M. Osnos
/ s / Stanley P. Snyder Trustee March 28, 1996
- -----------------------
Stanley P. Snyder
/ s / Larry E. Finger Senior Vice President, Finance
- --------------------- and Chief Financial Officer March 28, 1996
Larry E. Finger
/ s / B. Franklin Kahn Trustee, Retired Chairman
- ---------------------- and Chief Executive Officer March 28, 1996
B. Franklin Kahn
/ s / Laura M. Franklin Vice President, Finance
- ----------------------- and Chief Accounting Officer March 28, 1996
Laura M. Franklin
19
Report of Independent Accountants
To the Trustees and Shareholders of
Washington Real Estate Investment Trust
In our opinion, the financial statements listed in the index appearing under
item 14(a)(1) and (2) on page 17 present fairly, in all material respects, the
financial position of Washington Real Estate Investment Trust at December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Washington, D.C.
March 27, 1996
20
WASHINGTON REAL ESTATE INVESTMENT TRUST
BALANCE SHEETS
December 31, December 31,
1995 1994
------------- -------------
Assets
Real estate at cost $272,597,214 $206,377,733
Accumulated depreciation (41,021,586) (36,588,540)
------------ ------------
231,575,628 169,789,193
Mortgage note receivable 800,000 800,000
------------ ------------
Total investment in real estate 232,375,628 170,589,193
Cash and temporary investments 3,531,812 2,736,183
Rents and other receivables, net of allowance for doubtful
accounts of $517,934 and $650,356, respectively 2,307,314 2,207,069
Prepaid expenses and other assets 3,568,753 3,273,665
------------ ------------
$241,783,507 $178,806,110
============ ============
Liabilities
Accounts payable and other liabilities $3,032,575 $2,975,691
Tenant security deposits 1,827,725 1,517,762
Advance rents 1,482,183 1,653,557
Mortgage note payable 7,706,346 -
Lines of credit payable 28,000,000 18,000,000
------------ ------------
42,048,829 24,147,010
------------ ------------
Shareholders' Equity
Shares of beneficial interest, unlimited authorization,
without par value 184,416,013 139,340,435
Undistributed gains on real estate dispositions 15,318,665 15,318,665
------------ ------------
199,734,678 154,659,100
------------ ------------
$241,783,507 $178,806,110
============ ============
See accompanying notes to financial statements
21
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF INCOME
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Real estate rental revenue $52,597,497 $45,511,482 $39,375,282
Real estate expenses (16,600,615) (14,030,844) (11,829,702)
----------- ----------- -----------
35,996,882 31,480,638 27,545,580
Depreciation (5,083,742) (3,933,090) (3,616,190)
----------- ----------- -----------
Income from real estate 30,913,140 27,547,548 23,929,390
Other income (expense) 715,189 (550,276) 1,496,326
Interest expense (2,169,801) (614,162) (61,462)
General and administrative (3,355,199) (3,260,870) (2,858,035)
----------- ----------- -----------
Income before gain on sale of real estate 26,103,329 23,122,240 22,506,219
Gain on sale of real estate - - 741,217
----------- ----------- -----------
Net income $26,103,329 $23,122,240 $23,247,436
=========== =========== ===========
Income before gain on sale of real estate per share $0.88 $0.82 $0.80
=========== =========== ===========
Net income per share $0.88 $0.82 $0.82
=========== =========== ===========
See accompanying notes to financial statemen
22
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1995 1994 1993
----------- ----------- -----------
Cash Flow From Operating Activities
Net income $26,103,329 $23,122,240 $23,247,436
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 5,083,742 3,933,090 3,616,190
Changes in other assets (395,333) 479,493 (1,156,187)
Changes in other liabilities 195,473 1,484,414 65,938
Gain on sale of property - - (741,217)
Loss on sale of marketable investment securities - 799,571 -
----------- ----------- -----------
Cash flow provided by operating activities 30,987,211 29,818,808 25,032,160
----------- ----------- -----------
Cash Flow From Investing Activities
Improvements to real estate (8,123,995) (5,786,977) (4,711,662)
Real estate acquisitions, net * (50,994,178) (30,729,184) (11,049,907)
Purchases of marketable investment securities (75,949,280) (33,560,706) (15,524,945)
Maturities and sales of marketable investment securities 75,949,280 49,045,967 53,000,435
Proceeds from the sale of real property - - 176,000
Payments received on mortgage note receivable
for sale of property - - 74,000
----------- ----------- -----------
Net cash (used in) provided by investing activities (59,118,173) (21,030,900) 21,963,921
----------- ----------- -----------
Cash Flow From Financing Activities
Dividends paid (29,711,993) (25,981,388) (24,380,361)
Distribution of gain on sale of real estate - - (741,217)
Repayment of short-term bank loan - - (21,000,000)
Borrowings - lines of credit 46,000,000 18,000,000 -
Repayments - lines of credit (36,000,000) - -
Mortgage principal payments (45,658) - (27,269)
Mortgage principal retirements - - (1,087,924)
Net proceeds from sale of shares 48,609,895 -
Share options exercised 74,347 170,192 195,673
----------- ----------- -----------
Net cash flow provided by (used in) financing activities 28,926,591 (7,811,196) (47,041,098)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 795,629 976,712 (45,017)
Cash and temporary investments at beginning of year 2,736,183 1,759,471 1,804,488
----------- ----------- -----------
Cash and temporary investments at end of year $3,531,812 $2,736,183 $1,759,471
=========== =========== ===========
Supplemental disclosure of cash flow information
- ------------------------------------------------
Cash paid during the year for interest $2,111,342 $514,811 $61,462
=========== =========== ===========
Cash paid during the year for real estate taxes $3,666,005 $3,247,171 $3,026,845
=========== =========== ===========
*Supplemental schedule of non-cash investing and financing activities
On August 22, 1995 WRIT purchased Frederick Square Shopping Center for an
acquisition cost of $13,392,000. WRIT assumed a mortgage in the amount of
$7,752,000 and paid the balance in cash, the $7,752,000 mortgage is not
included in the $50,994,178 amount shown as real estate acquisitions.
See accompanying notes to financial statements
23
WASHINGTON REAL ESTATE INVESTMENT TRUST
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Undistributed
Shares of Beneficial Gains on
Interest Real Estate
Shares Amount Dispositions
------------ ------------ ------------
Balance, December 31, 1992 28,211,387 $143,707,860 $15,318,665
Net income 22,506,219
Gain on sale of real estate 741,217
Dividends (24,380,361) (741,217)
Share options exercised 16,218 195,673
------------ ------------ ------------
Balance, December 31, 1993 28,227,605 142,029,391 15,318,665
Net income 23,122,240
Dividends (25,981,388)
Share options exercised 14,939 170,192
------------ ------------ ------------
Balance, December 31, 1994 28,242,544 139,340,435 15,318,665
Net income 26,103,329
Net proceeds from sale of shares 3,500,000 48,609,895
Dividends (29,711,993)
Share options exercised 9,190 74,347
------------ ------------ ------------
Balance, December 31, 1995 31,751,734 $184,416,013 $15,318,665
============ ============ ============
See accompanying notes to financial state
24
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE A: NATURE OF BUSINESS
Washington Real Estate Investment Trust (WRIT or the Trust) is a
self-administered qualified equity real estate investment trust. The Trust's
business consists of the ownership of income-producing real estate properties
principally in the Greater Washington-Baltimore Region. The Trust has a
fundamental strategy of regional focus, diversified property type ownership and
conservative financial management.
Washington Real Estate Investment Trust (WRIT) operates in a manner intended to
enable it to qualify as a real estate investment trust under the Internal
Revenue Code (the "Code"). In accordance with the Code, a trust which
distributes its capital gains and at least 95% of its taxable income to its
shareholders each year, and which meets certain other conditions, will not be
taxed on that portion of its taxable income which is distributed to its
shareholders. Accordingly, no provision for Federal income taxes is required.
NOTE B: ACCOUNTING POLICIES
Residential properties are leased under operating leases with terms of
generally one year or less, and commercial properties are leased under
operating leases with average terms of three years. WRIT recognizes rental
income from its residential and commercial leases when earned, which is not
materially different than revenue recognition on a straight-line basis.
Buildings are depreciated on a straight-line basis over estimated useful lives
not exceeding 50 years. Effective January 1, 1995, WRIT revised its estimate
of useful lives for major capital improvements to real estate. All capital
improvement expenditures associated with replacements, improvements, or major
repairs to real property are depreciated using the straight-line method over
their estimated useful lives ranging from 3 to 20 years. All tenant
improvements are amortized using the straight-line method over 5 years or the
term of the lease if it differs significantly from 5 years. Capital
improvements placed in service prior to January 1, 1995 will continue to be
depreciated on a straight-line basis over their previously estimated useful
lives not exceeding 30 years. Maintenance and repair costs are charged to
expense as incurred. Depreciation expense for Federal income tax purposes
differs from that reported for financial statement purposes due to the use of
different lives and depreciation methods. As of December 31, 1995 the net
assets as reported in WRIT's financial statements exceed the net basis for
Federal Income Tax purposes by $14,571,577 due to a lower basis of certain real
estate assets acquired by tax-free exchanges.
Cash and temporary investments, mortgage note receivable, rents and other
receivables, prepaid expenses and other assets, accounts payable and other
liabilities, tenant security deposits, advance rents, mortgage note payable and
lines of credit payable are carried at historical cost which reasonably
approximate their fair values. Cash and temporary investments include
investments readily convertible to known amounts of cash generally with
original maturities of 90 days or less.
Disclosure about the fair value of financial instruments is based on
information available to WRIT as of December 31, 1995. Although WRIT is not
aware of any factors that would significantly affect the reasonable fair value
amounts, such amounts have not been comprehensively revalued for purposes of
these financial statements since that date, and current estimates of fair value
may differ from the carrying amounts.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
25
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE B: ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements: In March 1995, The Financial Accounting
Standards Board (FASB) issued statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will adopt
Statement No. 121 in the first quarter of 1996. In October 1995, the FASB
issued Statement No. 123, "Accounting for Stock-Based Compensation". Statement
No. 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans and is effective for fiscal years
beginning after December 15, 1995. The company expects to continue to apply
the accounting provisions of APB opinion 25 in determining its net income.
However, beginning in 1996, additional disclosures will be made about the
estimated compensation expense under the method established by Statement No.
123. The adoption of these standards will not have a material effect on the
company's financial position or results of operations.
NOTE C: REAL ESTATE INVESTMENTS
WRIT's real estate investment portfolio, at cost, consists of properties
located in Maryland, Washington, D.C., Virginia and Delaware as follows:
December 31,
1995 1994
------------ --------------
Office buildings $128,222,088 $ 88,968,658
Apartment buildings 27,195,617 26,369,011
Shopping centers 82,108,462 65,921,524
Industrial distribution centers 35,071,047 25,118,540
------------ ------------
$272,597,214 $206,377,733
============ ============
Properties acquired by WRIT during the year ending December 31, 1995 are as
follows:
Acquisition Rentable Acquisition
Date Property Type Square Feet Cost
- -------------- ------------------------------------------ ------------------------- ----------- ------------
1/26/95 6110 Executive Boulevard Office 198,800 $16,515,000
5/17/95 Tech 100 Industrial Park Industrial 167,300 6,830,000
8/22/95 Frederick County Square (Note E) Shopping center 232,800 13,392,000
11/02/95 1220 19th Street Office 104,000 19,169,000
12/23/95 Crossroads Distribution Center Industrial 84,600 2,840,000
----------- -----------
787,500 $58,746,000
=========== ===========
NOTE D: MORTGAGE NOTE RECEIVABLE
In June 1993, WRIT sold its headquarters building for $1,050,000 and recognized
a gain of $741,217. Proceeds received were $176,000 in cash and $874,000 in a
mortgage note receivable. Principal payments received in 1993 totaled $74,000.
In February 1996, the mortgage note receivable was modified and the term was
extended for a period of ten years beginning July, 1996. The mortgage bears
interest at 9% through June, 1996, then 12% thereafter and matures in June,
2006. Interest only is payable monthly until June, 1996. Beginning in July,
1996, interest and principal are payable monthly, based upon a thirty year
amortization, until June, 2006. At that time all accrued and unpaid interest
and principal are due in full. At December 31, 1995, the fair value of the
mortgage note receivable approximates its carrying amount.
26
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE E: MORTGAGE NOTE PAYABLE
On August 22, 1995 WRIT assumed a $7,752,000 mortgage note payable as partial
consideration for its acquisition of Frederick County Square. The mortgage
bears interest at 9%. Principal and interest are payable monthly until January
1, 2003 at which time all unpaid principal and interest are payable in full.
Annual maturities of principal as of December 31, 1995 are $117,000, $128,000,
$140,000, $153,000, $167,000 and $7,001,000 thereafter. At December 31, 1995,
the fair value of the mortgage note payable approximates its carrying amount.
NOTE F: LINES OF CREDIT PAYABLE
On January 26, 1995 WRIT borrowed $16,000,000 on a short-term bank loan at the
bank's then prime rate of 8.5%. Interest only was payable monthly on the
unpaid principal balance at the bank's corporate base rate. On March 8, 1995,
the $16,000,000 short-term loan was replaced with an unsecured credit
commitment of $25,000,000 and the outstanding advance of $16,000,000 was
transferred to this new commitment. This $16,000,000 advance bore interest at
the rate of 6.8% until September 8, 1995, at which time it was paid in full
(See Capital Resources and Liquidity). Additionally under this commitment,
WRIT borrowed the following amounts: On May 15, 1995, $7,000,000 for the
acquisition of Tech 100 Industrial Park, on June 28, 1995, $2,000,000 for
capital improvements and major renovations, and on November 2, 1995,
$18,000,000 for the acquisition of 1220 19th Street. The $2,000,000 advance
bore interest at the rate of 6.42% until July 31, 1995 at which time it was
paid in full. On November 15, 1995 the initial interest rate of 6.425%
expired for the $7,000,000 advance. The new rate of 5.99% is effective until
August 12, 1996 at which time it will adjust as described below. The
$18,000,000 advance bears interest at the rate of 6.11% until August 29, 1996
at which time it will also adjust as further described. Interest only is
payable monthly, in arrears, on the unpaid principal balance. All new advances
and interest rate adjustments upon the expiration of WRIT's interest lock-in
dates will bear interest at LIBOR plus a spread based on WRIT's debt service
coverage ratio. Based on WRIT's current debt service coverage ratio, this
spread is 30 basis points over LIBOR. All unpaid interest and principal can be
prepaid prior to the expiration of WRIT's interest rate lock-in periods subject
to a yield maintenance obligation and all unpaid principal and interest are due
January 31, 1999.
This $25,000,000 credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.15% per annum in the first year, and 0.20% per
annum thereafter, on the amount that the $25,000,000 commitment exceeds the
balance of outstanding advances and term loans. This fee is payable monthly
beginning March, 1995 until January, 1999. This commitment also contains
certain financial and legal covenants which WRIT is required to meet
periodically.
On July 27, 1995 WRIT renegotiated its other $25,000,000 unsecured credit
commitment that was scheduled to expire on August 25, 1995 and replaced it with
an unsecured credit commitment of $50,000,000 from the same bank and a
participating bank for the express purpose of purchasing income-producing
property and to make capital improvements to real property. On December 21,
1995 WRIT borrowed $3,000,000 under this commitment for the acquisition of
Crossroads Distribution Center. The $3,000,000 advance bears interest at the
rate of 6.15% until July 18, 1996 at which time it will adjust. Interest only
is payable monthly, in arrears, on the unpaid principal balance. All unpaid
interest and principal are due July 26, 1996, and can be prepaid prior to this
date without any prepayment fee or yield maintenance obligation. WRIT has the
option to extend this agreement until July 25, 1997. At that time, WRIT
intends to exercise this option. Any new advances shall bear interest at LIBOR
plus a spread based on WRIT's interest coverage ratio. Based on WRIT's current
interest coverage ratio, this spread is 50 basis points over LIBOR. This
credit agreement provides WRIT the option to convert any advances or portions
thereof into a term loan at any time after January 27, 1996 and prior to July
26, 1996 or July 25, 1997, if extended. The principal amount of each term
loan, if any, shall be repaid on July 27, 1999. Such term loan(s) may be
prepaid subject to a prepayment fee.
27
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE F: LINES OF CREDIT PAYABLE (continued)
The $50,000,000 credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.15% per annum on the amount by which
$50,000,000 exceeds the balance of outstanding advances and term loans. This
fee is payable quarterly in arrears beginning October 1995 until July 26, 1996,
or July 25, 1997 if extended. This commitment also contains certain covenants
which WRIT is required to meet periodically.
As of December 31, 1995 there were advances outstanding on the above credit
facilities in the amount of $28,000,000.
NOTE G: SHARES OF BENEFICIAL INTEREST AND DIVIDENDS
Net income per share is calculated by dividing net income by the weighted
average number of shares outstanding during the year. The weighted average
shares outstanding were 29,786,933, 28,239,420 and 28,223,307 in 1995, 1994 and
1993, respectively.
The following is a breakdown of the taxable percentage of WRIT's dividends for
1995, 1994 and 1993, respectively:
Ordinary Income Capital Gain Return of Capital
--------------- ------------ -----------------
1995 89.23% -- 10.77%
1994 90.54% -- 9.46%
1993 95.80% 2.60% 1.60%
NOTE H: SHARE OPTIONS
WRIT maintains an Incentive Share Option Plan under which up to 1,324,700
shares may be awarded to eligible employees. Options, which are issued at
market price on the date of grant, vest after not more than two years and
expire ten years following the date of grant. Activity under the plan is
summarized below:
Number Options
of Shares Option Price Exercisable
--------- ------------ -----------
Balance,
December 31, 1992 193,142 $ 7.07 - $ 18.62 101,986
Exercised (16,218) 7.07 - 15.21
Balance,
December 31, 1993 176,924 7.07 - 18.62 119,394
Granted 57,798 15.1875 - 20.625
Exercised (14,939) 7.07 - 15.21
Canceled (23,642) 12.79 - 20.625
--------
Balance,
December 31, 1994 196,141 8.09 - 20.625 100,868
Granted 50,196 14.625
Exercised (9,190) 8.09
Canceled (56,375) 12.41
--------
Balance,
December 31, 1995 180,772 $ 9.89 - $ 20.625 112,429
28
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE H: SHARE OPTIONS (continued)
On June 27, 1990, the then Chairman and Chief Executive Officer was granted
non-qualified share options for 150,000 shares at $11.71, the per share market
price on that day. These shares were exercisable 20% at date of grant and 20%
upon each anniversary over a four year period. Share options of 60,000 in 1991
and 30,000 in 1992 were exercised leaving 60,000 remaining to be exercised. In
June 1995, 56,375 of qualified share options granted to WRIT's former Chairman,
B. Franklin Kahn became non-qualified share options, three months after his
retirement. These shares are exercisable 10% per year. As of December 31,
1995, 24,162 of these options are exercisable.
On December 19, 1995 the President and Chief Executive Officer of WRIT was
granted non-qualified share options for 13,333 at $14.625, the per share market
price that day. On December 14, 1994, non-qualified share options were granted
for 9,091 shares at the June 1, 1994 market price of $19.25. All shares are
50% exercisable after the first anniversary date and 100% exercisable after the
second anniversary date. As of December 31, 1995, 4,546 shares are
exercisable.
NOTE I: PENSION PLAN AND OTHER BENEFIT PLANS
WRIT maintains a noncontributory defined benefit pension plan for all eligible
employees through December 31, 1995. At December 31, 1995, all benefit accruals
under the plan were frozen and thus the projected benefit obligation (PBO) and
the accumulated benefit obligation (ABO) became equal. WRIT anticipates
terminating the plan no later than December 31, 1999. Since there are no
further benefit accruals provided under the plan, WRIT has substantially
reduced its funding obligation and there will be no further increases in the
ABO or PBO. Benefits under the plan were generally based on years of service
and final average pay. Pension costs are accrued and funded annually from plan
entry date in the plan to projected retirement date and include service costs
for benefits earned during the period and interest costs on the projected
benefit obligation less the return on plan assets. Pension costs were $27,000,
$90,000, and $164,000 in 1995, 1994 and 1993, respectively. The actual return
(loss) on plan assets was $10,000, $27,000, and $(31,000) for 1995, 1994 and
1993 respectively. The assumed long-term rate of return is 8.00%. Plan
obligations in excess of amounts permitted under the Tax Equity and Fiscal
Responsibility Act of 1982 are accrued as a liability of WRIT and included in
total pension cost. The funded status of the plan is:
December 31,
1995 1994
---------- ----------
Actuarial present value of
benefit obligations:
Vested benefit obligation $1,625,000 $3,269,000
Accumulated benefit obligation 1,663,000 3,271,000
Projected benefit obligation 1,663,000 3,364,000
Plan assets at market value 1,596,000 3,281,000
The liabilities are calculated using an assumed discount rate of 8.00% for
December 31, 1995 and 1994 and an assumed compensation increase of 5% for 1994.
In 1995, annuity contracts were purchased with plan assets for two participants
who retired during 1995, one being WRIT's former Chairman and Chief Executive
Officer B. Franklin Kahn. The cost of said annuities was $1,593,000 and the
reduction in the PBO was $1,632,000.
In 1996, WRIT intends to implement a Retirement Savings Plan (the "Savings
Plan"). It will be established so that participants in the savings plan may
elect to contribute a portion of their earnings to the Savings Plan and WRIT
may, at its discretion, make a voluntary contribution to the Savings Plan.
29
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE I: PENSION PLAN AND OTHER BENEFIT PLANS (continued)
Management has adopted a compensation plan for its senior personnel which will
align their compensation growth with shareholders' interests. Essentially, the
plan limits future salary increases, with an emphasis on cash bonus incentives
and a stock option plan based on performance. The financial incentives to
management are earned after achieving prescribed growth. This plan is
effective for the 1996 year and will be reviewed by the Board of Trustees'
compensation Committee each year.
NOTE J: RENTALS UNDER OPERATING LEASES
Noncancelable commercial operating leases provide for minimum rental income
during each of the next five years of approximately $34,921,957, $27,065,221,
$20,109,678, $15,816,407, $9,635,551 and $12,190,221 thereafter. Apartment
leases are not included as they are generally for one year. Most of these
commercial rentals increase in future years based on changes in the Consumer
Price Index or agreed-upon percentages. Contingent rentals from the shopping
centers, based on a percentage of tenants' gross sales, were $496,000, $428,000
and $447,000 in 1995, 1994 and 1993 respectively.
NOTE K: ENVIRONMENTAL MATTERS
New Occupational Safety and Health Administration (OSHA) regulations effective
October 1995, require owners of buildings constructed before 1981 to actively
determine whether their buildings contain asbestos containing material ("ACM").
WRIT, through the services of an environmental consulting firm, determined
that ACM was located within the ceiling plaster above the ceiling tiles in most
vacant spaces and some occupied spaces at its 1901 Pennsylvania Avenue office
building. In December 1995, WRIT contracted for the removal of the ACM's at
1901 Pennsylvania Avenue in strict accordance with all applicable Federal,
State and local codes as well as OSHA regulations. An independent
environmental firm was contracted to monitor and enforce this compliance.
WRIT has retained the services of an environmental consulting firm to test for
asbestos in 29 of its properties built before 1981 which had no previous and/or
current environmental studies performed. The results of these tests are
expected to be completed in May, 1996.
A summary of costs associated with these matters are as follows:
1) Total Estimated Costs for ACM Removal at 1901 Pennsylvania Avenue $469,000
Total Costs Incurred and Capitalized as of December 31, 1995 $ 75,000
--------
Estimated Costs Remaining $394,000
========
2) Total Environmental Costs for Other Buildings and Survey for 29 buildings $192,000
Total Costs for Other Buildings Incurred and Capitalized as of December 31,1995 $136,000
--------
Estimated Costs Remaining (Environmental Survey) $ 56,000
========
The management of WRIT anticipates that any additional costs incurred resulting
from the environmental survey will not have a material effect on the financial
position and results of operations of the company.
NOTE L: SUBSEQUENT EVENT
On March 13, 1996 WRIT acquired Walker House Apartments, a 196 unit 8 story
apartment building located in Gaithersburg, Maryland for an acquisition cost of
$10,800,000. WRIT borrowed $11,000,000 from its line of credit for this
acquisition at a rate of 5.78% until July 11, 1996 at which time the rate will
adjust (See Note F). Interest only is payable monthly, in arrears, on the
unpaid principal balance.
30
SCHEDULE III
WASHINGTON REAL ESTATE INVESTMENT TRUST
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
Initial Cost (b) Net
--------------------------------- Improvements
Building (Retirements)
and since
Properties Location Land Improvements Acquisition
- ------------------------- ------------ ----------- ------------ -----------
SHOPPING CENTERS
Concord Centre Virginia $412,500 $850,038 $2,644,518
Bradlee Virginia 4,151,583 5,428,251 3,445,989
Clairmont Maryland 154,739 891,608 636,474
Dover Mart Delaware 243,500 463,858 689,376
Chevy Chase Metro Plaza Washington, D.C. 1,549,262 4,304,434 2,675,195
Prince William Plaza Virginia 171,482 820,465 562,090
Takoma Park Maryland 415,200 1,084,453 1,203
Westminster Maryland 552,745 1,889,032 1,732,596
Wheaton Park Maryland 622,908 856,683 755,172
Montgomery Village Center Maryland 11,624,500 9,105,262 491,984
Shoppes of Foxchase Virginia 5,838,138 2,979,469 646,811
Frederick County Square (e) Maryland 6,561,293 6,830,250 25,401
----------- ----------- -----------
32,297,850 35,503,803 14,306,809
----------- ----------- -----------
OFFICE BUILDINGS
The WRIT Building Maryland 222,000 1,690,497 2,969,295
1901 Pennsylvania Avenue Washington, D.C. 891,600 3,481,239 4,088,839
One Metro Square Maryland 840,000 10,868,917 5,718,453
444 North Frederick Avenue Maryland 812,901 3,817,459 1,233,834
7700 Leesburg Pike Virginia 3,669,464 4,000,406 2,241,601
Arlington Financial Center Virginia 3,000,000 3,293,122 147,273
515 King Street Virginia 4,102,276 3,931,408 627,945
The Lexington Building Maryland 1,179,700 1,262,472 236,969
The Saratoga Building Maryland 1,464,140 1,554,284 540,861
Brandywine Center Maryland 718,180 735,381 142,910
Tycon Plaza II Virginia 3,261,965 7,242,691 513,606
Tycon Plaza III Virginia 3,254,670 7,794,189 578,989
6110 Executive Boulevard Maryland 4,621,112 11,895,120 407,843
1220 19th Street Washington, D.C. 7,802,475 11,366,002 0
----------- ----------- -----------
35,840,483 72,933,187 19,448,418
----------- ----------- -----------
APARTMENT BUILDINGS
Country Club Towers Virginia 299,389 2,561,473 2,335,376
Munson Hill Towers Virginia (a) 3,337,038 3,604,475
Park Adams Virginia 286,588 1,653,833 2,390,022
Roosevelt Towers Virginia 335,831 1,996,340 1,613,750
3801 Connecticut Avenue Washington, D.C. 419,483 2,678,440 3,683,579
----------- ----------- -----------
1,341,291 12,227,124 13,627,202
----------- ----------- -----------
INDUSTRIAL DISTRIBUTION CENTERS
Pepsi-Cola Maryland 759,927 1,791,754 1,559,917
Capitol Freeway Center Washington, D.C. 300,000 1,204,748 2,624,258
Department of Commerce Virginia 346,817 1,008,864 1,291,642
Fullerton Virginia 950,000 3,317,305 605,730
Ravensworth Center Virginia 391,490 1,059,291 344,542
Shirley I-395 Business Center Virginia 652,474 1,264,695 1,030,313
V Street Distribution Center Washington, D.C. 125,500 317,019 156,996
Charleston Business Center Maryland 2,044,930 2,090,821 128,235
Tech 100 Industrial Park Maryland 2,086,212 4,743,720 33,849
Crossroads Distribution Center Maryland 894,404 1,945,594 0
----------- ----------- -----------
8,551,754 18,743,811 7,775,482
----------- ----------- -----------
Totals $78,031,378 $139,407,925 $55,157,911
=========== ============ ===========
Gross Amounts at which carried at
December 31, 1995 Accumulated
----------------------------------------- Depreciation
Buildings at
and December 31, Date of
Properties Land Improvements Total(d) 1995 Construction
- ------------------------- ---------- ------------ ----------- ------------- ------------
SHOPPING CENTERS
Concord Centre $412,500 $3,494,556 $3,907,056 $931,555 1960
Bradlee 4,151,583 8,874,240 13,025,823 2,716,337 1955
Clairmont 154,739 1,528,082 1,682,821 641,328 1965
Dover Mart 243,500 1,153,234 1,396,734 402,814 1960
Chevy Chase Metro Plaza 1,549,262 6,979,629 8,528,891 990,830 1975
Prince William Plaza 171,482 1,382,555 1,554,037 582,459 1967
Takoma Park 415,200 1,085,656 1,500,856 732,347 1962
Westminster 552,745 3,621,628 4,174,373 1,726,071 1969
Wheaton Park 622,908 1,611,855 2,234,763 410,915 1967
Montgomery Village Center 11,624,500 9,597,246 21,221,746 554,996 1969
Shoppes of Foxchase 5,838,138 3,626,280 9,464,418 97,386 1960
Frederick County Square (e) 6,561,293 6,855,651 13,416,944 82,621 1973
----------- ----------- ----------- -----------
32,297,850 49,810,612 82,108,462 9,869,659
----------- ----------- ----------- -----------
OFFICE BUILDINGS
The WRIT Building 222,000 4,659,792 4,881,792 1,307,759 1965
1901 Pennsylvania Avenue 891,600 7,570,078 8,461,678 2,837,693 1960
One Metro Square 840,000 16,587,370 17,427,370 5,395,525 1975
444 North Frederick Avenue 812,901 5,051,293 5,864,194 485,222 1981
7700 Leesburg Pike 3,669,464 6,242,007 9,911,471 450,942 1976
Arlington Financial Center 3,000,000 3,440,395 6,440,395 239,538 1963
515 King Street 4,102,276 4,559,353 8,661,629 285,156 1966
The Lexington Building 1,179,700 1,499,441 2,679,141 30,706 1970
The Saratoga Building 1,464,140 2,095,145 3,559,285 51,926 1977
Brandywine Center 718,180 878,291 1,596,471 24,569 1969
Tycon Plaza II 3,261,965 7,756,297 11,018,262 229,055 1981
Tycon Plaza III 3,254,670 8,373,178 11,627,848 225,146 1978
6110 Executive Boulevard 4,621,112 12,302,963 16,924,075 385,219 1971
1220 19th Street 7,802,475 11,366,002 19,168,477 62,398 1976
----------- ----------- ----------- -----------
35,840,483 92,381,605 128,222,088 12,010,854
----------- ----------- ----------- -----------
APARTMENT BUILDINGS
Country Club Towers 299,389 4,896,849 5,196,238 2,454,666 1965
Munson Hill Towers (a) 6,941,513 6,941,513 3,389,428 1963
Park Adams 286,588 4,043,855 4,330,443 1,836,229 1959
Roosevelt Towers 335,831 3,610,090 3,945,921 1,847,471 1964
3801 Connecticut Avenue 419,483 6,362,019 6,781,502 3,560,484 1951
----------- ----------- ----------- -----------
1,341,291 25,854,326 27,195,617 13,088,278
----------- ----------- ----------- -----------
INDUSTRIAL DISTRIBUTION CENTER
Pepsi-Cola 759,927 3,351,671 4,111,598 481,661 1971
Capitol Freeway Center 300,000 3,829,006 4,129,006 1,469,734 1940
Department of Commerce 346,817 2,300,506 2,647,323 1,432,241 1964
Fullerton 950,000 3,923,035 4,873,035 785,004 1980
Ravensworth Center 391,490 1,403,833 1,795,323 266,697 1965
Shirley I-395 Business Center 652,474 2,295,008 2,947,482 1,208,762 1960
V Street Distribution Center 125,500 474,015 599,515 203,889 1960
Charleston Business Center 2,044,930 2,219,056 4,263,986 91,570 1973
Tech 100 Industrial Park 2,086,212 4,777,569 6,863,781 111,283 1990
Crossroads Distribution Center 894,404 1,945,594 2,839,998 1,954 1987
----------- ----------- ----------- -----------
8,551,754 26,519,293 35,071,047 6,052,795
----------- ----------- ----------- -----------
Totals $78,031,378 $194,565,836 $272,597,214 $41,021,586
=========== ============ ============ ===========
Date of Net Rentable Depreciation
Properties Acquisition Square Feet (f) Life (c)
- ------------------------ ----------------- --------------- ------------
SHOPPING CENTERS
Concord Centre December 1973 76,383 33 Years
Bradlee December 1984 167,974 40 Years
Clairmont December 1976 40,455 39 Years
Dover Mart January 1973 44,044 40 Years
Chevy Chase Metro Plaza September 1985 49,893 50 Years
Prince William Plaza August 1968 54,584 50 Years
Takoma Park July 1963 58,811 50 Years
Westminster September 1972 171,531 37 Years
Wheaton Park September 1977 46,716 49 Years
Montgomery Village Center December 1992 196,464 50 Years
Shoppes of Foxchase June 1994 127,564 50 Years
Frederick County Square (e) August 1995 232,783 30 Years
-----------
1,267,202
-----------
OFFICE BUILDINGS
The WRIT Building August 1979 65,653 31 Years
1901 Pennsylvania Avenue May 1977 97,036 28 Years
One Metro Square August 1979 206,144 41 Years
444 North Frederick Avenue October 1989 65,463 50 Years
7700 Leesburg Pike October 1990 122,497 50 Years
Arlington Financial Center June 1992 51,655 50 Years
515 King Street July 1992 78,073 50 Years
The Lexington Building November 1993 47,751 50 Years
The Saratoga Building November 1993 58,237 50 Years
Brandywine Center November 1993 34,982 50 Years
Tycon Plaza II June 1994 139,938 50 Years
Tycon Plaza III June 1994 151,594 50 Years
6110 Executive Boulevard January 1995 198,796 30 Years
1220 19th Street November 1995 104,033 30 Years
-----------
1,421,852
-----------
APARTMENT BUILDINGS
Country Club Towers July 1969 276,000 35 Years
Munson Hill Towers January 1970 340,000 33 Years
Park Adams January 1969 210,000 35 Years
Roosevelt Towers May 1965 229,000 40 Years
3801 Connecticut Avenue January 1963 242,000 30 Years
-----------
1,297,000
-----------
INDUSTRIAL DISTRIBUTION CENTERS
Pepsi-Cola October 1987 68,750 40 Years
Capitol Freeway Center July 1974 145,000 25 Years
Department of Commerce December 1971 105,000 43 Years
Fullerton September 1985 103,339 50 Years
Ravensworth Center December 1986 29,000 40 Years
Shirley I-395 Business Center September 1961 112,585 40 Years
V Street Distribution Center October 1973 30,753 40 Years
Charleston Business Center November 1993 85,267 50 Years
Tech 100 Industrial Park May 1995 167,267 30 Years
Crossroads Distribution Center December 1995 84,550 30 Years
-----------
931,511
-----------
Totals 4,917,565
===========
Notes:
(a) The site of Munson Hill Towers is rented under a lease requiring annual
payments of $22,590 until the expiration of the lease in 2060.
(b) The purchase of real estate investments has been divided between land and
buildings and improvements on the basis of valuations by the Trust.
(c) The useful life shown is for the main structure. Buildings and
improvements are depreciated over various useful lives ranging from 3 to
50 years.
(d) At December 31, 1995 total land, buildings and improvements are carried
at $258,025,637 for federal income tax purposes.
(e) At December 31, 1995, the only mortgage encumbrance was the $7,706,346
mortgage note payable on Frederick County Square.
(f) Residential properties are presented in gross square feet
31
SCHEDULE III
WASHINGTON REAL ESTATE INVESTMENT TRUST
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
Continued
The following is a reconciliation of real estate assets and accumulated
depreciation for the years ended December 31, 1995, 1994, and 1993:
Year Ended December 31,
1995 1994 1993
Real Estate Assets ------------ ------------ ------------
Balance, beginning of period $206,377,733 $170,461,454 $155,765,010
Additions - property acquisitions 58,746,182 30,729,184 11,049,907
- improvements 8,123,995 5,786,977 4,711,662
Deductions - write-off of fully depreciated assets (650,696) (599,882) (410,783)
- sale of 4936 Fairmont - - (654,342)
------------ ------------ ------------
Balance, end of period $272,597,214 $206,377,733 $170,461,454
============ ============ ============
Accumulated Depreciation
Balance, beginning of period $36,588,540 $33,255,332 $30,460,618
Additions - depreciation (a) 5,083,742 3,933,090 3,616,190
Deductions - write-off of fully depreciated assets (650,696) (599,882) (410,783)
- sale of 4936 Fairmont - - (410,693)
------------ ------------ ------------
Balance, end of period $41,021,586 $36,588,540 $33,255,332
============ ============ ------------
(a) Total depreciation charged to income in 1995, 1994, and 1993,
respectively, consists of the following:
1995 1994 1993
------------ ------------ ------------
Depreciation on real estate investments $5,083,742 $3,933,090 $3,616,190
Depreciation on office furniture, fixtures and equipment
(included in general and administrative expenses) 47,745 45,211 39,612
------------ ------------ ------------
$5,131,487 $3,978,301 $3,655,802
============ ============ ============
32
WASHINGTON REAL ESTATE INVESTMENT TRUST
MORTGAGE NOTE RECEIVABLE SCHEDULE IV
Final Periodic Face
Interest Maturity Payment Prior Amount of
Description Rate Date Terms Liens Mortgages
- -----------------------------------------------------------------------------------------------------------------------------
Mortgage note receivable 9.00% June 1, 2006 9% interest only from N/A $874,000
dated June 28, 1993, and First July 1, 1993 until Dec.
Modification dated February 2, 1996, 28, 1993. On Dec. 28,
secured by a first lien deed of trust and 1993, principal payment
security agreement. of $70,000 due. 9% interest
only from Dec. 28, 1993
until June 30, 1996. Interest
and principal based upon
a 30 year amortization,
bearing interest at the rate
of 12%, due monthly from July
1, 1996 until June 1, 2006 at
which time all accrued and
unpaid interest and principal
are due in full.
Principal
Amount of
Mortgage
subject to
Carrying delinquent
Amount of principal or
Description Mortgages(2) interest
- --------------------------------------------------------------------------------------
Mortgage note receivable $800,000(1) None
dated June 28, 1993, and First
Modification dated February 2, 1996,
secured by a first lien deed of trust and
security agreement.
(1) Reconciliation of Carrying Amont:
Face amount July 1, 1993 $874,000
Principal payment Dec. 28, 1993 (74,000)
--------
Carrying amount at Dec. 31, 1995 and 1994 $800,000
========
(2) Aggregate cost is equal to cost for Federal income tax purposes.
33
SUPPLEMENTARY INFORMATION:
QUARTERLY FINANCIAL RESULTS (Unaudited)
Quarter
1995 First Second Third Fourth
---- ----- ------ ----- ------
Real estate rental revenue $12,463,950 $12,827,773 $13,273,490 $14,032,284
Net income 6,159,411 6,198,440 6,835,409 6,910,069
Net income per share $0.22 $0.22 $0.22 $0.22
1994
----
Real estate rental revenue $11,312,489 $10,758,614 $11,759,339 $11,681,040
Net income 5,805,007 5,827,737 5,846,949 5,642,547
Net income per share $0.21 $0.21 $0.21 $0.20
1993
----
Real estate rental revenue $9,758,105 $9,713,873 $9,904,958 $9,998,346
Net income 5,770,868 5,580,892 5,535,365 5,619,095
Net income per share $0.20 $0.20 $0.20 $0.20
34