SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 20, 1999
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WASHINGTON REAL ESTATE INVESTMENT TRUST
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(Exact name of registrant as specified in its charter)
Maryland 1-6622 53-0261100
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification Number)
6110 Executive Boulevard, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 984-9400
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The undersigned registrant, in order to provide the financial statements
required to be included in the Current Report on Form 8-K dated October 5, 1999
in connection with the acquisition of certain assets and the assumption of
certain liabilities of Avondale Apartments (Avondale), 600 Jefferson Plaza
(Jefferson) and 1700 Research Boulevard (Research), hereby amends the following
items, as set forth in the pages attached hereto.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
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1. Avondale - Audited Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998.
2. Jefferson - Audited Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998.
3. Research - Audited Historical Summary of Gross Income and Direct
Operating Expenses for the year ended December 31, 1998.
In acquiring Avondale, Jefferson and Research, WRIT evaluated among
other things, sources of revenue (including but not limited to,
competition in the rental market, comparative rents and occupancy
rates) and expenses (including but not limited to, utility rates, ad
valorem tax rates, maintenance expenses and anticipated capital
expenditures). After reasonable inquiry, management is not aware of
any material factors affecting Avondale, Jefferson and Research that
would cause the reported financial information not to be indicative of
Avondale's, Jefferson's and Research's future operating results.
(b) Pro Forma Financial Information
-------------------------------
The following pro forma financial statements for a substantial
majority of the assets acquired by WRIT in 1999 (as defined in
Regulation S-X) are filed as an exhibit hereto:
1. WRIT Unaudited Pro Forma Condensed and Consolidated Balance
Sheet as of September 30, 1999.
2. WRIT Unaudited Pro Forma Condensed and Consolidated Statements
of Operations for the year ended December 31, 1998 and the nine
months ended September 30, 1999.
(c) Exhibits
23. Consent of Auditors
Independent Auditors' Report
To the Board of Trustees of
Washington Real Estate Investment Trust
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of Avondale Apartments ("Historical Summary") for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
Apartments' management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 2, and is not intended to be a complete presentation of the
Apartments' revenue and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 2 of Avondale Apartments for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
October 15, 1999
1
AVONDALE APARTMENTS
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
Year Ended December 31, 1998
Gross income:
Base rents $2,112,954
Other 65,335
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Total gross income $2,178,289
==========
Direct operating expenses:
Administrative $ 209,011
Advertising 30,200
Furniture rentals 43,485
Insurance 14,540
Real estate taxes 232,412
Repairs and maintenance 271,699
Utilities 155,607
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Total direct operating expenses $ 956,954
==========
The Notes to Historical Summary of Gross Income and Direct Operating
Expenses are an integral part of this summary.
2
AVONDALE APARTMENTS
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 1 - NATURE OF BUSINESS:
Avondale Apartments is an eleven-story apartment complex located in Laurel,
Maryland, containing 237 one and two bedroom rental units. The operations of
Avondale Apartments consist of leasing residential units to various tenants.
Leases are generally for terms of one year or less.
NOTE 2 - BASIS OF PRESENTATION:
Washington Real Estate Investment Trust purchased Avondale Apartments in
September 1999. The Historical Summary has been prepared for the purpose of
complying with Regulation S-X, Rule 3-14 of the Securities and Exchange
Commission ("SEC"), which requires certain information with respect to real
estate operations acquired to be included with certain filings with the SEC.
This Historical Summary includes the historical gross income and direct
operating expenses of Avondale Apartments, exclusive of the following expenses
which may not be comparable to the proposed future operations:
(a) Interest expense on existing mortgages and borrowings
(b) Depreciation of property and equipment
(c) Management fees
(d) Certain corporate expenses
(e) Provisions for income taxes
3
Independent Auditors' Report
To the Board of Trustees of
Washington Real Estate Investment Trust
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of 600 Jefferson Plaza ("Historical Summary") for the year
ended December 31, 1998. This Historical Summary is the responsibility of the
Building's management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Historical Summary. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the Historical
Summary. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 2, and is not intended to be a complete presentation of the
Building's revenue and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 2 of 600 Jefferson Plaza for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
November 11, 1999
1
600 JEFFERSON PLAZA
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
Year Ended December 31, 1998
Gross Income:
Base rents $1,607,879
Expense recoveries 7,102
Other 7,152
----------
Total gross income $1,622,133
==========
Direct operating expenses:
Insurance $ 7,286
Real estate taxes 147,923
Repairs and maintenance 247,216
Utilities 224,460
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Total direct operating expenses $ 626,885
==========
The Notes to Historical Summary of Gross Income and Direct Operating Expenses
are an integral part of this summary.
2
600 JEFFERSON PLAZA
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 1 - NATURE OF BUSINESS:
600 Jefferson Plaza is a five-story office building located in Rockville,
Maryland, containing approximately 115,000 rentable square feet. The operations
of 600 Jefferson Plaza consist of leasing office space to various tenants.
Expense recoveries represent operating expenses, including real estate taxes,
billed to the tenants and are recognized in the period the expenses are
incurred.
All leases are classified as operating leases and expire at various dates prior
to 2009. The following is a schedule by years of future minimum rents receivable
on noncancelable operating leases in effect as of December 31, 1998.
1999 $2,102,351
2000 1,837,933
2001 1,495,076
2002 1,380,024
2003 1,286,326
Thereafter 3,366,928
During the year ended December 31, 1998, two tenants accounted for approximately
37% of the total base rents.
NOTE 2 - BASIS OF PRESENTATION:
Washington Real Estate Investment Trust purchased 600 Jefferson Plaza in May
1999. The Historical Summary has been prepared for the purpose of complying with
Regulation S-X, Rule 3-14 of the Securities and Exchange Commission ("SEC"),
which requires certain information with respect to real estate operations
acquired to be included with certain filings with the SEC. This Historical
Summary includes the historical gross income and direct operating expenses of
600 Jefferson Plaza, exclusive of the following expenses which may not be
comparable to the proposed future operations:
(a) Interest expense on existing mortgages and borrowings
(b) Depreciation of property and equipment
(c) Management and leasing fees
(d) Certain corporate and administrative expenses
(e) Provisions for income taxes
3
Independent Auditors' Report
To the Board of Trustees of
Washington Real Estate Investment Trust
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of 1700 Research Boulevard ("Historical Summary") for the
year ended December 31, 1998. This Historical Summary is the responsibility of
the Building's management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 2, and is not intended to be a complete presentation of the
Building's revenue and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described
in Note 2 of 1700 Research Boulevard for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
November 11, 1999
1
1700 RESEARCH BOULEVARD
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
Year Ended December 31, 1998
Gross Income:
Base rents $1,804,177
Expense recoveries 9,814
Other 8,117
----------
Total gross income $1,822,108
==========
Direct operating expenses:
Insurance $ 5,639
Real estate taxes 137,482
Repairs and maintenance 200,553
Utilities 191,246
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Total direct operating expenses $ 534,920
==========
The Notes to Historical Summary of Gross Income and Direct Operating Expenses
are an Integral part of this summary.
2
1700 RESEARCH BOULEVARD
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 1 - NATURE OF BUSINESS:
1700 Research Boulevard is a four-story building located in Rockville, Maryland,
containing approximately 103,000 rentable square feet. The operations of 1700
Research Boulevard consist of leasing office and research and development space
to various tenants.
Expenses recoveries represent operating expenses, including real estate taxes,
billed to the tenants and are recognized in the period the expenses are
incurred.
All leases are classified as operating leases and expire at various dates prior
to 2003. The following is a schedule by years of future minimum rents receivable
on noncancelable operating leases in effect as of December 31, 1998.
1999 $1,871,633
2000 1,913,856
2001 1,956,994
2002 2,026,137
During the year ended December 31, 1998, two tenants accounted for approximately
88% of the total base rents.
NOTE 2 - BASIS OF PRESENTATION:
Washington Real Estate Investment Trust purchased 1700 Research Boulevard in May
1999. The Historical Summary has been prepared for the purpose of complying with
Regulation S-X, Rule 3-14 of the Securities and Exchange Commission ("SEC"),
which requires certain information with respect to real estate operations
acquired to be included with certain filings with the SEC. This Historical
Summary includes the historical gross income and direct operating expenses of
1700 Research Boulevard, exclusive of the following expenses which may not be
comparable to the proposed future operations:
(a) Interest expense on existing mortgages and borrowings
(b) Depreciation on property and equipment
(c) Management and leasing fees
(d) Certain corporate and administrative expenses
(e) Provisions for income taxes
3
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The pro forma balance sheet as of September 30, 1999 presents consolidated
financial information as if the acquisition of the Properties had taken place on
September 30, 1999. The pro forma statements of operations for the year ended
December 31, 1998 and for the nine months ended September 30, 1999 present
combined financial information as if the acquisition of the Properties had taken
place as of January 1, 1998.
WRIT purchased Avondale on September 20, 1999 and Jefferson and Research on
May 21, 1999.
The pro forma statements of operations shows earnings in the amount of
$41,702,000 and $34,452,000 for the year ended December 31, 1998 and the nine
months ended September 30, 1999, respectively, after giving effect to certain
pro forma adjustments required to reflect the operating results as if the
Properties had been acquired as of January 1, 1998.
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1999
(in thousands, except per share data)
PRO
FORMA PRO
REGISTRANT ADJ'S (1) FORMA
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Assets
Real estate at cost $ 654,094 $ 654,094
Accumulated depreciation (78,114) -- (78,114)
--------- ---- ---------
Total Investment in Real Estate 575,980 0 575,980
Cash and temporary Investments, receivables,
prepaid expenses and other assets 26,242 26,242
--------- ---- ---------
$ 602,222 $ 0 $ 602,222
========= ==== =========
Liabilities
Notes payable $ 210,000 $ -- $ 210,000
Mortgage notes payable 87,208 87,208
Lines of credit payable 29,000 29,000
Accounts payable and other liabilities 12,161 -- 12,161
Tenant security deposits 5,050 -- 5,050
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343,419 0 343,419
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Minority interest 1,517 1,517
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Shareholders' Equity
Shares of beneficial interest, $0.01 par value,
100,000,000 authorized, 35,721,494 issued and
outstanding at September 30, 1999 357 -- 357
Additional paid-in capital 256,929 -- 256,929
--------- ---- ---------
257,286 -- 257,286
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$ 602,222 $ 0 $ 602,222
========= ==== =========
(1) No adjustments are necessary for Avondale, Jefferson and Research
because the properties were purchased prior to September 30, 1999, so
the property acquisitions and operating activities are already
reflected in WRIT's balance sheet as of September 30, 1999.
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share amounts)
PRO
600 1700 FORMA PRO
REGISTRANT AVONDALE JEFFERSON RESEARCH ADJ'S FORMA
---------- -------- --------- -------- ----- ------
Real estate revenue $103,597 $2,178 $1,622 $1,822 $ -- $109,219
Real estate expenses (31,114) (957) (627) (535)(1) (169) (33,402)
-------- ------ ------ ------- ------ --------
72,483 1,221 995 1,287 (169) 75,817
Depreciation (15,399) (2) (1,084) (16,483)
-------- ------ ------ ------- ------ --------
Income from real estate 57,084 1,221 995 1,287 (1,253) 59,334
Other income (expense)
Investment income 880 -- -- -- -- 880
Interest expense (17,106) (651) -- -- (3) (960) (18,717)
General and administrative (6,558) -- -- -- -- (6,558)
Gain on sale of real estate 8,764 -- -- -- -- 6,764
-------- ------ ------ ------- ------ --------
Net income $ 41,064 $ 570 $ 995 $1,287 $ (2,214) $ 41,702
======== ====== ====== ======= ======== ========
Net income per share--Basic $1.15 $1.17
Net income per share--Diluted $1.15 $1.17
(1) Property management fees based on rate schedule paid by Registrant.
(2) Depreciation over 30 years, based upon the portion of the purchase price
allocated to building and improvements.
(3) Interest expense based on an estimated weighted average borrowing rate of
6.0%.
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in thousands, except per share amounts)
PRO
600 1700 FORMA PRO
REGISTRANT AVONDALE JEFFERSON RESEARCH ADJ'S FORMA
---------- -------- --------- -------- ----- ------
Real estate revenue $ 86,084 $1,806 $ 849 $ 733 $ -- $ 89,472
Real estate expenses (26,085) (748) (311) (252)(1) (102) (27,498)
-------- ------ ------ ------- ------ --------
59,999 1,058 538 481 (102) 61,974
Depreciation (13,900) -- -- -- (2) (522) (14,422)
-------- ------ ------ ------- ------ --------
Income from real estate 46,099 1,058 538 481 (624) 47,552
Other income (expense)
Investment income 521 -- -- -- -- 521
Interest expense (16,070) (498) -- -- (3) (451) (17,019)
General and administrative (4,510) -- -- -- -- (4,510)
Gain on sale of real estate 7,909 -- -- -- -- 7,909
-------- ------ ------ ------- ------ --------
Net income $ 33,949 $ 560 $ 538 $ 481 $(1,076) $ 34,452
======== ====== ====== ======= ======== ========
Net income per share--Basic $0.95 $0.96
Net income per share--Diluted $0.95 $0.96
(1) Property management fees based on rate schedule paid by Registrant.
(2) Depreciation over 30 years, based upon the portion of the purchase price
allocated to building and improvements.
(3) Interest expense based on an estimated weighted average borrowing rate of
0.0%.
(4) The pro forma amounts were derived using the first eight months of actual
results and one month of budgeted amounts for Avondale. For 600 Jefferson
and 1700 Research, the pro forma amounts were derived using the first four
months of actual amounts and one month of budgeted amounts.
SIGNATURES
Pursuant to the requirements 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
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(Registrant)
By: /s/ Laura M. Franklin
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(Signature)
Laura M. Franklin
Vice President
Chief Accounting Officer & Corporate
Secretary
November 30, 1999
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(Date)