SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
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 30, 1998
WASHINGTON REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-6622 53-0261100
(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification Number)
6110 Executive Boulevard, Rockville, Maryland 20852
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 984-9400
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
During the period from January 1, 1998 to September 30, 1998, Washington
Real Estate Investment Trust ("WRIT") or its subsidiaries purchased four real
estate properties, which, individually are insignificant as defined in
Regulation S-X, but in the aggregate, constitute a "significant amount of
assets" as defined in Regulation S-X. When acquisitions are individually
insignificant but significant in the aggregate, Regulation S-X requires the
presentation of audited financial statements for assets comprising a substantial
majority of the individually insignificant properties. WRIT's 1998 real estate
asset purchases first exceeded the minimum level of significance upon the
September 30, 1998 purchase of an office property located in Vienna, Virginia.
This therefore requires reporting on Form 8-K.
On May 22, 1998, WRIT and WRIT-NVIP LLC, a 93% owned subsidiary of WRIT,
purchased Northern Virginia Industrial Park ("NVIP" or the "Property"), a
790,000 square foot industrial distribution center located in Lorton, Virginia
from CAMM L.L.C. and Maywood Building Corporation, for a contract purchase price
of $30,350,000. Approximately $7.6 million of the contract purchase price was
provided by WRIT's March 1998 sale of Shirley-395 Business Center. The balance
of the contract purchase price was paid out of a portion of the proceeds from
WRIT's February 1998 Medium Term Note offering. On the date of acquisition, NVIP
was 83% leased. NVIP constitutes a "substantial majority" of the assets acquired
by WRIT during 1998 as defined in Regulation S-X.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The acquisition on May 22, 1998 of NVIP combined with WRIT's other
1998 acquisitions constitutes the acquisition of a "significant
amount of assets" as defined in Regulation S-X. The following
financial statements, for assets constituting a substantial majority
of such assets acquired by WRIT, are filed as an exhibit hereto:
1. Northern Virginia Industrial Park - Audited Historical
Summary of Gross Income and Direct Operating Expenses for
the year ended December 31, 1997.
In acquiring NVIP, 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 the Property, other than those referred to above, that
would cause the reported financial information not to be indicative
of the Property'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 1998 (as defined in
Regulation S-X) are filed as an exhibit hereto:
1. WRIT Unaudited Pro Forma Condensed and Consolidated Statements
of Operations for the year ended December 31,1997 and the six
months ended June 30, 1998.
A pro forma balance sheet as of June 30, 1998 is not presented
because the purchase of NVIP was reflected in WRIT's balance sheet
as of June 30, 1998 filed in connection with WRIT's Form 10-Q on
August 14, 1998.
(c) Exhibits
23. Consent of Auditors
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
_______________________________________
(Registrant)
By: /s/ Laura M. Franklin
_____________________________________
(Signature)
Laura M. Franklin
Vice President
Chief Accounting Officer &
Corporate Secretary
October 15, 1998
________________
(Date)
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE SIX MONTHS ENDED JUNE 30, 1998
(in thousands, except per share amounts)
The pro forma statements of operations for the year ended December 31,
1997 and for the six months ended June 30, 1998 present combined financial
information as if the acquisition of the Property had taken place as of
January 1, 1997.
WRIT purchased Northern Virginia Industrial Park on May 22, 1998.
The pro forma statement of operations shows earnings in the amount of
$31,660 and $23,413 for the year ended December 31, 1997 and the six months
ended June 30, 1998, respectively, after giving effect to certain pro forma
adjustments required to reflect the operating results as if NVIP had been
acquired on January 1, 1997.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
PRO
FORMA PRO
REGISTRANT NVIP ADJ'S FORMA
---------- ---- ----- -----
Real estate revenue $79,429 $3,147 $ - $82,576
Real estate expenses (25,459) (644) (1) (126) (26,229)
----------- ------- ------------- --------
53,970 2,503 (126) 56,347
Depreciation (10,911) (2) (853) (11,764)
----------- ------- ------------- --------
Income from real estate 43,059 2,503 (979) 44,583
Other income (expense)
Investment income 1,011 - - 1,011
Interest expense (9,691) - - (9,691)
General and administrative (4,243) - - (4,243)
----------- ------- ------------- --------
Net income $30,136 $2,503 ($979) $31,660
=========== ======= ============= ========
Net income per share (3) $0.90 $0.95
(1) Property management fees based on rate schedule paid by Registrant.
(2) Depreciation over 30 years, based upon the portion of the puchase
price allocated to building and improvements.
(3) There is no difference between basic and diluted earnings per share.
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(in thousands, except per share amounts)
PRO
FORMA PRO
REGISTRANT NVIP ADJ'S FORMA
---------- ---- ----- -----
Real estate revenue $49,914 $1,422 $ - $51,336
Real estate expenses (14,942) (394) (1) (57) (15,393)
----------- ------- ------------- --------
34,972 1,028 (57) 35,943
Depreciation (7,383) - (2) (427) (7,810)
----------- ------- ------------- --------
Income from real estate 27,589 1,028 (484) 28,133
Other income (expense)
Investment income 547 - - 547
Interest expense (8,015) - - (8,015)
General and administrative (3,178) - - (3,178)
Gain on sale of real estate 5,926 - - 5,926
----------- ------- ------------- --------
Net income $22,869 $1,028 ($484) $23,413
=========== ======= ============= ========
Net income per share (3) $0.64 $0.66
(1) Property management fees based on rate schedule paid by Registrant.
(2) Depreciation over 30 years, based upon the portion of the puchase
price allocated to building and improvements.
(3) There is no difference between basic and diluted earnings per share.
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 Northern Virginia Industrial Park ("Historical Summary")
for the year ended December 31, 1997. This Historical Summary is the
responsibility of the Park'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
Park'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 Northern Virginia Industrial Park for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
September 30, 1998
NORTHERN VIRGINIA INDUSTRIAL PARK
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
Year Ended December 31, 1997
Gross income - base rents $ 3,147,039
===========
Direct operating expenses:
Real estate taxes $ 431,270
Repairs and maintenance 157,346
Insurance 26,625
Trash 18,083
Utilities 10,400
---------
Total direct operating expenses $ 643,724
=========
The Notes to Historical Summary of Gross Income and Direct Operating Expenses
are an integral part of this summary.
2
NORTHERN VIRGINIA INDUSTRIAL PARK
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
NOTE 1 - NATURE OF BUSINESS:
Northern Virginia Industrial Park consists of fourteen industrial warehouses
located in Lorton, Virginia, containing approximately 790,000 rentable square
feet. The operations of Northern Virginia Industrial Park consist of leasing
industrial warehouse space to various tenants.
All leases are classified as operating leases and expire at various dates prior
to 2004. The following is a schedule by years of future minimum rents receivable
on noncancelable operating leases in effect as of December 31, 1997.
1998 $3,030,187
1999 2,410,039
2000 1,726,373
2001 1,147,642
2002 870,686
Thereafter 167,341
During the year ended December 31, 1997, one tenant accounted for approximately
12% of the total base rents.
NOTE 2 - BASIS OF PRESENTATION:
Washington Real Estate Investment Trust purchased Northern Virginia Industrial
Park in May 1998. 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 Northern Virginia Industrial Park, 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 expenses
(e) Provisions for income taxes
3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of Washington Real Estate Investment
Trust ("WRIT") of our report dated September 30, 1998, relating to the audited
historical summary of gross income and direct operating expenses of Northern
Virginia Industrial Park, for the year ended December 31, 1997. We also consent
to the incorporation by reference of our report in WRIT's Form S-3 Number
333-23157 dated March 12, 1997, in WRIT's Forms S-8 Number 33-63671 dated
October 25, 1995, post effectively amended July 25, 1996 and Number 333-48081
dated March 17, 1998, and in WRIT's Form S-4 Number 333-48293 dated March 20,
1998.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
October 14, 1998