Exhibit 99.1

NEWS RELEASE

LOGO

 

CONTACT:

Sara Grootwassink

   LOGO   

6110 Executive Blvd., Suite 800

Rockville, Maryland 20852

Chief Financial Officer       Tel 301-984-9400
Direct Dial: 301-255-0820       Fax 301-984-9610
E-Mail: sgrootwassink@writ.com       www.writ.com
   Newspaper Quote: WRIT   
Page 1 of 7    FOR IMMEDIATE RELEASE    July 19, 2006

WASHINGTON REAL ESTATE INVESTMENT TRUST ANNOUNCES

SECOND QUARTER 2006 RESULTS

Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) today reported the following financial results for the second quarter ended June 30, 2006:

 

    Net Income totaled $7.7 million, or $0.18 per share on a fully diluted basis, compared to $10.9 million, or $0.26 per share on a fully diluted basis during the same period one year ago. In the second quarter 2006 there were charges related to the severance of a senior executive of $1.4 million and the full expensing of second quarter 2006 share grants issued to the CEO of $0.8 million in accordance with FAS 123(R), “Share Based Payments,” a total of $0.05 per share on a fully diluted basis. In 2005 there was a disposal gain in the second quarter of $1.9 million or $0.04 per share on a fully diluted basis.

 

    Funds From Operations (FFO) (1) totaled $20.7 million for the quarter, or $0.48 per share on a fully diluted basis, compared to $21.5 million, or $0.51 per share on a fully diluted basis during the quarter ended June 30, 2005. In the second quarter 2006 the charges related to the severance of a senior executive and the full expensing of second quarter 2006 share grants issued to the CEO in accordance with FAS 123(R), “Share Based Payments,” reduced FFO by $2.2 million or $0.05 per share on a fully diluted basis.

“The Trust achieved significant improvement in operating results with core portfolio NOI increasing 5.8% from increased rental rate growth and occupancy,” stated Edmund B. Cronin, Jr., Chairman and CEO.

FFO is a non-GAAP financial measure. A reconciliation of net income to FFO is provided on the attached income statement.

Operating Results

Core Operating NOI (3) for the second quarter increased by 5.8% as compared with the same period over a year ago. The multifamily portfolio experienced an 8.2% gain due primarily to increased rental rates, the office portfolio increased 5.8% as occupancy and rental rates both increased, and the retail portfolio increased 11.2% due primarily to the recognition of rental revenue on the Harris Teeter lease at Foxchase. Core occupancy for the entire portfolio increased 150 bps, to 93.8%.

Core portfolio rental rate growth increased 3.7% with average tenant improvements and leasing costs per square foot of $8.76 for the quarter, as compared to $10.61 during the same period one year ago. Details by property type are contained in our second quarter 2006 Supplemental Financial Report, located on our website.

Acquisition Activity

During the second quarter of 2006, WRIT acquired approximately $133.4 million of assets, totaling net acquisitions of $156.5 million year-to-date. This quarter’s acquisitions included four medical office properties, two retail centers and one industrial/flex property as detailed below.

On April 11, 2006, WRIT acquired Alexandria Professional Center, a 100% leased, 113,000 square foot, small tenant medical office building located in Alexandria, VA, for $26.9 million.


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On April 13, 2006, WRIT acquired the 38,300 square foot Shady Grove Medical Building for $15.8 million, the first of the four building, 100% leased, $67 million Shady Grove/Plumtree Medical Office Portfolio.

On April 19, 2006, WRIT acquired the 51,100 square foot Shady Grove Professional Center, the second building in the Shady Grove/Plumtree Medical Office Portfolio, for $21.0 million.

On May 16, 2006, WRIT acquired Randolph and Montrose Shopping Centers, two retail shopping centers with approximately 227,200 square feet located in Rockville, MD, for $50.3 million.

On May 25, 2006, WRIT acquired 9950 Business Parkway, a recently constructed 101,700 square foot industrial property located in Lanham, MD, for $11.7 million.

On June 22, 2006, WRIT acquired the 33,400 square foot Plumtree Medical Building, the third building in the Shady Grove/Plumtree Medical Office Portfolio, for $7.7 million.

These acquisitions were financed with the assumption of some mortgages and borrowings on our line of credit. The line of credit borrowings were later repaid with the proceeds of our recent debt and equity offerings discussed below.

Development/Redevelopment Activity

At quarter end, three buildings were under construction, including two apartment buildings totaling 299 units, for a total projected cost of approximately $96.3 million.

Also under construction is a 180,000 square foot office building with a total projected cost of approximately $51.0 million. The 133,000 square foot Shoppes of Foxchase retail center is under redevelopment with a projected cost of approximately $10.5 million.

Capital Structure

On May 3, 2006, the Trustees of WRIT announced a 2.5% increase of $0.01 per share in the quarterly dividend rate to an indicated annual rate of $1.65 per share. The quarterly dividend of $.4125 per share was paid on June 30, 2006 to shareholders of record on June 15, 2006. This was WRIT’s 178th consecutive quarterly dividend at equal or increasing rates. WRIT dividends have increased every year for 36 consecutive years. During these 36 years, WRIT dividends have increased 41 times.

On June 6, 2006, WRIT raised $91.1 million through the issuance of 2,600,000 common shares at $34.40 per share, plus the underwriters’ exercise of their option to purchase an additional 145,000 shares. WRIT used the net proceeds to repay borrowings under its line of credit.

On June 6, 2006, WRIT raised $99.4 million through the issuance of $100 million in unsecured notes with a coupon of 5.95%. The five-year notes mature on June 15, 2011 and have an effective yield of 5.961%. WRIT used the net proceeds to repay borrowings under its lines of credit.

As of June 30, 2006, WRIT had a total capitalization of $2.4 billion.

Earnings Guidance

WRIT is lowering its previously issued 2006 FFO per share guidance to $2.12-$2.15 from $2.17-$2.20. The reduction in FFO is due primarily to the second quarter charges of $0.05 related to the severance of a senior executive and the full expensing of second quarter 2006 share grants issued to the CEO in accordance with FAS 123(R), “Share Based Payments.” Additional FAS 123(R) charges are expected in the second half of the year. WRIT’s operating portfolio continues to perform as expected.

Corporate Events

On May 30, 2006, George McKenzie was appointed President and Chief Operating Officer. Mr. McKenzie joined WRIT in September 1996, and served as its Executive Vice President, Real Estate. From 1985 to 1996, Mr. McKenzie held various positions with the Prudential Realty Group, a subsidiary of Prudential Insurance Company of America, most recently as Vice President, Investment & Sales.


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Subsequent Event

On July 12, 2006, WRIT purchased the 52,300 square foot 15005 Shady Grove Road, the fourth and final building of the Shady Grove/Plumtree Medical Office Portfolio, for $22.5 million. The purchase was funded through a mortgage assumption and borrowings on our line of credit.

Conference Call Information

WRIT will conduct a Conference/Webcast Call to discuss 2nd Quarter on Thursday, July 20, 2006 at 10:00 AM, Eastern Time. Conference call access information is as follows:

 

USA Toll Free Number:      1-888-271-8857
International Toll Number:      1-706-679-7697
Leader:      Sara Grootwassink
Conference ID:      2192446

The instant replay of the Conference Call will be available until August 3, 2006 at 11:59 PM Eastern Time. Instant Replay access information is as follows:

 

USA Toll Free Number:      1-800-642-1687
International Toll Number:      1-706-645-9291
Conference ID:      2192446

The live on-demand webcast of the Conference Call will also be available on WRIT’s website at www.writ.com. The on-line playback of the webcast will be available at www.writ.com for 30 days following the Conference Call.

About WRIT

WRIT is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington/Baltimore metropolitan region. WRIT owns a diversified portfolio of 78 properties consisting of 14 retail centers, 21 office properties, 12 medical office properties, 22 industrial/flex properties, 9 multi-family properties and land for development. WRIT’s dividends have increased every year for 36 consecutive years and FFO per share has increased every year for 33 consecutive years. WRIT shares are publicly traded on the New York Stock Exchange (symbol:WRE).

Note: WRIT’s press releases and supplemental financial information are available on the company website at www.writ.com or by contacting Investor Relations at (301) 984-9400.

Certain statements in this press release and the supplemental disclosures attached hereto are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, fluctuations in interest rates, availability of raw materials and labor costs, levels of competition, the effect of government regulation, the availability of capital, weather conditions, the timing and pricing of lease transactions and changes in general and local economic and real estate market conditions, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2005 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 


(1) Funds From Operations (“FFO”) – The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO (April, 2002 White Paper) as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. We consider FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs.


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(2) Funds Available for Distribution (“FAD”) is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs that are capitalized and amortized and are necessary to maintain our properties and revenue stream and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) amortization of restricted share compensation, and adding or subtracting amortization of lease intangibles, as appropriate. FAD is included herein, because we consider it to be a measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
(3) For purposes of evaluating comparative operating performance, we categorize our properties as “core” or “non-core”. Core Operating NOI is calculated as real estate rental revenue less real estate operating expenses for those properties owned for the entirety of the periods being evaluated. Core Operating NOI is a non-GAAP measure.

Occupancy Levels by Core Portfolio (1) and All Properties

 

     Core Portfolio     All Properties  

Sector

   2ND QTR
2006
    2ND QTR
2005
    2ND QTR
2006
    2ND QTR
2005
 

Multifamily

   90.4 (2)   93.7 %   90.4 %   93.7 %

Office Buildings

   92.8 %   88.2 %   92.4 %   87.9 %

Medical Office

   98.5 %   98.5 %   98.7 %   98.5 %

Retail Centers

   99.0 %   97.2 %   96.1 (3)   97.2 %

Industrial/Flex Centers

   92.4 %   93.6 %   92.5 %   92.9 %

Overall Portfolio

   93.8 %   92.3 %   93.3 %   92.0 %

(1) Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods. For Q2 2006 and Q2 2005, core portfolio properties exclude DBP Coleman Building, Albemarle Point, Pepsi Distribution Center, Hampton Overlook & Hampton South, Lexington (held for sale), Alexandria Professional Center, 9707 Medical Center Dr, 15001 Shady Grove Rd, 104 Plum Tree, Randolph Shopping Center, Montrose Shopping Center and 9950 Business Parkway.
(2) Multifamily occupancy level for Q206 is 91.2% without the impact of 26 units off-line for planned renovations at Bethesda Hill. The overall portfolio occupancy is 94.0% without this impact
(3) Montrose Shopping Center was 58% leased when purchased in May 2006.


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WASHINGTON REAL ESTATE INVESTMENT TRUST

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

(Unaudited)

 

    

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 

OPERATING RESULTS

   2006     2005     2006     2005  

Revenue

        

Real estate rental revenue

   $ 52,916     $ 46,410     $ 103,683     $ 91,503  

Expenses

        

Real estate expenses

     15,574       13,870       30,998       27,965  

Depreciation and amortization

     12,955       12,903       24,893       23,399  

General and administrative

     5,276       2,092       7,931       4,324  
                                
     33,805       28,865       63,822       55,688  
                                

Other (expense) income:

        

Interest expense

     (11,604 )     (9,283 )     (21,926 )     (17,870 )

Other income

     175       207       345       320  

Other income from property settlement

     —         504       —         504  
                                
     (11,429 )     (8,572 )     (21,581 )     (17,046 )
                                

Income from continuing operations

     7,682       8,973       18,280       18,769  

Discontinued operations:

        

Income from operations of properties sold or held for sale

     37       19       71       368  

Gain on property disposed

     —         1,883       —         33,973  
                                

Net Income

   $ 7,719     $ 10,875     $ 18,351     $ 53,110  
                                

Income from continuing operations

   $ 7,682     $ 8,973     $ 18,280     $ 18,769  

Other income from property settlement

     —         (504 )     —         (504 )

Continuing operations real estate depreciation and amortization

     12,955       12,903       24,893       23,399  
                                

Funds from continuing operations

   $ 20,637     $ 21,372     $ 43,173     $ 41,664  
                                

Income from discontinued operations before gain on disposal

     37       19       71       368  

Discontinued operations real estate depreciation and amortization

     35       64       66       132  
                                

Funds from discontinued operations

     72       83       137       500  
                                

Funds from operations(1)

   $ 20,709     $ 21,455     $ 43,310     $ 42,164  
                                

Tenant improvements

     (2,033 )     (2,063 )     (4,728 )     (3,868 )

External and internal leasing commissions capitalized

     (1,477 )     (1,094 )     (2,437 )     (2,157 )

Recurring capital improvements

     (2,724 )     (2,360 )     (5,018 )     (4,551 )

Straight-line rents, net *

     (686 )     (661 )     (1,499 )     (1,358 )

Non real estate depreciation & amortization

     554       428       1,048       835  

Amortization of lease intangibles, net

     (24 )     (33 )     (19 )     17  

Amortization of lease incentives

     7       —         15       —    

Amortization and expensing of Restricted Share Compensation

     1,487       467       1,827       467  

Other

     —         301         301  
                                

Funds Available for Distribution (2)

   $ 15,813     $ 16,440     $ 32,499     $ 31,850  
                                

* Certain prior year amounts have been reclassified to conform to the current presentation.


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         Three Months Ended
June 30,
   Six Months Ended
June 30,

Per Share Data

       2006    2005    2006    2005

Income from continuing operations

   (Basic)   $ 0.18    $ 0.21    $ 0.43    $ 0.45
   (Diluted)   $ 0.18    $ 0.21    $ 0.43    $ 0.45

Net income

   (Basic)   $ 0.18    $ 0.26    $ 0.43    $ 1.27
   (Diluted)   $ 0.18    $ 0.26    $ 0.43    $ 1.26

Funds from continuing operations

   (Basic)   $ 0.48    $ 0.51    $ 1.02    $ 0.99
   (Diluted)   $ 0.48    $ 0.51    $ 1.01    $ 0.99

Funds from operations

   (Basic)   $ 0.48    $ 0.51    $ 1.02    $ 1.01
   (Diluted)   $ 0.48    $ 0.51    $ 1.02    $ 1.00

Dividends paid

     $ 0.4125    $ 0.4025    $ 0.8150    $ 0.7950

Weighted average shares outstanding

       42,852      41,932      42,454      41,899

Fully diluted weighted average shares outstanding

       43,037      42,059      42,620      42,023


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WASHINGTON REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

 

    

June 30

2006

    December 31,
2005
 

Assets

    

Land

   $ 266,329     $ 225,038  

Income producing property

     1,155,280       1,022,160  
                
     1,421,609       1,247,198  

Accumulated depreciation and amortization

     (262,150 )     (239,051 )
                

Net income producing property

     1,159,459       1,008,147  

Development in progress (4)

     90,612       58,241  
                

Total investment in real estate, net

     1,250,071       1,066,388  

Investment in real estate held for sale, net

     3,244       2,620  

Cash and cash equivalents

     13,970       4,938  

Restricted cash

     2,540       1,764  

Rents and other receivables, net of allowance for doubtful accounts of 3,301 and 2,910, respectively

     29,047       25,240  

Prepaid expenses and other assets

     46,931       40,270  

Other assets related to properties held for sale

     31       66  
                

Total Assets

   $ 1,345,834     $ 1,141,286  
                

Liabilities

    

Accounts payable and other liabilities

   $ 54,783     $ 32,714  

Advance rents

     6,279       5,461  

Tenant security deposits

     8,445       7,325  

Other liabilities related to properties held for sale

     184       193  

Mortgage notes payable

     178,834       169,617  

Lines of credit

     19,000       24,000  

Notes payable

     620,000       520,000  
                

Total Liabilities

     887,525       759,310  
                

Minority interest

     1,699       1,670  
                

Shareholders’ Equity

    

Shares of beneficial interest, $.01 par value; 100,000 shares authorized: 44,998 and 42,139 shares issued and outstanding, respectively

     450       421  

Additional paid-in capital

     498,577       405,112  

Distributions in excess of net income

     (42,417 )     (25,227 )
                

Total Shareholders’ Equity

     456,610       380,306  
                

Total Liabilities and Shareholders’ Equity

   $ 1,345,834     $ 1,141,286  
                

(4) Includes cost of land acquired for development.