SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 8-K/A1

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) August 25, 2006

 


WASHINGTON REAL ESTATE INVESTMENT TRUST

(Exact name of registrant as specified in its charter)

 


 

Maryland   1-6622   53-0261100

(State or other jurisdiction

of incorporation)

  (Commission File Number)  

IRS Employer

Identification Number)

 

6110 Executive Boulevard, Suite 800, Rockville, Maryland   20852
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code (301) 984- 9400

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 



ITEM 2.01 COMPLETION OF 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 filed August 30, 2006 in connection with the acquisition of certain assets and the borrowing under the lines of credit to pay for the acquisitions of West Gude Office Park, The Ridges and The Crescent (Matan Portfolio) and 15005 Shady Grove Road hereby amends the following items, as set forth in the pages attached hereto.

Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

  (a) Financial Statements of Businesses Acquired

 

  1. The Matan Portfolio - Audited Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2005 and unaudited Historical Summary of Gross Income and Direct Operating Expenses for the six months ended June 30, 2006.

 

  2. 15005 Shady Grove Road- Audited Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2005 and unaudited Historical Summary of Gross Income and Direct Operating Expenses for the six months ended June 30, 2006.

In acquiring the properties listed above, Washington Real Estate Investment Trust (“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). The results of the interim period are not necessarily indicative of the results to be obtained for the full fiscal year. However, after reasonable inquiry, management is not aware of any material factors affecting these properties that would cause the reported financial information not to be indicative of their future operating results.

 

  (b) Pro Forma Financial Information

The following pro forma financial statements for the property acquisitions listed above (as defined in Regulation S-X) are filed as an exhibit hereto:

 

  1. WRIT Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2006.

 

  2. WRIT Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2005 and the six months ended June 30, 2006.

 

  (d) Exhibits

 

  23. Consent of Independent Public Accounting Firm


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 hereunto duly authorized.

 

WASHINGTON REAL ESTATE INVESTMENT TRUST
(Registrant)
By:  

/s/ Laura M. Franklin

  (Signature)
  Laura M. Franklin
  Senior Vice President Accounting,
  Administration and Corporate Secretary

 

November 7, 2006

(Date)


REPORT OF INDEPENDENT ACCOUNTANTS

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 the Matan Portfolio (“Historical Summary”) for the year ended December 31, 2005. This Historical Summary is the responsibility of the property’s management. Our responsibility is to express an opinion on the Historical Summary based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 Matan Portfolio’s revenues 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 the Matan Portfolio for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

ARGY, WILTSE & ROBINSON, P.C.

McLean, Virginia

September 8, 2006


MATAN PORTFOLIO

HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2005 AND THE SIX MONTHS

ENDED JUNE 30, 2006 (UNAUDITED)

 

     2005    2006
(Unaudited)

Gross income:

     

Base rents

   $ 8,523,636    $ 4,415,522

Expense recoveries

     1,063,535      685,673
             

Total gross income

     9,587,171      5,101,195
             

Direct operating expenses:

     

Real estate taxes

     841,335      419,294

Utilities

     1,030,244      530,072

Contract services

     743,658      396,612

Insurance

     76,996      37,908

Repairs, maintenance and supplies

     261,036      119,082

Other expenses

     202,216      84,979
             

Total direct operating expenses

     3,155,485      1,587,947
             

Gross income in excess of direct operating expenses

   $ 6,431,686    $ 3,513,248
             

The accompanying notes are an integral part of this historical summary.


MATAN PORTFOLIO

NOTES TO THE HISTORICAL SUMMARY OF GROSS INCOME AND

DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2005 AND THE SIX MONTHS

ENDED JUNE 30, 2006 (UNAUDITED)

NOTE 1 - NATURE OF BUSINESS

The Matan Portfolio consists of seven buildings located in Montgomery County, MD containing a total of 442,467 square feet in three locations: (1) four buildings located in West Gude Office Park (289,491 SF), (2) The Ridges (104,025 SF), a building located in The Ridges Office Park, and (3) The Crescent (48,951 SF), two buildings located in the Quince Orchard Office Park. The operations of the Matan Portfolio consist of leasing offices to a variety of different tenants.

NOTE 2 - BASIS OF PRESENTATION

Washington Real Estate Investment Trust purchased the Matan Portfolio in August, 2006. 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 the Matan Portfolio, 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

The Historical Summaries of these seven buildings are presented on a combined basis as they were part of an office portfolio purchased from one seller at the same time.

NOTE 3 - USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions regarding revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results could differ from estimated amounts.

NOTE 4 - DESCRIPTION OF LEASING ARRANGEMENTS

All leases are classified as operating leases and expire at various dates through 2016. The following is a schedule by years of future minimum rents receivable on non-cancelable operating leases in effect as of December 31, 2005:

 

2006

   $ 8,638,000

2007

     7,429,000

2008

     6,759,000

2009

     6,214,000

2010

     5,936,000

Thereafter

     16,530,000
      
   $ 51,506,000
      

During the year ended December 31, 2005, three tenants accounted for approximately 59% of the total base rents.

NOTE 5 - INTERIM UNAUDITED FINANCIAL INFORMATION

The Historical Summary for the six months ended June 30, 2006 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal, recurring adjustments) necessary for the fair presentation of the Historical Summary for the interim period have been included. The results of the interim period are not necessarily indicative of the results to be obtained for a full fiscal year.


REPORT OF INDEPENDENT ACCOUNTANTS

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 15005 Shady Grove Road (“Historical Summary”) for the year ended December 31, 2005. This Historical Summary is the responsibility of the property’s management. Our responsibility is to express an opinion on the Historical Summary based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 15005 Shady Grove Road’s revenues 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 15005 Shady Grove Road for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

ARGY, WILTSE & ROBINSON, P.C.

McLean, Virginia

September 8, 2006


15005 SHADY GROVE ROAD

HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2005 AND THE SIX MONTHS

ENDED JUNE 30, 2006 (UNAUDITED)

 

     2005   

2006

(Unaudited)

Gross income:

     

Base rents

   $ 1,822,029    $ 924,801

Expense recoveries

     43,413      31,444
             

Total gross income

     1,865,442      956,245
             

Direct operating expenses:

     

Real estate taxes

     103,499      52,469

Utilities

     200,648      92,349

Contract services

     96,515      46,697

Insurance

     4,117      2,116

Repairs, maintenance and supplies

     32,306      13,131

Other expenses

     41,508      16,209
             

Total direct operating expenses

     478,593      222,971
             

Gross income in excess of direct operating expenses

   $ 1,386,849    $ 733,274
             

The accompanying notes are an integral part of this historical summary.


15005 SHADY GROVE ROAD

NOTES TO THE HISTORICAL SUMMARY OF GROSS INCOME AND

DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2005 AND THE SIX MONTHS

ENDED JUNE 30, 2006 (UNAUDITED)

NOTE 1 - NATURE OF BUSINESS

15005 Shady Grove Road is medical office building, consisting of 52,300 square feet, in Rockville, Maryland. The operations of 15005 Shady Grove Road consist of leasing offices primarily to medical related tenants.

NOTE 2 - BASIS OF PRESENTATION

Washington Real Estate Investment Trust purchased 15005 Shady Grove Road in July, 2006. 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 15005 Shady Grove Road, 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

NOTE 3 - USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions regarding revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results could differ from estimated amounts.

NOTE 4 - DESCRIPTION OF LEASING ARRANGEMENTS

All leases are classified as operating leases and expire at various dates through 2015. The following is a schedule by years of future minimum rents receivable on non-cancelable operating leases in effect as of December 31, 2005:

 

2006

   $ 1,769,000

2007

     1,767,000

2008

     1,718,000

2009

     1,769,000

2010

     1,822,000

Thereafter

     4,188,000
      
   $ 13,033,000
      

During the year ended December 31, 2005, two tenants accounted for approximately 30% of the total base rents.

NOTE 5 - INTERIM UNAUDITED FINANCIAL INFORMATION

The Historical Summary for the six months ended June 30, 2006 is unaudited; however, in the opinion of management, all adjustments (consisting solely of normal, recurring adjustments) necessary for the fair presentation of the Historical Summary for the interim period have been included. The results of the interim period are not necessarily indicative of the results to be obtained for a full fiscal year.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The pro forma balance sheet as of June 30, 2006 presents consolidated financial information as if the acquisitions had taken place on June 30, 2006. The pro forma statements of operations for the year ended December 31, 2005, and the six months ended June 30, 2006, present the pro forma results of operations as if the acquisitions had taken place as of the beginning of the respective reporting periods. Both the balance sheets and statements of operations illustrate the operating results of 15005 Shady Grove Road and The Matan Portfolio (the “Properties”) as well as the operating results of a substantial majority of the properties previously acquired during 2006 (the “Prior Properties”) necessary to develop the pro forma results for the registrant. Explanations or details of the pro forma adjustments are in the notes to each of the financial statements.

WRIT purchased the following properties during 2006:

 

Acquisition Date

  

Property Name

April 11, 2006    Alexandria Professional Center
April 13, 2006    9707 Medical Center Drive
April 29, 2006    15001 Shady Grove Road
May 16, 2006    Randolph Shopping Center
May 16, 2006    Montrose Shopping Center
June 22, 2006    Plumtree Medical Center
July 12, 2006    15005 Shady Grove Road
August 25, 2006    The Matan Portfolio

The unaudited consolidated pro forma financial information is not necessarily indicative of what WRIT’s actual results of operations or financial position would have been had these transactions been consummated on the dates indicated, nor does it purport to represent WRIT’s results of operations or financial position for any future period. The results of operations for the periods ended December 31, 2005 and June 30, 2006 are not necessarily indicative of the operating results for these periods.

The unaudited consolidated pro forma financial information should be read in conjunction with WRIT’s Form 8-K filed with the Securities and Exchange Commission (“SEC”) on August 30, 2006, announcing the acquisition; WRIT’s Form 8-K filed with the SEC on May 19, 2006 and amended on June 7, 2006 and July 31, 2006 presenting the pro forma results for the Prior Properties listed above; the consolidated financial statements and notes thereto included in WRIT’s Annual Report on Form 10-K for the year ended December 31, 2005; WRIT’s Quarterly Report on Form 10-Q for the six months ended June 30, 2006; and the Historical Summary of Gross Income and Direct Operating Expenses and Notes included elsewhere in this Form 8-K/A1. In management’s opinion, all adjustments necessary to reflect these acquisitions and related transactions have been made.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2006

(In thousands)

 

     Registrant    

15005 Shady

Grove Road

   

Matan

Portfolio

   

Total All

Properties

    Pro Forma  

Assets

          

Land

   $ 266,329     $ 4,186     $ 17,699     $ 21,885 (1)   $ 288,214  

Income producing property

     1,155,280       17,840       72,052       89,892 (1)     1,245,172  

Accumulated depreciation

     (262,150 )         —         (262,150 )
                                        

Net income producing property

     1,159,459       22,026       89,751       111,777       1,271,236  

Development in progress

     90,612           —         90,612  
                                        

Total investment in real estate, net

     1,250,071       22,026       89,751       111,777       1,361,848  

Investment in real estate sold or held for sale, net

     3,244       —         —         —         3,244  

Cash and cash equivalents

     13,970       (1,614 )     (10,167 )     (11,781 )(2)     2,189  

Restricted cash

     2,540           —         2,540  

Rents and other receivables, net of allowance for doubtful accounts

     29,047           —         29,047  

Prepaid expenses and other assets

     44,892       599       3,939       4,538 (2)     49,430  

Other assets related to properties sold or held for sale

     31           —         31  
                                        

Total assets

   $ 1,343,795     $ 21,011     $ 83,523     $ 104,534     $ 1,448,329  
                                        

Liabilities

          

Notes payable

   $ 618,662     $ —       $ —       $ —       $ 618,662  

Mortgage notes payable

     178,834       8,805       57,269       66,074 (2)     244,908  

Lines of credit/short-term note payable

     19,000       12,000       25,000       37,000 (2)     56,000  

Accounts payable and other liabilities

     54,082       5       259       356 (2)     54,438  
       2       90         (1)  
             (2)  

Advance rents

     6,279       98       303       401 (2)     6,680  

Tenant security deposits

     8,445       101       602       703 (2)     9,148  

Other liabilities related to properties sold or held for sale

     184           —         184  
                                        

Total liabilities

     885,486       21,011       83,523       104,534       990,020  
                                        

Minority interest

     1,699             1,699  
                      

Shareholders’ Equity

          

Shares of beneficial interest; $.01 par value

     450             450  

Additional paid-in capital

     498,577             498,577  

Distributions in excess of net income

     (42,417 )           (42,417 )
                      

Total Shareholders’ Equity

     456,610             456,610  
                                        

Total Liabilities and Shareholders’ Equity

   $ 1,343,795     $ 21,011     $ 83,523     $ 104,534     $ 1,448,329  
                                        


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

JUNE 30, 2006

(In thousands)

NOTES TO PRO FORMA BALANCE SHEET

Note 1: WRIT accounted for the acquisitions using the purchase method of accounting. WRIT allocated the purchase price to the related physical assets (land, building and tenant improvements) and in-place leases (tenant origination costs, leasing commissions, and net lease intangible assets/liabilities) based on their fair values, in accordance with SFAS No. 141, “Business Combinations.”

 

    15005 Shady Grove Road     Matan Portfolio  

Purchase price

  $ 22,500     $ 92,540  

Acquisition costs

    123       372  
               

Total purchase price

  $ 22,623     $ 92,912  
               

Amounts allocated to investment in real estate:

   

Amount allocated to building

  $ 17,495     $ 69,958  

Amount allocated to land

    4,186       17,699  

Amount allocated to tenant origination costs

    345       2,094  
               
  $ 22,026     $ 89,751  

Amounts allocated to investment in real estate:

   

Amount allocated to leasing commissions

    237       714  

Amount allocated to net lease intangible asset

    362       2,537  

Amount allocated to net intangible lease liability

    (2 )     (90 )
               
  $ 597     $ 3,161  
               

Total

  $ 22,623     $ 92,912  
               

Note 2: Adjustments to the Pro Forma Condensed Consolidated Balance Sheet represent draws on the line, cash paid and deposits applied at closing, and the assumption of certain assets and liabilities, including real estate and personal property taxes and security deposits.

 

     15005 Shady Grove Road     Matan Portfolio  

Funding of purchase price:

    

Lines of credit

   $ (12,000 )   $ (25,000 )

Assumed mortgages

     (8,805 )     (57,269 )

Cash and cash equivalents

     (1,614 )     (10,167 )

Prepaid expenses and other assets

     —         688  
                
     (22,419 )     (91,748 )

Other assets and liabilities assumed:

    

Accounts payable and other liabilities

     (5 )     (259 )

Advance rents

     (98 )     (303 )

Tenant security deposits

     (101 )     (602 )
                
   $ (22,623 )   $ (92,912 )
                

Acquisition related borrowings on our credit facilities totaled $37.0 million, $25.0 million in August 2006 to fund the acquisition of the Matan Portfolio and $12.0 million in July 2006 to fund the acquisition of 15005 Shady Grove Road. In addition we assumed mortgages of $57.3 million for the Matan Portfolio and $8.8 million for 15005 Shady Grove Road. Advances under our credit facilities bear interest at LIBOR plus a spread based on the credit rating of our publicly issued debt. All outstanding advances are due and payable upon maturity in July 2007. These borrowings were paid in full in September 2006 using a portion of the proceeds from the September 2006 issuance of $100.0 million senior convertible notes.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2006

(In thousands, except per share amounts)

 

     Registrant     Alexandria
Professional
Center (7)
    9707 Medical
Center Dr &
15001 Shady
Grove Road (7)
    Randolph
Shopping
Center(7)
    Montrose
Shopping
Center (7)
    Plum Tree
Medical
Center (7)
    15005
Shady
Grove
Road
    Matan
Portfolio
    Total All
Properties
    Pro Forma  

Revenue

                    

Real estate rental revenue

   $ 103,683     $ 917     $ 1,013     $ 457     $ 531     $ 350     $ 956     $ 5,136     $ 9,360     $ 113,267  
       3       (50 )     134       60       (39 )     (29 )     (296 )     (217 )(1),(6)  
       66       106       —         70       54       —         145       441 (2),(6)  

Expenses

                     —      

Real estate expenses

     30,998       367       316       107       134       39       223       1,588       2,774       34,017  
       26       20       15       13       10       31       130       245 (3),(6)  

Depreciation and amortization

     24,893       224       365       231       308       120       341       1,077       2,666 (4),(6)     27,559  

General and administrative

     7,931       —         —         —         —         —         —         —         —         7,931  
                                                                                
     63,822       617       701       353       455       169       595       2,795       5,685       69,507  
                                                                                
     39,861       369       368       238       206       196       332       2,190       3,899       43,760  
                                                                                

Other income (expense)

                    

Interest expense

     (21,926 )     (389 )     (594 )     (338 )     (659 )     (131 )     (579 )     (2,388 )     (5,078 )(5),(6)     (27,004 )

Other income from property settlement

     —         —         —         —         —         —               —    

Other income

     345       —         —         —         —         —               345  
                                                                                
     (21,581 )     (389 )     (594 )     (338 )     (659 )     (131 )     (579 )     (2,388 )     (5,078 )     (26,659 )
                                                                                

Income from continuing operations

     18,280       (20 )     (226 )     (100 )     (453 )     65       (247 )     (198 )     (1,179 )     17,101  

Discontinued operations

                    

Income (Loss) from operations of property disposed/held for sale

     71                 —         —         —         71  

Gain on disposal

     —                   —         —         —         0  
                                                                                

Net Income

   $ 18,351     $ (20 )   $ (226 )   $ (100 )   $ (453 )   $ 65     $ (247 )   $ (198 )     (1,179 )   $ 17,172  
                                                                                

Per share information based on the weighted average of shares outstanding

                    

Shares – basic

     42,454                       42,454  

Shares – diluted

     42,620                       42,620  

Income from continuing operations per share – basic

   $ 0.43                     $ 0.40  

Income from continuing operations per share – diluted

   $ 0.43                     $ 0.40  

Net income per share – basic

   $ 0.43                     $ 0.40  

Net income per share – diluted

   $ 0.43                     $ 0.40  

NOTES TO PRO FORMA STATEMENT OF OPERATIONS

 

(1) Represents amortization of the net intangible lease liability based on the average remaining life of the acquired leases.
(2) Represents straight-line revenue adjustment.
(3) Represents property management costs incurred by the properties
(4) Represents depreciation over 30 years, based upon the portion of the purchase price allocated to building and improvements, plus amortization of tenant origination costs and FAS 141 leasing commissions over the average remaining life of the acquired leases.
(5) Represents interest expense on the line of credit borrowings, used to fund the acquisitions - See Note 3 to the Balance Sheet and interest on assumed mortgages.
(6) The table below illustrates the pro forma adjustments for each property including six properties acquired in April, May and June 2006. The proforma amounts for these properties for the quarter ended March 31, 2006 are set forth in the Form 8-K/A2 filed with the SEC on July 31, 2006 (in thousands):

 

    Matan
Portfolio
    15005
Shady
Grove Road
    Alexandria
Professional
Center
  

9707 Medical
Center Dr &
15001 Shady Grove

Road

    Randolph
Shopping
Center
   Montrose
Shopping
Center
   Plumtree
Medical
Center
    Total  

(1) Amortization of lease intangibles, net

  $ (296 )   $ (29 )   $ 3    $ (50 )   $ 134    $ 60    $ (39 )   $ (217 )

(2) Straight line rent adjustment

  $ 145       —       $ 66    $ 106       —      $ 70    $ 54     $ 441  

(3) Property management costs

  $ 130     $ 31     $ 26    $ 20     $ 15    $ 13    $ 10     $ 245  

(4) Depreciation and amortization

  $ 1,077     $ 341     $ 224    $ 365     $ 231    $ 308    $ 120     $ 2,666  

(5) Interest expense

  $ 2,388     $ 579     $ 389    $ 594     $ 338    $ 659    $ 131     $ 5,078  

 

(7) Represents adjustments for 1/1/06 through the date of acquisition.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2005

(In thousands, except per share amounts)

 

    Registrant     Alexandria
Professional
Center
   

9707 Medical
Center Dr &

15001 Shady

Grove Road

    Randolph
Shopping
Center
    Montrose
Shopping
Center
    Plum Tree
Medical
Center
    15005
Shady Grove
Road
    Matan
Portfolio
    Total All
Properties
    Pro Forma  

Revenue

                   

Real estate rental revenue

  $ 190,046     $ 3,217     $ 3,138     $ 1,232     $ 1,557     $ 709     $ 1,865     $ 9,553     $ 21,271     $ 212,183  
      12       125       162       306       83       (58 )   $ (592 )     38 (1),(6)  
      52       54       —         371       92         259       828 (2),(6)  

Expenses

                   

Real estate expenses

    58,116       1,045       993       212       365       88       479       3,155       6,337       65,003  
      85       58       42       45       20       51       249       550 (3),(6)  

Depreciation and amortization

    47,161       808       1,181       823       615       252       684       3,086       7,449 (4),(6)     54,610  

General and administrative

    8,005                 —         —         —         8,005  
                                                                               
    113,282       1,938       2,232       1,077       1,025       360       1,214       6,490       14,336       127,618  
                                                                               
    76,764       1,343       1,085       317       1,209       524       593       2,730       7,801       84,565  
                                                                               

Other income (expense)

                   

Interest expense

    (37,743 )     (1,084 )     (1,542 )     (689 )     (1,338 )     (779 )     (991 )     (4,474 )     (10,897 )(5),(6)     (48,640 )

Other income from property settlement

    504                       504  

Other income

    918                       918  
                                                                               
    (36,321 )     (1,084 )     (1,542 )     (689 )     (1,338 )     (779 )     (991 )     (4,474 )     (10,897 )     (47,218 )
                                                                               

Income from continuing operations

    40,443       259       (457 )     (372 )     (129 )     (255 )     (398 )     (1,744 )     (3,096 )     37,347  

Discontinued operations

                   

Income (Loss) from operations of property disposed/held for sale

    184       —         —         —         —         —         —         —         —         184  

Gain on disposal

    37,011       —         —         —         —         —         —         —         —         37,011  
                                                                               

Net Income

  $ 77,638     $ 259     $ (457 )   $ (372 )   $ (129 )   $ (255 )   $ (398 )   $ (1,744 )     (3,096 )   $ 74,542  
                                                                               

Per share information based on the weighted average of shares outstanding

                   

Shares – basic

    42,069                       42,069  

Shares – diluted

    42,203                       42,203  

Income from continuing operations per share – basic

  $ 0.96                     $ 0.89  

Income from continuing operations per share – diluted

  $ 0.96                     $ 0.88  

Net income per share – basic

  $ 1.85                     $ 1.77  

Net income per share – diluted

  $ 1.84                     $ 1.77  

NOTES TO PRO FORMA STATEMENT OF OPERATIONS

 

(1) Represents amortization of the net intangible lease liability based on the average remaining life of the acquired leases.
(2) Represents straight-line revenue adjustment.
(3) Represents property management costs incurred by the properties.
(4) Represents depreciation over 30 years, based upon the portion of the purchase price allocated to building and improvements, plus amortization of tenant origination costs and FAS 141 leasing commissions over the average remaining life of the acquired leases.
(5) Represents interest expense on the line of credit borrowings, used to fund the acquisitions – See Note 3 to the Balance Sheet.
(6) The table below illustrates the corporate pro forma adjustments for each property including six properties acquired in April, May and June 2006, The pro forma adjustments amounts for these properties were initially set forth in the Form 8-K/A2 filed with the SEC on July 31, 2006 ($ in thousands):

 

    Matan
Portfolio
    15005
Shady
Grove Road
    Alexandria
Professional
Center
   9707 Medical
Center Dr &
15001 Shady Grove
Road
   Randolph
Shopping
Center
   Montrose
Shopping
Center
   Plumtree
Medical
Center
   Total

(1) Amortization of lease intangibles, net

  $ (592 )   $ (58 )   $ 12    $ 125    $ 162    $ 306    $ 83    $ 38

(2) Straight line rent adjustment

  $ 259       —       $ 52    $ 54      —      $ 371    $ 92    $ 828

(3) Property management costs

  $ 249     $ 51     $ 85    $ 58    $ 42    $ 45    $ 20    $ 550

(4) Depreciation and amortization

  $ 3,086     $ 684     $ 808    $ 1,181    $ 823    $ 615    $ 252    $ 7,449

(5) Interest expense

  $ 4,474     $ 991     $ 1,084    $ 1,542    $ 689    $ 1,338    $ 779    $ 10,897