Table of Contents

Exhibit 99.2

 

LOGO

LOGO

Second Quarter 2008

Supplemental Operating and Financial Data

for the Quarter Ending June 30, 2008

 

Contact:

 

Sara Grootwassink

 

Executive Vice President and

 

Chief Financial Officer

 

E-mail: sgrootwassink@writ.com

 

6110 Executive Boulevard

 

Suite 800

 

Rockville, MD 20852

 

(301) 984-9400

 

(301) 984-9610 fax


Table of Contents

Company Background and Highlights

Second Quarter 2008

 

Washington Real Estate Investment Trust (the “Company”) is a self-administered, self-managed, equity real estate investment trust (REIT) investing in income-producing properties in the greater Washington metropolitan region. WRIT is diversified, as it invests in multifamily, retail, industrial/flex, office, and medical office properties.

During second quarter 2008, WRIT focused on improving its portfolio through acquisitions and dispositions, while maintaining its strong balance sheet. This quarter, WRIT acquired a medical office building for a $6.5 million and entered into a purchase agreement to acquire a D.C. office building for $182 million, and disposed of two flex properties for a net book gain of $15.3 million. Also this quarter, WRIT issued $90.5 million of equity and refinanced $81 million of short-term debt with long-term debt at a rate of 5.71% and an 8-year maturity. WRIT’s Board of Trustees appointed Wendelin (Wendy) A. White, Esq. and Terence C. Golden to serve as trustees. WRIT also increased its dividend for the 38th consecutive year. Earlier this year, WRIT increased its borrowing capacity on its unsecured credit facilities to $337 million and refinanced its only debt maturity during 2008.

On May 21, 2008, WRIT acquired Sterling Medical Office Building, a 36,000 square foot medical office building located in Sterling, Virginia for $6.5 million. Demand for medical office space in the area is driven by its proximity to Inova Loudoun Hospital and Reston Hospital Center. WRIT expects to achieve a first-year, unleveraged yield of 7.6% on a cash basis and 7.9% on a GAAP basis. The acquisition was funded with cash from operations.

On June 16, 2008, WRIT entered into a purchase agreement to acquire 2445 M Street, a 290,000 square foot office building located in Washington, DC, for approximately $182 million. The property is 100% leased and strategically positioned between Georgetown and the Central Business District in the West End submarket of Washington, DC. WRIT anticipates the closing of the acquisition will take place no later than the fourth quarter of 2008.

On June 6, 2008, WRIT completed the sale of Sullyfield Commerce Center and The Earhart Building, totaling 336,000 square feet for $41.1 million. The industrial/flex properties, located in Chantilly, VA, were acquired in 2001 and 1996, respectively. WRIT achieved a net book gain of $15.3 million on the sale of the properties and a combined 13.0% unlevered internal rate of return during ownership. Proceeds from the sale will be reinvested in a 1031 exchange.

During the last year, WRIT completed several ground-up development projects. In third quarter 2007, WRIT completed base construction on Dulles Station, a 180,000 square foot development project of Class A office space located in Herndon, VA. The building, prominently visible from the Dulles Toll Road, is part of a larger mixed-use development which will include 1,095 multifamily units and 56,000 square feet of retail and restaurant space.

In fourth quarter 2007, WRIT completed construction at Bennett Park. Bennett Park is a ground-up development project in Arlington, VA consisting of high-rise and mid-rise Class A apartment buildings with a total of 224 units and 5,800 square feet of retail space. The property was 55% leased at quarter-end.

In first quarter 2008, WRIT began delivering units at The Clayborne Apartments. The Clayborne is a ground-up development project in Alexandria, VA, adjacent to our 800 South Washington retail property. The project consists of a 74-unit Class A apartment building that will include 2,700 square feet of additional retail space. The property was 36% leased at quarter-end.

 

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On May 23, 2008, WRIT raised $90.5 million by issuing 2.6 million common shares at a price of $34.80 per share. WRIT used the net proceeds from the offering to repay borrowings under its lines of credit. On May 29, 2008, WRIT entered into three mortgage loans with an aggregate principal amount of approximately $81 million. The mortgage loans bear interest at a fixed rate of 5.71% per annum through the maturity date of May 31, 2016. WRIT used the net proceeds of the mortgage loans to repay borrowings under its lines of credit. On June 30, 2008, WRIT increased its quarterly dividend 2.4% to $0.4325 per share for its 186th consecutive quarterly dividend at equal or increasing rates.

On May 15, 2008, WRIT announced the Board of Trustees appointed Wendelin (Wendy) A. White, Esq. and Terence C. Golden to serve as trustees. Both trustees have many years experience in real estate and investments. Wendy White is a partner and serves on the Managing Board at Pillsbury Winthrop Shaw Pittman LLP, where she is the head of the firm’s DC real estate group and has practiced law since 1981. Terence Golden has been Chairman of Bailey Capital Corporation, a private investment company in Washington, D.C. since 2000. Prior to 2000, Mr. Golden was President, Chief Executive Officer and a director of Host Marriott Corporation. He also served as the head of the General Services Administration (GSA) from 1985 to 1988 and as Assistant Secretary of the U.S. Department of the Treasury from 1984 to 1985.

WRIT is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. WRIT’s dividends have increased every year for 38 consecutive years. WRIT’s FFO per share has increased every year for 35 consecutive years. WRIT owns a diversified portfolio of 90 properties consisting of 14 retail centers, 26 office properties, 17 medical office properties, 22 industrial/flex properties, 11 multi-family properties and land for development. WRIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

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Table of Contents

Net Operating Income Contribution by Sector—Second Quarter 2008

With investments in the multifamily, retail, industrial/flex, office and medical office segments, WRIT is uniquely diversified. This balanced portfolio provides stability during market fluctuations in specific property types.

LOGO

Second Quarter 2008 Acquisition and Purchase Agreement

 

Acquired:

Sterling Medical Office Building

Sterling, VA

 

Under Purchase Agreement:

2445 M Street, NW

Washington, DC

LOGO   LOGO

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 2007 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

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Table of Contents

Supplemental Financial and Operating Data

Table of Contents

June 30, 2008

 

Schedule

   Page
Key Financial Data   

Consolidated Statements of Operations

   5

Consolidated Balance Sheets

   6

Funds From Operations and Funds Available for Distribution

   7

Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)

   8
Capital Analysis   

Long-Term Debt Analysis

   9-10

Capital Analysis

   11
Portfolio Analysis   

Core Portfolio Net Operating Income (NOI) Growth & Rental Rate Growth

   12

Core Portfolio Net Operating Income (NOI) Summary

   13

Core Portfolio Net Operating Income (NOI) Detail for the Quarter

   14-15

Core Portfolio & Overall Economic Occupancy Levels by Sector

   16
Tenant Analysis   

Commercial Leasing Summary

   17-18

10 Largest Tenants - Based on Annualized Base Rent

   19

Industry Diversification

   20

Lease Expirations as of June 30, 2008

   21
Growth and Strategy   

2008 Acquisition and Disposition Summary

   22
Appendix   

Schedule of Properties

   23-24

Supplemental Definitions

   25

Certain statements discussed in this Supplemental regarding anticipated operating results and future events are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although such statements and projections are based upon what we believe to be reasonable assumptions, actual results may differ from those projected. Key factors that could cause actual results to differ materially include changes in the economy, the successful and timely completion of acquisitions, changes in interest rates, leasing activities and other risks associated with the commercial real estate business and as detailed in our filings from time to time with the Securities and Exchange Commission.

 

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Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

 

     Three Months Ended  
     06/30/08     03/31/08     12/31/07     09/30/07     06/30/07  

OPERATING RESULTS

          

Real estate rental revenue

   $ 69,768     $ 70,278     $ 67,528     $ 65,020     $ 63,255  

Real estate expenses

     (22,803 )     (23,133 )     (21,271 )     (20,395 )     (19,542 )
                                        
     46,965       47,145       46,257       44,625       43,713  

Real estate depreciation and amortization

     (21,198 )     (20,525 )     (18,998 )     (18,019 )     (16,632 )
                                        

Income from real estate

     25,767       26,620       27,259       26,606       27,081  

Other income

     220       238       480       357       420  

Other income from life insurance proceeds

     —         —         —         —         —    

Loss on extinguishment of debt

     —         (8,449 )     —         —         —    

Interest expense

     (17,582 )     (17,664 )     (16,400 )     (15,824 )     (15,298 )

General and administrative

     (3,111 )     (3,080 )     (3,675 )     (3,174 )     (5,367 )
                                        

Income (loss) from continuing operations

     5,294       (2,335 )     7,664       7,965       6,836  

Discontinued operations:

          

Income from operations of properties held for sale

     639       847       778       1,403       1,501  

Gain on sale of real estate investment

     15,275       —         —         25,022       —    
                                        

Income from discontinued operations

     15,914       847       778       26,425       1,501  

Net Income (loss)

   $ 21,208     $ (1,488 )   $ 8,442     $ 34,390     $ 8,337  
                                        

Per Share Data

          

Net Income

   $ 0.44     $ (0.03 )   $ 0.18     $ 0.73     $ 0.18  

Fully diluted weighted average shares outstanding

     48,148       46,819       46,822       46,802       45,658  

Percentage of Revenues:

          

Real estate expenses

     32.7 %     32.9 %     31.5 %     31.4 %     30.9 %

General and administrative

     4.5 %     4.4 %     5.4 %     4.9 %     8.5 %

Ratios:

          

EBITDA / Interest expense

     2.5 x     2.1 x(1)     2.7 x     2.7 x     2.6 x

Income from continuing operations/Total real estate revenue

     7.6 %     -3.3 %(1)     11.3 %     12.3 %     10.8 %

Net income/Total real estate revenue

     30.4 %     -2.1 %(1)     12.5 %     52.9 %     13.2 %

Note: Certain prior quarter amounts have been reclassified to conform to the current quarter presentation.

 

(1)

Includes the impact of the loss on extinguishment of debt of $8.4 million in the first quarter of 2008

 

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Consolidated Balance Sheets

(In thousands)

(unaudited)

 

     June 30,
2008
    March 31,
2008
    December 31,
2007
    September 30,
2007
    June 30,
2007
 

Assets

          

Land

   $ 337,680     $ 336,710     $ 328,951     $ 334,484     $ 322,733  

Income producing property

     1,693,384       1,674,319       1,635,169       1,496,731       1,448,874  
                                        
     2,031,064       2,011,029       1,964,120       1,831,215       1,771,607  

Accumulated depreciation and amortization

     (368,200 )     (349,926 )     (331,991 )     (315,444 )     (299,494 )
                                        

Net income producing property

     1,662,864       1,661,103       1,632,129       1,515,771       1,472,113  

Development in progress, including land held for development

     58,760       58,784       98,321       138,093       151,393  
                                        

Total real estate held for investment, net

     1,721,624       1,719,887       1,730,450       1,653,864       1,623,506  

Investment in real estate held for sale, net

     —         23,614       23,843       23,382       52,907  

Cash and cash equivalents

     12,724       12,858       21,488       9,919       8,133  

Restricted cash

     48,868       7,637       6,030       46,002       6,835  

Rents and other receivables, net of allowance for doubtful accounts

     37,096       39,008       36,595       34,520       34,359  

Prepaid expenses and other assets

     85,129       87,515       78,517       76,689       68,179  

Other assets related to properties sold or held for sale

     —         1,679       1,403       1,425       3,276  
                                        

Total Assets

   $ 1,905,441     $ 1,892,198     $ 1,898,326     $ 1,845,801     $ 1,797,195  
                                        

Liabilities and Shareholders’ Equity

          

Notes payable

   $ 918,834     $ 918,783     $ 879,123     $ 879,094     $ 879,064  

Mortgage notes payable

     331,575       251,539       252,484       253,500       254,324  

Lines of credit/short-term note payable

     15,000       174,500       192,500       128,500       95,500  

Accounts payable and other liabilities

     59,193       57,590       63,543       65,228       66,223  

Advance rents

     8,793       9,383       9,552       6,424       6,544  

Tenant security deposits

     10,436       10,462       10,487       9,961       10,262  

Other liabilities related to properties sold or held for sale

     —         417       317       358       1,360  
                                        

Total Liabilities

     1,343,831       1,422,674       1,408,006       1,343,065       1,313,277  
                                        

Minority interest

     3,791       3,786       3,776       5,593       1,776  
                                        

Shareholders’ Equity

          

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized

     496       468       468       467       467  

Additional paid-in capital

     653,816       563,174       561,492       560,695       560,276  

Distributions in excess of net income

     (96,873 )     (96,660 )     (75,416 )     (64,019 )     (78,601 )

Accumulated other comprehensive income (loss)

     380       (1,244 )     —         —         —    
                                        

Total Shareholders’ Equity

     557,819       465,738       486,544       497,143       482,142  
                                        

Total Liabilities and Shareholders’ Equity

   $ 1,905,441     $ 1,892,198     $ 1,898,326     $ 1,845,801     $ 1,797,195  
                                        

Total Debt / Total Market Capitalization

     0.46:1       0.46:1       0.47:1       0.44:1       0.44:1  
                                        

Note: Certain prior quarter amounts have been reclassified to conform to the current quarter presentation.

 

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Funds From Operations and Funds Available for Distribution

(In thousands, except per share data)

(unaudited)

 

     Three Months Ended  
     6/30/2008     3/31/2008     12/31/2007     9/30/2007     6/30/2007  

Funds From Operations(1)

          

Net Income (loss)

   $ 21,208     $ (1,488 )   $ 8,442     $ 34,390     $ 8,337  

Real estate depreciation and amortization

     21,198       20,525       18,998       18,019       16,632  

Other income from life insurance proceeds

     —         —         —         —         —    

Discontinued operations:

          

Gain on sale

     (15,275 )         (25,022 )     —    

Real estate depreciation and amortization

     —         —         87       266       248  
                                        

Funds From Operations (FFO)

   $ 27,131     $ 19,037     $ 27,527     $ 27,653     $ 25,217  
                                        

FFO per share - basic

   $ 0.57     $ 0.41     $ 0.59     $ 0.59     $ 0.55  

FFO per share - fully diluted

   $ 0.56     $ 0.41     $ 0.59     $ 0.59     $ 0.55  

FFO per share - fully diluted, excluding loss on extinguishment of debt

   $ 0.56     $ 0.59     $ 0.59     $ 0.59     $ 0.55  

Funds Available for Distribution(2)

          

Tenant Improvements

     (5,029 )     (2,110 )     (5,026 )     (4,215 )     (5,185 )

External and Internal Leasing Commissions Capitalized

     (1,429 )     (2,023 )     (1,613 )     (1,159 )     (1,165 )

Recurring Capital Improvements

     (3,052 )     (2,116 )     (3,899 )     (2,635 )     (3,425 )

Straight-Line Rent, Net

     (712 )     (744 )     (957 )     (988 )     (1,088 )

Non-real estate depreciation and amortization

     987       1,000       1,011       987       824  

Amortization of lease intangibles, net

     (537 )     (506 )     (191 )     (315 )     (280 )

Amortization and expensing of restricted share and unit compensation

     716       699       850       882       1,574  

Other

     —         —         —         102       1,201  
                                        

Funds Available for Distribution (FAD)

   $ 18,075     $ 13,237     $ 17,702     $ 20,312     $ 17,673  
                                        

Total Dividends Paid

   $ 21,376     $ 19,724     $ 19,723     $ 19,716     $ 19,716  

Average shares - basic

     47,933       46,623       46,604       46,596       45,490  

Average shares - fully diluted

     48,148       46,819       46,822       46,802       45,658  

 

(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. FFO is a non-GAAP measure.

 

(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 and adding or subtracting the 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.

 

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Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)

(In thousands)

(unaudited)

 

     Three Months Ended  
     06/30/08     03/31/08     12/31/07     09/30/07     06/30/07  

EBITDA(1)

          

Net income (loss)

   $ 21,208     $ (1,488 )   $ 8,442     $ 34,390     $ 8,337  

Add:

          

Interest expense

     17,582       17,664       16,400       15,824       15,298  

Real estate depreciation and amortization

     21,198       20,525       19,085       18,285       16,880  

Non-real estate depreciation

     285       276       277       261       202  

Less:

          

Gain on sale of real estate

     (15,275 )         (25,022 )     —    

Other income

     (220 )     (238 )     (480 )     (357 )     (420 )
                                        

EBITDA

   $ 44,778     $ 36,739     $ 43,724     $ 43,381     $ 40,297  
                                        

 

(1)

EBITDA is earnings before interest, taxes, depreciation and amortization. We consider EBITDA to be an appropriate supplemental performance measure because it eliminates depreciation, interest and the gain (loss) from property dispositions, which permits investors to view income from operations without the effect of non-cash depreciation or the cost of debt. EBITDA is a non-GAAP measure.

 

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Long-Term Debt Analysis

(In thousands, except per share amounts)

 

     June 30,
2008
    March 31,
2008
    December 31,
2007
    September 30,
2007
    June 30,
2007
 

Balances Outstanding

          

Secured

          

Conventional fixed rate

   $ 331,575     $ 251,539     $ 252,484     $ 253,500     $ 254,323  
                                        

Secured total

     331,575       251,539       252,484       253,500       254,323  
                                        

Unsecured

          

Fixed rate bonds and notes

     918,834       918,783       879,123       879,094       879,064  

Credit facility

     15,000       174,500       192,500       128,500       95,500  
                                        

Unsecured total

     933,834       1,093,283       1,071,623       1,007,594       974,564  
                                        

Total

   $ 1,265,409     $ 1,344,822     $ 1,324,107     $ 1,261,094     $ 1,228,887  
                                        

Average Interest Rates

          

Secured

          

Conventional fixed rate

     5.8 %     5.8 %     5.8 %     5.8 %     5.8 %
                                        

Secured total

     5.8 %     5.8 %     5.8 %     5.8 %     5.8 %
                                        

Unsecured

          

Fixed rate bonds

     5.0 %     5.0 %     5.2 %     5.2 %     5.2 %

Credit facilities

     5.1 %     5.1 %     5.4 %     5.9 %     5.8 %
                                        

Unsecured total

     5.0 %     5.0 %     5.2 %     5.3 %     5.3 %
                                        

Average

     5.2 %     5.2 %     5.3 %     5.4 %     5.4 %
                                        

Note: The current balance outstanding of the fixed rate bonds and notes is shown net of discounts/premiums in the amount of $1,165,598.

 

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Long-Term Debt Analysis

(In thousands, except per share amounts)

Continued from previous page

LOGO

 

     Future Maturities of Debt  

Year

   Secured Debt    Unsecured Debt    Credit Facilities    Total Debt    Average Interest Rate  

2008

   $ 2,119    $ —      $ —      $ 2,119    5.4 %

2009

     54,285      —        —        54,285    7.0 %

2010

     25,973      100,000      —        125,973    4.7 %

2011

     13,339      150,000      15,000      178,339    5.8 %

2012

     21,088      50,000      —        71,088    5.0 %

2013

     106,039      60,000      —        166,039    5.5 %

2014

     884      100,000      —        100,884    5.3 %

2015

     19,373      150,000      —        169,373    5.3 %

2016

     81,582      —        —        81,582    5.7 %

Thereafter

     6,893      310,000      —        316,893    4.5 %
                                  

Total maturities

   $ 331,575    $ 920,000    $ 15,000    $ 1,266,575    5.2 %
                                  

Weighted average maturity = 8.1 years

 

10


Table of Contents

Capital Analysis

(In thousands, except per share amounts)

 

     June 30,
2008
    March 31,
2008
    December 31,
2007
    September 30,
2007
    June 30,
2007
 

Market Data

          

Shares Outstanding

     49,461       46,716       46,682       46,669       46,665  

Market Price per Share

   $ 30.05     $ 33.42     $ 31.41     $ 33.18     $ 34.00  

Equity Market Capitalization

   $ 1,486,303     $ 1,561,249     $ 1,466,282     $ 1,548,477     $ 1,586,610  

Total Debt

   $ 1,265,409     $ 1,344,822     $ 1,324,107     $ 1,261,094     $ 1,228,888  

Total Market Capitalization

   $ 2,751,712     $ 2,906,071     $ 2,790,389     $ 2,809,571     $ 2,815,498  

Total Debt to Market Capitalization

     0.46:1       0.46:1       0.47:1       0.44:1       0.44:1  
                                        

Earnings to Fixed Charges(1)

     1.3 x     0.8 x (3)     1.3 x     1.4 x     1.3 x

Debt Service Coverage Ratio(2)

     2.4 x     1.9 x (3)     2.5 x     2.6 x     2.5 x

Dividend Data

          

Total Dividends Paid

   $ 21,376     $ 19,724     $ 19,723     $ 19,716     $ 19,716  

Common Dividend per Share

   $ 0.4325     $ 0.4225     $ 0.4225     $ 0.4225     $ 0.4225  

Payout Ratio (FFO per share basis)

     77.2 %     103.0 %     71.6 %     71.6 %     76.8 %

 

(1)

The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized.

 

(2)

Debt service coverage ratio is computed by dividing earnings before interest income and expense, depreciation, amortization and gain on sale of real estate by interest expense and principal amortization.

 

(3)

Includes the impact of the loss on extinguishment of debt of $8.4 million and the write off of related note premium in the first quarter of 2008.

 

11


Table of Contents

Core Portfolio Net Operating Income (NOI) Growth & Rental Rate Growth

2008 vs. 2007

Cash Basis

 

     Second Quarter(1)  

Sector

   NOI
Growth
    Rental Rate
Growth
 

Multifamily

   2.1 %   1.1 %

Office Buildings

   3.6 %   2.3 %

Medical Office Buildings

   3.5 %   2.2 %

Retail Centers

   3.3 %   3.5 %

Industrial / Flex Properties

   -0.3 %   3.0 %

Overall Core Portfolio

   2.7 %   2.4 %

GAAP Basis

 

     Second Quarter(1)  

Sector

   NOI
Growth
    Rental Rate
Growth
 

Multifamily

   2.1 %   1.1 %

Office Buildings

   1.8 %   0.7 %

Medical Office Buildings

   1.6 %   0.6 %

Retail Centers

   2.0 %   4.1 %

Industrial / Flex Properties

   -1.1 %   2.0 %

Overall Core Portfolio

   1.3 %   1.5 %

 

1

Non-core properties were:

2007 and 2008 sold properties - Maryland Trade Centers I and II, Sullyfield Center and The Earhart Building.

2007 acquisitions - 270 Technology Park, Monument II, 2440 M Street, Woodholme Medical Office Building, Woodholme Center, Ashburn Farm Office Park, CentreMed I & II, and 2000 M Street.

2008 acquisitions - 6100 Columbia Park Road and Sterling Medical Office Building.

 

12


Table of Contents

Core Portfolio Net Operating Income (NOI) Summary

(In thousands)

 

     Three Months Ended June 30,  
     2008    2007    % Change  

Cash Basis:

        

Multifamily

   $ 5,101    $ 4,995    2.1 %

Office Buildings

     17,085      16,490    3.6 %

Medical Office Buildings

     5,824      5,626    3.5 %

Retail Centers

     7,727      7,483    3.3 %

Industrial/Flex

     7,449      7,474    -0.3 %
                    
   $ 43,186    $ 42,068    2.7 %
                    

GAAP Basis:

        

Multifamily

   $ 5,104    $ 5,001    2.1 %

Office Buildings

     17,367      17,055    1.8 %

Medical Office Buildings

     6,030      5,937    1.6 %

Retail Centers

     7,930      7,773    2.0 %

Industrial/Flex

     7,495      7,582    -1.1 %
                    
   $ 43,926    $ 43,348    1.3 %
                    

 

13


Table of Contents

Core Portfolio Net Operating Income (NOI) Detail

(In thousands)

 

    Three Months Ended June 30, 2008  
    Multifamily     Office     Medical Office     Retail     Industrial     Corporate and
Other
    Total  

Real estate rental revenue

             

Core Portfolio

  $ 8,884     $ 25,550     $ 8,759     $ 10,341     $ 9,938     $ —       $ 63,472  

Non-core - acquired and in development 1

    681       3,167       2,109       —         339       —         6,296  
                                                       

Total

    9,565       28,717       10,868       10,341       10,277       —         69,768  

Real estate expenses

             

Core Portfolio

    3,780       8,183       2,729       2,411       2,443       —         19,546  

Non-core - acquired and in development 1

    812       1,627       710       —         108       —         3,257  
                                                       

Total

    4,592       9,810       3,439       2,411       2,551       —         22,803  

Net Operating Income (NOI)

             

Core Portfolio

    5,104       17,367       6,030       7,930       7,495       —         43,926  

Non-core - acquired and in development 1

    (131 )     1,540       1,399       —         231       —         3,039  
                                                       

Total

  $ 4,973     $ 18,907     $ 7,429     $ 7,930     $ 7,726     $ —       $ 46,965  
                                                       

Core Portfolio NOI GAAP Basis (from above)

  $ 5,104     $ 17,367     $ 6,030     $ 7,930     $ 7,495     $ —       $ 43,926  

Straight-line revenue, net for core properties

    (4 )     (204 )     (92 )     (81 )     (70 )     —         (451 )

FAS 141 Min Rent

    —         (83 )     (114 )     (125 )     19       —         (303 )

Amortization of lease intangibles for core properties

    1       5       —         3       5       —         14  
                                                       

Core portfolio NOI, Cash Basis

  $ 5,101     $ 17,085     $ 5,824     $ 7,727     $ 7,449     $ —       $ 43,186  
                                                       

Reconciliation of NOI to Net Income (loss)

             

Total NOI

  $ 4,973     $ 18,907     $ 7,429     $ 7,930     $ 7,726     $ —       $ 46,965  

Other income

    —         —         —         —         —         220       220  

Other income from life insurance proceeds

    —         —         —         —         —         —         —    

Interest expense

    (1,337 )     (848 )     (1,402 )     (334 )     (246 )     (13,415 )     (17,582 )

Depreciation and amortization

    (3,257 )     (9,234 )     (3,602 )     (1,771 )     (3,158 )     (176 )     (21,198 )

General and administrative

    —         —         —         —         —         (3,111 )     (3,111 )

Discontinued Operations2

    —         —         —         —         639       —         639  

Gain on sale of real estate

    —         —         —         —         —         15,275       15,275  

Loss on extinguishment of debt

    —         —         —         —         —         —         —    
                                                       

Net Income (loss)

  $ 379     $ 8,825     $ 2,425     $ 5,825     $ 4,961     $ (1,207 )   $ 21,208  
                                                       

 

1

Non-core acquired and in development properties:

2007 in development - Bennett Park, Clayborne Apartments and Dulles Station.

2007 acquisitions - 270 Technology Park, Monument II, 2440 M Street, Woodholme Medical Office Building, Woodholme Center, Ashburn Farm Office Park, CentreMed I & II and 2000 M Street.

2008 acquisitions - 6100 Columbia Park Road and Sterling Medical Office Building.

 

2

Discontinued operations include: Sold Properties - Sullyfield Center and The Earhart Building.

 

14


Table of Contents

Core Portfolio Net Operating Income (NOI) Detail

(In thousands)

 

    Three Months Ended June 30, 2007  
    Multifamily     Office     Medical Office     Retail     Industrial     Corporate and
Other
    Total  

Real estate rental revenue

             

Core Portfolio

  $ 8,430     $ 25,532     $ 8,543     $ 10,064     $ 9,982     $ —       $ 62,551  

Non-core - acquired and in development 1

    —         176       528       —         —         —         704  
                                                       

Total

    8,430       25,708       9,071       10,064       9,982       —         63,255  

Real estate expenses

             

Core Portfolio

    3,429       8,477       2,606       2,291       2,400       —         19,203  

Non-core - acquired and in development 1

    108       61       170       —         —         —         339  
                                                       

Total

    3,537       8,538       2,776       2,291       2,400       —         19,542  

Net Operating Income (NOI)

             

Core Portfolio

    5,001       17,055       5,937       7,773       7,582       —         43,348  

Non-core - acquired and in development 1

    (108 )     115       358       —         —         —         365  
                                                       

Total

  $ 4,893     $ 17,170     $ 6,295     $ 7,773     $ 7,582     $ —       $ 43,713  
                                                       

Core Portfolio NOI GAAP Basis (from above)

  $ 5,001     $ 17,055     $ 5,937     $ 7,773     $ 7,582     $ —       $ 43,348  

Straight-line revenue, net for core properties

    (7 )     (470 )     (208 )     (151 )     (168 )     —         (1,004 )

FAS 141 Min Rent

    —         (99 )     (103 )     (142 )     56       —         (288 )

Amortization of lease intangibles for core properties

    1       4       —         3       4       —         12  
                                                       

Core portfolio NOI, Cash Basis

  $ 4,995     $ 16,490     $ 5,626     $ 7,483     $ 7,474     $ —       $ 42,068  
                                                       

Reconciliation of NOI to Net Income

             

Total NOI

  $ 4,893     $ 17,170     $ 6,295     $ 7,773     $ 7,582     $ —       $ 43,713  

Other income

    —         —         —         —         —         420       420  

Other income from life insurance proceeds

    —         —         —         —         —         —         —    

Interest expense

    (913 )     (862 )     (1,172 )     (339 )     (250 )     (11,762 )     (15,298 )

Depreciation and amortization

    (1,691 )     (7,344 )     (2,806 )     (1,783 )     (2,896 )     (112 )     (16,632 )

General and administrative

    —         —         —         —         —         (5,367 )     (5,367 )

Discontinued Operations2

    —         1,016       —         —         485       —         1,501  

Other income from life insurance proceeds

    —         —         —         —         —         —         —    
                                                       

Net Income

  $ 2,289     $ 9,980     $ 2,317     $ 5,651     $ 4,921     $ (16,821 )   $ 8,337  
                                                       

 

1

Non-core acquired and in development properties were:

2007 in development - Bennett Park, Clayborne Apartments and Dulles Station.

2007 acquisitions - 270 Technology Park, Monument II, 2440 M Street, Woodholme Medical Office Building, Woodholme Center, Ashburn Farm Office Park, CentreMed I & II, and 2000 M Street.

 

2

Discontinued operations include: Sold Properties - Maryland Trade Center I and II, Sullyfield Center and The Earhart Building.

 

15


Table of Contents

Core Portfolio & Overall Economic Occupancy Levels by Sector

Q2 2008 vs. Q2 2007

GAAP Basis

 

     Core Portfolio     All Properties  

Sector

   2nd QTR 2008     2nd QTR 2007     2nd QTR 2008     2nd QTR 2007  

Multifamily

   93.3 %   90.8 %   81.0 %   90.8 %

Office Buildings

   94.8 %   95.1 %   94.1 %   95.0 %

Medical Office Buildings

   97.6 %   96.2 %   97.2 %   96.3 %

Retail Centers

   95.1 %   95.0 %   95.1 %   95.0 %

Industrial / Flex Properties

   93.4 %   94.9 %   92.8 %   94.0 %
                        

Overall Portfolio

   94.8 %   94.5 %   92.3 %   94.4 %

LOGO

 

16


Table of Contents

Commercial Leasing Summary

Three and Six months ended 6/30/08

 

     2nd Quarter 2008     Year-to-Date  

Gross Leasing Square Footage

    

Office Buildings

     167,751       318,114  

Medical Office Buildings

     47,729       60,441  

Retail Centers

     59,168       76,569  

Industrial Centers

     198,561       287,647  
                

Total

     473,209       742,771  
                

Weighted Average Term (yrs)

    

Office Buildings

     4.1       4.5  

Medical Office Buildings

     5.8       5.7  

Retail Centers

     7.0       6.5  

Industrial Centers

     4.2       4.3  
                

Total

     4.7       4.7  
                
     GAAP     CASH     GAAP     CASH  

Rental Rate Increases:

        

Rate on expiring leases

        

Office Buildings

   $ 25.08     $ 26.32     $ 28.45     $ 29.55  

Medical Office Buildings

     30.21       32.80       30.03       32.23  

Retail Centers

     20.01       21.13       20.61       21.85  

Industrial Centers

     8.67       8.86       10.79       11.05  
                                

Total

   $ 18.08     $ 19.00     $ 20.93     $ 21.81  
                                

Rate on new and renewal leases

        

Office Buildings

   $ 28.67     $ 27.48     $ 33.10     $ 31.64  

Medical Office Buildings

     38.72       36.18       37.84       35.39  

Retail Centers

     25.68       23.38       26.15       23.96  

Industrial Centers

     9.65       9.14       11.86       11.17  
                                

Total

   $ 21.33     $ 20.15     $ 24.54     $ 23.23  
                                

Percentage Increase

        

Office Buildings

     14.30 %     4.42 %     16.33 %     7.10 %

Medical Office Buildings

     28.19 %     10.32 %     26.03 %     9.78 %

Retail Centers

     28.33 %     10.65 %     26.84 %     9.70 %

Industrial Centers

     11.26 %     3.15 %     9.92 %     1.12 %
                                

Total

     17.97 %     6.07 %     17.25 %     6.52 %
                                

 

17


Table of Contents

Commercial Leasing Summary

Continued from previous page

Three and Six months ended 6/30/08

 

     2nd Quarter 2008    Year-to-Date
     Total Dollars    Dollars per
Square Foot
   Total Dollars    Dollars per
Square Foot

Tenant Improvements

           

Office Buildings

   $ 1,053,486    $ 6.28    $ 2,230,365    $ 7.01

Medical Office Buildings

     871,444      18.26      979,239      16.20

Retail Centers

     15,500      0.26      15,500      0.20

Industrial Centers

     154,800      0.78      482,675      1.68
                           

Subtotal

   $ 2,095,230    $ 4.43    $ 3,707,779    $ 4.99
                           
     Total Dollars    Dollars per
Square Foot
   Total Dollars    Dollars per
Square Foot

Leasing Costs

           

Office Buildings

   $ 766,730    $ 4.57    $ 1,844,326    $ 5.80

Medical Office Buildings

     405,958      8.51      457,340      7.57

Retail Centers

     177,167      2.99      202,317      2.64

Industrial Centers

     379,320      1.91      546,600      1.90
                           

Subtotal

   $ 1,729,175    $ 3.65    $ 3,050,583    $ 4.11
                           
     Total Dollars    Dollars per
Square Foot
   Total Dollars    Dollars per
Square Foot

Tenant Improvements and Leasing Costs

           

Office Buildings

   $ 1,820,216    $ 10.85    $ 4,074,691    $ 12.81

Medical Office Buildings

     1,277,402      26.76      1,436,579      23.77

Retail Centers

     192,667      3.26      217,817      2.84

Industrial Centers

     534,120      2.69      1,029,275      3.58
                           

Total

   $ 3,824,405    $ 8.08    $ 6,758,362    $ 9.10
                           

 

18


Table of Contents

10 Largest Tenants - Based on Annualized Rent

June 30, 2008

 

Tenant

   Number of
Buildings
   Weighted
Average
Remaining
Lease Term
in Months
   Percentage
of Aggregate
Portfolio
Annualized
Rent
    Aggregate
Rentable
Square Feet
   Percentage
of Aggregate
Occupied
Square
Feet
 

World Bank

   1    41    4.42 %   210,354    2.17 %

Sunrise Assisted Living, Inc.

   1    63    2.57 %   184,202    1.90 %

General Services Administration

   8    20    2.04 %   256,038    2.64 %

URS Corporation

   1    58    1.42 %   97,208    1.00 %

INOVA Health System Hospital

   6    33    1.38 %   82,193    0.85 %

Lafarge North America, Inc.

   1    25    1.35 %   80,610    0.83 %

George Washington University

   2    92    1.18 %   77,538    0.80 %

IQ Solutions, Inc.

   1    35    1.02 %   57,452    0.59 %

Science Applications Int’l Corporation

   1    60    0.96 %   80,561    0.83 %

Sun Microsystems, Inc.

   1    42    0.94 %   65,443    0.67 %
                         

Total/Weighted Average

      44    17.28 %   1,191,599    12.28 %
                         

 

19


Table of Contents

Industry Diversification

June 30, 2008

 

Industry Classification (NAICS)

   Annualized
Base Rental
Revenue
   Percentage
of Aggregate
Annualized
Rent
    Aggregate
Rentable
Square Feet
   Percentage
of Aggregate
Square
Feet
 

Professional, Scientific and Technical Services

   $ 45,292,161    22.51 %   1,904,377    19.64 %

Ambulatory Health Care Services

     38,348,426    19.06 %   1,312,968    13.54 %

Credit Intermediation and Related Activities

     15,336,976    7.62 %   425,367    4.39 %

Executive, Legislative & Other General Government

     8,361,882    4.16 %   423,309    4.37 %

Religious, Grantmaking, Civic, Professional

     6,122,311    3.04 %   198,850    2.05 %

Nursing and Residential Care Facilities

     5,720,577    2.84 %   209,671    2.16 %

Food Services and Drinking Places

     5,509,807    2.74 %   219,267    2.26 %

Educational Services

     5,449,240    2.71 %   215,932    2.23 %

Administrative and Support Services

     5,411,670    2.69 %   380,279    3.92 %

Food and Beverage Stores

     4,070,248    2.02 %   254,796    2.63 %

Miscellaneous Store Retailers

     3,599,474    1.79 %   264,199    2.73 %

Merchant Wholesalers-Durable Goods

     3,559,757    1.77 %   376,104    3.88 %

Furniture and Home Furnishing Stores

     3,529,257    1.75 %   226,581    2.34 %

Specialty Trade Contractors

     3,465,049    1.72 %   378,951    3.91 %

Nonmetallic Mineral Product Manufacturing

     3,082,484    1.53 %   119,474    1.23 %

Broadcasting (except Internet)

     3,005,968    1.49 %   87,939    0.91 %

Personal and Laundry Services

     2,837,818    1.41 %   130,697    1.35 %

Health & Personal Care Services

     2,288,278    1.14 %   79,701    0.82 %

Clothing & Clothing Accessories Stores

     2,286,345    1.14 %   143,648    1.48 %

Real Estate

     2,199,898    1.09 %   84,424    0.87 %

Merchant Wholesalers-Non Durable Goods

     2,020,207    1.00 %   221,355    2.28 %

Amusement, Gambling and Recreation industries

     1,951,127    0.97 %   142,780    1.47 %

Miscellaneous Manufacturing

     1,868,793    0.93 %   196,837    2.03 %

Hospitals

     1,843,305    0.92 %   60,457    0.62 %

Construction of Buildings

     1,662,546    0.83 %   111,142    1.15 %

Sporting Goods/Books/Hobby/Music Stores

     1,633,033    0.81 %   122,058    1.26 %

Insurance Carriers and Related Activities

     1,544,289    0.77 %   71,305    0.74 %

General Merchandise Stores

     1,514,754    0.75 %   216,330    2.23 %

Telecommunications

     1,298,165    0.65 %   48,757    0.50 %

Other

     16,386,146    8.15 %   1,068,515    11.01 %
                        

Total

   $ 201,199,991    100.00 %   9,696,070    100.00 %
                        

 

20


Table of Contents

Lease Expirations

June 30, 2008

 

Year

   Number of
Leases
   Rentable
Square Feet
   Percent of
Rentable
Square Feet
    Annualized
Rent *
   Average
Rental
Rate
   Percent of
Annualized
Rent *
 

Office:

                

2008

   44    142,791    4.17 %   $ 4,013,881    $ 28.11    4.03 %

2009

   109    427,954    12.51 %     12,088,158      28.25    12.13 %

2010

   108    780,043    22.80 %     23,730,668      30.42    23.82 %

2011

   90    545,895    15.96 %     16,887,014      30.93    16.95 %

2012

   50    316,184    9.24 %     8,886,923      28.11    8.92 %

2013 and thereafter

   109    1,208,681    35.32 %     34,023,157      28.15    34.15 %
                                    
   510    3,421,548    100.00 %   $ 99,629,801    $ 29.12    100.00 %
                                    

Medical Office:

                

2008

   21    48,662    4.22 %   $ 1,538,173    $ 31.61    4.26 %

2009

   42    102,332    8.87 %     3,114,168      30.43    8.62 %

2010

   54    185,224    16.06 %     5,943,127      32.09    16.45 %

2011

   60    198,395    17.20 %     6,296,199      31.74    17.42 %

2012

   41    141,375    12.26 %     4,666,844      33.01    12.91 %

2013 and thereafter

   104    477,336    41.39 %     14,579,274      30.54    40.34 %
                                    
   322    1,153,324    100.00 %   $ 36,137,785    $ 31.33    100.00 %
                                    

Retail:

                

2008

   17    130,160    7.01 %   $ 936,833    $ 7.20    2.90 %

2009

   48    158,440    8.53 %     3,410,312      21.52    10.57 %

2010

   53    309,244    16.65 %     5,429,445      17.56    16.83 %

2011

   31    156,346    8.42 %     2,819,384      18.03    8.74 %

2012

   39    168,906    9.10 %     3,291,940      19.49    10.20 %

2013 and thereafter

   100    933,927    50.29 %     16,375,149      17.53    50.76 %
                                    
   288    1,857,023    100.00 %   $ 32,263,063    $ 17.37    100.00 %
                                    

Industrial:

                

2008

   35    277,291    8.50 %   $ 2,955,133    $ 10.66    8.91 %

2009

   52    530,040    16.24 %     4,878,129      9.20    14.71 %

2010

   53    382,795    11.73 %     4,396,002      11.48    13.25 %

2011

   46    483,979    14.83 %     4,029,321      8.33    12.15 %

2012

   27    424,661    13.01 %     4,460,304      10.50    13.45 %

2013 and thereafter

   54    1,165,409    35.69 %     12,450,453      10.68    37.53 %
                                    
   267    3,264,175    100.00 %   $ 33,169,342    $ 10.16    100.00 %
                                    

Total:

                

2008

   117    598,904    6.18 %   $ 9,444,020    $ 15.77    4.69 %

2009

   251    1,218,766    12.57 %     23,490,767      19.27    11.68 %

2010

   268    1,657,306    17.09 %     39,499,242      23.83    19.63 %

2011

   227    1,384,615    14.28 %     30,031,918      21.69    14.93 %

2012

   157    1,051,126    10.84 %     21,306,011      20.27    10.59 %

2013 and thereafter

   367    3,785,353    39.04 %     77,428,033      20.45    38.48 %
                                    
   1,387    9,696,070    100.00 %   $ 201,199,991    $ 20.75    100.00 %
                                    

 

* Annualized Rent is as of June 30, 2008 rental revenue (cash basis) multiplied by 12.

 

21


Table of Contents

2008 Acquisition and Disposition Summary

as of June 30, 2008

($’s in thousands)

Acquisition Summary

 

          Acquisition
Date
   Square
Feet
   Leased
Percentage at
Acquisition
    June 30,
2008
Leased
Percentage
    Investment

6100 Columbia Park Road

   Landover, MD    February 22, 2008    150,000    78 %     100 %   $ 11,200

Sterling Medical Office Building1

   Sterling, VA    May 21, 2008    36,000    100 %     100 %   $ 6,500
                     

Total

         186,000        $ 17,700
                     
Disposition Summary                
          Disposition
Date
   Property
Type
   Square
Feet
    Sale Price     GAAP Gain

Sullyfield Center/The Earhart Building

   Chantilly, VA    June 6, 2008    Industrial    336,000     $ 41,100     $ 15,300

 

1

The sellers of Sterling Medical Office Building agreed to lease 37% of the building’s space for a period of 12-18 months.

 

22


Table of Contents

Schedule of Properties

June 30, 2008

 

PROPERTIES

  

LOCATION

   YEAR ACQUIRED    YEAR CONSTRUCTED    NET RENTABLE
SQUARE FEET*

Office Buildings

           

1901 Pennsylvania Avenue

   Washington, DC    1977    1960    97,000

51 Monroe Street

   Rockville, MD    1979    1975    210,000

515 King Street

   Alexandria, VA    1992    1966    76,000

The Lexington Building

   Rockville, MD    1993    1970    46,000

The Saratoga Building

   Rockville, MD    1993    1977    58,000

Brandywine Center

   Rockville, MD    1993    1969    35,000

6110 Executive Boulevard

   Rockville, MD    1995    1971    198,000

1220 19th Street

   Washington, DC    1995    1976    102,000

1600 Wilson Boulevard

   Arlington, VA    1997    1973    166,000

7900 Westpark Drive

   McLean, VA    1997    1972/1986/1999    523,000

600 Jefferson Plaza

   Rockville, MD    1999    1985    112,000

1700 Research Boulevard

   Rockville, MD    1999    1982    101,000

Parklawn Plaza

   Rockville, MD    1999    1986    40,000

Wayne Plaza

   Silver Spring, MD    2000    1970    91,000

Courthouse Square

   Alexandria, VA    2000    1979    113,000

One Central Plaza

   Rockville, MD    2001    1974    267,000

The Atrium Building

   Rockville, MD    2002    1980    80,000

1776 G Street

   Washington, DC    2003    1979    263,000

Albemarle Point

   Chantilly, VA    2005    2001    89,000

6565 Arlington Blvd

   Falls Church, VA    2006    1967/1998    140,000

West Gude Drive

   Rockville, MD    2006    1984/1986/1988    289,000

The Ridges

   Gaithersburg, MD    2006    1990    104,000

The Crescent

   Gaithersburg, MD    2006    1989    49,000

Monument II

   Herndon, VA    2007    2000    205,000

Woodholme Center

   Pikesville, MD    2007    1989    73,000

2000 M Street

   Washington, DC    2007    1971    227,000
             

Subtotal

            3,754,000
             

Medical Office Buildings

           

Woodburn Medical Park I

   Annandale, VA    1998    1984    71,000

Woodburn Medical Park II

   Annandale, VA    1998    1988    96,000

Prosperity Medical Center I

   Merrifield, VA    2003    2000    92,000

Prosperity Medical Center II

   Merrifield, VA    2003    2001    88,000

Prosperity Medical Center III

   Merrifield, VA    2003    2002    75,000

Shady Grove Medical Village II

   Rockville, MD    2004    1999    66,000

8301 Arlington Boulevard

   Fairfax, VA    2004    1965    49,000

Alexandria Professional Center

   Alexandria, VA    2006    1968    113,000

9707 Medical Center Drive

   Rockville, MD    2006    1994    38,000

15001 Shady Grove Road

   Rockville, MD    2006    1999    51,000

Plumtree Medical Center

   Bel Air, MD    2006    1991    33,000

15005 Shady Grove Road

   Rockville, MD    2006    2002    52,000

2440 M Street

   Washington, DC    2007    1986/2006    110,000

Woodholme Medical Office Building

   Pikesville, MD    2007    1996    125,000

Ashburn Office Park

   Ashburn, VA    2007    1998/2000/2002    75,000

CentreMed I & II

   Centreville, VA    2007    1998    52,000

Sterling Medical Office Building

   Sterling, VA    2008    1986/2000    36,000
             

Subtotal

            1,222,000
             

Retail Centers

           

Takoma Park

   Takoma Park, MD    1963    1962    51,000

Westminster

   Westminster, MD    1972    1969    151,000

Concord Centre

   Springfield, VA    1973    1960    76,000

Wheaton Park

   Wheaton, MD    1977    1967    72,000

Bradlee

   Alexandria, VA    1984    1955    168,000

Chevy Chase Metro Plaza

   Washington, DC    1985    1975    49,000

Montgomery Village Center

   Gaithersburg, MD    1992    1969    198,000

Shoppes of Foxchase1

   Alexandria, VA    1994    1960    134,000

Frederick County Square

   Frederick, MD    1995    1973    227,000

800 S. Washington Street

   Alexandria, VA    1998/2003    1955/1959    44,000

Centre at Hagerstown

   Hagerstown, MD    2002    2000    332,000

Frederick Crossing

   Frederick, MD    2005    1999/2003    295,000

Randolph Shopping Center

   Rockville, MD    2006    1972    82,000

Montrose Shopping Center

   Rockville, MD    2006    1970    143,000
             

Subtotal

            2,022,000
             

 

1

Development on approximately 60,000 square feet of the center was completed in December 2006.

 

23


Table of Contents

Schedule of Properties (Cont.)

June 30, 2008

 

PROPERTIES

  

LOCATION

   YEAR ACQUIRED    YEAR CONSTRUCTED   NET RENTABLE
SQUARE FEET*

Multifamily Buildings * / # units

          

3801 Connecticut Avenue / 307

   Washington, DC    1963    1951   179,000

Roosevelt Towers / 191

   Falls Church, VA    1965    1964   170,000

Country Club Towers / 227

   Arlington, VA    1969    1965   163,000

Park Adams / 200

   Arlington, VA    1969    1959   173,000

Munson Hill Towers / 279

   Falls Church, VA    1970    1963   259,000

The Ashby at McLean / 253

   McLean, VA    1996    1982   252,000

Walker House Apartments / 212

   Gaithersburg, MD    1996    1971/20032   159,000

Bethesda Hill Apartments / 195

   Bethesda, MD    1997    1986   226,000

Avondale / 237

   Laurel, MD    1999    1987   170,000

Bennett Park / 224

   Arlington, VA    2007    2007   268,000

Clayborne / 74

   Alexandria, VA    2008    2008   87,000
            

Subtotal (2,399 units)

           2,106,000
            

Industrial Distribution / Flex Properties

          

Fullerton Business Center

   Springfield, VA    1985    1980   104,000

Charleston Business Center

   Rockville, MD    1993    1973   85,000

Tech 100 Industrial Park

   Elkridge, MD    1995    1990   166,000

Crossroads Distribution Center

   Elkridge, MD    1995    1987   85,000

The Alban Business Center

   Springfield, VA    1996    1981/1982   87,000

Ammendale Technology Park I

   Beltsville, MD    1997    1985   167,000

Ammendale Technology Park II

   Beltsville, MD    1997    1986   107,000

Pickett Industrial Park

   Alexandria, VA    1997    1973   246,000

Northern Virginia Industrial Park

   Lorton, VA    1998    1968/1991   787,000

8900 Telegraph Road

   Lorton, VA    1998    1985   32,000

Dulles South IV

   Chantilly, VA    1999    1988   83,000

Sully Square

   Chantilly, VA    1999    1986   95,000

Amvax

   Beltsville, MD    1999    1986   31,000

Fullerton Industrial Center

   Springfield, VA    2003    1980   137,000

8880 Gorman Road

   Laurel, MD    2004    2000   141,000

Dulles Business Park Portfolio

   Chantilly, VA    2004/2005    1999-2005   324,000

Albemarle Point

   Chantilly, VA    2005    2001/2003/2005   207,000

Hampton Overlook

   Capital Heights, MD    2006    1989   134,000

Hampton South

   Capital Heights, MD    2006    1989/2005   168,000

9950 Business Parkway

   Lanham, MD    2006    2005   102,000

270 Technology Park

   Frederick, MD    2007    1986-1987   157,000

6100 Columbia Park Road

   Landover, MD    2008    1969   150,000
            

Subtotal

           3,595,000
            

TOTAL

           12,699,000
            

 

* Multifamily buildings are presented in gross square feet.

 

2

A 16 unit addition referred to as The Gardens at Walker House was completed in October 2003.

 

24


Table of Contents

Supplemental Definitions

June 30, 2008

Annualized base rent (ABR) is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.

Debt to total market capitalization is total debt from the balance sheet divided by the sum of total debt from the balance sheet plus the market value of shares outstanding at the end of the period.

EBITDA (a non-GAAP measure) is earnings before interest, taxes, depreciation and amortization.

Ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized.

Debt service coverage ratio is computed by dividing earnings before interest income and expense, depreciation, amortization and gain on sale of real estate by interest expense and principal amortization.

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. FFO is a non-GAAP measure.

Funds Available for Distribution (FAD), a non-GAAP measure, is calculated by subtracting from FFO recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream and straight line rents, then adding non-real estate depreciation and amortization and adding or subtracting amortization of lease intangibles, as appropriate.

Recurring capital expenditures represents non-accretive building improvements and leasing costs required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to “operating standard.

Rent increases on renewals and rollovers are calculated as the difference, weighted by square feet, of the net ABR due the first month after a term commencement date and the net ABR due the last month prior to the termination date of the former tenant’s term.

Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods.

Core portfolio net operating income (NOI) growth is the change in the NOI of the core portfolio properties from the prior reporting period to the current reporting period.

 

25