SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A1

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) December 2, 2008

 

 

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

Washington Real Estate Investment Trust (“WRIT”), in order to provide the financial statements required to be included in the Current Report on Form 8-K, filed on December 3, 2008, 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. Kenmore Apartments - Audited Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2007 and unaudited Historical Summary of Gross Income and Direct Operating Expenses for the eight months ended August 31, 2008.

 

  2. 2445 M Street - Audited Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2007 and unaudited Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2008.

In acquiring the properties listed above, 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 reflecting 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 September 30, 2008.

 

  2. WRIT Unaudited Pro Forma Condensed Consolidated Statements of Operation for the year ended December 31, 2007 and the nine months ended September 30, 2008.

 

  (c) Exhibits

 

  23. Consent of Argy, Wiltse & Robinson, P.C.


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
  Executive Vice President Accounting,
  Administration and Corporate Secretary

February 17, 2009

          (Date)


LOGO

INDEPENDENT AUDITOR’S REPORT

To the Board of Trustees

Washington Real Estate Investment Trust

Rockville, Maryland

We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses of Kenmore Apartments (Historical Summary) for the year ended December 31, 2007. 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 Kenmore Apartments’ 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 Kenmore Apartments for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the Historical Summary for the year ended December 31, 2007. The Historical Summary of Gross Income and Direct Operating Expenses for the eight months ended August 31, 2008, is presented for the purposes of additional analysis and is not a required part of the Historical Summary for the year ended December 31, 2007. Such information has not been subjected to the auditing procedures applied in the audit of the Historical Summary for the year ended December 31, 2007, and, accordingly, we express no opinion on it.

 

LOGO
McLean, Virginia
February 10, 2009

LOGO


KENMORE APARTMENTS

HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2007 AND FOR THE

EIGHT MONTHS ENDED AUGUST 31, 2008 (UNAUDITED)

 

     Year Ended
December 31,
2007
   Eight
Months Ended
August 31,
2008
(Unaudited)

Gross income

     

Base rents

   $ 5,413,487    $ 3,693,952

Parking, garages and storage revenue

     233,945      164,639

Other revenue

     78,639      27,062
             

Total gross income

     5,726,071      3,885,653
             

Direct operating expenses

     

Utilities

     700,517      537,284

Real estate taxes

     366,505      316,743

Repairs, maintenance and supplies

     341,970      213,612

Insurance

     69,934      51,968

Contract services

     19,660      9,768

Other expenses

     2,172      1,284
             

Total direct operating expenses

     1,500,758      1,130,659
             

Income in excess of direct operating expenses

   $ 4,225,313    $ 2,754,994
             

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


KENMORE APARTMENTS

NOTES TO THE HISTORICAL SUMMARY OF GROSS INCOME AND

DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2007

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Kenmore Apartments is a 374-unit, 270,000 square foot apartment building with 145 parking spaces in Northwest Washington, D.C. The operations of Kenmore Apartments consist of leasing apartments primarily to private individuals.

Revenue recognition

Residential and storage space within Kenmore Apartments (the Property) is leased under operating leases with terms not to exceed one year. The Property recognizes rental income and rental abatements under the leases when earned on a straight-line basis in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases. Recognition of rental income commences when control of the apartment has been given to the tenant.

NOTE 2 - BASIS OF PRESENTATION

Washington Real Estate Investment Trust purchased Kenmore Apartments in September 2008. 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 Kenmore Apartments, exclusive of the following expenses which may not be comparable to the proposed future operations:

 

  (a) Interest expense on existing mortgages and borrowings

 

  (b) Depreciation of property and equipment

 

  (c) Management and leasing fees

 

  (d) Certain corporate and administrative expenses

 

  (e) Provision 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 expired at various dates through 2008. The following is a schedule of future minimum rents receivable on noncancelable operating leases in effect as of December 31, 2007:

 

Year ended December 31,

  

2008

   $ 3,264,000
      


NOTE 5 - INTERIM UNAUDITED FINANCIAL INFORMATION

The Historical Summary for the eight months ended August 31, 2008 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.


LOGO

INDEPENDENT AUDITOR’S REPORT

To the Board of Trustees

Washington Real Estate Investment Trust

Rockville, Maryland

We have audited the accompanying Historical Summary of Gross Income and Direct Operating Expenses of 2445 M Street (Historical Summary) for the year ended December 31, 2007. 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 2445 M Street’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 2445 M Street for the year ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the Historical Summary for the year ended December 31, 2007. The Historical Summary of Gross Income and Direct Operating Expenses for the nine months ended September 30, 2008, is presented for the purposes of additional analysis and is not a required part of the Historical Summary for the year ended December 31, 2007. Such information has not been subjected to the auditing procedures applied in the audit of the Historical Summary for the year ended December 31, 2007, and, accordingly, we express no opinion on it.

LOGO

McLean, Virginia

February 10, 2009

LOGO


2445 M STREET

HISTORICAL SUMMARY OF GROSS INCOME AND DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2007 AND FOR THE

NINE MONTHS ENDED SEPTEMBER 30, 2008 (UNAUDITED)

 

     Year Ended
December 31,
2007
   Nine Months
Ended
September 30,
2008
(Unaudited)

Gross income

     

Base rents

   $ 8,583,950    $ 7,651,606

Lease termination income

     916,668      1,532,769

Parking revenue

     533,383      360,780

Other revenue

     499,954      540,033

Expense recoveries

     5,174,417      4,533,727
             

Total gross income

     15,708,372      14,618,915
             

Direct operating expenses

     

Real estate taxes

     2,508,085      1,982,534

Utilities

     1,220,412      924,003

Contract services

     813,205      585,426

Repairs, maintenance and supplies

     251,814      161,264

Insurance

     298,924      172,390

Other expenses

     250,907      180,104
             

Total direct operating expenses

     5,343,347      4,005,721
             

Income in excess of direct operating expenses

   $ 10,365,025    $ 10,613,194
             

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


2445 M STREET

NOTES TO THE HISTORICAL SUMMARY OF GROSS INCOME AND

DIRECT OPERATING EXPENSES

YEAR ENDED DECEMBER 31, 2007

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Nature of business

2445 M Street is a Class A, 290,000 net rentable square foot, office building with a two-level parking garage in Northwest Washington, D.C. The operations of 2445 M Street consist of leasing offices primarily to four tenants.

Revenue recognition

Office and storage space within 2445 M Street (the Property) is leased under operating leases with average terms of 12 to 15 years. The Property recognizes rental income and rental abatements from the leases when earned on a straight-line basis in accordance with Statement of Financial Accounting Standards No. 13, Accounting for Leases. Recognition of rental income commences when control of the facility has been given to the tenant. The Property recognizes lease termination income payable in accordance with the terms of a promissory note entered into with a former tenant, as cash payments are received.

NOTE 2 - BASIS OF PRESENTATION

Washington Real Estate Investment Trust purchased 2445 M Street in December 2008. 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 2445 M Street, 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 2019. The following is a schedule of approximate future minimum rents receivable on noncancelable operating leases in effect as of December 31, 2007:

 

Year ending December 31,

  

2008

   $ 8,734,000

2009

     9,824,000

2010

     10,040,000

2011

     10,354,000

2012

     10,627,000

Thereafter

     63,301,000
      
   $ 112,880,000
      

NOTE 5 - INTERIM UNAUDITED FINANCIAL INFORMATION

The Historical Summary for the nine months ended September 30, 2008 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 September 30, 2008 presents consolidated financial information as if the acquisitions had taken place by September 30, 2008. The pro forma statements of operations for the year ended December 31, 2007, and the nine months ended September 30, 2008, 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 pro forma balance sheet and pro forma statements of operations illustrate the operating results of Kenmore Apartments and 2445 M Street, which represent the substantial majority of the properties previously acquired during 2008 necessary to develop the pro forma results for WRIT. Explanations or details of the pro forma adjustments are in the notes to each of the financial statements.

WRIT purchased Kenmore Apartments and 2445 M Street on the following dates:

 

Acquisition

Date

 

Property

Name

   
September 3, 2008   Kenmore Apartments  
December 2, 2008   2445 M Street  

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 pro forma results of operations for the period ended December 31, 2007 are not necessarily indicative of the operating results for the period.

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 December 3, 2008, announcing the acquisitions; the consolidated financial statements and notes thereto included in WRIT’s Annual Report on Form 10-K for the year ended December 31, 2007; 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

September 30, 2008

(In thousands)

 

     WRIT     2445 M
Street
    PRO
FORMA
 

Assets

      

Land

   $ 368,371     $ 46,887 (1)   $ 415,258  

Income producing property

     1,751,057       106,647 (1)     1,857,704  
                        
     2,119,428       153,534       2,272,962  

Accumulated depreciation and amortization

     (382,261 )     —         (382,261 )
                        

Net income producing property

     1,737,167       153,534       1,890,701  

Development in progress

     23,469       —         23,469  
                        

Total real estate held for investment, net

     1,760,636       153,534       1,914,170  

Investment in real estate held for sale, net

     12,546       —         12,546  

Cash and cash equivalents

     7,813       (11,020 )(2)     (3,207 )

Restricted cash

     47,074       (278 )(2)     58,228  
       11,432 (2)  

Rents and other receivables, net of allowance for doubtful accounts

     38,121       —         38,121  

Prepaid expenses and other assets

     104,291       7,300 (1)     129,346  
       4,086 (1)  
       11,742 (1)  
       1,783 (1)  
       144 (2)  

Other assets related to properties held for sale

     211       —         211  
                        

Total assets

   $ 1,970,692     $ 178,723     $ 2,149,415  
                        

Liabilities

      

Notes payable

   $ 918,873     $ —       $ 918,873  

Mortgage notes payable

     330,569       91,726 (2)     422,295  

Lines of credit

     47,000       78,000 (2)     125,000  

Accounts payable and other liabilities

     65,724       6,200 (1)     71,924  
       2,797 (2)     2,797  

Advance rents

     9,291       —         9,291  

Tenant security deposits

     10,209       —         10,209  

Other liabilities related to properties held for sale

     137       —         137  
                        

Total liabilities

     1,381,803       178,723       1,560,526  

Minority interest

     3,790         3,790  

Shareholders’ Equity

      

Shares of beneficial interest, $0.01 par value

     508       —         508  

Additional paid-in capital

     696,885       —         696,885  

Distributions in excess of net income

     (112,570 )     —         (112,570 )

Accumulated other comprehensive income

     276       —         276  
                        

Total shareholders’ equity

     585,099       —         585,099  
                        

Total liabilities and shareholders’ equity

   $ 1,970,692     $ 178,723     $ 2,149,415  
                        


NOTES TO PRO FORMA BALANCE SHEET

Note 1: WRIT accounted for the acquisition 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, absorption costs, and net lease intangible assets/liabilities) based on their fair values, in accordance with SFAS No. 141, “Business Combinations.”

 

     2445 M
Street
(In thousands)
 

Contract purchase price

   $ 181,413  

Acquisition costs

     972  
        

Total purchase price

   $ 182,385  
        

Amounts allocated to investment in real estate:

  

Amount allocated to building

   $ 96,772  

Amount allocated to land

     46,887  

Amount allocated to tenant origination costs

     9,875  
        
   $ 153,534  

Amounts allocated to other assets and liabilities:

  

Amount allocated to notes receivable

   $ 7,300  

Amount allocated to discount on assumed mortgage

     10,140  

Amount allocated to leasing commissions

     4,086  

Amount allocated to absorption costs

     11,742  

Amount allocated to net lease intangible

     1,783  

Amount allocated to net lease intangible liability

     (6,200 )
        
   $ 28,851  
        

Total

   $ 182,385  
        


NOTES TO PRO FORMA BALANCE SHEET

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

 

     2445 M
Street
(In thousands)
 

Funding of purchase price:

  

Lines of credit

   $ (78,000 )

Cash from recent equity offering

     (11,020 )

Cash deposits held in escrow

     (278 )
        
     (89,298 )

Other assets and liabilities assumed:

  

Escrow accounts

     11,432  

Prepaid expenses and other assets

     144  

Mortgage note payable (1)

     (101,866 )

Accounts payable and other liabilities

     (2,797 )
        
   $ (182,385 )
        
 
 

(1)

The assumed mortgage note payable has a discount of $10,140, giving the liability a carrying value of $91,726.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In thousands, except per share amounts)

 

     WRIT     Kenmore
Apartments (9)
    2445 M
Street
    Total All
Properties
    Pro
Forma
 

Revenue

          

Real estate rental revenue

   $ 209,227     $ 3,918     $ 14,619     $ 18,537     $ 227,764  
       515       297       812 (1),(8)     812  
         (728 )     (728 )(2),(8)     (728 )
         (1,533 )     (1,533 )(6),(8)     (1,533 )
                                        
     209,227       4,433       12,655       17,088       226,315  

Expenses

          

Real estate expenses

     69,101       1,140       4,006       5,146       74,247  
       502       197       699 (3),(8)     699  

Depreciation and amortization

     62,799       829       4,422       5,251 (4),(8)     68,050  

General and administrative

     8,971           —         8,971  
                                        
     140,871       2,471       8,625       11,096       151,967  

Other income (expense)

          

Interest expense

     (52,395 )     (1,245 )     (7,110 )     (8,355 )(5),(8)     (60,750 )

Other income

     796         716       716 (7),(8)     1,512  

Loss on extinguishment of debt

     (8,449 )         —         (8,449 )

Gain from non-disposal activities

     17           —         17  
                                        
     (60,031 )     (1,245 )     (6,394 )     (7,639 )     (67,670 )
                                        

Income from continuing operations

     8,325       717       (2,364 )     (1,647 )     6,678  

Discontinued operations

          

Gain on sale of real estate

     15,275             15,275  

Income from operations of properties held for sale

     1,999             1,999  
                                        

Net income

   $ 25,599     $ 717     $ (2,364 )   $ (1,647 )   $ 23,952  
                                        

Basic net income per share

          

Continuing operations

   $ 0.17           $ 0.14  

Discontinued operations

     0.36             0.36  
                      

Basic net income per share

   $ 0.53           $ 0.50  
                      

Diluted net income per share

          

Continuing operations

   $ 0.17           $ 0.14  

Discontinued operations

     0.36             0.36  
                      

Diluted net income per share

   $ 0.53           $ 0.50  
                      

Weighted average shares outstanding—basic

     48,057             48,057  

Weighted average shares outstanding—diluted

     48,298             48,298  


NOTES TO PRO FORMA STATEMENT OF OPERATIONS

 

 

(1) Represents amortization of the net intangible lease asset or liability based on the remaining life of the acquired leases.
(2) Represents straight-line rent 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, FAS 141 leasing commissions and FAS 141 absorption over the remaining life of the acquired leases.
(5) Represents interest expense on the mortgage assumed with the 2445 M Street acquisition ($4.3 million), amortization of the discount on the assumed mortgage ($0.9 million), and the lines of credit used to fund the acquisitions ($1.3 million and $1.9 million for Kenmore Apartments and 2445 M Street, respectively).
(6) Represents the reversal of lease termination income for 2445 M Street. In purchase accounting, we estimated the fair value of the note receivable and are recording the income as interest income over the term of the note (see Note 7).
(7) Represents interest income on the note receivable acquired with 2445 M Street—See Note 1 Balance Sheet.
(8) The table below illustrates the pro forma adjustments for each property (in thousands):

 

     Kenmore
Apartments
    2445 M
Street
    Total All
Properties
 

(1) Amortization of lease intangibles, net

   $ 515     $ 297     $ 812  

(2) Straight line rent adjustment

   $ —       $ (728 )   $ (728 )

(3) Property management costs

   $ 502     $ 197     $ 699  

(4) Depreciation and amortization

   $ 829     $ 4,422     $ 5,251  

(5) Interest expense

   $ (1,245 )   $ (7,110 )   $ (8,355 )

(6) Lease termination income reversal

   $ —       $ (1,533 )   $ (1,533 )

(7) Interest income

   $ —       $ 716     $ 716  

 

(9) Represents adjustments for 1/1/08 through the date of acquisition.


WASHINGTON REAL ESTATE INVESTMENT TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2007

(In thousands, except per share amounts)

 

     WRIT     Kenmore
Apartments
    2445 M
Street
    Total All
Properties
    Pro
Forma
 

Revenue

          

Real estate rental revenue

   $ 255,655     $ 5,726     $ 15,708     $ 21,434     $ 277,089  
       766       396       1,162 (1),(8)     1,162  
         (681 )     (681 )(2),(8)     (681 )
         (917 )     (917 )(6),(8)     (917 )
                                        
     255,655       6,492       14,506       20,998       276,653  

Expenses

          

Real estate expenses

     79,914       1,501       5,343       6,844       86,758  
       742       222       964 (3),(8)     964  

Depreciation and amortization

     69,775       2,288       5,896       8,184 (4),(8)     77,959  

General and administrative

     15,099           —         15,099  
                                        
     164,788       4,531       11,461       15,992       180,780  

Other income (expense)

          

Interest expense

     (61,906 )     (3,262 )     (11,365 )     (14,627 )(5),(8)     (76,533 )

Other income

     1,875         945       945 (7),(8)     2,820  

Gain from non-disposal activities

     1,303           —         1,303  
                                        
     (58,728 )     (3,262 )     (10,420 )     (13,682 )     (72,410 )
                                        

Income from continuing operations

     32,139       (1,301 )     (7,375 )     (8,676 )     23,463  

Discontinued operations

          

Income from operation of properties held for sale

     4,720             4,720  

Gain on sale of real estate

     25,022             25,022  
                                        

Net income

   $ 61,881     $ (1,301 )   $ (7,375 )   $ (8,676 )   $ 53,205  
                                        

Basic net income per share

          

Continuing operations

   $ 0.70           $ 0.51  

Discontinued operations

     0.65             0.65  
                      

Basic net income per share

   $ 1.35           $ 1.16  
                      

Diluted net income per share

          

Continuing operations

   $ 0.70           $ 0.51  

Discontinued operations

     0.64             0.64  
                      

Diluted net income per share

   $ 1.34           $ 1.15  
                      

Weighted average shares outstanding—basic

     45,911             45,911  

Weighted average shares outstanding—diluted

     46,115             46,115  


NOTES TO PRO FORMA STATEMENT OF OPERATIONS

 

 

(1) Represents amortization of the net intangible lease asset or liability based on the remaining life of the acquired leases.
(2) Represents straight-line rent 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, FAS 141 leasing commissions and FAS 141 absorption over the remaining life of the acquired leases.
(5) Represents interest expense on the mortgage assumed with the 2445 M Street acquisition ($5.7 million), amortization of the discount on the assumed mortgage ($1.3 million), and the lines of credit used to fund the acquisitions ($3.3 million and $4.4 million for Kenmore Apartments and 2445 M Street, respectively).
(6) Represents the reversal of lease termination income for 2445 M Street. In purchase accounting, we estimated the fair value of the note receivable and are recording the income as interest income over the term of the note (see Note 7).
(7) Represents interest income on the note receivable acquired with 2445 M Street—See Note 1 Balance Sheet.
(8) The table below illustrates the pro forma adjustments for each property (in thousands):

 

     Kenmore
Apartments
    2445 M
Street
    Total All
Properties
 

(1) Amortization of lease intangibles, net

   $ 766     $ 396     $ 1,162  

(2) Straight line rent adjustment

   $ —       $ (681 )   $ (681 )

(3) Property management costs

   $ 742     $ 222     $ 964  

(4) Depreciation and amortization

   $ 2,288     $ 5,896     $ 8,184  

(5) Interest expense

   $ (3,262 )   $ (11,365 )   $ (14,627 )

(6) Lease termination income reversal

   $ —       $ (917 )   $ (917 )

(7) Interest income

   $ —       $ 945     $ 945