Washington Real Estate Investment Trust ("Washington REIT” or the
“Company”) (NYSE: WRE), a leading owner and operator of commercial
and multifamily properties in the Washington, DC area, reported
financial and operating results today for the quarter and year
ended December 31, 2018:
Full-Year and Fourth Quarter 2018
Financial Results and Highlights
Net Income and NAREIT Funds from Operations
(FFO)(1)
- Reported net income attributable to
controlling interests of $25.6 million, or $0.32 per diluted share,
for the year, compared to $19.7 million, or $0.25 per diluted
share, in 2017
- Reported net income attributable to
controlling interests of $5.7 million, or $0.07 per diluted share,
for the quarter, compared to $2.3 million, or $0.03 per diluted
share, for fourth quarter 2017
- Reported NAREIT FFO of $146.2
million, or $1.84 per diluted share, for the year, compared to
$141.0 million, or $1.83 per diluted share, in 2017
- Reported NAREIT FFO of $36.8
million, or $0.46 per diluted share, for the quarter, compared to
$35.4 million, or $0.45 per diluted share, in fourth quarter
2017
Core FFO and Operational Performance:
- Reported Core FFO of $1.86 per
diluted share for the year, a $0.04 increase over Core FFO of $1.82
per diluted share in 2017
- Reported Core FFO of $0.46 per
diluted share for the quarter, a $0.02 increase over Core FFO of
$0.44 per diluted share in fourth quarter 2017
- Grew same-store(2) Net Operating
Income (NOI)(3) by 3.1% and cash NOI by 3.7% for the year
- Grew office same-store NOI by 4.5%
and cash NOI by 5.5% for the year
- Grew multifamily same-store NOI and
cash NOI by 3.3% for the year
- Grew retail same-store NOI by 0.7%
and cash NOI by 1.2% for the year
Other Financial Metrics:
- Ended the year with a net debt to
adjusted EBITDA(4) ratio of 6.2x
- Ended the year with a Core FAD(5)
payout ratio of 78.4%
"We delivered another year of solid operational
performance with healthy same-store NOI growth and recycled office
assets to further de-risk the portfolio while implementing a
differentiated leasing strategy branded Space+ to maximize
value-creation," said Paul T. McDermott, President and Chief
Executive Officer. "As a result, we have entered 2019 with a
higher-quality, better-located portfolio that is well-suited to
meet the fastest-growing segments of demand in the DC Metro region:
flexible space in office and value-oriented apartments in
multifamily. We are working hard to lease our well-positioned
commercial availabilities and to capitalize on demand
opportunities, including those emerging from Amazon-related growth,
with the goal of creating long-term value for our
shareholders."
Operating Results
The Company's overall portfolio NOI for the
fourth quarter was $54.6 million, compared to $51.9 million in the
same period one year ago and $53.9 million in the third quarter of
2018. The sequential increase in NOI was primarily due to lower
property operating expenses across the portfolio as well as higher
reimbursements and lease termination fees in office, partially
offset by higher real estate taxes across the portfolio.
Overall portfolio ending occupancy(6) at
year-end was 93.1%, compared to 91.8% at year-end 2017, driven by
occupancy gains across the portfolio.
Same-store portfolio NOI increased by 3.1% for
the full year and 4.5% for the fourth quarter on a year-over-year
basis. Same-store portfolio ending occupancy at year-end was 93.0%,
compared to 92.6% at year-end 2017.
Same-store portfolio by sector:
- Office: 43% of 2018 Same-Store NOI - Office
properties' same-store NOI increased by 4.5% and cash NOI increased
by 5.5% for the full year. Same-store NOI increased by 5.4% and
cash NOI increased by 7.0% for the fourth quarter compared to the
same period a year ago. The year-over-year increase in full-year
and fourth quarter office same-store NOI was primarily driven by
new lease commencements, annual rent increases and higher
recoveries, with these being partially offset by higher operating
expenses. Same-store ending occupancy decreased by 30 basis points
year-over-year and 40 basis points sequentially to 91.7% due to a
few anticipated tenant move-outs in the portfolio. The overall
office portfolio was 92.3% occupied and 93.6% leased at
year-end.
- Multifamily: 31% of 2018 Same-Store NOI -
Multifamily properties' same-store NOI and cash NOI increased by
3.3% for the full year. Same-store NOI increased by 4.2% and cash
NOI increased by 4.1% for the fourth quarter on a year-over-year
basis. Same-store ending occupancy on a unit basis decreased by 20
basis points year-over-year and 50 basis points sequentially to
94.8% as the Company focused on optimizing the portfolio's rental
income growth potential by focusing on rental rate growth. In the
fourth quarter, the overall multifamily portfolio achieved 240
basis points of year-over-year rental growth, with Class B average
monthly rent per unit growing by 260 basis points year-over-year.
The overall multifamily portfolio was 94.8% occupied and 96.5%
leased, on a unit basis, at year-end.
- Retail: 26% of 2018 Same-Store NOI - Retail
properties' same-store NOI increased by 0.7% and cash NOI increased
by 1.2% for the full year. Same-store NOI increased by 3.4% and
cash NOI increased by 3.5% year-over-year in the fourth quarter due
to new lease commencements, higher percentage rent income and
higher specialty leasing as well as lower operating expenses
compared to the same period a year ago. Same-store ending occupancy
increased by 70 basis points year-over-year to 91.9% but declined
by 240 basis points sequentially due to seasonally lower levels of
specialty leasing relative to third quarter 2018. The retail
portfolio was 91.9% occupied and 92.6% leased at year-end.
Leasing Activity
During full-year 2018, Washington REIT signed
new and renewal commercial leases as follows (all dollar amounts
are on a per square foot basis):
|
Square
Feet |
Weighted Average
Term(in years) |
Weighted Average Free
Rent Period(in months) |
WeightedAverage Rental
Rates |
Weighted AverageRental
Rate% Increase |
Tenant
Improvements |
Leasing
Commissions |
Office |
325,000 |
|
5.7 |
|
5.0 |
|
$ |
49.22 |
|
10.3 |
% |
$ |
40.49 |
|
$ |
14.37 |
|
Retail |
307,000 |
|
5.5 |
|
0.6 |
|
18.48 |
|
5.8 |
% |
3.52 |
|
3.02 |
|
Total |
632,000 |
|
5.6 |
|
3.9 |
|
34.31 |
|
9.0 |
% |
22.56 |
|
8.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the fourth quarter, Washington REIT
signed commercial leases totaling 153,000 square feet, including
52,000 square feet of new leases and 101,000 square feet of renewal
leases, as follows (all dollar amounts are on a per square foot
basis):
|
Square
Feet |
Weighted Average
Term(in years) |
Weighted Average Free
Rent Period(in months) |
WeightedAverage Rental
Rates |
Weighted AverageRental
Rate% Increase |
Tenant
Improvements |
Leasing
Commissions |
New: |
|
|
|
|
|
|
|
Office |
35,000 |
|
4.8 |
|
3.9 |
|
$ |
46.68 |
|
5.2 |
% |
$ |
43.81 |
|
$ |
10.57 |
|
Retail |
17,000 |
|
7.2 |
|
5.9 |
|
19.82 |
|
-11.9 |
% |
8.51 |
|
9.31 |
|
Total |
52,000 |
|
5.6 |
|
4.2 |
|
37.69 |
|
1.7 |
% |
31.99 |
|
10.15 |
|
|
|
|
|
|
|
|
|
Renewal: |
|
|
|
|
|
|
|
Office |
90,000 |
|
6.9 |
|
6.2 |
|
$ |
57.59 |
|
13.6 |
% |
$ |
51.26 |
|
$ |
20.77 |
|
Retail |
11,000 |
|
7.3 |
|
0.1 |
|
72.98 |
|
15.2 |
% |
1.39 |
|
17.32 |
|
Total |
101,000 |
|
7.0 |
|
5.3 |
|
59.23 |
|
13.8 |
% |
45.94 |
|
20.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fourth quarter weighted average rental rate
for new retail leases decreased due to two leases signed with
service providers that are expected to further improve the
merchandising mix and traffic at two of the Company's shopping
centers.
Earnings Guidance
2019 Core FFO guidance is expected to range from
$1.74 to $1.78 per fully diluted share. The following assumptions
are included in this guidance:
- Same-store NOI change is projected
to range from -0.50% to 0.50%○ Excluding Watergate 600,
same-store NOI growth is projected to range from 1.75% to
2.75%○ The inclusion of Watergate 600 is the only
addition to the same store pool in 2019○ The Company
expects the top two floors of Watergate 600 to be built out for a
new tenant in 2019 and for rents to commence in January 2020
- Same-store office NOI is projected
to decline by a range of -5.25% to -4.25%○ Excluding
Watergate 600, same-store office NOI change is projected to range
from -0.50% to 0.50%
- Same-store multifamily NOI growth
is projected to range from 3.75% to 4.25%
- Same-store retail NOI growth is
projected to range from 3.75% to 4.25%
- Dispositions are projected to range
from $175 million to $200 million
- There are no acquisitions assumed
in guidance
- Development expenditures are
projected to range from $65 to $70 million
- The annual impact of the adoption
of the new lease accounting standard ASC 842 as of January 1, 2019
is projected to be between $1 million and $1.50 million in
2019
- General and administrative expense
is projected to be approximately $18 to $18.75 million
- Interest expense is projected to be
approximately $51 to $51.75 million
- Non same-store office NOI is
projected to range between $16.75 to $17.25 million
The non same-store office pool in 2019 consists
of Arlington Tower, which was acquired in 2018.
Washington REIT's 2019 Core FFO guidance is
based on a number of factors, many of which are outside the
Company's control and all of which are subject to change.
Washington REIT may change the guidance provided during the year as
actual and anticipated results vary from these assumptions.
2019 Guidance Reconciliation
Table
A reconciliation of projected net income
attributable to the controlling interests per diluted share to
projected Core FFO per diluted share for the year-ending December
31, 2019, reflecting the dispositions assumptions above, is as
follows:
|
Low |
|
High |
|
Net income attributable to the controlling
interests per diluted share(a) |
$ |
0.21 |
|
$ |
0.25 |
|
Real estate depreciation and amortization(a) |
1.53 |
|
1.53 |
|
NAREIT FFO per diluted share |
1.74 |
|
1.78 |
|
Core adjustments |
— |
|
— |
|
Core FFO per diluted share |
$ |
1.74 |
|
$ |
1.78 |
|
|
|
|
|
|
|
|
(a) Does not include any impact from future
acquisitions or any additional dispositions during the year.
Dividends
On January 4, 2019, Washington REIT paid a
quarterly dividend of $0.30 per share.
Washington REIT announced today that its Board
of Trustees has declared a quarterly dividend of $0.30 per share to
be paid on March 29, 2019 to shareholders of record on March 15,
2019.
Conference Call Information
The Conference Call for Full Year and Fourth
Quarter 2018 Earnings is scheduled for Friday, February 15, 2019 at
11:00 A.M. Eastern Time. Conference Call access information is as
follows:
USA Toll Free
Number: |
|
|
1-877-407-9205 |
International Toll
Number: |
|
|
1-201-689-8054 |
The instant replay of the Conference Call will
be available until March 1, 2019 at 11:00 P.M. Eastern time.
Instant replay access information is as follows:
USA Toll Free
Number: |
|
|
1-877-481-4010 |
International Toll
Number: |
|
|
1-919-882-2331 |
Conference ID: |
|
|
41509 |
The live on-demand webcast of the Conference
Call will be available on the Investor section of Washington REIT's
website at www.washreit.com. Online playback of the webcast will be
available for two weeks following the Conference Call.
About Washington REIT
Washington REIT owns and operates uniquely
positioned real estate assets in the Washington D.C. market. Backed
by decades of experience, expertise and ambition, we create value
by transforming insights into strategy and strategy into action.
Our portfolio of 48 properties includes approximately 6.1 million
square feet of commercial space and 4,268 multifamily apartment
units. These 48 properties consist of 19 office properties, 16
retail centers and 13 multifamily properties. Washington REIT
shares are publicly traded on the New York Stock Exchange
(NYSE:WRE).
Note: Washington REIT's press releases and
supplemental financial information are available on the Company
website at www.washreit.com or by contacting Investor Relations at
(202) 774-3200.
Certain statements in our earnings release and
on our conference call are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements relate to expectations, beliefs,
projections, future plans and strategies, anticipated events or
trends and similar expressions concerning matters that are not
historical facts. In some cases, you can identify forward looking
statements by the use of forward-looking terminology such as “may,”
“will,” “should,” “expects,” “intends,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” or “potential” or the negative
of these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not
relate solely to historical matters. Such statements involve known
and unknown risks, uncertainties, and other factors which may cause
the actual results, performance, or achievements of Washington REIT
to be materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, but are not limited to the risks
associated with the ownership of real estate in general and our
real estate assets in particular; the economic health of the
greater Washington Metro region; fluctuations in interest rates;
reductions in or actual or threatened changes to the timing of
federal government spending; the risks related to use of
third-party providers and joint venture partners; the ability to
control our operating expenses; the economic health of our tenants;
the supply of competing properties; shifts away from brick and
mortar stores to e-commerce; the availability and terms of
financing and capital and the general volatility of securities
markets; compliance with applicable laws, including those
concerning the environment and access by persons with disabilities;
terrorist attacks or actions and/or cyber attacks; weather
conditions and natural disasters; ability to maintain key
personnel; failure to qualify and maintain our qualification as a
REIT and the risks of changes in laws affecting REITs; and other
risks and uncertainties detailed from time to time in our filings
with the SEC, including our 2017 Form 10-K and subsequent Quarterly
Reports on Form 10-Q. While forward-looking statements reflect our
good faith beliefs, they are not guarantees of future performance.
We undertake no obligation to update our forward-looking statements
or risk factors or risk factors to reflect new information, future
events, or otherwise.
(1) Funds From Operations (“FFO”) - NAREIT FFO
is a widely used measure of operating performance for real estate
companies. We provide NAREIT FFO as a supplemental measure to net
income calculated in accordance with GAAP. Although NAREIT FFO is a
widely used measure of operating performance for REITs, NAREIT FFO
does not represent net income calculated in accordance with GAAP.
As such, it should not be considered an alternative to net income
as an indication of our operating performance. In addition, NAREIT
FFO does not represent cash generated from operating activities in
accordance with GAAP, nor does it represent cash available to pay
distributions and should not be considered as an alternative to
cash flow from operating activities, determined in accordance with
GAAP, as a measure of our liquidity. In its 2018 NAREIT White Paper
Restatement, the National Association of Real Estate Investment
Trusts, Inc. (“NAREIT”) defines NAREIT FFO as net income (computed
in accordance with GAAP) excluding gains (or losses) associated
with sales of properties, impairments of depreciable real estate,
and real estate depreciation and amortization. We consider NAREIT
FFO to be a standard supplemental measure for 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 NAREIT FFO more accurately provides
investors an indication of our ability to incur and service debt,
make capital expenditures and fund other needs. Our NAREIT FFO may
not be comparable to FFO reported by other REITs. These other REITs
may not define the term in accordance with the current NAREIT
definition or may interpret the current NAREIT definition
differently.
Core Funds From Operations (“Core FFO”) is
calculated by adjusting FFO for the following items (which we
believe are not indicative of the performance of Washington REIT's
operating portfolio and affect the comparative measurement of
Washington REIT's operating performance over time): (1) gains or
losses on extinguishment of debt, (2) expenses related to
acquisition and structuring activities, (3) executive transition
costs and severance expense related to corporate reorganization and
related to executive retirements or resignations, (4) property
impairments, casualty gains, and gains or losses on sale not
already excluded from FFO, as appropriate, and (5) relocation
expense. These items can vary greatly from period to period,
depending upon the volume of our acquisition activity and debt
retirements, among other factors. We believe that by excluding
these items, Core FFO serves as a useful, supplementary measure of
Washington REIT's ability to incur and service debt and to
distribute dividends to its shareholders. Core FFO is a non-GAAP
and non-standardized measure and may be calculated differently by
other REITs.
(2) For purposes of evaluating comparative
operating performance, we categorize our properties as
“same-store”, “non-same-store” or discontinued operations.
Same-store properties include properties that were owned for the
entirety of the years being compared, and exclude properties under
redevelopment or development and properties acquired, sold or
classified as held for sale during the years being compared. We
define development properties as those for which we have planned or
ongoing major construction activities on existing or acquired land
pursuant to an authorized development plan. We consider a
property's development activities to be complete when the property
is ready for its intended use. The property is categorized as
same-store when it has been ready for its intended use for the
entirety of the years being compared. We define redevelopment
properties as those for which have planned or ongoing significant
development and construction activities on existing or acquired
buildings pursuant to an authorized plan, which has an impact on
current operating results, occupancy and the ability to lease space
with the intended result of a higher economic return on the
property. We categorize a redevelopment property as same-store when
redevelopment activities have been complete for the majority of
each year being compared.
(3) Net Operating Income (“NOI”), defined as
real estate rental revenue less real estate expenses, is a non-GAAP
measure. NOI is calculated as net income, less non-real estate
revenue and the results of discontinued operations (including the
gain or loss on sale, if any), plus interest expense, depreciation
and amortization, general and administrative expenses, acquisition
costs, real estate impairment and gain or loss on extinguishment of
debt. We also present NOI on a cash basis ("cash NOI") which is
calculated as NOI less the impact of straight-lining of rent and
amortization of market intangibles. We believe that NOI and cash
NOI are useful performance measures because, when compared across
periods, they reflect the impact on operations of trends in
occupancy rates, rental rates and operating costs on an unleveraged
basis, providing perspective not immediately apparent from net
income. NOI [and cash NOI] excludes certain components from net
income in order to provide results more closely related to a
property’s results of operations. For example, interest expense is
not necessarily linked to the operating performance of a real
estate asset. In addition, depreciation and amortization, because
of historical cost accounting and useful life estimates, may
distort operating performance at the property level. As a result of
the foregoing, we provide each of NOI and cash NOI as a supplement
to net income, calculated in accordance with GAAP. Neither
represents net income or income from continuing operations, in
either case calculated in accordance with GAAP. As such, NOI and
cash NOI should not be considered alternatives to these measures as
an indication of our operating performance.
(4) Net Debt to Adjusted EBITDA represents net
debt as of period end divided by adjusted EBITDA for the period, as
annualized (i.e. three months periods are multiplied by four) or on
a trailing 12 month basis. We define net debt as the total
outstanding debt reported as per our consolidated balance sheets
less cash and cash equivalents at the end of the period. Adjusted
EBITDA is earnings before interest expense, taxes, depreciation,
amortization, gain/loss on sale of real estate, casualty gain/loss,
real estate impairment, gain/loss on extinguishment of debt,
severance expense, relocation expense, acquisition and structuring
expense and gain from non-disposal activities. We consider Adjusted
EBITDA to be an appropriate performance measure because it permits
investors to view income from operations without the effect of
depreciation, and the cost of debt or non-operating gains and
losses. Adjusted EBITDA and Net Debt to Adjusted EBITDA are a
non-GAAP measures.
(5) Funds Available for Distribution (“FAD”) is
a non-GAAP measure. It 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 (excluding items contemplated prior
to acquisition or associated with development / redevelopment of a
property) and (2) straight line rents, then adding (3) non-real
estate depreciation and amortization, (4) non-cash fair value
interest expense and (5) amortization of restricted share
compensation, then adding or subtracting the (6) amortization of
lease intangibles, (7) real estate impairment and (8) non-cash
gain/loss on extinguishment of debt, as appropriate. FAD is
included herein, because we consider it to be a performance 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.
Core Funds Available for Distribution ("Core
FAD") is calculated by adjusting FAD for the following items (which
we believe are not indicative of the performance of Washington
REIT’s operating portfolio and affect the comparative measurement
of Washington REIT’s operating performance over time): (1) gains or
losses on extinguishment of debt, (2) costs related to the
acquisition of properties, (3) non-share-based severance expense
related to corporate reorganization and related to executive
retirements or resignations, (4) property impairments, casualty
gains and losses, and gains or losses on sale not already excluded
from FAD, as appropriate, and (5) relocation expense. These items
can vary greatly from period to period, depending upon the volume
of our acquisition activity and debt retirements, among other
factors. We believe that by excluding these items, Core FAD serves
as a useful, supplementary performance measure of Washington REIT’s
ability to incur and service debt, and distribute dividends to its
shareholders. Core FAD is a non-GAAP and non-standardized measure,
and may be calculated differently by other REITs.
The Core FAD payout ratio is calculated by
dividing dividends declared per share by Core FAD per diluted share
for a given reporting period.
(6) Ending Occupancy is calculated as occupied
square footage as a percentage of total square footage as of the
last day of that period.
Ending Occupancy Levels by Same-Store
Properties (i) and All Properties |
|
Ending
Occupancy |
|
Same-Store
Properties |
|
All
Properties |
|
December
31, |
|
December
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Multifamily |
94.8 |
% |
|
94.1 |
% |
|
94.8 |
% |
|
94.1 |
% |
Office |
91.7 |
% |
|
92.0 |
% |
|
92.3 |
% |
|
90.1 |
% |
Retail |
91.9 |
% |
|
91.2 |
% |
|
91.9 |
% |
|
91.2 |
% |
|
|
|
|
|
|
|
|
Overall Portfolio |
93.0 |
% |
|
92.6 |
% |
|
93.1 |
% |
|
91.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(i) Same-store properties include
properties that were owned for the entirety of the years being
compared, and exclude properties under redevelopment or development
and properties acquired, sold or classified as held for sale during
the years being compared. We define development properties as those
for which we have planned or ongoing major construction activities
on existing or acquired land pursuant to an authorized development
plan. We consider a property's development activities to be
complete when the property is ready for its intended use. The
property is categorized as same-store when it has been ready for
its intended use for the entirety of the years being compared. We
define redevelopment properties as those for which we have planned
or ongoing significant development and construction activities on
existing or acquired buildings pursuant to an authorized plan,
which has an impact on current operating results, occupancy and the
ability to lease space with the intended result of a higher
economic return on the property. We categorize a redevelopment
property as same-store when redevelopment activities have been
complete for the majority of each year being compared. For Q4 2018
and Q4 2017, same-store properties exclude:
Acquisitions:
Office - Arlington Tower and Watergate 600Sold
properties:
Multifamily - Walker
House
Office - Braddock Metro Center and 2445 M Street
|
WASHINGTON REAL
ESTATE INVESTMENT TRUST |
FINANCIAL
HIGHLIGHTS |
(In thousands, except per
share data) |
(Unaudited) |
|
|
|
|
|
Quarter Ended December
31, |
|
Year Ended December
31, |
OPERATING RESULTS |
2018 |
|
2017 |
|
2018 |
|
2017 |
Revenue |
|
|
|
|
|
|
|
Real estate rental revenue |
$ |
82,901 |
|
|
$ |
81,302 |
|
|
$ |
336,890 |
|
|
$ |
325,078 |
|
Expenses |
|
|
|
|
|
|
|
Real estate expenses |
28,255 |
|
|
29,450 |
|
|
116,230 |
|
|
115,650 |
|
Depreciation and amortization |
31,109 |
|
|
28,785 |
|
|
121,228 |
|
|
112,056 |
|
Real estate impairment |
— |
|
|
28,152 |
|
|
1,886 |
|
|
33,152 |
|
General and administrative |
5,352 |
|
|
5,868 |
|
|
22,089 |
|
|
22,580 |
|
|
64,716 |
|
|
92,255 |
|
|
261,433 |
|
|
283,438 |
|
Other operating income |
|
|
|
|
|
|
|
Gain on sale of real estate |
— |
|
|
24,915 |
|
|
2,495 |
|
|
24,915 |
|
Real estate operating income |
18,185 |
|
|
13,962 |
|
|
77,952 |
|
|
66,555 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
(12,497 |
) |
|
(11,900 |
) |
|
(51,144 |
) |
|
(47,534 |
) |
Other income |
— |
|
|
298 |
|
|
— |
|
|
507 |
|
Loss on extinguishment of debt |
— |
|
|
— |
|
|
(1,178 |
) |
|
— |
|
Income tax (expense) benefit |
— |
|
|
(23 |
) |
|
— |
|
|
84 |
|
|
(12,497 |
) |
|
(11,625 |
) |
|
(52,322 |
) |
|
(46,943 |
) |
|
|
|
|
|
|
|
|
Net income |
5,688 |
|
|
2,337 |
|
|
25,630 |
|
|
19,612 |
|
Less: Net loss attributable to noncontrolling
interests in subsidiaries |
— |
|
|
— |
|
|
— |
|
|
56 |
|
Net income attributable to the controlling
interests |
$ |
5,688 |
|
|
$ |
2,337 |
|
|
$ |
25,630 |
|
|
$ |
19,668 |
|
|
|
|
|
|
|
|
|
Net income |
$ |
5,688 |
|
|
$ |
2,337 |
|
|
$ |
25,630 |
|
|
$ |
19,612 |
|
Depreciation and amortization |
31,109 |
|
|
28,785 |
|
|
121,228 |
|
|
112,056 |
|
Real estate impairment |
— |
|
|
28,152 |
|
|
1,886 |
|
|
33,152 |
|
Gain on sale of depreciable real estate |
— |
|
|
(23,838 |
) |
|
(2,495 |
) |
|
(23,838 |
) |
NAREIT funds from operations(1) |
$ |
36,797 |
|
|
$ |
35,436 |
|
|
$ |
146,249 |
|
|
$ |
140,982 |
|
|
|
|
|
|
|
|
|
Non-cash loss on extinguishment of debt |
— |
|
|
— |
|
|
1,178 |
|
|
— |
|
Tenant improvements and leasing incentives |
(10,730 |
) |
|
(7,788 |
) |
|
(23,535 |
) |
|
(18,182 |
) |
External and internal leasing commissions
capitalized |
(3,556 |
) |
|
(1,741 |
) |
|
(5,856 |
) |
|
(7,405 |
) |
Recurring capital improvements |
(2,110 |
) |
|
(4,455 |
) |
|
(3,954 |
) |
|
(6,838 |
) |
Straight-line rents, net |
(959 |
) |
|
(1,238 |
) |
|
(4,343 |
) |
|
(4,380 |
) |
Non-cash fair value interest expense |
(214 |
) |
|
(221 |
) |
|
(865 |
) |
|
(970 |
) |
Non real estate depreciation & amortization
of debt costs |
989 |
|
|
943 |
|
|
3,887 |
|
|
3,537 |
|
Amortization of lease intangibles, net |
372 |
|
|
436 |
|
|
1,842 |
|
|
2,431 |
|
Amortization and expensing of restricted share
and unit compensation |
1,682 |
|
|
1,211 |
|
|
6,746 |
|
|
4,772 |
|
Funds available for distribution(4) |
$ |
22,271 |
|
|
$ |
22,583 |
|
|
$ |
121,349 |
|
|
$ |
113,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December
31, |
|
Year Ended December
31, |
Per share data: |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income attributable to the controlling
interests |
(Basic) |
$ |
0.07 |
|
|
$ |
0.03 |
|
|
$ |
0.32 |
|
|
$ |
0.25 |
|
|
(Diluted) |
$ |
0.07 |
|
|
$ |
0.03 |
|
|
$ |
0.32 |
|
|
$ |
0.25 |
|
NAREIT funds from operations |
(Basic) |
$ |
0.46 |
|
|
$ |
0.45 |
|
|
$ |
1.85 |
|
|
$ |
1.83 |
|
|
(Diluted) |
$ |
0.46 |
|
|
$ |
0.45 |
|
|
$ |
1.84 |
|
|
$ |
1.83 |
|
|
|
|
|
|
|
|
|
|
Dividends declared |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
1.20 |
|
|
$ |
1.20 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic |
|
79,748 |
|
|
78,386 |
|
|
78,960 |
|
|
76,820 |
|
Weighted average shares outstanding –
diluted |
|
79,760 |
|
|
78,478 |
|
|
79,042 |
|
|
76,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WASHINGTON REAL ESTATE
INVESTMENT TRUST |
CONSOLIDATED BALANCE
SHEETS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
|
December 31, |
|
2018 |
|
2017 |
Assets |
|
|
|
Land |
$ |
614,659 |
|
|
$ |
588,025 |
|
Income producing property |
2,271,926 |
|
|
2,113,977 |
|
|
2,886,585 |
|
|
2,702,002 |
|
Accumulated depreciation and amortization |
(770,535 |
) |
|
(683,692 |
) |
Net income producing property |
2,116,050 |
|
|
2,018,310 |
|
Properties under development or held for future
development |
87,231 |
|
|
54,422 |
|
Total real estate held for investment, net |
2,203,281 |
|
|
2,072,732 |
|
Investment in real estate sold or held for sale,
net |
— |
|
|
68,534 |
|
Cash and cash equivalents |
6,016 |
|
|
9,847 |
|
Restricted cash |
1,624 |
|
|
2,776 |
|
Rents and other receivables, net of allowance for
doubtful accounts of $3,561 and $2,426 respectively |
73,861 |
|
|
69,766 |
|
Prepaid expenses and other assets |
132,322 |
|
|
125,087 |
|
Other assets related to properties sold or held
for sale |
— |
|
|
10,684 |
|
Total assets |
$ |
2,417,104 |
|
|
$ |
2,359,426 |
|
|
|
|
|
Liabilities |
|
|
|
Notes payable, net |
$ |
995,397 |
|
|
$ |
894,358 |
|
Mortgage notes payable, net |
59,792 |
|
|
95,141 |
|
Lines of credit |
188,000 |
|
|
166,000 |
|
Accounts payable and other liabilities |
59,567 |
|
|
61,565 |
|
Dividend payable |
24,022 |
|
|
23,581 |
|
Advance rents |
11,736 |
|
|
12,487 |
|
Tenant security deposits |
10,112 |
|
|
9,149 |
|
Other liabilities related to properties sold or
held for sale |
— |
|
|
1,809 |
|
Total liabilities |
1,348,626 |
|
|
1,264,090 |
|
|
|
|
|
Equity |
|
|
|
Shareholders' equity |
|
|
|
Preferred shares; $0.01 par value; 10,000 shares
authorized; no shares issued or outstanding |
— |
|
|
— |
|
Shares of beneficial interest, $0.01 par value;
100,000 shares authorized; 79,910 and 78,510 shares issued and
outstanding, respectively |
799 |
|
|
785 |
|
Additional paid-in capital |
1,526,574 |
|
|
1,483,980 |
|
Distributions in excess of net income |
(469,085 |
) |
|
(399,213 |
) |
Accumulated other comprehensive income |
9,839 |
|
|
9,419 |
|
Total shareholders' equity |
1,068,127 |
|
|
1,094,971 |
|
Noncontrolling interests in subsidiaries |
351 |
|
|
365 |
|
Total equity |
1,068,478 |
|
|
1,095,336 |
|
Total liabilities and equity |
$ |
2,417,104 |
|
|
$ |
2,359,426 |
|
|
|
|
|
|
The following tables contain
reconciliations of same-store net operating income to net income
attributable to the controlling interests for the periods presented
(in thousands): |
|
|
|
|
|
|
|
|
Quarter Ended December 31, 2018 |
Multifamily |
|
Office |
|
Retail |
|
Total |
Same-store net operating income(3) |
$ |
14,803 |
|
|
$ |
20,056 |
|
|
$ |
11,917 |
|
|
$ |
46,776 |
|
Add: Net operating income from non-same-store
properties(3) |
— |
|
|
7,870 |
|
|
— |
|
|
7,870 |
|
Total net operating income(2) |
$ |
14,803 |
|
|
$ |
27,926 |
|
|
$ |
11,917 |
|
|
$ |
54,646 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(12,497 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(31,109 |
) |
General and administrative expenses |
|
|
|
|
|
|
(5,352 |
) |
Net income |
|
|
|
|
|
|
5,688 |
|
Less: Net income attributable to noncontrolling
interests in subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the controlling interests |
|
|
|
|
|
|
$ |
5,688 |
|
|
|
|
|
|
|
|
|
Quarter Ended December 31, 2017 |
Multifamily |
|
Office |
|
Retail |
|
Total |
Same-store net operating income(3) |
$ |
14,212 |
|
|
$ |
19,021 |
|
|
$ |
11,530 |
|
|
$ |
44,763 |
|
Add: Net operating income from non-same-store
properties(3) |
101 |
|
|
6,988 |
|
|
— |
|
|
7,089 |
|
Total net operating income(2) |
$ |
14,313 |
|
|
$ |
26,009 |
|
|
$ |
11,530 |
|
|
$ |
51,852 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
298 |
|
Interest expense |
|
|
|
|
|
|
(11,900 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(28,785 |
) |
General and administrative expenses |
|
|
|
|
|
|
(5,868 |
) |
Income tax expense |
|
|
|
|
|
|
(23 |
) |
Gain on sale of real estate |
|
|
|
|
|
|
24,915 |
|
Real estate impairment |
|
|
|
|
|
|
(28,152 |
) |
Net income |
|
|
|
|
|
|
2,337 |
|
Less: Net income attributable to noncontrolling
interests in subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the controlling interests |
|
|
|
|
|
|
$ |
2,337 |
|
|
|
|
|
|
|
|
|
|
|
|
The following tables contain
reconciliations of same-store net operating income to net income
attributable to the controlling interests for the periods presented
(in thousands): |
|
|
|
|
|
|
|
|
Year Ended December 31,
2018 |
Multifamily |
|
Office |
|
Retail |
|
Total |
Same-store net operating income(3) |
$ |
57,980 |
|
|
$ |
79,742 |
|
|
$ |
47,548 |
|
|
$ |
185,270 |
|
Add: Net operating income from non-same-store
properties(3) |
(21 |
) |
|
35,411 |
|
|
— |
|
|
35,390 |
|
Total net operating income(2) |
$ |
57,959 |
|
|
$ |
115,153 |
|
|
$ |
47,548 |
|
|
$ |
220,660 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(51,144 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(121,228 |
) |
General and administrative expenses |
|
|
|
|
|
|
(22,089 |
) |
Real estate impairment |
|
|
|
|
|
|
(1,886 |
) |
Gain on sale of real estate |
|
|
|
|
|
|
2,495 |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
(1,178 |
) |
Net income |
|
|
|
|
|
|
25,630 |
|
Less: Net income attributable to noncontrolling
interests in subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the controlling
interests |
|
|
|
|
|
|
$ |
25,630 |
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2017 |
Multifamily |
|
Office |
|
Retail |
|
Total |
Same-store net operating income(3) |
$ |
56,137 |
|
|
$ |
76,330 |
|
|
$ |
47,204 |
|
|
$ |
179,671 |
|
Add: Net operating income from non-same-store
properties(3) |
1,473 |
|
|
28,284 |
|
|
— |
|
|
29,757 |
|
Total net operating income(2) |
$ |
57,610 |
|
|
$ |
104,614 |
|
|
$ |
47,204 |
|
|
$ |
209,428 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Other income |
|
|
|
|
|
|
507 |
|
Interest expense |
|
|
|
|
|
|
(47,534 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(112,056 |
) |
General and administrative expenses |
|
|
|
|
|
|
(22,580 |
) |
Income tax benefit |
|
|
|
|
|
|
84 |
|
Gain on sale of real estate |
|
|
|
|
|
|
24,915 |
|
Real estate impairment |
|
|
|
|
|
|
(33,152 |
) |
Net income |
|
|
|
|
|
|
19,612 |
|
Less: Net loss attributable to noncontrolling
interests in subsidiaries |
|
|
|
|
|
|
56 |
|
Net income attributable to the controlling
interests |
|
|
|
|
|
|
$ |
19,668 |
|
|
|
|
|
|
|
|
|
|
|
|
The following table contains a
reconciliation of net income to core funds from operations for the
periods presented (in thousands, except per share amounts): |
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December
31, |
|
Year Ended December
31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income |
|
$ |
5,688 |
|
|
$ |
2,337 |
|
|
$ |
25,630 |
|
|
$ |
19,612 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Real estate depreciation and amortization |
|
31,109 |
|
|
28,785 |
|
|
121,228 |
|
|
112,056 |
|
Gain on sale of depreciable real estate |
|
— |
|
|
(23,838 |
) |
|
(2,495 |
) |
|
(23,838 |
) |
Real estate impairment |
|
— |
|
|
28,152 |
|
|
1,886 |
|
|
33,152 |
|
NAREIT funds from operations(1) |
|
36,797 |
|
|
35,436 |
|
|
146,249 |
|
|
140,982 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
— |
|
|
— |
|
|
1,178 |
|
|
— |
|
Gain on sale of non-depreciable real estate,
net |
|
— |
|
|
(1,077 |
) |
|
— |
|
|
(1,077 |
) |
Structuring expenses |
|
— |
|
|
— |
|
|
— |
|
|
319 |
|
Core funds from operations(1) |
|
$ |
36,797 |
|
|
$ |
34,359 |
|
|
$ |
147,427 |
|
|
$ |
140,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended December
31, |
|
Year Ended December
31, |
Per share data: |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
NAREIT FFO |
(Basic) |
$ |
0.46 |
|
|
$ |
0.45 |
|
|
$ |
1.85 |
|
|
$ |
1.83 |
|
|
(Diluted) |
$ |
0.46 |
|
|
$ |
0.45 |
|
|
$ |
1.84 |
|
|
$ |
1.83 |
|
Core FFO |
(Basic) |
$ |
0.46 |
|
|
$ |
0.44 |
|
|
$ |
1.86 |
|
|
$ |
1.82 |
|
|
(Diluted) |
$ |
0.46 |
|
|
$ |
0.44 |
|
|
$ |
1.86 |
|
|
$ |
1.82 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic |
|
79,748 |
|
|
78,386 |
|
|
78,960 |
|
|
76,820 |
|
Fully diluted weighted average shares outstanding |
|
79,760 |
|
|
78,478 |
|
|
79,042 |
|
|
76,935 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT: |
Tejal R. Engman |
Vice President, Investor Relations |
E-Mail: tengman@washreit.com |
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