Washington Real Estate Investment Trust (“WRIT” or the
“Company”) (NYSE: WRE), a leading owner and operator of diversified
properties in the Washington, D.C. region, reported financial and
operating results today for the quarter ended March 31,
2012:
- Core Funds from Operations(1), defined
as Funds from Operations(1) (“FFO”) excluding acquisition expense,
gains or losses on extinguishment of debt and impairment, was $31.2
million, or $0.47 per diluted share for the quarter ended
March 31, 2012, compared to $32.2 million, or $0.49 per
diluted share for the prior year period. FFO for the quarter ended
March 31, 2012 was $31.2 million, or $0.47 per share, compared
to $30.5 million, or $0.46 per share, in the same period one year
ago.
- Net income attributable to the
controlling interests for the quarter ended March 31, 2012 was
$5.2 million, or $0.08 per diluted share, compared to $4.7 million,
or $0.07 per diluted share, in the same period one year ago.
Included in first quarter 2011 net income are acquisition costs of
$1.6 million, or $0.03 per share.
Operating Results
The Company's overall portfolio Net Operating Income (“NOI”)(2)
was $50.5 million compared to $46.0 million in the same period one
year ago and $50.6 million in the fourth quarter of 2011. Overall
portfolio physical occupancy for the first quarter was 89.7%,
compared to 88.5% in the same period one year ago and 90.8% in the
fourth quarter of 2011.
Same-store(3) portfolio physical occupancy for the first quarter
was 90.1%, compared to 91.8% in the same period one year ago.
Sequentially, same-store physical occupancy decreased 120 basis
points (bps) compared to the fourth quarter of 2011. Same-store
portfolio NOI for the first quarter decreased 1.1% and rental rate
growth was 1.3% compared to the same period one year ago.
- Multifamily: 16.0% of Total NOI
- Multifamily properties' same-store NOI for the first quarter
increased 5.2% compared to the same period one year ago. Rental
rate growth was 4.0% while same-store physical occupancy decreased
10 bps to 95.2%. Sequentially, same-store physical occupancy
increased 30 bps compared to the fourth quarter of 2011.
- Office: 49.0% of Total NOI -
Office properties' same-store NOI for the first quarter decreased
6.4% compared to the same period one year ago. Rental rate growth
was 0.3% while same-store physical occupancy decreased 340 bps to
85.9%, primarily due to the previously announced expiration and
move-out of Sun Microsystems/Oracle at 7900 Westpark Drive at the
end of 2011. Sequentially, same-store physical occupancy decreased
270 bps compared to the fourth quarter of 2011.
- Medical: 15.2% of Total NOI -
Medical office properties' same-store NOI for the first quarter
increased 1.5% compared to the same period one year ago. Rental
rate growth was 1.8% while same-store physical occupancy decreased
280 bps to 90.7%. Sequentially, same-store physical occupancy
increased 10 bps compared to the fourth quarter of 2011.
- Retail: 19.8% of Total NOI -
Retail properties' same-store NOI for the first quarter increased
4.1% compared to the same period one year ago. Rental rate growth
was 0.9% while same-store physical occupancy increased 40 bps to
92.4%. Sequentially, same-store physical occupancy decreased 40 bps
compared to the fourth quarter of 2011.
Leasing Activity
During the first quarter, WRIT signed commercial leases for
217,979 square feet with an average rental rate increase of 8.6%
over expiring lease rates on a GAAP basis, an average lease term of
5.7 years, tenant improvement costs of $19.08 per square foot and
leasing costs of $12.56 per square foot.
- Rental rates for new and renewed office
leases increased 10.0% to $31.87 per square foot, with $21.57 per
square foot in tenant improvement costs and $17.35 per square foot
in leasing costs. Weighted average term for new and renewed leases
was 5.6 years.
- Rental rates for new and renewed
medical office leases increased 5.8% to $29.94 per square foot,
with $17.65 per square foot in tenant improvement costs and $5.29
per square foot in leasing costs. Weighted average term for new and
renewed leases was 5.3 years.
- Rental rates for new and renewed retail
leases increased 7.1% to $15.13 per square foot, with no tenant
improvement costs and $0.73 per square foot in leasing costs.
Weighted average term for new and renewed leases was 8.3
years.
Dividends
On March 30, 2012, WRIT paid a quarterly dividend of $0.43375
per share for its 201st consecutive quarterly dividend at equal or
increasing rates.
Conference Call Information
The Conference Call for 1st Quarter Earnings is scheduled for
Friday, April 27, 2012 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 May 11, 2012 at 11:59 P.M. Eastern time. Instant replay
access information is as follows:
USA Toll Free Number:
1-877-660-6853 International Toll Number: 1-201-612-7415 Account:
286 Conference ID: 390948
The live on-demand webcast of the Conference Call will be
available on the Investor section of WRIT's website at
www.writ.com. On-line playback of the webcast will be available for
two weeks following the Conference Call.
About WRIT
WRIT is a self-administered, self-managed, equity real estate
investment trust investing in income-producing properties in the
greater Washington metro region. WRIT owns a diversified portfolio
of 71 properties totaling approximately 9 million square feet of
commercial space and 2,540 residential units, and land held for
development. These 71 properties consist of 26 office properties,
18 medical office properties, 16 retail centers and 11 multifamily
properties. WRIT shares are publicly traded on the New York Stock
Exchange (NYSE:WRE).
Note: WRIT's press releases and supplemental financial
information are available on the company website at www.writ.com or
by contacting Investor Relations at (301) 984-9400.
Certain statements in our earnings release and on our conference
call 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,
the potential for federal government budget reductions, changes in
general and local economic and real estate market conditions, the
timing and pricing of lease transactions, the effect of the current
credit and financial market conditions, the availability and cost
of capital, fluctuations in interest rates, tenants' financial
conditions, levels of competition, the effect of government
regulation, the impact of newly adopted accounting principles, and
other risks and uncertainties detailed from time to time in our
filings with the SEC, including our 2011 Form 10-K. We assume no
obligation to update or supplement forward-looking statements that
become untrue because of subsequent events.
(1) Funds From Operations (“FFO”) - The National Association of
Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO (April,
2002 White Paper) as net income (computed in accordance with
generally accepted accounting principles (“GAAP”)) excluding gains
(or losses) associated with sales of property, impairment of
depreciable real estate and real estate depreciation and
amortization. FFO is a non-GAAP measure and does not replace net
income as a measure of performance or net cash provided by
operating activities as a measure of liquidity. 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.
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 WRIT's operating portfolio and
affect the comparative measurement of WRIT's operating performance
over time): (1) gains or losses on extinguishment of debt, (2) real
estate impairment not already excluded from FFO and (3) costs
related to the acquisition of properties, as appropriate. 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 WRIT'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) 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 on sale, if
any), plus interest expense, depreciation and amortization and
general and administrative expenses. We provide NOI as a supplement
to 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. It is the primary
performance measure we use to assess the results of our operations
at the property level.
(3) For purposes of evaluating comparative operating
performance, we categorize our properties as “same-store” or
“non-same-store”. A same-store property is one that was owned for
the entirety of the periods being evaluated. A non-same-store
property is one that was acquired or placed into service during
either of the periods being evaluated.
(4) 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 and (2) straight-line rents, then
adding (3) non-real estate depreciation and amortization, (4)
amortization of restricted share and unit compensation, and adding
or subtracting amortization of lease intangibles, as appropriate.
We consider FAD 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-standardized measure and may be calculated differently by
other REITs.
Physical
Occupancy Levels by Same-Store Properties (i) and All
Properties
Physical Occupancy Same-Store
Properties All Properties 1st QTR
1st QTR 1st QTR 1st QTR Segment
2012 2011 2012 2011 Multifamily 95.2 %
95.3 % 95.2 % 95.3 % Office 85.9 % 89.3 % 86.3 % 89.1 % Medical
Office 90.7 % 93.5 % 87.1 % 88.3 % Retail 92.4 % 92.0 % 92.9 % 92.0
% Industrial — % — % — % 80.2 % Overall Portfolio 90.1 %
91.8 % 89.7 % 88.5 %
(i) Same-Store properties include all stabilized properties that
were owned for the entirety of the current and prior year reporting
periods. For Q1 2012 and Q1 2011, same-store properties
exclude:Residential Acquisitions:
none;Office Acquisitions: 1140
Connecticut Ave, 1227 25th Street, Braddock Metro Center and John
Marshall II;Medical Office
Acquisition: Lansdowne Medical Office Building;Retail Acquisition: Olney Village Center.
Also excluded from Same-Store Properties in Q1 2012 and Q1 2011
are:Held for Sale and Sold Properties:
Dulles Station, Phase I and the Industrial Portfolio (all
industrial properties and the Crescent and Albemarle Point).
WASHINGTON REAL ESTATE INVESTMENT TRUST FINANCIAL
HIGHLIGHTS (In thousands, except per share data)
(Unaudited) Three Months Ended March
31, OPERATING RESULTS 2012 2011 Revenue
Real estate rental revenue $ 76,499 $ 69,204 Expenses Real estate
expenses 26,013 23,253 Depreciation and amortization 25,994 21,894
General and administrative 3,606 3,702 55,613
48,849 Real estate operating income 20,886 20,355 Other
income (expense): Interest expense (15,895 ) (16,893 ) Other income
244 306 Acquisition costs (54 ) (1,649 ) (15,705 ) (18,236 )
Income from continuing operations 5,181 2,119 Discontinued
operations: Income (loss) from operations of properties sold or
held for sale — 2,569 Net income 5,181 4,688 Less:
Net income attributable to noncontrolling interests in subsidiaries
— (23 ) Net income attributable to the controlling interests
$ 5,181 $ 4,665 Income from continuing
operations attributable to the controlling interests 5,181 2,119
Continuing operations real estate depreciation and amortization
25,994 21,894 Funds from continuing operations(1) $
31,175 $ 24,013 Income (loss) from operations
of properties sold or held for sale attributable to the controlling
interests — 2,546 Real estate impairment — 599 Discontinued
operations real estate depreciation and amortization — 3,355
Funds from discontinued operations — 6,500
Funds from operations(1) $ 31,175 $ 30,513
Tenant improvements (4,066 ) (2,370 ) External and internal
leasing commissions capitalized (2,557 ) (2,232 ) Recurring capital
improvements (1,539 ) (691 ) Straight-line rents, net (992 ) (657 )
Non-cash fair value interest expense 228 179 Non real estate
depreciation & amortization of debt costs 1,008 874
Amortization of lease intangibles, net — (278 ) Amortization and
expensing of restricted share and unit compensation 1,405
1,257 Funds available for distribution(4) $ 24,662 $
26,595 Note: Certain prior period amounts have been
reclassified to conform to the current presentation.
Three Months Ended March 31, Per share data
attributable to the controlling interests: 2012
2011 Income from continuing operations (Basic) $ 0.08 $ 0.03
(Diluted) $ 0.08 $ 0.03 Net income (Basic) $ 0.08 $ 0.07 (Diluted)
$ 0.08 $ 0.07 Funds from continuing operations (Basic) $ 0.47 $
0.36 (Diluted) $ 0.47 $ 0.36 Funds from operations (Basic) $ 0.47 $
0.46 (Diluted) $ 0.47 $ 0.46 Dividends paid $ 0.4338 $
0.4338 Weighted average shares outstanding 66,194 65,885
Fully diluted weighted average shares outstanding 66,328 65,907
WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS (In thousands, except per
share data) (Unaudited) March 31, 2012
December 31, 2011 Assets Land $ 472,196 $ 472,196 Income
producing property 1,947,630 1,934,587 2,419,826
2,406,783 Accumulated depreciation and amortization (556,833 )
(535,732 ) Net income producing property 1,862,993 1,871,051
Development in progress 44,236 43,089 Total real
estate held for investment, net 1,907,229 1,914,140 Cash and cash
equivalents 17,809 12,765 Restricted cash 21,922 19,424 Rents and
other receivables, net of allowance for doubtful accounts of $9,653
and $8,921 respectively 54,727 53,828 Prepaid expenses and other
assets 114,859 120,601 Total assets $ 2,116,546
$ 2,120,758 Liabilities Notes payable $
657,562 $ 657,470 Mortgage notes payable 426,485 427,710 Lines of
credit 109,000 99,000 Accounts payable and other liabilities 57,766
51,145 Advance rents 15,065 13,739 Tenant security deposits 8,949
8,862 Total liabilities 1,274,827 1,257,926
Equity Shareholders' equity
Shares of beneficial interest, $0.01 par
value; 100,000 shares authorized; 66,310 and 66,265 shares issued
and 66,309 and 66,265 shares outstanding at March 31, 2012 and
December 31, 2011, respectively
662 662 Additional paid-in capital 1,141,062 1,138,478
Distributions in excess of net income (303,815 ) (280,096 ) Total
shareholders' equity 837,909 859,044 Noncontrolling
interests in subsidiaries 3,810 3,788 Total equity
841,719 862,832 Total liabilities and equity $ 2,116,546
$ 2,120,758 Note: Certain prior year amounts
have been reclassified to conform to the current year presentation.
The following tables contain reconciliations of net
income to same-store net operating income for the periods
presented:
Medical
Quarter Ended March 31, 2012 Multifamily
Office
Office
Retail Total Same-store net operating income(3) $
8,065 $ 19,778 $ 7,618 $ 8,962 $ 44,423 Add: Net operating income
from non-same-store properties(3) — 4,957 66
1,040 6,063 Total net operating income(2) $ 8,065 $
24,735 $ 7,684 $ 10,002 $ 50,486 Add/(deduct): Other income 244
Acquisition costs (54 ) Interest expense (15,895 ) Depreciation and
amortization (25,994 ) General and administrative expenses (3,606 )
Income (loss) from operations of properties sold or held for sale —
Net income 5,181 Less: Net income attributable to
noncontrolling interests in subsidiaries — Net income
attributable to the controlling interests $ 5,181
Medical
Quarter Ended March 31, 2011 Multifamily
Office
Office
Retail Total Same-store net operating income(3) $
7,665 $ 21,123 $ 7,505 $ 8,605 $ 44,898 Add: Net operating income
from non-same-store properties(3) — 1,096 (43 ) —
1,053 Total net operating income(2) $ 7,665 $ 22,219
$ 7,462 $ 8,605 $ 45,951 Add/(deduct): Other income 306 Acquisition
costs (1,649 ) Interest expense (16,893 ) Depreciation and
amortization (21,894 ) General and administrative expenses (3,702 )
Income (loss) from operations of properties sold or held for sale
2,569 Net income 4,688 Less: Net income attributable to
noncontrolling interests in subsidiaries (23 ) Net income
attributable to the controlling interests $ 4,665
The following table contains a reconciliation of net income
attributable to the controlling interests to core funds from
operations for the periods presented:
Three Months Ended March 31,
2012 2011 Net income attributable to the controlling
interests $ 5,181 $ 4,665 Add/(deduct): Real estate depreciation
and amortization 25,994 21,894 Discontinued operations: Real estate
impairment — 599 Real estate depreciation and amortization — 3,355
Funds from operations(1) 31,175 30,513 Add/(deduct): Acquisition
costs 54 1,649 Core funds from operations(1) $ 31,229 $ 32,162
Three Months Ended March 31, Per share data
attributable to the controlling interests:
2012 2011
Funds from operations (Basic) $ 0.47 $ 0.46 (Diluted) $ 0.47 $ 0.46
Core FFO (Basic) $ 0.47 $ 0.49 (Diluted) $ 0.47 $ 0.49
Weighted average shares outstanding 66,194 65,885 Fully diluted
weighted average shares outstanding 66,328 65,907
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