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 ended
September 30, 2018:
Third Quarter 2018
Highlights
Net income attributable to controlling interests
was $5.9 million, or $0.07 per diluted share, compared to $2.8
million, or $0.04 per diluted share in the third quarter of 2017,
primarily due to the recognition of an impairment charge on
Braddock Metro Center in the third quarter of 2017. NAREIT Funds
from Operations (FFO) was $36.2 million, or $0.45 per diluted
share, compared to $35.8 million, or $0.46 per diluted share, in
the third quarter of 2017. Additional highlights are as below:
- Reported Core FFO(1) of $0.45 per diluted share, compared to
$0.46 per diluted share in third quarter 2017
- Grew Core FFO to $36.2 million in third quarter 2018 from $35.8
million in third quarter 2017
- Grew same-store(2) NOI by 3.4% and cash NOI(3) by 4.2% over
third quarter 2017
- Grew same-store office NOI by 4.1% and cash NOI by 5.6% over
third quarter 2017
- Grew same-store multifamily NOI and cash NOI by 3.4% over third
quarter 2017
- Grew same-store retail NOI by 2.4% and cash NOI by 3.0% over
third quarter 2017
- Increased same-store average occupancy by 40 basis points over
third quarter 2017 and 70 basis points over second quarter 2018 to
93.8%
- Increased same-store ending occupancy by 70 basis points over
third quarter 2017 and second quarter 2018 to 94.0%
- Prepaid secured debt of $31.7 million without penalty
- Issued 1,165,140 common shares through the Company’s
At-the-Market (ATM) program at an average share price of $31.18 for
gross proceeds of $36.3 million and continued to keep balance sheet
metrics strong
"We delivered a stable third quarter with solid
same-store NOI growth across all three asset classes and continued
balance sheet strength," said Paul T. McDermott, President and
Chief Executive Officer. "In 2019, we expect our well-positioned
re-leasing opportunities to capitalize on the demand created by
increased Federal spending, which is now more certain to continue
next year as the majority of annual discretionary funding for 2019
was approved prior to the end of the government's fiscal year 2018,
an achievement our region hasn't experienced in over a decade."
Operating Results
The Company's overall portfolio NOI was $53.9
million for the quarter ended September 30, 2018, compared to
$53.2 million in the corresponding prior year period primarily
driven by an increase in same-store portfolio NOI, partially offset
by a decrease in non same-store portfolio NOI due to the
dispositions of 2445 M Street and Braddock Metro Center earlier
this year.
Same-store portfolio NOI for the third quarter
increased by 3.4%, compared to the corresponding prior year period,
primarily due to average occupancy gains in the office same-store
portfolio and rental rate growth in the multifamily same-store
portfolio.
Same-store portfolio by sector:
- Office: 42% of Same-Store
NOI - Same-store NOI increased by 4.1% compared to the
corresponding prior year three-month period primarily due to
80 basis points of average occupancy gains driven by new lease
commencements across multiple assets within the office portfolio.
As a result, same-store office revenue growth more than offset
higher operating expenses compared to the third quarter of 2017.
The same-store office portfolio was 92.1% occupied and 93.9% leased
at quarter end.
- Multifamily: 32% of
Same-Store NOI - Same-store NOI increased by 3.4% compared
to the corresponding prior year three-month period, primarily due
to 230 basis points of year-over-year rental rate growth and 20
basis points of increased average unit occupancy. Same-store
effective new lease rent trade-outs increased by 3.3% and
same-store effective renewal rent trade-outs increased by 4.1%
during the quarter. The same-store multifamily portfolio was 95.3%
occupied on a unit basis and 97.0% leased at quarter
end.
- Retail: 26% of Same-Store
NOI - Same-store NOI increased by 2.4% compared to the
corresponding prior year three-month period as new lease
commencements, higher reimbursements and lower provisions for bad
debt more than offset lower lease termination income and higher
operating expenses. Same-store ending occupancy was 80 basis points
higher year-over-year driven by seasonal specialty leasing
agreements. The same-store retail portfolio was 94.3% occupied and
95.1% leased at quarter end.
Leasing Activity
During the third quarter, Washington REIT signed
commercial leases totaling 103,000 square feet, including 54,000
square feet of new leases and 49,000 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) |
Weighted Average Rental Rates |
Weighted Average Rental Rate%
Increase |
Tenant Improvements |
Leasing Commissions |
|
New: |
|
|
|
|
|
|
|
|
|
|
Office |
36,000 |
|
5.9 |
|
4.7 |
|
$ |
51.27 |
|
11.1 |
% |
$ |
61.00 |
|
$ |
17.30 |
|
|
Retail |
18,000 |
|
5.8 |
|
1.2 |
|
31.87 |
|
5.1 |
% |
19.28 |
|
9.75 |
|
|
Total |
54,000 |
|
5.9 |
|
3.9 |
|
44.96 |
|
9.6 |
% |
47.44 |
|
14.84 |
|
|
|
|
|
|
|
|
|
|
Renewal: |
|
|
|
|
|
|
|
Office |
37,000 |
|
5.7 |
|
5.3 |
|
$ |
46.63 |
|
16.3 |
% |
$ |
32.35 |
|
$ |
13.13 |
|
|
Retail |
12,000 |
|
6.3 |
|
— |
|
43.83 |
|
12.3 |
% |
— |
|
6.32 |
|
|
Total |
49,000 |
|
5.9 |
|
4.1 |
|
45.96 |
|
15.4 |
% |
24.57 |
|
11.49 |
|
|
Capital Update
In the third quarter, the Company prepaid
secured debt of $31.7 million without penalty.
The Company issued 1,165,140 common shares at an
average price of $31.18 per share through its ATM program.
Gross proceeds of $36.3 million were raised, which further
strengthens the Company's balance sheet and provides additional
capacity for development and redevelopment projects.
Earnings Guidance
Management is maintaining the mid-point of its
2018 Core FFO guidance and is tightening the range by $0.04 per
fully diluted share to $1.85 to $1.87 from $1.83 to $1.89 per fully
diluted share. The following GAAP assumptions underpin this
guidance:
- Same-store NOI growth is tightened
and projected to range from 2.75% to 3.25% from a range of 2.5% to
3.5%
- Same-store office NOI growth is
lowered and projected to range from 4.0% to 4.5%, from a range of
4.0% to 5.0% due to a slight delay in the timing of certain lease
commencements
- Same-store multifamily NOI growth
is lowered to be approximately 3.30% compared to a prior range of
3.25% to 4.0% due to higher weather-related expenses impacting the
third quarter
- Same-store retail NOI growth has
been raised and is projected to range from 0.5% to 1.0% from a
range of 0.25% to 1.0% due to better than expected revenue
growth
- There are no future acquisitions or
dispositions assumed in guidance
- General and administrative expense
is projected to be approximately $21.5 to $22.0 million
- Interest expense is projected to be
approximately $51.0 to $51.25 million
- Non same-store office NOI is
projected to range between $35.25 to $35.5 million
Non same-store office properties in 2018 consist
of Watergate 600 and Arlington Tower as these assets were acquired
in 2017 and 2018, respectively; Braddock Metro Center, which was
sold in January 2018; and 2445 M Street, which was sold in June of
this year.
Washington REIT's 2018 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.
2018 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, 2018 is as follows:
|
Low |
|
|
High |
|
|
Net income attributable to the controlling interests per diluted
share (a) |
$ |
0.33 |
|
|
$ |
0.35 |
|
|
Gain on sale of depreciable real estate (a) |
(0.03 |
) |
|
(0.03 |
) |
|
Real estate impairment |
0.02 |
|
|
0.02 |
|
|
Real estate depreciation and amortization (a) |
1.52 |
|
|
1.52 |
|
|
NAREIT FFO per diluted share |
1.84 |
|
|
1.86 |
|
|
Core adjustments |
0.01 |
|
|
0.01 |
|
|
Core FFO per diluted share |
$ |
1.85 |
|
|
$ |
1.87 |
|
|
(a) Does not include any impact from future
acquisitions and dispositions during the year. There are no further
acquisitions or dispositions assumed in guidance.
Dividends
On September 28, 2018, 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 January 4, 2019 to shareholders of record on December
20, 2018.
Conference Call Information
The Conference Call for Third Quarter Earnings is scheduled for
Friday, October 26, 2018 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 Friday, November 9, 2018 at 11:59 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: |
|
|
21308 |
|
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. The
Company’s portfolio of 48 properties consists of 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 include statements in this earnings
release preceded by, followed by or that include the words
“believe,” “expect,” “intend,” “anticipate,” “potential,”
“project,” “will” and other similar expressions. 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,
changes in general and local economic and real estate market
conditions, the potential for federal government budget reductions,
the risk of failure to complete contemplated acquisitions and
dispositions, the timing and pricing of lease transactions, the
availability and cost of capital, fluctuations in interest rates,
tenants' financial conditions, levels of competition, the effect of
government regulation, 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. We assume
no obligation to update or supplement forward-looking statements
that become untrue because of subsequent events.
(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
April, 2002 White Paper, 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) 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.
(5) Ending Occupancy is calculated as occupied square footage as
a percentage of total square footage as of the last day of that
period.
(6) Average Occupancy is based on monthly
occupied net rentable square footage as a percentage of total net
rentable square footage, except for the rows labeled "Multifamily
(calculated on a unit basis)," on which average occupancy is based
on average monthly occupied units as a percentage of total
units.
Ending Occupancy Levels by Same-Store Properties (i) and
All Properties |
|
|
Ending Occupancy |
|
|
Same-Store Properties |
|
All Properties |
|
|
3rd QTR |
|
3rd QTR |
|
3rd QTR |
|
3rd QTR |
|
Segment |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Multifamily (calculated
on a unit basis) |
95.3 |
% |
|
94.8 |
% |
|
95.3 |
% |
|
94.7 |
% |
|
|
|
|
|
|
|
|
|
Multifamily |
95.4 |
% |
|
94.5 |
% |
|
95.4 |
% |
|
94.5 |
% |
|
Office |
92.1 |
% |
|
91.7 |
% |
|
92.7 |
% |
|
93.2 |
% |
|
Retail |
94.3 |
% |
|
93.5 |
% |
|
94.3 |
% |
|
93.5 |
% |
|
|
|
|
|
|
|
|
|
Overall Portfolio |
94.0 |
% |
|
93.3 |
% |
|
94.1 |
% |
|
93.8 |
% |
|
(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 Q3 2018
and Q3 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
AND SUBSIDIARIES |
|
FINANCIAL HIGHLIGHTS |
|
(In thousands, except per share
data) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
OPERATING RESULTS |
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
Real
estate rental revenue |
$ |
82,502 |
|
|
$ |
82,819 |
|
|
$ |
253,989 |
|
|
$ |
243,776 |
|
|
Expenses |
|
|
|
|
|
|
|
Real
estate expenses |
28,571 |
|
|
29,646 |
|
|
87,975 |
|
|
86,200 |
|
|
Depreciation and amortization |
30,272 |
|
|
27,941 |
|
|
90,119 |
|
|
83,271 |
|
|
General
and administrative |
5,267 |
|
|
5,327 |
|
|
16,737 |
|
|
16,712 |
|
|
Real
estate impairment |
— |
|
|
5,000 |
|
|
1,886 |
|
|
5,000 |
|
|
|
64,110 |
|
|
67,914 |
|
|
196,717 |
|
|
191,183 |
|
|
Other operating
income |
|
|
|
|
|
|
|
|
|
|
Gain on sale of real
estate |
— |
|
|
— |
|
|
2,495 |
|
|
— |
|
|
Real estate operating
income |
18,392 |
|
|
14,905 |
|
|
59,767 |
|
|
52,593 |
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
Interest
expense |
(12,499 |
) |
|
(12,176 |
) |
|
(38,647 |
) |
|
(35,634 |
) |
|
Loss on
extinguishment of debt |
— |
|
|
— |
|
|
(1,178 |
) |
|
— |
|
|
Other
income |
— |
|
|
84 |
|
|
— |
|
|
209 |
|
|
Income
tax benefit |
— |
|
|
— |
|
|
— |
|
|
107 |
|
|
|
(12,499 |
) |
|
(12,092 |
) |
|
(39,825 |
) |
|
(35,318 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
5,893 |
|
|
2,813 |
|
|
19,942 |
|
|
17,275 |
|
|
Less: Net loss
attributable to noncontrolling interests in subsidiaries |
— |
|
|
20 |
|
|
— |
|
|
56 |
|
|
Net income attributable
to the controlling interests |
$ |
5,893 |
|
|
$ |
2,833 |
|
|
$ |
19,942 |
|
|
$ |
17,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
5,893 |
|
|
$ |
2,813 |
|
|
$ |
19,942 |
|
|
$ |
17,275 |
|
|
Depreciation and
amortization |
30,272 |
|
|
27,941 |
|
|
90,119 |
|
|
83,271 |
|
|
Real estate
impairment |
— |
|
|
5,000 |
|
|
1,886 |
|
|
5,000 |
|
|
Gain on sale of
depreciable real estate |
— |
|
|
— |
|
|
(2,495 |
) |
|
— |
|
|
NAREIT funds from
operations (1) |
$ |
36,165 |
|
|
$ |
35,754 |
|
|
$ |
109,452 |
|
|
$ |
105,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash loss on
extinguishment of debt |
$ |
— |
|
|
$ |
— |
|
|
$ |
1,178 |
|
|
$ |
— |
|
|
Tenant improvements and
incentives |
(5,808 |
) |
|
(1,822 |
) |
|
(12,805 |
) |
|
(10,394 |
) |
|
External and internal
leasing commissions capitalized |
(957 |
) |
|
(1,727 |
) |
|
(2,300 |
) |
|
(5,664 |
) |
|
Recurring capital
improvements |
(752 |
) |
|
(1,315 |
) |
|
(1,844 |
) |
|
(2,383 |
) |
|
Straight-line rents,
net |
(1,058 |
) |
|
(1,187 |
) |
|
(3,384 |
) |
|
(3,142 |
) |
|
Non-cash fair value
interest expense |
(215 |
) |
|
(223 |
) |
|
(651 |
) |
|
(749 |
) |
|
Non real estate
depreciation & amortization of debt costs |
997 |
|
|
880 |
|
|
2,898 |
|
|
2,594 |
|
|
Amortization of lease
intangibles, net |
430 |
|
|
560 |
|
|
1,470 |
|
|
1,995 |
|
|
Amortization and
expensing of restricted share and unit compensation |
1,694 |
|
|
1,245 |
|
|
5,064 |
|
|
3,561 |
|
|
Funds available for
distribution (4) |
$ |
30,496 |
|
|
$ |
32,165 |
|
|
$ |
99,078 |
|
|
$ |
91,364 |
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
Per share data: |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Net income attributable
to the controlling interests |
(Basic) |
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
|
(Diluted) |
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
NAREIT funds from
operations |
(Basic) |
$ |
0.46 |
|
|
$ |
0.46 |
|
|
$ |
1.39 |
|
|
$ |
1.38 |
|
|
(Diluted) |
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
1.38 |
|
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.90 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
79,076 |
|
|
77,291 |
|
|
78,695 |
|
|
76,292 |
|
Weighted average shares
outstanding - diluted |
|
79,238 |
|
|
77,423 |
|
|
78,802 |
|
|
76,415 |
|
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In thousands, except per share
data) |
|
|
|
|
|
September 30, 2018 |
|
|
|
(unaudited) |
|
December 31, 2017 |
|
Assets |
|
|
|
|
|
|
Land |
$ |
614,659 |
|
|
$ |
588,025 |
|
|
Income
producing property |
2,239,917 |
|
|
2,113,977 |
|
|
|
2,854,576 |
|
|
2,702,002 |
|
|
Accumulated depreciation and amortization |
(745,829 |
) |
|
(683,692 |
) |
|
Net
income producing property |
2,108,747 |
|
|
2,018,310 |
|
|
Properties under development or held for future development |
81,765 |
|
|
54,422 |
|
|
Total
real estate held for investment, net |
2,190,512 |
|
|
2,072,732 |
|
|
Investment in real estate held for sale, net |
— |
|
|
68,534 |
|
|
Cash and
cash equivalents |
4,810 |
|
|
9,847 |
|
|
Restricted cash |
1,352 |
|
|
2,776 |
|
|
Rents and
other receivables, net of allowance for doubtful accounts of
$2,927 and $2,426, respectively |
74,395 |
|
|
69,766 |
|
|
Prepaid
expenses and other assets |
145,448 |
|
|
125,087 |
|
|
Other
assets related to properties held for sale |
— |
|
|
10,684 |
|
|
Total
assets |
$ |
2,416,517 |
|
|
$ |
2,359,426 |
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
Notes
payable |
$ |
995,130 |
|
|
$ |
894,358 |
|
|
Mortgage
notes payable |
60,541 |
|
|
95,141 |
|
|
Line of
credit |
183,000 |
|
|
166,000 |
|
|
Accounts
payable and other liabilities |
63,683 |
|
|
61,565 |
|
|
Dividend
payable |
— |
|
|
23,581 |
|
|
Advance
rents |
10,597 |
|
|
12,487 |
|
|
Tenant
security deposits |
9,857 |
|
|
9,149 |
|
|
Liabilities related to properties held for sale |
— |
|
|
1,809 |
|
|
Total
liabilities |
1,322,808 |
|
|
1,264,090 |
|
|
|
|
|
|
Equity |
|
|
|
Shareholders' equity |
|
|
|
Preferred
shares; $0.01 par value; 10,000 shares authorized; no shares issued
and outstanding |
— |
|
|
— |
|
|
Shares of
beneficial interest, $0.01 par value; 100,000 shares authorized;
79,844 and 78,510 shares issued and
outstanding, respectively |
798 |
|
|
785 |
|
|
Additional paid-in capital |
1,526,125 |
|
|
1,483,980 |
|
|
Distributions in excess of net income |
(450,749 |
) |
|
(399,213 |
) |
|
Accumulated other comprehensive loss |
17,181 |
|
|
9,419 |
|
|
Total
shareholders' equity |
1,093,355 |
|
|
1,094,971 |
|
|
|
|
|
|
Noncontrolling interests in subsidiaries |
354 |
|
|
365 |
|
|
Total
equity |
1,093,709 |
|
|
1,095,336 |
|
|
|
|
|
|
|
|
|
Total
liabilities and equity |
$ |
2,416,517 |
|
|
$ |
2,359,426 |
|
|
The
following tables contain reconciliations of net income to
same-store net operating income for the periods presented (in
thousands): |
|
|
|
|
|
|
|
|
Three months
ended September 30, 2018 |
Multifamily |
|
Office |
|
Retail |
|
Total |
|
Same-store net
operating income(2) |
$ |
14,592 |
|
|
$ |
19,423 |
|
|
$ |
12,205 |
|
|
$ |
46,220 |
|
|
Add: Net
operating income from non-same-store properties(2) |
64 |
|
|
7,647 |
|
|
— |
|
|
7,711 |
|
|
Total net operating
income(3) |
$ |
14,656 |
|
|
$ |
27,070 |
|
|
$ |
12,205 |
|
|
$ |
53,931 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest
expense |
|
|
|
|
|
|
(12,499 |
) |
|
Depreciation and amortization |
|
|
|
|
|
|
(30,272 |
) |
|
General
and administrative expenses |
|
|
|
|
|
|
(5,267 |
) |
|
Net income |
|
|
|
|
|
|
5,893 |
|
|
Less: Net
loss attributable to noncontrolling interests in subsidiaries |
|
|
|
|
|
|
— |
|
|
Net income attributable
to the controlling interests |
|
|
|
|
|
|
$ |
5,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended September 30, 2017 |
Multifamily |
|
Office |
|
Retail |
|
Total |
|
Same-store net
operating income(2) |
$ |
14,106 |
|
|
$ |
18,662 |
|
|
$ |
11,917 |
|
|
$ |
44,685 |
|
|
Add: Net
operating income from non-same-store properties(2) |
414 |
|
|
8,074 |
|
|
— |
|
|
8,488 |
|
|
Total net operating
income(3) |
$ |
14,520 |
|
|
$ |
26,736 |
|
|
$ |
11,917 |
|
|
$ |
53,173 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
Other
income |
|
|
|
|
|
|
84 |
|
|
Interest
expense |
|
|
|
|
|
|
(12,176 |
) |
|
Depreciation and amortization |
|
|
|
|
|
|
(27,941 |
) |
|
General
and administrative expenses |
|
|
|
|
|
|
(5,327 |
) |
|
Real
estate impairment |
|
|
|
|
|
|
(5,000 |
) |
|
Net income |
|
|
|
|
|
|
2,813 |
|
|
Less: Net
loss attributable to noncontrolling interests in subsidiaries |
|
|
|
|
|
|
20 |
|
|
Net income attributable
to the controlling interests |
|
|
|
|
|
|
$ |
2,833 |
|
|
The
following tables contain reconciliations of net income to
same-store net operating income for the periods presented (in
thousands): |
|
|
|
|
|
|
|
|
Nine months
ended September 30, 2018 |
Multifamily |
|
Office |
|
Retail |
|
Total |
|
Same-store net
operating income(2) |
$ |
43,177 |
|
|
$ |
59,686 |
|
|
$ |
35,631 |
|
|
$ |
138,494 |
|
|
Add: Net
operating (loss) income from non-same-store properties(2) |
(21 |
) |
|
27,541 |
|
|
— |
|
|
27,520 |
|
|
Total net operating
income(3) |
$ |
43,156 |
|
|
$ |
87,227 |
|
|
$ |
35,631 |
|
|
$ |
166,014 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest
expense |
|
|
|
|
|
|
(38,647 |
) |
|
Depreciation and amortization |
|
|
|
|
|
|
(90,119 |
) |
|
General
and administrative expenses |
|
|
|
|
|
|
(16,737 |
) |
|
Real
estate impairment |
|
|
|
|
|
|
(1,886 |
) |
|
Loss on
extinguishment of debt |
|
|
|
|
|
|
(1,178 |
) |
|
Gain on
sale of real estate |
|
|
|
|
|
|
2,495 |
|
|
Net income |
|
|
|
|
|
|
19,942 |
|
|
Less: Net
loss attributable to noncontrolling interests in subsidiaries |
|
|
|
|
|
|
— |
|
|
Net income attributable
to the controlling interests |
|
|
|
|
|
|
$ |
19,942 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months
ended September 30, 2017 |
Multifamily |
|
Office |
|
Retail |
|
Total |
|
Same-store net
operating income(2) |
$ |
41,925 |
|
|
$ |
57,309 |
|
|
$ |
35,674 |
|
|
$ |
134,908 |
|
|
Add: Net
operating income from non-same-store properties(2) |
1,372 |
|
|
21,296 |
|
|
— |
|
|
22,668 |
|
|
Total net operating
income(3) |
$ |
43,297 |
|
|
$ |
78,605 |
|
|
$ |
35,674 |
|
|
$ |
157,576 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
Other
income |
|
|
|
|
|
|
209 |
|
|
Interest
expense |
|
|
|
|
|
|
(35,634 |
) |
|
Depreciation and amortization |
|
|
|
|
|
|
(83,271 |
) |
|
General
and administrative expenses |
|
|
|
|
|
|
(16,712 |
) |
|
Real
estate impairment |
|
|
|
|
|
|
(5,000 |
) |
|
Income
tax benefit |
|
|
|
|
|
|
107 |
|
|
Net income |
|
|
|
|
|
|
17,275 |
|
|
Less: Net
loss attributable to noncontrolling interests in subsidiaries |
|
|
|
|
|
|
56 |
|
|
Net income attributable
to the controlling interests |
|
|
|
|
|
|
$ |
17,331 |
|
|
The following table contains a reconciliation of net
income attributable to the controlling interests to core funds from
operations for the periods presented (in thousands, except per
share data): |
|
|
Three Months Ended September
30, |
|
Nine Months Ended September 30, |
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Net income |
|
$ |
5,893 |
|
|
$ |
2,813 |
|
|
$ |
19,942 |
|
|
$ |
17,275 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Real
estate depreciation and amortization |
|
30,272 |
|
|
27,941 |
|
|
90,119 |
|
|
83,271 |
|
|
Gain on
sale of depreciable real estate |
|
— |
|
|
— |
|
|
(2,495 |
) |
|
— |
|
|
Real
estate impairment |
|
— |
|
|
5,000 |
|
|
1,886 |
|
|
5,000 |
|
|
NAREIT funds from
operations(1) |
|
36,165 |
|
|
35,754 |
|
|
109,452 |
|
|
105,546 |
|
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Structuring expenses |
|
— |
|
|
— |
|
|
— |
|
|
319 |
|
|
Loss on
extinguishment of debt |
|
— |
|
|
— |
|
|
1,178 |
|
|
— |
|
|
Core funds from
operations(1) |
|
$ |
36,165 |
|
|
$ |
35,754 |
|
|
$ |
110,630 |
|
|
$ |
105,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
Per share
data: |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
NAREIT FFO |
(Basic) |
$ |
0.46 |
|
|
$ |
0.46 |
|
|
$ |
1.39 |
|
|
$ |
1.38 |
|
|
|
(Diluted) |
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
1.38 |
|
|
$ |
1.38 |
|
|
Core FFO |
(Basic) |
$ |
0.46 |
|
|
$ |
0.46 |
|
|
$ |
1.40 |
|
|
$ |
1.38 |
|
|
|
(Diluted) |
$ |
0.45 |
|
|
$ |
0.46 |
|
|
$ |
1.40 |
|
|
$ |
1.38 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
79,076 |
|
|
77,291 |
|
|
78,695 |
|
|
76,292 |
|
|
Weighted average shares
outstanding - diluted |
|
79,238 |
|
|
77,423 |
|
|
78,802 |
|
|
76,415 |
|
|
CONTACT: |
Tejal R. Engman |
Vice President, Investor Relations |
E-Mail: tengman@washreit.com |
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