Washington Real Estate Investment Trust (“WashREIT” or the
“Company”) (NYSE: WRE), a leading owner and operator of multifamily
and commercial properties in the Washington, DC area, reported
financial and operating results today for the quarter ended June
30, 2020:
Financial Results
- Net loss attributable to controlling interests was $5.4
million, or $0.07 per diluted share, primarily due to a loss
recognized on the sale of an office asset during the quarter
- NAREIT FFO(1) was $31.7 million, or $0.38 per diluted
share
- Core FFO(1) was $0.39 per diluted share
Operational Highlights
- Net Operating Income (NOI)(2) was $46.0 million
- Same-store(3) NOI declined 4.5% and cash NOI declined 3.5%
compared to the second quarter of 2019. The decline was primarily
driven by lower parking income, lease termination fees and expense
reimbursements, and higher bad debt expenses from our retail
assets
- Same-store multifamily NOI increased 0.7% compared to the
second quarter of 2019 and same-store multifamily cash NOI
increased 0.8%
- Total multifamily blended lease rate growth was 0.4%(4)
Financing Activity
- Prepaid $250 million 4.95% Senior Notes at par that were
scheduled to mature in October 2020 on April 2, 2020
- Entered into a one-year $150 million unsecured term loan
facility, maturing in May 2021 with a one-year extension option.
The term loan bears interest at LIBOR plus 150 basis points with a
LIBOR floor of 50 basis points. Proceeds were used to repay
borrowings under our revolving line of credit.
Liquidity Position
- Available liquidity of approximately $530 million as of June 30
consisting of the remaining capacity under the Company's $700
million revolving credit facility and cash on hand
- The Company has no secured debt and believes that it has the
ability to access the capital markets as well as agency debt
secured by multifamily assets
Cash Collections
Multifamily
- Collected over 99% of cash rent and 99% of contractual rent due
during the second quarter
- Agreed to provide $0.1 million of rent relief through payment
deferral programs as of July 22
Commercial
- Collected 97% of cash rent and 99% of contractual rent due from
office tenants during the second quarter
- Agreed to defer $1.2 million of rent due from office tenants
through payment deferral programs as of July 22
- Collected 72% of cash rent and 90% of contractual rent due from
retail tenants during the second quarter
- Agreed to defer $1.0 million of rent due from retail tenants
through payment deferral programs as of July 22
“We delivered solid second quarter performance
driven by strong cash collections despite the challenges presented
by the ongoing economic disruption due to COVID-19," said Paul T.
McDermott, President and CEO of WashREIT. "As our local economy
gradually reopens, our focus continues to center around the health
and safety of our residents, tenants and employees. We have taken a
thoughtful approach to re-entry planning, and I am proud of the
dedication shown by the WashREIT team to ensure that our efforts
and protocols align with the needs of our tenants. Looking forward,
we are confident in our ability to effectively manage through this
period of uncertainty and absorb the near-term impact, while
preserving our embedded growth and protecting long-term value. Our
strong multifamily performance underscores the value of our
research-driven capital allocation strategy, which has led us to
invest in well-located residential units that will be in the path
of growth once the economy resumes."
Second Quarter Operating
Results
The Company's overall portfolio NOI from
continuing operations was $46.0 million for the quarter ended
June 30, 2020 compared to $48.7 million in the corresponding
prior year period. The decrease was primarily driven by the impact
of our net asset sales during 2019 and thus far in 2020, each of
which was a result of our 2019 Strategic Capital Allocation
Plan.
Same store portfolio by sector:
- Multifamily Same-Store NOI - Same-store NOI
and cash NOI increased by 0.7% compared to the corresponding prior
year period driven by rental rate growth, offset in part, by lower
move-in and other fee income related to COVID-19. The Company
achieved 0.4% percent of blended year-over-year lease rate growth
comprised of 2% of blended lease rate growth for our non-same-store
portfolio and a decline in lease rates of 0.4% on a blended basis
for our same-store portfolio. At quarter end, the same-store
multifamily portfolio was 93.8% occupied(7) and the total operating
portfolio was 94.3% occupied.
- Office Same-Store NOI - Same-store NOI
decreased by 4.8% and cash NOI decreased by 3.7% compared to the
corresponding prior year period, primarily due to lower parking
income and lease termination fees, as well as, lower expense
reimbursements. Same-store average occupancy(6) declined 330 basis
points year-over-year and 80 basis points sequentially, primarily
due to expected lease expirations. The same-store office portfolio
was 86.8% occupied and 89.1% leased at quarter end.
- Other Same-Store NOI - Same-store NOI
decreased by 24.6% and cash NOI decreased by 22.1% compared to the
prior year period driven, in part, by approximately $0.6 million of
credit losses related to COVID-19. The same-store other portfolio
was 84.0% occupied and 87.0% leased at quarter end.
Leasing Activity
During the second quarter, WashREIT signed
commercial leases totaling 35,000 square feet, including 20,000
square feet of new leases and 15,000 square feet of renewal leases,
as follows (all dollar amounts are on a per square foot basis).
|
Square Feet |
WeightedAverage Term (in
years) |
WeightedAverage FreeRent Period (in
months) |
WeightedAverageRental Rates |
WeightedAverageRental Rate %
Increase |
TenantImprovements |
LeasingCommissions |
New: |
|
|
|
|
|
|
|
Office |
20,000 |
8.3 |
7.3 |
$54.89 |
0.8% |
$84.22 |
$23.48 |
|
|
|
|
|
|
|
|
Renewal: |
|
|
|
|
|
|
|
Office |
15,000 |
1.7 |
4.5 |
$52.44 |
19.4% |
$— |
$2.72 |
|
|
|
|
|
|
|
|
2020 Outlook
Given the uncertainty surrounding the duration
and extent of the pandemic and pace and durability of the recovery,
it is difficult to predict, with a reasonable degree of accuracy,
the impact on the Company's ability to collect rental revenue for
the remainder of 2020. As such, the Company is not
reinstating 2020 Guidance at this time.
The Company expects NOI and interest expense,
excluding future bad debt expenses, to be approximately $0.08 per
share lower than assumed in the Core FFO Guidance for 2020 as of
February 13, 2020. This estimate assumes a gradual phased recovery
over the balance of the year and reflects the following
impacts:
Core FFO attributable to the operating
multifamily portfolio to be approximately $0.03 per share lower
than assumed in the initial guidance (as of February 13, 2020) due
to the following impacts related to COVID-19:
- Temporary decline in average occupancy to 94% during the second
and third quarters of 2020. With the easing of stay-at-home
orders and increased staffing in our leasing offices, touring and
application volumes increased substantially from early April lows
and are trending above prior year levels for our same-store
portfolio. Occupancy is expected to gradually increase to 95% by
year-end.
- Lower new and renewal lease rate growth, combined with lower
move-in and other fee income partially offset by operating expense
saving initiatives. The majority of the impact of operating expense
savings related to lower turnover was recognized in the second
quarter.
The Company initially expected strong same-store
multifamily NOI growth during 2020 and now expects slightly
positive same-store multifamily growth for the year.
Core FFO attributable to the Trove multifamily
development is now assumed to be approximately $0.01 per share
lower than the initial guidance due to slower lease-up activity as
a result of COVID-19.
The NOI contribution of the commercial portfolio
excluding future bad debt expenses is now expected to be
approximately $0.08 per share lower than the initial guidance based
on the following assumed impacts related to COVID-19:
- Expected decline in revenue generated from speculative leasing
for 2020, partially offset, by the impact of higher revenue from
lease renewals and extensions. The vast majority of this
speculative leasing was expected to occur in high-quality space,
where leasing momentum had been the strongest. We now expect
this leasing to drive growth in 2021.
- Lower parking income than initially forecasted, offset in part,
by lower net operating expenses (i.e. net of recoveries) due to a
decline in office utilization
- Year-to-date bad debt expenses related to COVID-19 of
approximately $0.8 million
Excluding any future re-financings, interest
expense is expected to be approximately $0.04 per share lower than
the initial 2020 guidance.
These expectations are based on a number of
factors, many of which are outside the Company’s control and all of
which are subject to change. In particular, uncertainty regarding
the scope, severity and duration of disruptions, such as
quarantining and "shelter-in-place" orders, caused by the COVID-19
pandemic and any resulting economic impact, make it difficult to
assess future impacts with any degree of certainty. The Company may
provide updates to these expectations during the year as actual
results vary from these expectations, but undertakes no obligation
to do so.
Dividends
On July 6, 2020, WashREIT paid a quarterly
dividend of $0.30 per share.
WashREIT announced today that its Board of
Trustees has declared a quarterly dividend of $0.30 per share to be
paid on October 5, 2020 to shareholders of record on September 21,
2020.
Conference Call Information
The Conference Call for Second Quarter 2020
Earnings is scheduled for Wednesday, July 29, 2020 at 9:00
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 August 12, 2020 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: |
56871 |
|
|
The live on-demand webcast of the Conference
Call will be available on the Investor section of WashREIT's
website at www.washreit.com. Online playback of the webcast will be
available following the Conference Call.
About WashREIT
WashREIT 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. As of
July 28, 2020, the Company's portfolio of 45 properties includes
approximately 3.7 million square feet of commercial space and 6,861
multifamily apartment units. These 45 properties consist of 22
multifamily properties,15 office properties, and 8 retail centers.
Our shares trade on the NYSE and our company currently has an
enterprise value of approximately $3 billion. With a track record
of driving returns and delivering satisfaction, we are a trusted
authority in one of the nation's most competitive real estate
markets.
Note: WashREIT'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 WashREIT to be
materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Currently, one of the most significant factors is the
adverse effect of the COVID-19 virus and ensuing economic turmoil
on the financial condition, results of operations, cash flows and
performance of WashREIT, particularly the impact of our ability to
collect rent on schedule or at all, our ability to lease or release
our commercial spaces, and increased credit losses, on the
performance of our tenants generally, and on the global economy and
financial markets. The extent to which COVID-19 impacts WashREIT
and its tenants will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including
the scope, severity and duration of the pandemic, the actions taken
to contain the pandemic or mitigate its impact, and the direct and
indirect economic effects of the pandemic and containment measures,
among others. Moreover, investors are cautioned to interpret many
of the risks identified in the risk factors discussed in our Annual
Report on Form 10-K for the year ended December 31, 2019, as
amended by Amendment No. 1 to the Annual Report on Form 10-K, filed
on March 6, 2020, and our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020, filed on April 27, 2020, as being
heightened as a result of the ongoing and numerous adverse impacts
of COVID-19. Additional factors which may cause the actual results,
performance, or achievements of WashREIT to be materially different
from future results, performance or achievements expressed or
implied by such forward-looking statements 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; the risk of failure
to enter into/and or complete contemplated acquisitions and
dispositions at all, within the price ranges anticipated and on the
terms and timing anticipated; changes in the composition of our
portfolio; 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, natural disasters and pandemics;
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 2019 Form
10-K, as amended by Amendment No. 1 to the Annual Report on Form
10-K, filed on March 6, 2020, 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 to reflect new information, future events, or
otherwise.
This Earnings Release also includes certain
forward-looking non-GAAP information. Due to the high variability
and difficulty in making accurate forecasts and projections of some
of the information excluded from these estimates, together with
some of the excluded information not being ascertainable or
accessible, the Company is unable to quantify certain amounts that
would be required to be included in the most directly comparable
GAAP financial measures without unreasonable efforts
(1) NAREIT Funds From Operations (“FFO”)
is defined by the National Association of Real Estate Investment
Trusts, Inc. (“NAREIT”) in its NAREIT FFO White Paper - 2018
Restatement 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 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 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. NAREIT FFO is a non-GAAP measure.
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 WashREIT's
operating portfolio and affect the comparative measurement of
WashREIT'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,
severance expenses and other expenses related to corporate
restructuring 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
WashREIT'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 or loss on sale, if any), plus interest expense, depreciation
and amortization, lease origination expenses, general and
administrative expenses, 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.
(3) 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 year being compared, and exclude properties under
redevelopment or development and properties acquired, sold or
classified as held for sale during the year 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 year 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.
(4) Lease rate growth is defined as the
average percentage change in effective rent (net of concessions)
for a new or renewed lease compared to the prior lease based on the
move-in date. The blended rate represents the weighted average of
new and renewal lease rate growth achieved.
(5) Consists of retail centers not
classified as discontinued operations: Takoma Park, Westminster,
Concord Centre, Chevy Chase Metro Plaza, 800 S. Washington Street,
Randolph Shopping Center, Montrose Shopping Center and Spring
Valley Village. Pursuant to our Strategic Capital Allocation Plan,
and following completion of the above described dispositions of our
retail assets, we no longer report “Retail” as a separate operating
segment.
(6) Average Occupancy is based on monthly
occupied net rentable square footage or monthly occupied
multifamily units as a percentage of total net rentable square
footage or total multifamily units, respectively.
(7) Ending Occupancy is calculated as occupied
square footage or multifamily units as a percentage of total square
footage of multifamily units, respectively, as of the last day of
that period.
|
Ending
Occupancy (i) Levels by Same-Store Properties (ii) and All
Properties |
|
Ending Occupancy |
|
Same-Store Properties |
|
All Properties |
|
2nd QTR |
|
2nd QTR |
|
2nd QTR |
|
2nd QTR |
Segment |
2020 |
|
2019 |
|
2020 |
|
2019 |
Multifamily |
93.8 |
% |
|
95.2 |
% |
|
89.8 |
% |
|
95.3 |
% |
Office |
86.8 |
% |
|
89.2 |
% |
|
86.8 |
% |
|
90.7 |
% |
Other (iii) |
84.0 |
% |
|
88.7 |
% |
|
84.0 |
% |
|
91.5 |
% |
|
|
|
|
|
|
|
|
Overall Portfolio |
90.0 |
% |
|
92.2 |
% |
|
89.4 |
% |
|
93.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(i) Ending occupancy is calculated as occupied
square footage as a percentage of total square footage as of the
last day of that period, except for the row labeled "Multifamily,"
on which ending occupancy is calculated as occupied units as a
percentage of total available units as of the last day of that
period. The occupied square footage for office and other properties
includes short-term lease agreements.
(ii) 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 are 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 are 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 Q2 2020
and Q2 2019, same-store properties exclude:
|
Acquisitions: |
|
|
Multifamily - Assembly Alexandria, Assembly Manassas, Assembly
Dulles, Assembly Leesburg, Assembly Herndon, Assembly Germantown,
Assembly Watkins Mill and Cascade at Landmark |
Development: |
|
|
Multifamily - The Trove |
Sold properties: |
|
|
Office - Quantico Corporate Center, 1776 G Street and John Marshall
II |
Discontinued Operations: |
|
|
Retail - Wheaton Park, Bradlee Shopping Center, Shoppes at
Foxchase, Gateway Overlook, Olney Village Center, Frederick County
Square, Centre at Hagerstown and Frederick Crossing |
|
|
|
(iii) Same-Store Other consists of retail
properties not classified as discontinued operations: Takoma Park,
Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.
Washington Street, Randolph Shopping Center, Montrose Shopping
Center and Spring Valley Village. All Properties Other also
includes discontinued operations.
(8) 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.
|
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
FINANCIAL HIGHLIGHTS |
(In thousands, except per share data) |
(Unaudited) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
OPERATING
RESULTS |
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Real estate rental revenue |
$ |
72,870 |
|
|
$ |
76,820 |
|
|
$ |
149,662 |
|
|
$ |
148,254 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
Real estate expenses |
26,885 |
|
|
28,134 |
|
|
55,524 |
|
|
54,277 |
|
Depreciation and amortization |
29,599 |
|
|
33,044 |
|
|
59,319 |
|
|
60,101 |
|
General and administrative expenses |
5,296 |
|
|
5,535 |
|
|
11,633 |
|
|
13,342 |
|
Real estate impairment |
— |
|
|
— |
|
|
— |
|
|
8,374 |
|
|
61,780 |
|
|
66,713 |
|
|
126,476 |
|
|
136,094 |
|
Loss on sale of real estate |
(7,539 |
) |
|
(1,046 |
) |
|
(7,539 |
) |
|
(1,046 |
) |
Real estate operating
income |
3,551 |
|
|
9,061 |
|
|
15,647 |
|
|
11,114 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
(8,751 |
) |
|
(15,252 |
) |
|
(19,596 |
) |
|
(27,748 |
) |
(Loss) gain on extinguishment of debt |
(206 |
) |
|
— |
|
|
262 |
|
|
— |
|
|
(8,957 |
) |
|
(15,252 |
) |
|
(19,334 |
) |
|
(27,748 |
) |
Loss from continuing
operations |
(5,406 |
) |
|
(6,191 |
) |
|
(3,687 |
) |
|
(16,634 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
— |
|
|
7,178 |
|
|
— |
|
|
13,216 |
|
Net (loss) income |
(5,406 |
) |
|
987 |
|
|
(3,687 |
) |
|
(3,418 |
) |
Less: Net income attributable
to noncontrolling interests in subsidiaries |
— |
|
|
— |
|
|
— |
|
|
— |
|
Net (loss) income attributable
to the controlling interests |
$ |
(5,406 |
) |
|
$ |
987 |
|
|
$ |
(3,687 |
) |
|
$ |
(3,418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
$ |
(5,406 |
) |
|
$ |
(6,191 |
) |
|
$ |
(3,687 |
) |
|
$ |
(16,634 |
) |
Depreciation and
amortization |
29,599 |
|
|
33,044 |
|
|
59,319 |
|
|
60,101 |
|
Loss on sale of depreciable
real estate |
7,539 |
|
|
1,046 |
|
|
7,539 |
|
|
1,046 |
|
Funds from continuing operations |
$ |
31,732 |
|
|
$ |
27,899 |
|
|
$ |
63,171 |
|
|
$ |
52,887 |
|
Income from discontinued
operations |
— |
|
|
7,178 |
|
|
— |
|
|
13,216 |
|
Discontinued operations real
estate depreciation and amortization |
— |
|
|
2,377 |
|
|
— |
|
|
4,867 |
|
Funds from discontinued operations |
— |
|
|
9,555 |
|
|
— |
|
|
18,083 |
|
NAREIT funds from operations
(1) |
$ |
31,732 |
|
|
$ |
37,454 |
|
|
$ |
63,171 |
|
|
$ |
70,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash loss (gain) on
extinguishment of debt |
204 |
|
|
— |
|
|
(1,177 |
) |
|
$ |
— |
|
Tenant improvements and
incentives |
(1,877 |
) |
|
(3,576 |
) |
|
(2,949 |
) |
|
(5,845 |
) |
External and internal leasing
commissions capitalized |
(797 |
) |
|
(1,925 |
) |
|
(1,326 |
) |
|
(2,428 |
) |
Recurring capital
improvements |
(824 |
) |
|
(1,049 |
) |
|
(1,812 |
) |
|
(1,367 |
) |
Straight-line rents, net |
(655 |
) |
|
(966 |
) |
|
(1,318 |
) |
|
(1,790 |
) |
Non-cash fair value interest
expense |
— |
|
|
(209 |
) |
|
(59 |
) |
|
(421 |
) |
Non-real estate depreciation
& amortization of debt costs |
910 |
|
|
1,320 |
|
|
1,852 |
|
|
2,321 |
|
Amortization of lease
intangibles, net |
544 |
|
|
573 |
|
|
1,001 |
|
|
1,151 |
|
Amortization and expensing of
restricted share and unit compensation |
1,644 |
|
|
1,701 |
|
|
3,422 |
|
|
4,527 |
|
Funds available for
distribution |
$ |
30,881 |
|
|
$ |
33,323 |
|
|
$ |
60,805 |
|
|
$ |
67,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Per share
data: |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Loss from continuing operations |
(Basic) |
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.21 |
) |
|
(Diluted) |
$ |
(0.07 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.21 |
) |
Net (loss) income attributable
to the controlling interests |
(Basic) |
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.05 |
) |
|
(Diluted) |
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
$ |
(0.05 |
) |
NAREIT FFO |
(Basic) |
$ |
0.38 |
|
|
$ |
0.47 |
|
|
$ |
0.77 |
|
|
$ |
0.88 |
|
|
(Diluted) |
$ |
0.38 |
|
|
$ |
0.47 |
|
|
$ |
0.76 |
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.60 |
|
|
$ |
0.60 |
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic |
82,153 |
|
|
79,934 |
|
|
82,120 |
|
|
79,908 |
|
Weighted average
shares outstanding - diluted |
82,153 |
|
|
79,934 |
|
|
82,120 |
|
|
79,908 |
|
Weighted average
shares outstanding - diluted (for NAREIT FFO) |
82,323 |
|
|
79,998 |
|
|
82,305 |
|
|
79,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In thousands, except per share data) |
|
|
|
|
|
June 30, 2020 |
|
|
|
(unaudited) |
|
December 31, 2019 |
Assets |
|
|
|
Land |
$ |
574,025 |
|
|
$ |
566,807 |
|
Income producing property |
2,467,629 |
|
|
2,392,415 |
|
|
3,041,654 |
|
|
2,959,222 |
|
Accumulated depreciation and amortization |
(745,692 |
) |
|
(693,610 |
) |
Net income producing property |
2,295,962 |
|
|
2,265,612 |
|
Properties under development or held for future development |
89,166 |
|
|
124,193 |
|
Total real estate held for investment, net |
2,385,128 |
|
|
2,389,805 |
|
Investment in real estate held for sale, net |
— |
|
|
57,028 |
|
Cash and cash equivalents |
7,971 |
|
|
12,939 |
|
Restricted cash |
630 |
|
|
1,812 |
|
Rents and other receivables |
67,026 |
|
|
65,259 |
|
Prepaid expenses and other assets |
81,967 |
|
|
95,149 |
|
Other assets related to properties held for sale |
— |
|
|
6,336 |
|
Total assets |
$ |
2,542,722 |
|
|
$ |
2,628,328 |
|
|
|
|
|
Liabilities |
|
|
|
Notes payable, net |
$ |
897,060 |
|
|
$ |
996,722 |
|
Mortgage notes payable, net |
— |
|
|
47,074 |
|
Line of credit |
181,000 |
|
|
56,000 |
|
Accounts payable and other liabilities |
93,192 |
|
|
71,136 |
|
Dividend payable |
24,760 |
|
|
24,668 |
|
Advance rents |
7,375 |
|
|
9,353 |
|
Tenant security deposits |
10,769 |
|
|
10,595 |
|
Other liabilities related to properties held for sale |
— |
|
|
718 |
|
Total liabilities |
1,214,156 |
|
|
1,216,266 |
|
|
|
|
|
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; 82,327 and 82,099 shares issued and
outstanding, as of June 30, 2020 and December 31, 2019,
respectively |
823 |
|
|
821 |
|
Additional paid-in capital |
1,598,620 |
|
|
1,592,487 |
|
Distributions in excess of net income |
(236,673 |
) |
|
(183,405 |
) |
Accumulated other comprehensive (loss) income |
(34,533 |
) |
|
1,823 |
|
Total shareholders' equity |
1,328,237 |
|
|
1,411,726 |
|
|
|
|
|
Noncontrolling interests in subsidiaries |
329 |
|
|
336 |
|
Total equity |
1,328,566 |
|
|
1,412,062 |
|
|
|
|
|
Total liabilities and equity |
$ |
2,542,722 |
|
|
$ |
2,628,328 |
|
|
|
|
|
|
|
|
|
The following
tables contain reconciliations of net income to same-store net
operating income for the periods presented (in thousands): |
|
|
|
|
|
|
|
|
Three months ended
June 30, 2020 |
Multifamily |
|
Office |
|
Corporateand other |
|
Total |
Same-store net operating income (3) |
$ |
15,367 |
|
|
$ |
21,171 |
|
|
$ |
2,660 |
|
|
$ |
39,198 |
|
Add: Net operating income from non-same-store properties (3) |
6,561 |
|
|
226 |
|
|
— |
|
|
6,787 |
|
Total net operating income
(2) |
$ |
21,928 |
|
|
$ |
21,397 |
|
|
$ |
2,660 |
|
|
$ |
45,985 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(8,751 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(29,599 |
) |
General and administrative expenses |
|
|
|
|
|
|
(5,296 |
) |
Loss on extinguishment of debt |
|
|
|
|
|
|
(206 |
) |
Loss on sale of real estate |
|
|
|
|
|
|
(7,539 |
) |
Net loss |
|
|
|
|
|
|
(5,406 |
) |
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net loss attributable to the
controlling interests |
|
|
|
|
|
|
$ |
(5,406 |
) |
|
|
|
|
|
|
|
|
Three months ended
June 30, 2019 |
Multifamily |
|
Office |
|
Corporateand other |
|
Total |
Same-store net operating
income (3) |
$ |
15,255 |
|
|
$ |
22,243 |
|
|
$ |
3,529 |
|
|
$ |
41,027 |
|
Add: Net operating income from non-same-store properties (3) |
3,406 |
|
|
4,253 |
|
|
— |
|
|
7,659 |
|
Total net operating income
(2) |
$ |
18,661 |
|
|
$ |
26,496 |
|
|
$ |
3,529 |
|
|
$ |
48,686 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(15,252 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(33,044 |
) |
General and administrative expenses |
|
|
|
|
|
|
(5,535 |
) |
Loss on sale of real estate |
|
|
|
|
|
|
(1,046 |
) |
Loss from continuing
operations |
|
|
|
|
|
|
(6,191 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
|
|
7,178 |
|
Net income |
|
|
|
|
|
|
987 |
|
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the
controlling interests |
|
|
|
|
|
|
$ |
987 |
|
|
|
|
|
|
|
|
|
|
|
The following
tables contain reconciliations of net income to same-store net
operating income for the periods presented (in thousands): |
|
|
|
|
|
|
|
|
Six months ended June
30, 2020 |
Multifamily |
|
Office |
|
Corporateand Other |
|
Total |
Same-store net operating income(3) |
$ |
31,244 |
|
|
$ |
42,418 |
|
|
$ |
5,867 |
|
|
$ |
79,529 |
|
Add: Net operating income from non-same-store properties(3) |
13,277 |
|
|
1,332 |
|
|
— |
|
|
14,609 |
|
Total net operating
income(2) |
$ |
44,521 |
|
|
$ |
43,750 |
|
|
$ |
5,867 |
|
|
$ |
94,138 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(19,596 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(59,319 |
) |
General and administrative expenses |
|
|
|
|
|
|
(11,633 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
262 |
|
Loss on sale of real estate |
|
|
|
|
|
|
(7,539 |
) |
Net loss |
|
|
|
|
|
|
(3,687 |
) |
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net loss attributable to the
controlling interests |
|
|
|
|
|
|
$ |
(3,687 |
) |
|
|
|
|
|
|
|
|
Six months ended June
30, 2019 |
Multifamily |
|
Office |
|
Corporateand Other |
|
Total |
Same-store net operating
income(3) |
$ |
30,120 |
|
|
$ |
44,999 |
|
|
$ |
6,886 |
|
|
$ |
82,005 |
|
Add: Net operating income from non-same-store properties(3) |
3,406 |
|
|
8,566 |
|
|
— |
|
|
11,972 |
|
Total net operating
income(2) |
$ |
33,526 |
|
|
$ |
53,565 |
|
|
$ |
6,886 |
|
|
$ |
93,977 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(27,748 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(60,101 |
) |
General and administrative expenses |
|
|
|
|
|
|
(13,342 |
) |
Real estate impairment |
|
|
|
|
|
|
(8,374 |
) |
Loss on sale of real estate |
|
|
|
|
|
|
(1,046 |
) |
Loss from continuing
operations |
|
|
|
|
|
|
(16,634 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
|
|
13,216 |
|
Net loss |
|
|
|
|
|
|
(3,418 |
) |
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net loss attributable to the
controlling interests |
|
|
|
|
|
|
$ |
(3,418 |
) |
|
|
|
|
|
|
|
|
|
|
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 June 30, |
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net (loss) income |
|
$ |
(5,406 |
) |
|
$ |
987 |
|
|
$ |
(3,687 |
) |
|
$ |
(3,418 |
) |
Add: |
|
|
|
|
|
|
|
|
Real estate depreciation and amortization |
|
29,599 |
|
|
33,044 |
|
|
59,319 |
|
|
60,101 |
|
Loss on sale of depreciable real estate |
|
7,539 |
|
|
1,046 |
|
|
7,539 |
|
|
1,046 |
|
Real estate impairment |
|
— |
|
|
— |
|
|
— |
|
|
8,374 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
Real estate depreciation and amortization |
|
— |
|
|
2,377 |
|
|
— |
|
|
4,867 |
|
NAREIT funds from operations
(1) |
|
31,732 |
|
|
37,454 |
|
|
63,171 |
|
|
70,970 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Restructuring expenses |
|
— |
|
|
200 |
|
|
— |
|
|
2,096 |
|
Loss (gain) on extinguishment of debt |
|
206 |
|
|
— |
|
|
(262 |
) |
|
— |
|
Core funds from operations
(1) |
|
$ |
31,938 |
|
|
$ |
37,654 |
|
|
$ |
62,909 |
|
|
$ |
73,066 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Per share
data: |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
NAREIT FFO |
(Basic) |
$ |
0.38 |
|
|
$ |
0.47 |
|
|
$ |
0.77 |
|
|
$ |
0.88 |
|
|
(Diluted) |
$ |
0.38 |
|
|
$ |
0.47 |
|
|
$ |
0.76 |
|
|
$ |
0.88 |
|
Core FFO |
(Basic) |
$ |
0.39 |
|
|
$ |
0.47 |
|
|
$ |
0.76 |
|
|
$ |
0.91 |
|
|
(Diluted) |
$ |
0.39 |
|
|
$ |
0.47 |
|
|
$ |
0.76 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
82,153 |
|
|
79,934 |
|
|
82,120 |
|
|
79,908 |
|
Weighted average shares
outstanding - diluted (for NAREIT and Core FFO) |
|
82,323 |
|
|
79,998 |
|
|
82,305 |
|
|
79,989 |
|
|
CONTACT: |
Amy
Hopkins |
Vice
President, Investor Relations |
E-Mail:
ahopkins@washreit.com |
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