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
September 30, 2020:
Financial Results
- Net loss attributable to controlling interests was $1.0
million, or $0.01 per diluted share
- NAREIT FFO(1) was $29.5 million, or $0.36 per diluted
share
- Core FFO(1) was $0.36 per diluted share
Operational Highlights
- Net Operating Income (NOI)(2) was $44.6 million
- Same-store(3) NOI declined 4.9% and cash NOI declined 4.1%
compared to the third quarter of 2019 due primarily to lower
commercial parking income and higher credit loss related to
COVID-19
- Cash collection rates improved from the second quarter of
2020
- Total credit losses related to COVID-19 of $0.8 million
improved slightly from the second quarter of 2020
- Multifamily occupancy at quarter end excluding Trove increased
30 basis points compared to the second quarter of 2020, Office
ending occupancy declined 20 basis points, and Other(5) ending
occupancy increased 280 basis points compared to the second quarter
of 2020
- Multifamily new and renewal lease rates(4) for suburban
properties increased approximately 1.1% on a blended basis while
urban property lease rates declined 2.9% on a blended basis. Total
new and renewal lease rates declined 1.7% on a blended basis during
the quarter.
Financing Activity
- Executed a $350 million 10-year 3.44% Green Bond, the closing
and funding of which is expected to occur no later than December
29, 2020. The Company intends to allocate the net proceeds from the
offering to finance or refinance recently completed and future
green building and energy efficiency, sustainable water and
wastewater management and renewable energy projects (“Eligible
Green Projects”). Pending allocation to such Eligible Green
Projects, WashREIT expects to repay $300 million of existing term
loans with the balance to pay down amounts due under the revolving
credit facility. Following the closing and funding of the Green
Bond and the repayment of the term loans, the Company will have no
debt maturing until the fourth quarter of 2022.
Liquidity Position
- Available liquidity of approximately $520 million as of
September 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 if needed
Cash Collections
Multifamily
- Collected 99% of cash rent and 99% of contractual rent due
during the third quarter
- Deferred $60 thousand of rent due from multifamily residents,
net,(6) year-to-date
Commercial
- Collected 97% of cash rent and 99% of contractual rent due from
office tenants during the third quarter
- Deferred $1.4 million of rent due from office tenants, net,
year-to-date
- Collected 88% of cash rent and 95% of contractual rent due from
retail tenants during the third quarter
- Deferred $1.0 million of rent due from retail tenants, net,
year-to-date
“Our portfolio has demonstrated strong, stable
credit performance and the Washington Metro continues to experience
lower unemployment than most other major metropolitan areas and the
U.S. overall," said Paul T. McDermott, President and CEO of
WashREIT. "Our multifamily collections are consistently above
national averages and our suburban expansion through the Assembly
Portfolio acquisition is proving to be a prudent allocation of
capital. Our office portfolio is well positioned with a weighted
average lease maturity of over five years, strong and stable rent
collection rates, no exposure to co-working tenants and limited
near-term lease expirations. While our operating environment has
changed drastically over the past seven months and remains
challenging, we have swiftly adjusted to the new demands of today’s
market and remain well positioned to bolster our long-term
strategic growth plans once conditions improve."
Third Quarter Operating
Results
The Company's overall portfolio NOI from
continuing operations was $44.6 million for the quarter ended
September 30, 2020 compared to $49.6 million in the
corresponding prior year period. The decrease was primarily driven
by the impact of net transaction activity during 2019 and 2020, and
lower parking income and higher credit losses as a result of
COVID-19.
Same-Store Portfolio by Sector:
- Multifamily Same-Store NOI - Same-store NOI
and cash NOI decreased by 3.8% compared to the corresponding prior
year quarter driven by lower average occupancy and lower move-in
and other fees due to COVID-19. Lease rates declined 1.7% on a
blended basis year-over-year, comprised of 1.1% of blended lease
rate growth for our suburban properties and an average lease rate
decline of 2.9% on a blended basis for our urban properties. At
quarter end, our same-store portfolio was 94.0% occupied and our
total operating portfolio, which includes all of our multifamily
properties except Trove, was 94.6% occupied and 96.5% leased.(7)
- Office Same-Store NOI - Same-store NOI
decreased by 4.9% and cash NOI decreased by 3.7% compared to the
corresponding prior year period, primarily due to lower parking
income, known move-outs and an increase in bad debt expenses
related to COVID-19. Same-store average occupancy(8) increased 10
basis points sequentially but declined 280 basis points
year-over-year due to expected lease expirations. The office
portfolio was 86.6% occupied and 87.8% leased at quarter
end.
- Other Same-Store NOI - Same-store NOI and cash
NOI decreased by $0.3 million compared to the prior year period
driven, in part, by approximately $0.2 million of credit losses
related to COVID-19. The Other portfolio was 86.8% occupied and
88.8% leased at quarter end.
Leasing Activity
During the third quarter, WashREIT signed
commercial leases totaling 73,000 square feet, including 25,000
square feet of new leases and 48,000 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 |
19,000 |
5.3 |
6.2 |
$45.74 |
10.0% |
$46.73 |
$11.99 |
Retail |
6,000 |
12.1 |
5.2 |
18.87 |
—% |
27.87 |
1.47 |
Total |
25,000 |
6.9 |
6.1 |
39.41 |
8.8% |
42.29 |
9.51 |
|
|
|
|
|
|
|
|
Renewal: |
|
|
|
|
|
|
|
Office |
40,000 |
7.2 |
6.9 |
$39.15 |
17.6% |
$22.84 |
$5.19 |
Retail |
8,000 |
1.8 |
5.4 |
41.27 |
16.4% |
— |
— |
Total |
48,000 |
6.3 |
6.7 |
39.49 |
17.4% |
19.18 |
4.36 |
2020 Guidance
On April 22, 2020, the Company withdrew its 2020 Core FFO
guidance, originally provided in its February 13, 2020 Earnings
Release, in light of uncertainty surrounding the COVID-19 pandemic
and the related impact on the Company's business. The Company is
reinstating its full-year 2020 guidance, including in light of the
benefit of two additional quarters of actual results.
Notwithstanding this improved visibility, uncertainty remains as to
the risk and magnitude of COVID-19 resurgence, as well as the
economic consequences of the pandemic.
|
Full Year 2020 |
Core FFO per diluted
share |
$1.44 - $1.46 |
Same-Store NOI |
|
Multifamily |
$59.25 million - $59.75 million |
Office |
$81.5 million - $82.0 million |
Other NOI |
$11.5 million - $12.0 million |
Non Same-Store Multifamily
NOI |
$26.75 million - $27.25 million |
Corporate Expenses |
|
G&A and Leasing Expenses |
$23.5 million - $24.0 million |
Interest Expense |
$37.5 million - $37.75 million |
Development Expenditures |
$30.0 million - $35.0 million |
The non same-store multifamily properties in
2020 consist of the Assembly Portfolio, Cascade at Landmark, and
Trove multifamily development. John Marshall II is the only non
same-store office property in 2020.
WashREIT's 2020 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. WashREIT may change the
guidance provided during the year as actual and anticipated results
vary from these assumptions, but WashREIT undertakes no obligation
to do so.
2020 Guidance Reconciliation
Table
A reconciliation of projected net loss
attributable to the controlling interests per diluted share to
projected Core FFO per diluted share for the year ending December
31, 2020, reflecting the dispositions assumptions above, is as
follows:
|
Low |
|
High |
Net income attributable to the controlling interests per diluted
share(a)
|
$ |
(0.02 |
) |
$ |
— |
Real estate depreciation and amortization(b) |
1.46 |
|
1.46 |
NAREIT FFO per diluted share |
1.44 |
|
1.46 |
Core adjustments |
— |
|
— |
Core FFO per diluted share
|
$ |
1.44 |
|
$ |
1.46 |
(a) Excludes gains or losses on sale of real
estate (b) Includes impact from planned disposition during the
year
Dividends
On October 5, 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 January 6, 2021 to shareholders of record on December 23,
2020.
Conference Call Information
The Conference Call for Third Quarter 2020
Earnings is scheduled for Friday, October 30, 2020 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 November 13, 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: |
56872 |
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 Metro area. Backed by decades
of experience, expertise and ambition, we create value by
transforming insights into strategy and strategy into action. As of
October 29, 2020, the Company's portfolio of 45 properties includes
approximately 3.7 million square feet of commercial space and 6,863
multifamily apartment units. These 45 properties consist of 22
multifamily properties,15 office properties, and 8 retail centers.
Our shares trade on the NYSE. 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 closing and funding of our
recent notes offering, 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) Represents total outstanding deferred
rent net of the amount that has been repaid
(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.
(8) 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.
(9) 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.
Ending
Occupancy (i) Levels by Same-Store Properties (ii) and All
Properties |
|
|
|
Ending Occupancy |
|
Same-Store Properties |
|
All Properties |
|
3rd QTR |
|
3rd QTR |
|
3rd QTR |
|
3rd QTR |
Segment |
2020 |
|
2019 |
|
2020 |
|
2019 |
Multifamily (iiii) |
94.0 |
% |
|
95.1 |
% |
|
94.6 |
% |
|
95.0 |
% |
Office |
86.6 |
% |
|
88.7 |
% |
|
86.6 |
% |
|
90.3 |
% |
Other (iii) |
86.8 |
% |
|
89.0 |
% |
|
86.8 |
% |
|
89.0 |
% |
|
|
|
|
|
|
|
|
Overall Portfolio (iiii) |
90.3 |
% |
|
91.9 |
% |
|
91.6 |
% |
|
93.0 |
% |
(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 Q3 2020
and Q3 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:
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.
(iiii) Ending occupancy excludes the addition of the total
rentable units at Trove, which began to lease-up in the first
quarter of 2020. Including Trove, multifamily ending occupancy was
90.5% and overall portfolio ending occupancy was 89.5% as of
September 30, 2020.
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 |
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
|
|
|
|
|
|
|
Real estate rental revenue |
$ |
73,227 |
|
|
$ |
80,259 |
|
|
$ |
222,889 |
|
|
$ |
228,513 |
|
Expenses |
|
|
|
|
|
|
|
Real estate expenses |
28,672 |
|
|
30,692 |
|
|
84,196 |
|
|
84,969 |
|
Depreciation and amortization |
30,470 |
|
|
37,340 |
|
|
89,789 |
|
|
97,441 |
|
General and administrative expenses |
6,330 |
|
|
6,461 |
|
|
17,963 |
|
|
19,803 |
|
Real estate impairment |
— |
|
|
— |
|
|
— |
|
|
8,374 |
|
|
65,472 |
|
|
74,493 |
|
|
191,948 |
|
|
210,587 |
|
Loss on sale of real estate |
— |
|
|
— |
|
|
(7,539 |
) |
|
(1,046 |
) |
Real estate operating
income |
7,755 |
|
|
5,766 |
|
|
23,402 |
|
|
16,880 |
|
Other (expense) income: |
|
|
|
|
|
|
|
Interest expense |
(8,711 |
) |
|
(14,198 |
) |
|
(28,307 |
) |
|
(41,946 |
) |
Gain on extinguishment of debt |
— |
|
|
— |
|
|
262 |
|
|
— |
|
|
(8,711 |
) |
|
(14,198 |
) |
|
(28,045 |
) |
|
(41,946 |
) |
Loss from continuing
operations |
(956 |
) |
|
(8,432 |
) |
|
(4,643 |
) |
|
(25,066 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
— |
|
|
2,942 |
|
|
— |
|
|
16,158 |
|
Gain on sale of real estate |
— |
|
|
339,024 |
|
|
— |
|
|
339,024 |
|
Loss on extinguishment of debt |
— |
|
|
(764 |
) |
|
— |
|
|
(764 |
) |
Income from discontinued operations |
— |
|
|
341,202 |
|
|
— |
|
|
354,418 |
|
Net (loss) income |
(956 |
) |
|
332,770 |
|
|
(4,643 |
) |
|
329,352 |
|
Less: Net income attributable
to noncontrolling interests in subsidiaries |
— |
|
|
— |
|
|
— |
|
|
— |
|
Net (loss) income attributable
to the controlling interests |
$ |
(956 |
) |
|
$ |
332,770 |
|
|
$ |
(4,643 |
) |
|
$ |
329,352 |
|
|
|
|
|
|
|
|
|
Loss from continuing
operations |
$ |
(956 |
) |
|
$ |
(8,432 |
) |
|
$ |
(4,643 |
) |
|
$ |
(25,066 |
) |
Depreciation and
amortization |
30,470 |
|
|
37,340 |
|
|
89,789 |
|
|
97,441 |
|
Real estate impairment |
— |
|
|
— |
|
|
— |
|
|
8,374 |
|
Loss on sale of depreciable
real estate |
— |
|
|
— |
|
|
7,539 |
|
|
1,046 |
|
Funds from continuing operations |
$ |
29,514 |
|
|
$ |
28,908 |
|
|
$ |
92,685 |
|
|
$ |
81,795 |
|
Income from discontinued
operations |
— |
|
|
341,202 |
|
|
— |
|
|
354,418 |
|
Discontinued operations real
estate depreciation and amortization |
— |
|
|
59 |
|
|
— |
|
|
4,926 |
|
Gain on sale of real
estate |
— |
|
|
(339,024 |
) |
|
— |
|
|
(339,024 |
) |
Funds from discontinued operations |
— |
|
|
2,237 |
|
|
— |
|
|
20,320 |
|
NAREIT funds from operations
(1) |
$ |
29,514 |
|
|
$ |
31,145 |
|
|
$ |
92,685 |
|
|
$ |
102,115 |
|
|
|
|
|
|
|
|
|
Non-cash gain on
extinguishment of debt |
— |
|
|
(244 |
) |
|
(1,177 |
) |
|
$ |
(244 |
) |
Tenant improvements and
incentives |
(4,013 |
) |
|
(3,196 |
) |
|
(6,962 |
) |
|
(9,041 |
) |
External and internal leasing
commissions capitalized |
(1,081 |
) |
|
(1,243 |
) |
|
(2,407 |
) |
|
(3,671 |
) |
Recurring capital
improvements |
(1,068 |
) |
|
(1,034 |
) |
|
(2,880 |
) |
|
(2,401 |
) |
Straight-line rents, net |
(522 |
) |
|
(713 |
) |
|
(1,840 |
) |
|
(2,503 |
) |
Non-cash fair value interest
expense |
— |
|
|
(179 |
) |
|
(59 |
) |
|
(600 |
) |
Non-real estate depreciation
& amortization of debt costs |
956 |
|
|
1,654 |
|
|
2,808 |
|
|
3,975 |
|
Amortization of lease
intangibles, net |
464 |
|
|
528 |
|
|
1,465 |
|
|
1,679 |
|
Amortization and expensing of
restricted share and unit compensation |
2,479 |
|
|
1,737 |
|
|
5,901 |
|
|
6,264 |
|
Funds available for
distribution |
$ |
26,729 |
|
|
$ |
28,455 |
|
|
$ |
87,534 |
|
|
$ |
95,573 |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Per share data: |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Loss from continuing operations |
(Basic) |
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.31 |
) |
|
(Diluted) |
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.31 |
) |
Net (loss) income attributable
to the controlling interests |
(Basic) |
$ |
(0.01 |
) |
|
$ |
4.14 |
|
|
$ |
(0.06 |
) |
|
$ |
4.10 |
|
|
(Diluted) |
$ |
(0.01 |
) |
|
$ |
4.14 |
|
|
$ |
(0.06 |
) |
|
$ |
4.10 |
|
NAREIT FFO |
(Basic) |
$ |
0.36 |
|
|
$ |
0.39 |
|
|
$ |
1.12 |
|
|
$ |
1.27 |
|
|
(Diluted) |
$ |
0.36 |
|
|
$ |
0.39 |
|
|
$ |
1.12 |
|
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.90 |
|
|
$ |
0.90 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
82,186 |
|
|
79,981 |
|
|
82,142 |
|
|
79,933 |
|
Weighted average shares
outstanding - diluted |
|
82,186 |
|
|
79,981 |
|
|
82,142 |
|
|
79,933 |
|
Weighted average
shares outstanding - diluted (for NAREIT FFO) |
82,357 |
|
|
80,040 |
|
|
82,322 |
|
|
80,006 |
|
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In thousands, except per share data) |
|
|
|
|
|
September 30, 2020 |
|
|
|
(unaudited) |
|
December 31, 2019 |
Assets |
|
|
|
Land |
$ |
574,025 |
|
|
$ |
566,807 |
|
Income producing property |
2,497,017 |
|
|
2,392,415 |
|
|
3,071,042 |
|
|
2,959,222 |
|
Accumulated depreciation and amortization |
(772,482 |
) |
|
(693,610 |
) |
Net income producing property |
2,298,560 |
|
|
2,265,612 |
|
Properties under development or held for future development |
77,481 |
|
|
124,193 |
|
Total real estate held for investment, net |
2,376,041 |
|
|
2,389,805 |
|
Investment in real estate held for sale, net |
— |
|
|
57,028 |
|
Cash and cash equivalents |
3,814 |
|
|
12,939 |
|
Restricted cash |
615 |
|
|
1,812 |
|
Rents and other receivables |
67,628 |
|
|
65,259 |
|
Prepaid expenses and other assets |
84,174 |
|
|
95,149 |
|
Other assets related to properties held for sale |
— |
|
|
6,336 |
|
Total assets |
$ |
2,532,272 |
|
|
$ |
2,628,328 |
|
|
|
|
|
Liabilities |
|
|
|
Notes payable, net |
$ |
897,443 |
|
|
$ |
996,722 |
|
Mortgage notes payable, net |
— |
|
|
47,074 |
|
Line of credit |
186,000 |
|
|
56,000 |
|
Accounts payable and other liabilities |
99,388 |
|
|
71,136 |
|
Dividend payable |
24,767 |
|
|
24,668 |
|
Advance rents |
6,979 |
|
|
9,353 |
|
Tenant security deposits |
10,580 |
|
|
10,595 |
|
Other liabilities related to properties held for sale |
— |
|
|
718 |
|
Total liabilities |
1,225,157 |
|
|
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; 82,351 and 82,099 shares issued and
outstanding, as of September 30, 2020 and December 31, 2019,
respectively |
824 |
|
|
821 |
|
Additional paid-in capital |
1,601,160 |
|
|
1,592,487 |
|
Distributions in excess of net income |
(262,435 |
) |
|
(183,405 |
) |
Accumulated other comprehensive (loss) income |
(32,759 |
) |
|
1,823 |
|
Total shareholders' equity |
1,306,790 |
|
|
1,411,726 |
|
|
|
|
|
Noncontrolling interests in subsidiaries |
325 |
|
|
336 |
|
Total equity |
1,307,115 |
|
|
1,412,062 |
|
|
|
|
|
Total liabilities and equity |
$ |
2,532,272 |
|
|
$ |
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
September 30, 2020 |
Multifamily |
|
Office |
|
Corporate and other |
|
Total |
Same-store net operating income (3) |
$ |
14,461 |
|
$ |
20,237 |
|
$ |
3,040 |
|
$ |
37,738 |
|
Add: Net operating income from non-same-store properties (3) |
6,817 |
|
— |
|
— |
|
6,817 |
|
Total net operating income
(2) |
$ |
21,278 |
|
$ |
20,237 |
|
$ |
3,040 |
|
$ |
44,555 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(8,711 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(30,470 |
) |
General and administrative expenses |
|
|
|
|
|
|
(6,330 |
) |
Net loss |
|
|
|
|
|
|
(956 |
) |
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net loss attributable to the
controlling interests |
|
|
|
|
|
|
$ |
(956 |
) |
|
|
|
|
|
|
|
|
Three months ended
September 30, 2019 |
Multifamily |
|
Office |
|
Corporate and other |
|
Total |
Same-store net operating
income (3) |
$ |
15,033 |
|
$ |
21,285 |
|
$ |
3,347 |
|
$ |
39,665 |
|
Add: Net operating income from non-same-store properties (3) |
6,525 |
|
3,377 |
|
— |
|
9,902 |
|
Total net operating income
(2) |
$ |
21,558 |
|
$ |
24,662 |
|
$ |
3,347 |
|
$ |
49,567 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(14,198 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(37,340 |
) |
General and administrative expenses |
|
|
|
|
|
|
(6,461 |
) |
Loss from continuing
operations |
|
|
|
|
|
|
(8,432 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
|
|
2,942 |
|
Gain on sale of real estate |
|
|
|
|
|
|
339,024 |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
(764 |
) |
Net income |
|
|
|
|
|
|
332,770 |
|
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the
controlling interests |
|
|
|
|
|
|
$ |
332,770 |
|
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, 2020 |
Multifamily |
|
Office |
|
Corporate and Other |
|
Total |
Same-store net operating income(3) |
$ |
45,705 |
|
$ |
62,655 |
|
$ |
8,907 |
|
$ |
117,267 |
|
Add: Net operating income from non-same-store properties(3) |
20,094 |
|
1,332 |
|
— |
|
21,426 |
|
Total net operating
income(2) |
$ |
65,799 |
|
$ |
63,987 |
|
$ |
8,907 |
|
$ |
138,693 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(28,307 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(89,789 |
) |
General and administrative expenses |
|
|
|
|
|
|
(17,963 |
) |
Gain on extinguishment of debt |
|
|
|
|
|
|
262 |
|
Loss on sale of real estate |
|
|
|
|
|
|
(7,539 |
) |
Net loss |
|
|
|
|
|
|
(4,643 |
) |
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net loss attributable to the
controlling interests |
|
|
|
|
|
|
$ |
(4,643 |
) |
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2019 |
Multifamily |
|
Office |
|
Corporate and Other |
|
Total |
Same-store net operating
income(3) |
$ |
45,153 |
|
$ |
66,284 |
|
$ |
10,233 |
|
$ |
121,670 |
|
Add: Net operating income from non-same-store properties(3) |
9,931 |
|
11,943 |
|
— |
|
21,874 |
|
Total net operating
income(2) |
$ |
55,084 |
|
$ |
78,227 |
|
$ |
10,233 |
|
$ |
143,544 |
|
Deduct: |
|
|
|
|
|
|
|
Interest expense |
|
|
|
|
|
|
(41,946 |
) |
Depreciation and amortization |
|
|
|
|
|
|
(97,441 |
) |
General and administrative expenses |
|
|
|
|
|
|
(19,803 |
) |
Real estate impairment |
|
|
|
|
|
|
(8,374 |
) |
Loss on sale of real estate |
|
|
|
|
|
|
(1,046 |
) |
Loss from continuing
operations |
|
|
|
|
|
|
(25,066 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
|
|
16,158 |
|
Gain on sale of real estate |
|
|
|
|
|
|
339,024 |
|
Loss on extinguishment of debt |
|
|
|
|
|
|
(764 |
) |
Net income |
|
|
|
|
|
|
329,352 |
|
Less: Net income attributable to noncontrolling interests in
subsidiaries |
|
|
|
|
|
|
— |
|
Net income attributable to the
controlling interests |
|
|
|
|
|
|
$ |
329,352 |
|
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, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net (loss) income |
|
$ |
(956 |
) |
|
$ |
332,770 |
|
|
$ |
(4,643 |
) |
|
$ |
329,352 |
|
Add: |
|
|
|
|
|
|
|
|
Real estate depreciation and amortization |
|
30,470 |
|
|
37,340 |
|
|
89,789 |
|
|
97,441 |
|
Loss on sale of depreciable real estate |
|
— |
|
|
— |
|
|
7,539 |
|
|
1,046 |
|
Real estate impairment |
|
— |
|
|
— |
|
|
— |
|
|
8,374 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
Gain on sale of real estate |
|
— |
|
|
(339,024 |
) |
|
— |
|
|
(339,024 |
) |
Real estate depreciation and amortization |
|
— |
|
|
59 |
|
|
— |
|
|
4,926 |
|
NAREIT funds from operations
(1) |
|
29,514 |
|
|
31,145 |
|
|
92,685 |
|
|
102,115 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Restructuring expenses |
|
— |
|
|
653 |
|
|
— |
|
|
2,749 |
|
Loss (gain) on extinguishment of debt |
|
— |
|
|
764 |
|
|
(262 |
) |
|
764 |
|
Core funds from operations
(1) |
|
$ |
29,514 |
|
|
$ |
32,562 |
|
|
$ |
92,423 |
|
|
$ |
105,628 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
Per share
data: |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
NAREIT FFO |
(Basic) |
$ |
0.36 |
|
|
$ |
0.39 |
|
|
$ |
1.12 |
|
|
$ |
1.27 |
|
|
(Diluted) |
$ |
0.36 |
|
|
$ |
0.39 |
|
|
$ |
1.12 |
|
|
$ |
1.27 |
|
Core FFO |
(Basic) |
$ |
0.36 |
|
|
$ |
0.41 |
|
|
$ |
1.12 |
|
|
$ |
1.32 |
|
|
(Diluted) |
$ |
0.36 |
|
|
$ |
0.41 |
|
|
$ |
1.12 |
|
|
$ |
1.32 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding - basic |
|
82,186 |
|
|
79,981 |
|
|
82,142 |
|
|
79,933 |
|
Weighted average shares
outstanding - diluted (for NAREIT and Core FFO) |
|
82,357 |
|
|
80,040 |
|
|
82,322 |
|
|
80,006 |
|
CONTACT: |
Amy Hopkins |
Vice President, Investor
Relations |
E-Mail:
ahopkins@washreit.com |
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