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Washington Real Estate Investment Trust Announces Fourth Quarter and Year-End Operating Results for 2019

/EIN News/ -- WASHINGTON, Feb. 13, 2020 (GLOBE NEWSWIRE) -- Washington Real Estate Investment Trust ("WashREIT” or the “Company”) (NYSE: WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter and year ended December 31, 2019:

Full-Year 2019 Financial Results

  • Net income attributable to controlling interests was $383.6 million, or $4.75 per diluted share, including net gains on the sale of real estate of $399.0 million
  • NAREIT FFO(1) was $1.66 per diluted share
  • Core FFO(1) was $1.71 per diluted share

Fourth Quarter 2019 Financial Results

  • Net income attributable to controlling interests was $54.2 million, or $0.66 per diluted share
  • NAREIT FFO was $0.39 per diluted share
  • Core FFO was $0.40 per diluted share

2019 Operational Highlights

  • Same-store(2) Net Operating Income (NOI)(3) decreased by 0.2% and cash NOI increased by 0.5% from 2018
  • Same-store Office NOI decreased by 4.6% and cash NOI decreased by 3.6% compared to 2018
  • Same-store Multifamily NOI and cash NOI increased by 4.6% for the year
  • Same-store Other NOI increased by 3.4% and cash NOI increased by 4.9% for the year
  • Ended the year with a net debt to adjusted EBITDA(4) ratio of 5.6x

2019 Transaction Activity

  • Acquired the Assembly Portfolio, a 2,113 unit multifamily portfolio for approximately $461.2 million
  • Acquired Cascade at Landmark, a 277 unit multifamily asset in Alexandria, VA for approximately $69.8 million
  • Sold Quantico Corporate Center for approximately $33.0 million
  • Sold eight retail assets for approximately $562.0 million
  • Sold 1776 G Street for approximately $129.5 million
  • Entered into a contract to sell John Marshall II for approximately $63.4 million. The transaction is expected to close on March 26, 2020 and would eliminate the Company's remaining exposure to single tenant assets.

"2019 was a pivotal year for WashREIT on multiple fronts. We executed $1.3 billion of strategic transactions– a company record– to streamline and de-risk our portfolio and improve our ability to drive value creation," said Paul T. McDermott, President and CEO of WashREIT. "In addition to our transformative capital allocation, we exceeded our commercial leasing targets for 2019 and addressed the vast majority of our 2020 expirations. Looking ahead, we expect key lease commencements and multifamily value-creation to drive strong growth in the second half of 2020 and strong year-over-year growth in 2021."

Operating Results

The Company's overall portfolio NOI for the fourth quarter was $50.1 million, compared to $46.1 million in the same period one year ago and $49.6 million in the third quarter of 2019. Same-store portfolio NOI decreased by 0.2% for the full year and 2.0% for the fourth quarter on a year-over-year basis.  The Company's overall portfolio ending occupancy (5) was 92.8%, compared to 93.1% at year-end 2018. Same-store portfolio ending occupancy (6) was 92.1% compared to 93.9% at year-end 2018.

Same-store portfolio by sector:

  • Office: 48% of Q4 2019 Same-Store NOI - Same-store NOI decreased by 4.6% and cash NOI decreased by 3.6% for the full year. Same-store NOI decreased by 6.9% and cash NOI decreased by 6.1% for the fourth quarter compared to the same period a year ago. The full-year decrease was primarily driven by the termination of a prior lease at Watergate 600 that has largely been re-leased and occupied. The fourth quarter decrease was largely driven by the aforementioned lease termination as well as the previously anticipated vacancy at 1220 19th Street, the majority of which has been re-leased.  Same-store ending occupancy decreased by 510 basis points year-over-year and 40 basis points sequentially to 88.5% primarily due to the aforementioned lease termination that enabled the re-leasing of the majority of the space. The overall office portfolio was 89.6% occupied and 91.9% leased at year-end.
  • Multifamily: 43% of Q4 2019 Same-Store NOI - Same-store NOI and cash NOI increased by 4.6% for the full year. Same-store NOI increased by 4.6% and cash NOI increased by 4.8% for the fourth quarter on a year-over-year basis. The Company achieved 340 basis points of blended year-over-year lease rate growth(7) comprised of 430 basis points of renewal rate growth and 220 basis points of new lease rate growth reflecting strong demand for our value-oriented assets and the success of our daily pricing strategy which allows us to optimize rental income growth. Same-store ending occupancy increased by 20 basis points year over year and decreased by 10 basis points sequentially to 95.0%.  The overall multifamily portfolio was 94.9% occupied and 96.4% leased at year-end.
  • Other: 9% of Q4 2019 Same-Store NOI - Same-store NOI increased by 3.4% and cash NOI increased by 4.9% for the full year. Same-store NOI decreased by 3.6% and cash NOI decreased by 0.1% year-over-year in the fourth quarter due to one-time benefits that impacted the fourth quarter of 2018. Same-store ending occupancy increased by 100 basis points year-over-year and 190 basis points sequentially to 90.9% and was 92.8% leased at year-end.

Leasing Activity

During 2019, WashREIT signed new and renewal commercial leases as follows (all dollar amounts are on a per square foot basis):

  Square Feet Weighted
Average Term

(in years)
Weighted
Average Free
Rent Period

(in months)
Weighted
Average
Rental Rates
Weighted
Average
Rental Rate

% Increase
Tenant
Improvements
Leasing
Commissions
New:              
Office (a) 200,000   10.5   4.3   $ 58.38   25.2 % $ 106.02   $ 31.52  
Other 68,000   7.6   4.0   19.28   16.8 % 31.14   8.85  
Total (b) 268,000   9.7   4.2   48.41   23.1 % 86.91   25.74  
               
Renewal:              
Office 207,000   9.6   8.9   $ 44.69   9.7 % $ 30.81   $ 12.77  
Other 50,000   4.6   0.2   31.67   21.8 %   3.03  
Total (b) 257,000   8.6   7.2   42.15   12.0 % 24.79   10.86  

(a) Office tenant improvements per foot per year of term for new leases were approximately $10.10 driven by the 51,000 square foot lease signed at Watergate 600 in Q1 that had no free rent associated with it
(b) Excludes leasing activity at properties sold during the year

During the fourth quarter, WashREIT signed commercial leases totaling 120,000 square feet, including 55,000 square feet of new leases and 65,000 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 46,000   7.8   6.9   $ 57.63   33.7 % $ 69.88   $ 25.34  
Other (a) 9,000   14.9   6.4   61.86   1.8 % 127.02   42.59  
Total 55,000   8.9   6.8   58.28   27.2 % 78.71   28.01  
               
Renewal:              
Office (b) 57,000   8.7   6.5   $ 47.03   26.7 % $ 36.99   $ 20.15  
Other 8,000   5.0   1.1   39.33   8.9 %   2.45  
Total 65,000   8.2   5.8   46.06   24.5 % 32.33   17.92  

(a) Tenant improvements per square foot for Other new leases were high in the fourth quarter due to a 16-year lease signed at Spring Valley Village to a high-quality credit tenant
(b) Excludes leasing activity at properties sold during the quarter

2020 Guidance

  Full Year 2020
Core FFO per diluted share (a) $1.53 - $1.59
Same-Store NOI Growth 1.0% - 2.0%
Multifamily 3.25% - 4.25%
Office (1.0%) - 1.0%
Other NOI $13.25 million - $13.75 million
Non Same-Store Multifamily NOI $28.25 million - $29.25 million
Transactions  
Acquisitions $0
Dispositions (b) $63.4 million
Corporate Expenses  
G&A and Leasing Expenses $22.25 million - $23.25 million
Interest Expense $42.25 million - $43.25 million
Development Expenditures $42.5 million - $47.5 million

(a) Subsequent to the third quarter earnings call, the Company issued approximately 1.4 million shares through its at-the-market (ATM) program at an average price of $30.77 for gross proceeds of $43.7 million. On a combined basis, the ATM issuance and expected sale of John Marshall II reduced our 2020 Core FFO guidance by approximately $0.035 per share.
(b) Represents the sale of John Marshall II, which will reduce NOI by approximately $1.1 million per quarter

The non same-store multifamily properties in 2020 consist of the Assembly Portfolio, Cascade at Landmark, and the 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) $ 0.08   $ 0.14  
Real estate depreciation and amortization(b) 1.45   1.45  
NAREIT FFO per diluted share 1.53   1.59  
Core adjustments    
Core FFO per diluted share $ 1.53   $ 1.59  

(a) Excludes gains or losses on sale of real estate
(b) Includes impact from planned disposition during the year

Dividends

On January 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 March 31, 2020 to shareholders of record on March 17, 2020.

Conference Call Information

The Conference Call for Full Year and Fourth Quarter 2019 Earnings is scheduled for Friday, February 14, 2020 at 11:00 am ET. 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, February 28, 2020 at 11:00 pm ET.

USA Toll Free Number: 1-877-481-4010
International Toll Number: 1-919-882-2331
Conference ID: 56869

The live on-demand webcast of the Conference Call will be available on the Investor section of WashREIT's website at www.washreit.com.

About WashREIT

WashREIT owns and operates uniquely positioned real estate assets in the Washington D.C. metro area. Backed by decades of experience, expertise and ambition, we create value by transforming insights into strategy and strategy into action.  The Company's portfolio of 46 properties includes approximately 3.9 million square feet of commercial space and 6,861 multifamily apartment units. These 46 properties consist of 22 multifamily properties, 16 office properties, and 8 retail centers. Our shares trade on the NYSE and our company currently has an enterprise value of more than $3.5 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. Such factors include, but are not limited to the risks associated with the ownership of real estate in general and our real estate assets in particular; the risk that any of the assumptions on which our updated 2020 earnings guidance is based are incorrect, the risk of failure to enter into and/or complete contemplated dispositions, at all, within the price ranges anticipated and on the terms and timing anticipated; the economic health of the greater Washington Metro region; 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 ecommerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or cyber attacks; weather conditions and natural disasters; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2018 Form 10-K and subsequent Quarterly Reports on Form 10-Q. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors 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 a non-GAAP measure. It 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.

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) For purposes of evaluating comparative operating performance, we categorize our properties as “same-store”, “non-same-store” or "other." 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.

(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, 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.

(4) Net Debt to Adjusted EBITDA represents net debt as of period end divided by adjusted EBITDA for the period, as annualized (i.e. three months periods are multiplied by four) or on a trailing 12 month basis. We define net debt as the total outstanding debt reported as per our consolidated balance sheets less cash and cash equivalents at the end of the period. Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expense and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate performance measure because it permits investors to view income from operations without the effect of depreciation, and the cost of debt or non-operating gains and losses. Adjusted EBITDA and Net Debt to Adjusted EBITDA are a non-GAAP measures.

(5) 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.

(6) Ending Occupancy is calculated as occupied square footage or multifamily units as a percentage of total square footage or multifamily units, respectively, as of the last day of that period.

(7) Lease rate growth, which we sometimes refer to as "trade-out", 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.

Ending Occupancy Levels by Same-Store Properties (i) and All Properties 
  Ending Occupancy
  Same-Store Properties   All Properties
  December 31,   December 31,
  2019   2018   2019   2018
Multifamily (calculated on a unit basis) 95.0 %   94.8 %   94.9 %   94.8 %
               
Multifamily 94.9 %   94.8 %   94.8 %   94.8 %
Office 88.5 %   93.6 %   89.6 %   92.3 %
Other (ii) 90.9 %   89.9 %   90.9 %   91.9 %
               
Overall Portfolio 92.1 %   93.9 %   92.8 %   93.1 %

(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. 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
Office - Arlington Tower

Held for sale:

Office - John Marshall II

Sold properties (classified as continuing operations):

Office - 1776 G Street, Quantico Corporate Center, Braddock Metro Center and 2445 M Street

Discontinued operations:

Wheaton Park, Bradlee Shopping Center, Shoppes at Foxchase, Gateway Overlook, Olney Village Center, Frederick County Square, Centre at Hagerstown and Frederick Crossing

(ii) 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.  "Other" properties include discontinued operations.


 WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
(Unaudited)
       
  Quarter Ended
 
December 31,
  Year Ended
 
December 31,
OPERATING RESULTS 2019   2018   2019   2018
Revenue              
Real estate rental revenue $ 80,667     $ 71,740     $ 309,180     $ 291,730  
Expenses              
Real estate expenses 30,611     25,654     115,580     105,592  
Depreciation and amortization 38,812     28,692     136,253     111,826  
Real estate impairment         8,374     1,886  
General and administrative expenses 5,853     5,352     24,370     22,089  
Lease origination expenses 412         1,698      
  75,688     59,698     286,275     241,393  
Other operating income              
Gain on sale of real estate 61,007         59,961     2,495  
Real estate operating income 65,986     12,042     82,866     52,832  
Other expense              
Interest expense (11,788 )   (12,346 )   (53,734 )   (50,501 )
Loss on extinguishment of debt             (1,178 )
  (11,788 )   (12,346 )   (53,734 )   (51,679 )
Income (loss) from continuing operations 54,198     (304 )   29,132     1,153  
Discontinued operations              
Income from operations of properties sold or held for sale     5,992     16,158     24,477  
Gain on sale of real estate         339,024      
Loss on extinguishment of debt         (764 )    
Income from discontinued operations     5,992     354,418     24,477  
Net income 54,198     5,688     383,550     25,630  
Less: Net income attributable to noncontrolling interests in subsidiaries              
Net income attributable to the controlling interests $ 54,198     $ 5,688     $ 383,550     $ 25,630  
               
Income (loss) from continuing operations $ 54,198     $ (304 )   $ 29,132     $ 1,153  
Depreciation and amortization 38,812     28,692     136,253     111,826  
Real estate impairment         8,374     1,886  
Gain on sale of depreciable real estate, net (61,007 )       (59,961 )   (2,495 )
Funds from continuing operations (1) 32,003     28,388     113,798     112,370  
               
Income from discontinued operations     5,992     354,418     24,477  
Discontinued operations real estate depreciation and amortization     2,417     4,926     9,402  
Gain on sale of real estate         (339,024 )    
Funds from discontinued operations     8,409     20,320     33,879  
               
NAREIT funds from operations(1) $ 32,003     $ 36,797     $ 134,118     $ 146,249  
               
Non-cash loss (gain) on extinguishment of debt         (244 )   1,178  
Tenant improvements and leasing incentives (6,857 )   (10,730 )   (15,898 )   (23,535 )
External and internal leasing commissions capitalized (2,700 )   (3,556 )   (6,371 )   (5,856 )
Recurring capital improvements (4,345 )   (2,110 )   (6,746 )   (3,954 )
Straight-line rents, net (763 )   (959 )   (3,266 )   (4,343 )
Non-cash fair value interest expense (178 )   (214 )   (778 )   (865 )
Non-real estate depreciation & amortization of debt costs 1,030     989     5,005     3,887  
Amortization of lease intangibles, net 504     372     2,183     1,842  
Amortization and expensing of restricted share and unit compensation 1,479     1,682     7,743     6,746  
Funds available for distribution(4) $ 20,173     $ 22,271     $ 115,746     $ 121,349  


    Quarter Ended
 
December 31,
  Year Ended
 
December 31,
Per share data:   2019   2018   2019   2018
Income from continuing operations (Basic) $ 0.66     $     $ 0.36     $ 0.01  
  (Diluted) $ 0.66     $     $ 0.36     $ 0.01  
Net income attributable to the controlling interests (Basic) $ 0.66     $ 0.07     $ 4.75     $ 0.32  
  (Diluted) $ 0.66     $ 0.07     $ 4.75     $ 0.32  
NAREIT funds from operations (Basic) $ 0.39     $ 0.46     $ 1.67     $ 1.85  
  (Diluted) $ 0.39     $ 0.46     $ 1.66     $ 1.84  
                 
Dividends declared   $ 0.30     $ 0.30     $ 1.20     $ 1.20  
                 
Weighted average shares outstanding – basic   81,220     79,748     80,257     78,960  
Weighted average shares outstanding – diluted   81,313     79,748     80,335     79,042  


WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
       
  December 31,
  2019   2018
Assets      
Land $ 566,807     $ 526,572  
Income producing property 2,392,415     2,055,349  
  2,959,222     2,581,921  
Accumulated depreciation and amortization (693,610 )   (669,281 )
Net income producing property 2,265,612     1,912,640  
Properties under development or held for future development 124,193     87,231  
Total real estate held for investment, net 2,389,805     1,999,871  
Investment in real estate sold or held for sale, net 57,028     203,410  
Cash and cash equivalents 12,939     6,016  
Restricted cash 1,812     1,624  
Rents and other receivables 65,259     63,962  
Prepaid expenses and other assets 95,149     123,670  
Other assets related to properties sold or held for sale 6,336     18,551  
Total assets $ 2,628,328     $ 2,417,104  
       
Liabilities      
Notes payable, net 996,722     $ 995,397  
Mortgage notes payable, net 47,074     48,277  
Line of credit 56,000     188,000  
Accounts payable and other liabilities 71,136     57,946  
Dividend payable 24,668     24,022  
Advance rents 9,353     9,965  
Tenant security deposits 10,595     9,501  
Liabilities related to properties sold or held for sale 718     15,518  
Total liabilities 1,216,266     1,348,626  
       
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; 82,099 and 79,910 shares issued and outstanding, as of December 31, 2019 and December 31, 2018 respectively 821     799  
Additional paid-in capital 1,592,487     1,526,574  
Distributions in excess of net income (183,405 )   (469,085 )
Accumulated other comprehensive income 1,823     9,839  
Total shareholders' equity 1,411,726     1,068,127  
Noncontrolling interests in subsidiaries 336     351  
Total equity 1,412,062     1,068,478  
Total liabilities and equity $ 2,628,328     $ 2,417,104  
       


The following tables contain reconciliations of same-store net operating income to net income attributable to the controlling interests for the periods presented (in thousands):
               
Quarter Ended December 31, 2019 Multifamily   Office   Other   Total
Same-store net operating income(3) $ 15,485     $ 17,611     $ 3,235     $ 36,331  
Add: Net operating income from non-same-store properties(3) 6,427     7,298         13,725  
Total net operating income(2) $ 21,912     $ 24,909     $ 3,235     $ 50,056  
Add/(deduct):              
Interest expense             (11,788 )
Depreciation and amortization             (38,812 )
General and administrative expenses             (5,853 )
Lease origination expenses             (412 )
Gain on sale of real estate             61,007  
Income from continuing operations             54,198  
Discontinued operations:              
Income from operations of properties sold or held for sale              
Net income             54,198  
Less: Net income attributable to noncontrolling interests in subsidiaries              
Net income attributable to the controlling interests             $ 54,198  
               
Quarter Ended December 31, 2018 Multifamily   Office   Other   Total
Same-store net operating income(3) $ 14,803     $ 18,910     3,357     $ 37,070  
Add: Net operating income from non-same-store properties(3)     9,016         9,016  
Total net operating income(2) $ 14,803     $ 27,926     $ 3,357     $ 46,086  
Add/(deduct):              
Interest expense             (12,346 )
Depreciation and amortization             (28,692 )
General and administrative expenses             (5,352 )
Loss from continuing operations             (304 )
Discontinued operations:              
Income from operations of properties sold or held for sale             5,992  
Net income             5,688  
Less: Net income attributable to noncontrolling interests in subsidiaries              
Net income attributable to the controlling interests             $ 5,688  


The following tables contain reconciliations of same-store net operating income to net income attributable to the controlling interests for the periods presented (in thousands):
               
Year Ended December 31, 2019 Multifamily   Office   Other   Total
Same-store net operating income(3) $ 60,638     $ 71,387     $ 13,468     $ 145,493  
Add: Net operating income from non-same-store properties(3) 16,358     31,749         48,107  
Total net operating income(2) $ 76,996     $ 103,136     $ 13,468     $ 193,600  
Add/(deduct):              
Interest expense             (53,734 )
Depreciation and amortization             (136,253 )
General and administrative expenses             (24,370 )
Lease origination expenses             (1,698 )
Real estate impairment             (8,374 )
Gain on sale of real estate             59,961  
Income from continuing operations             29,132  
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             383,550  
Less: Net income attributable to noncontrolling interests in subsidiaries              
Net income attributable to the controlling interests             $ 383,550  
               
Year Ended December 31, 2018 Multifamily   Office   Other   Total
Same-store net operating income(3) $ 57,980     $ 74,799     $ 13,026     $ 145,805  
Add: Net operating (loss) income from non-same-store properties(3) (21 )   40,354         40,333  
Total net operating income(2) $ 57,959     $ 115,153     $ 13,026     $ 186,138  
Add/(deduct):              
Interest expense             (50,501 )
Depreciation and amortization             (111,826 )
General and administrative expenses             (22,089 )
Gain on sale of real estate             2,495  
Loss on extinguishment of debt             (1,178 )
Real estate impairment             (1,886 )
Income from continuing operations             1,153  
Discontinued operations:              
Income from operations of properties sold or held for sale             24,477  
Net income             25,630  
Less: Net loss attributable to noncontrolling interests in subsidiaries              
Net income attributable to the controlling interests             $ 25,630  


The following table contains a reconciliation of net income to core funds from operations for the periods presented (in thousands, except per share amounts):
                 
    Quarter Ended
 
December 31,
  Year Ended
 
December 31,
    2019   2018   2019   2018
Net income   $ 54,198     $ 5,688     $ 383,550     $ 25,630  
Add/(deduct):                
Real estate depreciation and amortization   38,812     28,692     136,253     111,826  
Gain on sale of depreciable real estate   (61,007 )       (59,961 )   (2,495 )
Real estate impairment           8,374     1,886  
Discontinued operations:                
Gain on sale of real estate           (339,024 )    
Real estate depreciation and amortization       2,417     4,926     9,402  
NAREIT funds from operations(1)   32,003     36,797     134,118     146,249  
Add:                
Loss on extinguishment of debt           764     1,178  
Restructuring expenses   270         3,019      
Core funds from operations(1)   $ 32,273     $ 36,797     $ 137,901     $ 147,427  
                 
                 
    Quarter Ended
 
December 31,
  Year Ended
 
December 31,
Per share data:   2019   2018   2019   2018
NAREIT FFO (Basic) $ 0.39     $ 0.46     $ 1.67     $ 1.85  
  (Diluted) $ 0.39     $ 0.46     $ 1.66     $ 1.84  
Core FFO (Basic) $ 0.40     $ 0.46     $ 1.71     $ 1.86  
  (Diluted) $ 0.40     $ 0.46     $ 1.71     $ 1.86  
                 
Weighted average shares outstanding - basic   81,220     79,748     80,257     78,960  
Weighted average shares outstanding - diluted   81,313     79,760     80,335     79,042  

 

CONTACT:
Amy Hopkins
Vice President, Investor Relations
E-Mail: ahopkins@washreit.com

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