Washington Real Estate Investment Trust : Announces First Quarter Financial and Operating Results
04/26/2012| 04:45pm US/Eastern
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Washington Real Estate Investment Trust ("WRIT" or the "Company") (NYSE:
WRE), a leading owner and operator of diversified properties in the
Washington, D.C. region, reported financial and operating results today
for the quarter ended March 31, 2012:
Core Funds from Operations(1), defined as Funds from
Operations(1) ("FFO") excluding acquisition expense, gains
or losses on extinguishment of debt and impairment, was $31.2 million,
or $0.47 per diluted share for the quarter ended March 31, 2012,
compared to $32.2 million, or $0.49 per diluted share for the prior
year period. FFO for the quarter ended March 31, 2012 was $31.2
million, or $0.47 per share, compared to $30.5 million, or $0.46 per
share, in the same period one year ago.
Net income attributable to the controlling interests for the quarter
ended March 31, 2012 was $5.2 million, or $0.08 per diluted share,
compared to $4.7 million, or $0.07 per diluted share, in the same
period one year ago. Included in first quarter 2011 net income are
acquisition costs of $1.6 million, or $0.03 per share.
Operating Results
The Company's overall portfolio Net Operating Income ("NOI")(2)
was $50.5 million compared to $46.0 million in the same period one year
ago and $50.6 million in the fourth quarter of 2011. Overall portfolio
physical occupancy for the first quarter was 89.7%, compared to 88.5% in
the same period one year ago and 90.8% in the fourth quarter of 2011.
Same-store(3) portfolio physical occupancy for the first
quarter was 90.1%, compared to 91.8% in the same period one year ago.
Sequentially, same-store physical occupancy decreased 120 basis points
(bps) compared to the fourth quarter of 2011. Same-storeportfolio
NOI for the first quarter decreased 1.1% and rental rate growth was 1.3%
compared to the same period one year ago.
Multifamily: 16.0% of Total NOI - Multifamily properties'
same-store NOI for the first quarter increased 5.2% compared to the
same period one year ago. Rental rate growth was 4.0% while same-store
physical occupancy decreased 10 bps to 95.2%. Sequentially, same-store
physical occupancy increased 30 bps compared to the fourth quarter of
2011.
Office: 49.0% of Total NOI - Office properties' same-store NOI
for the first quarter decreased 6.4% compared to the same period one
year ago. Rental rate growth was 0.3% while same-store physical
occupancy decreased 340 bps to 85.9%, primarily due to the previously
announced expiration and move-out of Sun Microsystems/Oracle at 7900
Westpark Drive at the end of 2011. Sequentially, same-store physical
occupancy decreased 270 bps compared to the fourth quarter of 2011.
Medical: 15.2% of Total NOI - Medical office properties'
same-store NOI for the first quarter increased 1.5% compared to the
same period one year ago. Rental rate growth was 1.8% while same-store
physical occupancy decreased 280 bps to 90.7%. Sequentially,
same-store physical occupancy increased 10 bps compared to the fourth
quarter of 2011.
Retail: 19.8% of Total NOI - Retail properties' same-store NOI
for the first quarter increased 4.1% compared to the same period one
year ago. Rental rate growth was 0.9% while same-store physical
occupancy increased 40 bps to 92.4%. Sequentially, same-store physical
occupancy decreased 40 bps compared to the fourth quarter of 2011.
Leasing Activity
During the first quarter, WRIT signed commercial leases for 217,979
square feet with an average rental rate increase of 8.6% over expiring
lease rates on a GAAP basis, an average lease term of 5.7 years, tenant
improvement costs of $19.08 per square foot and leasing costs of $12.56
per square foot.
Rental rates for new and renewed office leases increased 10.0% to
$31.87 per square foot, with $21.57 per square foot in tenant
improvement costs and $17.35 per square foot in leasing costs.
Weighted average term for new and renewed leases was 5.6 years.
Rental rates for new and renewed medical office leases increased 5.8%
to $29.94 per square foot, with $17.65 per square foot in tenant
improvement costs and $5.29 per square foot in leasing costs. Weighted
average term for new and renewed leases was 5.3 years.
Rental rates for new and renewed retail leases increased 7.1% to
$15.13 per square foot, with no tenant improvement costs and $0.73 per
square foot in leasing costs. Weighted average term for new and
renewed leases was 8.3 years.
Dividends
On March 30, 2012, WRIT paid a quarterly dividend of $0.43375 per share
for its 201st consecutive quarterly dividend at equal or
increasing rates.
Conference Call Information
The Conference Call for 1st Quarter Earnings is scheduled for
Friday, April 27, 2012 at 11:00 A.M. Eastern time. Conference Call
access information is as follows:
USA Toll Free Number:
1-877-407-9205
International Toll Number:
1-201-689-8054
The instant replay of the Conference Call will be available until May
11, 2012 at 11:59 P.M. Eastern time. Instant replay access information
is as follows:
USA Toll Free Number:
1-877-660-6853
International Toll Number:
1-201-612-7415
Account:
286
Conference ID:
390948
The live on-demand webcast of the Conference Call will be available on
the Investor section of WRIT's website at www.writ.com.
On-line playback of the webcast will be available for two weeks
following the Conference Call.
About WRIT
WRIT is a self-administered, self-managed, equity real estate investment
trust investing in income-producing properties in the greater Washington
metro region. WRIT owns a diversified portfolio of 71 properties
totaling approximately 9 million square feet of commercial space and
2,540 residential units, and land held for development. These 71
properties consist of 26 office properties, 18 medical office
properties, 16 retail centers and 11 multifamily properties. WRIT shares
are publicly traded on the New York Stock Exchange (NYSE:WRE).
Note: WRIT's press releases and supplemental financial information are
available on the company website at www.writ.com
or by contacting Investor Relations at (301) 984-9400.
Certain statements in our earnings release and on our conference call
are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements involve known
and unknown risks, uncertainties, and other factors that may cause
actual results to differ materially. Such risks, uncertainties and other
factors include, but are not limited to, the potential for federal
government budget reductions, changes in general and local economic and
real estate market conditions, the timing and pricing of lease
transactions, the effect of the current credit and financial market
conditions, the availability and cost of capital, fluctuations in
interest rates, tenants' financial conditions, levels of competition,
the effect of government regulation, the impact of newly adopted
accounting principles, and other risks and uncertainties detailed from
time to time in our filings with the SEC, including our 2011 Form 10-K.
We assume no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events.
(1) Funds From Operations ("FFO") - The National Association
of Real Estate Investment Trusts, Inc. ("NAREIT") defines FFO (April,
2002 White Paper) as net income (computed in accordance with generally
accepted accounting principles ("GAAP")) excluding gains (or losses)
associated with sales of property, impairment of depreciable real estate
and real estate depreciation and amortization. FFO is a non-GAAP measure
and does not replace net income as a measure of performance or net cash
provided by operating activities as a measure of liquidity. We consider
FFO to be a standard supplemental measure for equity real estate
investment trusts ("REITs") because it facilitates an understanding of
the operating performance of our properties without giving effect to
real estate depreciation and amortization, which historically assumes
that the value of real estate assets diminishes predictably over time.
Since real estate values have instead historically risen or fallen with
market conditions, we believe that FFO more accurately provides
investors an indication of our ability to incur and service debt, make
capital expenditures and fund other needs.
Core Funds From Operations ("Core FFO") is calculated by adjusting FFO
for the following items (which we believe are not indicative of the
performance of WRIT's operating portfolio and affect the comparative
measurement of WRIT's operating performance over time): (1) gains or
losses on extinguishment of debt, (2) real estate impairment not already
excluded from FFO and (3) costs related to the acquisition of
properties, as appropriate. These items can vary greatly from period to
period, depending upon the volume of our acquisition activity and debt
retirements, among other factors. We believe that by excluding these
items, Core FFO serves as a useful, supplementary measure of WRIT's
ability to incur and service debt and to distribute dividends to its
shareholders. Core FFO is a non-GAAP and non-standardized measure, and
may be calculated differently by other REITs.
(2) Net Operating Income ("NOI"), defined as real estate
rental revenue less real estate expenses, is a non-GAAP measure. NOI is
calculated as net income, less non-real estate revenue and the results
of discontinued operations (including the gain on sale, if any), plus
interest expense, depreciation and amortization and general and
administrative expenses. We provide NOI as a supplement to net income
calculated in accordance with GAAP. As such, it should not be considered
an alternative to net income as an indication of our operating
performance. It is the primary performance measure we use to assess the
results of our operations at the property level.
(3) For purposes of evaluating comparative operating
performance, we categorize our properties as "same-store" or
"non-same-store".A same-store property is one that was owned
for the entirety of the periods being evaluated. A non-same-store
property is one that was acquired or placed into service during either
of the periods being evaluated.
(4) Funds Available for Distribution ("FAD") is a non-GAAP
measure. It is calculated by subtracting from FFO (1) recurring
expenditures, tenant improvements and leasing costs that are capitalized
and amortized and are necessary to maintain our properties and revenue
stream and (2) straight-line rents, then adding (3) non-real estate
depreciation and amortization, (4) amortization of restricted share and
unit compensation, and adding or subtracting amortization of lease
intangibles, as appropriate. We consider FAD to be a measure of a REIT's
ability to incur and service debt and to distribute dividends to its
shareholders. FAD is a non-standardized measure and may be calculated
differently by other REITs.
Physical Occupancy Levels by Same-Store
Properties (i) and All Properties
Physical Occupancy
Same-Store Properties
All Properties
1st QTR
1st QTR
1st QTR
1st QTR
Segment
2012
2011
2012
2011
Multifamily
95.2
%
95.3
%
95.2
%
95.3
%
Office
85.9
%
89.3
%
86.3
%
89.1
%
Medical Office
90.7
%
93.5
%
87.1
%
88.3
%
Retail
92.4
%
92.0
%
92.9
%
92.0
%
Industrial
--
%
--
%
--
%
80.2
%
Overall Portfolio
90.1
%
91.8
%
89.7
%
88.5
%
(i) Same-Store properties include all stabilized properties that were
owned for the entirety of the current and prior year reporting periods.
For Q1 2012 and Q1 2011, same-store properties exclude: Residential
Acquisitions: none; Office Acquisitions:
1140 Connecticut Ave, 1227 25th Street, Braddock Metro Center and John
Marshall II; Medical Office Acquisition:
Lansdowne Medical Office Building; Retail
Acquisition: Olney Village Center.
Also excluded from Same-Store Properties in Q1 2012 and Q1 2011 are: Held
for Sale and Sold Properties: Dulles Station, Phase I and the
Industrial Portfolio (all industrial properties and the Crescent and
Albemarle Point).
WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
OPERATING RESULTS
2012
2011
Revenue
Real estate rental revenue
$
76,499
$
69,204
Expenses
Real estate expenses
26,013
23,253
Depreciation and amortization
25,994
21,894
General and administrative
3,606
3,702
55,613
48,849
Real estate operating income
20,886
20,355
Other income (expense):
Interest expense
(15,895
)
(16,893
)
Other income
244
306
Acquisition costs
(54
)
(1,649
)
(15,705
)
(18,236
)
Income from continuing operations
5,181
2,119
Discontinued operations:
Income (loss) from operations of properties sold or held for sale
--
2,569
Net income
5,181
4,688
Less: Net income attributable to noncontrolling interests in
subsidiaries
--
(23
)
Net income attributable to the controlling interests
$
5,181
$
4,665
Income from continuing operations attributable to the controlling
interests
5,181
2,119
Continuing operations real estate depreciation and amortization
25,994
21,894
Funds from continuing operations(1)
$
31,175
$
24,013
Income (loss) from operations of properties sold or held for sale
attributable to the controlling interests
--
2,546
Real estate impairment
--
599
Discontinued operations real estate depreciation and amortization
--
3,355
Funds from discontinued operations
--
6,500
Funds from operations(1)
$
31,175
$
30,513
Tenant improvements
(4,066
)
(2,370
)
External and internal leasing commissions capitalized
(2,557
)
(2,232
)
Recurring capital improvements
(1,539
)
(691
)
Straight-line rents, net
(992
)
(657
)
Non-cash fair value interest expense
228
179
Non real estate depreciation & amortization of debt costs
1,008
874
Amortization of lease intangibles, net
--
(278
)
Amortization and expensing of restricted share and unit compensation
1,405
1,257
Funds available for distribution(4)
$
24,662
$
26,595
Note: Certain prior period amounts have been reclassified to conform
to the current presentation.
Three Months Ended March 31,
Per share data attributable to the controlling interests:
2012
2011
Income from continuing operations
(Basic)
$
0.08
$
0.03
(Diluted)
$
0.08
$
0.03
Net income
(Basic)
$
0.08
$
0.07
(Diluted)
$
0.08
$
0.07
Funds from continuing operations
(Basic)
$
0.47
$
0.36
(Diluted)
$
0.47
$
0.36
Funds from operations
(Basic)
$
0.47
$
0.46
(Diluted)
$
0.47
$
0.46
Dividends paid
$
0.4338
$
0.4338
Weighted average shares outstanding
66,194
65,885
Fully diluted weighted average shares outstanding
66,328
65,907
WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
March 31, 2012
December 31, 2011
Assets
Land
$
472,196
$
472,196
Income producing property
1,947,630
1,934,587
2,419,826
2,406,783
Accumulated depreciation and amortization
(556,833
)
(535,732
)
Net income producing property
1,862,993
1,871,051
Development in progress
44,236
43,089
Total real estate held for investment, net
1,907,229
1,914,140
Cash and cash equivalents
17,809
12,765
Restricted cash
21,922
19,424
Rents and other receivables, net of allowance for doubtful accounts
of $9,653 and $8,921 respectively
54,727
53,828
Prepaid expenses and other assets
114,859
120,601
Total assets
$
2,116,546
$
2,120,758
Liabilities
Notes payable
$
657,562
$
657,470
Mortgage notes payable
426,485
427,710
Lines of credit
109,000
99,000
Accounts payable and other liabilities
57,766
51,145
Advance rents
15,065
13,739
Tenant security deposits
8,949
8,862
Total liabilities
1,274,827
1,257,926
Equity
Shareholders' equity
Shares of beneficial interest, $0.01 par value; 100,000 shares
authorized; 66,310 and 66,265 shares issued and 66,309 and 66,265
shares outstanding at March 31, 2012 and December 31, 2011,
respectively
662
662
Additional paid-in capital
1,141,062
1,138,478
Distributions in excess of net income
(303,815
)
(280,096
)
Total shareholders' equity
837,909
859,044
Noncontrolling interests in subsidiaries
3,810
3,788
Total equity
841,719
862,832
Total liabilities and equity
$
2,116,546
$
2,120,758
Note: Certain prior year amounts have been reclassified to conform
to the current year presentation.
The following tables contain reconciliations of net income to
same-store net operating income for the periods presented:
Medical
Quarter Ended March 31, 2012
Multifamily
Office
Office
Retail
Total
Same-store net operating income(3)
$
8,065
$
19,778
$
7,618
$
8,962
$
44,423
Add: Net operating income from non-same-store properties(3)
--
4,957
66
1,040
6,063
Total net operating income(2)
$
8,065
$
24,735
$
7,684
$
10,002
$
50,486
Add/(deduct):
Other income
244
Acquisition costs
(54
)
Interest expense
(15,895
)
Depreciation and amortization
(25,994
)
General and administrative expenses
(3,606
)
Income (loss) from operations of properties sold or held for sale
--
Net income
5,181
Less: Net income attributable to noncontrolling interests in
subsidiaries
--
Net income attributable to the controlling interests
$
5,181
Medical
Quarter Ended March 31, 2011
Multifamily
Office
Office
Retail
Total
Same-store net operating income(3)
$
7,665
$
21,123
$
7,505
$
8,605
$
44,898
Add: Net operating income from non-same-store properties(3)
--
1,096
(43
)
--
1,053
Total net operating income(2)
$
7,665
$
22,219
$
7,462
$
8,605
$
45,951
Add/(deduct):
Other income
306
Acquisition costs
(1,649
)
Interest expense
(16,893
)
Depreciation and amortization
(21,894
)
General and administrative expenses
(3,702
)
Income (loss) from operations of properties sold or held for sale
2,569
Net income
4,688
Less: Net income attributable to noncontrolling interests in
subsidiaries
(23
)
Net income attributable to the controlling interests
$
4,665
The following table contains a reconciliation of net income attributable
to the controlling interests to core funds from operations for the
periods presented:
Three Months Ended March 31,
2012
2011
Net income attributable to the controlling interests
$
5,181
$
4,665
Add/(deduct):
Real estate depreciation and amortization
25,994
21,894
Discontinued operations:
Real estate impairment
--
599
Real estate depreciation and amortization
--
3,355
Funds from operations(1)
31,175
30,513
Add/(deduct):
Acquisition costs
54
1,649
Core funds from operations(1)
$
31,229
$
32,162
Three Months Ended March 31,
Per share data attributable to the controlling interests:
2012
2011
Funds from operations
(Basic)
$
0.47
$
0.46
(Diluted)
$
0.47
$
0.46
Core FFO
(Basic)
$
0.47
$
0.49
(Diluted)
$
0.47
$
0.49
Weighted average shares outstanding
66,194
65,885
Fully diluted weighted average shares outstanding
66,328
65,907
Washington Real Estate Investment Trust William T. Camp Executive
Vice President and Chief Financial Officer Tel: 301-984-9400 Fax:
301-984-9610 bcamp@writ.com www.writ.com
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