Washington Real Estate Investment Trust Announces Third Quarter Financial and Operating Results

ROCKVILLE, Md.--(BUSINESS WIRE)-- Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) reported financial and operating results today for the quarter ended September 30, 2009:

    --  Net income was $0.16 per diluted share compared to $0.09 per diluted
        share in the same period one year ago. Included in the third quarter
        2009 and third quarter 2008 net income are respective charges of $0.02
        and $0.03 per diluted share from the adoption of an accounting
        pronouncement impacting the accounting of our 3.875% convertible notes
        (1). Also included in the third quarter 2009 net income is a gain of
        $0.09 per diluted share related to the sale of real estate.
    --  Funds From Operations (FFO)(2) was $0.48 per diluted share compared to
        $0.53 per diluted share in the same period one year ago. This difference
        is largely due to share dilution from our equity offerings.
    --  Guidance for 2009 FFO per diluted share is revised from a range of $1.95
        to $2.15 to a range of $1.97 to $2.02, not including gains related to
        the repurchase of convertible debt which total $0.12 per diluted share
        through the end of third quarter 2009.

Capital Structure

In the third quarter, WRIT issued 1,431,440 common shares through its Sales Agency Financing Agreement with BNY Mellon at an average offering price of $27.70 for proceeds of approximately $39.6 million. WRIT repurchased a total of $12.2 million of its 3.875% convertible notes at an average discounted price of 95.6% of par for approximately $11.7 million. Subsequent to the quarter end, WRIT repurchased an additional $6.6 million of its convertible notes at an average discounted price of 96.8% of par for approximately $6.4 million. Also this quarter, WRIT prepaid a $50 million mortgage due in October 2009, unencumbering five of our multifamily assets in Virginia.

WRIT completed the sale of two properties, Tech 100 Industrial Park in Elkridge, Maryland for $10.54 million and a net book gain of $4.1 million, and Brandywine Center, a 35,000 square foot office property in Rockville, Maryland for $3.3 million and a net book gain of $1.0 million. WRIT acquired Lansdowne Medical Office Building, a newly-constructed 87,400 square foot property across the street from Inova Loudoun Hospital for $19.9 million. The projected stabilized yield on the property is between 8.0% and 8.5%.

On September 30, 2009, WRIT paid a quarterly dividend of $0.4325 per share for its 191st consecutive quarterly dividend at equal or increasing rates.

As of September 30, 2009, WRIT had a total market capitalization of $2.9 billion.(6)

Operating Results

Overall portfolio economic occupancy for the third quarter was 93.0%, compared to 91.1% in the same period one year ago and 92.9% in the second quarter of 2009. Overall portfolio Net Operating Income (NOI)(3) was $50.0 million compared to $47.0 million in the same period one year ago and $51.4 million in the second quarter of 2009.

Core(4) portfolio economic occupancy for the third quarter was 92.8%, a decrease of 90 basis points (bps) from the same period one year ago and a decrease of 30 bps sequentially from the second quarter of 2009. Core portfolio NOI for the third quarter decreased 2.8% and rental rate growth was 1.3% compared to the same period one year ago.

    --  Multifamily properties' core NOI for the third quarter increased 2.5%
        compared to the same period one year ago. Rental rate growth was -0.4%
        while core economic occupancy decreased 10 bps to 94.6%. Sequentially,
        core economic occupancy increased 200 bps from the second quarter of
        2009.
    --  Office properties' core NOI for the third quarter decreased 2.9%
        compared to the same period one year ago. Rental rate growth was 2.2%
        while core economic occupancy decreased 70 bps to 91.8%. Sequentially,
        core economic occupancy decreased 80 bps from the second quarter of
        2009.
    --  Medical office properties' core NOI for the third quarter decreased 1.1%
        compared to the same period one year ago. Rental rate growth was 2.3%
        while core economic occupancy increased 20 bps to 96.0%. Sequentially,
        core economic occupancy increased 10 bps from the second quarter of
        2009.
    --  Retail properties' core NOI for the third quarter decreased 5.0%
        compared to the same period one year ago. Rental rate growth was 0.8%
        while core economic occupancy decreased 40 bps to 94.0%. Sequentially,
        core economic occupancy decreased 100 bps from the second quarter of
        2009.
    --  Industrial properties' core NOI for the third quarter decreased 5.5%
        compared to the same period one year ago. Rental rate growth was -0.1%
        while core economic occupancy decreased 370 bps to 89.6%. Sequentially,
        core economic occupancy decreased 100 bps from the second quarter of
        2009.

Leasing Activity

During the third quarter, WRIT signed commercial leases for 325,990 square feet with an average rental rate increase of 8.1% over expiring lease rates, an average lease term of 3.4 years, tenant improvement costs of $7.65 per square foot and leasing costs of $3.95 per square foot.

    --  Rental rates for new and renewed office leases increased 7.3% to $29.06
        per square foot, with $9.62 per square foot in tenant improvement costs
        and $4.93 per square foot in leasing costs.
    --  Rental rates for new and renewed medical office leases increased 18.8%
        to $39.59 per square foot, with $18.23 per square foot in tenant
        improvement costs and $8.88 per square foot in leasing costs.
    --  Rental rates for new and renewed retail leases decreased 8.6% to $21.37
        per square foot, with no tenant improvement costs and $1.64 per square
        foot in leasing costs.
    --  Rental rates for new and renewed industrial/flex leases increased 2.7%
        to $8.66 per square foot, with $0.73 per square foot in tenant
        improvement costs and $0.45 per square foot in leasing costs.

Residential rental rates decreased 0.4% in the third quarter compared to the same period one year ago.

Conference Call Information

The Conference Call for 3rd Quarter Earnings is scheduled for Friday, October 23, 2009 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

Leader:                     William T. Camp



The instant replay of the Conference Call will be available until November 6, 2009 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:              333187



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 at http://www.writ.com 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 91 properties totaling approximately 11 million square feet of commercial space and 2,536 residential units. These 91 properties consist of 27 office properties, 21 industrial/flex properties, 18 medical office properties, 14 retail centers, 11 multi-family properties and land for development. 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 this press release 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 effect of the current credit and financial market conditions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, the timing and pricing of lease transactions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, changes in general and local economic and real estate market conditions, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2008 Form 10-K, our second quarter 2009 10-Q and our Form 8-K filed July 10, 2009. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(1) Financial Accounting Standards Board Staff Position APB14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"), requires the bifurcation of a component of our 3.875% convertible notes, classification of that component in shareholders' equity, and accretion of the resulting discount on the convertible notes to interest expense. As a result of the adoption of FSP 14-1, equity increased by $21.0 million as of September 30, 2009 and December 31, 2008. The principal balance of our 3.875% convertible notes was reduced by $5.2 million and $12.0 million as of September 30, 2009 and December 31, 2008, respectively, and the unamortized balance of the related loan origination costs was reduced by $2.1 million and $2.7 million, respectively. The decline in principal reflects the unamortized discount balance related to the adoption of FSP 14-1. Interest expense increased $0.8 million in the third quarter of 2009 and $1.3 million in the third quarter of 2008 as a result of the adoption. The gain (loss) on extinguishment of debt decreased by $0.4 million for the third quarter of 2009 as a result of the adoption.

(2) 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) from sales of property plus 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.

(3) Net Operating income ("NOI"), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. 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. 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.

(4) For purposes of evaluating comparative operating performance, we categorize our properties as "core" or "non-core". A core property is one that was owned for the entirety of the periods being evaluated. A non-core property is one that was acquired or placed into service during either of the periods being evaluated.

(5) 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.

(6) Total market capitalization is calculated by multiplying the total outstanding common shares at period end times the closing share price on the last trading day of the period, and then adding the book value of the total outstanding debt at period end.


Economic Occupancy Levels by Core Properties(i)and All Properties

                   Core Properties   All Properties

Sector             3rd QTR  3rd QTR  3rd QTR      3rd QTR

                   2009     2008     2009         2008

Residential        94.6 %   94.7 %   93.9 %  (ii) 85.6 %

Office             91.8 %   92.5 %   92.3 %       90.2 %

Medical Office     96.0 %   95.8 %   96.0 %       95.8 %

Retail             94.0 %   94.4 %   94.0 %       94.4 %

Industrial         89.6 %   93.3 %   89.6 %       92.9 %

Overall Portfolio  92.8 %   93.7 %   93.0 %       91.1 %




((i)) Core properties include all properties that were owned for the entirety
of the current and prior year reporting periods. For Q3 2009 and Q3 2008, core
properties exclude:

Residential Acquisition: Kenmore Apartments;

Office Acquisition: 2445 M Street;

Medical Office Acquisition: Lansdowne Medical Office Building;

Retail Acquisitions: none;

Industrial Acquisitions: none.

Also excluded from Core Properties in Q3 2009 and Q3 2008 are Sold Properties:
Avondale Apartments, Brandywine Center and Tech 100;

Held for Sale Properties: Charleston Business Center and Crossroads
Distribution Center;

In Development Properties: Bennett Park, Clayborne Apartments, and Dulles
Station.

(ii) Residential occupancy for all properties reflects the completion of
Bennett Park and Clayborne Apartments. At 9/30/09, 220 of 224 units were
occupied at Bennett Park and 70 of 74 units were occupied at Clayborne
Apartments.




WASHINGTON REAL ESTATE INVESTMENT TRUST

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

(Unaudited)

                Three Months Ended September   Nine Months Ended September 30,
                30,

OPERATING         2009          2008             2009          2008
RESULTS

Revenue

Real estate     $ 75,607      $ 69,798         $ 229,063     $ 206,405
rental revenue

Expenses

Real estate       25,868        23,790           78,409        68,283
expenses

Depreciation
and               23,643        21,240           70,095        62,213
amortization

General and       3,834         2,731            10,732        8,812
administrative

                  53,345        47,761           159,236       139,308

Real estate
operating         22,262        22,037           69,827        67,097
income

Other income/
(expense):

Interest          (18,224 )     (18,447 )        (57,221 )     (56,187 )
expense(1)

Investment        262           338              921           796
income

Gain (loss) on
extinguishment    (133    )     -                6,931         (8,449  )
of debt(1)

Gain from
non-disposal      62            17               62            17
activities

                  (18,033 )     (18,092 )        (49,307 )     (63,823 )

Income from
continuing        4,229         3,945            20,520        3,274
operations

Discontinued
operations:

Income from
operations of     227           684              1,304         3,416
properties
held for sale

Gain on sale      5,147         -                11,821        15,275
of real estate

Net income        9,603         4,629            33,645        21,965

Less: Net
income
attributable
to                (53     )     (48     )        (154    )     (158    )
noncontrolling
interests in
subsidiaries

Net income
attributable
to the          $ 9,550       $ 4,581          $ 33,491      $ 21,807
controlling
interests

Income from
continuing
operations
attributable    $ 4,176       $ 3,897          $ 20,366      $ 3,116
to the
controlling
interests

Gain from
non-disposal      (62     )     (17     )        (62     )     (17     )
activities

Continuing
operations
real estate       23,643        21,240           70,095        62,213
depreciation
and
amortization

Funds from
continuing      $ 27,757      $ 25,120         $ 90,399      $ 65,312
operations

Income from
discontinued
operations        227           684              1,304         3,416
before gain on
sale

Discontinued
operations
real estate       46            305              405           1,054
depreciation
and
amortization

Funds from
discontinued      273           989              1,709         4,470
operations

Funds from      $ 28,030      $ 26,109         $ 92,108      $ 69,782
operations(2)

Gain on
extinguishment    133           -                (6,931  )     -
of debt

Tenant            (2,272  )     (1,452  )        (8,065  )     (8,591  )
improvements

External and
internal
leasing           (1,543  )     (1,851  )        (4,787  )     (5,303  )
commissions
capitalized

Recurring
capital           (1,756  )     (1,936  )        (4,914  )     (7,104  )
improvements

Straight-line     (576    )     (779    )        (1,852  )     (2,235  )
rents, net

Non-cash fair
value interest    794           1,067            2,822         3,175
expense

Non real
estate
depreciation &    1,122         1,262            3,518         3,778
amortization
of debt costs

Amortization
of lease          (559    )     (533    )        (1,809  )     (1,576  )
intangibles,
net

Amortization
and expensing
of restricted     1,136         706              2,640         2,121
share and unit
compensation

Funds
available for   $ 24,509      $ 22,593         $ 72,730      $ 54,047
distribution
(5)

Note: Certain prior period amounts have been reclassified to conform to the
current presentation.




                           Three Months Ended    Nine Months Ended September
                           September 30,         30,

Per share data
attributable
to the                     2009       2008       2009       2008
controlling
interests:

Income from
continuing      (Basic)    $ 0.07     $ 0.08     $ 0.36     $ 0.06
operations

                (Diluted)  $ 0.07     $ 0.08     $ 0.36     $ 0.06

Net income      (Basic)    $ 0.16     $ 0.09     $ 0.60     $ 0.45

                (Diluted)  $ 0.16     $ 0.09     $ 0.60     $ 0.45

Funds from
continuing      (Basic)    $ 0.47     $ 0.51     $ 1.61     $ 1.36
operations

                (Diluted)  $ 0.47     $ 0.51     $ 1.61     $ 1.35

Funds from      (Basic)    $ 0.48     $ 0.53     $ 1.65     $ 1.45
operations

                (Diluted)  $ 0.48     $ 0.53     $ 1.65     $ 1.45

Dividends paid             $ 0.4325   $ 0.4325   $ 1.2975   $ 1.2875

Weighted
average shares               58,556     49,599     55,936     48,057
outstanding

Fully diluted
weighted                     58,571     49,725     55,940     48,202
average shares
outstanding




WASHINGTON REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

                                                   September 30,   December 31,

                                                   2009            2008 (7)

Assets

Land                                               $ 412,137       $ 410,833

Income producing property                            1,890,505       1,854,008

                                                     2,302,642       2,264,841

Accumulated depreciation and amortization            (454,407  )     (394,902  )

Net income producing property                        1,848,235       1,869,939

Development in progress                              24,611          23,732

Total real estate held for investment, net           1,872,846       1,893,671

Investment in real estate sold or held for sale      6,277           26,734

Cash and cash equivalents                            7,119           11,874

Restricted cash                                      18,072          18,823

Rents and other receivables, net of allowance for    49,109          44,675
doubtful accounts of $6,347 and $6,122

Prepaid expenses and other assets(1)                 104,421         112,284

Other assets related to property sold or held for    553             1,346
sale

Total assets                                       $ 2,058,397     $ 2,109,407

Liabilities

Notes payable(1)                                   $ 796,064       $ 890,679

Mortgage notes payable                               406,377         421,286

Lines of credit                                      6,000           67,000

Accounts payable and other liabilities               64,462          70,538

Advance rents                                        9,792           8,926

Tenant security deposits                             10,021          10,084

Other liabilities related to property sold or        112             469
held for sale

Total liabilities                                  $ 1,292,828     $ 1,468,982

Shareholders' equity

Shares of beneficial interest, $0.01 par value;
100,000 shares authorized; 59,724 and 52,434         598             526
shares issued and outstanding, respectively

Additional paid-in capital(1)                        942,884         777,375

Distributions in excess of net income                (179,639  )     (138,936  )

Accumulated other comprehensive income               (2,080    )     (2,335    )

Total shareholders' equity                           761,763         636,630

Noncontrolling interests in subsidiaries             3,806           3,795

Total equity                                         765,569         640,425

Total liabilities and equity                       $ 2,058,397     $ 2,109,407

Note: Certain prior year amounts have been reclassified to conform to the
current year presentation.

(7) As adjusted (see Current Report on Form 8-K filed on July 10, 2009)





The following tables contain reconciliations of net income to core net operating
income for the periods presented:

Three months
ended           Multifamily  Office      Medical    Retail   Industrial  Total
September 30,                            Office
2009

Core net
operating       $ 4,927      $ 17,872    $ 7,347    $ 7,665  $ 6,562     $ 44,373
income(4)

Add: Net
operating
income from       1,942        3,504       (80   )    -        -           5,366
non-core
properties(4)

Total net
operating       $ 6,869      $ 21,376    $ 7,267    $ 7,665  $ 6,562     $ 49,739
income(3)

Add/(deduct):

Other income                                                               262

Other income -                                                             62
gain

Interest                                                                   (18,224 )
expense

Gain (loss) on
extinguishment                                                             (133    )
of debt

Depreciation
and                                                                        (23,643 )
amortization
expense

General and
administrative                                                             (3,834  )
expenses

Income from
operations of                                                              227
properties
held for sale

Gain on sale                                                               5,147
of real estate

Net income                                                               $ 9,603

Less: Net
income
attributable
to                                                                         (53     )
noncontrolling
interests in
subsidiaries

Net income
attributable
to the                                                                   $ 9,550
controlling
interests

Three months
ended           Multifamily  Office      Medical    Retail   Industrial  Total
September 30,                            Office
2008

Core net
operating       $ 4,809      $ 18,409    $ 7,425    $ 8,071  $ 6,941     $ 45,655
income(4)

Add: Net
operating
income from       510          (157   )    -          -        -           353
non-core
properties(4)

Total net
operating       $ 5,319      $ 18,252    $ 7,425    $ 8,071  $ 6,941     $ 46,008
income(3)

Add/(deduct):

Other income                                                               338

Other income -                                                             17
gain

Interest                                                                   (18,447 )
expense

Depreciation
and                                                                        (21,240 )
amortization
expense

General and
administrative                                                             (2,731  )
expenses

Income from
operations of                                                              684
properties
held for sale

Net income                                                               $ 4,629

Less: Net
income
attributable
to                                                                         (48     )
noncontrolling
interests in
subsidiaries

Net income
attributable
to the                                                                   $ 4,581
controlling
interests

The following tables contain reconciliations of net income to core net operating
income for the periods presented:





Nine months
ended           Multifamily  Office      Medical   Retail    Industrial  Total
September 30,                            Office
2009

Core net
operating       $ 14,595     $ 54,130    $ 22,163  $ 23,040  $ 19,660    $ 133,588
income(4)

Add: Net
operating
income from       5,462        10,660      123       -         821         17,066
non-core
properties(4)

Total net
operating       $ 20,057     $ 64,790    $ 22,286  $ 23,040  $ 20,481    $ 150,654
income(3)

Add/(deduct):

Other income                                                               921

Other income -                                                             62
gain

Interest                                                                   (57,221 )
expense

Gain (loss) on
extinguishment                                                             6,931
of debt

Depreciation
and                                                                        (70,095 )
amortization
expense

General and
administrative                                                             (10,732 )
expenses

Income from
operations of                                                              1,304
properties
held for sale

Gain on sale                                                               11,821
of real estate

Net income                                                               $ 33,645

Less: Net
income
attributable
to                                                                         (154    )
noncontrolling
interests in
subsidiaries

Net income
attributable
to the                                                                   $ 33,491
controlling
interests

Nine months
ended           Multifamily  Office      Medical   Retail    Industrial  Total
September 30,                            Office
2008

Core net
operating       $ 14,118     $ 56,582    $ 21,979  $ 24,375  $ 20,724    $ 137,778
income(4)

Add: Net
operating
income from       152          (467   )    99        -         560         344
non-core
properties(4)

Total net
operating       $ 14,270     $ 56,115    $ 22,078  $ 24,375  $ 21,284    $ 138,122
income(3)

Add/(deduct):

Other income                                                               796

Other income -                                                             17
gain

Interest                                                                   (56,187 )
expense

Gain (loss) on
extinguishment                                                             (8,449  )
of debt

Depreciation
and                                                                        (62,213 )
amortization
expense

General and
administrative                                                             (8,812  )
expenses

Income from
operations of                                                              3,416
properties
held for sale

Gain on sale                                                               15,275
of real estate

Net income                                                               $ 21,965

Less: Net
income
attributable
to                                                                         (158    )
noncontrolling
interests in
subsidiaries

Net income
attributable
to the                                                                   $ 21,807
controlling
interests




    Source: Washington Real Estate Investment Trust