Washington Real Estate Investment Trust Announces Fourth Quarter and Year-End Operating Results for 2008

ROCKVILLE, Md.--(BUSINESS WIRE)-- Washington Real Estate Investment Trust (WRIT) (NYSE:WRE) reported financial and operating results today for the quarter and year ending December 31, 2008:

    --  Net income for the year ending December 31, 2008 was $0.67 per diluted
        share, compared to $1.34 per diluted share in 2007. Net income for the
        quarter ending December 31, 2008 was $0.14 per diluted share, compared
        to $0.18 per diluted share in the same period one year ago. Included in
        the 2008 full year net income per share was a $0.17 non-recurring charge
        for the extinguishment of $60 million of 10-year Mandatory Par Put
        Remarketed Securities ("MOPPRS") and a $0.07 gain due to the repurchase
        of convertible debt. Additionally, 2008 full year net income per share
        declined $0.20 from 2007 due to higher gains from the sale of real
        estate in 2007.
    --  Funds from Operations (FFO)(1) for the year ending December 31, 2008 was
        $2.12 per diluted share compared to $2.31 per diluted share the prior
        year. FFO for the quarter ending December 31, 2008 was $0.59 per diluted
        share, compared to $0.59 per diluted share in the same period one year
        ago. Included in the 2008 full-year FFO per share was a $0.17
        non-recurring charge for the extinguishment of $60 million of 10-year
        Mandatory Par Put Remarketed Securities ("MOPPRS") and a $0.07 gain due
        to the repurchase of convertible debt.

Operating Results

Core Net Operating Income (NOI)(2) for the year 2008 was $160.6 million compared to $161.8 million last year. Core rental rate growth was 1.9%.

Core NOI for the fourth quarter was $43.0 million compared to $45.8 million the same period one year ago. Core rental rate growth was 2.4%.

    --  Office properties' core NOI for the fourth quarter decreased 3.9%
        compared to the same period one year ago. Rental rate growth for the
        office sector was 2.3% while core economic occupancy decreased 190 basis
        points to 93.5%. Sequentially, core economic occupancy increased from
        92.5% in the third quarter of 2008.
    --  Retail properties' core NOI for the fourth quarter decreased 17.3%
        compared to the same period one year ago due in a large part to
        write-offs associated with the bankruptcy of Circuit City. Rental rate
        growth was 3.5% while core economic occupancy decreased 130 basis points
        to 94.8%. Sequentially, core economic occupancy increased from 94.4% in
        the third quarter of 2008.
    --  Industrial properties' core NOI for the fourth quarter decreased 8.5%
        compared to the same period one year ago. Rental rate growth was 2.7%
        while core economic occupancy decreased 340 basis points to 92.3%.
        Sequentially, core economic occupancy declined from 92.9% in the third
        quarter of 2008.
    --  Medical office properties' core NOI for the fourth quarter decreased
        1.8% compared to the same period one year ago. Rental rate growth was
        2.0% while core economic occupancy decreased 210 basis points to 96.0%.
        Sequentially, core economic occupancy remained relatively flat compared
        to 95.8% in the third quarter of 2008.
    --  Multifamily properties' core NOI for the fourth quarter increased 2.1%
        compared to the same period one year ago. Rental rate growth was 1.8%
        and core economic occupancy increased 200 basis points to 93.2%.
        Sequentially, core economic occupancy declined from 94.7% in the third
        quarter of 2008.

Overall core economic occupancy was 93.9% during the fourth quarter of 2008 compared to 95.4% the same period in the prior year. Sequentially, core economic occupancy increased from 93.6% in the third quarter of 2008.

Leasing Activity

During the fourth quarter, WRIT signed commercial leases for 307,000 square feet, with an average rental rate increase of 19.9% and tenant improvement costs of $15.33 per square foot. Residential rental rates increased 1.8% in the fourth quarter compared to the same period one year ago.

    --  Rental rates for new and renewed office leases increased 15.9% to $29.65
        per square foot, with $20.77 per square foot in tenant improvement
        costs.
    --  Rental rates for new and renewed retail leases increased 14.4% to $30.98
        per square foot, with $2.14 per square foot in tenant improvement costs.
    --  Rental rates for new and renewed medical office leases increased 26.0%
        to $41.07 per square foot, with $27.56 per square foot in tenant
        improvement costs.
    --  Rental rates for new and renewed industrial/flex leases increased 26.3%
        to $12.18 per square foot, with $3.37 per square foot in tenant
        improvement costs.

For the full year, WRIT signed commercial leases for 1,508,000 square feet, with an average rental rate increase of 19.4% and tenant improvement costs of $8.44 per square foot.

Acquisition Activity

On December 2, 2008, WRIT acquired 2445 M Street, NW, a 290,000 square foot Class A office building with a two-level parking garage in Washington, D.C. for $181.4 million. The property is 100% leased to two high-quality tenants under long-term leases. The Advisory Board Company occupies 180,000 square feet and Patton Boggs LLP occupies 110,000 square feet. WRIT expects to achieve a first-year, leveraged yield of 6.7% on a cash basis and 7.2% on a GAAP basis. At closing, WRIT assumed a $101.9 million loan with an interest rate of 5.619% per annum with the remaining balance funded with cash and borrowings from our lines of credit, which were subsequently paid down in part with proceeds from the sale of Sullyfield Center and The Earhart Building.

Capital Structure

On October 1, 2008, WRIT closed a $60.4 million offering of 1.725 million common shares at an offering price of $35.00 per share. WRIT used the proceeds from the offering to repay borrowings under its lines of credit and for general corporate purposes. In December 2008, WRIT repurchased $16,000,000 of its 3.875% convertible notes. WRIT repurchased the notes at a discount price of 75% of par for $12,000,000. In conjunction with the repurchase, WRIT reported a gain of approximately $3,493,000 in the fourth quarter of 2008.

On December 31, 2008, WRIT paid a quarterly dividend of $0.4325 per share for its 188th consecutive quarterly dividend at equal or increasing rates.

As of December 31, 2008 WRIT had a total capitalization of $2.9 billion.

Earnings Guidance

Management estimates that 2009 FFO per diluted share earnings should range from $1.95 - $2.15. This guidance takes into account approximately $0.10 per share interest expense adjustments related to the new convertible debt accounting rules and fair value accounting treatment for the loan on our 2445 M Street acquisition. Additionally, our guidance includes:

    --  Increasing bad debt expense as a percentage of revenue earned in 2009 in
        anticipation of the potential future impact of continued deteriorating
        economic conditions in the real estate markets.
    --  Taking a more conservative projection for vacancy by assuming lower
        retention and longer lease up of vacant or expiring space.
    --  Assuming our overall cost of capital will rise throughout the year given
        rates on our lines of credit currently hover around 1%.
    --  Increasing cap rate assumptions on approximately $50 - $70 million of
        planned dispositions and a nominal level of acquisitions.
    --  Accounting for the full year impact of the additional shares we issued
        last year.

Conference Call Information

The Conference Call for 4th Quarter Earnings is scheduled for Friday, February 20, 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:                     Sara Grootwassink



The instant replay of the Conference Call will be available until March 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:              308562



The live on-demand webcast of the Conference Call will also be available on the Investor section of WRIT's website at www.writ.com. On-line playback of the webcast will be available at 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 93 properties consisting of 28 office properties, 22 industrial/flex properties, 17 medical office properties, 14 retail centers, 12 multifamily 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 2007 Form 10-K and our third-quarter 2008 10-Q. 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) from sales of property plus real estate depreciation and amortization. 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. FFO is a non-GAAP measure.

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

(3) Funds Available for Distribution ("FAD") 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. FAD is included herein, because we consider it 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-GAAP and non-standardized measure, and may be calculated differently by other REITs.


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

                   Core Properties   All Properties

Sector             4th QTR  4th QTR  4th QTR       4th QTR

                   2008     2007     2008          2007

Residential        93.2%    91.2%    87.6%   (ii)  84.9%

Office             93.5%    95.4%    93.2%         95.5%

Medical Office     96.0%    98.1%    95.2%         98.1%

Retail             94.8%    96.1%    94.8%         96.1%

Industrial         92.3%    95.7%    92.5%         95.5%

Overall Portfolio  93.9%    95.4%    92.6%         94.3%




(i) Core properties include all properties that were owned for the entirety of
the current and prior year reporting periods. For Q4 2008 and Q4 2007, core
properties exclude:

Residential Acquisition: The Kenmore

Office Acquisition: 2445 M Street, 2000 M Street

Medical Office Acquisitions: Sterling Medical Office Building

Retail Acquisitions: none

Industrial Acquisition: 6100 Columbia Pike Drive

Also excluded from Core Properties in Q4 2008 and Q4 2007 are Sold Properties:
Sullyfield Center and The Earhart Building; Held for Sale Property: Avondale;
and In Development Properties: Bennett Park, Clayborne Apartments, Dulles
Station, and 4661 Kenmore Ave.

(ii) Residential occupancy for all properties reflects the completion of
Bennett Park and Clayborne Apartments. At 12/31/08, 174 of 224 units were
leased at Bennett Park and 47 of 74 units were leased at Clayborne Apartments.




WASHINGTON REAL ESTATE INVESTMENT TRUST

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)

(Unaudited)

                Three Months Ended December 31,  Twelve Months Ended December
                                                 31,

OPERATING         2008         2007                2008         2007
RESULTS

Revenue

Real estate     $ 73,085     $ 66,802            $ 282,312    $ 252,732
rental revenue

Expenses

Real estate       25,471       20,897              94,573       78,414
expenses

Depreciation
and               23,630       18,826              86,429       69,136
amortization

General and       3,350        3,675               12,321       15,099
administrative

                  52,451       43,398              193,323      162,649

Real estate
operating         20,634       23,404              88,989       90,083
income

Other income/
(expense):

Interest          (17,515 )    (16,400 )           (69,909 )    (61,906 )
expense

Gain (loss) on
extinguishment    3,493        -                   (4,956  )    -
of debt

Other income      277          480                 1,073        1,875

Gain from
non-disposal      -            -                   17           1,303
activities

                  (13,745 )    (15,920 )           (73,775 )    (58,728 )

Income from
continuing        6,889        7,484               15,214       31,355
operations

Discontinued
operations:

Income from
operations of     353          958                 2,352        5,504
properties
held for sale

Gain on sale      -            -                   15,275       25,022
of real estate

Net Income      $ 7,242      $ 8,442             $ 32,841     $ 61,881

Income from
continuing      $ 6,889      $ 7,484             $ 15,214     $ 31,355
operations

Gain from
non-disposal      -            -                   (17     )    (1,303  )
activities

Continuing
operations
real estate       23,630       18,826              86,429       69,136
depreciation
and
amortization

Funds from
continuing      $ 30,519     $ 26,310            $ 101,626    $ 99,188
operations

Income from
discontinued
operations        353          958                 2,352        5,504
before gain on
sale

Discontinued
operations
real estate       -            259                 469          1,889
depreciation
and
amortization

Funds from
discontinued      353          1,217               2,821        7,393
operations

Funds from      $ 30,872     $ 27,527            $ 104,447    $ 106,581
Operations(1)

Tenant            (2,759  )    (5,026  )           (11,350 )    (16,587 )
improvements

External and
internal
leasing           (1,184  )    (1,613  )           (6,487  )    (6,005  )
commissions
capitalized

Recurring
capital           (2,688  )    (3,899  )           (9,792  )    (11,895 )
improvements

Straight-line     (517    )    (957    )           (2,752  )    (4,204  )
rents, net

Non-cash fair
value interest    (827    )    -                   (827    )    -
expense

Non real
estate
depreciation &    988          1,011               3,971        3,572
amortization
of debt costs

Amortization
of lease          (47     )    (191    )           (1,623  )    (1,381  )
intangibles,
net

Amortization
and expensing
of restricted     417          850                 2,538        4,088
share and unit
compensation

Other             -            -                   -            1,303

Funds
Available for   $ 24,255     $ 17,702            $ 78,125     $ 75,472
Distribution
(3)

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




                             Three Months Ended December    Twelve Months Ended
                             31,                            December 31,

Per Share Data               2008      2007                 2008      2007

Income from
continuing      (Basic)      $ 0.13    $ 0.16               $ 0.31    $ 0.68
operations

                (Diluted)    $ 0.13    $ 0.16               $ 0.31    $ 0.68

Net income      (Basic)      $ 0.14    $ 0.18               $ 0.67    $ 1.35

                (Diluted)    $ 0.14    $ 0.18               $ 0.67    $ 1.34

Funds from
continuing      (Basic)      $ 0.58    $ 0.56               $ 2.07    $ 2.16
operations

                (Diluted)    $ 0.58    $ 0.56               $ 2.06    $ 2.15

Funds from      (Basic)      $ 0.59    $ 0.59               $ 2.13    $ 2.32
operations

                (Diluted)    $ 0.59    $ 0.59               $ 2.12    $ 2.31

Dividends paid               $ 0.4325  $ 0.4225             $ 1.7200  $ 1.6800

Weighted
average shares                 52,358    46,604               49,138    45,911
outstanding

Fully diluted
weighted                       52,604    46,822               49,373    46,115
average shares
outstanding




WASHINGTON REAL ESTATE INVESTMENT TRUST

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

                                                   December 31,    December 31,

                                                     2008            2007

Assets

Land                                               $ 416,576       $ 325,490

Income producing property                            1,868,500       1,621,679

                                                     2,285,076       1,947,169

Accumulated depreciation and amortization            (401,539  )     (327,759  )

Net income producing property                        1,883,537       1,619,410

Development in progress                              23,630          98,321

Total real estate held for investment, net           1,907,167       1,717,731

Investment in real estate sold or held for sale      12,526          36,562

Cash and cash equivalents                            11,874          21,485

Restricted cash                                      18,823          6,030

Rents and other receivables, net of allowance for    45,439          36,548
doubtful accounts of $6,308 and $4,196

Prepaid expenses and other assets                    115,401         78,394

Other assets related to property sold or held for    161             1,576
sale

Total assets                                       $ 2,111,391     $ 1,898,326

Liabilities

Notes payable                                      $ 902,900       $ 879,123

Mortgage notes payable                               421,286         252,484

Lines of credit                                      67,000          192,500

Accounts payable and other liabilities               70,575          63,327

Advance rents                                        9,016           9,537

Tenant security deposits                             10,298          10,419

Other liabilities related to property sold or        128             616
held for sale

Total liabilities                                    1,481,203       1,408,006

Minority interest                                    3,795           3,776

Shareholders' equity

Shares of beneficial interest, $0.01 par value;
100,000 shares authorized; 52,434 and 46,682         526             468
shares issued and outstanding, respectively

Additional paid-in capital                           756,341         561,492

Distributions in excess of net income                (128,139  )     (75,416   )

Accumulated other comprehensive income               (2,335    )     -

Total shareholders' equity                           626,393         486,544

Total liabilities and shareholders' equity         $ 2,111,391     $ 1,898,326

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





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

Three months
ended December                         Medical
31, 2008

                Multifamily  Office    Office    Retail    Industrial  Total

Core net
operating       $ 4,766      $ 16,899  $ 7,307   $ 6,966   $ 7,075     $ 43,013
income

Add: Net
operating
income from       1,388        2,921     32        -         260         4,601
non-core
properties

Total net
operating       $ 6,154      $ 19,820  $ 7,339   $ 6,966   $ 7,335     $ 47,614
income

Add/(deduct):

Other income                                                             277

Interest                                                                 (17,515 )
expense

Gain (loss) on
extinguishment                                                           3,493
of debt

Depreciation
and                                                                      (23,630 )
amortization
expense

General and
administrative                                                           (3,350  )
expenses

Income from
operations of                                                            353
properties
held for sale

Net income                                                             $ 7,242

Three months
ended December                         Medical
31, 2007

                Multifamily  Office    Office    Retail    Industrial  Total

Core net
operating       $ 4,668      $ 17,577  $ 7,444   $ 8,420   $ 7,731     $ 45,840
income

Add: Net
operating
income (loss)     (112   )     177       -         -         -           65
from non-core
properties

Total net
operating       $ 4,556      $ 17,754  $ 7,444   $ 8,420   $ 7,731     $ 45,905
income

Add/(deduct):

Other income                                                             480

Interest                                                                 (16,400 )
expense

Depreciation
and                                                                      (18,826 )
amortization
expense

General and
administrative                                                           (3,675  )
expenses

Income from
operations of                                                            958
properties
held for sale

Net income                                                             $ 8,442

Twelve months
ended December                         Medical
31, 2008

                Multifamily  Office    Office    Retail    Industrial  Total

Core net
operating       $ 18,884     $ 62,150  $ 20,613  $ 31,341  $ 27,611    $ 160,599
income

Add: Net
operating
income from       1,538        14,039    8,804     -         2,759       27,140
non-core
properties

Total net
operating       $ 20,422     $ 76,189  $ 29,417  $ 31,341  $ 30,370    $ 187,739
income

Add/(deduct):

Other income                                                             1,073

Gain from
non-disposal                                                             17
activities

Interest                                                                 (69,909 )
expense

Gain (loss) on
extinguishment                                                           (4,956  )
of debt

Depreciation
and                                                                      (86,429 )
amortization
expense

General and
administrative                                                           (12,321 )
expenses

Income from
operations of                                                            2,352
properties
held for sale

Gain on sale                                                             15,275
of real estate

Net income                                                             $ 32,841

Twelve months
ended December                         Medical
31, 2007

                Multifamily  Office    Office    Retail    Industrial  Total

Core net
operating       $ 18,266     $ 62,229  $ 20,660  $ 32,591  $ 28,051    $ 161,797
income

Add: Net
operating
income (loss)     (364   )     5,536     5,536     -         1,813       12,521
from non-core
properties

Total net
operating       $ 17,902     $ 67,765  $ 26,196  $ 32,591  $ 29,864    $ 174,318
income

Add/(deduct):

Other income                                                             1,875

Gain from
non-disposal                                                             1,303
activities

Interest                                                                 (61,906 )
expense

Depreciation
and                                                                      (69,136 )
amortization
expense

General and
administrative                                                           (15,099 )
expenses

Income from
operations of                                                            5,504
properties
held for sale

Gain on sale                                                             25,022
of real estate

Net income                                                             $ 61,881




    Source: Washington Real Estate Investment Trust (WRIT)