Washington Real Estate Investment Trust Announces Third Quarter 2007 Results

ROCKVILLE, Md.--(BUSINESS WIRE)--

Washington Real Estate Investment Trust (WRIT) (NYSE:WRE) reported financial and operating results today for the third quarter ended September 30, 2007:

    --  Net income for the quarter ended September 30, 2007 was $34.4
        million, or $0.73 per diluted share, compared to $10.2
        million, or $0.23 per diluted share in the same period one
        year ago. Net income this quarter included a $25.0 million
        gain on disposed assets, related to the sale of Maryland Trade
        Center I & II.

    --  Funds from Operations (FFO) (1) for the quarter ended
        September 30, 2007 was $27.7 million, or $0.59 per diluted
        share, an increase of $3.3 million, or $0.05 per diluted share
        from the same period last year.

    Operating Results

Core Net Operating Income (NOI) (3) for the third quarter increased by 6.8%, or $2.5 million, compared to the same period one year ago. The increase in Core NOI is due to rental rate growth of 2.7% and economic occupancy increase of 110 basis points. Rental rate growth was achieved in all sectors; the increase in economic occupancy was primarily achieved in the office sector.

    --  Office properties' Core NOI increased 9.8% compared to the
        same period one year ago. Economic occupancy increased 290 bps
        to 95.5%, mainly due to lease ups at 7900 Westpark, 6110
        Executive Boulevard, and Lexington office buildings. Rental
        rate growth for the office sector increased 1.9%.

    --  Retail properties' Core NOI increased 7.3% compared to the
        same period one year ago. Rental rate growth was 2.9%,
        primarily due to rate increases at the newly redeveloped
        Shoppes at Foxchase, Bradlee Shopping Center, and Frederick
        County Square. Economic occupancy increased 110 bps to 95.0%
        due to occupancy gains at Montrose Shopping Center.

    --  Industrial properties' Core NOI increased 5.4% compared to the
        same period one year ago due to rental rate growth of 2.3%.
        Economic occupancy increased 20 bps to 94.6% from the same
        quarter one year ago.

    --  Medical office properties' Core NOI increased 3.9% compared to
        the same period one year ago. Rental rate growth was 1.9% and
        economic occupancy remains high for the medical office sector
        at 99.4%.

    --  Multifamily properties' Core NOI increased 3.6% compared to
        the same period one year ago. Rental rate growth was 4.9%
        while economic occupancy declined 120 bps quarter-over-quarter
        to 93.2%, but increased 240 bps sequentially. Rental rate
        growth was driven by new leases at 3801 Connecticut Avenue and
        Bethesda Hill Apartments.

Core occupancy was 95.3% during the third quarter of 2007, an increase of 110 bps from the same period the prior year.

Leasing Activity

During the third quarter, WRIT signed commercial leases for 323,000 square feet, with an average rental rate increase of 22.6% and tenant improvement costs of $6.36 per square foot. Residential rental rates increased 4.9%.

    --  Rental rates for new and renewed retail leases increased
        37.2%, with no tenant improvement costs.

    --  Rental rates for new and renewed office leases increased
        22.7%, with $17.66 per square foot in tenant improvement
        costs.

    --  Rental rates for new and renewed medical office leases
        increased 19.8%, with $18.33 per square foot in tenant
        improvement costs.

    --  Rental rates for new and renewed industrial/flex leases
        increased 15.6%, with $0.88 per square foot in tenant
        improvement costs.

    Acquisition and Disposition Activity

During the third quarter of 2007, WRIT acquired one medical office property for $15.3 million and land for development. WRIT sold two Class A office buildings for $58.0 million achieving a net gain on sale of $25 million. The acquisitions were financed with borrowings on our line of credit, cash from operations and operating partnership units. The proceeds from the disposition will be reinvested in a 1031 exchange.

    --  On August 17, 2007, WRIT acquired CentreMed I & II medical
        office buildings, located in Centreville, VA consisting of
        52,000 net rentable square feet and 258 parking spaces, for
        $15.3 million. The buildings are located off Route
        28/Centreville Road near I-66, in close proximity to Inova
        Fair Oaks Hospital and Prince William Hospital. Upon
        acquisition, the property was 100% leased to 14 tenants and is
        expected to achieve a first-year, unleveraged yield of 7.2% on
        a cash basis and 7.6% on a GAAP basis.

    --  On September 13, 2007, WRIT acquired a 0.8 acre parcel of
        land, located at 4661 Kenmore Avenue, Alexandria, VA for
        future medical office development. The acquisition was funded
        by issuing operating units in a consolidated subsidiary of
        WRIT. The land is adjacent to WRIT's Alexandria Professional
        Center, one-half mile from Inova Alexandria Hospital and
        directly off I-395. WRIT currently has the right to develop
        70,000 square feet of office space on the site, but will
        pursue a modification of the existing zoning to develop
        additional square footage.

    --  On September 27, 2007, WRIT completed the sale of Maryland
        Trade Center I & II for $58 million. Maryland Trade Center I
        is a 16-story, office tower consisting of 190,000 net rentable
        square feet. Maryland Trade Center II is a 12-story, office
        tower consisting of 160,000 net rentable square feet. WRIT
        acquired the office properties on May 17, 1996 for $28 million
        and achieved a net book gain on sale of $25 million. The
        unlevered internal rate of return was 16.9% over the WRIT
        ownership period. Proceeds from the sale will be reinvested in
        a 1031 exchange.

    Development Activity

    --  In July, WRIT completed base construction on Dulles Station, a
        180,000 square foot development project of Class A office and
        retail space located in Herndon, VA. The building, prominently
        visible from the Dulles Toll Road, is part of a mixed-use
        development which will include 1,095 multifamily units and
        56,000 square feet of retail and restaurant space.

    --  This quarter WRIT began delivering units in the mid-rise tower
        of Bennett Park, fully delivering all 46 units by quarter-end.
        Bennett Park is a ground-up development project in Arlington,
        VA consisting of high-rise and mid-rise Class A apartment
        buildings with a total of 224 units and 5,900 square feet of
        retail space. The mid-rise tower was 70% leased at
        quarter-end. Construction is anticipated to be substantially
        complete on the high-rise tower in the fourth quarter 2007.

    --  Construction is nearing completion at The Clayborne
        Apartments. The Clayborne is a ground-up development project
        in Alexandria, VA, adjacent to our 800 South Washington retail
        property. The project consists of a 74-unit Class A apartment
        building that will include 2,600 square feet of additional
        retail space. Construction is anticipated to be substantially
        complete during the fourth quarter 2007.

    Capital Structure

On September 28, 2007, WRIT paid a quarterly dividend of $0.4225 per share for its 183rd consecutive quarterly dividend at equal or increasing rates.

As of September 30, 2007 WRIT had a total capitalization of $2.8 billion.

Earnings Guidance

WRIT is increasing its previously issued 2007 FFO per share guidance from $2.23-$2.26 to $2.28-$2.31.

Conference Call Information

The Conference Call for 3rd Quarter Earnings is scheduled for Thursday, October 25, 2007 at 11:00 A.M. Eastern Daylight 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 November 25, 2007 at 11:59 PM Eastern Standard Time. Instant Replay access information is as follows:

USA Toll Free Number:       1-877-660-6853
International Toll Number:  1-201-612-7415
Conference ID:              256605

The live on-demand webcast of the Conference Call will also be available on 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 metropolitan region. WRIT owns a diversified portfolio of 88 properties consisting of 14 retail centers, 24 office properties, 17 medical office properties, 23 industrial/flex properties, 10 multifamily properties and land for development. WRIT's dividends have increased every year for 37 consecutive years and FFO per share has increased every year for 34 consecutive years. WRIT shares are publicly traded on the New York Stock Exchange (symbol: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 and the supplemental disclosures attached hereto 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, fluctuations in interest rates, availability of raw materials and labor costs, levels of competition, the effect of government regulation, the availability of capital, weather conditions, the timing and pricing of lease transactions and 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 2006 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) 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.

(2) 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.

(3) For purposes of evaluating comparative operating performance, we categorize our properties as "core" or "non-core". Core Operating NOI is calculated as real estate rental revenue less real estate operating expenses for those properties owned for the entirety of the periods being evaluated. Core Operating NOI is a non-GAAP measure.

Economic Occupancy Levels by Core Portfolio (i) and All Properties
----------------------------------------------------------------------
                                 Core Portfolio      All Properties
Sector                          3rd QTR   3rd QTR   3rd QTR   3rd QTR
                                 2007      2006      2007      2006
Multifamily                        93.2%     94.4%     91.5%     94.4%
Office Buildings                   95.5%     92.6%     94.3%     92.6%
Medical Office                     99.4%     99.5%     99.4%     99.5%
Retail Centers                     95.0%     93.9%     95.0%     93.9%
Industrial/Flex Centers            94.6%     94.4%     94.8%     94.4%

Overall Portfolio                  95.3%     94.2%     94.8%     94.2%

(i) Core portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods. For Q3 2007 and Q3 2006, core portfolio properties exclude:

Office Acquisitions: Woodholme Center, Monument II, West Gude Office Park, The Ridges and 6565 Arlington Blvd.

Medical Office Acquisitions: CentreMed I & II, Ashburn Farm Office Park, Woodholme Medical Office Building, 2440 M Street, 15005 Shady Grove Rd and The Crescent;

    Retail Acquisitions: none;

    Industrial Acquisitions: 270 Technology Park

Also excluded from Core Properties in Q3 2007 and Q3 2006 are Sold Properties: Maryland Trade Centers I & II and In Development Properties: Bennett Park, Clayborne Apartments, and 4661 Kenmore Ave

               WASHINGTON REAL ESTATE INVESTMENT TRUST
                         FINANCIAL HIGHLIGHTS
                (In thousands, except per share data)
                             (Unaudited)



                               Three Months Ended  Nine Months Ended
                                  September 30,       September 30,
OPERATING RESULTS                2007      2006      2007      2006
------------------------------ --------- --------- --------- ---------
Revenue
  Real estate rental revenue   $ 66,028  $ 54,857  $191,028  $155,428

Expenses
  Real estate expenses           20,604    17,025    59,319    46,643
  Depreciation and
   amortization                  18,285    13,588    51,543    37,546
  General and administrative      3,174     2,230    11,424    10,161
                               --------- --------- --------- ---------
                                 42,063    32,843   122,286    94,350
                               --------- --------- --------- ---------

Other (expense) income:
  Interest expense              (15,824)  (12,527)  (45,498)  (34,453)
  Other income                      357       293     1,395       637
  Other income from life
   insurance proceeds                 -         -     1,303         -
                               --------- --------- --------- ---------
                                (15,467)  (12,234)  (42,800)  (33,816)
                               --------- --------- --------- ---------


Income from continuing
 operations                       8,498     9,780    25,942    27,262

Discontinued operations:
  Income from operations of
   properties sold or held for
   sale                             870       450     2,475     1,319
  Gain on property disposed      25,022         -    25,022         -
                               --------- --------- --------- ---------

Net Income                     $ 34,390  $ 10,230  $ 53,439  $ 28,581
                               ========= ========= ========= =========

Income from continuing
 operations                    $  8,498  $  9,780  $ 25,942  $ 27,262
Other income from life
 insurance proceeds                   -         -    (1,303)        -
Continuing operations real
 estate depreciation and
 amortization                    18,285    13,588    51,543    37,546
                               --------- --------- --------- ---------
Funds from continuing
 operations                    $ 26,783  $ 23,368  $ 76,182  $ 64,808
                               --------- --------- --------- ---------

Income from discontinued
 operations before gain on
 disposal                           870       450     2,475     1,319
Discontinued operations real
 estate depreciation and
 amortization                         -       550       397     1,551
                               --------- --------- --------- ---------
Funds from discontinued
 operations                         870     1,000     2,872     2,870
                               --------- --------- --------- ---------

Funds from operations(1)       $ 27,653  $ 24,368  $ 79,054  $ 67,678
                               ========= ========= ========= =========


Tenant improvements              (4,215)   (2,602)  (11,561)   (7,330)
External and internal leasing
 commissions capitalized         (1,159)   (1,604)   (4,392)   (4,041)
Recurring capital improvements   (2,635)   (2,019)   (7,997)   (7,037)
Straight-line rents, net           (988)     (836)   (3,247)   (2,336)
Non real estate depreciation &
 amortization of debt costs         987       640     2,561     1,688
Amortization of lease
 intangibles, net                  (315)       91    (1,190)       87
Amortization and expensing of
 restricted share and unit
 compensation                       882       556     3,238     2,383
Other                               102         -     1,303         -
                               ---------------------------------------
Funds Available for
 Distribution (2)              $ 20,312  $ 18,594  $ 57,769  $ 51,092
                               ========= ========= ========= =========



Certain prior year amounts have been reclassified to conform to the
 current presentation.
                                  Three Months    Nine Months Ended
                                  Ended September    September 30,
                                        30,
Per Share Data                     2007    2006     2007       2006
----------------------           ------- ------- ---------- ----------

Income from continuing
 operations            (Basic)   $  0.18 $  0.22 $     0.57 $     0.63
                       (Diluted) $  0.18 $  0.22 $     0.57 $     0.63
Net income             (Basic)   $  0.74 $  0.23 $     1.17 $     0.66
                       (Diluted) $  0.73 $  0.23 $     1.16 $     0.66
Funds from continuing
 operations            (Basic)   $  0.57 $  0.52 $     1.67 $     1.50
                       (Diluted) $  0.57 $  0.52 $     1.66 $     1.49
Funds from operations  (Basic)   $  0.59 $  0.54 $     1.73 $     1.56
                       (Diluted) $  0.59 $  0.54 $     1.72 $     1.56

Dividends paid                   $0.4225 $0.4125 $   1.2575 $   1.2275
Weighted average
 shares outstanding               46,596  44,874     45,678     43,270
Fully diluted weighted
 average shares
 outstanding                      46,802  45,093     45,877     43,453
                WASHINGTON REAL ESTATE INVESTMENT TRUST
                      CONSOLIDATED BALANCE SHEETS
                            (In thousands)

                                             (Unaudited)
                                            September 30, December 31,
                                                2007          2006
                                            ------------- ------------
Assets
  Land                                      $    338,203  $   288,821
  Income producing property                    1,522,790    1,264,442
                                            ------------- ------------
                                               1,860,993    1,553,263
  Accumulated depreciation and amortization     (321,840)    (277,016)
                                            ------------- ------------
  Net income producing property                1,539,153    1,276,247
  Development in progress (4)                    138,093      120,656
                                            ------------- ------------
    Total investment in real estate, net       1,677,246    1,396,903

  Investment in real estate sold or held
   for sale                                            -       29,551
  Cash and cash equivalents                        9,919        8,721
  Restricted cash                                 46,002        4,151
  Rents and other receivables, net of
   allowance for doubtful accounts of
   $5,096 and $3,464, respectively                35,677       31,649
  Prepaid expenses and other assets               76,957       58,192
  Other assets related to property sold or
   held for sale                                       -        2,098
                                            ------------- ------------
    Total Assets                            $  1,845,801  $ 1,531,265
                                            ============= ============

Liabilities
  Notes payable                             $    879,094  $   728,255
  Mortgage notes payable                         253,500      237,073
  Lines of credit                                128,500       61,000
  Accounts payable and other liabilities          65,335       45,089
  Advance rents                                    6,561        5,894
  Tenant security deposits                        10,075        9,231
  Other liabilities related to property
   sold or held for sale                               -        1,053
                                            ------------- ------------
    Total Liabilities                          1,343,065    1,087,595
                                            ------------- ------------

Minority interest                                  5,593        1,739
                                            ------------- ------------

Shareholders' Equity
  Shares of beneficial interest, $.01 par
   value; 100,000 shares authorized: 46,669
   and 45,042 shares issued and
   outstanding, respectively                         467          451
  Additional paid-in capital                     560,695      500,727
  Distributions in excess of net income          (64,019)     (59,247)
                                            ------------- ------------
    Total Shareholders' Equity                   497,143      441,931
                                            ------------- ------------
    Total Liabilities and Shareholders'
     Equity                                 $  1,845,801  $ 1,531,265
                                            ============= ============


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

(4) Includes cost of land acquired for development.

Source: Washington Real Estate Investment Trust (WRIT)