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Section 1: 8-K (8-K)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 8-K
 ___________________________________________________

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 24, 2019
 WASHINGTON REAL ESTATE
INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
MARYLAND
001-06622
53-0261100
(State of incorporation)
(Commission File Number)
(IRS Employer Identification Number)
1775 EYE STREET, NW, SUITE 1000, WASHINGTON, DC 20006
(Address of principal executive office) (Zip code)
Registrant’s telephone number, including area code: (202) 774-3200
___________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.02 Results of Operations and Financial Condition

and

Item 7.01 Regulation FD Disclosure.

A press release issued by the Registrant on April 24, 2019 regarding earnings for the three months ended March 31, 2019, is attached as Exhibit 99.1. Also, certain supplemental information not included in the press release is attached as Exhibit 99.2. This information is being furnished pursuant to Item 7.01 and Item 2.02 of Form 8-K. This information is not deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any Securities Act registration statements.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits

Exhibit No.
Description
 
 
99.1
99.2






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
WASHINGTON REAL ESTATE INVESTMENT TRUST
 
 
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ W. Drew Hammond
 
 
 
 
 
 
(Signature)
 
 
 
 
 
 
 
 
 
 
 
 
 
W. Drew Hammond
 
 
 
 
 
 
Vice President, Chief Accounting Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
April 24, 2019
 
 
 
 
 
 
(Date)
 
 
 
 
 



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
397635946_wrelogo18.jpg
FOR IMMEDIATE RELEASE
 
CONTACT:
 
1775 Eye Street, NW, Suite 1000
Tejal R. Engman
Washington, DC 20006
Vice President, Investor Relations
Tel 202-774-3200
Fax 301-984-9610
 
www.washreit.com
 
 
 
 
April 24, 2019
 
 
 
WASHINGTON REAL ESTATE INVESTMENT TRUST ANNOUNCES FIRST QUARTER FINANCIAL AND OPERATING RESULTS AND QUARTERLY DIVIDEND

Washington Real Estate Investment Trust (“WashREIT” or the “Company”) (NYSE: WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter ended March 31, 2019:

First Quarter 2019 Highlights

Net Income and NAREIT Funds from Operations (FFO)(1) 
Net loss attributable to controlling interests was $4.4 million, or $0.06 per diluted share, compared to net income attributable to the controlling interests of $3.3 million, or $0.04 per diluted share in the first quarter of 2018. The net loss in the first quarter of 2019 was primarily attributable to a real estate impairment of $8.4 million
NAREIT Funds from Operations (FFO) was $33.5 million, or $0.42 per diluted share, compared to $35.2 million, or $0.45 per diluted share, in the first quarter of 2018
Core FFO(1)and Operational Performance
Reported Core FFO of $0.44 per diluted share, compared to $0.46 per diluted share in first quarter 2018
Grew same-store(2) Net Operating Income ("NOI") by 2.9% and cash NOI(3) by 3.8% over first quarter 2018
Grew same-store multifamily NOI and cash NOI by 4.4% over first quarter 2018
Grew same-store retail NOI by 4.5% and cash NOI by 6.1% over first quarter 2018
Grew same-store office NOI by 1.3% and cash NOI by 2.3% over first quarter 2018
Commercial Leasing Activity
Leased 264,000 square feet of space, including 138,000 square feet of new leases
Achieved several key office leasing goals including leasing the top two floors of Watergate 600 in Washington, DC and multiple Space+ suites at Arlington Tower in Rosslyn, VA
Achieved a weighted average term of 11.1 years on new leases and 7.7 years on renewal leases

Recent Highlights (subsequent to quarter-end)
 
Investment Activity
Entered into a contract to purchase a 2,113 unit Class B value-add multifamily portfolio for approximately $461 million and announced plans to sell commercial assets to match fund the acquisition
Entered into a contract to sell Quantico Corporate Center in Stafford, VA, for approximately $33 million. The transaction is expected to close in the second quarter of 2019.

Retail Leasing Activity
Executed leases for the 28,000 square foot former hhgregg vacancy at Centre at Hagerstown in Hagerstown, MD, and 23,000 square foot former hhgregg vacancy at Frederick Crossing in Frederick, MD

"We are pleased to have delivered solid commercial leasing volumes and robust multifamily rent growth in the first quarter," said Paul T. McDermott, President and Chief Executive Officer. "Moreover, we are excited to be allocating significant capital into value-add multifamily, which remains fundamentally strong in the DC Metro region, and out of select legacy commercial assets. We are working hard to accelerate our leasing and strategic capital allocation goals and expect our execution to meaningfully de-risk our long-term cash flows and generate a higher risk-adjusted return for our shareholders."



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Operating Results

The Company's overall portfolio NOI was $54.0 million for the quarter ended March 31, 2019, compared to $55.0 million in the corresponding prior year period as higher same-store portfolio NOI was offset by a decrease in non-same-store portfolio NOI due to the dispositions of 2445 M Street and Braddock Metro Center in 2018.

Same-store portfolio NOI for the first quarter increased by 2.9% on a year-over-year basis, primarily due to higher rental rates and average occupancy(5) in the multifamily and retail portfolios, as well as higher reimbursements and lease termination income in the office portfolio.

Same-store portfolio by sector:

Office: 46% of Same-Store NOI - Same-store NOI increased by 1.3% and cash NOI increased by 2.3% compared to the corresponding prior year period, primarily due to higher reimbursements and lease termination fees. Same-store office average occupancy(6) declined by 170 basis points year-over-year and 180 basis points sequentially primarily due to the termination of the master lease for the top two floors at Watergate 600 that have now been backfilled with lease commencement expected in early 2020. The same-store office portfolio was 90.4% occupied and 93.0% leased at quarter end.

Multifamily: 30% of Same-Store NOI - Same-store NOI and cash NOI increased by 4.4%, compared to the corresponding prior year period, as the Company achieved 260 basis points of year-over-year rental rate growth and 400 basis points of first quarter renewal trade-outs, while maintaining 95.4% average unit occupancy. At quarter end, the same-store multifamily portfolio was 95.5% occupied on a unit basis and 97% leased.

Retail: 24% of Same-Store NOI - Same-store NOI increased by 4.5% and cash NOI increased by 6.1% compared to the corresponding prior year period, as average occupancy gains, higher reimbursements and lower provisions for bad debt more than offset higher operating expenses. Same-store ending occupancy(5) was 80 basis points higher year-over-year driven by new lease commencements at several neighborhood and community-anchored shopping centers. The same-store retail portfolio was 91.9% occupied and 92.9% leased at quarter end.

Leasing Activity

During the first quarter, WashREIT signed commercial leases totaling 264,000 square feet, including 138,000 square feet of new leases and 126,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis).
 
Square Feet
Weighted Average Term
(in years)
Weighted Average Free Rent Period
(in months)
Weighted Average Rental Rates
Weighted Average Rental Rate
% Increase
Tenant Improvements
Leasing Commissions
New:
 
 
 
 
 
 
 
Office
90,000

13.7

1.7

$
62.31

26.1
%
$
182.06

$
39.01

Retail
48,000

6.5

1.8

12.11

4.1
%
18.72

5.57

Total
138,000

11.1

1.7

44.66

23.7
%
124.62

27.25

 
 
 
 
 
 
 
 
Renewal:
 
 
 
 
 
 
 
Office
86,000

9.8

10.9

$
45.95

5.6
%
$
19.63

$
4.91

Retail
40,000

3.5


29.40

11.8
%
0.45

1.00

Total
126,000

7.7

8.4

40.37

7.0
%
13.52

3.67


Office tenant improvements per foot per year of term for new leases were approximately $13.30 driven by the 51,000 square foot lease signed at Watergate 600 that had no free rent associated with it. As a result, the weighted average



Washington Real Estate Investment Trust
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free rent for new office leases was only 1.7 months, while the weighted average term of new office leases was 13.7 years.

Acquisitions

Subsequent to quarter-end, WashREIT entered into a contract to purchase a 2,113 unit multifamily portfolio for approximately $461 million. The multifamily portfolio consists of Class B, garden-style apartments located at 205 Century Place, Alexandria, VA; 13690 Legacy Circle, Herndon, VA; 2511 Farmcrest Drive, Herndon, VA; 10519 Lariat Lane, Manassas, VA; 86 Heritage Way, NE, Leesburg, VA; 2 Observation Court, Germantown, MD and 99 Watkins Mill Road, Gaithersburg, MD.

The portfolio is approximately 95% occupied and in close proximity to major regional highways that provide excellent access to prime employment concentrations throughout the Washington metro region including: downtown Washington, DC; Crystal City/Pentagon City; the Rosslyn-Ballston Corridor; Tysons; Reston/Herndon; Route 28 South; Alexandria and the I-270 Corridor.

The Company expects to implement appropriately scoped, value-add unit renovations across most of the acquired portfolio and to grow rents by upgrading these well-located and desirable communities.

WashREIT expects to close the acquisition in the second quarter of 2019, potentially in multiple closings, subject to due diligence and the satisfaction of customary closing conditions.

Dispositions

On April 2, 2019, WashREIT announced that it plans to sell select commercial assets to match fund the multifamily acquisition mentioned-above and expects to provide further information upon entering into agreements to sell the assets. These planned asset sales are in addition to the Company's previously contemplated dispositions.

The additional dispositions are expected to close primarily in the third quarter. WashREIT has term loan commitments from members of its bank group to provide interim funding prior to completing the planned asset sales.

The Company has also signed a contract to sell Quantico Corporate Center in Stafford, VA, for approximately $33 million. WashREIT recognized an $8.4 million impairment charge during the first quarter of 2019 to reduce the carrying value of the asset to its estimated fair value. This sale transaction is a part of the Company's previously contemplated dispositions and is expected to close in the second quarter of 2019.

Earnings Guidance

Given the pending asset acquisition transaction and additional dispositions described above, WashREIT is not providing an outlook for the remainder of 2019 or updating or affirming its previously issued 2019 Core FFO guidance range (or the underlying assumptions) at this time.

Dividends

On March 29, 2019, WashREIT paid a quarterly dividend of $0.30 per share.

WashREIT announced today that its Board of Trustees has declared a quarterly dividend of $0.30 per share to be paid on June 28, 2019 to shareholders of record on June 14, 2019.

Conference Call Information

The Conference Call for First Quarter 2019 Earnings is scheduled for Thursday, April 25, 2019 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




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The instant replay of the Conference Call will be available until Thursday, May 9, 2019 at 11:00 P.M. Eastern Time. Instant replay access information is as follows:

USA Toll Free Number:            1-877-481-4010
International Toll Number:        1-919-882-2331
Conference ID:                41511

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

About WashREIT

WashREIT owns and operates uniquely positioned real estate assets in the Washington D.C. market. Backed by decades of experience, expertise and ambition, we create value by transforming insights into strategy and strategy into action. Our current portfolio of 48 properties includes approximately 6.1 million square feet of commercial space and 4,268 multifamily apartment units. These 48 properties consist of 19 office properties, 16 retail centers and 13 multifamily properties. Our shares trade on the NYSE and our company had an enterprise value of more than $3 billion as of December 31, 2018. With a track record of driving returns and delivering satisfaction, we are a trusted authority in one of the nation's most competitive real estate markets.
Note: WashREIT's press releases and supplemental financial information are available on the Company website at www.washreit.com or by contacting Investor Relations at (202) 774-3200.
Certain statements in our earnings release and on our conference call are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of WashREIT to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the risks associated with the ownership of real estate in general and our real estate assets in particular; the risk of failure to complete contemplated acquisitions and dispositions, including completion of the acquisition and disposition transactions described in this earnings release; the economic health of the greater Washington Metro region; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to ecommerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or cyber attacks; weather conditions and natural disasters; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2018 Form 10-K and subsequent Quarterly Reports on Form 10-Q. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

(1) Funds From Operations (“FFO”) - NAREIT FFO is a widely used measure of operating performance for real estate companies. We provide NAREIT FFO as a supplemental measure to net income calculated in accordance with GAAP. Although NAREIT FFO is a widely used measure of operating performance for REITs, NAREIT FFO does not represent 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. In addition, NAREIT FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity. In its 2018 NAREIT White Paper Restatement, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines NAREIT FFO as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of properties, impairments of depreciable real estate, and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for REITs because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures



Washington Real Estate Investment Trust
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and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently.

Core Funds From Operations (“Core FFO”) is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of WashREIT's operating portfolio and affect the comparative measurement of WashREIT's operating performance over time): (1) gains or losses on extinguishment of debt, (2) expenses related to acquisition and structuring activities, (3) executive transition costs, severance expenses and other expenses related to corporate restructuring and related to executive retirements or resignations, (4) property impairments, casualty gains, and gains or losses on sale not already excluded from FFO, as appropriate, and (5) relocation expense. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of WashREIT's ability to incur and service debt and to distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.

(2) For purposes of evaluating comparative operating performance, we categorize our properties as “same-store”, “non-same-store” or discontinued operations. Same-store properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property's development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

(3) Net Operating Income (“NOI”), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, general and administrative expenses, acquisition costs, real estate impairment and gain or loss on extinguishment of debt. We also present NOI on a cash basis ("cash NOI") which is calculated as NOI less the impact of straight-lining of rent and amortization of market intangibles. We believe that NOI and cash NOI are useful performance measures because, when compared across periods, they reflect the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI and cash NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide each of NOI and cash NOI as a supplement to net income, calculated in accordance with GAAP. Neither represents net income or income from continuing operations, in either case calculated in accordance with GAAP. As such, NOI and cash NOI should not be considered alternatives to these measures as an indication of our operating performance.

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

(5) Average Occupancy is based on monthly occupied net rentable square footage or monthly occupied multifamily units as a percentage of total net rentable square footage or total multifamily units, respectively.



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Ending Occupancy Levels by Same-Store Properties (i) and All Properties
 
 
 
 
 
Ending Occupancy
 
Same-Store Properties
 
All Properties
 
1st QTR
 
1st QTR
 
1st QTR
 
1st QTR
Segment
2019
 
2018
 
2019
 
2018
Multifamily (calculated on a unit basis)
95.5
%
 
95.2
%
 
95.5
%
 
95.2
%
 
 
 
 
 
 
 
 
Multifamily
95.6
%
 
95.4
%
 
95.6
%
 
95.4
%
Office
90.4
%
 
92.3
%
 
89.6
%
 
92.8
%
Retail
91.9
%
 
91.1
%
 
91.9
%
 
91.1
%
 
 
 
 
 
 
 
 
Overall Portfolio
92.8
%
 
93.2
%
 
92.3
%
 
93.3
%

(i) Same-store properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property's development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared. For Q1 2019 and Q1 2018, same-store properties exclude:

Acquisitions:
Office - Arlington Tower
Sold properties:
Office - Braddock Metro Center and 2445 M Street



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 WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
(Unaudited)
 
 
 
 
 
Three Months Ended March 31,
OPERATING RESULTS
2019
 
2018
Revenue
 
 
 
Real estate rental revenue
$
83,174

 
$
84,881

Expenses
 
 
 
Real estate expenses
29,210

 
29,901

Depreciation and amortization
29,547

 
29,969

General and administrative expenses
7,429

 
5,821

Lease origination expenses
378

 

Real estate impairment
8,374

 
1,886

 
74,938

 
67,577

 
 
 
 
Real estate operating income
8,236

 
17,304

Other income (expense):
 
 
 
Interest expense
(12,641
)
 
(12,827
)
Loss on extinguishment of debt

 
(1,178
)
 
(12,641
)
 
(14,005
)
 
 
 
 
Net (loss) income
(4,405
)
 
3,299

Less: Net income attributable to noncontrolling interests in subsidiaries

 

Net (loss) income attributable to the controlling interests
$
(4,405
)
 
$
3,299

 
 
 
 
Net (loss) income
$
(4,405
)
 
$
3,299

Depreciation and amortization
29,547

 
29,969

Real estate impairment
8,374

 
1,886

NAREIT funds from operations (1)
$
33,516

 
$
35,154

 
 
 
 
Non-cash loss on extinguishment of debt
$

 
$
1,178

Tenant improvements and incentives
(2,269
)
 
(4,667
)
External and internal leasing commissions capitalized
(503
)
 
(447
)
Recurring capital improvements
(318
)
 
(623
)
Straight-line rents, net
(824
)
 
(1,203
)
Non-cash fair value interest expense
(212
)
 
(219
)
Non real estate depreciation & amortization of debt costs
1,001

 
956

Amortization of lease intangibles, net
578

 
620

Amortization and expensing of restricted share and unit compensation
2,826

 
1,540

Funds available for distribution
$
33,795

 
$
32,289




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Three Months Ended March 31,
Per share data:
 
2019
 
2018
Net (loss) income attributable to the controlling interests
(Basic)
$
(0.06
)
 
$
0.04

 
(Diluted)
$
(0.06
)
 
$
0.04

NAREIT FFO
(Basic)
$
0.42

 
$
0.45

 
(Diluted)
$
0.42

 
$
0.45

 
 
 
 
 
Dividends paid
 
$
0.30

 
$
0.30

 
 
 
 
 
Weighted average shares outstanding - basic
 
79,881

 
78,483

Weighted average shares outstanding - diluted
 
79,881

 
78,547

Weighted average shares outstanding - diluted (for NAREIT FFO)
79,979

 
78,547





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WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
 
 
 
 
 
March 31, 2019
 
 
 
(unaudited)
 
December 31, 2018
Assets
 
 
 
Land
$
612,692

 
$
614,659

Income producing property
2,276,385

 
2,271,926

 
2,889,077

 
2,886,585

Accumulated depreciation and amortization
(781,302
)
 
(770,535
)
Net income producing property
2,107,775

 
2,116,050

Properties under development or held for future development
97,288

 
87,231

Total real estate held for investment, net
2,205,063

 
2,203,281

Cash and cash equivalents
12,025

 
6,016

Restricted cash
1,368

 
1,624

Rents and other receivables
73,293

 
73,861

Prepaid expenses and other assets
116,718

 
132,322

Total assets
$
2,408,467

 
$
2,417,104

 
 
 
 
Liabilities
 
 
 
Notes payable
$
995,750

 
$
995,397

Mortgage notes payable
58,805

 
59,792

Line of credit
228,000

 
188,000

Accounts payable and other liabilities
67,279

 
59,567

Dividend payable

 
24,022

Advance rents
10,418

 
11,736

Tenant security deposits
10,019

 
10,112

Total liabilities
1,370,271

 
1,348,626

 
 
 
 
Equity
 
 
 
Shareholders' equity
 
 
 
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued and outstanding

 

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 80,029 and 79,910 shares issued and outstanding, as of March 31, 2019 and December 31, 2018, respectively
800

 
799

Additional paid-in capital
1,529,916

 
1,526,574

Distributions in excess of net income
(498,537
)
 
(469,085
)
Accumulated other comprehensive loss
5,670

 
9,839

Total shareholders' equity
1,037,849

 
1,068,127

 
 
 
 
Noncontrolling interests in subsidiaries
347

 
351

Total equity
1,038,196

 
1,068,478

 
 
 
 
Total liabilities and equity
$
2,408,467

 
$
2,417,104






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Page 10 of 11

The following tables contain reconciliations of net income to same-store net operating income for the periods presented (in thousands):
 
 
 
 
 
 
 
 
Three months ended March 31, 2019
Multifamily
 
Office
 
Retail
 
Total
Same-store net operating income(2)
$
14,865

 
$
22,938

 
$
12,030

 
$
49,833

Add: Net operating income from non-same-store properties(2)

 
4,131

 

 
4,131

Total net operating income(3)
$
14,865

 
$
27,069

 
$
12,030

 
$
53,964

Add/(deduct):
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
(12,641
)
Depreciation and amortization
 
 
 
 
 
 
(29,547
)
General and administrative expenses
 
 
 
 
 
 
(7,429
)
Lease origination expenses
 
 
 
 
 
 
(378
)
Real estate impairment
 
 
 
 
 
 
(8,374
)
Net loss
 
 
 
 
 
 
(4,405
)
Less: Net income attributable to noncontrolling interests in subsidiaries
 
 
 
 
 
 

Net loss attributable to the controlling interests
 
 
 
 
 
 
$
(4,405
)
 
 
 
 
 
 
 
 
Three months ended March 31, 2018
Multifamily
 
Office
 
Retail
 
Total
Same-store net operating income(2)
$
14,245

 
$
22,652

 
$
11,511

 
$
48,408

Add: Net operating income from non-same-store properties(2)
(21
)
 
6,593

 

 
6,572

Total net operating income(3)
$
14,224

 
$
29,245

 
$
11,511

 
$
54,980

Add/(deduct):
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
(12,827
)
Depreciation and amortization
 
 
 
 
 
 
(29,969
)
General and administrative expenses
 
 
 
 
 
 
(5,821
)
Loss on extinguishment of debt
 
 
 
 
 
 
(1,178
)
Real estate impairment
 
 
 
 
 
 
(1,886
)
Net income
 
 
 
 
 
 
3,299

Less: Net income attributable to noncontrolling interests in subsidiaries
 
 
 
 
 
 

Net income attributable to the controlling interests
 
 
 
 
 
 
$
3,299







Washington Real Estate Investment Trust
Page 11 of 11

The following table contains a reconciliation of net income attributable to the controlling interests to core funds from operations for the periods presented (in thousands, except per share data):
 
 
Three Months Ended March 31,
 
 
2019
 
2018
Net (loss) income
 
$
(4,405
)
 
$
3,299

Add/(deduct):
 
 
 
 
Real estate depreciation and amortization
 
29,547

 
29,969

Real estate impairment
 
8,374

 
1,886

NAREIT funds from operations(1)
 
33,516

 
35,154

Add/(deduct):
 
 
 
 
Restructuring expenses
 
1,896

 

Loss on extinguishment of debt
 

 
1,178

Core funds from operations(1)
 
$
35,412

 
$
36,332

 
 
 
 
 
 
 
Three Months Ended March 31,
Per share data:
 
2019
 
2018
NAREIT FFO
(Basic)
$
0.42

 
$
0.45

 
(Diluted)
$
0.42

 
$
0.45

Core FFO
(Basic)
$
0.44

 
$
0.46

 
(Diluted)
$
0.44

 
$
0.46

 
 
 
 
 
Weighted average shares outstanding - basic
 
79,881

 
78,483

Weighted average shares outstanding - diluted (for NAREIT FFO and Core FFO)
 
79,979

 
78,547





(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


397635946_picture2a06.jpg




Company Background and Highlights
First Quarter 2019

Washington Real Estate Investment Trust ("Washington REIT") owns and operates uniquely positioned real estate assets in the Washington D.C. market. As of March 31, 2019, Washington REIT owned a diversified portfolio of 48 properties, totaling approximately 6.1 million square feet of commercial space and 4,268 multifamily units, and land held for development. These 48 properties consist of 19 office properties, 16 retail centers and 13 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).
397635946_picture2asd.jpg




Supplemental Financial and Operating Data

Table of Contents
March 31, 2019
 
 
 
Schedule
Page
Key Financial Data
 
 
 
 
 
 
Capital Analysis
 
 
Long Term Debt Analysis
 
 
 
Portfolio Analysis
 
 
 
 
 
Same-Store Portfolio and Overall Ending Occupancy Levels by Sector
 
Growth and Strategy
 
 
Development Summary
Tenant Analysis
 
 
 
 
 
 
 
Appendix
 
 
 





Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
OPERATING RESULTS
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Real estate rental revenue
 
$
83,174

 
$
82,901

 
$
82,502

 
$
86,606

 
$
84,881

Real estate expenses
 
(29,210
)
 
(28,255
)
 
(28,571
)
 
(29,503
)
 
(29,901
)
 
 
53,964

 
54,646

 
53,931

 
57,103

 
54,980

Real estate depreciation and amortization
 
(29,547
)
 
(31,109
)
 
(30,272
)
 
(29,878
)
 
(29,969
)
Income from real estate
 
24,417

 
23,537

 
23,659

 
27,225

 
25,011

Interest expense
 
(12,641
)
 
(12,497
)
 
(12,499
)
 
(13,321
)
 
(12,827
)
Gain on sale of real estate
 

 

 

 
2,495

 

Loss on extinguishment of debt
 

 

 

 

 
(1,178
)
Real estate impairment
 
(8,374
)
 

 

 

 
(1,886
)
General and administrative expenses (1)
 
(7,429
)
 
(5,352
)
 
(5,267
)
 
(5,649
)
 
(5,821
)
Lease origination expenses
 
(378
)
 

 

 

 

Net (loss) income
 
(4,405
)
 
5,688

 
5,893

 
10,750

 
3,299

Less: Net income from noncontrolling interests
 

 

 

 

 

Net (loss) income attributable to the controlling interests
 
$
(4,405
)
 
$
5,688

 
$
5,893

 
$
10,750

 
$
3,299

Per Share Data:
 
 
 
 
 
 
 
 
 
 
Net (loss) income attributable to the controlling interests
 
$
(0.06
)
 
$
0.07

 
$
0.07

 
$
0.13

 
$
0.04

Fully diluted weighted average shares outstanding
 
79,881

 
79,760

 
79,238

 
78,616

 
78,547

Percentage of Revenues:
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
35.1
 %
 
34.1
%
 
34.6
%
 
34.1
%
 
35.2
%
General and administrative and lease origination expenses
 
9.4
 %
 
6.5
%
 
6.4
%
 
6.5
%
 
6.9
%
Ratios:
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / Interest expense
 
3.8
x
 
4.0
x
 
3.9
x
 
3.9
x
 
3.9
x
Net income attributable to the controlling interests /
Real estate rental revenue
 
(5.3
)%
 
6.9
%
 
7.1
%
 
12.4
%
 
3.9
%
(1) 
General and administrative expenses for the three months ended March 31, 2019 include restructuring expenses totaling $1.9 million. Restructuring expenses include severance, accelerated share-based compensation and other expenses related to a restructuring of corporate personnel.

4




Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Assets
 
 
 
 
 
 
 
 
 
Land
$
612,692

 
$
614,659

 
$
614,659

 
$
614,659

 
$
614,659

Income producing property
2,276,385

 
2,271,926

 
2,239,917

 
2,220,819

 
2,211,529

 
2,889,077

 
2,886,585

 
2,854,576

 
2,835,478

 
2,826,188

Accumulated depreciation and amortization
(781,302
)
 
(770,535
)
 
(745,829
)
 
(722,423
)
 
(698,450
)
Net income producing property
2,107,775

 
2,116,050

 
2,108,747

 
2,113,055

 
2,127,738

Development in progress, including land held for development
97,288

 
87,231

 
81,765

 
71,522

 
61,712

Total real estate held for investment, net
2,205,063

 
2,203,281

 
2,190,512

 
2,184,577

 
2,189,450

Investment in real estate held for sale, net

 

 

 

 
93,048

Cash and cash equivalents
12,025

 
6,016

 
4,810

 
5,952

 
11,510

Restricted cash
1,368

 
1,624

 
1,352

 
2,301

 
2,469

Rents and other receivables
73,293

 
73,861

 
74,395

 
73,650

 
71,499

Prepaid expenses and other assets
116,718

 
132,322

 
145,448

 
142,648

 
148,088

Other assets related to properties held for sale

 

 

 

 
2,231

Total assets
$
2,408,467

 
$
2,417,104

 
$
2,416,517

 
$
2,409,128

 
$
2,518,295

Liabilities
 
 
 
 
 
 
 
 
 
Notes payable
$
995,750

 
$
995,397

 
$
995,130

 
$
994,778

 
$
994,425

Mortgage notes payable
58,805

 
59,792

 
60,541

 
93,071

 
93,991

Line of credit
228,000

 
188,000

 
183,000

 
169,000

 
260,000

Accounts payable and other liabilities
67,279

 
59,567

 
63,683

 
57,983

 
64,823

Dividend payable

 
24,022

 

 

 

Advance rents
10,418

 
11,736

 
10,597

 
12,020

 
12,441

Tenant security deposits
10,019

 
10,112

 
9,857

 
9,643

 
9,466

Liabilities related to properties held for sale

 

 

 

 
2,385

Total liabilities
1,370,271

 
1,348,626

 
1,322,808

 
1,336,495

 
1,437,531

Equity
 
 
 
 
 
 
 
 
 
Preferred shares; $0.01 par value; 10,000 shares authorized

 

 

 

 

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
800

 
799

 
798

 
787

 
786

Additional paid-in capital
1,529,916

 
1,526,574

 
1,526,125

 
1,488,366

 
1,485,765

Distributions in excess of net income
(498,537
)
 
(469,085
)
 
(450,749
)
 
(432,585
)
 
(419,633
)
Accumulated other comprehensive loss
5,670

 
9,839

 
17,181

 
15,707

 
13,484

Total shareholders' equity
1,037,849

 
1,068,127

 
1,093,355

 
1,072,275

 
1,080,402

Noncontrolling interests in subsidiaries
347

 
351

 
354

 
358

 
362

Total equity
1,038,196

 
1,068,478

 
1,093,709

 
1,072,633

 
1,080,764

Total liabilities and equity
$
2,408,467

 
$
2,417,104

 
$
2,416,517

 
$
2,409,128

 
$
2,518,295


5




Funds from Operations
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Funds from operations(1)
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(4,405
)
 
$
5,688

 
$
5,893

 
$
10,750

 
$
3,299

Real estate depreciation and amortization
 
29,547

 
31,109

 
30,272

 
29,878

 
29,969

Gain on sale of depreciable real estate
 

 

 

 
(2,495
)
 

Real estate impairment
 
8,374

 

 

 

 
1,886

NAREIT funds from operations (FFO)
 
33,516

 
36,797

 
36,165

 
38,133

 
35,154

Loss on extinguishment of debt
 

 

 

 

 
1,178

Restructuring expenses
 
1,896

 

 

 

 

Core FFO (1)
 
$
35,412

 
$
36,797

 
$
36,165

 
$
38,133

 
$
36,332

 
 
 
 
 
 
 
 
 
 
 
Allocation to participating securities(2)
 
(134
)
 
(93
)
 
(144
)
 
(144
)
 
(144
)
 
 
 
 
 
 
 
 
 
 
 
NAREIT FFO per share - basic
 
$
0.42

 
$
0.46

 
$
0.46

 
$
0.48

 
$
0.45

NAREIT FFO per share - fully diluted
 
$
0.42

 
$
0.46

 
$
0.45

 
$
0.48

 
$
0.45

Core FFO per share - fully diluted
 
$
0.44

 
$
0.46

 
$
0.45

 
$
0.48

 
$
0.46

 
 
 
 
 
 
 
 
 
 
 
Common dividend per share
 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
 
 
 
 
 
 
 
 
 
 
Average shares - basic
 
79,881

 
79,748

 
79,076

 
78,520

 
78,483

Average shares - fully diluted (for NAREIT FFO and Core FFO)
 
79,979

 
79,760

 
79,238

 
78,616

 
78,547

 
 
 
 
 
 
 
 
 
 
 
(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FFO and Core FFO.
(2)  Restructuring expenses include severance, accelerated share-based compensation and other expenses related to a restructuring of corporate personnel.
(3)  Adjustment to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.


6




Funds Available for Distribution
(In thousands, except per share data)
(Unaudited)

 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Funds available for distribution (FAD) (1)
 
 
 
 
 
 
 
 
 
 
NAREIT FFO
 
$
33,516

 
$
36,797

 
$
36,165

 
$
38,133

 
$
35,154

Non-cash loss on extinguishment of debt
 

 

 

 

 
1,178

Tenant improvements and incentives
 
(2,269
)
 
(10,730
)
 
(5,808
)
 
(2,330
)
 
(4,667
)
External and internal leasing commissions capitalized
 
(503
)
 
(3,556
)
 
(957
)
 
(896
)
 
(447
)
Recurring capital improvements
 
(318
)
 
(2,110
)
 
(752
)
 
(469
)
 
(623
)
Straight-line rent, net
 
(824
)
 
(959
)
 
(1,058
)
 
(1,123
)
 
(1,203
)
Non-cash fair value interest expense
 
(212
)
 
(214
)
 
(215
)
 
(217
)
 
(219
)
Non-real estate depreciation and amortization of debt costs
 
1,001

 
989

 
997

 
945

 
956

Amortization of lease intangibles, net
 
578

 
372

 
430

 
420

 
620

Amortization and expensing of restricted share and unit compensation
 
2,826

 
1,682

 
1,694

 
1,830

 
1,540

FAD
 
33,795

 
22,271

 
30,496

 
36,293

 
32,289

Restructuring expenses (excluding accelerated share-based compensation)
 
915

 

 

 

 

Core FAD (1)
 
$
34,710

 
$
22,271

 
$
30,496

 
$
36,293

 
$
32,289

 
 
 
 
 
 
 
 
 
 
 
(1)  See "Supplemental Definitions" on page 31 of this supplemental for the definitions of FAD and Core FAD.



7




Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
(In thousands)
(Unaudited)

 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Adjusted EBITDA (1)
 
 
 
 
 
 
 
 
 
 
Net (loss) income
 
$
(4,405
)
 
$
5,688

 
$
5,893

 
$
10,750

 
$
3,299

Add:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
12,641

 
12,497

 
12,499

 
13,321

 
12,827

Real estate depreciation and amortization
 
29,547

 
31,109

 
30,272

 
29,878

 
29,969

Real estate impairment
 
8,374

 

 

 

 
1,886

Non-real estate depreciation
 
249

 
236

 
226

 
191

 
255

Restructuring expenses
 
1,896

 

 

 

 

Less:
 
 
 
 
 
 
 
 
 
 
Gain on sale of real estate
 

 

 

 
(2,495
)
 

Loss on extinguishment of debt
 

 

 

 

 
1,178

Adjusted EBITDA
 
$
48,302

 
$
49,530

 
$
48,890

 
$
51,645

 
$
49,414

 
 
 
 
 
 
 
 
 
 
 
(1)   Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, restructuring expenses (which include severance, accelerated share-based compensation and other expenses related to a restructuring of corporate personnel), acquisition expenses and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, and the cost of debt or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure.



8




Long Term Debt Analysis
($'s in thousands)

 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Balances Outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Mortgage note payable, net
$
58,805

 
$
59,792

 
$
60,541

 
$
93,071

 
$
93,991

Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
597,124

 
596,876

 
596,714

 
596,467

 
596,219

Term loans
398,626

 
398,521

 
398,416

 
398,311

 
398,206

Credit facility
228,000

 
188,000

 
183,000

 
169,000

 
260,000

Unsecured total
1,223,750

 
1,183,397

 
1,178,130

 
1,163,778

 
1,254,425

Total
$
1,282,555

 
$
1,243,189

 
$
1,238,671

 
$
1,256,849

 
$
1,348,416

 
 
 
 
 
 
 
 
 
 
Weighted Average Interest Rates
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
 
 
 
 
 
 
 
 
Mortgage note payable, net
4.0
%
 
4.0
%
 
4.0
%
 
4.5
%
 
4.5
%
Unsecured
 
 
 
 
 
 
 
 
 
Fixed rate bonds
4.7
%
 
4.7
%
 
4.7
%
 
4.7
%
 
4.7
%
Term loans (1)
2.8
%
 
2.8
%
 
2.8
%
 
2.8
%
 
2.6
%
Credit facility
3.5
%
 
3.5
%
 
3.2
%
 
3.0
%
 
2.9
%
Unsecured total
3.9
%
 
3.9
%
 
3.8
%
 
3.8
%
 
3.7
%
Weighted Average
3.9
%
 
3.9
%
 
3.9
%
 
3.9
%
 
3.7
%
 
 
 
 
 
 
 
 
 
 
(1) Washington REIT has entered into interest rate swaps to effectively fix the floating interest rates on its term loans (see page 10 of this Supplemental)
 
 
 
 
 
 
 
 
 
 
Note: The current debt balances outstanding are shown net of discounts, premiums and unamortized debt costs (see page 10 of this Supplemental).



    

9



Long Term Debt Maturities
(in thousands, except average interest rates)
March 31, 2019
, except per share data)397635946_chart-73e52e2483e558b7b36.jpg
 
Future Maturities of Debt
Year
Secured Debt
 
Unsecured Debt
 
Credit Facility
 
Total Debt
 
Avg Interest Rate
2019
$

 
$

 
$

 
$

 

2020

 
250,000

 

 
250,000

 
5.1%
2021

 
150,000

(2) 

 
150,000

 
2.7%
2022
44,517

 
300,000

 


 
344,517

 
4.0%
2023

 
250,000

(3) 
228,000

(1) 
478,000

 
3.2%
2024

 

 

 

 

Thereafter

 
50,000

 

 
50,000

 
7.4%
Scheduled principal payments
$
44,517

 
$
1,000,000

 
$
228,000

 
$
1,272,517

 
3.9%
Scheduled amortization payments
12,243

 

 

 
12,243

 
4.8%
Net discounts/premiums
2,308

 
(1,091
)
 

 
1,217

 
 
Loan costs, net of amortization
(263
)
 
(3,159
)
 

 
(3,422
)
 
 
Total maturities
$
58,805

 
$
995,750

 
$
228,000

 
$
1,282,555

 
3.9%
Weighted average maturity = 3.4 years

(1) Maturity date for credit facility of March 2023 assumes election of option for two additional 6-month periods.
(2) Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 110 basis points floating interest rate to a 2.72% all-in fixed interest rate through the term loan maturity of March 2021.
(3) Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 110 basis points floating interest rate to a 2.31% all-in fixed interest rate for $150.0 million portion of the term loan. For the remaining $100.0 million portion of the term loan, Washington REIT entered into interest rate swaps to effectively fix a LIBOR plus 100 basis points floating interest rate to a 3.71% all-in fixed interest rate. The interest rates are fixed through the term loan maturity of July 2023.

10




Debt Covenant Compliance

 
Unsecured Notes Payable
 
Unsecured Line of Credit
and Term Loans
 
Quarter Ended March 31, 2019
 
Covenant
 
Quarter Ended March 31, 2019
 
Covenant
% of Total Indebtedness to Total Assets(1)
40.8
%
 
≤ 65.0%
 
 N/A

 
N/A
Ratio of Income Available for Debt Service to Annual Debt Service
4.1

 
            ≥ 1.5
 
 N/A

 
N/A
% of Secured Indebtedness to Total Assets(1)
1.9
%
 
≤ 40.0%
 
 N/A

 
N/A
Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness
2.5

 
            ≥ 1.5
 
 N/A

 
N/A
% of Net Consolidated Total Indebtedness to Consolidated Total Asset Value(3)
 N/A

 
 N/A
 
34.8
%
 
≤ 60.0%
Ratio of Consolidated Adjusted EBITDA(4) to Consolidated Fixed Charges(5)
 N/A

 
 N/A
 
3.62

 
             ≥ 1.50
% of Consolidated Secured Indebtedness to Consolidated Total Asset Value(3)
 N/A

 
 N/A
 
1.6
%
 
≤ 40.0%
% of Consolidated Unsecured Indebtedness to Unencumbered Pool Value(6)
 N/A

 
 N/A
 
34.5
%
 
≤ 60.0%
Ratio of Unencumbered Adjusted Net Operating Income to Consolidated Unsecured Interest Expense
 N/A

 
 N/A
 
4.30

 
             ≥ 1.75
 
 
 
 
 
 
 
 
(1) Total Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(2) Total Unencumbered Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(4) from unencumbered properties from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.
(3) Consolidated Total Asset Value is the sum of unrestricted cash plus the quotient of applying a capitalization rate to the annualized NOI from the most recently ended quarter for each asset class, excluding NOI from disposed properties, acquisitions during the past 6 quarters, development, major redevelopment and low occupancy properties. To this amount, we add the purchase price of acquisitions during the past 6 quarters plus values for development, major redevelopment and low occupancy properties.
(4) Consolidated Adjusted EBITDA is defined as earnings before noncontrolling interests, depreciation, amortization, interest expense, income tax expense, acquisition costs, extraordinary, unusual or nonrecurring transactions including sale of assets, impairment, gains and losses on extinguishment of debt and other non-cash charges.
(5) Consolidated Fixed Charges consist of interest expense excluding capitalized interest and amortization of deferred financing costs, principal payments and preferred dividends, if any.
(6) Unencumbered Pool Value is the sum of unrestricted cash plus the quotient of applying a capitalization rate to the annualized NOI from unencumbered properties from the most recently ended quarter for each asset class excluding NOI from disposed properties, acquisitions during the past 6 quarters, development, major redevelopment and low occupancy properties. To this we add the purchase price of unencumbered acquisitions during the past 6 quarters and values for unencumbered development, major redevelopment and low occupancy properties.


11




Capital Analysis
(In thousands, except per share amounts)
 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Market Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares Outstanding
 
$
80,029

 
$
79,910

 
$
79,844

 
$
78,661

 
$
78,636

Market Price per Share
 
28.38

 
23.00

 
30.65

 
30.33

 
27.30

Equity Market Capitalization
 
$
2,271,223

 
$
1,837,930

 
$
2,447,219

 
$
2,385,788

 
$
2,146,763

 
 
 
 
 
 
 
 
 
 
 
Total Debt
 
$
1,282,555

 
$
1,243,189

 
$
1,238,671

 
$
1,256,849

 
$
1,348,416

Total Market Capitalization
 
$
3,553,778

 
$
3,081,119

 
$
3,685,890

 
$
3,642,637

 
$
3,495,179

 
 
 
 
 
 
 
 
 
 
 
Total Debt to Market Capitalization
 
0.36
:1
 
0.40
:1
 
0.34
:1
 
0.35
:1
 
0.39
:1
 
 
 
 
 
 
 
 
 
 
 
Earnings to Fixed Charges(1)
 
0.6x

 
1.4x

 
1.4x

 
1.8x

 
1.2x

Debt Service Coverage Ratio(2)
 
3.6x

 
3.8x

 
3.7x

 
3.7x

 
3.6x

 
 
 
 
 
 
 
 
 
 
 
Dividend Data
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Total Dividends Declared
 
$
24,141

 
$
24,024

 
$
24,057

 
$
23,702

 
$
23,719

Common Dividend Declared per Share
 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

 
$
0.30

Payout Ratio (Core FFO basis)
 
68.2
%
 
65.2
%
 
66.7
%
 
62.5
%
 
65.2
%
Payout Ratio (Core FAD basis)
 
69.8
%
 
 
 
 
 
 
 
73.2
%
 
 
 
 
 
 
 
 
 
 
 
(1) The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations attributable to the controlling interests plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized. The earnings to fixed charges ratio for the three months ended June 30, 2018 includes gain on sale of real estate of $2.5 million.
(2) Debt service coverage ratio is computed by dividing Adjusted EBITDA (see page 8) by interest expense and principal amortization.


12




Same-Store Portfolio Net Operating Income (NOI) Growth
2019 vs. 2018

 
 
Three Months Ended March 31,
 
 
 
 
2019
 
2018
 
% Change
Cash Basis:
 
 
 
 
 
 
Multifamily
 
$
14,869

 
$
14,247

 
4.4
%
Office
 
22,806