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

Washington Real Estate Investment Trust (“WRIT” or the “Company”) (NYSE: WRE), a leading owner and operator of diversified properties in the Washington, D.C. region, reported financial and operating results today for the quarter ended September 30, 2012:

  • Core Funds from Operations (1), defined as Funds from Operations (1) (“FFO”) excluding acquisition expense, gains or losses on extinguishment of debt and impairment, was $31.9 million, or $0.48 per diluted share for the quarter ended September 30, 2012, compared to $32.4 million, or $0.48 per diluted share for the prior year period. FFO for the quarter ended September 30, 2012 was $32.1 million, or $0.48 per share, compared to $30.8 million, or $0.46 per share, in the same period one year ago.
  • Net income attributable to the controlling interests for the quarter ended September 30, 2012 was $9.6 million, or $0.14 per diluted share, compared to $63.0 million, or $0.95 per diluted share, in the same period one year ago. Included in third quarter 2012 and third quarter 2011 net income, respectively, was a $3.7 million, or $0.06 per share, and a $56.6 million, or $0.86 per share, gain on sale of real estate.

“With the completion of our $300 million 3.95% unsecured debt transaction this quarter, we paid down our line balances in full as well as a portion of our upcoming 2013 debt maturities. We believe we are well-positioned to execute on acquisition opportunities in the months and years ahead. On the operations side, our diversified portfolio continues to produce stable results. We expect that the upcoming election will provide greater clarity for our market, so tenants and investors can once again assess risk and return to normal business decision-making,” said George F. "Skip" McKenzie, President and Chief Executive Officer of WRIT.

Operating Results

The Company's overall portfolio Net Operating Income (“NOI”) (2) was $50.2 million compared to $47.0 million in the same period one year ago and $50.6 million in the second quarter of 2012. Overall portfolio physical occupancy for the third quarter was 89.2%, compared to 89.0% in the same period one year ago and 89.3% in the second quarter of 2012.

Same-store (3) portfolio physical occupancy for the third quarter was 89.5%, compared to 90.5% in the same period one year ago. Sequentially, same-store physical occupancy decreased 20 basis points (bps) compared to the second quarter of 2012. Same-store portfolio NOI for the third quarter decreased 1.4% and rental rate growth was 1.3% compared to the same period one year ago.

  • Multifamily: 15.9% of Total NOI - Multifamily properties' same-store NOI for the third quarter increased 3.6% compared to the same period one year ago. Rental rate growth was 3.4% while same-store physical occupancy increased 80 bps to 94.8%. Sequentially, same-store physical occupancy remained unchanged compared to the second quarter of 2012.
  • Office: 48.3% of Total NOI - Office properties' same-store NOI for the third quarter decreased 5.7% compared to the same period one year ago. Rental rate growth was 0.7% while same-store physical occupancy decreased 240 bps to 85.3%, primarily due to previously announced expirations and move-outs at 1140 Connecticut Avenue, 2000 M Street, 7900 Westpark and 6110 Executive Boulevard. Sequentially, same-store physical occupancy increased 20 bps compared to the second quarter of 2012.
  • Medical: 14.7% of Total NOI - Medical office properties' same-store NOI for the third quarter decreased 3.1% compared to the same period one year ago. Rental rate growth was 1.4% while same-store physical occupancy decreased 320 bps to 88.0%, primarily due to move-outs at Alexandria Professional Center, Woodholme Medical Center and 8501 Arlington Boulevard. Sequentially, same-store physical occupancy decreased 170 bps compared to the second quarter of 2012.
  • Retail: 21.1% of Total NOI - Retail properties' same-store NOI for the third quarter increased 5.9% compared to the same period one year ago. Rental rate growth was 0.9% while same-store physical occupancy increased 110 bps to 92.7%. Sequentially, same-store physical occupancy decreased 50 bps compared to the second quarter of 2012.

Leasing Activity

During the third quarter, WRIT signed commercial leases for 221,344 square feet with an average rental rate increase of 11.3% over expiring lease rates on a GAAP basis, an average lease term of 5.2 years, tenant improvement costs of $19.63 per square foot and leasing commissions and incentives of $12.15 per square foot.

  • Rental rates for new and renewed office leases increased 11.7% to $36.35 per square foot, with $20.73 per square foot in tenant improvement costs and $14.86 per square foot in leasing commissions and incentives. Weighted average term for new and renewed leases was 4.8 years.
  • Rental rates for new and renewed medical office leases increased 5.7% to $33.30 per square foot, with $27.65 per square foot in tenant improvement costs and $9.87 per square foot in leasing commissions and incentives. Weighted average term for new and renewed leases was 6.9 years.
  • Rental rates for new and renewed retail leases increased 16.3% to $40.50 per square foot, with $3.74 per square foot in tenant improvement costs and $2.96 per square foot in leasing commissions and incentives. Weighted average term for new and renewed leases was 4.7 years.

Dispositions

In the third quarter WRIT sold 1700 Research Boulevard, a 101,000 square foot office building in Rockville, Maryland, for $14.25 million and a net book gain of $3.7 million. The property was built in 1982 and acquired by WRIT in 1999.

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