Washington Real Estate Investment Trust CEO Discusses Q3 2010 Results - Earnings Call Transcript

Washington Real Estate Investment Trust CEO Discusses Q3 2010 Results - Earnings Call Transcript
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Washington Real Estate Investment Trust (

WRE

)

Q3 2010 Earnings Call

October 28, 2010 11:00 am ET

Executives

Jordan Willis - Senior Finance Analyst

Skip McKenzie - President & CEO

Bill Camp - EVP & CFO

Laura Franklin - EVP, Accounting and Administration & Corporate Secretary

Mike Paukstitus - SVP, Real Estate

Analysts

Mitch Germain - JMP Securities

Michael Knott - Green Street Advisors

John Guinee - Stifel Nicolaus

Mike Carroll - RBC Capital Markets

Young Ku - Wells Fargo Securities

Michael Knott - Green Street Advisors

Suzanne Kim - Credit Suisse

Presentation

Operator

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Previous Statements by WRE
» Washington Real Estate Investment Trust Q2 2010 Earnings Call Transcript
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» Washington Real Estate Investment Trust Q3 2009 Earnings Call Transcript

Welcome to the Washington Real Estate Investment Trust Third Quarter 2010 earnings conference call. As a reminder, today's call is being recorded. Before turning over the call to the company's President and Chief Executive Officer, Skip McKenzie; Jordan Willis, Senior Finance Analyst, will provide some introductory information. Ms. Willis, please go ahead.

Jordan Willis

Thank you and good morning, everyone. After the market closed yesterday, we issued our earnings press release. If there is anyone on the call who would like a copy of the release, please contact me at 301-984-9400 or you may access the document from our website at www.writ.com. Our first-quarter supplemental financial information is also available on our website.

Our conference call today will contain financial measures such as FFO and NOI that are non-GAAP measures and in accordance with Reg G, we have provided a reconciliation to those measures in our supplementals. The per-share information being discussed on today's call is reported on a fully diluted share basis.

Please bear in mind that certain statements during this call 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 recent credit and financial market conditions, the availability and cost of capital, fluctuations in interest rates, tenant 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 2009 Form 10-K and second quarter 2010 10-Q.

We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Participating in today's call with me will be Skip McKenzie, President and Chief Executive Officer; Bill Camp, Executive Vice President and Chief Financial Officer; Laura Franklin, Executive Vice President and Chief Accounting and Administrative Officer; and Mike Paukstitus, Senior Vice President, Real Estate. Now, I'd like to turn the call over to Skip.

Skip McKenzie

Good morning and thank you for joining the Washington REIT earnings conference call this morning. The economic recovery is moving along in the Washington region albeit slower than we would like. It feels like the market is moving slowly off the bottom with choppy improvements in operating metrics and increased leasing activity.

As I mentioned last quarter investments sales activity continues to improve in the Washington region with cap rates for quality assets stabilizing as more product is brought to market. In particular beginning September we have seen a dramatic increase in property offerings region wide. We are diligently mining investment opportunities both on and off market an across several property sectors, and I am optimistic we will be reporting some good news in the near future although nothing is firm at this time.

In addition, we continue to evaluate our existing portfolio for accretive ways to recycle assets and to better long-term growth opportunities. And we expect to report progress in this front as well in the fourth quarter.

Operationally in the third quarter, same store results were generally flat compared to last quarter as we saw a diversified portfolio service purpose of offsetting losses in some property sectors with better results than others. Multifamily operations in particular are reporting strong activity. The big news this quarter is on capital side where we made significant progress in strategically refinancing the 2011 maturities with the execution of our first ever index eligible bond deal and the resulting tenders of some of our outstanding debt which still will explain in detail later in the call.

Now I'd like to turn the call over to Bill Camp, who will discuss our financial results in capital market activities and then Mike Paukstitus, who will discuss our real estate operations. Bill?

Bill Camp

Thanks Skip, good morning everyone. We reported FFO of $0.49 in the third quarter generally in line with last quarter and still pushing our expected results for the year towards the upper end of the guidance range before the effects of the premiums and charges related to the refinancing of our 2011 debt.

In terms of a core portfolio, our multifamily occupancy increased nearly 200 basis points sequentially. We lost occupancy in our office sector primarily due to the previously announced move out of Lafarge at Monument II. We call that our new tenant taking over half of that space as expected to partially show up in our fourth quarter numbers with the December moving. Our medical office, retail and industrial sector occupancy were generally stable from second quarter to third. This quarter the combination of bad debt vacancy loss and rents abatements was 12.6% of minimum rank on a GAAP basis. A slight improvement over the last quarter and consistent with our original projections for 2010.

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