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Washington Real Estate Investment Trust (WRE)

Q4 2010 Earnings Call

February 18, 2011 11:00 a.m. ET

Executives

Kelly Shiflett - Director of Finance

Skip McKenzie - President & Chief Executive Officer

Bill Camp - Executive Vice President & Chief Financial Officer

Mike Paukstitus - Senior Vice President, Real Estate

Laura Franklin - Executive Vice President, Chief Accounting & Administrative Officer

Analysts

Michael Knott - Green Street Advisors

Mitch Germain - JMP Securities

Steve Benyik - Jefferies & Company

Erin Aslakson - Stifel Nicolaus

Chris Lucas - Robert W. Baird

Unidentified Analyst - Wells Fargo

TheStreet Recommends

Anthony Pallone - JP Morgan

Dave Rogers - RBC Capital Markets

Unidentified Analyst - Raymond James & Associates

Presentation

Operator

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Previous Statements by WRE
» Washington Real Estate Investment Trust CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Washington Real Estate Investment Trust Q2 2010 Earnings Call Transcript
» Washington Real Estate Investment Trust Q1 2010 Earnings Call Transcript

Welcome to the Washington Real Estate Investment Trust fourth 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, Kelly Shiflett, Director of Finance, will provide some introductory information. Ms. Shiflett, please go ahead.

Kelly Shiflett

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 Web site at www.writ.com. Our fourth quarter supplemental financial information is also available on our Web site.

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 the 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 the 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 our third 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

Thank you Kelly. Good morning and thank you for joining the Washington Real Estate Investment Trust earnings conference call this morning. As we wrap up 2010 and look ahead to 2011 the Washington, DC real estate market continues to recover albeit slower than our patience allows. The leasing activity is picking up across most of the property types and concession packages are declining.

What we have not seen is a rapid absorption of vacancy by the private sector. But we are making progress region wide. In addition to modest improvement in the leasing market we are seeing healthier investment sales activity. We have been active in the market having closed on two well located properties and a third under contract with closing to occur within 45 days. In addition, in the fourth quarter we continued to recycle capital by disposing of four assets, which no longer fit into our strategic plan.

As we announced in our press release last night, we are projecting continued asset sales in 2011 and are focusing our future investment on well located assets inside the Beltway near major transportation modes like Metro Stop in the areas with strong employment drivers and in areas with outstanding improving demographics. With this in mind, we believe there are excellent opportunities to concentrate our investment capital on high quality, well located office, medical office, multi-family and retail property in the Washington Metro region.

We are exploring the sale of our industrial portfolio not only as a means to fund future acquisitions but also with an eye towards streamlining operations and focusing our asset allocation. It is our intent to exit the industrial sector on a wholesale basis over the next year or two dependent upon the optimal exit opportunity. Over an extended period of time we expect that approximately 1/3 of the funding of acquisitions will come from disposition proceeds.

Naturally this process may appear somewhat choppy as over any given shorter period of time we may sell significantly more or less than this amount. I’d now like to briefly discuss our current portfolio results before I turn the call to Bill and Mike to discuss our financials and property operations in more detail. Throughout 2010 certain property sectors performed much better than others both region wide and within our portfolio.

We believe these differential results validate our property sector diversification strategy, which has been one of the linchpins of our long-term success over the past 50 years. Apartments continue to perform exceptionally well with high occupancy levels and increasing rents. Medical office is performing well and has been generally steady with growing rents throughout the downturn. Retail is picking up and we expect good leasing velocity over the next few quarters and continued rental rate increases and higher occupancies.

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