Washington Real Estate Investment Trust ( WRE)

Q2 2011 Earnings Call

July 29, 2011 11:00 am ET

Executives

Kelly Shiflett - Director of Finance

Skip McKenzie - President and CEO

Bill Camp - EVP and CFO

Mike Paukstitus - SVP, Real Estate

Analysts

Mitchell Germain - JMP Asset Management

Michael Knott - Green Street Advisors

Brendan Maiorana - Wells Fargo

Steve Benyik - Jefferies & Company

Dave Rodgers - RBC Capital Markets

Chris Lucas - Robert W. Baird

Presentation:

Operator

Welcome to the Washington Real Estate Investment Trust Second Quarter 2011 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, you may begin.

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 website at www.writ.com.

Our second quarter supplemental financial information is also available on our website. Our conference call today will contain financial measures such as Core FFO and NOI that are non-GAAP measures and in accordance with Reg G; we have provided 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 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. We provide a detailed discussion of these risks from time to time in our filings with the SEC, please refer to pages 7 to 14 of our Form 10-K for our complete risk factor disclosure.

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 of Real Estate.

Now, I would like to turn the call over to Skip.

Skip McKenzie

Thanks Kelly. Good morning and thank you for joining Washington Real Estate Investment Trust second quarter earnings conference call this morning. Our portfolio continued to show its resilience delivering positive same-store NOI growth, positive rental rate growth in all sectors but industrial generally steady occupancy.

We believe these results combine with our continued focus on our strategic initiatives, our recycling assets to improve asset and cash flow quality enabled us to deliver better long-term risk adjusted returns to our investors. This is impressive, considering we live in a city of indecision and political posturing.

Our federal government is doing what it does best, political grid lock. This obviously has created a very skittish real estate market where tenants remain apprehensive to pull the trigger on new leases. We remain optimistic about the Washington D.C. region and we are confident we will make good progress on our strategy going forward.

We announced this last month that we entered into a 90/10 joint venture agreement with Crimson Partners to develop a 150-unit apartment community in the Boston neighborhood or Arlington, Virginia. The joint venture purchased the proposed development site at the corner of North Glebe Road and North Carlin Springs Road for $11.8 million in June.

Construction is projected to begin in the second quarter of 2012 with completion expected 15 to 18 months thereafter. We are excited to partner with Crimson on this great site and grow our multifamily portfolio in an environment where it has been nearly impossible to purchase stabilized apartments assets accretively.

As we announced last quarter, we are currently in a contract to purchase John Marshall II, a 223,000 square foot office building on the metro in Tysons Corner, Virginia for $73.5 million. This property is 100% leased to Booz Allen Hamilton and serves as their worldwide headquarters.

We expect closing to occur by the end of the third quarter subject to the loan assumption. Yesterday, we went firm on a contract to purchase a $58 million grocery-anchored shopping centre at a prime location in our region. This will be an outstanding addition to our retail portfolio and we expect to close on it in the third quarter.

Deal flow in the investment market is very good and at this time our pipeline is full. I am optimistic we will have further good news to report on this in the forthcoming quarter. Please stay tuned.

On the disposition front, we continue to move forward with the sale of our industrial portfolio. The portfolio is under a letter of intent with a potential buyer who is currently conducting due diligence and we hope to make a formal announcement on this transaction very soon.

On the capital side, we successfully replaced and expanded our line of credit to $400 for three years, which Bill will discuss in detail in a few minutes. We have ample capacity between our lines of credit and potential future disposition proceeds to take advantage of the many acquisition opportunities we are seeing in the market.

Now I would like to turn the call over to Bill, who will discuss our financial results and capital markets activities and then, Mike will discuss our real estate operations.

Bill Camp

Thanks, Skip. Good morning, everyone. I’m going to keep this rather short today. Last night, we reported second quarter Core FFO of $0.51 on par with last year and $0.02 better than the first quarter primarily due to higher overall net operating income. Two quarters into 2011, we are at $1 per share in Core FFO, which puts us on track to end the year within our original Core FFO guidance range of $1.96 to $2.08. In terms of the Core FAD, we reported $0.44 per share, up $0.01 from the first quarter.

Read the rest of this transcript for free on seekingalpha.com