Washington Real Estate Investment Trust (WRE)

Q4 2011 Earnings Call

February 17, 2012 11:00 a.m. ET


Kelly Shiflett - Director of Finance

Skip McKenzie - President and Chief Executive Officer

Bill Camp - Executive Vice President and Chief Financial Officer

Laura Franklin - Executive Vice President, Accounting and Administration and Corporate Secretary

Mike Paukstitus - Senior Vice President, Real Estate


Michael Knott - Green Street Advisors

Erin Aslakson - Stifel Nicolaus

Mitch Germain - JMP Securities

Chris Lucas - Robert W. Baird



Welcome to the Washington Real Estate Investment Trust Fourth 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, 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 website at www.writ.com. Our fourth 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 a reconciliation to those measures in the supplemental.

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 a 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 the Washington Real Estate Investment Trust fourth quarter earnings conference call this morning. At the beginning of last year we laid out a strategic plan for our company. This plan called for the increased investment through acquisitions and development in high-quality office, multifamily, retail and medical office property in excellent locations inside the Beltway near major transportation nodes, and in areas with strong employment drivers and superior growth demographic.

To help pay for this investment activity, we committed ourselves to a much more active asset recycling program, such that we have the guideline to pay for approximately a quarter to one third of our investment activity through asset sales. The largest part of this recycling program was the announced completion of the sale our entire industrial flex portfolio. I am proud to say that we executed this plan on all fronts and had a record year in terms of acquisition and disposition transaction volumes.

We acquired five income producing assets for a total of $360 million, including two downtown Washington DC office properties, a grocery anchored shopping center in an affluent suburb, and two office properties located at Metro station in Alexandria in Tysons Corner. In addition we entered in tow joint ventures to develop two apartment projects at or near metro stations, totaling 430 multifamily units in Arlington and Alexandria, Virginia, two of the best submarkets in the region. These 430 units will increase our total multifamily portfolio unit count by 17% over the coming year.

Finally, and most notably, we completed the sale of our industrial portfolio along with three non-strategic suburban office assets for proceeds of $409 million, resulting in $97 million in gain. While by my account the team here did an exception job executing this record setting volume of transactional activity, the fact of the matter is, these transaction in total mean we are commencing 2012 as a $50 million smaller company which will have an adverse effect on earnings until this capital in reinvested.

Bill, will talk more about the details of our acquisitions and disposition guidance in a few minutes. But from a strategic standpoint, we will focus more of our sale on non-strategic assets, primarily suburban office buildings in our portfolio, that do not fit our long-term vision. This plan is a result of a thorough review of our portfolio, wherein we identified a small subset of our portfolio representing just under 10% of our total NOI, that does not fit our long-term strategic plan. While the specific timing and execution of these potential transactions will be dependent on a number of variables, such as market conditions, lease rollover exposure and the use of proceeds, to name a few. We expect these dispositions to be completed over the next three years.

In addition to these sales of non-core assets, we continue to look at creative ways to use our existing asset base to help competitively fund our strategic plan. With that disposition framework in mind, in 2012 we anticipate recycling these disposition proceeds plus the $50 million we are in the hold from last year, into assets which fit our new strategic plan. While I am hopeful we will be more acquisitive than that, those are the details we have modeled into our guidance as Bill will discuss further.

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