Washington Real Estate Investment Trust Announces 2013 Strategic Initiatives, Expected CEO Retirement at End of 2013 & 2013 G...
January 29 2013 - 3:25PM
Business Wire
Washington Real Estate Investment Trust (WRIT) (NYSE: WRE)
announced several major developments, as follows.
Proposed Sale of Medical Office Division
WRIT is exploring a 2013 disposition of its Medical Office
Division. The disposition will simplify WRIT’s business model to
focus on its core office, multifamily and retail sectors. Upon the
completion of the transaction, WRIT’s business will consist
entirely of properties where people work, live and shop in one of
the strongest real estate markets in the world.
The Medical Office Division totals approximately 1.3 million
square feet and 17 properties and, as of third quarter 2012,
contributed 15% of WRIT’s total net operating income. The Medical
Office Division represents the largest portfolio of institutional
quality medical office assets in the Washington, DC region, with
all of the assets in affluent communities or urban centers or near
major medical centers such as INOVA Fairfax, Shady Grove Adventist
and George Washington Hospital. The portfolio has very low
leverage, with only three encumbered properties totaling
approximately $24 million in mortgage debt.
“We believe we have a unique opportunity to capture embedded
value for our shareholders and streamline our investment thesis,
both operationally and from a capital allocation standpoint.
Beginning in earnest in 2003, we have assembled a one-of-a-kind
medical office portfolio that now encompasses 20% of institutional
grade medical office assets in the DC metro area. Given the
successful execution of our industrial portfolio sale in 2011 and
our DC market expertise, we expect to be able to reinvest the
medical office portfolio sale proceeds into high quality office,
multifamily and retail assets in core submarkets,” said George F.
“Skip” McKenzie, President and Chief Executive Officer of WRIT.
Other 2013 Strategic Initiatives
- Breaking ground on two previously
announced apartment joint ventures
- 650 N. Glebe Road, Arlington, Virginia:
163 unit project with a $49.5 million budget, expected to break
ground first quarter 2013 with substantial completion on or about
fourth quarter 2014
- 1219 First Street, Alexandria,
Virginia: 270 unit project with a $95.3 million budget, expected to
break ground first quarter 2013 with substantial completion on or
about first quarter 2015
- Continuing to upgrade existing
properties, including lobby and common area renovations at 1901
Pennsylvania Avenue, 1220 19th Street, 1140 Connecticut Avenue,
1600 Wilson Boulevard, 6110 Executive Boulevard and 51 Monroe
Street, and multifamily unit renovations upon turnover
- Continuing to sell non-strategic
assets, including an anticipated sale of the Atrium office building
in Rockville, Maryland, in the first quarter
Expected CEO Retirement
George F. “Skip” McKenzie has communicated to WRIT’s Board of
Trustees his decision to retire from WRIT by the end of 2013. The
WRIT Board has requested that Mr. McKenzie remain with WRIT in
order to oversee the sale of the Medical Office Division and the
reinvestment of proceeds, and Mr. McKenzie has agreed to do so. The
WRIT Board intends to commence a search for a successor chief
executive promptly, with the goal of announcing a selection in the
coming months.
“On behalf of the shareholders and Board, I thank Skip for his
numerous contributions during his 16 years with WRIT. When Skip
came to WRIT, we owned only 47 properties. Since that time, WRIT
has grown extensively and now owns 70 properties across the region.
Since Skip took the reins as CEO, WRIT has successfully weathered
the recession, executed the sale of its Industrial Division at a
substantial gain, upgraded the quality of the portfolio by focusing
investment inside the Beltway, and developed a highly qualified
team of executives. I am delighted that Skip will continue with the
company in the coming months as we pursue the sale of the Medical
Office Division, and I thank him for his willingness to do so,”
commented John P. McDaniel, Chairman of WRIT’s Board.
"As to my expected retirement, although I will greatly miss
working with my WRIT family, I am looking forward to spending time
with my real family after a continuous 29-year real estate career.
I am expecting the sale of our Medical Office Division and
reinvestment of the proceeds to represent my last major
contribution to WRIT, and I am excited to work with our
highly-capable executive team and outstanding employees to complete
these initiatives. I have enjoyed my time at WRIT tremendously and
want to thank our shareholders, the Board and our employees. The
WRIT franchise has excelled in this marketplace for 53 years, and I
have been involved for over 16 of those years, including serving as
CEO since 2007. I am exceptionally proud of my involvement with the
firm and look forward to watching WRIT continue to grow in the
years ahead," said Mr. McKenzie.
2013 Guidance
2013 core FFO per fully diluted share is projected to be $1.82 -
$1.90. Included in this projection are all of the above strategic
initiatives, with the exception of the potential Medical Office
Division sale.
The following assumptions are also incorporated into 2013
guidance:
- Same-store multifamily NOI growth is
projected to range from 3% to 5%, with flat same-store
occupancy
- Same-store retail NOI growth is
projected to range from 1% to 3%, with same-store occupancy
improving incrementally
- Same-store office NOI is projected to
decrease by 1% to 2%, with same-store occupancy improving
incrementally
- General and administrative expense is
projected to be approximately $16.5 million, an increase over the
third quarter 2012 run rate, due to the projected three-year
long-term incentive compensation plan payout in the fourth quarter
of 2013
- Interest expense is projected to be
approximately $66 million, an increase over the third quarter 2012
run rate, due to the full year impact of the third quarter 2012
$300 million unsecured debt issuance, offset in part by recent
mortgage prepayments totaling approximately $88.5 million, and
capitalized interest on development
- Acquisition and disposition activities,
including the effects of the proposed Medical Office Division sale
and any potential reinvestment, are not included in guidance.
Conference Call Information
WRIT management will discuss 2013 strategic initiatives,
expected CEO retirement and 2013 guidance on a conference call on
Wednesday, January 30, 2013 at 1:00 PM Eastern Time. Conference
call access information is as follows:
USA Toll Free Number:
1-877-407-9205 International Toll Number: 1-201-689-8054
The instant replay of the Conference Call will be available
until February 13, 2013 at 11:59 PM. Instant replay access
information is as follows:
USA Toll Free Number:
1-877-660-6853 International Toll Number: 1-201-612-7415 Conference
ID: 408398
The live on-demand webcast of the Conference Call will be
available on the Investor section of WRIT’s website at
www.writ.com. Online playback of the webcast will be available for
two weeks following the Conference Call.
WRIT is a self-administered, self-managed, equity real estate
investment trust investing in income-producing properties in the
greater Washington metro region. WRIT owns a diversified portfolio
of 70 properties totaling approximately 9 million square feet of
commercial space and 2,540 residential units, and land held for
development. These 70 properties consist of 26 office properties,
17 medical office properties, 16 retail centers and 11 multifamily
properties. WRIT shares are publicly traded on the New York Stock
Exchange (NYSE: WRE).
Certain statements in this press release 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 potential for federal
government budget reductions, changes in general and local economic
and real estate market conditions, the timing and pricing of lease
transactions, the effect of the current credit and financial market
conditions, the availability and cost of capital, fluctuations in
interest rates, tenants' financial conditions, levels of
competition, the effect of government regulation, the impact of
newly adopted accounting principles, and other risks and
uncertainties detailed from time to time in our filings with the
SEC, including our 2011 Form 10-K and third quarter 2012 Form 10-Q.
We assume no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events.
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