Washington Real Estate Investment Trust (“WashREIT” or the
“Company”) (NYSE: WRE), a leading owner and operator of multifamily
properties in the Washington, DC area, reported financial and
operating results today for the quarter ended June 30, 2021:
Second Quarter Results
- Net loss was
$7.0 million, or $0.08 per diluted share
- NAREIT FFO(1)
was $20.6 million, or $0.24 per diluted share
- Core FFO was
$30.1 million, or $0.35 per diluted share
- Net Operating Income (NOI)(2) was
$25.1 million
- Same-store(3) multifamily NOI
declined 2.0% compared to the second quarter of 2020, due to the
impact of COVID-19 on lease rates
Multifamily Highlights
- New lease rates
improved significantly during June and thus far in July, with
weekly rate growth on new lease executions improving by over 10%
over the last seven weeks on a gross basis. New lease executions
with August and September move-in dates indicate continued
improvement.
- Average
concession for new move-ins scheduled in July and August declined
70% compared to the second quarter average
- New lease rate
growth(4) turned positive on an effective basis for the first time
since March 2020
- Renewal lease
rate growth is currently tracking above 3%, on average, with
suburban renewal lease rate growth tracking above 5% on an
effective basis thus far in July
- Blended lease
rates declined 2.8% during the second quarter on an effective
basis, reflecting the cumulative impact of the pandemic
- Same-store
occupancy increased 60 basis points from June 30th to 95.8%,
allowing for continued growth in lease rates and reductions in
concessions
- Application
volumes remain robust; urban net application volume increased 40%
year-to-date and 35% during the second quarter compared to the
prior year period
- Collected 99% of
cash rent from multifamily residents during the second quarter,
continuing the strong collection performance throughout the
pandemic
- Trove is
currently over 76% occupied and, as previously disclosed, the
expected stabilization timeframe has improved to near year-end from
the previous expectation of May 2022
Transformation Update
- Completed the
sale of the office portfolio, excluding Watergate 600, for gross
proceeds of $766 million
- Entered into a
purchase and sale agreement with a single buyer to sell all of the
Company's remaining retail assets for gross proceeds of $168.3
million, which is expected to close in the third quarter
- The Company
plans to use the net proceeds from the commercial portfolio sales
to fund the expansion of its multifamily platform through expected
acquisitions in Southeastern markets and to reduce leverage by
repaying outstanding debt
- The Company
expects to redeem all $300 million of senior unsecured notes due
2022 on or about August 26th and to repay $150 million of amounts
outstanding under the term loan maturing in 2023 shortly after the
closing of the retail portfolio sale
Liquidity Position
- Current
available liquidity is approximately $1.35 billion (prior to the
debt repayments discussed above), consisting of the entire capacity
under the Company's $700 million revolving credit facility and cash
on hand
- The Company has
no secured debt and following the redemption of the $300 million
senior unsecured notes due 2022, will have no debt scheduled to
mature until July 2023
"We are in the final stages of a multi-year
strategic transformation that streamlined our portfolio into our
strongest-performing asset class which strengthened our growth
prospects and further improved our business and credit profiles,"
said Paul T. McDermott, President and CEO. "Following these
transactions, we will have recycled over $5 billion of assets and
will move forward as a multifamily REIT with proven, differentiated
research-driven strategies, a solid pipeline of investment
opportunities and a good economic backdrop. We are focused and
diligently executing each step of our transformation and are
confident in our strategy, our track record and our team. We are
excited about delivering continued value to our shareholders in
this next important phase of WashREIT."
Second Quarter Operating
Results
The Company’s second quarter operating results
have a challenging comparison against second quarter 2020 when the
leases negotiated during the early months of the pandemic were just
starting to impact its financial results. The Company's overall
portfolio NOI was $25.1 million for the quarter ended June 30, 2021
compared to $27.2 million in the corresponding prior year period.
The decrease was primarily driven by lower rental income as a
result of COVID-19.
Portfolio by Sector:
- Multifamily Same-Store NOI
- Same-store NOI and cash NOI decreased by 2.0% compared
to the corresponding prior year period due to the impact of
COVID-19 on rental income. At quarter end, the total operating
portfolio, excluding Trove, was 95.2% occupied and 97.7%
leased.
- Other Same-Store
NOI - The Other portfolio is comprised of one asset,
Watergate 600. Same-store NOI declined by 4.6% and cash NOI
declined by 1.7% compared to the corresponding prior year period
primarily due to lower expense recoveries and higher utility
expenses. Watergate 600 was 88.8% occupied and leased at quarter
end.
Outlook
The Company is providing its full year outlook
on key assumptions and metrics but is not providing FFO guidance at
this time because the timing of certain of the planned transactions
that comprise the transformation announced on June 15, 2021 have
not been finalized. The Company has, however, provided detailed
guidance on the timing and amount of debt repayments and the
expected timeframe for the retail portfolio sale. The Company
expects to establish full year guidance for 2022 on its year-end
earnings call.
"While we’ve experienced a significant
improvement in multifamily operating fundamentals since December,
we are just starting to experience the significant inflection in
our multifamily performance," said Stephen E. Riffee, Executive
Vice President and CFO. "Concessions are pulling back across our
marketplace and effective lease rate growth accelerated
significantly from June to July. We expect that our return to
portfolio-wide lease rate growth combined with increasing leasing
momentum at Trove will drive growth throughout the second half of
the year and will have an even greater impact in 2022."
Full Year Outlook on Key Assumptions and
Metrics
- Same-store multifamily NOI is
expected to range from $85.5 million and $86.5 million for full
year 2021, which is higher than previously disclosed. Same-store
multifamily NOI growth is now forecasted to range between 2% and 4%
in the second half of 2021.
- Trove is expected to contribute
between $3.0 and $3.5 million of NOI in 2021, which is higher than
previously disclosed, and is now expected to reach stabilized
occupancy near year-end, which is earlier than previously
estimated. Once pre-stabilized concessions burn off, we expect
Trove to contribute $7.0 to $7.5 million of NOI annually with
growth thereafter.
- Watergate 600 NOI is expected to
range between $12.0 and $12.5 million for full year 2021
- The office portfolio sale closed on
July 26th for gross proceeds of $766 million
- The retail portfolio is under a
purchase and sale agreement for gross proceeds of $168.3 million
and is expected to close in the third quarter, subject to customary
closing conditions
- $300 million of senior notes
maturing in 2022 are expected to be redeemed on or about August 26,
2021
- $150 million of the amounts
outstanding under the term loan maturing in 2023 are expected to be
repaid shortly after the closing of the retail portfolio sale
- Over the remainder of the year, $450
million of multifamily acquisitions are expected to be completed in
the Southeastern markets of Atlanta, Raleigh/Durham and/or
Charlotte. The average initial first year cap rate for these
acquisitions is estimated to be in the low-to-mid 4% range with
potential upside in some submarkets
- Estimated total transaction-related
costs are approximately $56 million, inclusive of debt breakage
costs
|
Full Year 2021 NOI |
Same-Store |
|
Multifamily |
$85.5 million - $86.5 million |
Other |
$12.0 million - $12.5 million |
Trove |
$3.0 million - $3.5 million |
|
|
This Outlook is based on a number of factors,
many of which are outside the Company's control and all of which
are subject to change. WashREIT may change the guidance provided
during the year as actual and anticipated results vary from these
assumptions, but WashREIT undertakes no obligation to do so.
Dividends
On July 6, 2021, WashREIT paid a quarterly
dividend of $0.30 per share.
WashREIT announced today that its Board of
Trustees has declared a quarterly dividend of $0.17 per share to be
paid on October 5, 2021 to shareholders of record on September 22,
2021.
Mr. McDermott further commented, “As discussed
during our June 15th webcast, this transformation is a reset, and
as such, the Board reset our dividend to a level that ensures that
we have sufficient capital to execute the transformative steps
outlined on June 15th. We continue to prioritize the strength of
our balance sheet and we expect this transformation to enable
stronger FAD(5) growth over the long-term."
Conference Call Information
The Conference Call for Second Quarter 2021
Earnings is scheduled for Friday, July 30, 2021 at 11:00 A.M.
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 Friday, August 13, 2021 at 11:00 P.M. Eastern
Time. Instant replay access information is as follows:
USA Toll Free Number: |
|
1-877-481-4010 |
International Toll Number: |
|
1-919-882-2331 |
Conference ID: |
|
41426 |
The live on-demand webcast of the Conference
Call will be available on the Investor section of WashREIT's
website at www.washreit.com. Online playback of the webcast will be
available following the Conference Call.
About WashREIT
WashREIT owns and operates uniquely positioned
real estate assets in the Washington Metro area. Backed by decades
of experience, expertise and ambition, we create value by
transforming insights into strategy and strategy into action. As of
July 29, 2021, the Company's portfolio of 31 properties includes
7,059 multifamily apartment units and approximately 1 million
square feet of commercial space. These 31 properties consist of 22
multifamily properties, one office property, and eight retail
centers. Our shares trade on the NYSE. With a track record of
driving returns and delivering satisfaction, we are a trusted
authority in one of the nation's most competitive real estate
markets.
Note: WashREIT's press releases and supplemental
financial information are available on the Company website at
www.washreit.com or by contacting Investor Relations at (202)
774-3200.
Certain statements in our earnings release and
on our conference call are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and
involve risks and uncertainties. Forward-looking statements relate
to expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning
matters that are not historical facts. In some cases, you can
identify forward looking statements by the use of forward-looking
terminology such as “may,” “will,” “should,” “expects,” “intends,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” or
“potential” or the negative of these words and phrases or similar
words or phrases which are predictions of or indicate future events
or trends and which do not relate solely to historical matters.
Such statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or
achievements of WashREIT to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. Currently, one of the most significant
factors continues to be the adverse effect of the COVID-19 virus,
including any variants and mutations thereof, the actions taken to
contain the pandemic or mitigate the impact of COVID-19, and the
direct and indirect economic effects of the pandemic and
containment measures. The extent to which COVID-19 continues to
impact WashREIT and its tenants will depend on future developments,
which are highly uncertain and cannot be predicted with confidence,
including the scope, severity and duration of the pandemic, the
actions taken to contain the pandemic or mitigate its impact, and
the direct and indirect economic effects of the pandemic and
containment measures, the continued speed and success of the
vaccine distribution, effectiveness and willingness of people to
take COVID-19 vaccines, and the duration of associated immunity and
their efficacy against emerging variants of COVID-19, among others.
Moreover, investors are cautioned to interpret many of the risks
identified in the risk factors discussed in our Annual Report on
Form 10-K for the year ended December 31, 2020 filed on
February 16, 2021, as being heightened as a result of the
ongoing and numerous adverse impacts of COVID-19. Additional
factors which may cause the actual results, performance, or
achievements of WashREIT to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements include, but are not limited to the
risks associated with the failure to enter into and/or complete
contemplated acquisitions or dispositions (including the expected
retail asset sales) within the price ranges anticipated and on the
terms and timing anticipated, or at all; our ability to execute on
our strategies, including new strategies with respect to our
operations and our portfolio, including the acquisition of
multifamily properties in the Southeastern markets and the
repayment of debt, on the terms anticipated, or at all, and to
realize any anticipated benefits, including the performance of any
acquired multifamily properties at the levels anticipated; our
ability to lease up Trove on the timing anticipated; our ability to
reduce actual net leverage to levels consistent with our targeted
net leverage range, the risks associated with ownership of real
estate in general and our real estate assets in particular; the
economic health of the greater Washington, DC metro region and the
larger Southeastern region; changes in the composition and
geographic location of our portfolio; fluctuations in interest
rates; reductions in or actual or threatened changes to the timing
of federal government spending; the risks related to use of
third-party providers; the economic health of our tenants; shifts
away from brick and mortar stores to e-commerce; the availability
and terms of financing and capital and the general volatility of
securities markets; compliance with applicable laws, including
those concerning the environment and access by persons with
disabilities; the risks related to not having adequate insurance to
cover potential losses; the risks related to our organizational
structure and limitations of stock ownership; changes in the market
value of securities; terrorist attacks or actions and/or
cyber-attacks; failure to qualify and maintain our qualification as
a REIT and the risks of changes in laws affecting REITs; and other
risks and uncertainties detailed from time to time in our filings
with the SEC, including our 2020 Form 10-K filed on
February 16, 2021. While forward-looking statements reflect
our good faith beliefs, they are not guarantees of future
performance. We undertake no obligation to update our
forward-looking statements or risk factors to reflect new
information, future events, or otherwise.
This Earnings Release also includes certain
forward-looking non-GAAP information. Due to the high variability
and difficulty in making accurate forecasts and projections of some
of the information excluded from these estimates, together with
some of the excluded information not being ascertainable or
accessible, the Company is unable to quantify certain amounts that
would be required to be included in the most directly comparable
GAAP financial measures without unreasonable efforts.
(1) NAREIT Funds From Operations (“FFO”) is
defined by 2018 National Association of Real Estate Investment
Trusts, Inc. (“NAREIT”) FFO White Paper Restatement, as net income
(computed in accordance with generally accepted accounting
principles (“GAAP”)) excluding gains (or losses) associated with
the sale of property, impairment of depreciable real estate and
real estate depreciation and amortization. We consider NAREIT FFO
to be a standard supplemental measure for equity real estate
investment trusts (“REITs”) because it facilitates an understanding
of the operating performance of our properties without giving
effect to real estate depreciation and amortization, which
historically assumes that the value of real estate assets
diminishes predictably over time. Since real estate values have
instead historically risen or fallen with market conditions, we
believe that NAREIT FFO more accurately provides investors an
indication of our ability to incur and service debt, make capital
expenditures and fund other needs. Our FFO may not be comparable to
FFO reported by other real estate investment trusts. These other
REITs may not define the term in accordance with the current NAREIT
definition or may interpret the current NAREIT definition
differently. NAREIT FFO is a non-GAAP measure.
Core Funds From Operations (“Core FFO”) is
calculated by adjusting NAREIT FFO for the following items (which
we believe are not indicative of the performance of Washington
REIT’s operating portfolio and affect the comparative measurement
of Washington REIT’s operating performance over time): (1) gains or
losses on extinguishment of debt and gains or losses on interest
rate derivatives, (2) expenses related to acquisition and
structuring activities, (3) executive transition costs, severance
expenses and other expenses related to corporate restructuring and
executive retirements or resignations, (4) property impairments,
casualty gains and losses, and gains or losses on sale not already
excluded from NAREIT FFO, as appropriate, (5) relocation expense
and (6) transformation costs. These items can vary greatly from
period to period, depending upon the volume of our acquisition
activity and debt retirements, among other factors. We believe that
by excluding these items, Core FFO serves as a useful,
supplementary measure of Washington REIT’s ability to incur and
service debt, and distribute dividends to its shareholders. Core
FFO is a non-GAAP and non-standardized measure, and may be
calculated differently by other REITs.
(2) Net Operating Income (“NOI”), defined as
real estate rental revenue less real estate expenses, is a non-GAAP
measure. NOI is calculated as net income, less non-real estate
revenue and the results of discontinued operations (including the
gain or loss on sale, if any), plus interest expense, depreciation
and amortization, lease origination expenses, general and
administrative expenses, acquisition costs, real estate impairment,
casualty gain and losses, and gain or loss on extinguishment of
debt. We also present NOI on a cash basis ("cash NOI") which is
calculated as NOI less the impact of straight-lining of rent and
amortization of market intangibles. We believe that NOI and cash
NOI are useful performance measures because, when compared across
periods, they reflect the impact on operations of trends in
occupancy rates, rental rates and operating costs on an unleveraged
basis, providing perspective not immediately apparent from net
income. NOI and cash NOI exclude certain components from net income
in order to provide results more closely related to a property’s
results of operations. For example, interest expense is not
necessarily linked to the operating performance of a real estate
asset. In addition, depreciation and amortization, because of
historical cost accounting and useful life estimates, may distort
operating performance at the property level. As a result of the
foregoing, we provide each of NOI and cash NOI as a supplement to
net income, calculated in accordance with GAAP. Neither represents
net income or income from continuing operations, in either case
calculated in accordance with GAAP. As such, NOI and cash NOI
should not be considered alternatives to these measures as an
indication of our operating performance.
(3) For purposes of evaluating comparative
operating performance, we categorize our properties as “same-store”
or “non-same-store”. Same-store portfolio properties include
properties that were owned for the entirety of the year being
compared, and exclude properties under redevelopment or development
and properties acquired, sold or classified as held for sale during
the year being compared. We categorize our properties as
"same-store" or "non-same-store" for purposes of evaluating
comparative operating performance. We define development properties
as those for which we have planned or ongoing major construction
activities on existing or acquired land pursuant to an authorized
development plan. We consider a property's development activities
to be complete when the property is ready for its intended use. The
property is categorized as same-store when it has been ready for
its intended use for the entirety of the year being compared. We
define redevelopment properties as those for which have planned or
ongoing significant development and construction activities on
existing or acquired buildings pursuant to an authorized plan,
which has an impact on current operating results, occupancy and the
ability to lease space with the intended result of a higher
economic return on the property. We categorize a redevelopment
property as same-store when redevelopment activities have been
complete for the majority of each year being compared.
(4) Lease rate growth is defined as the average
percentage change in gross (excluding the impact of concessions)
and effective rent (net of concessions) for a new or renewed lease
compared to the prior lease based on the move-in date. The blended
rate represents the weighted average of new and renewal lease rate
growth achieved.
(5) Funds Available for Distribution (“FAD”) is
a non-GAAP measure. It is calculated by subtracting from FFO (1)
recurring expenditures, tenant improvements and leasing costs, that
are capitalized and amortized and are necessary to maintain our
properties and revenue stream (excluding items contemplated prior
to acquisition or associated with development / redevelopment of a
property) and (2) straight line rents, then adding (3) non-real
estate depreciation and amortization, (4) non-cash fair value
interest expense and (5) amortization of restricted share
compensation, then adding or subtracting the (6) amortization of
lease intangibles, (7) real estate impairment and (8) non-cash
gain/loss on extinguishment of debt, as appropriate. FAD is
included herein, because we consider it to be a performance measure
of a REIT’s ability to incur and service debt and to distribute
dividends to its shareholders. FAD is a non-GAAP and
non-standardized measure, and may be calculated differently by
other REITs.
Average
Occupancy
(i)
Levels by Same-Store Properties
(ii) |
|
Average Occupancy |
|
Same-Store Properties |
|
2nd QTR |
|
2nd QTR |
Segment |
2021 |
|
2020 |
Multifamily |
95.1 |
% |
|
94.5 |
% |
|
|
|
|
|
|
(i) Average occupancy is based on average
monthly occupied units as a percentage of total units.
(ii) Same-store properties include properties
that were owned for the entirety of the years being compared, and
exclude properties under redevelopment or development and
properties acquired, sold or classified as held for sale during the
years being compared. We define development properties as those for
which we have planned or are ongoing major construction activities
on existing or acquired land pursuant to an authorized development
plan. We consider a property's development activities to be
complete when the property is ready for its intended use. The
property is categorized as same-store when it has been ready for
its intended use for the entirety of the years being compared. We
define redevelopment properties as those for which we have planned
or are ongoing significant development and construction activities
on existing or acquired buildings pursuant to an authorized plan,
which has an impact on current operating results, occupancy and the
ability to lease space with the intended result of a higher
economic return on the property. We categorize a redevelopment
property as same-store when redevelopment activities have been
complete for the majority of each year being compared. For Q2 2021
and Q2 2020, same-store properties exclude:
Development: |
Multifamily - Trove |
Sold properties: |
Office - John Marshall II, Monument II, and 1227 25th Street
NW |
Discontinued Operations: |
Office - 1901 Pennsylvania Avenue, 515 King Street, 1220 19th
Street, 1600 Wilson Boulevard, Silverline Center, Courthouse
Square, 2000 M Street, 1140 Connecticut Avenue, Army Navy Club,
1775 Eye Street, Fairgate at Ballston and Arlington TowerRetail:
Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza,
800 S. Washington Street, Randolph Shopping Center, Montrose
Shopping Center and Spring Valley Village. |
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
FINANCIAL HIGHLIGHTS |
(In thousands, except per share data) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
OPERATING RESULTS |
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
|
|
|
|
|
|
|
Real estate rental revenue |
$ |
41,297 |
|
|
$ |
43,757 |
|
|
$ |
81,904 |
|
|
$ |
89,500 |
|
Expenses |
|
|
|
|
|
|
|
Real estate expenses |
16,230 |
|
|
16,588 |
|
|
32,684 |
|
|
34,046 |
|
Depreciation and amortization |
17,303 |
|
|
17,372 |
|
|
34,290 |
|
|
34,619 |
|
Transformation costs |
3,780 |
|
|
— |
|
|
3,780 |
|
|
— |
|
General and administrative expenses |
6,325 |
|
|
5,296 |
|
|
11,929 |
|
|
11,633 |
|
|
43,638 |
|
|
39,256 |
|
|
82,683 |
|
|
80,298 |
|
Loss on sale of real estate |
— |
|
|
(7,539 |
) |
|
— |
|
|
(7,539 |
) |
Real estate operating
income |
(2,341 |
) |
|
(3,038 |
) |
|
(779 |
) |
|
1,663 |
|
Other income (expense) |
|
|
|
|
|
|
|
Interest expense |
(10,158 |
) |
|
(8,751 |
) |
|
(20,281 |
) |
|
(19,596 |
) |
Loss on interest rate derivatives |
(5,760 |
) |
|
— |
|
|
(5,760 |
) |
|
— |
|
(Loss) gain on extinguishment of debt |
— |
|
|
(206 |
) |
|
— |
|
|
262 |
|
Other income |
1,522 |
|
|
— |
|
|
2,806 |
|
|
— |
|
|
(14,396 |
) |
|
(8,957 |
) |
|
(23,235 |
) |
|
(19,334 |
) |
|
|
|
|
|
|
|
|
Loss from continuing
operations |
(16,737 |
) |
|
(11,995 |
) |
|
(24,014 |
) |
|
(17,671 |
) |
Discontinued operations: |
|
|
|
|
|
|
|
Income from operations of properties sold or held for sale |
9,745 |
|
|
6,589 |
|
|
15,875 |
|
|
13,984 |
|
Net loss |
$ |
(6,992 |
) |
|
$ |
(5,406 |
) |
|
$ |
(8,139 |
) |
|
$ |
(3,687 |
) |
|
|
|
|
|
|
|
|
Loss from continuing
operations |
$ |
(16,737 |
) |
|
$ |
(11,995 |
) |
|
$ |
(24,014 |
) |
|
$ |
(17,671 |
) |
Depreciation and
amortization |
17,303 |
|
|
17,372 |
|
|
34,290 |
|
|
34,619 |
|
Loss on sale of depreciable
real estate |
— |
|
|
7,539 |
|
|
— |
|
|
7,539 |
|
Funds from continuing operations |
$ |
566 |
|
|
$ |
12,916 |
|
|
$ |
10,276 |
|
|
$ |
24,487 |
|
|
|
|
|
|
|
|
|
Income from discontinued
operations |
9,745 |
|
|
6,589 |
|
|
15,875 |
|
|
13,984 |
|
Discontinued operations real
estate depreciation and amortization |
10,248 |
|
|
12,227 |
|
|
22,904 |
|
|
24,700 |
|
Funds from discontinued operations |
19,993 |
|
|
18,816 |
|
|
38,779 |
|
|
38,684 |
|
|
|
|
|
|
|
|
|
NAREIT funds from operations
(1) |
$ |
20,559 |
|
|
$ |
31,732 |
|
|
$ |
49,055 |
|
|
$ |
63,171 |
|
|
|
|
|
|
|
|
|
Non-cash gain on
extinguishment of debt |
$ |
— |
|
|
$ |
204 |
|
|
$ |
— |
|
|
$ |
(1,177 |
) |
Tenant improvements and
incentives, net of reimbursements |
(1,112 |
) |
|
(1,877 |
) |
|
(573 |
) |
|
(2,949 |
) |
External and internal leasing
commissions capitalized |
(1,868 |
) |
|
(797 |
) |
|
(2,406 |
) |
|
(1,326 |
) |
Recurring capital
improvements |
(1,156 |
) |
|
(824 |
) |
|
(2,023 |
) |
|
(1,812 |
) |
Straight-line rents, net |
(625 |
) |
|
(655 |
) |
|
(1,173 |
) |
|
(1,318 |
) |
Non-cash fair value interest
expense |
— |
|
|
— |
|
|
— |
|
|
(59 |
) |
Non-real estate depreciation
& amortization of debt costs |
1,350 |
|
|
910 |
|
|
2,694 |
|
|
1,852 |
|
Amortization of lease
intangibles, net |
195 |
|
|
544 |
|
|
572 |
|
|
1,001 |
|
Amortization and expensing of
restricted share and unit compensation |
2,163 |
|
|
1,644 |
|
|
3,827 |
|
|
3,422 |
|
Funds available for
distribution (7) |
$ |
19,506 |
|
|
$ |
30,881 |
|
|
$ |
49,973 |
|
|
$ |
60,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Per share data: |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Loss from continuing operations |
(Basic) |
$ |
(0.20 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.22 |
) |
|
(Diluted) |
$ |
(0.20 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.22 |
) |
Net loss |
(Basic) |
$ |
(0.08 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.05 |
) |
|
(Diluted) |
$ |
(0.08 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.05 |
) |
NAREIT FFO |
(Basic) |
$ |
0.24 |
|
|
$ |
0.38 |
|
|
$ |
0.58 |
|
|
$ |
0.77 |
|
|
(Diluted) |
$ |
0.24 |
|
|
$ |
0.38 |
|
|
$ |
0.58 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
|
$ |
0.60 |
|
|
$ |
0.60 |
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic |
84,461 |
|
|
82,153 |
|
|
84,437 |
|
|
82,120 |
|
Weighted average
shares outstanding - diluted |
84,461 |
|
|
82,153 |
|
|
84,437 |
|
|
82,120 |
|
Weighted average
shares outstanding - diluted (for NAREIT FFO) |
84,519 |
|
|
82,323 |
|
|
84,507 |
|
|
82,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
WASHINGTON REAL ESTATE INVESTMENT TRUST AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
(In thousands, except per share data) |
(Unaudited) |
|
|
|
|
|
June 30, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
Land |
$ |
301,709 |
|
|
$ |
301,709 |
|
Income producing property |
1,490,975 |
|
|
1,473,335 |
|
|
1,792,684 |
|
|
1,775,044 |
|
Accumulated depreciation and amortization |
(367,519 |
) |
|
(335,006 |
) |
Net income producing property |
1,425,165 |
|
|
1,440,038 |
|
Properties under development or held for future development |
30,065 |
|
|
36,494 |
|
Total real estate held for investment, net |
1,455,230 |
|
|
1,476,532 |
|
Investment in real estate held for sale, net |
779,121 |
|
|
795,687 |
|
Cash and cash equivalents |
5,435 |
|
|
7,697 |
|
Restricted cash |
595 |
|
|
593 |
|
Rents and other receivables |
12,916 |
|
|
9,725 |
|
Prepaid expenses and other assets |
28,297 |
|
|
29,587 |
|
Other assets related to properties sold or held for sale |
86,811 |
|
|
89,997 |
|
Total assets |
$ |
2,368,405 |
|
|
$ |
2,409,818 |
|
|
|
|
|
Liabilities |
|
|
|
Notes payable, net |
$ |
945,905 |
|
|
$ |
945,370 |
|
Line of credit |
43,000 |
|
|
42,000 |
|
Accounts payable and other liabilities |
47,897 |
|
|
44,067 |
|
Dividend payable |
25,474 |
|
|
25,361 |
|
Advance rents |
1,572 |
|
|
2,461 |
|
Tenant security deposits |
4,374 |
|
|
4,221 |
|
Other liabilities related to properties sold or held for sale |
23,748 |
|
|
25,229 |
|
Total liabilities |
1,091,970 |
|
|
1,088,709 |
|
|
|
|
|
Equity |
|
|
|
Shareholders' equity |
|
|
|
Preferred shares; $0.01 par value; 10,000 shares authorized; no
shares issued or outstanding |
— |
|
|
— |
|
Shares of beneficial interest, $0.01 par value; 150,000 and 100,000
shares authorized; 84,590 and 84,409 shares issued and
outstanding, as of June 30, 2021 and December 31, 2020,
respectively |
846 |
|
|
844 |
|
Additional paid in capital |
1,654,409 |
|
|
1,649,366 |
|
Distributions in excess of net income |
(357,934 |
) |
|
(298,860 |
) |
Accumulated other comprehensive loss |
(21,200 |
) |
|
(30,563 |
) |
Total shareholders' equity |
1,276,121 |
|
|
1,320,787 |
|
|
|
|
|
Noncontrolling interests in subsidiaries |
314 |
|
|
322 |
|
Total equity |
1,276,435 |
|
|
1,321,109 |
|
|
|
|
|
Total liabilities and equity |
$ |
2,368,405 |
|
|
$ |
2,409,818 |
|
|
|
|
|
|
|
|
|
The following tables contain reconciliations of net loss for the
periods presented (in thousands):
Three months ended
June 30, 2021 |
Multifamily |
|
Corporate and other |
|
Total |
Same-store net operating income (2) |
$ |
21,607 |
|
|
$ |
3,037 |
|
|
$ |
24,644 |
|
Add: Net operating income from non-same-store properties (2) |
423 |
|
|
— |
|
|
423 |
|
Total net operating income
(2) |
$ |
22,030 |
|
|
$ |
3,037 |
|
|
$ |
25,067 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
(17,303 |
) |
General and administrative expenses |
|
|
|
|
(6,325 |
) |
Transformation costs |
|
|
|
|
(3,780 |
) |
Interest expense |
|
|
|
|
(10,158 |
) |
Loss on interest rate derivatives |
|
|
|
|
(5,760 |
) |
Other income |
|
|
|
|
1,522 |
|
Loss from continuing
operations |
|
|
|
|
(16,737 |
) |
Discontinued operations: |
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
9,745 |
|
Net loss |
|
|
|
|
$ |
(6,992 |
) |
|
|
|
|
|
|
Three months ended
June 30, 2020 |
Multifamily |
|
Corporate and other |
|
Total |
Same-store net operating
income (2) |
$ |
22,046 |
|
|
$ |
3,184 |
|
|
$ |
25,230 |
|
Add: Net operating (loss) income from non-same-store properties
(2) |
(90 |
) |
|
2,029 |
|
|
1,939 |
|
Total net operating income
(2) |
$ |
21,956 |
|
|
$ |
5,213 |
|
|
$ |
27,169 |
|
Deduct: |
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
(17,372 |
) |
General and administrative expenses |
|
|
|
|
(5,296 |
) |
Loss on extinguishment of debt |
|
|
|
|
(206 |
) |
Interest expense |
|
|
|
|
(8,751 |
) |
Loss on sale of real estate |
|
|
|
|
(7,539 |
) |
Loss from continuing
operations |
|
|
|
|
(11,995 |
) |
Discontinued operations: |
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
6,589 |
|
Net loss |
|
|
|
|
$ |
(5,406 |
) |
|
|
|
|
|
|
|
|
The following tables contain reconciliations of net loss to
same-store net operating income for the periods presented (in
thousands):
Six months ended June
30, 2021 |
Multifamily |
|
Corporate and Other |
|
Total |
Same-store net operating income(3) |
$ |
42,393 |
|
|
$ |
6,195 |
|
|
$ |
48,588 |
|
Add: Net operating income from non-same-store properties(3) |
632 |
|
|
— |
|
|
632 |
|
Total net operating
income(2) |
$ |
43,025 |
|
|
$ |
6,195 |
|
|
$ |
49,220 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
(34,290 |
) |
General and administrative expenses |
|
|
|
|
(11,929 |
) |
Transformation costs |
|
|
|
|
(3,780 |
) |
Interest expense |
|
|
|
|
(20,281 |
) |
Loss on interest rate derivatives |
|
|
|
|
(5,760 |
) |
Other income |
|
|
|
|
2,806 |
|
Loss from continuing
operations |
|
|
|
|
(24,014 |
) |
Discontinued operations: |
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
15,875 |
|
Net loss |
|
|
|
|
$ |
(8,139 |
) |
|
|
|
|
|
|
Six months ended June
30, 2020 |
Multifamily |
|
Corporate and Other |
|
Total |
Same-store net operating
income(3) |
$ |
44,856 |
|
|
$ |
6,206 |
|
|
$ |
51,062 |
|
Add: Net operating (loss) income from non-same-store
properties(3) |
(300 |
) |
|
4,692 |
|
|
4,392 |
|
Total net operating
income(2) |
$ |
44,556 |
|
|
$ |
10,898 |
|
|
$ |
55,454 |
|
Add/(deduct): |
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
(34,619 |
) |
General and administrative expenses |
|
|
|
|
(11,633 |
) |
Gain on extinguishment of debt |
|
|
|
|
262 |
|
Interest expense |
|
|
|
|
(19,596 |
) |
Loss on sale of real estate |
|
|
|
|
(7,539 |
) |
Loss from continuing
operations |
|
|
|
|
(17,671 |
) |
Discontinued operations: |
|
|
|
|
|
Income from operations of properties sold or held for sale |
|
|
|
|
13,984 |
|
Net loss |
|
|
|
|
$ |
(3,687 |
) |
|
|
|
|
|
|
|
|
The following table contains a reconciliation of net loss to
core funds from operations for the periods presented (in thousands,
except per share data):
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net loss |
$ |
(6,992 |
) |
|
$ |
(5,406 |
) |
|
$ |
(8,139 |
) |
|
$ |
(3,687 |
) |
Add: |
|
|
|
|
|
|
|
Real estate depreciation and amortization |
17,303 |
|
|
17,372 |
|
|
34,290 |
|
|
34,619 |
|
Loss on sale of depreciable real estate |
— |
|
|
7,539 |
|
|
— |
|
|
7,539 |
|
Discontinued operations: |
|
|
|
|
|
|
|
Real estate depreciation and amortization |
10,248 |
|
|
12,227 |
|
|
22,904 |
|
|
24,700 |
|
NAREIT funds from
operations (1) |
20,559 |
|
|
31,732 |
|
|
49,055 |
|
|
63,171 |
|
Add: |
|
|
|
|
|
|
|
Loss (gain) on extinguishment of debt |
— |
|
|
206 |
|
|
— |
|
|
(262 |
) |
Loss on interest rate derivatives |
5,760 |
|
|
— |
|
|
5,760 |
|
|
— |
|
Severance expense |
— |
|
|
— |
|
|
173 |
|
|
— |
|
Transformation costs |
3,780 |
|
|
— |
|
|
3,780 |
|
|
— |
|
Core funds from
operations (1) |
$ |
30,099 |
|
|
$ |
31,938 |
|
|
$ |
58,768 |
|
|
$ |
62,909 |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Per share
data: |
2021 |
|
2020 |
|
2021 |
|
2020 |
NAREIT FFO |
(Basic) |
$ |
0.24 |
|
|
$ |
0.38 |
|
|
$ |
0.58 |
|
|
$ |
0.77 |
|
|
(Diluted) |
$ |
0.24 |
|
|
$ |
0.38 |
|
|
$ |
0.58 |
|
|
$ |
0.76 |
|
Core FFO |
(Basic) |
$ |
0.35 |
|
|
$ |
0.39 |
|
|
$ |
0.69 |
|
|
$ |
0.76 |
|
|
(Diluted) |
$ |
0.35 |
|
|
$ |
0.39 |
|
|
$ |
0.69 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic |
84,461 |
|
|
82,153 |
|
|
84,437 |
|
|
82,120 |
|
Weighted average
shares outstanding - diluted (for NAREIT and Core FFO) |
84,519 |
|
|
82,323 |
|
|
84,507 |
|
|
82,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTACT:Amy HopkinsVice President, Investor
RelationsE-Mail: ahopkins@washreit.com
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