Washington Real Estate Investment Trust Announces First Quarter Financial and Operating Results and Quarterly Dividend

WASHINGTON, April 25, 2018 (GLOBE NEWSWIRE) — Washington Real Estate Investment Trust (“Washington REIT” or the “Company”) (WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter ended March 31, 2018:

First Quarter 2018 Highlights

Net income attributable to controlling interests was $3.3 million, or $0.04 per diluted share, compared to $6.6 million, or $0.09 per diluted share in the first quarter of 2017. NAREIT Funds from Operations (FFO) was $35.2 million, or $0.45 per diluted share, compared to $32.7 million, or $0.43 per diluted share, in the first quarter of 2017. Additional highlights are as below:

Reported Core FFO of $0.46 per diluted share, compared to $0.44 per diluted share in first quarter 2017Grew same-store Net Operating Income (NOI) by 2.4% and cash NOI by 2.9% over first quarter 2017Grew same-store office NOI by 4.8% and cash NOI by 5.3% over first quarter 2017Grew both same-store multifamily NOI and cash NOI by 3.7% over first quarter 2017Increased same-store office average occupancy by 200 basis points over first quarter 2017 to 92.5%Increased same-store multifamily average occupancy by 120 basis points over first quarter 2017 to 95.4%
Completed acquisition of Arlington Tower in Arlington, VA for $250 millionCompleted disposition of Braddock Metro Center in Alexandria, VA for net proceeds of $79 millionExecuted an agreement to sell 2445 M Street in Washington, DC for a contract sale price of approximately $100 million and expects to advance the anticipated closing date from September 2018 to June 2018
Entered into an amended, extended and expanded $700 million unsecured revolving credit facility and refinanced an existing $150 million term loan expiring on July 21, 2023 with a $250 million unsecured term loan with the same expiry date

"We achieved a strong first quarter with revenue-driven Core FFO per share growth of 4.5% on a year-over-year basis, underpinned by solid same-store NOI growth," said Paul T. McDermott, President and Chief Executive Officer. "Following the passage of the Bipartisan Budget Act of 2018 and the FY18 Omnibus Spending Bill in the first quarter, we are encouraged by the new stimulus for the DC Metro region and optimistic about Washington REIT’s ability to capture growth that we believe will particularly benefit value-oriented multifamily assets in Northern Virginia."

Operating Results

Overall portfolio:
The Company’s overall portfolio NOI(2) was $55.0 million for the quarter ended March 31, 2018, compared to $49.6 million in the corresponding prior year period due to same-store office and multifamily NOI growth and the acquisition of Watergate 600 and Arlington Tower that offset the sale of Walker House and Braddock Metro Center. The sequential ending occupancy(5) trend for the overall portfolio was positive with 93.3% of the overall portfolio occupied at the end of the first quarter of 2018 compared to 91.8% at year-end 2017.

Same-store portfolio:
Same-store portfolio NOI for the first quarter increased by 2.4%, compared to the corresponding prior year period, primarily due to average occupancy gains and rental growth in the office and multifamily same-store portfolios. The sequential ending occupancy trend for the same-store portfolio was positive with 93.3% of the same-store portfolio occupied at the end of the first quarter of 2018 compared to 92.6% at year-end 2017.

Same-store portfolio by sector:

Office: 44% of Same-Store NOI – Same-store NOI increased by 4.8% compared to the corresponding prior year period, primarily due to 200 basis points of average occupancy gains driven by new lease commencements and tenant expansions at multiple assets within the office portfolio. As a result, same-store office revenue growth more than offset lower lease termination fee income and higher operating expenses than in the first quarter of 2017. The same-store office portfolio was 92.6% occupied and 93.7% leased at quarter end.Multifamily: 31% of Same-Store NOI – Same-store NOI increased by 3.7% compared to the corresponding prior year period, driven by 120 basis points of average occupancy gains on a unit basis. Rental rates grew 200 basis points in the first quarter of 2018. The same-store multifamily portfolio was 95.2% occupied on a unit basis and 97% leased at quarter end.Retail: 25% of Same-Store NOI – Same-store NOI decreased by 2.8% compared to the corresponding prior year period due to 300 basis points of year-over-year average occupancy declines, mainly related to the former hhgregg spaces that are currently in lease-up. The 10 basis points of sequential decline in retail ending occupancy was due to lower specialty leasing in the first quarter of 2018 compared to the fourth quarter of 2017 due to the normal seasonality of holiday specialty leasing. The same-store retail portfolio was 91.1% occupied and 94% leased at quarter end.

Leasing Activity

During the first quarter, Washington REIT signed commercial leases totaling 147,000 square feet, including 33,000 square feet of new leases and 114,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis).

Square Feet WeightedAverage Term(in years) WeightedAverage FreeRent Period(in months) WeightedAverageRental Rates WeightedAverageRental Rate% Increase TenantImprovements LeasingCommissions New: Office 27,000 3.7 3.6 $ 50.14 9.5 % $ 29.40 $ 9.49 Retail 6,000 9.0 0.6 50.03 (5.0 %) 68.50 28.46 Total 33,000 4.6 3.1 50.12 6.7 % 36.25 12.83 Renewal: Office 69,000 4.1 4.0 $ 43.51 5.3 % $ 15.60 $ 8.50 Retail 45,000 5.5 — 23.61 12.4 % 2.23 0.78 Total 114,000 4.7 2.9 35.72 7.0 % 10.37 5.47

The percentage rate decrease on new leasing in the retail portfolio was due to a 2,100 square foot new lease on space that had been vacant for approximately two years.

The first quarter tenant retention rate for the office and retail portfolios was approximately 71% and 100%, respectively.

Acquisition Activity

On January 18, 2018 Washington REIT completed the purchase of Arlington Tower, a 396,000 square foot, Class A office building located in the heart of the Rosslyn submarket in Arlington, VA, for $250 million.

Disposition Activity

On January 19, 2018, Washington REIT completed the sale of Braddock Metro Center, a 356,000 square foot office asset in Alexandria, VA, for net proceeds of approximately $79 million.

During the quarter, the Company entered into a definitive agreement to sell 2445 M Street, a 292,000 square foot office building in DC for approximately $100 million and now expects to complete this transaction in June 2018. Washington REIT expects to advance the timing of the sale to accelerate the continued strengthening of its balance sheet. The Company recorded a $1.9 million impairment to reduce the carrying value of the asset, which is now classified as held for sale, to its estimated fair value less closing costs.

Capital Update

Washington REIT entered into an amended, extended and expanded $700 million unsecured revolving credit facility and refinanced an existing $150 million seven-year unsecured term loan expiring on July 21, 2023 with a $250 million five-year unsecured term loan having the same expiration date. The interest rate spread for the existing $150 million term loan expiring in 2023 was reduced by 55 basis points by swapping to a lower fixed interest rate of 2.31% through scheduled maturity, after giving effect to interest rate swap arrangements.

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