SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) NOVEMBER 30, 1998
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WASHINGTON REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-6622 53-0261100
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(State or other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification Number)
6110 Executive Boulevard, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 984- 9400
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<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
During the period from January 1, 1998 to November 30, 1998, Washington
Real Estate Investment Trust ("WRIT") or its subsidiaries purchased five real
estate properties, which, individually are insignificant as defined in
Regulation S-X, but in the aggregate, constitute a "significant amount of
assets" as defined in Regulation S-X. When acquisitions are individually
insignificant but significant in the aggregate, Regulation S-X requires the
presentation of audited financial statements for assets comprising a substantial
majority of the individually insignificant properties. WRIT's 1998 real estate
asset purchases first exceeded the minimum level of significance upon the
September 30, 1998 purchase of an office property located in Vienna, Virginia,
and on October 13, 1998 WRIT filed a report on form 8-K providing certain
financial information with respect to properties acquired between January 1,
1998 and September 30, 1998.
On November 30, 1998, WRIT LP, a 99.9% owned subsidiary of WRIT, purchased
Woodburn Medical Park ("Woodburn"), consisting of two medical office buildings
with a total of 167,000 square feet located in Annandale, Virginia from Woodburn
Holding Limited Partnership I and II, for a contract purchase price of
$35,200,000. Approximately $13.5 million of the contract purchase price was
provided from a borrowing on one of WRIT's lines of credit. The balance of the
contract purchase price was paid through the assumption by WRIT of a first
mortgage on Woodburn in the amount of $21.7 million. On the date of acquisition,
Woodburn was 99% leased. Woodburn, combined with NVIP (see below), constitutes a
"substantial majority" of the assets acquired by WRIT during 1998 as defined in
Regulation S-X.
As previously reported on WRIT's Form 8-K filed with the Securities and
Exchange Commission on October 13, 1998, WRIT and WRIT- NVIP LLC, a 93% owned
subsidiary of WRIT, purchased Northern Virginia Industrial Park ("NVIP"), a
790,000 square foot industrial distribution center located in Lorton, Virginia
from CAMM L.L.C. and Maywood Building Corporation, for a contract purchase price
of $30,350,000 on May 22, 1998. Approximately $7.6 million of the contract
purchase price was provided by WRIT's March 1998 sale of Shirley- 395 Business
Center. The balance of the contract purchase price was paid out of a portion of
the proceeds from WRIT's February 1998 Medium Term Note offering. On the date of
acquisition, NVIP was 83% leased.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The acquisition of Woodburn and NVIP combined with WRIT's other 1998
acquisitions constitutes the acquisition of a "significant amount of
assets" as defined in Regulation S-X. Woodburn and NVIP constitute a
substantial majority of the assets acquired by WRIT in 1998. The
financial statements with respect to NVIP were filed with WRIT's 8-K
filed on October 13, 1998. The following financial statements are
filed as an exhibit hereto:
1. Woodburn Medical Park - Audited Historical Summary of Gross
Income and Direct Operating Expenses for the year ended
December 31, 1997.
In acquiring Woodburn and NVIP, WRIT evaluated among other things,
sources of revenue (including but not limited to, competition in the
rental market, comparative rents and occupancy rates) and expenses
(including but not limited to, utility rates, ad valorem tax rates,
maintenance expenses and anticipated capital expenditures). After
reasonable inquiry, management is not aware of any material factors
affecting Woodburn and NVIP that would cause the reported financial
information not to be indicative of Woodburn's and NVIP's future
operating results.
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(b) Pro Forma Financial Information
The following pro forma financial statements for a substantial
majority of the assets acquired by WRIT in 1998 (as defined in
Regulation S-X) are filed as an exhibit hereto:
1. WRIT Unaudited Pro Forma Condensed and Consolidated Balance
Sheet as of September 30, 1998.
2. WRIT Unaudited Pro Forma Condensed and Consolidated Statements
of Operations for the year ended December 31,1997 and the nine
months ended September 30, 1998.
(c) Exhibits
23. Consent of Auditors
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WASHINGTON REAL ESTATE INVESTMENT TRUST
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(Registrant)
By: /s/ Laura M. Franklin
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(Signature)
Laura M. Franklin
Vice President
Chief Accounting Officer &
Corporate Secretary
December 15, 1998
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(Date)
4
<PAGE>
Independent Auditors' Report
To the Board of Trustees of
Washington Real Estate Investment Trust
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses of Woodburn Medical Park ("Historical Summary") for the year
ended December 31, 1997. This Historical Summary is the responsibility of the
Park's management. Our responsibility is to express an opinion on the Historical
Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission as
described in Note 2, and is not intended to be a complete presentation of the
Park's revenue and expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses described in
Note 2 of Woodburn Medical Park for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
December 4, 1998
1
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WOODBURN MEDICAL PARK
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HISTORICAL SUMMARY OF GROSS INCOME AND
--------------------------------------
DIRECT OPERATING EXPENSES
-------------------------
Year Ended December 31, 1997
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Gross income:
Base rents $4,074,356
Operating expense recoveries 255,625
Other 11,722
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Total gross income $4,341,703
==========
Direct operating expenses:
Real estate taxes $ 331,896
Repairs and maintenance 278,563
Cleaning 169,304
Utilities 115,444
Insurance 40,457
Taxes - other 17,541
Security 13,554
----------
Total direct operating expenses $ 966,759
==========
The Notes to Historical Summary of Gross Income and Direct Operating Expenses
are an integral part of this summary.
2
<PAGE>
WOODBURN MEDICAL PARK
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NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
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DIRECT OPERATING EXPENSES
-------------------------
NOTE 1 - NATURE OF BUSINESS:
Woodburn Medical Park consists of two office buildings located in Annandale,
Virginia, containing approximately 167,000 rentable square feet.
The operations of Woodburn Medical Park consist of leasing commercial office
space to various tenants. All of the leases provide for operating expense
recoveries. The majority of leases provide for fixed rental rate increases of
2.5% - 3.0% per annum. A small number of leases provide for adjustments of rent
based on increases in the Consumer Price Index ("CPI"). There were no
significant rent adjustments based on increases in the CPI for 1997.
All leases are classified as operating leases and expire at various dates prior
to 2008. The following is a schedule by years of future minimum rents receivable
on noncancelable operating leases in effect as of December 31, 1997:
1998 $3,400,066
1999 2,696,823
2000 2,443,734
2001 2,078,288
2002 1,784,932
Thereafter 6,959,076
Included in the table above for 1998 is $376,920 of future minimum rents
receivable from a tenant whose lease expired June 30, 1998. Base rents from this
tenant totaled approximately $743,700 during 1997. During 1998, this tenant
entered into two new leases effective July 1, 1998. One lease is for 10 years
and provides for initial base rent of approximately $323,000 with fixed rental
rate increases of 2.5%. The other lease is for five years and provides for
initial base rent of approximately $414,000 with fixed rental rate increases of
3.0%.
NOTE 2 - BASIS OF PRESENTATION:
Washington Real Estate Investment Trust purchased Woodburn Medical Park on
November 30, 1998. The Historical Summary has been prepared for the purpose of
complying with Regulation S-X, Rule 3-14 of the Securities and Exchange
Commission ("SEC"), which requires certain information with respect to real
estate operations acquired to be included with certain filings with the SEC.
This Historical Summary includes the historical gross income and direct
operating expenses of Woodburn Medical Park, exclusive of the following expenses
which may not be comparable to the proposed future operations:
(a) Interest expense on existing mortgages and borrowings
(b) Depreciation of property and equipment
(c) Management and leasing fees
(d) Certain corporate expenses
(e) Provisions for income taxes
3
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WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
The pro forma balance sheet as of September 30, 1998 presents
consolidated financial information as if the acquisition of the Properties had
taken place on September 30, 1998. The pro forma statements of operations for
the year ended December 31, 1997 and for the nine months ended September 30,
1998 present combined financial information as if the acquisition of the
Properties had taken place as of January 1, 1997.
WRIT purchased Woodburn on November 30, 1998 and NVIP on May 22, 1998.
The pro forma statements of operations shows earnings in the amount of
$30,783 and $31,890 for the year ended December 31, 1997 and the nine months
ended September 30, 1998, respectively, after giving effect to certain pro forma
adjustments required to reflect the operating results as if the Properties had
been acquired as January 1, 1997.
<TABLE>
<CAPTION>
PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1998
(in thousands, except per share data)
PRO
FORMA PRO
REGISTRANT ADJ'S FORMA
----------- ------------ -------------
Assets
<S> <C> <C> <C> <C>
Real estate at cost $558,100 (1) $35,200 $593,300
Accumulated depreciation (64,879) - (64,879)
--------------- ------------ -------------
Total Investment in Real Estate 493,221 35,200 528,421
Cash and temporary investments, receivables,
prepaid expenses and other assets 24,901 24,901
--------------- ------------ -------------
$518,122 $35,200 $553,322
=============== ============ =============
Liabilities
Notes payable $210,000 $- $210,000
Mortgage notes payable 7,357 (1) 21,700 29,057
Lines of credit payable and bridge loan payable 30,000 (1) 13,500 43,500
Accounts payable and other liabilities 11,298 - 11,298
Tenant security deposits 4,136 - 4,136
--------------- ------------ -------------
262,791 35,200 297,991
--------------- ------------ -------------
Minority interest 1,524 1,524
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Shareholders' Equity
Shares of beneficial interest, $0.01 par value,
100,000,000 authorized, 35,692,042 issued and
outstanding at September 30, 1998 357 - 357
Additional paid-in capital 253,450 - 253,450
--------------- ------------ -------------
253,807 - 253,807
--------------- ------------ -------------
$518,122 $35,200 $553,322
=============== ============ =============
</TABLE>
(1) Adjustment to reflect contract purchase price of Woodburn of
$35,200, paid out of an advance from WRIT's lines of credit and
the assumption by WRIT of a first mortgage on the property. No
adjustment is made for NVIP because it was purchased on May 22,
1998, so it is already reflected in WRIT's balance sheet as of
September 30, 1998.
<PAGE>
<TABLE>
<CAPTION>
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
PRO
FORMA PRO
REGISTRANT NVIP WOODBURN ADJ'S FORMA
-------------- ------------ ----------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Real estate revenue $79,429 $3,147 $4,342 $ - $86,918
Real estate expenses (25,459) (644) (967) (1) (300) (27,370)
-------------- ------------ ----------------- ------------ -------------
53,970 2,503 3,375 (300) 59,548
Depreciation (10,911) (2) (852) (11,763)
-------------- ------------ ----------------- ------------ -------------
Income from real estate 43,059 2,503 3,375 (1,152) 47,785
Other income (expense)
Investment income 1,011 - - - 1,011
Interest expense (9,691) - (1,706) (3) (2,373) (13,770)
General and administrative (4,243) - - - (4,243)
-------------- ------------ ----------------- ------------ -------------
Net income $30,136 $2,503 $1,669 ($3,525) $30,783
============== ============ ================= ============ =============
Net income per share - Basic $0.90 $0.92
Net income per share - Diluted $0.90 $0.92
</TABLE>
(1)Property management fees based on rate schedule paid by Registrant.
(2)Depreciation over 30 years, based upon the portion of the puchase
price allocated to building and improvements.
(3)Interest expense based on an estimated weighted average borrowing
rate of 6.5%.
<TABLE>
<CAPTION>
WASHINGTON REAL ESTATE INVESTMENT TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands, except per share amounts)
PRO
FORMA PRO
REGISTRANT NVIP WOODBURN ADJ'S FORMA
-------------- ------------ ----------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Real estate revenue $76,157 $1,422 $3,194 $ - $80,773
Real estate expenses (23,232) (394) (773) (1) (185) (24,584)
-------------- ------------ ----------------- ------------ -------------
52,925 1,028 2,421 (185) 56,189
Depreciation (11,272) - - (2) (426) (11,698)
-------------- ------------ ----------------- ------------ -------------
Income from real estate 41,653 1,028 2,421 (611) 44,491
Other income (expense)
Investment income 712 - - - 712
Interest expense (12,484) - (1,261) (3) (831) (14,576)
General and administrative (4,663) - - (4,663)
Gain on sale of real estate 5,926 - - - 5,926
-------------- ------------ ----------------- ------------ -------------
Net income $31,144 $1,028 $1,160 ($1,442) $31,890
============== ============ ================= ============ =============
Net income per share - Basic $0.87 $0.89
Net income per share - Diluted $0.87 $0.89
</TABLE>
(1)Property management fees based on rate schedule paid by Registrant.
(2)Depreciation over 30 years, based upon the portion of the puchase
price allocated to building and improvements.
(3)Interest expense based on an estimated weighted average borrowing
rate of 6.5%.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K of Washington Real Estate Investment
Trust ("WRIT") of our report dated December 4, 1998, relating to the audited
historical summary of gross income and direct operating expenses of Woodburn
Medical Park, for the year ended December 31, 1997. We also consent to the
incorporation by reference of our report in WRIT's Form S-3 Number 333-23157
dated March 12, 1997, and in WRIT's Forms S-8 Number 33-63671 dated October 25,
1995, post effectively amended July 25, 1996 and Number 333-48081 dated March
17, 1998, and in WRIT's Form S-4 Number 333-48293 dated March 20, 1998.
STOY, MALONE & COMPANY, P.C.
Bethesda, Maryland
December 15, 1998
