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) OCTOBER 26, 1999
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WASHINGTON REAL ESTATE INVESTMENT TRUST
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(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, Suite 800, 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 5: OTHER EVENTS
Attached hereto as Exhibit 99.1 is a copy of certain Supplemental Data
included in the Trust's press release, dated October 26, 1999.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit
Number
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99.1 Press Release, October 26, 1999, entitled "Supplemental
Data"
<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/ Larry E. Finger
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(Signature)
Larry E. Finger
Senior Vice President
Chief Financial Officer
October 26, 1999
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(Date)
<PAGE>
Exhibit
Number
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99.1 Press Release, October 26, 1999, entitled "Supplemental Data"
NEWS RELEASE
[LOGO]WRIT
WASHINGTON REAL ESTATE INVESTMENT TRUST
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<CAPTION>
<S> <C> <C>
CONTACT: 6110 Executive Boulevard Listed: NYSE
Larry E. Finger Suite 800 Trading Symbol: WRE
Senior V.P. - C.F.O. Rockville, Maryland 20852 Newspaper Quote: WRIT
Direct Dial: (301) 255-0820 Tel 301-984-9400 www.washreit.com
E-Mail: [email protected] Fax 301-984-9610
</TABLE>
FOR IMMEDIATE RELEASE OCTOBER 26, 1999
PAGE 1 OF 9
WASHINGTON REAL ESTATE INVESTMENT TRUST
3RD QUARTER 1999 FFO PER SHARE UP 11.8%
Washington Real Estate Investment Trust (WRIT) reported today that Funds From
Operations (FFO) per share increased 11.8% to $0.38 in the third quarter of 1999
from $0.34 in the third quarter of 1998. FFO increased 12.0% to $13,631,000 for
the quarter ended September 30, 1999 from $12,166,000 for the quarter ended
September 30, 1998. FFO is the primary performance measure for the REIT
industry.
WRIT's FFO growth continues to be among the highest in the industry. WRIT's
11.8% FFO per share growth during the third quarter 1999 is 51% above the REIT
industry average as projected by PaineWebber Incorporated. Over the last 5
quarters, WRIT has averaged 11.2% FFO per share growth which is 19% above the
REIT industry average over the same period. WRIT's growth has been accelerating
as evidenced by the fact that WRIT's 2nd and 3rd quarter 1999 growth rates of
11.7% and 11.8% exceeded WRIT's five quarter average of 11.2%. At the same time,
the REIT industry's growth is decelerating as evidenced by the fact that the
REIT Industry's 2nd and 3rd quarter 1999 growth rates of 8.3% and 7.8% are below
the industry's five quarter average of 9.4%.
Edmund B. Cronin, Jr., President and CEO, stated that WRIT's FFO growth is due
to the excellent performance of recent acquisitions, combined with the strong
core portfolio net operating income increase of 6.8% in the 3rd quarter of 1999
as compared to the 3rd quarter of 1998. WRIT's core portfolio excludes
properties not owned for the entirety of both periods being compared.
WRIT's strong core portfolio net operating income (NOI) growth is also among the
highest in the industry. Over the last 5 quarters, WRIT has averaged 7.8% core
portfolio NOI growth which is 44% above the REIT industry average of 5.4% over
the same period.
Washington REIT is the only REIT to have produced positive earnings per share
growth and FFO per share growth through even 1 recession and our streak of 33
consecutive years of increased earnings per share and 28 consecutive years of
increased FFO per share growth spans 4 recessions. WRIT dividends have increased
every year for 28 consecutive years. During these 28 years, WRIT's dividends
have been increased 36 times, a record unmatched by any other publicly traded
real estate investment trust.
CONTINUED
<PAGE>
FOR IMMEDIATE RELEASE OCTOBER 26, 1999
PAGE 2 OF 9
WRIT is a self-administered, self-managed, equity real estate investment trust
investing in income-producing properties in the greater Washington-Baltimore
region. The Trust owns a diversified portfolio of 56 properties consisting of 12
retail centers, 20 office properties, 9 apartment properties and 15
industrial/flex properties.
WRIT's shares are publicly traded on the New York Stock Exchange (symbol: 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, FLUCTUATIONS IN INTEREST RATES,
AVAILABILITY OF RAW MATERIALS AND LABOR COSTS, LEVELS OF COMPETITION, THE EFFECT
OF GOVERNMENT REGULATION, THE AVAILABILITY OF CAPITAL, WEATHER CONDITIONS AND
CHANGES IN GENERAL ECONOMIC CONDITIONS.
CONTINUED
<PAGE>
FOR IMMEDIATE RELEASE OCTOBER 26, 1999
PAGE 3 OF 9
WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
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<S> <C> <C>
QUARTER ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------- -------------------------------
OPERATING RESULTS 1999 1998 1999 1998
- ----------------------------------------- -------------- ---------------- ------------------ --------------------
Real estate rental revenue $29,566 $26,243 $86,084 $76,157
Real estate expenses (8,985) (8,288) (26,085) (23,232)
-------------- ---------------- ------------------ --------------------
20,581 17,955 59,999 52,925
Real estate depreciation and amortization (4,805) (3,889) (13,900) (11,272)
-------------- ---------------- ------------------ --------------------
INCOME FROM REAL ESTATE $15,776 $14,066 $46,099 $41,653
Other income 85 165 521 712
Interest expense (5,463) (4,469) (16,070) (12,484)
General and administrative (1,572) (1,485) (4,510) (4,663)
-------------- ---------------- ------------------ --------------------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE $8,826 $8,277 $26,040 $25,218
-------------- ---------------- ------------------ --------------------
Gain on sale of real estate - - 7,909 5,927
NET INCOME $8,826 $8,277 $33,949 $31,145
============== ================ ================== ====================
INCOME BEFORE GAIN ON REAL ESTATE PER SHARE
(Basic) $0.25 $0.23 $0.73 $0.71
============== ================ ================== ====================
NET INCOME PER SHARE (Basic) $0.25 $0.23 $0.95 $0.87
============== ================ ================== ====================
Income before gain on sale of real estate $8,826 $8,277 $26,040 $25,218
Real estate depreciation and amortization 4,805 3,889 13,900 11,272
-------------- ---------------- ------------------ --------------------
FUNDS FROM OPERATIONS $13,631 $12,166 $39,940 $36,490
============== ================ ================== ====================
FUNDS FROM OPERATIONS PER SHARE $0.38 $0.34 $1.12 $1.02
============== ================ ================== ====================
DIVIDENDS PAID PER SHARE $0.2925 $0.28 $0.8651 $0.83
============== ================ ================== ====================
Weighted average shares outstanding 35,716,150 35,692,042 35,711,402 35,687,085
</TABLE>
AS OF AS OF
BALANCE SHEET DATA SEPTEMBER 30, DECEMBER 31,
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1999 1998
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Cash and temporary investments $1,936 $4,595
Real estate assets, at cost (1) 654,094 598,874
Total assets, at cost (1) 680,336 627,008
Lines of credit payable 29,000 44,000
Mortgage note payable 87,208 28,912
Notes payable 210,000 210,000
Total liabilities 343,456 303,447
Shareholders' equity 257,177 253,733
Shareholders' equity, at cost (1) $335,291 $322,034
(1) At cost means adding back accumulated depreciation.
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 4 OF 9
FFO PER SHARE GROWTH AVERAGES 19% > INDUSTRY AVERAGE OVER LAST 5 QUARTERS
50% > INDUSTRY AVERAGE OVER LAST 2 QUARTERS
As reflected in the following graph WRIT's FFO per share growth, as compared
to the corresponding quarter in the preceding calendar year, continues to
significantly outperform the industry.
[GRAPHIC]
Q3 1998 Q4 1998 Q1 1999 Q2 1999 Q3 1999 Average
WRIT 11.8% 11.2%
REIT Industry * 7.8% 9.9%
*REIT Industry data for Q3 1998 - Q2 1999 is actual FFO per share growth is per
DLJ Equity REIT Reasearch. Estimate for REIT Industry Q3 1999 FFO Per Share
growth is per PaineWebber Incorporated.
CORE PORTFOLIO OPERATING INCOME (NOI) GROWTH, RENTAL RATE GROWTH, NET REVENUE
GROWTH AND OPERATING EXPENSE INCREASE BY SECTOR - Q3 1999 VS. Q3 1998
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<CAPTION>
OPERATING
RENTAL RATE NET REVENUE EXPENSE
SECTOR NOI GROWTH GROWTH GROWTH INCREASE (DECREASE)
------ ---------- ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
Apartments 13.8% 4.8% 7.6% -0.7%
Office Buildings 6.0% 5.2% 3.9% -0.1%
Retail Centers 5.0% 1.9% 2.5% -5.6%
Industrial/Flex Centers 3.4% 1.7% 4.5% 6.8%
---- ---- ---- ----
OVERALL CORE PORTFOLIO 6.8% 4.1% 4.5% -0.3%
</TABLE>
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 5 OF 9
CORE PORTFOLIO & OVERALL OCCUPANCY LEVELS BY SECTOR
CORE PORTFOLIO ALL PROPERTIES
---------------------------------------------------
3RD QTR 3RD QTR 3RD QTR 3RD QTR
SECTOR 1999 1998 1999 1998
- ------ ---- ---- ---- ----
Apartments 97.4% 94.1% 97.4% 94.1%
Office Buildings 96.0% 97.4% 96.5% 97.3%
Retail Centers 95.2% 94.9% 93.3% 93.4%
Industrial/Flex Centers 93.8% 90.5% 94.5% 91.2%
----- ----- ----- -----
OVERALL PORTFOLIO 95.9% 95.3% 96.0% 95.1%
CORE PORTFOLIO NOI GROWTH HAS AVERAGED 44% > INDUSTRY OVER LAST 5 QUARTERS
As reflected in the following graph WRIT's core portfolio NOI growth, as
compared to the corresponding quarters in the preceding calendar year, continues
to significantly outperform the industry.
[GRAPHIC]
Q3 1998 Q4 1998 Q1 1999 Q2 1999 Q3 1999 Average
WRIT 6.8% 7.8%
Industry Avg. * 5.4% 5.4%
*REIT Industry Same Store NOI growth data is per PaineWebber Incorporated.
CAPITAL IMPROVEMENTS SUMMARY
During Q3 1999, WRIT invested $3.2 million in real estate capital improvements.
A breakdown of these improvements is as follows (in 000's):
Accretive Capital Improvements
Acquisition Related $1,790
Expansions & Major Renovations 3,188
Tenant Improvements 570
---
Total Accretive Capital Improvements 5,548
Recurring Capital Improvements 1,288
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Total Capital Improvements $6,836
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 6 OF 9
Q3 1999 COMMERCIAL LEASING ACTIVITY - 302,000 SF LEASED AT AVG. 26.5% RENT
INCREASE
In Q3 1999, WRIT executed leases for 302,000 square feet of commercial space at
a weighted average initial face rate of $14.12 psf. This represents an increase
of 26.5% ($2.96 psf) over the prior rent in place on a cash, i.e., non-straight
line basis. Details by sector are as follows:
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PREVIOUS NEW
SECTOR SQUARE FEET FACE RENT FACE RENT $ INCREASE % INCREASE
- ------ ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Office 128,526 $18.03 $ 23.21 $ 5.18 28.8%
Retail 49,178 9.64 12.59 2.95 30.6%
Industrial/Flex 124,133 4.66 5.33 .66 14.2%
------- ---- ---- --- -----
OVERALL/AVG. 301,837 $11.16 $14.12 $ 2.96 26.5%
AVG TERM AVERAGE AVERAGE
SECTOR (YEARS) SQUARE FEET TENANT IMP.
- ------ ------- ----------- -----------
Office 3.7 2,678 $7.50
Retail 3.9 3,278 1.33
Industrial/Flex 2.8 4,432 .11
--- ----- ----
OVERALL/AVG. 3.4 3,317 $3.46
</TABLE>
YTD 1999 COMMERCIAL LEASING ACTIVITY - 804,000 SF LEASED AT AVG. 18.6% RENT
INCREASE
Year to date in 1999, WRIT has executed leases for 804,000 square feet of
commercial space at a weighted average initial face rate of $14.49 psf. This
represents an increase of 18.6% ($2.27 psf) over the prior rent in place on a
cash, i.e., non-straight line basis. Details by sector are as follows:
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PREVIOUS NEW
SECTOR SQUARE FEET FACE RENT FACE RENT $ INCREASE % INCREASE
- ------ ----------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Office 342,493 $ 19.03 $ 22.94 $ 3.91 20.6%
Retail 140,576 11.35 13.38 2.03 17.9%
Industrial/Flex 321,131 5.33 5.96 .63 11.8%
----- ----- ---- -----
OVERALL/AVG. 804,200 $ 12.22 $ 14.49 $ 2.27 18.6%
AVG TERM AVERAGE AVERAGE
SECTOR (YEARS) SQUARE FEET TENANT IMP.
- ------ ------- ----------- -----------
Office 3.9 2,566 $5.32
Retail 4.3 3,195 .98
Industrial/Flex 2.8 7,646 .34
--- ----- ----
OVERALL/AVG. 3.6 3,655 $2.58
</TABLE>
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 7 OF 9
NORTHERN VIRGINIA INDUSTRIAL PARK UPDATE
On May 22, 1998 WRIT acquired the 790,000 square foot Northern Virginia
Industrial Park (NVIP). At acquisition, the property was leased at an average
per square foot rent of $4.25 NNN. Upon acquisition, WRIT reported that the
property had been under-managed and that the market vacancy rate was
approximately 1/2 the project vacancy rate. In addition, WRIT indicated that
market rents for the property, in a well managed condition, would range from
$5.00 to $5.50 NNN, depending on the interior office build-out of the various
spaces.
As of September 30, 1999, i.e., in the 16 months since acquisition, WRIT has
executed leases for 249,000 square feet at a weighted average $5.21 NNN psf.
This average rent is 23% above the average rent in the park at acquisition.
Based on the above, WRIT's cash, unleveraged return on investment (ROI) at NVIP
is as follows:
ROI at Acquisition 5/98 8.6%
ROI at 9/30/99 9.5%
ROI with marked to market rents 12.3%
Q3 1999 ACQUISITIONS
NORTH AMERICAN VACCINE BUILDING, a 30,800 square foot industrial/flex building
in Beltsville, Maryland was acquired for $2.2 million, cash, on September 13,
1999 in a sale-leaseback transaction. North American Vaccine, Inc. will occupy
the building under a 10 year lease and the acquisition is anticipated to produce
a first year unleveraged cash return on investment of 10.7%.
The North American Vaccine Building is located in the Ammendale Technology Park
in Beltsville, Maryland, at the southern end of the Baltimore-Washington
Corridor. Access to I-95 and the Capital Beltway interchange is two miles west
of the property.
WRIT now owns all seven buildings in Ammendale Technology Park Phases I and II.
These buildings contain 305,000 sf of flex/industrial space and are 100% leased.
AVONDALE APARTMENTS, a 237 unit apartment project located in Laurel, Maryland
was acquired for $12.7 million on September 21, 1999. The 11 story high-rise was
95% leased at acquisition. At an average purchase price of $53,600 per unit, the
property was acquired at a substantial discount to replacement cost.
Built in 1987, the property has high visibility from Route 1, Route 198, and
Laurel Centre Mall due to its height and position atop a hill. Avondale is
highly accessible from all of Laurel's major transportation arteries. The
property is 2 miles from I-95 and 1/4 mile from Route 1, a major transportation
artery originating in Northern Virginia which runs north through Washington, DC
and extends into Maryland. The Baltimore-Washington Parkway (I-295) is within 3
1/2 miles of the property.
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 8 OF 9
Laurel benefits from its close proximity to Washington, DC, as well as
Annapolis, Baltimore and Columbia in Maryland. Major area employers include the
National Security Agency, Fort Meade, University of Maryland, NASA-Goddard Space
Flight Center, and Johns Hopkins Applied Physics Laboratory.
Avondale Apartments are within walking distance of Laurel Centre Mall, Laurel
Shopping Center, and Laurel Lake Shopping Center as well as restaurants,
entertainment facilities and Laurel Lake, including its jogging path and
boathouse.
Project amenities include controlled access entry, swimming pool, whirlpool,
health club with sauna, lighted tennis court and a business center with
conference room.
Avondale boasts a diverse resident base with varying occupations and an average
household income of $36,508. Within a 3-mile radius of the property the median
household income is $50,398 per year, with 70% of the population having white
collar occupations. The 1998 median housing value is $155,075.
Q3 1999 FINANCING & 9/30/99 DEBT SUMMARY
On September 27, 1999, WRIT closed on a $50 million secured financing
transaction with First Union National Bank. Interest only is due on the loan at
7.14% fixed for 10 years. The loan is secured by five Virginia Apartment
properties - Country Club Towers, Park Adams, Munson Hill Towers, Roosevelt
Towers and the Ashby at McLean. Proceeds from the loan were used to pay down
WRIT's Lines of Credit.
At September 30, 1999, WRIT's debt was as follows (in $millions):
Average Average
Amount Maturity(Yrs) Interest Rate
------ ------------- -------------
Secured $ 87.2 8.0 7.5%
Unsecured
Lines of Credit $ 29.0 2.5 6.4%
Senior Notes & MTNs $ 210.0 11.7 7.2%
-----------------------------------
Total Unsecured $ 239.0 10.6 7.1%
-----------------------------------
Total Debt $ 326.2 9.9 7.2%
*WRIT's Lines of Credit total $75 million of capacity at LIBOR+ 70bp.
No more than $60 million of debt matures in any one year.
CONTINUED
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q3 1999 SUPPLEMENTAL DISCLOSURES
PAGE 9 OF 9
TERRACE BUILDING AT 7900 WESTPARK DRIVE DELIVERED
On September 15, 1999, WRIT delivered the Terrace Building at 7900 Westpark
Drive. The entire 49,000 square foot building will be occupied by a single
tenant as their corporate headquarters under a 12 year lease.
7900 Westpark Drive is a 527,000 square foot office complex in Tysons Corner,
Virginia. Upon acquisition in November 1997, WRIT announced the opportunity to
develop this addition and projected that the Terrace Building could produce a
12% unleveraged return on investment. With the development complete, WRIT now
anticipates the Terrace Building's unleveraged return on investment will exceed
13.6%.
Results at the existing 7900 building have also significantly exceeded
projections. Upon acquisition, WRIT indicated that market rents at the property
were $24 per square foot, which was 20% above the average existing rents in the
building. Since acquisition, leases executed at the property have averaged
$25.80 per square foot, which is 29% above the average existing rents in the
building.
Based on the above, WRIT's cash, unleveraged return on investment (ROI) at 7900
Westpark Drive is as follows:
ROI at Acquisition 11/97 8.4%
ROI at 9/30/99 9.7%
ROI with marked to market rents 11.9%
WRIT owns five office buildings containing approximately 1,030,000 square feet
in the Tysons Corner market, giving it significant leasing opportunities to
satisfy the changing needs of its more than 140 tenants in these properties. The
Tysons Corner office market is one of the nations largest and strongest, with
over 20 million square feet of office space and a 3.7% vacancy rate. WRIT's
Tysons Corner office buildings are currently over 99% leased.
END
