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) FEBRUARY 17, 1999
---------------------------
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, 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 February 17, 1999.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
Exhibit
Number
------
99.1 Press Release, February 17, 1999, entitled "1998 Funds From
Operations up 21%"
<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
---------------------------------------
(Registrant)
By: /s/ Larry E. Finger
-----------------------
(Signature)
Larry E. Finger
Senior Vice President
Chief Financial Officer
February 24, 1999
-----------------
(Date)
<PAGE>
Exhibit
Number
- ------
99.1 Press Release, February 17, 1999, entitled "1998 Funds From
Operations up 21%"
<PAGE>
Exhibit 99.1
FEBRUARY 17, 1999
WASHINGTON REAL ESTATE INVESTMENT TRUST
1998 FUNDS FROM OPERATIONS UP 21%
Washington Real Estate Investment Trust (WRIT) reported today that Funds From
Operations (FFO) increased 21% to $49,699,000 for the year ended December 31,
1998 from $41,047,000 for the year ended December 31, 1997. FFO per share
increased 13% to $1.39 in 1998 from $1.23 in 1997 on 2,284,000 more shares
outstanding. Funds From Operations (FFO) is the primary performance measure for
the REIT industry.
4th Quarter 1998 FFO was up 14% to $13,207,000 from $11,590,000 in the 4th
Quarter of 1997. FFO per share increased 14% to $.37 per share in the 4th
Quarter of 1998 from $.33 in the 4th Quarter of 1997 on 91,000 more shares
outstanding.
The Financial Accounting Standards Board Emerging Issues Task Force recently
issued EITF 97-11 requiring that all internal acquisition costs be expensed
rather than capitalized. As WRIT has historically expensed these costs,
compliance with this pronouncement has had no adverse impact on earnings.
Edmund B. Cronin, Jr., President and CEO, stated that WRIT's strong FFO growth
is due to the excellent performance of recent acquisitions, combined with core
portfolio net operating income increases of 10% for the year 1998 and 12% in the
4th Quarter of 1998. WRIT's core portfolio excludes properties not owned for the
entirety of both periods being compared.
WRIT is a self-administered, equity real estate investment trust investing in
income-producing properties in the greater Washington-Baltimore region. The
Trust owns a diversified portfolio of 54 properties consisting of 12 retail
centers, 19 office buildings, 8 apartment properties and 15 industrial/flex
properties.
CONTINUED
<PAGE>
FOR IMMEDIATE RELEASE FEBRUARY 17, 1999
PAGE 2 OF 3
WRIT has paid consecutive quarterly dividends to its shareholders for 36 years
and the annual dividend paid has increased every year for the past 28 years.
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 FEBRUARY 17, 1999
PAGE 3 OF 3
WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------- -----------------------
OPERATING RESULTS 1998 1997 1998 1997
- ----------------------------------------- ------------ ------------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Real estate rental revenue $27,440 $22,391 $103,597 $79,429
Real estate expenses (7,884) (6,896) (31,114) (25,459)
------------ ------------------- ------------------ ------------------
19,556 15,495 72,483 53,970
Real estate depreciation and amortization (4,127) (3,286) (15,399) (10,911)
------------ ------------------- ------------------ ------------------
INCOME FROM REAL ESTATE $15,429 $12,209 $57,084 $43,059
Other income 187 293 880 1,011
Interest expense (4,622) (2,902) (17,106) (9,691)
General and administrative (1,895) (1,296) (6,558) (4,243)
------------ ------------------- ------------------ ------------------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE $9,099 $8,304 $34,300 $30,136
------------ ------------------- ------------------ ------------------
Gain on sale of real estate 838 - 6,764 -
------------ ------------------- ------------------ ------------------
NET INCOME $9,937 $8,304 $41,064 $30,136
============ =================== ================== ==================
INCOME BEFORE GAIN ON REAL ESTATE PER SHARE $0.25 $0.23 $0.96 $0.90
============ =================== ================== ==================
NET INCOME PER SHARE $0.28 $0.23 $1.15 $0.90
============ =================== ================== ==================
Income before gain on sale of real estate $9,099 $8,304 $34,300 $30,136
Real estate depreciation and amortization 4,127 3,286 15,399 10,911
------------ ------------------- ------------------ ------------------
FUNDS FROM OPERATIONS $13,226 $11,590 $49,699 $41,047
============ =================== ================== ==================
FUNDS FROM OPERATIONS PER SHARE $0.37 $0.33 $1.39 $1.23
============ =================== ================== ==================
DIVIDENDS PAID PER SHARE $0.28 $0.27 $1.11 $1.07
============ =================== ================== ==================
Weighted average shares outstanding 35,692,042 35,600,731 35,688,334 33,404,012
</TABLE>
AS OF AS OF
BALANCE SHEET DATA DECEMBER 31, 1998 DECEMBER 31, 1997
- ------------------ --------------------------------------
Cash and temporary investments $4,595 $7,908
Real estate assets, at cost (1) 598,874 504,315
Total assets, at cost (1) 627,008 524,586
Lines of credit payable 44,000 95,250
Mortgage notes payable 28,912 7,461
Notes payable 210,000 100,000
Total liabilities 303,447 216,483
Shareholders' equity 253,733 252,088
Shareholders' equity, at cost (1) $322,034 $308,103
(1) At cost means adding back accumulated depreciation.
END
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL DISCLOSURES
PAGE 1 OF 6
CORE PORTFOLIO OPERATING INCOME (NOI) GROWTH BY SECTOR - 4TH QUARTER 1998 VS.
4TH QUARTER 1997
SECTOR
Apartments 7.2%
Office Buildings 14.2%
Retail Centers 16.1%
Industrial Flex Centers 5.7%
---------------
OVERALL CORE PORTFOLIO 12.0%
[BAR CHART APPEARS BELOW WITH THE FOLLOWING INFORMATION:]
WRIT Core
Portfolio NOI Growth
Q1 1998 10.1%
Q2 1998 7.5%
Q3 1998 7.5%
Q4 1998 12.0%
CORE PORTFOLIO & OVERALL OCCUPANCY LEVELS BY SECTOR
CORE PORTFOLIO ALL PROPERTIES
----------------------------------------------------
4TH QTR 4TH QTR 4TH QTR 4TH QTR
SECTOR 1998 1997 1998 1997
- ------ ---- ---- ---- ----
Apartments 94.8% 95.6% 95.2% 95.9%
Office Buildings 97.8% 95.3% 97.7% 95.9%
Retail Centers 94.1% 95.6% 93.9% 95.1%
Industrial Flex Centers 97.3% 92.9% 91.9% 92.2%
----- ----- ----- -----
OVERALL PORTFOLIO 96.3% 95.2% 95.8% 95.4%
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL DISCLOSURES
PAGE 2 OF 6
Q4 1998 STRAIGHT LINE RENTS POTENTIAL FFO IMPACT
WRIT does not straight line rents. However, in the interest of providing for
more effective comparisons to our peers, the following is a reconciliation of
WRIT's reported FFO to FFO with straight lined rents:
<TABLE>
<CAPTION>
Q4 1998 Q4 1997
------- -------
<S> <C> <C>
FFO as Reported $13,207 $ 11,590
Potential Straight Line Adjustment 279 246
-------- --------
FFO with Straight Lining $13,486 $ 11,836
Weighted Average Shares 35,692 35,601
FFO Per Share as Reported (unrounded) $ 0.370 $ 0.326
FFO Per Share with Straight Lining (unrounded) $ 0.378 $ 0.332
FFO Per Share Growth as Reported (unrounded) 13.7%
FFO Per Share Growth with Straight Lining (unrounded) 13.7%
</TABLE>
Q4 1998 COMMERCIAL LEASING ACTIVITY
In Q4 1998, WRIT executed leases for 470,450 square feet of commercial space at
a weighted average initial face rate of $11.68 psf. This represents an increase
of 17.6% ($1.86 psf) over the prior rent in place on a cash, i.e., non-straight
line basis. Details by sector are as follows:
<TABLE>
<CAPTION>
Square Previous New
Sector Feet Face Rent Face Rent $ Increase % Increase
- --------- ---- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Office 143,189 $ 18.47 $ 22.38 $ 3.91 21.2%
Retail 98,196 8.42 8.21 -.21 -2.5%
Industrial 229,065 6.52 7.98 1.46 22.4%
------- --------- ------- ------- -------
Overall 470,450 $ 10.55 $ 12.41 $ 1.86 17.6%
Sector Avg Term Avg Size Avg TI
Office 3.3 2,237 $ 2.78
Retail 5.3 6,137 .26
Industrial 3.3 9,163 1.97
----------- ------------- -----------
Overall 3.7 4,480 $ 1.86
</TABLE>
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL DISCLOSURES
PAGE 3 OF 6
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 82.8% leased at an average per square foot rent of $4.25 NNN.
WRIT previously disclosed 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 December 31, 1998, i.e., in the 7 months since acquisition, WRIT has
executed the following leases at NVIP:
65,800 sf New or Expansion Leases
95,600 sf Renewal Leases
------- Total Leases @ Weighted Average $5.44 NNN psf
164,000 sf (+28% over the existing average rent in the park)
NVIP was 85.4% leased as of 12/31/98.
Q4 1998 ACQUISITIONS
WOODBURN MEDICAL PARK was acquired for $35.2 Million on December 1,1998. The
property is located adjacent to both the Capital Beltway (I-495) and INOVA
Fairfax Hospital. The Park is comprised of two four-story medical office
buildings containing a total of approximately 167,500 rentable square feet.
Woodburn Medical Park is in excellent physical condition and is anticipated to
produce a first year return on investment of 10.7%, growing to 11.4% in Year 2.
Woodburn Medical Park's two buildings were originally designed as medical
buildings and feature hospital-sized elevator cabs, high capacity electrical and
water service, separate electrical metering for all tenants, and oversized
hallways to accommodate various medical needs. These features, combined with the
property's location adjacent to INOVA Fairfax Hospital, the Washington area's
busiest medical center, resulted in the property's 99.2% occupancy rate at date
of acquisition.
Q4 1998 DISPOSITIONS
On December 17, 1998, WRIT sold the 43,582 square foot Dover Mart Shopping
Center in Dover, Delaware. The property was sold to a local investor for
$1,975,000, resulting in a gain of $838,000. The sales proceeds have been
reinvested on a tax-deferred basis in Dulles South IV, a flex property acquired
January 28, 1999. The sale was pursuant to WRIT's strategic plan to dispose of
properties which do not fit our long-term objectives. During 1998, this plan
resulted in the sale of three properties for a total of $11,425,000, yielding a
gain of $6,765,000.
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL
DISCLOSURES PAGE 4 OF 6
YEAR ENDED 12/31/98 CORE PORTFOLIO OPERATING INCOME (NOI) GROWTH BY SECTOR
SECTOR
Apartments 4.2%
Office Buildings 13.4%
Retail Centers 8.7%
Industrial Flex Centers 6.5%
---------------
OVERALL CORE PORTFOLIO 9.6%
YEARS ENDED 12/31/98 & 12/31/97 CORE PORTFOLIO & OVERALL OCCUPANCY LEVELS BY
SECTOR
CORE PORTFOLIO ALL PROPERTIES
---------------------------------------------
SECTOR 1998 1997 1998 1997
- ------ ---- ---- ---- ----
Apartments 94.5% 95.6% 94.8% 95.8%
Office Buildings 96.1% 94.2% 96.9% 94.5%
Retail Centers 94.2% 93.6% 94.1% 93.1%
Industrial Flex Centers 98.1% 96.1% 92.8% 95.5%
----- ----- ----- -----
OVERALL PORTFOLIO 95.5% 94.6% 95.5% 94.7%
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL DISCLOSURES
PAGE 5 OF 6
YEAR ENDED 12/31/98 STRAIGHT LINE RENTS POTENTIAL FFO IMPACT
- ------------------------------------------------------------
WRIT does not straight line rents. However, in the interest of providing for
more effective comparisons to our peers, the following is a reconciliation of
WRIT's reported FFO to FFO with straight lined rents:
1998 1997
---- ----
(In 000's except per share amounts)
FFO as Reported $49,699 $41,047
Potential Straight Lining 1,094 528
--------- ----------
FFO with Straight Lining $50,793 $41,575
Weighted Average Shares 35,687 33,404
FFO Per Share as Reported (unrounded) $ 1.393 $1.229
FFO Per Share with Straight Lining (unrounded) $ 1.423 $1.245
FFO Per Share Growth as Reported (unrounded) 13.3%
FFO Per Share Growth with Straight Lining (unrounded) 14.3%
1998 COMMERCIAL LEASING ACTIVITY
- --------------------------------
In 1998, WRIT executed leases for 1,347,391 square feet of commercial space at a
weighted average initial face rate of $14.41 psf. This represents an increase of
13.0% ($1.66 psf) over the prior rent in place on a cash, i.e., non-straight
line basis. Details by sector are as follows:
<TABLE>
<CAPTION>
Square Previous New
Sector Feet Face Rent Face Rent $ Increase % Increase
- --------- ---- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Office 628,189 $ 18.87 $ 21.19 $ 2.32 12.3%
Retail 261,248 9.98 11.38 1.40 14.0%
Industrial 457,954 5.93 6.83 .90 15.2%
------- --------- ------- -------- ---------
Overall 1,347,391 $ 12.75 $ 14.41 $ 1.66 13.0%
Sector Avg Term Avg Size Avg TI
- ------ -------- -------- ------
Office 3.6 2,596 $ 3.78
Retail 5.8 3,680 1.30
Industrial 3.7 7,896 1.61
------- -------- ------
Overall 4.1 3,682 $ 2.56
</TABLE>
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
Q4 AND YEAR TO DATE 1998 SUPPLEMENTAL DISCLOSURES
PAGE 6 OF 6
Note - All of the above amounts exclude the Sunrise Retirement Communities lease
of 100% of the new 48,775 sf building WRIT is developing at 7900 Westpark Drive.
This lease is for a 12 year term at an initial rent of $25.33, plus electric.
This lease is excluded from the above amounts because it is in a newly
constructed addition, i.e., the space has no prior history.
