<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No.1
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE FISCAL YEAR ENDED December 31, 1999 COMMISSION FILE NO. 1-6622
----------------- ------
WASHINGTON REAL ESTATE INVESTMENT TRUST
---------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
MARYLAND 53-0261100
-------- ----------
<S> <C>
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)
</TABLE>
6110 EXECUTIVE BOULEVARD, SUITE 800, ROCKVILLE, MARYLAND 20852
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code (301) 984-9400
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of exchange on which registered
------------------- ------------------------------------
Shares of Beneficial Interest New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or such shorter period that the Registrant was
required to file such report) and (2) has been subject to such filing
requirements for the past ninety (90) days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
---
As of March 10, 2000, 35,733,793 Shares of Beneficial Interest were
outstanding and the aggregate market value of such shares held by non-affiliates
of the registrant was approximately $531,339,000 (based on the closing price of
the stock on March 10, 2000).
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K is incorporated by reference from the Trust's 2000
Notice of Annual Meeting and Proxy Statement.
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
1999 FORM 10-K ANNUAL REPORT
INDEX
<TABLE>
<CAPTION>
Page
PART I ----
<S> <C> <C>
Item 1. Business 3
Item 2. Properties 7
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 7A. Qualitative and Quantitative Disclosures About Market Risk 18
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
Item 10. Directors and Executive Officers of the Registrant 20
Item 11. Executive Compensation 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management 20
Item 13. Certain Relationships and Related Transactions 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 21
Signatures 24
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
--------
The Trust
Washington Real Estate Investment Trust ("WRIT" or the "Trust") is a self-
administered, self-managed equity real estate investment trust ("REIT"). The
Trust's business consists of the ownership and operation of income-producing
real properties. The Trust has a fundamental strategy of regional focus,
diversification by property type and conservative financial management.
WRIT operates in a manner intended to enable it to qualify as a REIT under the
Internal Revenue Code (the "Code"). In accordance with the Code, a trust which
distributes its capital gains and at least 95 percent of its taxable income to
its shareholders each year, and which meets certain other conditions, will not
be taxed on that portion of its taxable income which is distributed to its
shareholders. Over the last five years, dividends paid per share have been
$1.16 for 1999, $1.11 for 1998, $1.07 for 1997, $1.03 for 1996 and $.99 for
1995. The indicated annualized dividend rate for 2000, based upon the December
31, 1999 dividend, is $1.17. Gains on sale of real estate of $7.9 million in
1999 were tax deferred. Such gains were used to acquire real estate assets and
will not be distributed.
WRIT's geographic focus is based on two principles:
1. Real estate is a local business and is much more effectively selected and
managed by owners located and expert in the region.
2. Geographic markets deserving of focus must be among the nation's best
markets with a strong primary industry foundation but be diversified enough
to withstand downturns in its primary industry.
WRIT considers markets to be local if they can be reached from the operations
center within two hours by car. WRIT's Washington centered market reaches north
to Philadelphia, Pennsylvania and south to Richmond, Virginia. While WRIT has
historically focused most of its investments in the Greater Washington-Baltimore
Region, in order to maximize acquisition opportunities, WRIT will consider
investments within the two-hour radius described above. WRIT also will consider
opportunities to duplicate its Washington focused approach in other geographic
markets which meet the criteria described above.
All of WRIT's Trustees, officers and employees live and work in the Greater
Washington-Baltimore region and WRIT's officers average over 19 years of
experience in this region.
The Greater Washington-Baltimore Economy and Real Estate Markets
The Greater Washington-Baltimore area today is an economic machine driven by the
federal government at its center and the growth that results from being the #1
high tech center in the nation (see below). The Technology/Biotechnology sector
has surpassed the federal government as largest employer in the region, and the
Washington region now ranks #1 in the nation in number of high technology firms
and number of high technology employees.
Washington, D.C. 12,183 230,660
Silicon Valley 11,930 199,230
Los Angeles 11,058 152,850
New York 7,874 142,410
Boston 7,442 139,400
Atlanta 6,383 98,080
Austin 2,681 44,730
Source: Greater Washington Initiative, December 1999
-3-
<PAGE>
While federal employment in the region has decreased from 22% in 1970 to 11% in
1999, federal procurement (purchase of goods and services) has continued to grow
in the region. Federal procurement in the Washington region totaled $25.7
billion in 1999 making the region #1 in the nation exceeding the combined total
of the #2 and #3 metro areas (Los Angeles and St. Louis). Though the region may
not be recession proof, this federal procurement makes it substantially better
positioned than others to withstand an economic downturn.
Mae East, located in Tysons Corner, Virginia is one of only two Internet
convergence centers in the U.S. As a result, it is estimated that up to 60% of
the world's Internet traffic flows through Northern Virginia. The presence of
Mae East and of the thousands of high tech firms in the area has spawned a
concentration of data centers in the region where large Internet and other high
tech firms process tremendous amounts of data.
This concentration of high tech companies has served to attract even more high
tech firms. Amazon.com, Cisco Systems, Global Crossing and Winstar
Communications are all new presences in the Washington-Baltimore market.
Data Centers in the Washington Metro Area
-----------------------------------------
AboveNet Global Crossing
Amazon.com GTE
AOL IBM
AT&T Intel
Bell Atlantic Interliant
Cable & Wireless Mae East
Covad MCI/Worldcom/UUNet
Digex Pacific Gateway
Equinex PSINet
Exodus Qwest
Source: Delta Associates/Transwestern Carey Winston
This region serves as the headquarters for several of the largest U.S. and
international financial institutions including the World Bank, International
Monetary Fund, Inter-American Development Bank, Export-Import Bank, Federal
National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corp.
(Freddie Mac) and Student Loan Marketing Association (Sallie Mae).
Other major public companies headquartered in the region include MCI Worldcom,
USAirways, America Online, Marriott International, Lockheed-Martin, Danaher
Corp., Lafarge Corp. and Gannett. The region is the second most popular tourist
destination in the world. Most importantly, the Mid-Atlantic region is known as
a job center, with solid educational opportunities and easy access to leisure
time activities.
The region's real estate markets are the beneficiary of this high tech growth.
Vacancies are extremely low, and rental rate growth is very strong. At year-end
1999, regional vacancy rates stood at 1.1% in apartments, 2.7% in grocery
anchored shopping centers and 5.7% in office buildings. The industrial sector,
at 9.2%, is the only sector with a "normal" vacancy level, and some of this
vacancy is the result of obsolescence.
The apartment vacancy rate of 1.1% at year-end 1999 was the area's lowest since
World War II. The office vacancy rate of 5.7% was the 3rd lowest amongst major
metropolitan areas. More importantly, the cities ranked #1 and #2 had vacancy
rates only slightly lower than Washington at 5.0% and 5.3% while New York,
ranked 4th just behind Washington, had a vacancy rate of 8.8%.
-4-
<PAGE>
Development underway in the office and apartment sectors is expected to cause an
increase in vacancy rates, but Delta Associates/Transwestern Carey Winston
projects that office vacancies will only reach the 6% to 8% level at year-end
2001 - still lower than the #4 metro area in the nation today. Delta
Associates/Transwestern Carey Winston also projects that apartment vacancies
will only reach 4.9% by year-end 2002.
As of December 31, 1999, WRIT owned a diversified portfolio consisting of 12
retail centers, 22 office buildings, 9 apartment buildings and 16 industrial
distribution/flex properties. WRIT's principal objective is to invest in high
quality real properties in prime locations, then proactively manage, lease, and
develop ongoing capital improvement programs to improve their economic
performance. The percentage of total real estate rental revenue by property
group for 1999, 1998, and 1997 and the percent leased as of December 31, 1999
were as follows:
<TABLE>
<CAPTION>
Real Estate Rental Revenue
Percent Leased --------------------------------
December 31, 1999 1999 1998 1997
----------------- ---- ---- ----
<S> <C> <C> <C> <C>
98% Office buildings 52% 50% 45%
92% Retail centers 15 17 20
97% Apartment buildings 19 20 23
94% Industrial/flex properties 14 13 12
--- --- ---
100% 100% 100%
=== === ===
</TABLE>
On a combined basis, WRIT's portfolio was 96% occupied in 1999, 96% occupied in
1998, and 95% occupied in 1997.
Total revenue was $119.0 million for 1999, $103.6 million for 1998 and $79.4
million for 1997. During 1997 through 1999, WRIT acquired eight office
buildings, one retail center, two apartment buildings and eight industrial
distribution/flex properties for a total of 19 properties. These acquisitions
were the primary reason for the shifting of each group's percentage of total
revenue reflected above. During 1998 and 1999, WRIT sold two office properties,
four industrial/flex properties and one retail center for a total of seven
properties. No properties were sold in 1997. No single tenant accounted for
more than 3.81% of revenues in 1999, 3.96% of revenue in 1998 and 3.04% of
revenue in 1997. Various agencies of the U.S. government are counted separately
and include the Department of Commerce, Immigration and Naturalization Service,
U.S. Postal Service, Social Security Administration and U.S. Patent Office. All
Federal government tenants in the aggregate accounted for approximately 2.1% of
WRIT's 1999 total revenue. The larger non-Federal government tenants include
Crestar Bank, District of Columbia Metropolitan Police Department, Giant Food,
Main Control, Inc., OAO Corporation, Pepsi Cola, Sun Microsystems, Sunrise
Assisted Living, Inc., The American Red Cross, Wang Laboratories and Xerox.
As of December 31, 1999, and for the year then ended, the 7900 Westpark office
building accounted for 13% of total assets based upon book value and 9% of total
revenues. No other single property accounted for more than 10% of total assets
or total revenues.
During 1998 and prior, the actual day-to-day property management functions at
the properties owned by the Trust were carried out by an independent management
company whose only client was WRIT. No WRIT Trustee or officer was a director
or owned any interest in the management company. Effective December 31, 1998,
WRIT acquired substantially all of the operations of the management company and
took over the property management functions of the properties.
The Trust expects to continue investing in additional income producing
properties. WRIT invests only in properties which management believes will
increase in income and value. WRIT's properties compete for tenants with other
properties throughout the respective areas in which they are located. All
properties compete for tenants on the basis of location, quality and rental
rates.
-5-
<PAGE>
WRIT makes capital improvements on an ongoing basis to its properties for the
purpose of maintaining and increasing their values and income. Major
improvements and/or renovations to the properties in 1999 and 1998 are discussed
on page 10.
Further description of the property groups is contained in Item 2, Properties
and in Schedule III. Reference is also made to Item 7, Management's Discussion
and Analysis of Financial Condition and Results of Operations.
The number of persons employed by the Trust was 243 as of February 4, 2000,
including 175 persons engaged in property management functions and 68 persons
engaged in corporate, financial, leasing, and asset management functions.
ITEM 2. PROPERTIES
----------
The schedule on the following page lists the Trust's real estate investment
portfolio as of December 31, 1999, which consisted of 59 properties.
As of December 31, 1999, the percent leased is the percentage of net rentable
space for which fully executed leases exist and may include signed leases for
space not yet occupied by the tenant.
Cost information is included in Schedule III to WRIT's financial statements
included in this Form 10-K Annual Report.
-6-
<PAGE>
SCHEDULE OF PROPERTIES
----------------------
<TABLE>
<CAPTION>
Percent
Year Year Net Rentable/*/ Leased
Properties Location Acquired Constructed Square Feet 12/31/99
------------------------------ ---------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Office Buildings
----------------
10400 Connecticut Avenue Kensington, MD 1979 1965 65,000 96%
1901 Pennsylvania Avenue Washington, D.C. 1977 1960 97,000 99%
51 Monroe Street Rockville, MD 1979 1975 210,000 99%
7700 Leesburg Pike Falls Church, VA 1990 1976 145,000 97%
515 King Street Alexandria, VA 1992 1966 78,000 90%
The Lexington Building Rockville, MD 1993 1970 47,000 100%
The Saratoga Building Rockville, MD 1993 1977 59,000 100%
Brandywine Center Rockville, MD 1993 1969 35,000 100%
Tycon Plaza II Vienna, VA 1994 1981 131,000 96%
Tycon Plaza III Vienna, VA 1994 1978 152,000 96%
6110 Executive Boulevard Rockville, MD 1995 1971 199,000 99%
1220 19th Street Washington, D.C. 1995 1976 104,000 100%
Maryland Trade Center I Greenbelt, MD 1996 1981 191,000 99%
Maryland Trade Center II Greenbelt, MD 1996 1984 159,000 100%
1600 Wilson Boulevard Arlington, VA 1997 1973 167,000 92%
7900 Westpark Drive McLean, VA 1997 1972/1986/1999/1/ 527,000 100%
8230 Boone Boulevard Vienna, VA 1998 1981 58,000 97%
Woodburn Medical Park I Annandale, VA 1998 1984 71,000 99%
Woodburn Medical Park II Annandale, VA 1998 1988 96,000 100%
600 Jefferson Plaza Rockville, MD 1999 1985 115,000 97%
1700 Research Boulevard Rockville, MD 1999 1982 103,000 100%
Parklawn Plaza Rockville, MD 1999 1986 40,000 72%
--------- ---
Subtotal 2,849,000 98%
========= ===
Retail Centers
--------------
Concord Centre Springfield, VA 1973 1960 76,000 98%
Bradlee Alexandria, VA 1984 1955 168,000 98%
Clairmont Salisbury, MD 1976 1965 40,000 84%
Chevy Chase Metro Plaza Washington, D.C. 1985 1975 51,000 100%
Prince William Plaza/2/ Woodbridge, VA 1968 1967 55,000 72%
Takoma Park Takoma Park, MD 1963 1962 59,000 100%
Westminster/3/ Westminster, MD 1972 1969 165,000 58%
Wheaton Park Wheaton, MD 1977 1967 71,000 100%
Montgomery Village Center Gaithersburg, MD 1992 1969 196,000 99%
Shoppes of Foxchase Alexandria, VA 1994 1960 128,000 98%
Frederick County Square Frederick, MD 1995 1973 233,000 99%
800 S. Washington Street Alexandria, VA 1998 1955/1959 45,000 100%
--------- ---
Subtotal 1,287,000 92%
========= ===
Apartment Buildings/# units
---------------------------
Country Club Towers/227 Arlington, VA 1969 1965 276,000 100%
Munson Hill Towers/279 Falls Church, VA 1970 1963 340,000 97%
Park Adams/200 Arlington, VA 1969 1959 210,000 98%
Roosevelt Towers/191 Falls Church, VA 1965 1964 229,000 99%
3801 Connecticut Avenue/307 Washington, D.C. 1963 1951 242,000 98%
The Ashby at McLean/250 McLean, VA 1996 1982 349,000 96%
Walker House Apartments/196 Gaithersburg, MD 1996 1971 148,000 95%
Bethesda Hills Apartments/195 Bethesda, MD 1997 1986 226,000 97%
Avondale/237 Laurel, MD 1999 1987 162,000 91%
--------- ---
Subtotal (2,082 units) 2,182,000 97%
========= ===
</TABLE>
/1/ A 49,000 square foot addition to 7900 Westpark Drive was completed in
September 1999.
/2/ Property was sold subsequent to December 31, 1999.
/3/ Property is in the planning stages of redevelopment.
/*/ Apartment buildings are presented in gross square feet.
-7-
<PAGE>
SCHEDULE OF PROPERTIES (Cont.)
------------------------------
<TABLE>
<CAPTION>
Percent
Year Year Net Rentable/*/ Leased
Properties Location Acquired Constructed Square Feet 12/31/99
------------------------------ ---------- ---------- ------------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Industrial Distribution/Flex Properties
---------------------------------------
Pepsi-Cola Distribution Center Forestville, MD 1987 1971 69,000 100%
Capitol Freeway Center Washington, D.C. 1974 1940 145,000 100%
Fullerton Business Center Springfield, VA 1985 1980 103,000 91%
Charleston Business Center Rockville, MD 1993 1973 85,000 100%
Tech 100 Industrial Park Elkridge, MD 1995 1990 167,000 98%
Crossroads Distribution Center Elkridge, MD 1995 1987 85,000 100%
The Alban Business Center Springfield, VA 1996 1981/1982 87,000 100%
The Earhart Building Chantilly, VA 1996 1987 92,000 100%
Ammendale Technology Park I Beltsville, MD 1997 1985 167,000 98%
Ammendale Technology Park II Beltsville, MD 1997 1986 108,000 100%
Pickett Industrial Park Alexandria, VA 1997 1973 246,000 100%
Northern Virginia Industrial Park Lorton, VA 1998 1968/1991 790,000 84%
8900 Telegraph Road Lorton, VA 1998 1985 32,000 100%
Dulles South IV Chantilly, VA 1999 1988 83,000 100%
Sully Square Chantilly, VA 1999 1986 95,000 100%
Amvax Beltsville, MD 1999 1986 31,000 100%
--------- ---
Subtotal 2,385,000 94%
========= ===
TOTAL 8,703,000
=========
</TABLE>
-8-
<PAGE>
OFFICE BUILDINGS
----------------
Operating income in WRIT's core group of office buildings (excluding 1998 and
1999 acquisitions and dispositions) increased 7% from 1998 to 1999. This
increase was a result of strong rental rate growth and moderate occupancy gains
generally throughout the sector. WRIT's office markets are strong and, while
there is a significant amount of office development underway in several
submarkets, management anticipates that this sector will continue to perform
well in 2000.
During 1999, WRIT's office building revenues and operating income increased by
20% and 23% respectively, over 1998. These increases were primarily due to 1999
acquisitions (600 Jefferson Plaza, 1700 Research Boulevard and Parklawn Plaza)
and 1998 acquisitions (8230 Boone Boulevard and Woodburn Medical Park I and II)
combined with the 7% core group operating income increase described above.
Economic occupancy rates for the core group of office buildings averaged 97% for
both 1999 and 1998.
Rental rate increases of 5% for the sector were the result of increases at
nearly all of the properties. During 1999, WRIT executed new office leases for
645,000 square feet of office space at an average face rent increase of 18% on a
non-straight line basis.
Further details about the performance of the office building sector in 1999 and
1998 are provided in Management's Discussion and Analysis commencing on page 14.
INDUSTRIAL/FLEX PROPERTIES
--------------------------
Operating income in WRIT's core group of industrial/flex properties (excluding
1999 and 1998 acquisitions and dispositions) increased 5%. Economic occupancy
rates for the core group of industrial/flex properties averaged 97% in 1999
compared to 95% in 1998.
During 1999, WRIT's industrial/flex properties revenues and operating income
increased by 20% and 16%, respectively, over 1998. These increases were
primarily due to 1999 acquisitions (Dulles South IV, Sully Square and Amvax) and
1998 acquisitions (Northern Virginia Industrial Park and 8900 Telegraph Road)
combined with the 5% core portfolio operating income increase described below.
Rental rate increases of 5% for the sector were the result of increases at the
majority of the properties. During 1999, WRIT executed 446,000 square feet of
new industrial/ flex space leases at an average face rent increase of 9% on a
non-straight line basis.
Further details about the performance of the industrial/flex properties sector
in 1999 and 1998 are provided in Management's Discussion and Analysis commencing
on page 14.
RETAIL CENTERS
--------------
Operating income in WRIT's core retail centers (excluding 1999 and 1998
acquisitions and dispositions) increased 6% from 1998 to 1999. Retail center
rental rates for this same group increased 3% in 1999 over 1998.
During 1999, WRIT's retail center revenues and operating income increased by 4%
and 2%, respectively, over 1998. Economic occupancy rates for the core group of
retail center properties (excluding 1999 and 1998 acquisitions and dispositions)
averaged 96% in 1999 compared to 95% in 1998.
Further details about the performance of the retail center sector in 1999 and
1998 are provided in Management's Discussion and Analysis commencing on page 14.
-9-
<PAGE>
APARTMENT BUILDINGS
-------------------
During 1999, WRIT's apartment revenues and operating income increased by 8% and
9%, respectively, over 1998. These increases were primarily due to the 1999
acquisition of Avondale Apartments combined with the 7% operating income
increase described below.
WRIT's apartment sector core group operating income (excluding the Avondale
Apartments acquired in 1999) increased 7%. This increase was the result of
increased occupancy levels combined with 4% rental rate increases throughout the
group. Economic occupancy rates for the core group of apartments averaged 97%
in 1999 and 95% in 1998.
Further details about the performance of the apartment sector in 1999 and 1998
are provided in Management's Discussion and Analysis commencing on page 14.
PROPERTY EXPANSIONS & MAJOR RENOVATIONS
---------------------------------------
BRADLEE SHOPPING CENTER
-----------------------
The facade renovation that began in 1998 was completed in June 1999. Included
in the renovation was the retenanting of the former 26,640 square-foot GC Murphy
space. The new leases associated with this space have a blended rate per square
foot of $15.28, which is approximately six times the former GC Murphy rent of
$2.42 per square foot. The total cost of the renovation was approximately $3.1
million, of which $1.1 million was incurred in 1999.
7900 WESTPARK DRIVE
-------------------
In 1999, WRIT completed construction of a 49,000 square-foot office space
addition to its 7900 Westpark Drive office building in McLean, Virginia. This
addition commenced in 1998 and was built over the existing structured parking
deck, similar to the Trust's 1996 addition at 7700 Leesburg Pike. The addition
was 100% leased and occupied upon completion in October 1999. The total cost of
the addition will be approximately $7.5 million, of which $4.9 million was
incurred in 1999.
PROPERTY DISPOSITIONS
---------------------
During 1999, WRIT sold four real estate properties: 444 North Frederick Avenue,
Arlington Financial Center, Department of Commerce Industrial Center and V
Street Distribution Center. The total gain on the sales of these properties was
$7.9 million. Net proceeds from the sales of these properties of $22.0 million
were used to invest in other real estate properties acquired by WRIT in 1999.
-10-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
-----------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 1999.
-11-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
----------------------------------------------
RELATED STOCKHOLDER MATTERS
---------------------------
Effective January 4, 1999, the Trust's shares began trading on the New York
Stock Exchange.
From 1971 through December 31, 1998, the Trust's shares were traded on the
American Stock Exchange. There are approximately 37,000 shareholders. The
Trust's shares were split 3-for-1 in March 1981, 3-for-2 in July 1985, 3-for-2
in December 1988, and 3-for-2 in May 1992.
The high and low sales price for the Trust's shares for 1999 and 1998, by
quarter, and the amount of dividends paid by the Trust are as follows:
<TABLE>
<CAPTION>
Quarterly Share Price Range
---------------------------
Dividends
Quarter Per Share High Low
------- --------- ---- ---
<S> <C> <C> <C>
1999
4 $.2925 $15 15/16 $13 13/16
3 .2925 17 14 15/16
2 .2925 17 15/16 15 13/16
1 .28 18 3/4 15 1/2
1998
4 $ .28 $18 3/4 $15 9/16
3 .28 18 15 3/8
2 .28 18 1/4 16 11/16
1 .27 17 5/16 15 7/8
</TABLE>
The Trust has historically paid dividends on a quarterly basis. Dividends are
normally paid based on the Trust's cash flow from operating activities. The 2000
indicated annual dividend rate is $1.17 based on the annualization of the March
31, 2000 dividend.
-12-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
------------------------
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Real estate rental revenue $118,975 $103,597 $ 79,429 $ 65,541 $ 52,597
Income before gain on sale of real estate 36,392 34,300 30,136 27,964 26,103
Gain on sale of real estate 7,909 6,764 -- -- --
Net income 44,301 41,064 30,136 27,964 26,103
Income per share before gain on sale of
real estate 1.02 0.96 0.90 0.88 0.88
Basic and diluted earnings per share 1.24 1.15 0.90 0.88 0.88
Total assets 608,480 558,707 468,571 318,488 241,784
Lines of credit payable 33,000 44,000 95,250 5,000 28,000
Mortgage notes payable 87,038 28,912 7,461 7,590 7,706
Notes payable 210,000 210,000 100,000 100,000 --
Shareholders' equity 257,189 253,733 252,088 195,623 199,735
Cash dividends paid 41,341 39,614 36,108 32,718 29,712
Cash dividends paid per share 1.16 1.11 1.07 1.03 0.99
</TABLE>
-13-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
---------------------
REAL ESTATE RENTAL REVENUE: 1999 VERSUS 1998
--------------------------------------------
Total revenues for 1999 increased $15.4 million, or 15%, to $119.0 million from
$103.6 million in 1998. The percentage increase in real estate rental revenue
from 1998 to 1999 by property type was as follows:
Office Buildings 20%
Retail Centers 4%
Apartment Buildings 8%
Industrial/Flex Properties 20%
During 1999, WRIT's office building revenues and operating income increased by
20% and 23%, respectively, over 1998. These increases were primarily due to
1999 acquisitions (600 Jefferson Plaza and 1700 Research) and 1998 acquisitions
(8230 Boone Boulevard and Woodburn Medical Park I and II) combined with
increased rental rates and occupancy for the sector and offset in part by the
1999 sales of Arlington Financial Center and 444 N. Frederick Road.
During 1999, WRIT's retail center revenues and operating income increased by 4%
and 2%, respectively, over 1998. The change is primarily attributable to
increased rental rates and tenant recovery income offset by the December 1998
sale of Dover Mart retail center.
WRIT's apartment building revenues and operating income increased by 8% and 9%,
respectively, in 1999 over 1998. These increases were primarily due to the 1999
acquisition of Avondale Apartments, combined with increased rental rates and
occupancy levels across the sector.
WRIT's industrial/flex property revenues and operating income increased by 20%
and 16%, respectively, in 1999 over 1998. These increases were primarily due to
1999 acquisitions (Dulles South IV and Amvax) and 1998 acquisitions (Northern
Virginia Industrial Park and 8900 Telegraph Road) as well as increased rental
rates, offset in part by the 1999 sales of the Department of Commerce Industrial
Center and V Street Distribution Center.
REAL ESTATE RENTAL REVENUE: 1998 VERSUS 1997
--------------------------------------------
Total revenues for 1998 increased $24.2 million, or 30%, to $103.6 million from
$79.4 million in 1997. The percentage increase in real estate rental revenue
from 1997 to 1998 by property type was as follows:
Office Buildings 43%
Retail Centers 13%
Apartment Buildings 17%
Industrial/Flex Properties 37%
During 1998, WRIT's office building revenues and operating income increased by
43% and 48%, respectively, over 1997. These increases were primarily due to
1998 acquisitions (8230 Boone Boulevard and Woodburn Medical Park I and II) and
1997 acquisitions (1600 Wilson Boulevard and 7900 Westpark Drive) combined with
increased rental rates and occupancy for the sector.
During 1998, WRIT's retail center revenues and operating income increased by 13%
and 17%, respectively, over 1997. These increases were primarily due to the
1998 acquisition of 800 South Washington Street retail center combined with
increased rental rates and increased tenant recovery income.
-14-
<PAGE>
WRIT's apartment building revenues and operating income increased by 17% and
20%, respectively, in 1998 over 1997. These increases were primarily due to the
1997 acquisition of Bethesda Hill Apartments, combined with increased rental
rates across the sector.
WRIT's industrial/flex property revenues and operating income increased by 37%
and 39%, respectively, in 1998 over 1997. These increases were primarily due to
1998 acquisitions (Northern Virginia Industrial Park and 8900 Telegraph Road)
and 1997 acquisitions (Ammendale Technology Parks I and II and Pickett
Industrial Park), offset in part by the 1998 sales of Shirley 395 and
Ravensworth.
OPERATING EXPENSES AND OTHER RESULTS OF OPERATIONS
--------------------------------------------------
Real estate operating expenses as a percentage of revenue were 30% for 1999 and
1998 as compared to 32% for 1997. The decrease in 1998 compared to 1997 is
attributable to a 42% revenue increase in WRIT's office building segment
resulting from 1998 and 1997 property acquisitions and increased occupancy and
rental rates, combined with only a 32% increase in the office building segment's
operating expenses. WRIT's percentage of revenue from office buildings within
its entire real estate portfolio has increased to 52% at December 31, 1999, from
50% at December 31, 1998 and 45% at December 31, 1997. The increase is
attributable to 1999 and 1998 office building acquisitions. Generally, real
estate operating expenses have increased to $35.3 million in 1999 from $31.1
million in 1998 and $25.5 million in 1997 due to the acquisition of seven real
estate properties in 1999 and six real estate properties in each of 1998 and
1997.
Interest expense increased $5.2 million in 1999 from 1998. This increase is
primarily attributable to the assumption of an $8.7 million mortgage in
September 1999 in connection with the acquisition of Avondale Apartments, the
issuance of $110.0 million in medium-term notes in February 1998, and the
assumption of $21.6 million in mortgages in November 1998 in connection with the
acquisition of Woodburn Medical Park. In addition, WRIT closed on a $50.0
mortgage note in September 1999 at 7.14% interest rate that was used to pay down
WRIT's unsecured lines of credit at slightly lower interest rates. Interest
expense increased $7.4 million in 1998 from 1997. This increase was
attributable to the issuance of the $110 million medium-term notes in February
1998 and an increase in the average balance of outstanding line of credit
advances due to acquisitions in 1998 and 1997.
General and administrative expenses were $6.2 million for 1999 as compared to
$6.6 million for 1998 and $4.2 million for 1997. The decrease in general and
administrative expenses in 1999, as compared to 1998, is primarily attributable
to increased property management profits that in turn reduce the administrative
expenses of the Trust. The increase in general and administrative expenses in
1998 from 1997 was attributable to increased compensation from personnel
additions due to the increased portfolio of the Trust.
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
WRIT has utilized the proceeds of share offerings, unsecured and secured debt
offerings, medium and long-term fixed interest rate debt, bank lines of credit
and cash flow from operations for its capital needs. Management believes that
external sources of capital will continue to be available to WRIT from its
existing unsecured credit commitments and from selling additional shares and/or
the sale of medium or long-term secured or unsecured notes. The funds raised
would be used to pay off any outstanding advances on the Trust's lines of credit
and/or for new acquisitions and capital improvements.
As of December 31, 1999, WRIT had line of credit commitments in place from
commercial banks for up to $75 million, which bear interest at an adjustable
spread over LIBOR based on the Trust's interest coverage ratio and public debt
rating. WRIT acquired seven properties for a total acquisition cost of $61.9
million in 1999, and acquired six properties for total acquisition costs of
$82.2 million in 1998. The 1999 acquisitions were financed through line of
credit advances, the use of proceeds from property sales in February 1999 and
the assumption of a mortgage payable of $8.7 million. The 1998 acquisitions
were primarily financed through line of credit advances, the February 1998
issuance of $110 million of medium-term notes (after repayment of amounts
outstanding on line-of-credit borrowings of $95 million), the assumption of
mortgages payable amounting to $21.6 million and the reinvestment of the
proceeds of the sale of three properties in 1998 of $10.8 million. On September
27, 1999, WRIT closed on a $50.0 million mortgage note payable, the proceeds of
which were used to pay down WRIT's unsecured lines of credit. The mortgage is
secured by five of WRIT's Virginia residential properties.
-15-
<PAGE>
On February 20, 1998, WRIT sold $50 million of 7.25% unsecured notes due
February 25, 2028 at 98.653% to yield approximately 7.36%. WRIT also sold $60
million of 6.898% unsecured Mandatory Par Put Remarketed Securities ("MOPPRS")
at an effective borrowing rate through the remarketing date (February 2008) of
approximately 6.74%. WRIT used the proceeds of these notes for general business
purposes, including repayment of $95 million of outstanding advances under its
lines of credit. WRIT used the remainder of the proceeds to finance
acquisitions and capital improvements to its properties. WRIT had four interest
rate lock agreements related to this transaction which settled for $5.4 million
and treated that settlement and the cost of a related interest rate cap
agreement as transaction costs of the borrowing. These costs are being
amortized over the life of the unsecured notes using the effective interest rate
method.
Cash flow from operating activities totaled $52.4 million, $53.6 million and
$42.5 million for the years ended December 31, 1999, 1998 and 1997,
respectively, including net income of $44.3 million (net of $7.9 million gain on
property sales), $41.1 million (net of $6.8 million gain on property sales) and
$30.1 million, respectively, and depreciation and amortization of $19.6 million,
$15.4 million and $10.9 million, respectively. The decrease in cash flows from
operating activities in 1999 from 1998 is primarily due to the timing of
payments for trade accounts payable. The increase in cash flows from operating
activities in 1998 from 1997 was primarily due to real estate acquisitions,
increased operating income from previously owned properties and the resultant
increase in net income.
Cash flows used in investing activities totaled $50.0 million, $68.9 million and
$152.7 million for the years ended December 31, 1999, 1998 and 1997,
respectively. The decline in cash flows used in investing activities in 1999
from 1998 and in 1998 from 1997 is attributable to a reduction in real estate
acquisitions.
Cash flows used in financing activities were $2.4 million for the year ended
December 31, 1999, compared to cash flows provided by financing activities of
$12.0 million and $116.4 million for the years ended December 31, 1998 and 1997,
respectively. Cash flows used in financing activities in 1999 declined from
1998 as a result of increased dividend payments in 1999, line of credit
repayments in excess of advances and no debt issuance in 1999. Cash flows
provided by financing activities declined in 1998 from 1997 due to line of
credit repayments in excess of advances, offset by net proceeds from the debt
offering in 1998.
Rental revenue has been the principal source of funds to pay WRIT's operating
expenses, interest expense and dividends to shareholders. In 1999, 1998 and
1997, WRIT paid dividends totaling $41.3 million, $39.6 million and $36.1
million, respectively.
CAPITAL IMPROVEMENTS
--------------------
Capital improvements of $17.8 million were completed in 1999, including tenant
improvements. Capital improvements to WRIT properties in 1998 and 1997 were
approximately $18.7 million and $13.9 million, respectively.
Accretive Capital Improvements
------------------------------
Acquisition Related - These are capital improvements to properties acquired
during the current and preceding two years which were planned during WRIT's
investment analysis. In 1999, the most significant of these improvements were
made to the 7900 Westpark Drive, Woodburn Medical Park, Bethesda Hill
Apartments, Ammendale Technology Park II and Northern Virginia Industrial Park.
Expansions/Additions and Major Renovations - Expansions/Additions increase the
rentable area of a property. During 1999, WRIT completed the 49,000 square foot
addition at 7900 Westpark Drive. Major Renovations are improvements sufficient
to increase the income otherwise achievable at a property. During 1999, WRIT
completed the renovation of the Bradlee Shopping Center. See Expansions and
Major Renovations on Page 10 of this report for descriptions of these 1999
projects.
-16-
<PAGE>
Tenant Improvements - Tenant Improvements are costs associated with commercial
lease transactions such as painting and carpeting. During 1999, WRIT's average
Tenant Improvement Costs per square foot of space leased were as follows:
Office $4.59
Retail $0.69
Industrial $0.55
The Retail and Industrial Tenant Improvement costs are substantially lower than
Office Improvement costs because the tenant improvements required in these
property types are substantially less extensive than in offices. WRIT's office
tenant improvement costs are among the lowest in the industry for a number of
reasons. Approximately 66% of our office tenants renew their leases with WRIT,
and renewing tenants generally require minimal tenant improvements. In
addition, lower tenant improvement costs is one of the many benefits of WRIT's
focus on leasing to smaller office tenants. Smaller office suites have limited
configuration alternatives. Therefore, WRIT is often able to lease an existing
suite with tenant improvements being limited to new paint and carpet.
Other Capital Improvements
--------------------------
Other Capital Improvements are those not included in the above categories.
These are also referred to as recurring capital improvements. Over time these
costs will be reincurred to maintain a property's income and value. In our
residential properties, these include new appliances, flooring, cabinets,
bathroom fixtures, and the like. These improvements are made as needed upon
vacancy of an apartment and averaged $759 for the 724 apartments turned over in
1999. WRIT also expensed an average of $303 per apartment turnover for items
which do not have a long-term life and are, therefore, not capitalized.
During 1999, WRIT's capital improvement costs were as follows (in thousands):
Accretive capital improvements:
Acquisition related $ 5,716
Expansions and major renovations 5,929
Tenant improvements 2,342
-------
Total Accretive capital
improvements 13,987
Other: 3,752
-------
Total $17,739
=======
Management believes that WRIT has the liquidity and the capital resources
necessary to meet all of its known obligations and to make additional property
acquisitions and capital improvements when appropriate to enhance long-term
growth.
YEAR 2000
---------
WRIT's Year 2000 Project completion resulted in no interruption or failure of
normal business activities or operations. No material failures or significant
interruptions were experienced that materially or adversely affected WRIT's
results of operations, liquidity or financial condition. The total costs
incurred to become Year 2000 compliant were not material to WRIT's financial
position. Any future cost associated with Year 2000 compliancy is not expected
to be material to WRIT's financial position.
FORWARD-LOOKING STATEMENTS
--------------------------
This Annual Report on Form 10-K contains forward-looking statements which
involve risks and uncertainties. Such forward-looking statements include (a)
WRIT's intention to invest in properties that it believes will continue to
increase in income and value; (b) WRIT's belief that its real estate markets
will continue to perform well; (c) WRIT's belief that renovations and other
changes at the Bradlee Shopping Center will increase traffic and enable it
-17-
<PAGE>
to raise rents; (d) WRIT's belief that external sources of capital will continue
to be available and that additional sources of capital will be available from
the sale of shares or notes; (e) WRIT's belief that it has the liquidity and
capital resources necessary to meet its known obligations and to make additional
property acquisitions and capital improvements when appropriate to enhance long-
term growth and (f) other statements preceded by, followed by or that include
the words "believes," "expects," "intends," "anticipates," "potential" and other
similar expressions.
WRIT claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995 for the
foregoing statements. The following important factors, in addition to those
discussed elsewhere in this Annual Report, could affect WRIT's future results
and could cause those results to differ materially from those expressed in the
forward-looking statements: (a) the economic health of WRIT's tenants; (b) the
economic health of the Greater Washington-Baltimore region, or other markets
they may enter, including the effects of changes in Federal government spending;
(c) inflation; (d) consumer confidence; (e) unemployment rates; (f) consumer
tastes and preferences; (g) stock price and interest rate fluctuations; (h)
WRIT's future capital requirements; (i) competition; (j) compliance with
applicable laws, including those concerning the environment and access by
persons with disabilities; (k) weather conditions and (l) the effects of changes
in capital availability to the technology and biotechnology sectors of the
economy.
RATIOS OF EARNINGS TO FIXED CHARGES AND DEBT SERVICE COVERAGE
-------------------------------------------------------------
The following table sets forth the Trust's ratios of earnings to fixed charges
and debt service coverage for the periods shown:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Earnings to fixed charges 2.61x 3.01x 4.08x
Debt service coverage 3.42x 3.84x 5.08x
Debt service coverage is computed by dividing income before gain on sale of real
estate, interest income, interest expense, depreciation and amortization by the
sum of interest expense plus mortgage principal amortization.
</TABLE>
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
-------- ----------------------------------------------------------
The only material market risk to which WRIT is exposed is interest-rate risk.
WRIT's exposure to market risk for changes in interest rates relates primarily
to refinancing long-term fixed rate obligations, the opportunity cost of fixed
rate obligations in a falling interest rate environment and its variable rate
lines of credit. WRIT primarily enters into debt obligations to support general
corporate purposes including acquisition of real estate properties, capital
improvements and working capital needs. In the past WRIT has used interest rate
hedge agreements to hedge against rising interest rates in anticipation of
imminent refinancing or new debt issuance.
-18-
<PAGE>
The table below presents principal, interest and related weighted average
interest rates by year of maturity.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total Fair Value
------ ------ ------ ------ ------ ---------- ----- ----------
In thousands
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT (all fixed rate
except lines of credit)
Unsecured debt
Principal $ -- $ -- $ -- $50,000 $ -- $160,000 $210,000 $192,420
Interest $14,951 $14,951 $14,951 $13,467 $11,389 $103,424 $173,133
Average interest rate 7.12% 7.12% 7.12% 7.12% 7.22% 7.22% 7.20%
Mortgages
Principal amortization $ 768 $ 833 $ 902 $ 7,376 $ 820 $ 76,338 $ 87,037 $ 84,520
(30 year schedule)
Interest $ 6,502 $ 6,442 $ 6,376 $ 5,775 $ 5,645 $ 22,021 $ 52,761
Average interest rate 7.50% 7.50% 7.50% 7.50% 7.37% 7.37% 7.38%
Lines of Credit
Principal $33,000 $ 33,000 $ 33,000
Interest $ 2,283 $ 2,283
Average interest rate 6.46% 6.46%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements and supplementary data listed under Item 14 (a) and
filed as part of this report on the pages indicated are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
-19-
<PAGE>
PART III
Certain information required by Part III is omitted from this report in that the
Registrant will file a definitive proxy statement pursuant to Regulation 14A
(the "Proxy Statement") no later than 120 days after the end of the fiscal year
covered by this report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.
Such incorporation does not include the Performance Graph included in the Proxy
Statement.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
---------------------------------------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------
The information required by this Item is hereby incorporated herein by reference
to WRIT's 2000 Annual Meeting Proxy Statement.
-20-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
ITEM 14 (a). The following documents are filed as part of this Report:
1. Financial Statements: The following Financial Statements of Washington
--------------------
Real Estate Investment Trust and Reports of Independent Accountants are
included in this report:
Report of Arthur Andersen LLP.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Income for the years ended December 31, 1999,
1998 and 1997.
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules: The following financial statement schedules
-----------------------------
of Washington Real Estate Investment Trust for the periods indicated are
filed as part of this Report and should be read in conjunction with the
Financial Statements of Washington Real Estate Investment Trust.
Schedule Page
-------- ----
III Real Estate and Accumulated Depreciation 44
Supplementary Information: Quarterly Financial Results (unaudited) 45
Schedules not listed above have been omitted because they are not applicable,
are not required or the information to be set forth therein is included in the
Financial Statements or Notes thereto.
3. Exhibits:
--------
3. Declaration of Trust and Bylaws
(a) Declaration of Trust. Incorporated herein by reference to Exhibit 3
to the Trust's registration statement on Form 8-B dated July 10,
1996.
(b) Bylaws. Incorporated herein by reference to Exhibit 4 to the
Trust's registration statement on Form 8-B dated July 10, 1996.
(c) Amendment to Declaration of Trust dated September 21, 1998.
Incorporated herein by reference to Exhibit 3 to the Trust's Form
10-Q dated November 13, 1998.
(d) Articles of Amendment to Declaration of Trust dated June 24, 1999
incorporated by reference to Exhibit 4c to Amendment No. 1 to the
Trust's Form S-3 registration statement filed with the Securities
and Exchange Commission as of July 14, 1999.
-21-
<PAGE>
4.
(a) Credit agreement dated March 1, 1995 between Washington Real Estate
Investment Trust, as borrower, The First National Bank of Chicago,
as lender, and The First National Bank of Chicago as agent. The
credit agreement was amended and restated as of March 17, 1999 and
is attached hereto.
(b) Credit agreement dated July 17, 1998, among Washington Real Estate
Investment Trust, as borrower, Crestar Bank, as lender, First Union
National Bank (successor by merger to Signet Bank), as lender, and
Crestar Bank, as agent. The credit agreement was amended and
restated as of July 25, 1999 and is attached hereto.
(c) Indenture dated as of August 1, 1996 between Washington Real Estate
Investment Trust and The First National Bank of Chicago.*
(d) Officers' Certificate Establishing Terms of the Notes, dated August
8, 1996.*
(e) Form of 2003 Notes.*
(f) Form of 2006 Notes.*
(g) Form of MOPPRS Notes.****
(h) Form of 30 year Notes.****
(i) Remarketing Agreement.****
(j) The Trust is a party to a number of other instruments defining the
rights of holders of long-term debt. No such instrument authorizes
an amount of securities in excess of 10 percent of the total assets
of the Trust and its Subsidiaries on a consolidated basis. On
request, the Trust agrees to furnish a copy of each such instrument
to the Commission.
10. Management contracts, plans and arrangements
(a) Employment Agreement dated May 11, 1994 with Edmund B. Cronin,
Jr.**
(b) 1991 Incentive Stock Option Plan, as amended.**
(c) Nonqualified Stock Option Agreement dated June 27, 1990 with B.
Franklin Kahn.**
(d) Nonqualified Stock Option Agreement dated December 14, 1994 with
Edmund B. Cronin, Jr.**
(e) Nonqualified Stock Option Agreement dated December 19, 1995 with
Edmund B. Cronin, Jr. Incorporated herein by reference to Exhibit
10(e) to the 1995 Form 10-K.
(f) Share Grant Plan.***
(g) Share Option Plan for Trustees.***
12. Computation of Ratios of Earnings to fixed charges and Preferred
Dividends
21. Subsidiaries of Registrant
In 1995, WRIT formed a subsidiary partnership, WRIT Limited
Partnership, a Maryland limited partnership, in which WRIT owns 100% of
the partnership interest.
-22-
<PAGE>
In 1998, WRIT formed a subsidiary limited liability company, WRIT-NVIP,
L.L.C., a Virginia limited liability company, in which WRIT owns 93% of
the company interests.
In 1998, WRIT formed a subsidiary company, Real Estate Management,
Inc., a Maryland corporation, in which WRIT owns 100% of the stock.
22. Consents
(a) Consent of Arthur Andersen LLP
27. Financial Data Schedules
(a) 1999 financial data schedule
ITEM 14 (b). REPORTS ON FORM 8-K
(1) October 5, 1999 - Report pursuant to Item 2 on the acquisition of 1700
Research Boulevard, 600 Jefferson Plaza and Avondale Apartments.
(2) November 30, 1999 - Report pursuant to Item 7 to provide the financial
statements required to be included in the Current Report on Form 8-K dated
October 5, 1999 in connection with the acquisition of 1700 Research
Boulevard, 600 Jefferson Plaza and Avondale Apartments.
* Incorporated herein by reference to the Exhibit of the same designation to
the Trust's Form 8-K filed August 13, 1996.
** Incorporated herein by reference to the Exhibit of the same designation to
Amendment No. 2 to the Trust's Registration Statement on Form S-3 filed
July 17, 1995.
*** Incorporated herein by reference to Exhibits 4(a) and 4 (b), respectively,
to the Trust's Registration Statement on Form S-8 filed on March 17, 1998.
**** Incorporated herein by reference to the Exhibit of the same designation to
the Trust's Form 8-K filed February 25, 1998.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) 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
Date: March 24, 2000 /s/ Edmund B. Cronin, Jr.
By: _____________________________________
Edmund B. Cronin, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Arthur A. Birney
________________________ Chairman and Trustee March 24, 2000
Arthur A. Birney
/s/ John M. Derrick, Jr.
________________________ Trustee March 24, 2000
John M. Derrick, Jr.
/s/ Clifford M. Kendall
________________________ Trustee March 24, 2000
Clifford M. Kendall
/s/ John P. McDaniel
________________________ Trustee March 24, 2000
John P. McDaniel
/s/ David M. Osnos
________________________ Trustee March 24, 2000
David M. Osnos
/s/ Susan J. Williams
________________________ Trustee March 24, 2000
Susan J. Williams
/s/ Larry E. Finger
________________________ Senior Vice President and March 24, 2000
Larry E. Finger Chief Financial Officer
/s/ Laura Franklin
________________________ Vice President and March 24, 2000
Laura M. Franklin Chief Accounting Officer
</TABLE>
-24-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Washington Real Estate Investment Trust:
We have audited the accompanying consolidated balance sheets of Washington Real
Estate Investment Trust (the "Trust," a Maryland real estate investment trust)
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each of
the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Trust and subsidiaries as
of December 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
included on pages 42 through 45 of the Form 10-K is presented for the
purpose of complying with the Securities and Exchange Commission's rules and is
not a required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
Arthur Andersen LLP
Vienna, Virginia
February 4, 2000
-25-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
Assets ------ ------
<S> <C> <C>
Real estate, at cost $661,870 $598,874
Accumulated depreciation (83,574) (68,301)
-------- --------
Total investment in real estate, net 578,296 530,573
Cash and cash equivalents 4,716 4,595
Rents and other receivables, net of allowance for doubtful accounts of $831 and $821,
respectively 6,572 4,130
Prepaid expenses and other assets 18,896 19,409
-------- --------
Total assets $608,480 $558,707
======== ========
Liabilities and shareholders' equity
Accounts payable and other liabilities $ 11,421 $ 13,524
Advance rents 5,006 2,680
Tenant security deposits 3,304 4,331
Mortgage notes payable 87,038 28,912
Lines of credit payable 33,000 44,000
Notes payable 210,000 210,000
-------- --------
Total liabilities 349,769 303,447
-------- --------
Minority interest 1,522 1,527
-------- --------
Shareholders' equity
Shares of beneficial interest, $.01 par value; 100,000 shares authorized: 35,721 and
35,692 shares issued and outstanding, respectively 357 357
Additional paid in capital 256,832 253,376
-------- --------
Total shareholders' equity 257,189 253,733
-------- --------
Total liabilities and shareholders' equity $608,480 $558,707
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-26-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Real estate rental revenue $118,975 $103,597 $79,429
Real estate expenses
Utilities 7,298 7,012 5,897
Real estate taxes 8,496 7,372 5,746
Repairs and maintenance 4,765 4,296 3,576
Other expenses 14,722 12,434 10,240
-------- -------- -------
Total real estate expenses 35,281 31,114 25,459
-------- -------- -------
Operating income 83,694 72,483 53,970
Depreciation and amortization 19,590 15,399 10,911
-------- -------- -------
Income from real estate 64,104 57,084 43,059
Other income 732 880 1,011
Interest expense (22,271) (17,106) (9,691)
General and administrative expenses (6,173) (6,558) (4,243)
-------- -------- -------
Income before gain on sale of real estate 36,392 34,300 30,136
Gain on sale of real estate 7,909 6,764 --
-------- -------- -------
Net income $ 44,301 $ 41,064 $30,136
======== ======== =======
Basic and diluted earnings per share $ 1.24 $ 1.15 $ 0.90
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
-27-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
Shares of
Beneficial Additional
Interest at Par Paid in Shareholders'
Shares Value Capital Equity
------ --------------- ---------- -------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 31,803 $318 $195,305 $195,623
Net income -- -- 30,136 30,136
Net proceeds from sale of shares 3,750 38 60,825 60,863
Dividends -- -- (36,108) (36,108)
Share options exercised 125 1 1,573 1,574
------ ---- -------- --------
Balance, December 31, 1997 35,678 357 251,731 252,088
Net income -- -- 41,064 41,064
Dividends -- -- (39,614) (39,614)
Share options exercised 14 -- 195 195
------ ---- -------- --------
Balance, December 31, 1998 35,692 357 253,376 253,733
Net income -- -- 44,301 44,301
Dividends -- -- (41,341) (41,341)
Share options exercised 29 -- 496 496
------ ---- -------- --------
Balance, December 31, 1999 35,721 $357 $256,832 $257,189
====== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 44,301 $ 41,064 $ 30,136
Adjustments to reconcile net income to cash provided by operating
activities:
Gain on sale of real estate (7,909) (6,764) --
Depreciation and amortization 19,590 15,399 10,911
Increases in other assets (2,729) (2,895) (2,047)
Increases in other liabilities (808) 6,789 3,499
-------- -------- ---------
Cash provided by operating activities 52,445 53,593 42,499
-------- -------- ---------
Cash flows from investing activities
Real estate acquisitions, net* (53,197) (59,087) (138,804)
Improvements to real estate (18,371) (18,652) (13,913)
Non-real estate capital improvements (350) (1,967) --
Net proceeds from sale of real estate 22,033 10,844 --
-------- -------- ---------
Cash used in investing activities (49,885) (68,862) (152,717)
-------- -------- ---------
Cash flows from financing activities
Dividends paid (41,341) (39,614) (36,108)
Line of credit advances 33,000 44,000 113,250
Repayments of lines of credit (44,000) (95,250) (23,000)
Proceeds from mortgage note payable 50,000 -- --
Mortgage principal payments (594) (172) (129)
Net proceeds from sale of shares -- -- 60,863
Net proceeds from debt offering -- 102,797 --
Net proceeds from the exercise of share options 496 195 1,574
-------- -------- ---------
Cash (used in) provided by financing activities (2,439) 11,956 116,450
-------- -------- ---------
Net increase (decrease) in cash and temporary investments 121 (3,313) 6,232
Cash and cash equivalents, beginning of year 4,595 7,908 1,676
-------- -------- ---------
Cash and cash equivalents, end of year $ 4,716 $ 4,595 $ 7,908
======== ======== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 18,968 $ 13,475 $ 9,433
======== ======== =========
</TABLE>
Supplemental schedule of non-cash investing and financing activities
--------------------------------------------------------------------
* On September 20, 1999, WRIT purchased Avondale Apartments for an acquisition
cost of $13.0 million. WRIT assumed a mortgage in the amount of $8.7 million
and paid the balance in cash. The $8.7 million of assumed mortgage is not
included in the $53.2 million amount shown as 1999 real estate acquisitions.
* On November 30, 1998, WRIT purchased Woodburn Medical Park I and II for an
acquisition cost of $35.2 million. WRIT assumed two mortgages in the amount of
$9.2 million and $12.4 million and paid the balance in cash. The $21.6 million
is not included in the $59.1 million shown as 1998 real estate acquisitions.
The accompanying notes are an integral part of these statements.
-29-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1. Nature of Business:
Washington Real Estate Investment Trust ("WRIT" or the "Trust") is a self-
administered, self managed equity real estate investment trust, successor to a
trust organized in 1960. The Trust's business consists of the ownership and
operation of income-producing real properties.
WRIT operates in a manner intended to enable it to qualify as a real estate
investment trust under the Internal Revenue Code (the "Code"). In accordance
with the Code, a trust which distributes its capital gains and at least 95
percent of its taxable income to its shareholders each year, and which meets
certain other conditions, will not be taxed on that portion of its taxable
income which is distributed to its shareholders. Accordingly, no provision for
Federal income taxes is required.
In June 1996, WRIT changed its domicile from the District of Columbia to the
State of Maryland. Issued and outstanding shares were assigned a par value of
$.01 per share.
2. Accounting Policies:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of the
Trust and its majority owned subsidiaries, after eliminating all intercompany
transactions.
Revenue Recognition
Residential properties are leased under operating leases with terms of generally
one year or less, and commercial properties are leased under operating leases
with average terms of three to five years. WRIT recognizes rental income and
rental abatements from its residential and commercial leases when earned in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 13.
Deferred Financing Costs
Costs associated with the issuance of senior subordinated notes and draws on
lines of credit are capitalized and amortized using the effective interest rate
method over the term of the related notes.
Real Estate and Depreciation
Real estate assets are recorded at cost. Buildings are depreciated on a
straight-line basis over estimated useful lives not exceeding 50 years.
Effective January 1, 1995, WRIT revised its estimate of useful lives for major
capital improvements to real estate. All capital improvement expenditures
associated with replacements, improvements or major repairs to real property are
depreciated using the straight-line method over their estimated useful lives
ranging from 3 to 30 years. All tenant improvements are amortized using the
straight-line method over 5 years or the term of the lease if it differs
significantly from 5 years. Capital improvements placed in service prior to
January 1, 1995 will continue to be depreciated on a straight-line basis over
their previously estimated useful lives not exceeding 30 years. Maintenance and
repair costs are expensed as incurred.
WRIT evaluates quarterly the carrying value of its long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In cases where management
is holding particular properties for sale, the Trust assesses impairment based
on whether the fair value (estimated sales price less costs of disposal) of each
individual property to be sold is less than the net book value. A
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<PAGE>
property is considered to be held for sale when the Trust has made the decision
to dispose of the property. Otherwise, the Trust assesses impairment of its real
estate properties based on whether it is probable that undiscounted future cash
flows from each individual property will be less than its net book value. If a
property is determined to be impaired, its basis is adjusted to its fair market
value. There were no property impairments recognized during the three-year
period ending December 31, 1999.
Cash and Cash Equivalents
Cash and cash equivalents include investments readily convertible to known
amounts of cash with original maturities of 90 days or less.
Interest Rate Protection Agreements
WRIT has entered into interest rate protection agreements to reduce its exposure
to interest rate risk on anticipated borrowings. The costs (if any) of such
agreements which qualify for hedge accounting are included in other assets and
are amortized over the interest rate protection agreement term. To qualify for
hedge accounting, the interest rate protection agreement must meet two criteria:
(i) the debt to be hedged exposes WRIT to interest rate risk and (ii) the
interest rate protection agreement reduces WRIT's exposure to interest rate
risk. In the event that interest rate protection agreements that qualify for
hedge accounting are terminated or are closed out, the associated gain or loss
is deferred and amortized over the term of the underlying hedged asset or
liability. Amounts to be paid or received under interest rate protection
agreements are accrued currently and are netted with interest expense for
financial statement presentation purposes. Additionally, in the event that
interest rate protection agreements do not qualify as hedges, such agreements
are reclassified to investments accounted for at fair value, with any gain or
loss included as a component of income.
Comprehensive Income
WRIT has no items of comprehensive income that would require separate reporting
in the accompanying consolidated statements of income.
Earnings Per Common Share
During 1997, WRIT adopted SFAS No. 128, "Earnings per Share." This statement
requires the computation and reporting of both "basic" and "diluted" earnings
per share.
"Basic earnings per share" is computed as net income divided by the weighted-
average common shares outstanding. "Diluted earnings per share" is computed as
net income divided by the total weighted average common shares outstanding plus
the effect of dilutive common equivalent shares outstanding for the period.
Dilutive common equivalent shares reflect the assumed issuance of additional
common shares pursuant to certain of the Trust's share based compensation plans
(see Note 8) that could potentially reduce or "dilute" earnings per share, based
on the treasury stock method.
The weighted-average number of shares outstanding for the year ended December
31, 1999, 1998 and 1997, was 35.7, 35.7 and 33.4 million shares, respectively.
There was no impact of dilution of common equivalent shares on the basic
weighted-average shares outstanding for the years ended December 31, 1999, 1998
and 1997.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
-31-
<PAGE>
New Statements of Financial Accounting Standards
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives) and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure to variable cash flows of a forecasted transaction, or
(c) a hedge of the foreign currency exposure to a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security, or a
foreign-currency-denominated forecasted transaction. SFAS No. 137 amended the
effective date of SFAS No. 133 to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. Although currently WRIT has no derivative
instruments, this statement could affect derivative instruments acquired by WRIT
in future periods.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
3. Real Estate Investments:
WRIT's real estate investment portfolio, at cost, consists of properties located
in Maryland, Washington, D.C., and Virginia as follows:
December 31,
--------------------------
1999 1998
-------- --------
(In thousands)
Office buildings $352,145 $323,152
Retail centers 97,004 95,017
Apartment buildings 99,125 83,163
Industrial distribution/flex properties 113,596 97,542
-------- --------
$661,870 $598,874
======== ========
WRIT's results of operations are dependent on the overall economic health of its
tenants and the specific segments in which WRIT holds properties, as well as the
overall economic health of the markets in which it owns property. These segments
include commercial, residential, retail and industrial/flex properties. Although
all sectors are affected by external factors, such as inflation, consumer
confidence, unemployment rates and consumer tastes and preferences, the retail
segment is particularly sensitive to such factors. A decline in the retail
sector of the economy could reduce merchant sales, which could adversely affect
the operating results of WRIT.
As of December 31, 1999, 7900 Westpark office building accounted for 13 percent
of total assets and 9 percent of total revenues. No other single property or
tenant accounted for more than 10 percent of total assets or total revenues.
Properties acquired by WRIT during the year ending December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
Acquisition Rentable Acquisition Cost
Date Property Type Square Feet (In thousands)
----------- -------- ---- ----------- ----------------
<S> <C> <C> <C> <C>
January 27, 1999 Dulles South IV Industrial Distribution/Flex 83,000 $ 6,909
April 16, 1999 Sully Square Industrial Distribution/Flex 95,000 7,557
May 21, 1999 600 Jefferson Plaza Office 115,000 14,472
May 21, 1999 1700 Research Blvd. Office 103,000 12,941
September 10, 1999 Amvax Industrial Distribution/Flex 32,000 2,231
September 20, 1999 Avondale Residential 162,000 12,908
November 30, 1999 Parklawn Plaza Office 40,000 4,764
------- -------
630,000 $61,782
======= =======
</TABLE>
WRIT accounted for each acquisition using the purchase method of accounting.
-32-
<PAGE>
Properties sold by WRIT during the year ending December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Disposition Rentable Sales Price
Date Property Type Square Feet (In thousands)
----------- -------- ---- ----------- --------------
<S> <C> <C> <C> <C>
February 5, 1999 444 North Frederick Avenue Office 66,000 $ 5,671
February 5, 1999 Arlington Financial Center Office 51,000 9,798
February 5, 1999 Department of Commerce Industrial Distribution/Flex 105,000 7,031
February 26, 1999 V Street Distribution Center Industrial Distribution/Flex 31,000 600
------- -------
253,000 $23,100
======= =======
</TABLE>
4. Mortgage Notes Payable:
On August 22, 1995, WRIT assumed a $7.8 million mortgage note payable as partial
consideration for its acquisition of Frederick County Square retail center. The
mortgage bears interest at 9 percent. Principal and interest are payable
monthly until January 1, 2003, at which time all unpaid principal and interest
are payable in full.
On November 30, 1998, WRIT assumed a $9.2 million mortgage note payable and a
$12.4 million mortgage note payable as partial consideration for its acquisition
of Woodburn Medical Park I and II. Both mortgages bear interest at 7.69 percent
per annum. Principal and interest are payable monthly until September 15, 2005,
at which time all unpaid principal and interest are payable in full.
On September 20, 1999, WRIT assumed an $8.7 million mortgage note payable as
partial consideration for its acquisition of the Avondale Apartments. The
mortgage bears interest at 7.88 percent per annum. Principal and interest
are payable monthly until November 1, 2005, at which time all unpaid principal
and interest are payable in full.
On September 27, 1999, WRIT executed a $50.0 million mortgage note payable
secured by Munson Hill Towers, Country Club Towers, Roosevelt Towers, Park Adams
Apartments and the Ashby Apartments. The mortgage bears interest at 7.14
percent per annum and is payable monthly until October 1, 2009, at which time
all unpaid principal and interest are payable in full. These funds were used to
repay advances received on the Unsecured Lines of Credit Payable.
-33-
<PAGE>
Annual maturities of principal as of December 31, 1999 are as follows:
(In thousands)
--------------
2000 $ 768
2001 833
2002 902
2003 7,376
2004 820
Thereafter 76,338
--------
$87,037
=======
5. Unsecured Lines of Credit Payable:
During 1999, WRIT maintained two unsecured lines of credit: a $25 million line
of credit ("Credit Facility No. 1") and a $50 million line of credit ("Credit
Facility No. 2").
Credit Facility No. 1
WRIT had $22 and $0 million outstanding as of December 31, 1999 and 1998,
respectively, related to Credit Facility No. 1.
The following advances have been made under this commitment:
<TABLE>
<CAPTION>
Advance Date Paid Amount 1999 1998 1997
Date in Full (In thousands) Rate Rate Rate
------- --------- -------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
September 26, 1996 September 26, 1997 4,000 -- -- 6.83%
November 14, 1997 February 25, 1998 25,000 -- 6.64%-8.50% 6.40%-6.64%
March 29, 1999 March 28, 2000 4,000 5.98% -- --
May 20, 1999 July 19, 1999 12,000 5.67% -- --
July 20, 1999 January 20, 2000 12,000 6.30% -- --
September 15, 1999 March 15, 2000 6,000 6.64% -- --
</TABLE>
Prior to March 17, 1999, all new advances and interest rate adjustments, upon
the expiration of WRIT's interest lock-in dates bore interest at LIBOR plus a
spread based on WRIT's public debt rating. All unpaid interest and principal
could be prepaid prior to the expiration of WRIT's interest rate lock-in periods
subject to a yield maintenance obligation.
On March 17, 1999, WRIT executed an amended and restated agreement extending the
termination date to March 17, 2002. Under the amended agreement, WRIT may take
either a Corporate Base Rate ("CBR") or a LIBOR advance. Both advances have
interest rates based on the applicable rate plus a spread based on the most
recent ratings from Moody's and/or S&P for WRIT's long-term unsecured debt.
This $25 million credit commitment requires WRIT to pay the lender an unused
commitment fee at the rate of 0.375 percent per annum on the amount by which the
$25 million commitment exceeds the balance of outstanding advances and term
loans. At December 31, 1999 and 1998, $3 million and $25.0 , respectively, of
this commitment was unused and available for subsequent acquisitions or capital
improvements. This fee is paid quarterly. This commitment also contains certain
financial and non-financial covenants including debt service coverage, net
worth, and permitted indebtedness ratios which WRIT has met as of December 31,
1999. In addition, this commitment requires approval to be obtained from the
lender for purchases by the Trust over an agreed upon amount.
Credit Facility No. 2
WRIT had $11 million and $44 million outstanding as of December 31, 1999 and
1998, respectively, related to Credit Facility No. 2.
-34-
<PAGE>
The following advances have been made under this commitment:
<TABLE>
<CAPTION>
Advance Date Paid Amount 1999 1998 1997
Date in Full (In thousands) Rate Rate Rate
------- --------- -------------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
November 26, 1996 August 1, 1997 1,000 -- -- 6.29%
February 28, 1997 August 1, 1997 14,000 -- -- 6.25%
March 27, 1997 August 1, 1997 3,000 -- -- 6.25%
June 27, 1997 August 1, 1997 1,000 -- -- 6.19%
November 12, 1997 February 25, 1998 17,000 -- 6.64% 6.36%-6.64%
November 14, 1997 February 25, 1998 33,000 -- 6.61% 6.40%-6.61%
May 22, 1998 July 22, 1999 13,000 5.54% 5.54%-6.39% --
June 23, 1998 June 22, 1999 4,000 6.02% 6.02%-6.39% --
September 9, 1998 March 11, 1999 2,000 6.23% 6.23% --
September 25, 1998 September 25, 1999 3,000 5.76% 5.76% --
September 28, 1998 June 28, 1999 8,000 5.83% 5.83% --
November 30, 1998 May 30, 1999 14,000 5.82% 5.82% --
January 22, 1999 July 22, 1999 1,000 5.70% -- --
January 27, 1999 July 27, 1999 4,000 5.67% -- --
March 11, 1999 September 27, 1999 2,000 6.07% -- --
March 29, 1999 September 27, 1999 1,000 6.02% -- --
May 31, 1999 August 30, 1999 14,000 5.74% -- --
June 23, 1999 August 21, 1999 4,000 5.83% -- --
June 29, 1999 August 30, 1999 8,000 5.92% -- --
July 22, 1999 September 21, 1999 13,000 5.93% -- --
July 22, 1999 September 21, 1999 1,000 5.93% -- --
July 27, 1999 September 22, 1999 4,000 5.94% -- --
August 22, 1999 September 21, 1999 4,000 5.99% -- --
August 30, 1999 September 27, 1999 14,000 6.07% -- --
August 30, 1999 September 27, 1999 8,000 6.07% -- --
September 21, 1999 September 27, 1999 1,000 6.08% -- --
September 21, 1999 September 27, 1999 13,000 6.08% -- --
September 22, 1999 September 27, 1999 4,000 6.08% -- --
September 28, 1999 June 28, 2000 7,000 6.64% -- --
November 30, 1999 August 31, 2000 4,000 6.86% -- --
</TABLE>
On July 25, 1999, WRIT executed an agreement to amend and restate the original
Credit Facility No. 2 agreement. All unpaid interest and principal are due July
2002 and can be prepaid prior to this date without any prepayment fee or yield
maintenance obligation. Any new advances shall bear interest at LIBOR plus a
spread based on WRIT's public debt rating.
Credit Facility No. 2 provides WRIT the option to convert any advances or
portions thereof into a term loan at any time through July 2002. The principal
amount of each term loan, if any, shall be repaid in July 2002.
This $50 million credit commitment requires WRIT to pay the lender an unused
commitment fee ranging from 0.15 to 0.25 percent per annum based on WRIT's
public debt rating. The fee is paid on the amount by which the $50 million
commitment exceeds the balance of outstanding advances and term loans. At
December 31, 1999 and 1998, $39 million and $6 million, respectively, of this
commitment was unused. This fee is paid quarterly in arrears. This commitment
also contains certain financial covenants including cash flow to debt service,
net worth, capitalization and permitted indebtedness ratios which WRIT has met
as of December 31, 1999.
Bridge Loan
During 1997, WRIT temporarily expanded one of its lines of credit to provide up
to an additional $20.25 million through February 27, 1998, at which time it was
repaid. The bridge loan accrued interest at LIBOR plus 0.70 percent. At
February 27, 1998 and December 31, 1997, the interest rate was 8.50 percent and
6.64 percent, respectively.
WRIT was required to pay a commitment fee equal to 0.10 percent of the
commitment. The bridge loan also required WRIT to pay the lender an unused
commitment fee at the rate of 0.175 percent on the amount that the $20.25
million commitment exceeded the balance of outstanding advances.
-35-
<PAGE>
Information related to short-term borrowings are as follows (in thousands):
1999 1998
------ ------
Maximum Amount Outstanding $72,000 $95,250
Average Amount Outstanding 50,847 29,547
Weighted Average Interest Rate 5.93% 6.38%
6. Senior and Medium-Term Notes Payable:
Senior Notes
On August 8, 1996, WRIT entered into an underwriting agreement to sell $50
million of 7.125 percent 7-year unsecured notes due August 13, 2003, and $50
million of 7.25 percent unsecured 10-year notes due August 13, 2006. This
transaction closed on August 13, 1996. The 7-year notes were sold at 99.107
percent of par and the 10-year notes were sold at 98.166 percent of par. Net
proceeds to the Trust after deducting underwriting expenses were $97.6 million.
The 7-year notes bear an effective interest rate of 7.46 percent, and the 10-
year notes bear an effective interest rate of 7.49 percent, for a combined
effective interest rate of 7.47 percent. In 1996, WRIT used the proceeds of
these notes to pay down its lines of credit and to finance acquisitions and
capital improvements to its properties. These notes also contain certain
financial covenants including debt service coverage and permitted indebtedness
ratios which WRIT has met as of December 31, 1999.
Medium-Term Notes
On February 20, 1998, WRIT sold $50 million of 7.25 percent unsecured notes due
February 25, 2028 at 98.653 percent to yield approximately 7.36 percent. WRIT
also sold $60 million in unsecured Mandatory Par Put Remarketed Securities
("MOPPRS") at an effective borrowing rate through the remarketing date (February
2008) of approximately 6.74 percent. WRIT used the proceeds of these notes for
general business purposes, including repayment of outstanding advances under its
lines of credit and to finance acquisitions and capital improvements to its
properties. WRIT settled interest rate lock agreements for $5.4 million and
treated the cost of the interest rate caps as a transaction cost of the
borrowing. These costs are amortized over the life of the unsecured notes using
the effective interest rate method. These notes also contain certain financial
covenants including debt service coverage and permitted indebtedness ratios,
which WRIT has met as of December 31, 1999.
7. Shares of Beneficial Interest and Dividends:
In August 1997, WRIT received $61.1 million from the public sale of 3,750,000
shares. WRIT's offering costs were approximately $200,000, resulting in net
proceeds received by the Trust of $60.9 million. Approximately $23.0 million of
the net proceeds was used to repay certain borrowings outstanding under the
Trust's lines of credit resulting from 1997 property acquisitions. The balance
of the net proceeds was used to acquire income producing properties and for
capital improvements.
The following is a breakdown of the taxable percentage of WRIT's dividends for
1999, 1998 and 1997, respectively:
Ordinary Income Return of Capital
--------------- -----------------
1999 100% 0%
1998 98% 2%
1997 93% 7%
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<PAGE>
8. Share Options and Grants:
WRIT maintains an Incentive Stock Option Plan (the "Plan"), which includes
qualified and non-qualified options. As of December 31, 1999, 1.5 million
shares may be awarded to eligible employees. Under the Plan, options, which are
issued at market price on the date of grant, vest after not more than two years
and expire ten years following the date of grant. Options may be granted under
the Plan at any time prior to June 25, 2001. Activity under the Plan is
summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- ------------------- --------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price Shares Ex Price Shares Ex Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1 806,000 $16.83 409,000 $15.93 365,000 $14.78
Granted 513,000 14.47 430,000 17.59 183,000 16.13
Exercised (12,000) 15.89 (8,000) 12.41 (125,000) 12.58
Expired (34,000) 17.28 (25,000) 16.76 (14,000) 18.33
Outstanding at December 31 1,273,000 15.87 806,000 16.83 409,000 15.93
Exercisable at December 31 560,000 16.54 288,000 15.90 173,000 15.84
</TABLE>
560,000 of the exercisable options outstanding at December 31, 1999 have
exercise prices between $12.410 and $20.625, with a weighted-average exercise
price of $16.54 and a weighted average remaining contractual life of 7.53 years.
The remaining 713,000 options have exercise prices between $14.47 and $17.59,
with a weighted average exercise price of $15.35 and a remaining contractual
life of 9.72 years.
WRIT accounts for the Plan and the non-qualified share options granted under APB
Opinion No. 25, under which no compensation cost has been recognized. Had
compensation cost for these plans been determined consistent with SFAS No. 123,
"Accounting for Stock-Based Compensation," WRIT's net income and earnings per
share would have been reduced to the following pro-forma amounts:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C> <C>
Net Income: As Reported $44,301 $41,064 $30,136
Pro-Forma 43,419 40,240 29,780
Basic Earnings Per Share: As Reported 1.24 1.15 0.90
Pro-Forma 1.22 1.13 0.89
Weighted-average fair value of options
granted 1.76 1.92 1.94
Weighted-average assumptions:
Expected lives (years) 7 7 7
Risk free interest rate 6.42% 5.09% 5.75%
Expected volatility 21.05% 19.21% 17.41%
Expected dividend yield 7.12% 6.27% 5.79%
</TABLE>
Because the method of accounting has not been applied to options granted prior
to January 1, 1995, the resulting pro-forma compensation may not be
representative of that to be expected in future years. The assumptions used in
the calculations of weighted average fair value of options granted are as
prescribed under accounting principles generally accepted in the United States.
Such assumptions may not be the same as those used by the financial community
and others in determining the fair value of such options.
WRIT has computed basic earnings per share. There was no impact of dilution of
common equivalent shares on the basic weighted-average shares outstanding for
the years ended December 31, 1999, 1998 and 1997.
During 1999 and 1998, WRIT issued 12,299 and 9,692 share grants, respectively,
to executives and trustees of the Trust. The respective compensation expense
was recorded based upon the share price at the grant date. Share grants are
awarded by the compensation committee of the Board of Trustees.
-37-
<PAGE>
9. Benefit Plans:
During 1996, management adopted an Incentive Compensation Plan ("the
Compensation Plan") for its senior personnel which is intended to align their
compensation growth with shareholders' interests. Essentially, the Compensation
Plan limits future salary increases and provides cash bonus incentives, share
options under the Incentive Share Option Plan and share grants under the Share
Grant Plan based on performance. The financial incentives to management are
earned after WRIT has achieved a prescribed level of growth. This plan is
effective from 1996 forward and is reviewed by the Board of Trustees'
Compensation Committee each year.
In 1997, WRIT implemented a Retirement Savings Plan (the "Savings Plan"). It
was established so that participants in the Savings Plan may elect to contribute
a portion of their earnings to the Savings Plan and WRIT may, at its discretion,
make a voluntary contribution to the Savings Plan.
WRIT maintained a noncontributory defined benefit pension plan for all eligible
employees through December 31, 1995. At December 31, 1995, all benefit accruals
under the plan were frozen and thus the projected benefit obligation ("PBO") and
the accumulated benefit obligation ("ABO") became equal. WRIT terminated the
plan as of December 31, 1999. Since there are no further benefit accruals
provided under the plan, WRIT has substantially reduced its funding obligation
and there will be no further increases in the ABO or PBO. Benefits under the
plan were generally based on years of service and final average pay. Pension
costs are accrued and funded annually from plan entry date in the plan to
projected retirement date and include service costs for benefits earned during
the period and interest costs on the projected benefit obligation less the
return on plan assets. The effects of the pension plan are immaterial to WRIT's
financial statements.
10. Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 requires disclosure of the
fair value of financial instruments. Whenever possible the estimated fair value
has been determined using quoted market information as of December 31, 1999.
The estimated fair value information presented is not necessarily indicative of
amounts the Trust could realize currently in a market sale since the Trust may
be unable to sell such instruments due to contractual restrictions or the lack
of an established market. The estimated market values have not been updated
since December 31, 1999, therefore, current estimates of fair value may differ
significantly from the amounts presented.
Below is a summary of significant methodologies used in estimating fair values
and a schedule of fair values at December 31, 1999.
Cash and cash equivalents
Includes cash and commerical paper with remaining maturities of less than 90
days, which are valued at the carrying value.
Mortgage notes payable
Mortgage notes payable consist of instruments in which certain of the Trust's
real estate assets are used for collateral. The fair value of the mortgage
notes payable is estimated based upon published rates or dealer quotes for
instruments with similar terms and maturities.
Lines of credit payable
Lines of credit payable consist of bank facilities which the Trust uses for
various purposes including working capital, acquisition funding or capital
improvements. The lines of credit advances are priced at a specified rate plus
a spread. The carrying value of the lines of credit payable is estimated to be
market value since the interest rate adjusts with the market.
Notes payable
Notes payable consists of $50 million, 7.125 %, 7 year unsecured notes due
August 13, 2003, $50 million, 7.25%, 10 year unsecured notes due August 13,
2006, $50 million, 7.25%, 20 year unsecured notes due February 25, 2028 and $60
million unsecured Mandatory Par Put Remarketed Securities with an effective
yield of 6.74%. The fair value of these securities is estimated based on
published rates or dealer quotes for securities with similar terms and
characteristics.
-38-
<PAGE>
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
(In thousands) Carrying Value Fair Value Carrying Value Fair Value
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 4,716 $ 4,716 $ 4,595 $ 4,595
Mortgage notes payable $ 87,037 $ 84,520 N/A N/A
Lines of credit payable $ 33,000 $ 33,000 $ 44,000 $ 44,000
Notes payable $210,000 $192,420 $210,000 $202,900
</TABLE>
11. Rentals Under Operating Leases:
Noncancellable commercial operating leases provide for minimum rental income
during each of the next five years of approximately $79.6 million, $69.0
million, $50.6 million, $38.0 million, $27.0 million and $63.0 million
thereafter. Apartment leases are not included as they are generally for one
year. Most of these commercial leases increase in future years-based on changes
in the Consumer Price Index or agreed-upon percentages. Contingent rentals from
the shopping centers, based on a percentage of tenants' gross sales, were
$425,000, $462,000 and $351,000 in 1999, 1998 and 1997, respectively.
12. Contingencies:
In the normal course of business, WRIT is involved in various types of pending
or unasserted claims. In the opinion of management, these claims will not have
a material impact on the financial condition or future operations of the Trust.
13. Segment Information:
WRIT has four reportable segments: Office Buildings, Industrial/Flex
Properties, Apartment Buildings, and Retail Centers. Office Buildings represent
52 percent of real estate rental revenue and provide office space for various
types of businesses. Industrial/Flex Properties represent 14 percent of real
estate rental revenue and are used for warehousing and distribution. Apartment
Buildings represent 19 percent of real estate rental revenue and provide housing
for families throughout the Washington Metropolitan area. Retail Centers
represent 15 percent of real estate rental revenue and are retail outlets for a
variety of stores.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. WRIT evaluates performance based
upon income from real estate from the combined properties in each segment.
-39-
<PAGE>
WRIT's reportable segments are a consolidation of related properties, which
offer different products. They are managed separately because each segment
requires different operating, pricing and leasing strategies. All of the
properties have been acquired separately and are incorporated into the
applicable segment.
<TABLE>
<CAPTION>
1999
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 61,657 $ 16,196 $22,926 $18,196 $ -- $118,975
Real estate expenses 18,950 3,568 8,714 4,049 -- 35,281
-------- -------- ------- ------- -------- --------
Operating income 42,707 12,628 14,212 14,147 -- 83,694
Depreciation and amortization 10,979 3,301 2,915 2,395 -- 19,590
-------- -------- ------- ------- -------- --------
Income from real estate 31,728 9,327 11,322 11,682 -- 64,104
Other income -- -- -- -- 732 732
Interest expense (1,731) -- (1,145) (653) (18,742) (22,271)
General and administrative -- -- -- -- (6,173) (6,173)
-------- -------- ------- ------- -------- --------
Income before gain on sale
of real estate 29,997 9,327 10,152 11,099 (24,183) 36,392
-------- -------- ------- ------- -------- --------
Gain on sale of real estate -- -- -- -- 7,909 7,909
-------- -------- ------- ------- -------- --------
Net income $ 29,997 $ 9,327 $10,152 $11,099 $(16,274) $ 44,301
======== ======== ======= ======= ======== ========
Capital investments $ 37,691 $ 19,591 $20,324 $ 2,049 $ 1,216 $ 80,871
======== ======== ======= ======= ======== ========
Total assets $321,741 $105,177 $79,548 $84,041 $ 17,973 $608,480
======== ======== ======= ======= ======== ========
<CAPTION>
1998
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 51,311 $13,547 $21,170 $17,569 $ -- $103,597
Real estate expenses 16,610 2,703 8,096 3,705 -- 31,114
-------- ------- ------- ------- -------- --------
Operating income 34,701 10,844 13,074 13,864 -- 72,483
Depreciation and amortization 8,447 2,330 2,581 2,041 -- 15,399
-------- ------- ------- ------- -------- --------
Income from real estate 26,254 8,514 10,493 11,823 -- 57,084
Other income -- -- -- -- 880 880
Interest expense (69) -- -- (665) (16,372) (17,106)
General and administrative -- -- -- -- (6,558) (6,558)
-------- ------- ------- ------- -------- --------
Income before gain on sale of
real estate 26,185 8,514 10,493 11,158 (22,050) 34,300
-------- ------- ------- ------- -------- --------
Gain on sale of real estate -- -- -- -- 6,764 6,764
-------- ------- ------- ------- -------- --------
Net income $ 26,185 $ 8,514 $10,493 $11,158 $(15,286) $ 41,064
======== ======= ======= ======= ======== ========
Capital investments $ 54,389 $34,706 $ 3,012 $ 8,755 $ 1,967 $102,829
======== ======= ======= ======= ======== ========
Total assets $300,043 $90,077 $65,679 $84,198 $ 18,710 $558,707
======== ======= ======= ======= ======== ========
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
1997
(in thousands)
---------------------------------------------------------------------------------
Industrial/
Office Flex Apartment Retail Corporate
Buildings Properties Buildings Centers and Other Consolidated
--------- ----------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Real estate rental revenue $ 35,972 $ 9,877 $18,040 $15,540 $ -- $ 79,429
Real estate expenses 12,579 2,051 7,145 3,684 -- 25,459
-------- ------- ------- ------- -------- --------
Operating income 23,393 7,826 10,895 11,856 -- 53,970
Depreciation and amortization 5,404 1,585 2,091 1,831 -- 10,911
-------- ------- ------- ------- -------- --------
Income from real estate 17,989 6,241 8,804 10,025 -- 43,059
Other income -- -- -- -- 1,011 1,011
Interest expense -- -- -- (667) (9,014) (9,691)
General and administrative -- -- -- -- (4,243) (4,243)
-------- ------- ------- ------- -------- --------
Net income $ 17,989 $ 6,241 $ 8,804 $ 9,348 $(12,246) $ 30,136
======== ======= ======= ======= ======== ========
Capital investments $106,264 $22,919 $19,885 $ 3,649 $ -- $152,717
======== ======= ======= ======= ======== ========
Total assets $253,233 $60,290 $65,087 $77,233 $ 12,728 $468,571
======== ======= ======= ======= ======== ========
</TABLE>
14. Subsequent Event (Unaudited):
Subsequent to December 31, 1999, WRIT closed on the sale of Prince William
Plaza. On February 29, 2000, WRIT sold this property for $2.8 million resulting
in a gain of $1.5 million. WRIT intends to use these proceeds to purchase other
real estate assets.
-41-
<PAGE>
Schedule III
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost/(b)/ Net
------------------------ Improvements
Building (Retirements)
and since
Properties Location Land Improvements Acquisition
---------- -------- ---- ------------ -------------
<S> <C> <C> <C> <C>
Office Buildings
10400 Connecticut Avenue Maryland $ 222,000 $ 1,691,000 $ 3,541,000
1901 Pennsylvania Avenue Washington, D.C. 892,000 3,481,000 6,005,000
51 Monroe Street Maryland 840,000 10,869,000 9,966,000
7700 Leesburg Pike Virginia 3,669,000 4,000,000 6,037,000
515 King Street Virginia 4,102,000 3,931,000 1,173,000
The Lexington Building Maryland 1,180,000 1,263,000 668,000
The Saratoga Building Maryland 1,464,000 1,554,000 1,042,000
Brandywine Center Maryland 718,000 735,000 500,000
Tycon Plaza II Virginia 3,262,000 7,243,000 2,091,000
Tycon Plaza III Virginia 3,255,000 7,794,000 2,026,000
6110 Executive Boulevard Maryland 4,621,000 11,895,000 3,196,000
1220 19th Street Washington, D.C. 7,802,000 11,366,000 574,000
Maryland Trade Center I Maryland 3,330,000 12,747,000 2,499,000
Maryland Trade Center II Maryland 2,826,000 9,487,000 1,090,000
1600 Wilson Boulevard Virginia 6,661,000 16,740,000 878,000
7900 Westpark Drive Virginia 12,049,000 70,416,000 2,035,000
8230 Boone Boulevard Virginia 1,417,000 6,760,000 158,000
Woodburn Medical Park I/(a)/ Virginia 2,563,000 12,530,000 316,000
Woodburn Medical Park II/(a)/ Virginia 2,632,000 17,612,000 247,000
800 Jefferson Plaza Maryland 2,296,000 12,188,000 185,000
1700 Research Blvd. Maryland 1,847,000 11,105,000 86,000
Parklawn Plaza Maryland 714,000 4,049,000 14,000
------------ ------------ ------------
68,362,000 239,456,000 44,327,000
------------ ------------ ------------
Retail Centers
Concord Centre Virginia 413,000 850,000 2,905,000
Bradlee Virginia 4,152,000 5,428,000 6,836,000
Clairmont Maryland 155,000 892,000 1,016,000
Chevy Chase Metro Plaza Washington, D.C. 1,549,000 4,304,000 3,010,000
Prince William Plaza/(g)/ Virginia 181,000 820,000 1,040,000
Takoma Park Maryland 415,000 1,085,000 1,000
Westminster Maryland 553,000 1,889,000 1,818,000
Wheaton Park Maryland 796,000 857,000 3,219,000
Montgomery Village Center Maryland 11,624,000 9,105,000 959,000
Shoppes of Foxchase Virginia 5,838,000 2,980,000 1,324,000
Frederick County Square/(a)/ Maryland 6,561,000 6,830,000 1,312,000
South Washington St. Virginia 2,624,000 3,546,000 117,000
------------ ------------ ------------
34,861,000 38,586,000 23,557,000
------------ ------------ ------------
<CAPTION>
Gross Amounts at which carried at
December 31, 1999 Accumulated
------------------------------------- Depreciation
Buildings at
and December 31,
Properties Land Improvements Total/(d)/ 1999
---------- ------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Office Buildings
10400 Connecticut Avenue $ 222,000 $ 5,232,000 $ 5,454,000 $ 2,008,000
1901 Pennsylvania Avenue 892,000 9,486,000 10,378,000 4,487,000
51 Monroe Street 840,000 20,835,000 21,675,000 8,071,000
7700 Leesburg Pike 3,669,000 10,037,000 13,706,000 1,652,000
515 King Street 4,102,000 5,104,000 9,206,000 822,000
The Lexington Building 1,180,000 1,931,000 3,111,000 290,000
The Saratoga Building 1,464,000 2,596,000 4,060,000 468,000
Brandywine Center 718,000 1,235,000 1,953,000 185,000
Tycon Plaza II 3,262,000 9,334,000 12,596,000 1,312,000
Tycon Plaza III 3,255,000 9,820,000 13,075,000 1,334,000
6110 Executive Boulevard 4,621,000 15,091,000 19,712,000 2,582,000
1220 19th Street 7,802,000 11,940,000 19,742,000 1,741,000
Maryland Trade Center I 3,330,000 15,246,000 18,576,000 1,957,000
Maryland Trade Center II 2,826,000 10,577,000 13,403,000 1,289,000
1600 Wilson Boulevard 6,661,000 17,618,000 24,279,000 1,341,000
7900 Westpark Drive 12,049,000 72,451,000 84,500,000 4,673,000
8230 Boone Boulevard 1,417,000 6,918,000 8,335,000 296,000
Woodburn Medical Park I/(a)/ 2,563,000 12,846,000 15,409,000 476,000
Woodburn Medical Park II/(a)/ 2,632,000 17,859,000 20,491,000 684,000
800 Jefferson Plaza 2,296,000 12,373,000 14,669,000 256,000
1700 Research Blvd. 1,847,000 11,191,000 13,038,000 233,000
Parklawn Plaza 714,000 4,063,000 4,777,000 17,000
------------ ------------ ------------ ------------
68,362,000 283,783,000 352,145,000 36,174,000
------------ ------------ ------------ ------------
Retail Centers
Concord Centre 413,000 3,755,000 4,168,000 1,393,000
Bradlee 4,152,000 12,264,000 16,416,000 3,788,000
Clairmont 155,000 1,908,000 2,063,000 939,000
Chevy Chase Metro Plaza 1,549,000 7,314,000 8,863,000 1,947,000
Prince William Plaza/(g)/ 181,000 1,860,000 2,041,000 1,151,000
Takoma Park 415,000 1,086,000 1,501,000 814,000
Westminster 553,000 3,707,000 4,260,000 2,243,000
Wheaton Park 796,000 4,076,000 4,872,000 918,000
Montgomery Village Center 11,624,000 10,064,000 21,688,000 1,398,000
Shoppes of Foxchase 5,838,000 4,304,000 10,142,000 548,000
Frederick County Square/(a)/ 6,561,000 8,142,000 14,703,000 1,228,000
South Washington St. 2,624,000 3,663,000 6,287,000 184,000
------------ ------------ ------------ ------------
34,861,000 62,143,000 97,004,000 16,551,000
------------ ------------ ------------ ------------
<CAPTION>
Year of Date of Net Rentable Depreciation
Properties Construction Acquisition Square Feet/(f)/ Units Life/(e)/
---------- ------------ ----------- ---------------- ----- ------------
<S> <C> <C> <C> <C> <C>
Office Buildings
10400 Connecticut Avenue 1965 August 1979 65,000 31 Years
1901 Pennsylvania Avenue 1960 May 1977 97,000 28 Years
51 Monroe Street 1975 August 1979 210,000 41 Years
7700 Leesburg Pike 1976 October 1990 145,000 50 Years
515 King Street 1966 July 1992 78,000 50 Years
The Lexington Building 1970 November 1993 47,000 50 Years
The Saratoga Building 1977 November 1993 59,000 50 Years
Brandywine Center 1969 November 1993 35,000 50 Years
Tycon Plaza II 1981 June 1994 131,000 50 Years
Tycon Plaza III 1978 June 1994 152,000 50 Years
6110 Executive Boulevard 1971 January 1995 199,000 30 Years
1220 19th Street 1976 November 1995 104,000 30 Years
Maryland Trade Center I 1981 May 1996 191,000 30 Years
Maryland Trade Center II 1984 May 1996 159,000 30 Years
1600 Wilson Boulevard 1973 October 1997 167,000 30 Years
7900 Westpark Drive 1972/1986/1999 November 1997 527,000 30 Years
8230 Boone Boulevard 1981 September 1998 58,000 30 Years
Woodburn Medical Park I/(a)/ 1984 November 1998 71,000 30 Years
Woodburn Medical Park II/(a)/ 1988 November 1998 96,000 30 Years
800 Jefferson Plaza 1985 May 1999 115,000 30 Years
1700 Research Blvd. 1982 May 1999 103,000 30 Years
Parklawn Plaza 1986 November 1999 40,000 30 Years
---------
2,849,000
---------
Retail Centers
Concord Centre 1960 December 1973 76,000 33 Years
Bradlee 1955 December 1984 168,000 40 Years
Clairmont 1965 December 1976 40,000 39 Years
Chevy Chase Metro Plaza 1975 September 1985 51,000 50 Years
Prince William Plaza/(g)/ 1967 August 1968 55,000 50 Years
Takoma Park 1962 July 1963 59,000 50 Years
Westminster 1969 September 1972 165,000 37 Years
Wheaton Park 1967 September 1977 71,000 49 Years
Montgomery Village Center 1969 December 1992 196,000 50 Years
Shoppes of Foxchase 1960 June 1994 128,000 50 Years
Frederick County Square/(a)/ 1973 August 1995 233,000 30 Years
South Washington St. 1959 June 1998 45,000 30 Years
---------
1,287,000
---------
</TABLE>
-42-
<PAGE>
Schedule III (Continued)
<TABLE>
<CAPTION>
Initial Cost/(b)/ Net
----------------------------- Improvements
Building (Retirements)
and since
Properties Location Land Improvements Acquisition
---------- -------- ---- ------------ -------------
<S> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ Virginia $ 299,000 $ 2,561,000 $ 2,735,000
Munson Hill Towers/(a)/ Virginia (c) -- 3,337,000 4,420,000
Park Adams/(a)/ Virginia 287,000 1,654,000 3,731,000
Roosevelt Towers/(a)/ Virginia 336,000 1,996,000 2,005,000
3801 Connecticut Avenue Washington, D.C. 420,000 2,678,000 4,585,000
The Ashby at McLean/(a)/ Virginia 4,356,000 17,125,000 2,603,000
Walker House Apartments Virginia 2,851,000 7,946,000 828,000
Bethesda Hill Maryland 3,900,000 13,338,000 2,029,000
Avondale/(a)/ Maryland 3,460,000 9,244,000 401,000
------------ ------------ ------------
15,909,000 59,879,000 23,337,000
------------ ------------ ------------
Industrial Distribution /Flex
Property
Pepsi-Cola Maryland 760,000 1,792,000 1,560,000
Capitol Freeway Center Washington, D.C. 300,000 1,205,000 2,637,000
Fullerton Virginia 950,000 3,317,000 944,000
Charleston Business Center Maryland 2,045,000 2,091,000 251,000
Tech 100 Industrial Park Maryland 2,086,000 4,744,000 365,000
Crossroads Distribution Center Maryland 894,000 1,945,000 160,000
The Alban Business Center Virginia 878,000 3,298,000 377,000
The Earhart Building Virginia 916,000 4,128,000 260,000
Ammendale Technology Park I Maryland 1,335,000 6,492,000 821,000
Ammendale Technology Park II Maryland 862,000 5,016,000 270,000
Pickett Industrial Park Virginia 3,300,000 4,899,000 686,000
Northern VA Industrial Park Virginia 4,971,000 26,461,000 1,780,000
8900 Telegraph Road Virginia 372,000 1,538,000 55,000
Dulles South IV Virginia 913,000 5,996,000 70,000
Sully Square Virginia 1,052,000 6,506,000 80,000
Amvax Virginia 246,000 1,972,000 --
------------ ------------ ------------
21,880,000 81,400,000 10,316,000
------------ ------------ ------------
Totals $141,012,000 $419,321,000 $101,537,000
============ ============ ============
<CAPTION>
Gross Amounts at which carried at
December 31, 1999 Accumulated
-------------------------------------- Depreciation
Buildings at
and December 31,
Properties Land Improvements Total/(d)/ 1999
---------- ---- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ $ 299,000 $ 5,296,000 $ 5,595,000 $ 3,188,000
Munson Hill Towers/(a)/ -- 7,757,000 7,757,000 4,397,000
Park Adams/(a)/ 287,000 5,385,000 5,672,000 2,542,000
Roosevelt Towers/(a)/ 336,000 4,001,000 4,337,000 2,325,000
3801 Connecticut Avenue 420,000 7,263,000 7,683,000 4,201,000
The Ashby at McLean/(a)/ 4,356,000 19,728,000 24,084,000 2,115,000
Walker House Apartments 2,851,000 8,774,000 11,625,000 1,050,000
Bethesda Hill 3,900,000 15,367,000 19,267,000 1,006,000
Avondale/(a)/ 3,460,000 9,645,000 13,105,000 110,000
------------ ------------ ------------ -----------
15,909,000 83,216,000 99,125,000 20,934,000
------------ ------------ ------------ -----------
Industrial Distribution /Flex
Property
Pepsi-Cola 760,000 3,352,000 4,112,000 814,000
Capitol Freeway Center 300,000 3,842,000 4,142,000 1,969,000
Fullerton 950,000 4,261,000 5,211,000 1,282,000
Charleston Business Center 2,045,000 2,342,000 4,387,000 331,000
Tech 100 Industrial Park 2,086,000 5,109,000 7,195,000 834,000
Crossroads Distribution Center 894,000 2,105,000 2,999,000 289,000
The Alban Business Center 878,000 3,675,000 4,553,000 448,000
The Earhart Building 916,000 4,388,000 5,304,000 459,000
Ammendale Technology Park I 1,335,000 7,313,000 8,648,000 713,000
Ammendale Technology Park II 862,000 5,286,000 6,148,000 517,000
Pickett Industrial Park 3,300,000 5,585,000 8,885,000 375,000
Northern VA Industrial Park 4,971,000 28,241,000 33,212,000 1,436,000
8900 Telegraph Road 372,000 1,593,000 1,965,000 83,000
Dulles South IV 913,000 6,066,000 6,979,000 192,000
Sully Square 1,052,000 6,586,000 7,638,000 154,000
Amvax 246,000 1,972,000 2,218,000 19,000
------------ ------------ ------------ -----------
21,880,000 91,716,000 113,596,000 9,915,000
------------ ------------ ------------ -----------
Totals $141,012,000 $520,858,000 $661,870,000 $83,574,000
============ ============ ============ ===========
<CAPTION>
Year of Date of Net Rentable Depreciation
Properties Construction Acquisition Square Feet/(f)/ Units Life/(c)/
---------- ------------ ----------- ---------------- ----- ---------
<S> <C> <C> <C> <C> <C>
Apartment Buildings
Country Club Towers/(a)/ 1965 July 1969 276,000 227 35 Years
Munson Hill Towers/(a)/ 1963 January 1970 340,000 279 33 Years
Park Adams/(a)/ 1959 January 1969 210,000 200 35 Years
Roosevelt Towers/(a)/ 1964 May 1965 229,000 191 40 Years
3801 Connecticut Avenue 1951 January 1963 242,000 307 30 Years
The Ashby at McLean/(a)/ 1982 August 1996 349,000 250 30 Years
Walker House Apartments 1971 March 1996 148,000 196 30 Years
Bethesda Hill 1986 November 1997 226,000 195 30 Years
Avondale/(a)/ 1987 September 1999 162,000 237 40 Years
--------- -----
2,182,000 2,082
--------- -----
Industrial Distribution /Flex
Property
Pepsi-Cola 1971 October 1987 69,000 40 Years
Capitol Freeway Center 1940 July 1974 145,000 25 Years
Fullerton 1980 September 1985 103,000 50 Years
Charleston Business Center 1973 November 1993 85,000 50 Years
Tech 100 Industrial Park 1990 May 1995 167,000 30 Years
Crossroads Distribution Center 1987 December 1995 85,000 30 Years
The Alban Business Center 1981 October 1996 87,000 30 Years
The Earhart Building 1987 December 1996 92,000 30 Years
Ammendale Technology Park I 1985 February 1997 167,000 30 Years
Ammendale Technology Park II 1986 February 1997 108,000 30 Years
Pickett Industrial Park 1973 October 1997 246,000 30 Years
Northern VA Industrial Park 1968/1991 May 1998 790,000 30 Years
8900 Telegraph Road 1985 September 1998 32,000 30 Years
Dulles South IV 1988 January 1988 83,000 30 Years
Sully Square 1966 April 1999 95,000 30 Years
Amvax 1966 September 1999 31,000 30 Years
--------- -----
2,385,000 --
--------- -----
Totals 8,703,000 2,082
========= =====
</TABLE>
Notes:
/(a)/ At December 31, 1998, WRIT was obligated under the following mortgage
encumbrances: $13,700,000 on the Ashby, $8,679,000 on Avondale, $7,755,000
on Country Club Towers, $7,178,000 on Frederick County Square, $10,560,000
on Munson Hill Towers, $9,625,000 on Park Adams, $8,360,000 on Roosevelt
Towers, $9,056,000 on Woodburn Medical Park I and $12,136,000 on Woodburn
Medical Park II.
/(b)/ The purchase of real estate investments has been divided between land and
buildings and improvements on the basis of management determination of the
relative values.
/(c)/ The site of Munson Hill Towers is rented under a ground lease requiring
annual payments of $22,600 until the expiration of the lease in 2060.
/(d)/ At December 31, 1999, total land, buildings and improvements are carried
at 667,000,000 for federal income tax purposes.
/(e)/ The useful life shown is for the main structure. Buildings and
improvements are depreciated over various useful lives ranging from 3 to
50 years.
/(f)/ Residential properties are presented in gross square feet.
/(g)/ Property was sold subsequent to December 31, 1999.
-43-
<PAGE>
Schedule III
(Continued)
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
SUMMARY OF REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
(IN THOUSANDS)
The following is a reconciliation of real estate assets and accumulated
depreciation for the years ended December 31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
Years Ended December 31
1999 1998 1997
------ ------ -----
<S> <C> <C> <C>
Real Estate Assets
Balance, beginning of period $598,874 $504,315 $352,579
Additions - property acquisitions 56,837 82,210 138,802
- improvements 23,491 18,652 13,915
Deductions - write-off of fully depreciated assets -- -- (981)
Deductions - property sales 17,332 (6,303) --
-------- -------- --------
Balance, end of period $661,870 $598,874 $504,315
======== ======== ========
Accumulated Depreciation
Balance, beginning of period $ 68,301 $ 56,015 $ 46,639
Additions - depreciation 18,654 14,566 10,357
Deductions - write-off of fully depreciated assets -- -- (981)
Deductions - property sales (3,381) (2,280) --
-------- -------- --------
Balance, end of period $ 83,574 $ 68,301 $ 56,015
======== ======== ========
</TABLE>
-44-
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION:
QUARTERLY FINANCIAL RESULTS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Quarter
-------------------------------------
First Second Third Fourth
------- -------- ------- --------
<S> <C> <C> <C> <C>
1999:
Real estate rental revenue $27,654 $28,864 $29,566 $32,891
Net income 16,358 8,765 8,826 10,352
Net income per share*/1/ $0.46 $0.25 $0.25 $0.29
1998:
Real estate rental revenue $24,501 $25,413 $26,243 $27,440
Net income 14,499 8,351 8,277 9,937
Net income per share* $0.41 $0.23 $0.23 $0.28
1997:
Real estate rental revenue $18,498 $19,104 $19,436 $22,391
Net income 7,028 7,140 7,664 8,304
Net income per share $0.22 $0.22 $0.23 $0.23
</TABLE>
* Includes gain on the sale of real estate of $.22 per share in the fourth
quarter of 1999 and $.16 and $.02 per share in the first and fourth quarters
of 1998, respectively.
/1/ Net income per share does not sum to the total net income per share for the
year-ended December 31, 1999 due to rounding differences.
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