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PR Newswire
Washington Real Estate Investment Trust Announces Second Quarter Financial And Operating Results
Das Kapitol in Washington, D.C.
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PR Newswire
ROCKVILLE, Md., July 24, 2014
ROCKVILLE, Md., July 24, 2014 /PRNewswire/ -- Washington Real Estate Investment Trust ("Washington REIT" or the "Company") (NYSE: WRE), a leading owner and operator of diversified properties in the Washington, DC region, reported financial and operating results today for the quarter ended June 30, 2014:
Second Quarter 2014 Highlights
- Generated Core Funds from Operations (FFO) of $0.41 per fully diluted share for the quarter, a $0.05 increase over first quarter 2014
- Achieved same-store Net Operating Income (NOI) growth of 6.1% over second quarter 2013
- Improved overall same-store physical occupancy to 92.6% from 90.2% in the first quarter 2014
- Executed 62 new and renewal commercial leases totaling 222,000 square feet at an average rental rate increase of 9.0% over in-place rents for new leases and average rental rate increase of 7.3% over in-place rents for renewal leases
- Acquired 1775 Eye Street, NW, a 185,000 square foot office building located in Washington, DC, for $104.5 million
- Announced the election of Mr. Benjamin S. Butcher, an additional independent member, to the Board of Trustees
"The actions we have taken over the past several months are gaining traction and positively impacting our results as we continue to successfully execute on our strategy to improve the overall quality of Washington REIT's asset portfolio," said Paul T. McDermott, President and Chief Executive Officer. "In the second quarter, Washington REIT achieved significant same-store NOI growth as a result of substantial occupancy gains, and we are also beginning to see strong positive momentum in Core FFO from our acquisitions this year, including 1775 Eye Street which we acquired in May. Going forward, we will build on this momentum and drive shareholder value by continuing to improve our internal operations, aggressively filling vacancies, increasing tenant retention and selectively acquiring additional high-quality assets in the DC and Greater Washington region."
Financial Highlights
Core Funds from Operations(1), defined as Funds from Operations(1) ("FFO") excluding acquisition expense, gains or losses on extinguishment of debt, severance expense and impairment, was $27.7 million, or $0.41 per diluted share for the quarter ended June 30, 2014, compared to $31.2 million, or $0.47 per diluted share for the prior year period. FFO for the quarter ended June 30, 2014 was $25.2 million, or $0.38 per diluted share, compared to $30.8 million, or $0.46 per diluted share, in the same period one year ago. This decrease in Core Funds from Operations is primarily due to the reinvestment timing of the Medical Office Building sale proceeds.
Net income attributable to the controlling interests for the quarter ended June 30, 2014 was $1.1 million, or $0.02 per diluted share, compared to $5.3 million, or $0.08 per diluted share, in the same period one year ago.
Operating Results
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The Company's overall portfolio Net Operating Income ("NOI")(2) was $46.7 million for the quarter ended June 30, 2014 compared to $42.2 million in the same period one year ago and $42.3 million in the first quarter of 2014. Overall portfolio physical occupancy for the second quarter was 90.1%, compared to 89.1% in the same period one year ago and 88.4% in the first quarter of 2014.
Same-store(3) portfolio physical occupancy for the second quarter was 92.6%, compared to 90.0% in the same period one year ago and 90.2% in the first quarter of 2014. Same-store portfolio NOI for the second quarter increased 6.1% compared to the same period one year ago and rental rate growth was 0.8%.
- Office: 55.8% of Total NOI - Same-store NOI for the second quarter increased 8.0% compared to the same period one year ago. Rental rate growth was 1.4% while same-store physical occupancy increased 420 bps to 90.6%. Sequentially, same-store physical occupancy increased 370 bps compared to the first quarter of 2014.
- Retail: 24.6% of Total NOI - Same-store NOI for the second quarter increased 8.0% compared to the same period one year ago. Rental rate growth was 0.4% while same-store physical occupancy increased 100 bps to 94.2%. Sequentially, same-store physical occupancy increased 60 bps compared to the first quarter of 2014.
- Multifamily: 19.6% of Total NOI - Same-store NOI for the second quarter decreased 1.5% compared to the same period one year ago. Rental rates decreased 0.3% while same-store physical occupancy increased 120 bps to 94.3%. Sequentially, same-store physical occupancy increased 160 bps compared to the first quarter of 2014.
Leasing Activity
During the second quarter, Washington REIT signed commercial leases totaling 222,000 square feet, including 102,000 square feet of new leases and 120,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis):
| | Square Feet | Weighted Average Term (in years) | Weighted Average Rental Rates | Weighted Average Rental Rate % Increase | Tenant Improvements | Leasing Commissions and Incentives | |||||||||
| New: | | | | | | | | | | | | | |||
| Office | 69,367 | | 5.8 | | $ | 35.71 | | 14.7 | % | $ | 33.59 | | $ | 21.80 | |
| Retail | 32,191 | | 10.2 | | 22.07 | | -2.3 | % | 50.20 | | 9.33 | | |||
| Total | 101,558 | | 7.1 | | 30.79 | | 9.0 | % | 38.86 | | 17.84 | | |||
| | | | | | | | | | | | | | |||
| Renewal: | | | | | | | | | | | | | |||
| Office | 109,686 | | 4.8 | | $ | 36.12 | | 6.6 | % | $ | 17.29 | | $ | 13.83 | |
| Retail | 10,645 | | 4.3 | | 50.91 | | 12.8 | % | — | | 2.56 | | |||
| Total | 120,331 | | 4.8 | | 37.42 | | 7.3 | % | 15.76 | | 12.84 | | |||
Acquisition and Disposition Activity
In the second quarter, Washington REIT acquired 1775 Eye Street, NW, a 185,000 square foot office building located in Washington's Central Business District, for $104.5 million. Originally built in 1964, 1775 Eye Street is an eleven-story building with a two-level parking garage located at the intersection of 18th and Eye Street, in Northwest DC. The property is currently undergoing its second renovation, which includes a new modernized lobby, common areas, and fitness facility. 1775 Eye Street was originally renovated in 1997 when the owner replaced the facade, storefronts and all of the building systems. 1775 Eye Street is directly across from Farragut West (Blue and Orange Lines) and two blocks from Farragut North (Red Line) Metro Stations.
Other Developments
During the quarter, Washington REIT announced the election of Mr. Benjamin S. Butcher, an additional independent member, to the Board of Trustees. Mr. Butcher currently serves as the Chief Executive Officer, President and Chairman of the Board of Directors of STAG Industrial, Inc., a publicly traded real estate company focused on acquisition, ownership and management of single tenant industrial properties throughout the United States since its inception in 2011. Mr. Butcher joined the Washington REIT's Board of Trustees effective July 1, 2014.
Earnings Guidance
Management reiterates 2014 Core FFO guidance of $1.56-$1.64 per fully diluted share.
Dividends
On June 30, 2014, Washington REIT paid a quarterly dividend of $0.30 per share.
Conference Call Information
The Conference Call for 2nd Quarter Earnings is scheduled for Friday, July 25, 2014 at 11:00 A.M. Eastern time. Conference Call access information is as follows:
| USA Toll Free Number: | 1-877-407-9205 |
| International Toll Number: | 1-201-689-8054 |
The instant replay of the Conference Call will be available until August 8, 2014 at 11:59 P.M. Eastern time. Instant replay access information is as follows:
| USA Toll Free Number: | 1-877-660-6853 |
| International Toll Number: | 1-201-612-7415 |
| Conference ID: | 13585552 |
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