Company Continues to Post Significant Same-Store NOI Growth and Announces 213th Consecutive Quarterly Dividend

WASHINGTON, Feb. 19, 2015 /PRNewswire/ — Washington REIT (Washington Real Estate Investment Trust  — NYSE:WRE ), a leading owner and operator of diversified properties in the Washington, DC region, reported financial and operating results today for the quarter and year ended December 31, 2014:

Highlights for the Fourth Quarter and Recent Activity

• Generated Core Funds from Operations (FFO) of $0.43 per diluted share for the quarter and $1.63 per diluted share for the year
• Increased same-store physical occupancy to 93.2%, 390 basis points higher than fourth quarter 2013, led by the office portfolio with a 550 basis point improvement
• Achieved same-store Net Operating Income (NOI) growth of approximately 8% over fourth quarter 2013
• Executed 61 new and renewal leases totaling 724,000 square feet at an average rental rate increase of 25.6% for new leases and an average rental rate increase of 5.0% for renewal leases during the quarter, as compared to prior in-place rents
• Acquired Spring Valley Retail Center, a 75,000 square foot retail shopping center located in Northwest Washington, DC for $40.5 million in an off-market transaction
• Commenced lease-up of The Maxwell development, a six-story, 163-unit mid-rise apartment community with 2,200 square feet of retail in Arlington, VA

2014 was a key year for us as we continued to effectively execute our strategy to transition and upgrade our portfolio to more high-quality, well-located assets in urban in-fill locations, said Paul T. McDermott, President and Chief Executive Officer. In particular, we were able to successfully redeploy the remainder of the proceeds from our disposition of the Medical Office Portfolio and acquire $300 million of assets, all located in Washington, DC. Furthermore, the actions we have taken, and continue to take, to enhance our operations are gaining traction and are positively impacting our results as demonstrated most notably by our achieving same-store NOI growth of approximately 8 percent in the fourth quarter.  We are well-positioned and we will continue to take steps to appropriately balance executing leasing plans, mitigating risk and pursuing additional opportunities to further improve the quality and performance of our portfolio as part of our overall effort to drive shareholder value.

Financial Results

Core Funds from Operations (1). defined as Funds from Operations (FFO) excluding acquisition expense, gains or losses on extinguishment of debt, severance expense and impairment, was $1.63 per diluted share for the year and $0.43 per diluted share for the quarter ended December 31, 2014, as compared to $1.79 per diluted share and $0.42 per diluted share, respectively, for the corresponding periods in 2013.

FFO for the year ended December 31, 2014 was $101.1 million, or $1.51 per diluted share, compared to $113.1 million, or $1.69 per diluted share, in 2013. FFO for the quarter ended December 31, 2014 was $26.8 million, or $0.40 per diluted share, compared to $22.4 million, or $0.34 per diluted share, in the same period one year ago.

Net income attributable to the controlling interests for the year ended December 31, 2014 was $111.6 million, or $1.67 per diluted share, compared to $37.3 million, or $0.55 per diluted share, in 2013.

Net income attributable to the controlling interests for the quarter ended December 31, 2014 was $2.3 million, or $0.03 per diluted share, compared to $18.9 million, or $0.28 per diluted share, in the same period one year ago.

Operating Results

The Company’s overall portfolio Net Operating Income (NOI) (2) for the fourth quarter was $48.4 million, compared to $42.9 million in the same period one year ago and $47.5 million in the third quarter of 2014. Overall portfolio physical occupancy for the fourth quarter was 90.5%, compared to 88.8% in the same period one year ago and 90.7% in the third quarter of 2014.

Same-store (3) portfolio physical occupancy for the fourth quarter was 93.2%, compared to 89.3% in the same period one year ago. Sequentially, same-store physical occupancy remained flat with the third quarter of 2014. Same-store portfolio NOI for the fourth quarter increased 8.0% and rental rate growth was 0.5% compared to the same period one year ago.

• Office: 54% of Total NOI — Office properties’ same-store NOI for the fourth quarter increased 6.5% compared to the same period one year ago. Rental rate growth was 1.5% while same-store physical occupancy increased 550 basis points to 92.1%. Sequentially, same-store physical occupancy increased 20 basis points compared to the third quarter of 2014.
• Retail: 26% of Total NOI — Retail properties’ same-store NOI for the fourth quarter increased 13.7% compared to the same period one year ago. Rental rate growth was 0.2% while same-store physical occupancy increased 320 basis points to 94.5%. Sequentially, same-store physical occupancy increased 10 basis points compared to the third quarter of 2014.
• Multifamily: 20% of Total NOI — Multifamily properties’ same-store NOI for the fourth quarter increased 4.5% compared to the same period one year ago. Rental rates decreased 1.7% while same-store physical occupancy increased 180 basis points to 93.9%. Sequentially, same-store physical occupancy decreased 50 basis points compared to the third quarter of 2014.

Acquisitions

On October 1, 2014, Washington REIT acquired Spring Valley Retail Center, a 75,000 square foot retail shopping center located in Northwest Washington, DC for $40.5 million. Spring Valley was Washington REIT’s fourth acquisition in 2014, representing a total cumulative investment value of approximately $300 million for the year. Spring Valley Retail Center was 93% leased as of December 31, 2014 and consists of five separate buildings of multi-level retail space in the 4800 block of Massachusetts Avenue located in the affluent Spring Valley neighborhood.

Capital Markets Update

In the fourth quarter and through January 6, 2015, Washington REIT issued 1,308,853 shares at a weighted average price of $27.93 per share through its sales agency financing agreement with BNY Mellon Capital Markets, LLC, generating approximately $36.5 million in proceeds. These proceeds were used for general corporate purposes. Sales under this program are made at market prices prevailing at the time of sale and are also dependent upon a variety of factors, including, among others, market conditions, the trading price of Washington REIT’s common shares, Washington REIT’s liquidity position and the potential use of proceeds.

Leasing Activity

New leases signed during the year totaled approximately 326,000 square feet and renewal leases totaled approximately 1,043,000 square feet. The majority of this leasing occurred within the office portfolio which signed 243,000 square feet of new leases and 790,000 square feet of renewal leases.

During the fourth quarter, Washington REIT signed commercial leases totaling approximately 724,000 square feet, including 103,000 square feet of new leases and 621,000 square feet of renewal leases. Included in the renewal leases were the renewals of World Bank at 1776 G Street and Booz Allen Hamilton, Inc. at its headquarters location in John Marshall II in Tysons, VA.  The commercial leases breakdown as follows (all dollar amounts are on a per square foot basis):