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Washington Real Estate Investment Trust Announces Fourth Quarter and Year-End Operating Results for 2019

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WASHINGTON, Feb. 13, 2020 (GLOBE NEWSWIRE) — Washington Real Estate Investment Trust (“WashREIT” or the “Company”) (NYSE: WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter and year ended December 31, 2019:

Full-Year 2019 Financial Results

  • Net income attributable to controlling interests was $383.6 million, or $4.75 per diluted share, including net gains on the sale of real estate of $399.0 million
  • NAREIT FFO(1) was $1.66 per diluted share
  • Core FFO(1) was $1.71 per diluted share

Fourth Quarter 2019 Financial Results

  • Net income attributable to controlling interests was $54.2 million, or $0.66 per diluted share
  • NAREIT FFO was $0.39 per diluted share
  • Core FFO was $0.40 per diluted share

2019 Operational Highlights

  • Same-store(2) Net Operating Income (NOI)(3) decreased by 0.2% and cash NOI increased by 0.5% from 2018
  • Same-store Office NOI decreased by 4.6% and cash NOI decreased by 3.6% compared to 2018
  • Same-store Multifamily NOI and cash NOI increased by 4.6% for the year
  • Same-store Other NOI increased by 3.4% and cash NOI increased by 4.9% for the year
  • Ended the year with a net debt to adjusted EBITDA(4) ratio of 5.6x

2019 Transaction Activity

  • Acquired the Assembly Portfolio, a 2,113 unit multifamily portfolio for approximately $461.2 million
  • Acquired Cascade at Landmark, a 277 unit multifamily asset in Alexandria, VA for approximately $69.8 million
  • Sold Quantico Corporate Center for approximately $33.0 million
  • Sold eight retail assets for approximately $562.0 million
  • Sold 1776 G Street for approximately $129.5 million
  • Entered into a contract to sell John Marshall II for approximately $63.4 million. The transaction is expected to close on March 26, 2020 and would eliminate the Company’s remaining exposure to single tenant assets.

“2019 was a pivotal year for WashREIT on multiple fronts. We executed $1.3 billion of strategic transactions– a company record– to streamline and de-risk our portfolio and improve our ability to drive value creation,” said Paul T. McDermott, President and CEO of WashREIT. “In addition to our transformative capital allocation, we exceeded our commercial leasing targets for 2019 and addressed the vast majority of our 2020 expirations. Looking ahead, we expect key lease commencements and multifamily value-creation to drive strong growth in the second half of 2020 and strong year-over-year growth in 2021.”

Operating Results

The Company’s overall portfolio NOI for the fourth quarter was $50.1 million, compared to $46.1 million in the same period one year ago and $49.6 million in the third quarter of 2019. Same-store portfolio NOI decreased by 0.2% for the full year and 2.0% for the fourth quarter on a year-over-year basis.  The Company’s overall portfolio ending occupancy (5) was 92.8%, compared to 93.1% at year-end 2018. Same-store portfolio ending occupancy (6) was 92.1% compared to 93.9% at year-end 2018.

Same-store portfolio by sector:

  • Office: 48% of Q4 2019 Same-Store NOI – Same-store NOI decreased by 4.6% and cash NOI decreased by 3.6% for the full year. Same-store NOI decreased by 6.9% and cash NOI decreased by 6.1% for the fourth quarter compared to the same period a year ago. The full-year decrease was primarily driven by the termination of a prior lease at Watergate 600 that has largely been re-leased and occupied. The fourth quarter decrease was largely driven by the aforementioned lease termination as well as the previously anticipated vacancy at 1220 19th Street, the majority of which has been re-leased.  Same-store ending occupancy decreased by 510 basis points year-over-year and 40 basis points sequentially to 88.5% primarily due to the aforementioned lease termination that enabled the re-leasing of the majority of the space. The overall office portfolio was 89.6% occupied and 91.9% leased at year-end.
  • Multifamily: 43% of Q4 2019 Same-Store NOI – Same-store NOI and cash NOI increased by 4.6% for the full year. Same-store NOI increased by 4.6% and cash NOI increased by 4.8% for the fourth quarter on a year-over-year basis. The Company achieved 340 basis points of blended year-over-year lease rate growth(7) comprised of 430 basis points of renewal rate growth and 220 basis points of new lease rate growth reflecting strong demand for our value-oriented assets and the success of our daily pricing strategy which allows us to optimize rental income growth. Same-store ending occupancy increased by 20 basis points year over year and decreased by 10 basis points sequentially to 95.0%.  The overall multifamily portfolio was 94.9% occupied and 96.4% leased at year-end.
  • Other: 9% of Q4 2019 Same-Store NOI – Same-store NOI increased by 3.4% and cash NOI increased by 4.9% for the full year. Same-store NOI decreased by 3.6% and cash NOI decreased by 0.1% year-over-year in the fourth quarter due to one-time benefits that impacted the fourth quarter of 2018. Same-store ending occupancy increased by 100 basis points year-over-year and 190 basis points sequentially to 90.9% and was 92.8% leased at year-end.

Leasing Activity

During 2019, WashREIT signed new and renewal commercial leases as follows (all dollar amounts are on a per square foot basis):

Square FeetWeighted
Average Term

(in years)
Weighted
Average Free
Rent Period

(in months)
Weighted
Average
Rental Rates
Weighted
Average
Rental Rate

% Increase
Tenant
Improvements
Leasing
Commissions
New:
Office (a)200,00010.54.3$58.3825.2%$106.02$31.52
Other68,0007.64.019.2816.8%31.148.85
Total (b)268,0009.74.248.4123.1%86.9125.74
Renewal:
Office207,0009.68.9$44.699.7%$30.81$12.77
Other50,0004.60.231.6721.8%3.03
Total (b)257,0008.67.242.1512.0%24.7910.86

(a) Office tenant improvements per foot per year of term for new leases were approximately $10.10 driven by the 51,000 square foot lease signed at Watergate 600 in Q1 that had no free rent associated with it
(b) Excludes leasing activity at properties sold during the year

During the fourth quarter, WashREIT signed commercial leases totaling 120,000 square feet, including 55,000 square feet of new leases and 65,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis):

Square FeetWeighted
Average Term

(in years)
Weighted
Average Free
Rent Period

(in months)
Weighted
Average
Rental Rates
Weighted
Average
Rental Rate

% Increase
Tenant
Improvements
Leasing
Commissions
New:
Office46,0007.86.9$57.6333.7%$69.88$25.34
Other (a)9,00014.96.461.861.8%127.0242.59
Total55,0008.96.858.2827.2%78.7128.01
Renewal:
Office (b)57,0008.76.5$47.0326.7%$36.99$20.15
Other8,0005.01.139.338.9%2.45
Total65,0008.25.846.0624.5%32.3317.92

(a) Tenant improvements per square foot for Other new leases were high in the fourth quarter due to a 16-year lease signed at Spring Valley Village to a high-quality credit tenant
(b) Excludes leasing activity at properties sold during the quarter

2020 Guidance

Full Year 2020
Core FFO per diluted share (a)$1.53 – $1.59
Same-Store NOI Growth1.0% – 2.0%
Multifamily3.25% – 4.25%
Office(1.0%) – 1.0%
Other NOI$13.25 million – $13.75 million
Non Same-Store Multifamily NOI$28.25 million – $29.25 million
Transactions
Acquisitions$0
Dispositions (b)$63.4 million
Corporate Expenses
G&A and Leasing Expenses$22.25 million – $23.25 million
Interest Expense$42.25 million – $43.25 million
Development Expenditures$42.5 million – $47.5 million

(a) Subsequent to the third quarter earnings call, the Company issued approximately 1.4 million shares through its at-the-market (ATM) program at an average price of $30.77 for gross proceeds of $43.7 million. On a combined basis, the ATM issuance and expected sale of John Marshall II reduced our 2020 Core FFO guidance by approximately $0.035 per share.
(b) Represents the sale of John Marshall II, which will reduce NOI by approximately $1.1 million per quarter

The non same-store multifamily properties in 2020 consist of the Assembly Portfolio, Cascade at Landmark, and the Trove multifamily development. John Marshall II is the only non same-store office property in 2020.

WashREIT’s 2020 Core FFO guidance is based on a number of factors, many of which are outside the Company’s control and all of which are subject to change. WashREIT may change the guidance provided during the year as actual and anticipated results vary from these assumptions, but WashREIT undertakes no obligation to do so.

2020 Guidance Reconciliation Table

A reconciliation of projected net loss attributable to the controlling interests per diluted share to projected Core FFO per diluted share for the year ending December 31, 2020, reflecting the dispositions assumptions above, is as follows:

LowHigh
Net income attributable to the controlling interests per diluted share(a) $0.08$0.14
Real estate depreciation and amortization(b)1.451.45
NAREIT FFO per diluted share1.531.59
Core adjustments
Core FFO per diluted share$1.53$1.59

(a) Excludes gains or losses on sale of real estate
(b) Includes impact from planned disposition during the year

Dividends

On January 6, 2020, WashREIT paid a quarterly dividend of $0.30 per share.

WashREIT announced today that its Board of Trustees has declared a quarterly dividend of $0.30 per share to be paid on March 31, 2020 to shareholders of record on March 17, 2020.

Conference Call Information

The Conference Call for Full Year and Fourth Quarter 2019 Earnings is scheduled for Friday, February 14, 2020 at 11:00 am ET. 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 Friday, February 28, 2020 at 11:00 pm ET.

USA Toll Free Number:1-877-481-4010
International Toll Number:1-919-882-2331
Conference ID:56869

The live on-demand webcast of the Conference Call will be available on the Investor section of WashREIT’s website at www.washreit.com.

About WashREIT

WashREIT owns and operates uniquely positioned real estate assets in the Washington D.C. metro area. Backed by decades of experience, expertise and ambition, we create value by transforming insights into strategy and strategy into action.  The Company’s portfolio of 46 properties includes approximately 3.9 million square feet of commercial space and 6,861 multifamily apartment units. These 46 properties consist of 22 multifamily properties, 16 office properties, and 8 retail centers. Our shares trade on the NYSE and our company currently has an enterprise value of more than $3.5 billion. With a track record of driving returns and delivering satisfaction, we are a trusted authority in one of the nation’s most competitive real estate markets.

Note: WashREIT’s press releases and supplemental financial information are available on the Company website at www.washreit.com or by contacting Investor Relations at (202) 774-3200.

Certain statements in our earnings release and on our conference call are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Such statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of WashREIT to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the risks associated with the ownership of real estate in general and our real estate assets in particular; the risk that any of the assumptions on which our updated 2020 earnings guidance is based are incorrect, the risk of failure to enter into and/or complete contemplated dispositions, at all, within the price ranges anticipated and on the terms and timing anticipated; the economic health of the greater Washington Metro region; changes in the composition of our portfolio; fluctuations in interest rates; reductions in or actual or threatened changes to the timing of federal government spending; the risks related to use of third-party providers and joint venture partners; the ability to control our operating expenses; the economic health of our tenants; the supply of competing properties; shifts away from brick and mortar stores to ecommerce; the availability and terms of financing and capital and the general volatility of securities markets; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; terrorist attacks or actions and/or cyber attacks; weather conditions and natural disasters; ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2018 Form 10-K and subsequent Quarterly Reports on Form 10-Q. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future events, or otherwise.

This Earnings Release also includes certain forward-looking non-GAAP information. Due to the high variability and difficulty in making accurate forecasts and projections of some of the information excluded from these estimates, together with some of the excluded information not being ascertainable or accessible, the Company is unable to quantify certain amounts that would be required to be included in the most directly comparable GAAP financial measures without unreasonable efforts

(1) NAREIT Funds From Operations (“FFO”) is a non-GAAP measure. It is defined by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) in its NAREIT FFO White Paper – 2018 Restatement as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of properties, impairments of depreciable real estate, and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently.

Core Funds From Operations (“Core FFO”) is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of WashREIT’s operating portfolio and affect the comparative measurement of WashREIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) expenses related to acquisition and structuring activities, (3) executive transition costs,  severance expenses and other expenses related to corporate restructuring and related to executive retirements or resignations, (4) property impairments, casualty gains, and gains or losses on sale not already excluded from FFO, as appropriate, and (5) relocation expense. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of WashREIT’s ability to incur and service debt and to distribute dividends to its shareholders.  Core FFO is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.

(2) For purposes of evaluating comparative operating performance, we categorize our properties as “same-store”, “non-same-store” or “other.” Same-store properties include properties that were owned for the entirety of the year being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the year being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property’s development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the year being compared. We define redevelopment properties as those for which have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

(3) Net Operating Income (“NOI”), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, lease origination expenses, general and administrative expenses, real estate impairment and gain or loss on extinguishment of debt. We also present NOI on a cash basis (“cash NOI”) which is calculated as NOI less the impact of straight-lining of rent and amortization of market intangibles. We believe that NOI and cash NOI are useful performance measures because, when compared across periods, they reflect the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI and cash NOI excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide each of NOI and cash NOI as a supplement to net income, calculated in accordance with GAAP. Neither represents net income or income from continuing operations, in either case calculated in accordance with GAAP. As such, NOI and cash NOI should not be considered alternatives to these measures as an indication of our operating performance.

(4) Net Debt to Adjusted EBITDA represents net debt as of period end divided by adjusted EBITDA for the period, as annualized (i.e. three months periods are multiplied by four) or on a trailing 12 month basis. We define net debt as the total outstanding debt reported as per our consolidated balance sheets less cash and cash equivalents at the end of the period. Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain/loss on sale of real estate, casualty gain/loss, real estate impairment, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expense and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate performance measure because it permits investors to view income from operations without the effect of depreciation, and the cost of debt or non-operating gains and losses. Adjusted EBITDA and Net Debt to Adjusted EBITDA are a non-GAAP measures.

(5) Average Occupancy is based on monthly occupied net rentable square footage or monthly occupied multifamily units as a percentage of total net rentable square footage or total multifamily units, respectively.

(6) Ending Occupancy is calculated as occupied square footage or multifamily units as a percentage of total square footage or multifamily units, respectively, as of the last day of that period.

(7) Lease rate growth, which we sometimes refer to as “trade-out”, is defined as the average percentage change in effective rent (net of concessions) for a new or renewed lease compared to the prior lease based on the move-in date.

Ending Occupancy Levels by Same-Store Properties (i) and All Properties
Ending Occupancy
Same-Store PropertiesAll Properties
December 31,December 31,
2019201820192018
Multifamily (calculated on a unit basis)95.0%94.8%94.9%94.8%
Multifamily94.9%94.8%94.8%94.8%
Office88.5%93.6%89.6%92.3%
Other (ii)90.9%89.9%90.9%91.9%
Overall Portfolio92.1%93.9%92.8%93.1%

(i) Same-store properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property’s development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared. Same-store properties exclude:

Acquisitions:

Multifamily – Assembly Alexandria, Assembly Manassas, Assembly Dulles, Assembly Leesburg, Assembly Herndon, Assembly Germantown, Assembly Watkins Mill and Cascade at Landmark
Office – Arlington Tower

Held for sale:

Office – John Marshall II

Sold properties (classified as continuing operations):

Office – 1776 G Street, Quantico Corporate Center, Braddock Metro Center and 2445 M Street

Discontinued operations:

Wheaton Park, Bradlee Shopping Center, Shoppes at Foxchase, Gateway Overlook, Olney Village Center, Frederick County Square, Centre at Hagerstown and Frederick Crossing

(ii) Same-Store Other consists of retail properties not classified as discontinued operations: Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S. Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village.  “Other” properties include discontinued operations.

 WASHINGTON REAL ESTATE INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(In thousands, except per share data)
(Unaudited)
Quarter Ended

December 31,

Year Ended

December 31,

OPERATING RESULTS2019201820192018
Revenue
Real estate rental revenue$80,667$71,740$309,180$291,730
Expenses
Real estate expenses30,61125,654115,580105,592
Depreciation and amortization38,81228,692136,253111,826
Real estate impairment8,3741,886
General and administrative expenses5,8535,35224,37022,089
Lease origination expenses4121,698
75,68859,698286,275241,393
Other operating income
Gain on sale of real estate61,00759,9612,495
Real estate operating income65,98612,04282,86652,832
Other expense
Interest expense(11,788)(12,346)(53,734)(50,501)
Loss on extinguishment of debt(1,178)
(11,788)(12,346)(53,734)(51,679)
Income (loss) from continuing operations54,198(304)29,1321,153
Discontinued operations
Income from operations of properties sold or held for sale5,99216,15824,477
Gain on sale of real estate339,024
Loss on extinguishment of debt(764)
Income from discontinued operations5,992354,41824,477
Net income54,1985,688383,55025,630
Less: Net income attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests$54,198$5,688$383,550$25,630
Income (loss) from continuing operations$54,198$(304)$29,132$1,153
Depreciation and amortization38,81228,692136,253111,826
Real estate impairment8,3741,886
Gain on sale of depreciable real estate, net(61,007)(59,961)(2,495)
Funds from continuing operations (1)32,00328,388113,798112,370
Income from discontinued operations5,992354,41824,477
Discontinued operations real estate depreciation and amortization2,4174,9269,402
Gain on sale of real estate(339,024)
Funds from discontinued operations8,40920,32033,879
NAREIT funds from operations(1)$32,003$36,797$134,118$146,249
Non-cash loss (gain) on extinguishment of debt(244)1,178
Tenant improvements and leasing incentives(6,857)(10,730)(15,898)(23,535)
External and internal leasing commissions capitalized(2,700)(3,556)(6,371)(5,856)
Recurring capital improvements(4,345)(2,110)(6,746)(3,954)
Straight-line rents, net(763)(959)(3,266)(4,343)
Non-cash fair value interest expense(178)(214)(778)(865)
Non-real estate depreciation & amortization of debt costs1,0309895,0053,887
Amortization of lease intangibles, net5043722,1831,842
Amortization and expensing of restricted share and unit compensation1,4791,6827,7436,746
Funds available for distribution(4)$20,173$22,271$115,746$121,349
Quarter Ended

December 31,

Year Ended

December 31,

Per share data:2019201820192018
Income from continuing operations(Basic)$0.66$$0.36$0.01
(Diluted)$0.66$$0.36$0.01
Net income attributable to the controlling interests(Basic)$0.66$0.07$4.75$0.32
(Diluted)$0.66$0.07$4.75$0.32
NAREIT funds from operations(Basic)$0.39$0.46$1.67$1.85
(Diluted)$0.39$0.46$1.66$1.84
Dividends declared$0.30$0.30$1.20$1.20
Weighted average shares outstanding – basic81,22079,74880,25778,960
Weighted average shares outstanding – diluted81,31379,74880,33579,042
WASHINGTON REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
December 31,
20192018
Assets
Land$566,807$526,572
Income producing property2,392,4152,055,349
2,959,2222,581,921
Accumulated depreciation and amortization(693,610)(669,281)
Net income producing property2,265,6121,912,640
Properties under development or held for future development124,19387,231
Total real estate held for investment, net2,389,8051,999,871
Investment in real estate sold or held for sale, net57,028203,410
Cash and cash equivalents12,9396,016
Restricted cash1,8121,624
Rents and other receivables65,25963,962
Prepaid expenses and other assets95,149123,670
Other assets related to properties sold or held for sale6,33618,551
Total assets$2,628,328$2,417,104
Liabilities
Notes payable, net996,722$995,397
Mortgage notes payable, net47,07448,277
Line of credit56,000188,000
Accounts payable and other liabilities71,13657,946
Dividend payable24,66824,022
Advance rents9,3539,965
Tenant security deposits10,5959,501
Liabilities related to properties sold or held for sale71815,518
Total liabilities1,216,2661,348,626
Equity
Shareholders’ equity
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding
Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 82,099 and 79,910 shares issued and outstanding, as of December 31, 2019 and December 31, 2018 respectively821799
Additional paid-in capital1,592,4871,526,574
Distributions in excess of net income(183,405)(469,085)
Accumulated other comprehensive income1,8239,839
Total shareholders’ equity1,411,7261,068,127
Noncontrolling interests in subsidiaries336351
Total equity1,412,0621,068,478
Total liabilities and equity$2,628,328$2,417,104
The following tables contain reconciliations of same-store net operating income to net income attributable to the controlling interests for the periods presented (in thousands):
Quarter Ended December 31, 2019MultifamilyOfficeOtherTotal
Same-store net operating income(3)$15,485$17,611$3,235$36,331
Add: Net operating income from non-same-store properties(3)6,4277,29813,725
Total net operating income(2)$21,912$24,909$3,235$50,056
Add/(deduct):
Interest expense(11,788)
Depreciation and amortization(38,812)
General and administrative expenses(5,853)
Lease origination expenses(412)
Gain on sale of real estate61,007
Income from continuing operations54,198
Discontinued operations:
Income from operations of properties sold or held for sale
Net income54,198
Less: Net income attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests$54,198
Quarter Ended December 31, 2018MultifamilyOfficeOtherTotal
Same-store net operating income(3)$14,803$18,9103,357$37,070
Add: Net operating income from non-same-store properties(3)9,0169,016
Total net operating income(2)$14,803$27,926$3,357$46,086
Add/(deduct):
Interest expense(12,346)
Depreciation and amortization(28,692)
General and administrative expenses(5,352)
Loss from continuing operations(304)
Discontinued operations:
Income from operations of properties sold or held for sale5,992
Net income5,688
Less: Net income attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests$5,688
The following tables contain reconciliations of same-store net operating income to net income attributable to the controlling interests for the periods presented (in thousands):
Year Ended December 31, 2019MultifamilyOfficeOtherTotal
Same-store net operating income(3)$60,638$71,387$13,468$145,493
Add: Net operating income from non-same-store properties(3)16,35831,74948,107
Total net operating income(2)$76,996$103,136$13,468$193,600
Add/(deduct):
Interest expense(53,734)
Depreciation and amortization(136,253)
General and administrative expenses(24,370)
Lease origination expenses(1,698)
Real estate impairment(8,374)
Gain on sale of real estate59,961
Income from continuing operations29,132
Discontinued operations:
Income from operations of properties sold or held for sale16,158
Gain on sale of real estate339,024
Loss on extinguishment of debt(764)
Net income383,550
Less: Net income attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests$383,550
Year Ended December 31, 2018MultifamilyOfficeOtherTotal
Same-store net operating income(3)$57,980$74,799$13,026$145,805
Add: Net operating (loss) income from non-same-store properties(3)(21)40,35440,333
Total net operating income(2)$57,959$115,153$13,026$186,138
Add/(deduct):
Interest expense(50,501)
Depreciation and amortization(111,826)
General and administrative expenses(22,089)
Gain on sale of real estate2,495
Loss on extinguishment of debt(1,178)
Real estate impairment(1,886)
Income from continuing operations1,153
Discontinued operations:
Income from operations of properties sold or held for sale24,477
Net income25,630
Less: Net loss attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests$25,630
The following table contains a reconciliation of net income to core funds from operations for the periods presented (in thousands, except per share amounts):
Quarter Ended

December 31,

Year Ended

December 31,

2019201820192018
Net income$54,198$5,688$383,550$25,630
Add/(deduct):
Real estate depreciation and amortization38,81228,692136,253111,826
Gain on sale of depreciable real estate(61,007)(59,961)(2,495)
Real estate impairment8,3741,886
Discontinued operations:
Gain on sale of real estate(339,024)
Real estate depreciation and amortization2,4174,9269,402
NAREIT funds from operations(1)32,00336,797134,118146,249
Add:
Loss on extinguishment of debt7641,178
Restructuring expenses2703,019
Core funds from operations(1)$32,273$36,797$137,901$147,427
Quarter Ended

December 31,

Year Ended

December 31,

Per share data:2019201820192018
NAREIT FFO(Basic)$0.39$0.46$1.67$1.85
(Diluted)$0.39$0.46$1.66$1.84
Core FFO(Basic)$0.40$0.46$1.71$1.86
(Diluted)$0.40$0.46$1.71$1.86
Weighted average shares outstanding – basic81,22079,74880,25778,960
Weighted average shares outstanding – diluted81,31379,76080,33579,042
CONTACT:
Amy Hopkins
Vice President, Investor Relations
E-Mail: ahopkins@washreit.com

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Real estate deals stalled according to Altus Group report – Daily Commercial News

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Webinar panellists asked for their reading of the real estate sector across the country during a recent session billed as a pan-Canadian “pulse check” suggested the prospects of recovery in the industry are fraught with uncertainty.

The May 25 Urban Land Institute webinar began with analysis of first-quarter real estate market statistics as well as second-half 2020 market forecasts by Altus Group executive researcher Raymond Wong and his colleague Patricia Arsenault, an executive vice-president in research consulting with the firm.

Wong reported that a survey of clients showed over 50 per cent of respondents said all real estate investment transactions were currently on hold. Broken down into sectors, 50 per cent of office deals were on ice and 58 per cent of retail transaction were on hold, as were 51 per cent of industrial transactions and 53 per cent of residential.

Arsenault addressed the supply side of housing, noting COVID-related uncertainties influencing investors and builders included future low immigration and flat employment numbers.

“Most but not all new project launches planned for spring were pushed off,” Arsenault said. “Most of the delayed projects could be brought to market fairly quickly but that is only if there if was evidence of sustained pick-up in demand.

“As well, I suspect there will be many project postponements for a longer time period as proponents re-evaluate their projects’ viability.”

On the housing demand side, there was bad news and better news, Arsenault said.

The poor economy won’t necessarily mean housing demand will switch from ownership to rentals, she explained.

“Rather, household formation rates tend to go down, younger people will stay at home longer, they will move back in with parents, singles double up, couples delay splitting up, all those factors…will impact housing demand levels,” Arsenault explained.

But the burden of unemployment has not been borne equally, she said, with layoffs hitting people on the lower end of the socio-economic spectrum more than the more wealthy.

“Many of those could choose to buy right now,” she said. “Or they could still choose to wait and see what’s going on in the short term.”

But eventually, Arsenault said, that group represents potential future pent-up demand.

The presentations by Wong and Arsenault were followed by a panel discussion of real estate and construction prospects across the country featuring development experts from Ontario, Alberta and British Columbia.

Jeff Thompson, Alberta-based vice-president with Ledcor, a constructor active in many sectors, noted there was a lot of “tire kicking” going on in the housing sector.

“Everybody still has lots of projects that they want to proceed with,” he said. “They don’t know when exactly. They have to figure out what the metrics need to look like.”

But still, across the country, the pipeline of potential projects is full, though there is regional disparity, he said. He said the dip in productivity felt during the pandemic might continue for a couple more months but then production could return.

Brian McCauley, Vancouver-based president and CEO of Concert Properties, which has a busy portfolio in the residential, commercial and industrial sectors, said construction productivity in his province was returning to normal after cratering in the first weeks after the start of the crisis in March, with 85 to 90 per cent of the construction workforce now back on the job, but costs raised potential alarms.

“We don’t know how trade contractors will price this uncertainty or these hiccups that are related to COVID’s new safety precautions,” said McCauley. “That is not only causing some delays on the production side, but it is also a point of uncertainty moving forward.”

He said he doubts the Canada Mortgage and Housing Corporation’s warning that housing prices could drop by up to 18 per cent in the next year. He said given supply constraint and continued demand, it is likely prices will remain high, especially in Vancouver and Toronto.

Key factors to rebuilding homebuyer confidence, McCauley said, are jobs returning in a stable economy, resumption of immigration and low interest rates.

Meanwhile, McCauley said there could be a “seismic shift” in the public-oriented retail market, including restaurants and bars. It was a point introduced by panel moderator Duncan Wlodarczak, Vancouver-based chief of staff with the Onni Group, who said he heard from one U.S. commentator recently that 80 per cent of restaurants might go under.

“Some of them might not survive going forward but we are doing everything we can to keep them active and engaged,” McCauley said.

Panellist Lesley Leech, a Toronto-based director with office and retail developer Cadillac Fairview, acknowledged the retail market was hit hard. She said her firm is working constantly to help tenants survive their months-long shutdowns. Leech was asked if the developer was working on a strategy to repurpose some of its retail portfolio.

“Our investment team and development team is strategizing on all our current plans out there and we will wait to see what the trends are,” she said, adding Cadillac Fairview would wait to obtain more information before making such “major decisions.”

Follow the author on Twitter @DonWall_DCN.

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Muskoka Real Estate Red-Hot as Buyers and Renters Turn to Cottage Country – Toronto Storeys

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With travel restrictions tightly in place, the cancellation of events, and shuttered patios throughout the city, the return of the sweet smell of spring just didn’t evoke the same collective sense of joy for Torontonians as it has in the past.


As it became apparent that summer 2020 would look drastically different in response to the COVID-19 pandemic, it also became clear that having access to any outdoor space was a luxury many city residents did not enjoy (if even just a balcony). The lucky ones this summer are those with backyards, while the really fortunate ones complete these yards with pools.

But those who find themselves on a whole other level of fortune this summer are the ones with access to a cottage in Ontario’s pristine – and very pricy – cottage country.

Photo by Basil Thomas on Unsplash

Nearly three months (and counting) of quarantine mode has rendered most Torontonians stir crazy at best, especially those confined to small spaces typical of the Toronto core. Facilitating cravings for both a change of scenery from the restraints of the sweltering concrete, and to reconnect with nature and its many benefits, the cottage country real estate market is red-hot right now.

And this has realtors north of the city breathing a collective sigh of relief.

READ: Toronto Homebuyers Looking to Buy in Cottage Country During COVID-19

“It was looking like we were going to have a catastrophically bad year in March and early April. On the rental side, I was looking at half a million dollars of cancelled reservations from people who lived in places like Europe and Australia,” said Sotheby’s Realty sales representative Maryrose Coleman, who is based in Muskoka’s Port Carling community and is also a co-founder of luxury cottage rental company Muskoka District Rentals. “The cancellations just kept coming in. On the real estate side, the Cottage Life Show had been cancelled in March, and many visitors actually come to that show looking to purchase a cottage. We always put a lot of time and effort into it, getting our listings and materials ready so that we’re there for prospective buyers.”

A second blow to the cottage country rental market came with Ontario’s COVID-19-inspired restrictions on short-term rentals that went into effect on April 4, banning any units in the province from attempting to rent for less than a 28-day time period. “We had to go and proactively change all of our rentals that were booked until the end of June,” says Coleman. Right now, the restriction is in place until June 25, but Coleman suspects it could be extended throughout the summer.

Towards the end of April and in early May, things started to shift, says Coleman, as eyes turned north to cottage country. “People were thinking about their summer plans and realizing that they weren’t going to travel, and we started to get a lot of rental inquiries,” says Coleman. “Many people were actually looking to book for one month, two months, or three months – which is not unusual – but normally those people book a lot earlier, like in the August or September the year before.” The cancellation of overnight summer camp heightened this demand. “I was literally slammed,” says Coleman. “I had 27 phone calls within an hour and 300 emails.”

Muskoka
Sagamo Estate, Lake Joesph, Muskoka – for sale for $6,995,000

The demographic of cottage-seekers – both buyers and renters – includes everyone from double-income/no-kid millennial couples and young families, to retired couples looking to share a slice of Ontario’s north with their children and grandchildren for the summer months.

Usually, Jason Burke takes his two kids to an Ontario Park in the summer and rents a cabin. “This year, I want a little more privacy and don’t want to use shared facilities in light of the ongoing pandemic,” says Burke. “So I’m going to be looking for a private option, as opposed to the Ontario Parks choice. What I think I’ll do is rent a cottage that’s close to a provincial park, so I can still benefit from the offerings of the park, but stay with my family in our own space.”

Toronto resident Tristan Mackay entered the cottage market this season with his wife and 9-month-old son. “We started looking for a cottage given that we’ll likely travel a lot less for the foreseeable future,” says Mackay. “Plus, as everyone gets older and has families, the cottage invites are inevitably a lot less frequent, and more difficult to facilitate. So this seems like the right time, especially now that we have our son.” Mackay noticed right away that many of the most coveted cottages – those with the best views and exposure – are getting quickly snapped up. “The places that we recently visited have already sold,” he says.

The common theme among cottage-seekers for 2020, say realtors, is a sense of urgency to secure a piece of lakeside real estate for the summer – something that’s a contributing factor to the slim pickings for prospective buyers. “Looking at this year compared to last year, the inventory is low, and there are more buyers,” says Ruthann Brown, a realtor at Muskoka’s Engel & Volkers brokerage. “My thought is that there are would-be buyers who now don’t want to sell this year, because they want to get out of the city too. If they sell now, they’re stuck in the city. Then, of course, there are new buyers looking to get out of the city due to changes in potential travel plans and cancellations of summer camps.”

This urgency is so high, says Brown, that prospective buyers are opting to rent while they search for the right cottage just to lock in something for the summer (something that also clearly affects the dwindling rental supply). It’s also reflected in the amount of dollars cottage-seekers are willing to drop. “The prices have not gone up, however, there’s less willingness to negotiate down right now because of the limited inventory available of what today’s buyer is looking for,” says Coleman. “There’s a clear willingness for buyers to pay more for the right property than they would have before just to get something locked in. Anything ‘nice’ by today’s criteria – the urban lake house aesthetic – sells before making it onto the market.”

Muskoka
Acton Island, Lake Muskoka – for rent starting at $1,600 per night

Not surprisingly, the most affordable properties are in incredibly high demand. “Anything under $1-million is flying,” said Joshua Chisvin, a sales representative for PSR Brokerage, which has a location in Bracebridge. “A lot of cottages under $750,000 are getting multiple offers and bidding wars, and anything under $2-million on the ‘big three’ (Lake Muskoka, Joseph, and Lake Rosseau) is also beyond busy.” He notices a similar demand in the rental market. “Many properties are seeing double the rent offered in 2020 compared to 2019,” says Chisvin.

The high-end Muskoka market – that obtainable to Toronto’s one per cent – has also been bustling, says Chisvin, very possibly in direct response to COVID-19. “The luxury market has seen an increase in attention from buyers and renters, ranging from $4-million to $20-million for purchase, as well as rentals starting at $45,000 per week,” says Chisvin. Given the probability that the restrictions on short-term rentals will last throughout the summer, that rental figure jumps to a cool $180,000 for the 28-day minimum in what we can only assume is a Muskoka mansion.

For renters with deep enough pockets, renting a cottage for 28 days takes little convincing. After all, while the office may remain closed for many, the workday continues remotely. For cottagers, “working remotely” could mean creating presentations on the dock or answering emails from a hammock – something that sounds pretty appealing after months of working from home workspaces in the city. “Tellingly, the biggest question I’m receiving is about internet quality,” says Brown.

The 28-day minimum – and the current uncertainty as to whether or not it will be extended – makes renting a cottage a little trickier this year, especially for those simply seeking a week or two-week long outdoor fix. Not to mention, social distancing measures mean that groups of unrelated people are out of the question (so, you may have to reconsider that annual ‘boys’ or ‘girls’ cottage weekend this year). “I’m now reaching out to my renters saying ‘this is what I see happening, this is how I see this playing out,’ and offering less expensive cottage options for the 28-night minimum, a refund, or a deposit towards next season,” says Coleman.

It should be noted that all of Coleman’s cottage rentals are undergoing extensive cleaning measures in light of COVID-19, and will sit vacant for three days between guests. Renters are also required to undergo health screenings and follow proper social distancing measures so long as they are at the cottage.

For renters, the lure of going “under the table” and renting from a law-breaking end user for a week on the lake is admittedly somewhat tempting. Coleman, however, warns that some people have not been able to get their money back when they’ve had to cancel a private booking. “It’s riskier to rent from an end user during these times than from a company that can more easily withstand the blow of the cancellations of a bunch of rentals,” says Coleman. For those in the market to buy this season, she recommends that you work with a local agent who knows the ins and outs of cottage country and its properties.

Either way, if you’re seeking a slice of lakeside cottage country real estate this summer, the time to act is now.

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Vancouver Real Estate Prices Slide, With Typical Home Dropping $7600 Last Month – Better Dwelling

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Greater Vancouver real estate is still adjusting to the pandemic, but buyers seem to be more deterred than sellers. Real Estate Board of Greater Vancouver (REBGV) data shows the price of a typical home made a significant monthly decline in May. Inventory fell from last year’s levels, but didn’t drop nearly as much as sales did.

Great Vancouver Real Estate Prices Dropped $7,600 Last Month

Greater Vancouver real estate prices are up from the same month last year, but not much else. REBGV reported the benchmark price for a home reached $1,028,400 in May, up 2.9% from last year. In the City, Vancouver East’s composite benchmark reached $1,089,000, up 3.5% from last year. Pricey Vancouver West saw the benchmark reach $1,283,000, up 4.2% from last year. Looking at the benchmark price chart, you may have noticed this isn’t the first impression.

Greater Vancouver Composite Benchmark Price

The price of a typical home across Greater Vancouver, in Canadian dollars.

Source: REBGV, Better Dwelling.

The year-over-year rate of growth is higher than last month, but prices are down using monthly or peak numbers. The 2.9% annual increase for May is higher than it was in May 2019. However, prices are down 0.73% from April 2020 – about $7,600 lower over the span of a month. Prices are also down 6.88% from peak, whereas they were down just 6.19% from the month before. A lot of odd dynamics created by the monthly price change falling almost twice as fast as last year, but the takeaway is prices are lower from peak, and last month.

Greater Vancouver Composite Benchmark Price Change

The annual percent change of a typical home across Greater Vancouver.

Source: REBGV, Better Dwelling.

Greater Vancouver Home Sales Fall Over 43%

Greater Vancouver real estate sales slipped, although this was largely expected due to the pandemic. There were 1,485 home sales in May, down 33.9% from a month before. This represents a decline of 43.7% when compared to the same month last year. Once again, the drop in sales was expected due to the pandemic. However, sales coming in 54% lower than the 10-year average for the month is a tough pill to swallow regardless.

Greater Vancouver Composite Sales Vs. Listings

The number of homes sold vs total inventory in Greater Vancouver.

Source: REBGV, Better Dwelling.

Greater Vancouver Home Inventory Fell, But Not As Much As Sales

New listings for Greater Vancouver homes didn’t fall quite as much as sales. REBGV saw 3,684 new listings in May, up 59.3% from the month before. This represents a 37.1% decline compared to the same month last year. The smaller decline for new listings helped prevent total inventory from completely drying up.

Total inventory, a.k.a. active listings, climbed higher across the board. REBGV reported 9,927 active listings in May, up 5.7% from a month before. This represents a decline of 32.4%, when compared to the same month last year. Once again, total inventory didn’t quite fall as much as sales, which actually led to a lower ratio of sales to listings.

The sales to listings ratio (SALR) slid from last year. The SALR fell to 15% in May, down from 18% during the same month last year. Generally, analysts believe prices fall when the ratio drops below 12%. Prices are expected to rise when the SALR is above 20%, and considered balanced between 12% and 20%. The market is still in balanced territory, but a little closer to seeing prices fall, compared to last year.

The pandemic is slowing things down, but buyers appear to be more deterred than sellers at this point. Price growth did still accelerate on an annual basis, which is considered a bullish indicator. However, the mechanics are somewhat broken, considering prices fell on both the month and from peak.

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