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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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Ontario Passes Bill Intended to Modernize Real Estate Rules – Toronto Storeys

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Bill 145, the Trust in Real Estate Services Act, 2019 (TRESA) has officially passed and the new rules will now reflect today’s changing housing market.

On Thursday, at the Ontario Real Estate Association’s REALiTY Conference and AGM, OREA President Sean Morrison announced the Ontario Government had passed the Bill.

READ: Ontario Changes Real Estate Rules For The First Time in 20 Years

According to OREA, the legislation was called back for a third reading on Wednesday, and, at 11:50 am on Thursday, the Bill unanimously passed third and final reading and TRESA amends the Real Estate & Business Brokers Act, 2002 (REBBA).

Morrison said the passing of TRESA is a “huge win” for its realtor members, their clients, and Ontarians.

“Thanks to the Ford Government’s newly passed legislation, Ontario’s homebuyers and sellers can have greater confidence that the Realtor at their side during the largest financial transaction of their life has the highest professional standards, training and modern tools in North America, such as the ability to form personal real estate corporations.”

The passing of the Bill will help “enhance professional standards, create a more fair and efficient business environment, and better protect consumers dealing with those who trade in real estate in Ontario, including realtors.”

OREA says it’s been advocating for a review of REBBA for over a decade and the passing of the legislation is “historic” as the rules of the former act were outdated and over 18 years old.

“By strengthening consumer protection and fixing the broken real estate discipline system, the Government of Ontario is showing Realtors and home buyers and sellers that it is on their side,” said OREA CEO, Tim Hudak.

“Ontarians deserve the best when it comes to making the biggest financial transaction of their lives and TRESA will make this province the North American leader once again when it comes to a well-regulated real estate market.” Speaking with Toronto Storeys earlier this month ahead of the bill’s passing, Hudak explained that it would put Ontario realtors at the “forefront of professional standards.” Adding that while real estate is changing, “trust in a realtor remains king”.

TRESA is one of the few pieces of legislation in Ontario to receive bi-partisan support with positive and constructive debate in the Legislature led by Minister Lisa Thompson and NDP Consumer Critic Tom Rakocevic, as well as other MPPs.

Now, OREA says it will continue to work closely with the provincial government to develop regulations for the Bill and work towards enacting the legislation into law.

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High demand for luxury homes in Collingwood, says real estate company – CollingwoodToday

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NEWS RELEASE
ENGEL AND VÖLKERS
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Engel and Völkers Collingwood Muskoka is reporting a strong current trend of affluent baby boomers selling their luxury Muskoka properties and relocating to Collingwood to live full time.

At the same time, boomers from Toronto, and a new wave of millennial buyers, are showing interest in making Collingwood their full-time residence.

The area’s walkability and proximity to hospitality, recreation and entertainment. are attracting both young families and retirees who enjoy the year-round active lifestyle.

Collingwood has shifted from a seasonal vacation market to a popular full-time residential market with increasing investment. Private schools are growing in popularity due to the influx of new families, and its millennial buyers are entrepreneurial, opening breweries, fitness studios, interior design studios, restaurants and other service-related businesses.

A blooming cannabis industry in the area has seen an uptick in inquiries for agricultural land, and the first cannabis shop officially opened its doors in December, hiring 15 people. Another major segment is comprised of a cohort of professionals who work remotely, particularly in tech industries.

According to 2016 Census data, Collingwood is one of the fastest-growing communities in Canada, ranking 24th on the list of fastest-growing municipalities located outside a census metropolitan area. Collingwood saw a 13.3 per cent jump in population, increasing to 21,793 from 19,241.

Market spotlight

Collingwood is currently a balanced market with conditions favouring sellers due to a supply shortage, particularly within the condo market.

Demand remains high within the luxury segment with new-to-market residential freehold properties between $1 million to $2 million selling quickly.

In 2019, Collingwood experienced increased construction activity, seeing it become a hot destination for long term living – particularly for new families and high net worth baby boomers – a major trend to watch in the area.

Last year ended strong, with residential sales in the Southern Georgian Bay Area totaling 158 units in December 2019, up 22 per cent year-over-year.

Home sales in the western region, which includes Wasaga Beach, Clearview Township, Collingwood, The Blue Mountains, the Municipality of Meaford and Grey Highlands numbered 89 units in December 2019. This was an increase of 11.3 per cent (nine sales) from December 2018. An In-Depth Look

Home sales in the western region numbered 1,997 units over the course of 2019, up 10.6 per cent from the same period in 2018.

MLS reported that home sales improved throughout 2019, with the average price of homes sold in the Western Region in December 2019 reaching a record $594,714 – a drastic increase of 20.7 per cent from the previous year.

Active residential listings numbered 751 units at the end of December 2019, up 4.2 per cent from December 2018. This pick-up and interest in market activity is expected to grow in 2020.

The Blue Mountains remains as the top luxury hotspot in the area with average prices hitting $926,070 in January 2020. Following close behind is Collingwood, particularly in the infill, with the area seeing a lot of new luxury developments and interest in tearing down and building new properties.

Waterfront properties along Georgian Bay ranked the highest in terms of top-selling luxury properties in Collingwood and The Blue Mountains. The market saw more buyers seeking and building custom contemporary builds with flat roofs, large glass windows and smart home tech integration. This is expected to continue.

According to Engel & Völkers Collingwood Muskoka, Thornbury is experiencing an increase in interest and is expected to see a pickup in luxury real estate. Meaford is also growing as people are beginning to migrate west for residence.

Engel & Völkers Collingwood Muskoka currently has 14 listings priced at over $1 million in Collingwood. In 2019, the shop closed 11 deals over $1 million with the most expensive sale at $2.2 million.

This luxury segment of $1 million-plus properties represents 8.4 per cent of Engel & Völkers Collingwood Muskoka’s total transactions in 2019. Currently, the most expensive property listing from the shop is 449 Island View Road, priced at $2.99 million.

2020 Forecast

Engel & Völkers Collingwood Muskoka expects prices in the region will increase by 10 per cent within the Collingwood market. The Collingwood market is projected to grow at a healthy, steady pace in 2020, with the average sale price across all property types up 30.9 per cent to $618,571 in January 2020 compared to January 2019. In the Western District, the average price grew from $594,714 in December 2019 to $663,552 in January 2020. With this rapid price growth in January alone, Engel & Völkers Collingwood Muskoka expects the market to remain a real estate hot spot that will grow further into 2020.

Three trends to watch in 2020 include the movement of millennials and baby boomers to the market, the end to the market correction, and a steady uptick in average home prices with new interest in the luxury segment.

Overall, home prices in Collingwood are expected to rise with the popularity of the recreational market and increasing desire for long-term living in the area.

Mortgage rates are expected to be on the decline in 2020 as some have dropped below 4 per cent. For example, Royal Bank of Canada, the country’s largest mortgage lender, has reduced its rate to 3.09 per cent in January 2020 and TD Bank has recently cut its rate from 5.34 per cent to 4.99 per cent. Rates are predicted to continue to decline – posing a good opportunity for buyers to enter the market.

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Is climate change being priced into coastal real estate? Depends if you are buying from a believer or not – Financial Post

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Many believe climate change will affect economies and societies across the planet, and there are already signs that concerns are working their way into certain real estate prices.

Recently published research in the journal The Review of Regional Studies revealed that dwellings facing the highest risk of flooding from a rise in sea levels sell for a discount relative to risk-free properties.

Authors Jason Beck and Meimei Lin analyzed sales of 42,000 single-family homes in Savannah, Georgia, for the period covering 2007 to 2016. Using data from the National Oceanic and Atmospheric Administration, the authors categorized vulnerability to inundation for each dwelling. The flooding risk was deemed the highest for properties expected to be inundated with a one-foot rise in sea level. The lowest risk was assigned to properties only likely to flood for a six-foot increase in sea level.

For Savannah, properties susceptible to flooding for an increase in sea level of three feet or less sold at a 3.1 per cent discount relative to dwellings deemed not at risk. Houses exposed to flooding for a rise in sea-level between three and six feet, however, did not report a discount relative to the risk-free properties.

When the authors divided the study into two distinct periods, they observed that the discount due to climate change was higher for the more recent period. This suggest that with the passage of time, risk awareness increased, and the effect of potential flooding risk grew over time.

The results come with one puzzle. Waterfront properties in many coastal regions across the globe continue to sell for a premium. If the risk of flooding posed by climate change is real, do property values reflect such risks?

A soon-to-be-published paper in the journal Review of Financial Studies offers some clues to the problem. Markus Baldauf of the University of British Columbia and others analyzed millions of residential transactions in the United States to determine the impact of future flooding vulnerability on transaction prices.

They also controlled for climate-change related beliefs at the local level by categorizing counties as “believers” and “deniers” using beliefs data from Yale Program on climate change. The Yale Climate Survey posed the question: Do you think that global warming is happening?

The answer was tabulated as the share of respondents in a county who answered yes. The authors characterized counties as “believers” if the share of those who answered yes was greater than the median value for the overall response. The “denier” counties were those who responded yes were less than the overall median response.

The authors quite interestingly found that “homes located in climate change ‘denier’ neighbourhoods sell for about seven per cent more than homes in ‘believer’ neighbourhoods.” Using the median priced house as an example, the authors demonstrated that if such a house was “relocated” from a denier county to a believer county, its value would decrease by approximately $26,220, which accounted for 13.8 per cent of the median price of $190,000.

It is not evident from the paper if the believers were overreacting to climate change risks or the deniers were in denial, the difference in valuation, though, was found to be statistically significant.

Research on housing in Helsinki, Finland, showed that when flood risks were disclosed to residents in the form of high-resolution flood maps, a statistically significant price drop was observed for coastal properties with greater probability of flooding.

The Finnish study, published in the Journal of Real Estate Finance and Economics in 2016, showed that in addition to the price drop, some demand for housing shifted from coastal dwellings with an elevated risk of flooding to places with similar coastal amenities, but a lower risk of flooding.

The review of research presented above allows us to draw some conclusions. Waterfront properties in coastal regions continue to be in high demand and sell at a premium. Coastal properties, though, can be categorized based on flooding risk due to global warming or other factors.

Empirical research has demonstrated that properties less or unlikely to be flooded in the future sell at a premium. However, as the flooding risk elevates, coastal properties experience a discount in property values.

Still, a drop in values is more pronounced in areas inhabited by those who believe in climate change. In counties where climate change deniers are in majority, the expected drop in valuation is lower.

Thus, the answer to the question of whether global warming affects housing prices depends at least in part on who you’re asking.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

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