This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities of Washington REIT, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification of such securities under the securities law of any such jurisdiction. If Washington REIT were to conduct an offering of securities in the future, it will be made under an effective registration statement filed with the Securities and Exchange Commission and only by means of a prospectus supplement and accompanying prospectus. In such an event, a copy of the prospectus and the applicable preliminary prospectus supplement and final prospectus supplement, as well the final term sheet, relating to such transaction will be able to be obtained from the Securities and Exchange Commission atwww.sec.gov, by the underwriters in that offering, or by contacting Washington REIT at 202-774-3200. Before you invest in any such offering, you should read the applicable prospectus supplement related to such offering, the accompanying prospectus and the information incorporated by reference therein and other documents Washington REIT has then filed with the Securities and Exchange Commission for more complete information about Washington REIT and any such offering.
Certain statements in this presentation 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. Currently, one of the most significant factors is the potential adverse effect of the COVID-19 virus and ensuing economic turmoil on the financial condition, results of operations, cash flows and performance of the WashREIT, particularly our ability to collect rent, on the financial condition, results of operations, cash flows and performance of our tenants, and on the global economy and financial markets. The extent to which COVID-19 impacts WashREIT and its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified in the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended by Amendment No. 1 to the Annual Report on Form 10-K, filed on March 6, 2020, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. Additional 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 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 economic health of the greater Washington metro region; the risk of failure to enter into/and or complete contemplated acquisitions and dispositions at all, within the price ranges anticipated and on the terms and timing anticipated; 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; 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, natural disasters and pandemics; 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 2019 Form 10-K, as amended by Amendment No. 1 to the Annual Report on Form 10-K, filed on March 6, 2020, 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.
Use of Non-GAAP Financial Measures and other Definitions
This presentation contains certain non-GAAP financial measures and other terms that have particular definitions when used by us. The definitions and calculations of these non-GAAP financial measures and other terms may differ from those used by other REITs and, accordingly, may not be comparable. Please refer to the definitions and calculations of these terms and the reasons for their use, and reconciliations to the most directly comparable GAAP measures included later in this investor presentation.
This presentation 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.
Market data and industry forecasts are used in this presentation, including data obtained from publicly available sources. These sources generally state that the information they provide has been obtained from sources believed to be reliable, but the accuracy and completeness of the information is not assured. The Company has not independently verified any such information.
Navigate Our Story
Our portfolio is most heavily weighted to value-oriented multifamily properties located in high-growth Northern VA submarkets with limited competitive supply
(Recently delivered Trove, 401 units)
(All multifamily, 767 shovel-ready units)
(1) Pro forma for stabilized Net Operating Income from the Trove development and the sales of Monument II and 1227 25th Street that closed in December 2020
WASHREIT VALUE PROPOSITION
WashREIT's value proposition reflects a track record of successful capital allocation, solid long-term growth prospects, durable cashflows and a strong liquidity position
Completed ~$3.7B of strategic portfolio transactions since 2013 to recycle capital into assets with stronger longer-term risk adjusted growth potential
Eliminated the major risks to cashflow stability within our portfolio including selling big box retail assets and single-tenant office assets
Strong, stable cash collection performance reflects the resilience of our local economy
No exposure to co-working operators, no co-working tenants, no single-tenant risk and limited near-term expirations
~3,000-unit renovation pipeline
Currently leasing up our first WashREIT-led, ground-up multifamily development (Trove)
Future development pipeline of over 3,100 multifamily units with 767 shovel-ready at Riverside
Approximately $670 million of available liquidity (1)
Stable BBB/Baa2 investment grade credit ratings
Zero secured debt and well-balanced debt maturity ladder
(1) As of 12/31/2020
WASHINGTON METRO UPDATE
WASHINGTON METRO IS A RESILIENT MARKET
Washington Metro has experienced lower unemployment than most other major metro areas and U.S. overall
9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
Source: Bureau of Labor Statistics, February 2021.
OFFICE-USING JOB SECTORS REMAIN STABLE
Washington Metro has experienced significantly higher office-using employment stability than other major metro areas and the U.S. overall
December 2020 YoY Employment Change in Office-Using Sectors(1)
U.S. Job Decline: 4.3%
-5% -6% -7% -8%
Washington Metro jobs decreased 2.2% in December vs 4.3% in U.S. overall across the Info, Finance, PBS and Government sectors
Source: Bureau of Labor Statistics, December 2020.
(1) Sectors include Information, Financial Activities, Professional and Business Services and Government
MULTIFAMILY COLLECTIONS REMAIN STRONG
WashREIT multifamily collections continue to outperform U.S. averages, reflecting the resilience of our local economy and strong portfolio credit
Multifamily Monthly Rent Collections During Pandemic
WashREIT vs U.S. Average
Source: NMHC Rent Payment Tracker.
SUBURBAN ASSETS CONTINUE TO OUTPERFORM
Suburban multifamily properties continue to outperform urban properties as the preference for extra space and density combined with a reduction in the benefits of city living during the pandemic stabilize demand for suburban units
Occupancy as of 1/31/21
Resident Retention (Q4 2020)
Gross Lease Rate Change
Effective Lease Rate Change
(Blended Q4 2020)
(Blended Q4 2020)
0.0% -2.0% -4.0% -6.0% -8.0% -10.0%
CLASS B MULTIFAMILY IS OUTPERFORMING
85% of our multifamily portfolio is Class B, which has outperformed Class A over 15-year, 10-year, 5-year, and 1-Year timeframes
WASHINGTON METRO CLASS B VS. CLASS A NET EFFECTIVE RENT HISTORICAL CAGR
Source: RealPage Washington Metro Class B vs. Class A data. December 2020.
TROVE CONTINUES TO LEASE-UP AND IS ON
PACE TO ADD GROWTH IN 2021 AND 2022
Trove lease-up continues to progress in-line with our expectations and we expect Trove to be a substantial growth driver over the next 2 years
• 401 units
• Over 40% leased
• Targeting LEED Silver
DC APARTMENT RENT GROWTH OUTPERFORMS
IN PRESIDENTIAL ELECTION YEARS
Historically Washington Metro has experienced higher apartment rent growth than other major metro areas and the U.S. overall after a presidential election
Average Apartment Rent Growth in Presidential Election Cycles(1)
U.S. Average 3.7%
WashingtonNew YorkSan Francisco
(1) Average apartment rent growth in presidential election years since 1996 by June following election, excluding the two greatest outliers of performance from each market Source: CBRE Econometric Advisors, Q3 2020.
POTENTIAL POSITIVE IMPACT OF 2020 ELECTION
Political alignment has historically resulted in a higher number of legislative bills passed and corresponding increases in lobbying and legal presence, resulting in higher absorption within the DC office market
Public bills enacted into law
Metro DC Net Absorption ($ in millions)
Congressional Meeting Periods
Source: JLL as of Q3 2016; historical data excludes the Trump presidency because the correlation dissolved during the 2017-2020 timeframe despite party alignment
OFFICE PORTFOLIO HIGHLIGHTS
~ 5 year weighted average lease term and limited near-term lease expirations
Private spaces with no co-working exposure
99% of contractual rents collected in Q3 and Q4 2020
High-quality, move-in ready space at Arlington Tower, Watergate 600, and Silverline Center
No single-tenant risk
Tenants concentrated in industries with the lowest job losses (Prof & Business Services,
Finance, and Information)
NORTHERN VA: THE CORRIDOR OF GROWTH
73% of future occupancy gains are expected to be driven by tech demand
Microsoft leased 400,000 SF for a new software development and R&D hub in Reston in Q2 2020 plus 180,000 SF in Rosslyn in Q1 2021
Construction at Amazon HQ2 and Virginia Tech Innovation Potomac Yards Campus remains on track despite the pandemic
Northern Virginia comprises almost 70% of the 28M SF of occupied tech space in the Washington Metro region
Per CBRE, Washington Metro ranks #2 in the country in its Tech Talent ranking
NoVA Share of WashREIT Office
of our 2019 NoVA office leasing volume was driven by tech and cybersecurity
Government contract awards increased 4% year-over-year to a record $127 billion in 2020. Government awards, often a leading indicator of future demand, were concentrated around tech, including cloud and cyber
The Dulles Tech Corridor captures ~37% of all federal technology contracts
Source: JLL; July 2020, October 2020, Q4 2020; CBRE US 2020 Tech Talent July 2020
WashREIT NoVA Office
NORTHERN VIRGINIA IS A RESILIENT MARKET
Northern Virginia outperformed other major gateway markets in office leasing during the second and third quarters of 2020, driven by government contractor-technology, government, professional services, and business-to-consumer technology
Q2 and Q3 Leasing Activity
0.0%Q2 LeasingQ3 LeasingLeasing Ratio
(1) Leasing ratio reflects each markets Q2 and Q3 2020 leasing activity in SF over total SF in the market
Source: JLL; July 2020 and November 2020.
CASH COLLECTIONS CONTINUE TO IMPROVE
Collection performance continues to be strong and stable; we collected 99% of contractual multifamily and office rents during Q4 2020
Q3 2020 Cash Rent Collections1 2
Q4 2020 Cash Rent Collections
$40 $35 $30 $25 $20 $15 $10 $5 $0
Cash Rent Collected
Office Tenants 3 Retail Tenants
Cash Rent DeferredNet Uncollected
(1) Percentages represent rents due after adjustments for deferral agreements
(2) Amounts exclude cash rent expensed as bad debt
(3) Excludes monthly expense recovery and other miscellaneous charges
(4) Includes rental income from retail tenants at office properties
$40 $35 $30 $25 $20 $15 $10 $5 $0
Multifamily ResidentsOffice Tenants3 Retail Tenants
MINIMAL CASH IMPACT FROM RENT DEFERRALS
To date, only a small portion of rent has been deferred due to COVID-19 and the expected cumulative NOI impact is less than $0.01 per share through 2021
Expected Timing of Remaining Deferred Rent Payments (1)
Total Executed Rent
Deferrals, Net (1)
$700 $600 $500 $400 $300
(1) Represents total outstanding deferred rent net of the amount that has been repaid as of 2/1/21
LIMITED PORTFOLIO EXPOSURE TO JOB LOSSES
Washington Metro job losses have been concentrated in industry sector groups where WashREIT has limited credit exposure
Industry Sector Group
Leisure & Hospitality
Education & Health Services
Trade, Transportation + Utilities
Prof & Business Services
Washington Metro Nonfarm Employment
December YoY Absolute Change
Source: US Bureau of Labor Statistics, WashREIT % of Annual Base Rent, and % Industry Share of Employed Residents as of December 31, 2020
STRENGTHENED LIQUIDITY POSITION
Well-balanced debt maturity ladder with substantial access to liquidity provides strength during times of economic uncertainty
Newly-executed $350 million 10-year Green Bond further solidifies our strong liquidity position and demonstrates our commitment to our sustainability goals1
~$670 million of available liquidity2 with no significant capital commitments for balance of year and no remaining 2020 maturitiesWashREIT has proven access to long-term unsecured debt and term loans, as well as a 100% unencumbered multifamily portfolio to access agency debt, if needed
No debt maturing until the fourth quarter of 2022 and a weighted average debt maturity of over 5 years
1) The 10-year 3.44% Green Bond closed and funded on December 17, 2020 with proceeds used to repay $300 million of existing term loans with the balance to pay down amounts due under the revolving credit facility. WashREIT also settled forward swap agreements for $20.4 million to be amortized over the term of the bonds.
2) Available liquidity consists of capacity under the Company's $700 million revolving credit facility and cash on hand as of December 31, 2020
MULTIFAMILY PORTFOLIO COMPOSITION
UNIT DISTRIBUTION (1)
(1) Pro forma for fully delivered Trove
MULTIFAMILY UNIT DISTRIBUTION
Approximately 80% of our multifamily units are located in Northern Virginia and over 30% are located in the suburbs
Source: ESRI, WashREIT Research. Unit percentages include fully delivered Trove
RESEARCH-DRIVEN CAPITAL ALLOCATION
Research-led multifamily investment strategy has strengthened and stabilized our portfolio and reduced risk
Multifamily Investment Strategy:
Maximize Class B rental growth by uncovering submarkets that offer the widest differential, i.e. "affordability gap," between Class A and Class B unit rents
Invest in submarkets near major job centers that have limited competitive supply
Bolster rent growth with value-add unit renovations at compelling returns
Capitalized on excess parking fields by adding on-site density (Trove, 401 units) and future opportunity to add 767 units at Riverside
The Wellington, Arlington, VA in 2015
Riverside Apartments, Alexandria, VA in 2016
The Assembly Portfolio in VA + MD in 2019
Cascade at Landmark, Alexandria, VA in 2019
Delivered Trove development in Arlington, VA in 2020
$1.1 Billion of Value-Oriented Multifamily Investments since 2015
Since 2013, we have completed ~$3.7bn of strategic portfolio transactions to increase our exposure to value-oriented multifamily investments while reducing concentrations of non-core retail and office assets
AFFORDABILITY STRATEGY OVERVIEW
WashREIT's strategy seeks to maximize Class B rental growth by uncovering submarkets offering a wider than average differential, i.e. "affordability gap," between Class A and Class B unit rents. These provide an opportunity for Class B unit renovations with a mid-teen return on investment.
Affordability Gap Strategy
Value-add Class B multifamily portfolio
TOTAL CLASS A EFF RENTTOTAL CLASS B EFF RENT
CLASS A PREMIUM
Rent Expansion Widest Set of Value
Rent Compression: Increased Selectivity
Urban In-fill Suburban
% muimerP tneR A ssalC
QUALITY AFFORDABLE HOUSING IN
Renters who can't afford Class A urban in-fill multifamily
Renters who can't afford homeownership or urban in-fill rents and prefer the suburbs
ABILITY TO GROW RENTS ACROSS THE PORTFOLIO
Value-add unit renovations at assets located in submarkets with large affordability gaps, i.e. wider than market average differentials between Class A and Class B rentsAppropriately scoped unit renovations to upgrade well-located, accessible and desirable communities
Source: Delta Associates. As of December 31, 2020.
TARGET RENTER DEMOGRAPHICS
Washington Metro region's largest renter cohort, comprising 25% of all market renters, earns $50,000 to $75,000 per annum. This creates strong demand for units with average monthly rents between $1,250 and $1,875 that is largely met by Class B suburban and urban in-fill multifamily product.
Market Rate Rental Housing 160,000
140,000 120,000 100,000 80,000 60,000 40,000 20,000
Less than $5,000 to $10,000 to $15,000 to $20,000 to $25,000 to $35,000 to $50,000 to $75,000 to $100,000 $150,000
$9,999 $14,999 $19,999 $24,999 $34,999 $49,999 $74,999 $99,999 to or more $149,999
Household Income Level, Washington Metro Region
Source: US Census.
OFFICE PORTFOLIO COMPOSITION
SQUARE FOOTAGE DISTRIBUTION
TECH INVESMENT IN WASHINGTON METRO
Amazon HQ2 is expected to create an influx of private and public sector growth over the next several years. Additional business-to-consumer technology companies are already beginning to plant roots in the region, diversifying our region's technology sector
Amazon has publicly stated that it intends to bring at least 25,000 employees to the Washington
Metro Region over 10 years. State and local incentives encourage up to 37,850 employees.
59% multifamily units and 79% office SF within a 5-mile radius of Amazon HQ2(1)
(1) WashREIT data as of December 31, 2020 and pro forma for fully delivered Trove
DC OFFICE: COMPETITIVELY POSITIONED
WashREIT believes that its Class B office in Washington, DC is the product type that attracts the greatest volume of tenant demand
52% of leasing volume in the DC core submarkets takes place between $45 - $60 per SF
Q4 2020 AVG. ASK. RENT PSF
Class B Office
Class A Office
~70% of our DC Office portfolio is between $45 - $60 per SF ~45% is between $45 - 55 per SF
Gross Rents per SF
Source: Comstak Data, West End, CBD and East End submarkets July 2020; JLL Research Q4 2020; WashREIT data as of June 30, 2020.
Space+ is a WashREIT proprietary office program that is controlled and designed in-house, with strategically-located spaces in our portfolio. Space+ offers quick move-ins, all-in pricing on lease terms, scalable solutions, as well as privacy and independence.
Private office suites with both in-suite and shared amenities and sufficient space toallow for social distancing
Q4 2020 Overview
Space+ By Property
Pre-furnished and ability to customize space 97% Traditional
Showcase tenant's brand and culture through semi-custom interiors with signage opportunities
Arlington Tower2000 MSpring Valley
Wtd. Avg lease term >2 years
Tenant leases directly with and space is managed by WashREIT
Visit our Space+ website at https://www.space-plus.com/
SPACE+ DESIGN PROVIDES ADVANTAGES
In addition to helping fill space quicker, our expenses are lower due to the reusability of build-out costs and the built-in flexibility in our design aspects
Office Suites Traditional and open-floor layouts, pantries, conference and meeting rooms, reception areas
THE ADVANTAGES OF SPACE+ DESIGN Representative Floorplan: Arlington Tower 8th Floor
• Controlled access to suites
• Variety of private/open seating floorplans
Shared Common Space
Pantry, Event Space, Conference Rooms,
• Pre-furnished, with flexibility to customize furniture in as little as 3 days
• Branding opportunities in suite, including brand/logo walls
• In-suite conference rooms for additional privacy
• In-suite pantries
• Perks for smaller tenants in shared amenities such as views, higher-end design, and lounge areas
• Large shared conference rooms for when tenants need it
• Branding opportunity and directional signage in elevator lobby
SPACE+ ADDS VALUE
Space+ was designed in 2018 to improve cash flow through reduced downtime to lease commencement, rent premiums to the market, and capex spend that is reusable for 2nd generation leases, while meeting tenant demand for speed to market, scalable solutions, and competitive amenities
Less downtime than traditional leases
>90% of 1st generation capex is reutilized in 2nd generation spaces
>7% rent premiums1
Compared to traditional leases in buildings with Space+
>2 years term
(1) Represents average of new leases signed from January 2019 - September 2020 compared to traditional leases in buildings with Space+ signed during the same timeframe
(2) Downtime reflects time from delivery to lease commencement
NEW INITIATIVES AND HIGHER AMBITIONS
WashREIT's ESG programs are being accelerated, we just executed our first Green Bond and recently established an internal council committed to improving diversity, equity, inclusion, and belonging within our company and our local community
ESG IS A CORPORATE STRATEGIC OBJECTIVE
ESG performance is a 2020 corporate strategic objective, which extends across all departments and solidifies our commitment to demonstrating continual progress on our ESG initiatives.
NAMED BEST CR PROGRAM BY NAIOP
DC/MD CHAPTER 2020
CLIMATE RISK ASSESSMENT AND ALIGNMENT WITH TCFD
We have assessed the physical and transition risks and opportunities posed by climate change and have disclosed these results in our 2020 ESG Report. Our approach on these issues is aligned with the Task Force on Climate-Related Financial Disclosures (TCFD).
To establish a global context to the impacts of our operations, our ESG objectives are aligned with the United Nations Sustainable Development Goals (UN SDGs).
New development is currently pursuing LEED for Building Design & Construction
ENERGY STAR-certified space
200,000+ Green Leases executed
1,000+ Annual company-sponsored
Five-Year GRESB Score
Our 2020 ESG Report can be found in the Investor section of our website.
As of 12/31/2019, Source: WashREIT 2020 ESG Report
On track to achieve our sustainability goals and continuously demonstrating ESG performance improvement
Source: WashREIT 2020 ESG Report.
Note: Water data covers office and multifamily properties and excludes retail properties. Energy and GHG targets limited to Office and Multifamily portfolios. Waste target limited to Office portfolio.
We have an entire food system housed in one building - from the bees pollinating the garden to the restaurant harvesting the produce and the building compost completing the circle.
Employee & Community Engagement
We believe the most valuable investments we make are in our people and community. We place great value on employee growth and development. And we give back to our community, most visibly through our annual company-wide community service day.
Supporting our Community with Clean EnergyRisk Management
We have solar panels on the roof of our headquarters building and the clean energy produced is credited to low-and moderate-income families at Jubilee Housing, a provider of deeply affordable housing in Washington, D.C.
We have established a company-wide focus on business continuity preparedness and cybersecurity prevention over the past several years. Our robust tools and resources have allowed us to work and collaborate remotely, performing to the highest standards without disruption during the global health crisis.
2013-2014 Dispositions $518.1M
Country Club Towers $38M
Munson Hill Towers $57M
Interest in Land 1225 $15M
Montgomery Village $28M
2015 Dispositions $138M
Suburban MD office $240M
2016 Dispositions $252M
Walker House Apartments $32.2M
2017 Dispositions $32.2M
Braddock Metro Center $79M
2445 M Street $101.6M
2018 Dispositions $180.6M
Quantico Corporate Center $33M
Retail Tranche 1 (5 Shopping Centers) $485M
Retail Tranche 2 (3 Power Centers) $77M
1776 G Street $129.5M
2019 Dispositions $724.5M
John Marshall II $57M
Monument II $53M
1227 25th Street $53.5M
2013-2014 Acquisitions $345.2M
The Wellington $167M
2015 Acquisitions $167M
Riverside Apartments $244.8M
2016 Acquisitions $244.8M
Watergate 600 $135M
2017 Acquisitions $135M
Arlington Tower $250M
2018 Acquisitions $250M
Assembly Northern Virginia (5 assets) $379.1M
Assembly Maryland (2 assets) $82.1M
Cascade at Landmark $69.8M
2019 Acquisitions $531M
TOTAL TRANSACTION VOLUME: ~$3.7 BILLION
(1) Pro forma for stabilized Net Operating Income from the Trove development and the sales of Monument II and 1227 25th Street that closed in December 2020
NOI as of Q1 2013
NOI as of Q4 2020(1)
(1) See "Definitions" for the definitions of NAREIT FFO and Core FFO.
(2) Restructuring expenses include severance, accelerated share-based compensation and other expenses related to a restructuring of corporate personnel.
(3) Adjustments to the numerators for FFO and Core FFO per share calculations when applying the two-class method for calculating EPS.
(1) See "Definitions" for the definitions of FAD and Core FAD.
SAME-STORE PORTFOLIO FROM Q4 2020 SUPPLEMENT
1) For a list of non same-store, discontinued operations and other properties, see "Same-Store Portfolio Net Operating Income (NOI) Growth 2020 vs 2019"
Adjusted EBITDA (a non-GAAP measure) 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, restructuring expenses (which include severance, accelerated share-based compensation and other expenses related to a restructuring of corporate personnel), acquisition expenses and gain from non-disposal activities.
Annualized base rent ("ABR") is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.
Average occupancy is based on monthly occupied net rentable square footage as a percentage of total net rentable square footage, except for the rows labeled "Multifamily (calculated on a unit basis)," on which average occupancy is based on average monthly occupied units as a percentage of total units. The square footage for multifamily properties only includes residential space. The occupied square footage for office and retail properties includes temporary lease agreements.
Debt service coverage ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, real estate impairment, gain on sale of real estate, gain/loss on extinguishment of debt, severance expense, relocation expense, acquisition and structuring expenses and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.
Debt to total market capitalization is total debt divided by the sum of total debt plus the market value of shares outstanding at the end of the period.
Earnings to fixed charges ratio is computed by dividing earnings attributable to the controlling interest by fixed charges. For this purpose, earnings consist of income from continuing operations (or net income if there are no discontinued operations) plus fixed charges, less capitalized interest. Fixed charges consist of interest expense (excluding interest expense from discontinued operations), including amortized costs of debt issuance, plus interest costs capitalized.
Ending Occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period. Multifamily unit basis ending occupancy is calculated as occupied units as a percentage of total units as of the last day of that period.
NAREIT Funds from operations ("NAREIT FFO") is defined by National Association of Real Estate Investment Trusts, Inc. ("NAREIT") in its NAREIT FFO White Paper - 2018 Restatement, as net income (computed in accordance with generally accepted accounting principles ("GAAP") excluding gains (or losses) associated with sales of property, impairment 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 FFO may not be comparable to FFO reported by other real estate investment trusts. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently. NAREIT FFO is a non-GAAP measure.
Core Funds From Operations ("Core FFO") is calculated by adjusting NAREIT FFO for the following items (which we believe are not indicative of the performance of Washington REIT's operating portfolio and affect the comparative measurement of Washington REIT'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 losses, and gains or losses on sale not already excluded from NAREIT 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 Washington REIT's ability to incur and service debt, and distribute dividends to its shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Funds Available for Distribution ("FAD") is calculated by subtracting from NAREIT FFO (1) recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream (excluding items contemplated prior to acquisition or associated with development / redevelopment of a property) and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles, (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, as appropriate. FAD is included herein, because we consider it to be a performance measure of a REIT's ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Core Funds Available for Distribution ("Core FAD") is calculated by adjusting FAD for the following items (which we believe are not indicative of the performance of Washington REIT's operating portfolio and affect the comparative measurement of Washington REIT's operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties, (3) non-share-based 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 losses, and gains or losses on sale not already excluded from FAD, 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 FAD serves as a useful, supplementary performance measure of Washington REIT's ability to incur and service debt, and distribute dividends to its shareholders. Core FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.
Net Operating Income ("NOI") is a non-GAAP measure defined as real estate rental revenue less real estate expenses. 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, general and administrative expenses, acquisition costs, real estate impairment, casualty gains and losses, 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 straightlining of rent and amortization of market intangibles. We provide each of NOI and cash NOI as a supplement to net income calculated in accordance with GAAP. As such, neither should be considered an alternative to net income as an indication of our operating performance. They are the primary performance measures we use to assess the results of our operations at the property level.
Recurring capital expenditures represent non-accretive building improvements and leasing costs required to maintain current revenues. Recurring capital expenditures do not include acquisition capital that was taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to "operating standard."
Rent increases on renewals and rollovers are calculated as the difference, weighted by square feet, of the net ABR due the first month after a term commencement date and the net ABR due the last month prior to the termination date of the former tenant's term. Beginning in Q4 2018, in cases where the space has been remeasured in accordance with criteria set by the Building Owners and Managers Association ("BOMA"), the square feet former tenant's space is adjusted to be equivalent to the square feet of the new/renewing tenant's space.
Same-store portfolio 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 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 portfolio NOI growth is the change in the NOI of the same-store portfolio properties from the prior reporting period to the current reporting period.
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