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8-K - FORM 8-K - WASHINGTON REAL ESTATE INVESTMENT TRUSTd8k.htm
EX-99.1 - EXHIBIT 99.1 - WASHINGTON REAL ESTATE INVESTMENT TRUSTdex991.htm

Exhibit 99.2

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Washington Real Estate Investment Trust (“WRIT”) is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. WRIT is diversified, as it invests in office, medical office, industrial/flex, retail, and multifamily properties and land for development.

2010 Summary

WRIT continued to improve the quality of its property portfolio, acquiring two Class A office buildings at Quantico Corporate Center in Stafford, Virginia and a Class A retail center in Columbia, Maryland for a total of $156 million while disposing of eight lower growth office and industrial properties in suburban Maryland for a total of $74 million. WRIT executed 1.6 million square feet of commercial lease transactions, compared to 1.4 million square feet in 2009. In 2010, WRIT issued 5,644,777 common shares through its Sales Agency Financing Agreement with BNY Mellon Capital Markets at a weighted average price of $30.34 for gross proceeds of $171 million. WRIT refinanced $179 million of its 2011 debt maturities by issuing $250 million 10-year unsecured senior notes at a coupon of 4.95%.

Fourth Quarter 2010 Update

WRIT acquired Gateway Overlook, a 223,000 square foot Class A shopping center in Columbia, Maryland for $88.35 million. This transaction highlights WRIT’s continued focus on acquiring superior-located, newer assets. The property was completed in 2007 and is located immediately off of I-95 at the intersection of Little Patuxent Parkway/Route 175 and Waterloo Road/Route 108 in Howard County. It is 90% leased to 21 tenants, including national retailers Trader Joe’s, Best Buy and Office Depot, as well as Wachovia Bank and Capital One Bank. WRIT funded the acquisition using available cash and its line of credit. The expected first year unleveraged yield is 6.9% on a cash basis.

In December, WRIT sold four properties that no longer fit into its long term growth plan. The Ridges, a 104,000 square foot office building in Gaithersburg, Maryland was sold for $27.5 million. The sale generated a net book gain of $4.4 million and produced an unleveraged internal rate of return was 11% over the four year holding period. In a separate transaction, WRIT completed the sale of three industrial properties, Ammendale I and II and Amvax, totaling 305,000 square feet in Beltsville, Maryland for $23.0 million and a net book gain of $9.2 million. The unleveraged internal rate of return was 15%.

During the quarter, WRIT issued 1,679,508 shares at a weighted average price of $30.68 per share through its Sales Agency Financing Agreement with BNY Capital Markets, generating approximately $51.5 million in proceeds. These proceeds were used for general corporate purposes, including partially funding the acquisition of Gateway Overlook Shopping Center. WRIT also completed tender offers for its 5.95% senior notes due June 15, 2011 and its 3 7/8% convertible senior notes due September 15, 2026. Of the $150 million 5.95% senior notes, $56.1 million were tendered. With respect to the $125.5 million of 3 7/8% convertible senior notes outstanding, $122.8 million were tendered. The repurchases were funded with a portion of the proceeds from the $250 million 4.95% senior unsecured notes offering completed in September 2010.

WRIT signed commercial leases for 382,000 square feet with an average lease term of 5.8 years. The average rental rate increase on new and renewal leases was 11.5% on a GAAP basis and -0.7% on a cash basis. Commercial tenant improvement costs were $7.86 per square foot and leasing costs were $6.01 per square foot for the quarter.

As of December 31, 2010, WRIT owned a diversified portfolio of 85 properties totaling approximately 11 million square feet of commercial space and 2,540 residential units. These 85 properties consist of 25 office properties, 18 medical office properties, 16 industrial/flex properties, 15 retail centers, 11 multifamily properties and land for development. WRIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

 

 

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With investments in the office, medical office, industrial/flex, retail and multifamily segments, WRIT is uniquely diversified. This balanced portfolio provides stability during market fluctuations in specific property types.

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* Excludes discontinued operations:

Sold Properties: The Ridges, Ammendale I & II and Amvax.

Certain statements in the supplemental disclosures which follow are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially. Such risks, uncertainties and other factors include, but are not limited to, the effect of the current credit and financial market conditions, the availability and cost of capital, fluctuations in interest rates, tenants’ financial conditions, the timing and pricing of lease transactions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, changes in general and local economic and real estate market conditions, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2009 Form 10-K and third quarter 2010 10-Q. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 

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Schedule

   Page  
Key Financial Data   

Consolidated Statements of Operations

     4   

Consolidated Balance Sheets

     5   

Funds From Operations and Funds Available for Distribution

     6   

Adjusted Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)

     7   
Capital Analysis   

Long-Term Debt Analysis

     8-9   

Debt Covenant Compliance

     10   

Capital Analysis

     11   
Portfolio Analysis   

Same-Store Portfolio Net Operating Income (NOI) Growth & Rental Rate Growth

     12   

Same-Store Portfolio Net Operating Income (NOI) Summary

     13   

Same-Store Portfolio Net Operating Income (NOI) Detail for the Quarter

     14-15   

Same-Store Portfolio Net Operating Income (NOI) Detail for the Year

     16-17   

Net Operating Income (NOI) by Region

     18   

Same-Store Portfolio & Overall Physical Occupancy Levels by Sector

     19   

Same-Store Portfolio & Overall Economic Occupancy Levels by Sector

     20   
Tenant Analysis   

Commercial Leasing Summary

     21   

10 Largest Tenants - Based on Annualized Base Rent

     22   

Industry Diversification

     23   

Lease Expirations as of December 31, 2010

     24   
Growth and Strategy   

2010 Acquisition and Disposition Summary

     25   
Appendix   

Schedule of Properties

     26-27   

Supplemental Definitions

     28   


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     Twelve Months Ended     Three Months Ended  

OPERATING RESULTS

   12/31/10     12/31/09     12/31/10     09/30/10     06/30/10     03/31/10     12/31/09  

Real estate rental revenue

   $ 297,977      $ 298,161      $ 75,143      $ 74,738      $ 73,481      $ 74,615      $ 75,774   

Real estate expenses

     (98,922     (101,304     (23,957     (24,658     (23,614     (26,693     (25,319
                                                        
     199,055        196,857        51,186        50,080        49,867        47,922        50,455   

Real estate depreciation and amortization

     (93,992     (91,668     (23,889     (23,826     (23,213     (23,064     (23,358
                                                        

Income from real estate

     105,063        105,189        27,297        26,254        26,654        24,858        27,097   

Other income (expense)

     32        417        (391     301        (112     234        297   

Gain from non-disposal activities

     7        73        3        4        —          —          11   

Gain (loss) on extinguishment of debt

     (9,176     5,336        (8,896     (238     —          (42     (1,595

Interest expense

     (68,389     (74,074     (17,801     (16,965     (16,785     (16,838     (17,548

General and administrative

     (14,406     (13,118     (3,951     (3,153     (3,519     (3,783     (3,187
                                                        

Income (loss) from continuing operations

     13,131        23,823        (3,739     6,203        6,238        4,429        5,075   

Discontinued operations:

              

Income from operations of properties held for sale

     2,829        3,777        697        455        841        836        701   

Gain on sale of real estate

     21,599        13,348        13,657        —          7,942        —          1,527   
                                                        

Income from discontinued operations

     24,428        17,125        14,354        455        8,783        836        2,228   

Net income

     37,559        40,948        10,615        6,658        15,021        5,265        7,303   

Less: Net income from noncontrolling interests

     (133     (203     (24     (33     (27     (49     (49
                                                        

Net income attributable to the controlling interests

   $ 37,426      $ 40,745      $ 10,591      $ 6,625      $ 14,994      $ 5,216      $ 7,254   
                                                        

Per Share Data

              

Net income attributable to the controlling interests

   $ 0.60      $ 0.71      $ 0.16      $ 0.10      $ 0.24      $ 0.09      $ 0.12   

Fully diluted weighted average shares outstanding

     62,264        56,968        64,536        63,055        61,287        60,001        59,833   

Percentage of Revenues:

              

Real estate expenses

     33.2     34.0     31.9     33.0     32.1     35.8     33.4

General and administrative

     4.8     4.4     5.3     4.2     4.8     5.1     4.2

Ratios:

              

Adjusted EBITDA / Interest expense

     2.8     2.6     2.7     2.8     2.8     2.7     2.8

Income from continuing operations attributable to the controlling interest/Total real estate revenue

     4.4     7.9     -5.0     8.3     8.5     5.9     6.6

Net income attributable to the controlling interest/Total real estate revenue

     12.6     13.7     14.1     8.9     20.4     7.0     9.6

Note: Certain prior quarter amounts have been reclassified to conform to the current quarter presentation.

 

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     December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Assets

          

Land

   $ 440,509      $ 411,693      $ 411,675      $ 402,277      $ 402,277   

Income producing property

     1,976,378        1,913,140        1,904,745        1,850,980        1,848,129   
                                        
     2,416,887        2,324,833        2,316,420        2,253,257        2,250,406   

Accumulated depreciation and amortization

     (538,786     (518,121     (497,486     (477,570     (457,858
                                        

Net income producing property

     1,878,101        1,806,712        1,818,934        1,775,687        1,792,548   

Development in progress, including land held for development

     26,240        26,103        25,952        25,561        25,031   
                                        

Total real estate held for investment, net

     1,904,341        1,832,815        1,844,886        1,801,248        1,817,579   

Investment in real estate held for sale, net

     —          33,373        33,696        48,198        48,636   

Cash and cash equivalents

     78,767        262,413        13,338        10,758        11,203   

Restricted cash

     21,552        19,858        21,567        19,035        17,668   

Rents and other receivables, net of allowance for doubtful accounts

     55,176        55,104        51,994        51,628        49,617   

Prepaid expenses and other assets

     108,045        104,790        97,480        91,640        95,986   

Other assets related to properties sold or held for sale

     —          2,626        3,879        4,469        4,536   
                                        

Total assets

   $ 2,167,881      $ 2,310,979      $ 2,066,840      $ 2,026,976      $ 2,045,225   
                                        

Liabilities and Equity

          

Notes payable

   $ 753,587      $ 930,201      $ 689,007      $ 688,358      $ 688,912   

Mortgage notes payable

     380,171        381,109        381,929        382,735        383,563   

Lines of credit/short-term note payable

     100,000        100,000        107,000        110,000        128,000   

Accounts payable and other liabilities

     51,130        54,017        54,685        53,397        52,324   

Advance rents

     12,597        10,595        10,208        9,510        10,743   

Tenant security deposits

     9,538        9,538        9,410        9,581        9,512   

Other liabilities related to properties sold or held for sale

     —          659        22,306        23,124        23,108   
                                        

Total Liabilities

     1,307,023        1,486,119        1,274,545        1,276,705        1,296,162   
                                        

Equity

          

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized

     659        642        625        607        599   

Additional paid-in capital

     1,127,825        1,074,308        1,020,768        966,952        944,825   

Distributions in excess of net income

     (269,935     (251,964     (230,942     (219,094     (198,412

Accumulated other comprehensive income (loss)

     (1,469     (1,906     (1,949     (2,004     (1,757
                                        

Total shareholders’ equity

     857,080        821,080        788,502        746,461        745,255   

Noncontrolling interests in subsidiaries

     3,778        3,780        3,793        3,810        3,808   
                                        

Total equity

     860,858        824,860        792,295        750,271        749,063   
                                        

Total liabilities and equity

   $ 2,167,881      $ 2,310,979      $ 2,066,840      $ 2,026,976      $ 2,045,225   
                                        

Total Debt / Total Market Capitalization

     0.38:1        0.41:1        0.41:1        0.39:1        0.43:1   
                                        

Note: Certain prior quarter amounts have been reclassified to conform to the current quarter presentation.

 

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     Twelve Months Ended     Three Months Ended  
     12/31/2010     12/31/2009     12/31/2010     9/30/2010     6/30/2010     3/31/2010     12/31/2009  

Funds from operations(1)

              

Net income (loss) attributable to the controlling interests

   $ 37,426      $ 40,745      $ 10,591      $ 6,625      $ 14,994      $ 5,216      $ 7,254   

Real estate depreciation and amortization

     93,992        91,668        23,889        23,826        23,213        23,064        23,358   

Gain from non-disposal activities

     (7     (73     (3     (4     —          —          (11

Discontinued operations:

              

Gain on sale of real estate

     (21,599     (13,348     (13,657     —          (7,942     —          (1,527

Real estate depreciation and amortization

     1,754        2,779        302        452        456        544        590   
                                                        

Funds From Operations (FFO)

   $ 111,566      $ 121,771      $ 21,122      $ 30,899      $ 30,721      $ 28,824      $ 29,664   
                                                        

Loss (gain) on extinguishment of debt

     9,176        (5,336     8,896        238        —          42        1,595   

Acquisition costs

     1,161        788        709        (12     409        55        (13
                                                        

Core FFO (3)

   $ 121,903      $ 117,223      $ 30,727      $ 31,125      $ 31,130      $ 28,921      $ 31,246   
                                                        

FFO per share - basic

   $ 1.79      $ 2.14      $ 0.33      $ 0.49      $ 0.50      $ 0.48      $ 0.50   

FFO per share - fully diluted

   $ 1.79      $ 2.14      $ 0.33      $ 0.49      $ 0.50      $ 0.48      $ 0.50   

Core FFO per share - fully diluted

   $ 1.96      $ 2.06      $ 0.48      $ 0.49      $ 0.51      $ 0.48      $ 0.52   

Funds available for distribution(2)

              

FFO

   $ 111,566      $ 121,771      $ 21,122      $ 30,899      $ 30,721      $ 28,824      $ 29,664   

Non-cash (gain)/loss on extinguishment of debt

     3,202        (6,336     2,922        238        —          42        595   

Tenant improvements

     (13,579     (12,490     (6,373     (2,863     (2,331     (2,012     (4,425

External and internal leasing commissions capitalized

     (9,511     (5,845     (2,089     (3,387     (1,767     (2,268     (1,058

Recurring capital improvements

     (5,938     (6,356     (1,698     (1,377     (1,999     (864     (1,442

Straight-line rent, net

     (3,470     (3,379     (951     (1,099     (812     (608     (1,527

Non-cash fair value interest expense

     2,664        3,595        345        760        783        776        773   

Non-real estate depreciation and amortization

     3,969        4,555        889        1,094        993        993        1,037   

Amortization of lease intangibles, net

     (1,817     (2,587     (437     (413     (405     (562     (777

Amortization and expensing of restricted share and unit compensation

     5,852        3,460        1,553        1,311        1,355        1,633        820   
                                                        

Funds Available for Distribution (FAD)

   $ 92,938      $ 96,388      $ 15,283      $ 25,163      $ 26,538      $ 25,954      $ 23,660   
                                                        

Cash loss (gain) on extinguishment of debt

     5,974        1,000        5,974        —          —          —          1,000   

Acquisition costs

     1,161        788        709        (12     409        55        (13
                                                        

Core FAD (4)

   $ 100,073      $ 98,176      $ 21,966      $ 25,151      $ 26,947      $ 26,009      $ 24,647   
                                                        

FAD per share - basic

   $ 1.49      $ 1.69      $ 0.24      $ 0.40      $ 0.43      $ 0.43      $ 0.40   

FAD per share - fully diluted

   $ 1.49      $ 1.69      $ 0.24      $ 0.40      $ 0.43      $ 0.43      $ 0.39   

Core FAD per share - fully diluted

   $ 1.60      $ 1.72      $ 0.34      $ 0.40      $ 0.44      $ 0.43      $ 0.41   

Common dividend per share

   $ 1.73      $ 1.73      $ 0.4338      $ 0.4325      $ 0.4325      $ 0.4325      $ 0.4325   

Average shares - basic

     62,140        56,894        64,536        62,894        61,171        59,898        59,735   

Average shares - fully diluted

     62,264        56,968        64,536        63,055        61,287        60,001        59,833   

 

(1)

Funds From Operations (“FFO”) – The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO (April, 2002 White Paper) as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. We consider 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 FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. FFO is a non-GAAP measure.

(2)

Funds Available for Distribution (“FAD”) is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream 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 and (7) non-cash gain/loss on extinguishment of debt, as appropriate. FAD is included herein, because we consider it to be a 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.

(3)

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 WRIT’s operating portfolio and affect the comparative measurement of WRIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties and (3) property impairments, as appropriate. 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 WRIT’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.

(4)

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 WRIT’s operating portfolio and affect the comparative measurement of WRIT’s operating performance over time): (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties and (3) property impairments, as appropriate. 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 WRIT’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.

 

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     Twelve Months Ended     Three Months Ended  
   12/31/10     12/31/09     12/31/10     09/30/10     06/30/10     03/31/10      12/31/09  

Adjusted EBITDA(1)

               

Net income attributable to the controlling interests

   $ 37,426      $ 40,745      $ 10,591      $ 6,625      $ 14,994      $ 5,216       $ 7,254   

Add:

               

Interest expense

     68,979        75,001        17,801        17,100        17,013        17,065         17,780   

Real estate depreciation and amortization

     95,746        94,447        24,191        24,278        23,669        23,608         23,948   

Non-real estate depreciation

     1,102        1,192        279        277        274        272         288   

Less:

               

Gain on sale of real estate

     (21,599     (13,348     (13,657     —          (7,942     —           (1,527

Loss (gain) on extinguishment of debt

     9,176        (5,336     8,896        238        —          42         1,595   

Gain from non-disposal activities

     (7     (73     (3     (4     —          —           (11
                                                         

Adjusted EBITDA

   $ 190,823      $ 192,628      $ 48,098      $ 48,514      $ 48,008      $ 46,203       $ 49,327   
                                                         

 

(1)

Adjusted EBITDA is earnings before interest expense, taxes, depreciation, amortization, gain on sale of real estate, gain/loss on extinguishment of debt and gain from non-disposal activities. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, the cost of debt or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure.

 

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    December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Balances Outstanding

         

Secured

         

Conventional fixed rate

  $ 380,171      $ 381,109      $ 403,612 (1)    $ 404,518 (1)    $ 405,451 (1) 
                                       

Secured total

    380,171        381,109        403,612        404,518        405,451   
                                       

Unsecured

         

Fixed rate bonds and notes

    753,587        930,201        689,007        688,358        688,912   

Credit facility

    100,000        100,000        107,000        110,000        128,000   
                                       

Unsecured total

    853,587        1,030,201        796,007        798,358        816,912   
                                       

Total

  $ 1,233,758      $ 1,411,310      $ 1,199,619      $ 1,202,876      $ 1,222,363   
                                       

Average Interest Rates

         

Secured

         

Conventional fixed rate

    5.9     5.9     5.9     5.9     5.9
                                       

Secured total

    5.9     5.9     5.9     5.9     5.9
                                       

Unsecured

         

Fixed rate bonds

    5.4     5.5     5.7     5.7     5.7

Credit facilities

    2.5 %(2)      2.5 %(2)      2.4 %(2)      2.4 %(2)      2.8 %(2) 
                                       

Unsecured total

    5.1     5.2     5.3     5.2     5.2
                                       

Average

    5.4     5.4     5.5     5.5     5.5
                                       

Note: The current balances outstanding of the secured and unsecured fixed rate bonds and notes are shown net of discounts/premiums in the amount of $6.7 million and $2.9 million, respectively.

 

(1)

Balance includes the $22.5 million mortgage note payable secured by The Ridges, a property we sold on December 21, 2010, which has been reclassified to “Other liabilities related to properties sold or held for sale.” We repaid this mortgage note payable without penalty on July 12, 2010.

(2)

On December 1, 2009, we borrowed $100.0 million on a line of credit in order to prepay the $100.0 million term loan. Through February 19, 2010, the interest rate on this $100.0 million borrowing on our lines of credit is effectively fixed by an interest rate swap at 3.375%. Beginning February 20, 2010 through November 1, 2011, an interest rate swap effectively fixes the interest rate at 2.525%.

 

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LOGO

 

     Future Maturities of Debt  
Year    Secured Debt      Unsecured Debt     Credit Facilities      Total Debt      Average Interest
Rate
 
2011    $ 13,349       $ 96,521 (1)    $ 100,000       $ 209,870         4.3
2012      21,362         50,000        —           71,362         5.0
2013      106,630         60,000        —           166,630         5.4
2014      1,516         100,000        —           101,516         5.3
2015      20,041         150,000        —           170,041         5.3
2016      82,281         —          —           82,281         5.7
2017      103,193         —          —           103,193         7.2
2018      1,402         —          —           1,402         5.4
2019      32,061         —          —           32,061         5.4
Thereafter      5,041         300,000        —           305,041         5.4
                                           
Total maturities    $ 386,876       $ 756,521      $ 100,000       $ 1,243,397         5.4
                                           

Weighted average maturity = 5.3 years

 

(1)

The 3.875% convertible notes due 2026 in the aggregate principal amount of $2.7 million are puttable at par in September, 2011. Due to the probability that the convertible notes will be paid off in September, 2011, that date is reflected in the future maturities schedule. The effective rate on this debt is 5.875%, which reflects our nonconvertible debt borrowing rate at the inception of the 3.875% convertible notes.

 

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    Unsecured Notes Payable     Unsecured Line of Credit #1
($75.0 million)
    Unsecured Line of Credit #2
($262.0 million)
 
    Quarter Ended
December 31, 2010
    Covenant     Quarter Ended
December  31, 2010
    Covenant     Quarter Ended
December  31, 2010
    Covenant  

% of Total Indebtedness to Total Assets(1)

    42.1     £ 65.0     N/A        N/A        N/A        N/A   

Ratio of Income Available for Debt Service to Annual Debt Service

    3.0        ³ 1.5        N/A        N/A        N/A        N/A   

% of Secured Indebtedness to Total Assets(1)

    13.0     £ 40.0     N/A        N/A        N/A        N/A   

Ratio of Total Unencumbered Assets(2) to Total Unsecured Indebtedness

    2.4        ³ 1.5        N/A        N/A        N/A        N/A   

Tangible Net Worth

    N/A        N/A      $ 1.1 billion        $808.6 million      $ 1.1 billion        $808.6 million   

% of Total Liabilities to Gross Asset Value(4)

    N/A        N/A        50.4     £ 60.0     48.9     £ 60.0

% of Secured Indebtedness to Gross Asset Value(4)

    N/A        N/A        14.6     £ 35.0     14.2     £ 35.0

Ratio of EBITDA(3) to Fixed Charges(5)

    N/A        N/A        2.43        ³ 1.75        2.43        ³ 1.75   

Ratio of Unencumbered Pool Value(7) to Unsecured Indebtedness

    N/A        N/A        2.43        ³ 1.67        N/A        N/A   

Ratio of Unencumbered Net Operating Income to Unsecured Interest Expense

    N/A        N/A        N/A        N/A        3.02        ³ 2.00   

% of Development in Progress to Gross Asset Value(4)

    N/A        N/A        1.0     £ 30.0     1.0     £ 20.0

% of Non-Wholly Owned Assets(6) to Gross Asset Value(4)

    N/A        N/A        1.3     £ 15.0     1.3     £ 15.0

 

(1)

Total Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(3) from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.

(2)

Total Unencumbered Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(3) from unencumbered properties from the last four consecutive quarters, excluding EBITDA from acquired, disposed, and non-stabilized development properties.

(3)

EBITDA is defined in our debt covenants as earnings before interest income, interest expense, taxes, depreciation, amortization, gain on sale of real estate, gain/loss on extinguishment of debt and gain from non-disposal activities.

(4)

Gross Asset Value is calculated by applying a capitalization rate to the annualized EBITDA(3) from the most recently ended quarter, excluding EBITDA from disposed properties and current quarter acquisitions. To this amount, the purchase price of current quarter acquisitions, cash and cash equivalents and development in progress is added.

(5)

Fixed Charges consist of interest expense, principal payments, ground lease payments and replacement reserve payments.

(6)

Non-Wholly Owned Assets is calculated by applying a capitalization rate of 7.50% to the EBITDA(3) from properties subject to a joint operating agreement (i.e. NVIP I&II). We add to this amount the development in progress subject to a joint operating agreement (i.e. 4661 Kenmore Avenue).

(7)

Unencumbered Pool Value is calculated by applying a capitalization rate of 7.75% to the net operating income from unencumbered properties owned for the entire quarter. To this we add the purchase price of unencumbered acquisitions during the current quarter and development in progress.

 

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     December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Market Data

          

Shares Outstanding

     65,870        64,093        62,380        60,545        59,811   

Market Price per Share

   $ 30.99      $ 31.73      $ 27.59      $ 30.55      $ 27.55   

Equity Market Capitalization

   $ 2,041,311      $ 2,033,671      $ 1,721,064      $ 1,849,650      $ 1,647,793   

Total Debt

   $ 1,233,758      $ 1,411,310      $ 1,199,619 (3)    $ 1,202,876 (3)    $ 1,222,363 (3) 

Total Market Capitalization

   $ 3,275,069      $ 3,444,981      $ 2,920,683      $ 3,052,526      $ 2,870,156   

Total Debt to Market Capitalization

     0.38:1        0.41:1        0.41:1        0.39:1        0.43:1   
                                        

Earnings to Fixed Charges(1)

     0.8     1.4     1.3     1.2     1.3

Debt Service Coverage Ratio(2)

     2.5     2.7     2.7     2.5     2.6

Dividend Data

          

Total Dividends Paid

   $ 28,438      $ 27,485      $ 26,677      $ 25,890      $ 25,843   

Common Dividend per Share

   $ 0.4338      $ 0.4325      $ 0.4325      $ 0.4325      $ 0.4325   

Payout Ratio (Core FFO per share basis)

     90.4     88.3     84.8     90.1     83.2

Payout Ratio (Core FAD per share basis)

     127.6     108.1     98.3     100.6     105.5

Payout Ratio (FAD per share basis)

     180.7     108.1     100.6     100.6     110.9

 

(1)

The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations attributable to the controlling interests plus fixed charges, less capitalized interest. Fixed charges consist of interest expense, including amortized costs of debt issuance, plus interest costs capitalized.

(2)

Debt service coverage ratio is computed by dividing Adjusted EBITDA (see page 7) by interest expense and principal amortization.

(3)

“Total Debt” balance includes a $22.5 million mortgage notes payable secured by The Ridges, a property we sold on December 21, 2010, that has been reclassified to “Other liabilities related to properties sold or held for sale.” We repaid this mortgage note payable without penalty on July 12, 2010.

 

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    Fourth  Quarter(1)     Year(2)  
    NOI
Growth
    Rental Rate
Growth
    NOI
Growth
    Rental Rate
Growth
 

Cash Basis:

       

Multifamily

    9.9     2.4     4.7     -0.1

Office Buildings

    -2.1     1.7     -2.1     1.8

Medical Office Buildings

    3.8     3.4     3.8     3.4

Retail Centers

    -8.3     1.5     -2.8     1.7

Industrial/Flex

    -3.8     5.1     -7.4     3.2

Overall Same-Store Portfolio

    -0.8     2.4     -1.1     1.9
    Fourth  Quarter(1)     Year(2)  
    NOI
Growth
    Rental Rate
Growth
    NOI
Growth
    Rental Rate
Growth
 

GAAP Basis:

       

Multifamily

    9.7     2.4     4.6     -0.1

Office Buildings

    -6.7     -0.5     -2.5     1.8

Medical Office Buildings

    5.1     3.4     3.0     3.1

Retail Centers

    -7.3     1.4     -3.0     1.2

Industrial/Flex

    -5.5     3.2     -8.2     1.8

Overall Same-Store Portfolio

    -2.7     1.2     -1.6     1.6

 

1

Non same-store properties were:

 

Acquisitions:  

Office - Quantico Corporate Center;

Retail - Gateway Overlook;

Medical Office - Lansdowne Medical Office Building.

 

Sold properties:  

Office - Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;

Industrial - Crossroads Distribution Center, Charleston Business Center, Ammendale I&II and Amvax.

 

2

Non same-store properties were:

 

Acquisitions:  

Office - Quantico Corporate Center;

Retail - Gateway Overlook;

Medical Office - Lansdowne Medical Office Building.

 

Development:  

Office - Dulles Station I;

Multifamily - Bennett Park and Clayborne.

 

Sold properties:   Multifamily - Avondale;
  Office - Brandywine Center, Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;
  Industrial - Crossroads Distribution Center, Tech 100 Industrial Park, Charleston Business Center, Ammendale I&II and Amvax.

 

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     Three Months Ended December 31,     Twelve Months Ended December 31,  
     2010      2009      % Change     2010      2009      % Change  

Cash Basis:

                

Multifamily

   $ 7,385       $ 6,717         9.9   $ 23,907       $ 22,833         4.7

Office Buildings

     19,705         20,127         -2.1     76,022         77,618         -2.1

Medical Office Buildings

     7,643         7,361         3.8     29,924         28,839         3.8

Retail Centers

     7,353         8,020         -8.3     29,808         30,661         -2.8

Industrial/Flex

     5,795         6,025         -3.8     22,914         24,739         -7.4
                                                    
   $ 47,881       $ 48,250         -0.8   $ 182,575       $ 184,690         -1.1
                                                    

GAAP Basis:

                

Multifamily

   $ 7,588       $ 6,919         9.7   $ 24,699       $ 23,620         4.6

Office Buildings

     20,467         21,948         -6.7     79,721         81,728         -2.5

Medical Office Buildings

     7,877         7,492         5.1     30,744         29,860         3.0

Retail Centers

     7,507         8,101         -7.3     30,196         31,141         -3.0

Industrial/Flex

     5,746         6,082         -5.5     22,856         24,904         -8.2
                                                    
   $ 49,185       $ 50,542         -2.7   $ 188,216       $ 191,253         -1.6
                                                    

 

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     Three Months Ended December 31, 2010  
     Multifamily     Office     Medical Office     Retail     Industrial/Flex     Corporate and
Other
    Total  

Real estate rental revenue

              

Same-store portfolio

   $ 12,407      $ 30,889      $ 11,279      $ 9,810      $ 7,939      $ —        $ 72,324   

Non same-store - acquired and in development 1

     —          2,137        54        628        —          —          2,819   
                                                        

Total

     12,407        33,026        11,333        10,438        7,939        —          75,143   

Real estate expenses

              

Same-store portfolio

     4,819        10,422        3,402        2,303        2,193        —          23,139   

Non same-store - acquired and in development 1

     —          565        123        130        —          —          818   
                                                        

Total

     4,819        10,987        3,525        2,433        2,193        —          23,957   

Net Operating Income (NOI)

              

Same-store portfolio

     7,588        20,467        7,877        7,507        5,746        —          49,185   

Non same-store - acquired and in development 1

     —          1,572        (69     498        —          —          2,001   
                                                        

Total

   $ 7,588      $ 22,039      $ 7,808      $ 8,005      $ 5,746      $ —        $ 51,186   
                                                        

Same-store portfolio NOI GAAP basis (from above)

   $ 7,588      $ 20,467      $ 7,877      $ 7,507      $ 5,746      $ —        $ 49,185   

Straight-line revenue, net for same-store properties

     (12     (715     (145     (89     188        —          (773

FAS 141 Min Rent

     (191     (359     (98     (80     (145     —          (873

Amortization of lease intangibles for same-store properties

     —          312        9        15        6        —          342   
                                                        

Same-store portfolio NOI, cash basis

   $ 7,385      $ 19,705      $ 7,643      $ 7,353      $ 5,795      $ —        $ 47,881   
                                                        

Reconciliation of NOI to Net Income

              

Total NOI

   $ 7,588      $ 22,039      $ 7,808      $ 8,005      $ 5,746      $ —        $ 51,186   

Other income (expense)

     —          —          —          —          —          (391     (391

Interest expense

     (1,725     (2,270     (1,347     (322     (234     (11,903     (17,801

Depreciation and amortization

     (3,312     (11,778     (3,939     (1,971     (2,564     (325     (23,889

General and administrative

     —          —          —          —          —          (3,951     (3,951

Discontinued operations2

     —          331        —          —          366        —          697   

Gain from non-disposal activities

     —          —          —          —          —          3        3   

Gain on sale of real estate

     —          —          —          —          —          13,657        13,657   

Gain (loss) on extinguishment of debt

     —          —          —          —          —          (8,896     (8,896
                                                        

Net Income

     2,551        8,322        2,522        5,712        3,314        (11,806     10,615   

Net income attributable to noncontrolling interests

     —          —          —          —          —          (24     (24
                                                        

Net income attributable to the controlling interests

   $ 2,551      $ 8,322      $ 2,522      $ 5,712      $ 3,314      $ (11,830   $ 10,591   
                                                        

 

Non same-store acquired and in development properties:

 

Acquisitions:

  

Office - Quantico Corporate Center;

   Retail - Gateway Overlook;
   Medical Office - Lansdowne Medical Office Building.

 

2 Discontinued operations include sold properties: Office - The Ridges;
                        Industrial - Ammendale I&II and Amvax.

 

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     Three Months Ended December 31, 2009  
     Multifamily     Office     Medical Office     Retail     Industrial/Flex     Corporate and
Other
    Total  

Real estate rental revenue

              

Same-store portfolio

   $ 11,864      $ 33,346      $ 11,293      $ 10,825      $ 8,446      $ —        $ 75,774   

Non same-store - acquired and in development 1

     —          —          —          —          —          —          —     
                                                        

Total

     11,864        33,346        11,293        10,825        8,446        —          75,774   

Real estate expenses

              

Same-store portfolio

     4,945        11,398        3,801        2,724        2,364        —          25,232   

Non same-store - acquired and in development 1

     —          —          87        —          —          —          87   
                                                        

Total

     4,945        11,398        3,888        2,724        2,364        —          25,319   

Net operating income (NOI)

              

Same-store portfolio

     6,919        21,948        7,492        8,101        6,082        —          50,542   

Non same-store - acquired and in development 1

     —          —          (87     —          —          —          (87
                                                        

Total

   $ 6,919      $ 21,948      $ 7,405      $ 8,101      $ 6,082      $ —        $ 50,455   
                                                        

Same-store portfolio NOI GAAP basis (from above)

   $ 6,919      $ 21,948      $ 7,492      $ 8,101      $ 6,082      $ —        $ 50,542   

Straight-line revenue, net for same-store properties

     (10     (1,461     (33     82        (42     —          (1,464

FAS 141 Min Rent

     (192     (638     (99     (166     (20     —          (1,115

Amortization of lease intangibles for same-store properties

     —          278        1        3        5        —          287   
                                                        

Same-store portfolio NOI, cash basis

   $ 6,717      $ 20,127      $ 7,361      $ 8,020      $ 6,025      $ —        $ 48,250   
                                                        

Reconciliation of NOI to net income

              

Total NOI

   $ 6,919      $ 21,948      $ 7,405      $ 8,101      $ 6,082      $ —        $ 50,455   

Other income (expense)

     —          —          —          —          —          297        297   

Interest expense

     (1,731     (2,385     (1,376     (329     (239     (11,488     (17,548

Depreciation and amortization

     (3,466     (11,133     (3,695     (1,897     (2,858     (309     (23,358

General and administrative

     —          —          —          —          —          (3,187     (3,187

Discontinued operations2

     —          200        —          —          501        —          701   

Gain from non-disposal activities

     —          11        —          —          —          —          11   

Gain on sale of real estate

     —          —          —          —          —          1,527        1,527   

Gain (loss) on extinguishment of debt

     —          —          —          —          —          (1,595     (1,595
                                                        

Net income

     1,722        8,641        2,334        5,875        3,486        (14,755     7,303   

Net income attributable to noncontrolling interests

     —          —          —          —          —          (49     (49
                                                        

Net income attributable to the controlling interests

   $ 1,722      $ 8,641      $ 2,334      $ 5,875      $ 3,486      $ (14,804   $ 7,254   
                                                        

 

Non same-store acquired and in development properties:

 

Acquisitions:

   Medical Office - Lansdowne Medical Office Building.

 

2 Discontinued operations include sold properties:   
  

Office - Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;

  

Industrial - Crossroads Distribution Center, Charleston Business Center, Ammendale I&II and Amvax.

 

15


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     Twelve Months Ended December 31, 2010  
     Multifamily     Office     Medical Office     Retail     Industrial/Flex     Corporate and
Other
    Total  

Real estate rental revenue

              

Same-store portfolio

   $ 40,567      $ 121,783      $ 44,949      $ 40,376      $ 32,190      $ —        $ 279,865   

Non same-store - acquired and in development 1

     8,032        9,374        79        627        —          —          18,112   
                                                        

Total

     48,599        131,157        45,028        41,003        32,190        —          297,977   

Real estate expenses

              

Same-store portfolio

     15,868        42,062        14,205        10,180        9,334        —          91,649   

Non same-store - acquired and in development 1

     3,375        3,258        510        130        —          —          7,273   
                                                        

Total

     19,243        45,320        14,715        10,310        9,334        —          98,922   

Net Operating Income (NOI)

              

Same-store portfolio

     24,699        79,721        30,744        30,196        22,856        —          188,216   

Non same-store - acquired and in development 1

     4,657        6,116        (431     497        —          —          10,839   
                                                        

Total

   $ 29,356      $ 85,837      $ 30,313      $ 30,693      $ 22,856      $ —        $ 199,055   
                                                        

Same-store portfolio NOI GAAP basis (from above)

   $ 24,699      $ 79,721      $ 30,744      $ 30,196      $ 22,856      $ —        $ 188,216   

Straight-line revenue, net for same-store properties

     (26     (2,208     (447     (109     297        —          (2,493

FAS 141 Min Rent

     (766     (1,672     (401     (323     (262     —          (3,424

Amortization of lease intangibles for same-store properties

     —          181        28        44        23        —          276   
                                                        

Same-store portfolio NOI, cash basis

   $ 23,907      $ 76,022      $ 29,924      $ 29,808      $ 22,914      $ —        $ 182,575   
                                                        

Reconciliation of NOI to Net Income

              

Total NOI

   $ 29,356      $ 85,837      $ 30,313      $ 30,693      $ 22,856      $ —        $ 199,055   

Other income (expense)

     —          —          —          —          —          32        32   

Interest expense

     (6,853     (9,255     (5,391     (1,287     (944     (44,659     (68,389

Depreciation and amortization

     (13,635     (45,586     (15,514     (7,314     (10,641     (1,302     (93,992

General and administrative

     —          —          —          —          —          (14,406     (14,406

Discontinued operations2

     —          1,100        —          —          1,729        —          2,829   

Gain from non-disposal activities

     —          —          —          —          —          7        7   

Gain on sale of real estate

     —          —          —          —          —          21,599        21,599   

Gain (loss) on extinguishment of debt

     —          —          —          —          —          (9,176     (9,176
                                                        

Net Income

     8,868        32,096        9,408        22,092        13,000        (47,905     37,559   

Net income attributable to noncontrolling interests

     —          —          —          —          —          (133     (133
                                                        

Net income attributable to the controlling interests

   $ 8,868      $ 32,096      $ 9,408      $ 22,092      $ 13,000      $ (48,038   $ 37,426   
                                                        

 

1 Non same-store acquired and in development properties:

 

Acquisitions:

  

Office - Quantico Corporate Center;

Retail - Gateway Overlook;

Medical Office - Lansdowne Medical Office Building.

 

2 Discontinued operations include sold properties: Office - Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;
                                                                         Industrial - Charleston Business Center, Ammendale I&II and Amvax.

 

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     Twelve Months Ended December 31, 2009  
     Multifamily     Office     Medical Office     Retail     Industrial/Flex     Corporate and
Other
    Total  

Real estate rental revenue

              

Same-store portfolio

   $ 39,507      $ 126,725      $ 44,911      $ 41,821      $ 34,288      $ —        $ 287,252   

Non same-store - acquired and in development 1

     6,963        3,946        —          —          —          —          10,909   
                                                        

Total

     46,470        130,671        44,911        41,821        34,288        —          298,161   

Real estate expenses

              

Same-store portfolio

     15,887        44,997        15,051        10,680        9,384        —          95,999   

Non same-store - acquired and in development 1

     3,607        1,531        167        —          —          —          5,305   
                                                        

Total

     19,494        46,528        15,218        10,680        9,384        —          101,304   

Net operating income (NOI)

              

Same-store portfolio

     23,620        81,728        29,860        31,141        24,904        —          191,253   

Non same-store - acquired and in development 1

     3,356        2,415        (167     —          —          —          5,604   
                                                        

Total

   $ 26,976      $ 84,143      $ 29,693      $ 31,141      $ 24,904      $ —        $ 196,857   
                                                        

Same-store portfolio NOI GAAP basis (from above)

   $ 23,620      $ 81,728      $ 29,860      $ 31,141      $ 24,904      $ —        $ 191,253   

Straight-line revenue, net for same-store properties

     (21     (2,193     (399     (28     (109     —          (2,750

FAS 141 Min Rent

     (766     (2,026     (623     (465     (75     —          (3,955

Amortization of lease intangibles for same-store properties

     —          109        1        13        19        —          142   
                                                        

Same-store portfolio NOI, cash basis

   $ 22,833      $ 77,618      $ 28,839      $ 30,661      $ 24,739      $ —        $ 184,690   
                                                        

Reconciliation of NOI to net income

              

Total NOI

   $ 26,976      $ 84,143      $ 29,693      $ 31,141      $ 24,904      $ —        $ 196,857   

Other income (expense)

     —          —          —          —          —          417        417   

Interest expense

     (8,466     (9,496     (5,503     (1,312     (963     (48,334     (74,074

Depreciation and amortization

     (13,921     (43,591     (14,814     (7,416     (10,826     (1,100     (91,668

General and administrative

     —          —          —          —          —          (13,118     (13,118

Discontinued operations2

     392        970        —          —          2,415        —          3,777   

Gain from non-disposal activities

     —          71        2        —          —          —          73   

Gain on sale of real estate

     —          —          —          —          —          13,348        13,348   

Gain (loss) on extinguishment of debt

     —          —          —          —          —          5,336        5,336   
                                                        

Net income

     4,981        32,097        9,378        22,413        15,530        (43,451     40,948   

Net income attributable to noncontrolling interests

     —          —          —          —          —          (203     (203
                                                        

Net income attributable to the controlling interests

   $ 4,981      $ 32,097      $ 9,378      $ 22,413      $ 15,530      $ (43,654   $ 40,745   
                                                        

 

1 Non same-store acquired and in development properties:

 

Acquisition:

   Medical Office - Lansdowne Medical Office Building.

 

2 Discontinued operations include sold properties: Multifamily - Avondale;
  

Office - Brandywine Center, Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;

Industrial - Crossroads Distribution Center, Tech 100 Industrial Park, Charleston Business Center, Ammendale I&II and Amvax.

 

17


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WRIT Portfolio

Maryland/Virginia/DC

 

     Percentage of
Q4 2010 GAAP NOI
    Percentage of
YTD 2010 GAAP NOI
 

DC

    

Multifamily

     3.5     3.7

Office

     15.9     15.6

Medical Office Buildings

     1.8     1.7

Retail

     0.7     0.7

Industrial/Flex

     0.0     0.0
                
     21.9     21.7

Maryland

    

Multifamily

     2.3     2.1

Office

     11.8     11.8

Medical Office Buildings

     4.5     4.5

Retail

     9.3     9.0

Industrial/Flex

     3.0     3.2
                
     30.9     30.6

Virginia

    

Multifamily

     9.0     8.9

Office

     15.5     15.8

Medical Office Buildings

     8.9     9.0

Retail

     5.6     5.7

Industrial/Flex

     8.2     8.3
                
     47.2     47.7

Total Portfolio 1

     100.0     100.0

 

WRIT Portfolio

Inside & Outside the Beltway

 

     Percentage of
Q4 2010 GAAP NOI
    Percentage of
YTD 2010 GAAP NOI
 

Inside the Beltway

    

Multifamily

     14.0     14.0

Office

     21.5     21.4

Medical Office Buildings

     3.0     2.9

Retail

     6.0     6.1

Industrial/Flex

     2.7     2.6
                
     47.2     47.0

Outside the Beltway

    

Multifamily

     0.8     0.8

Office

     21.6     21.7

Medical Office Buildings

     12.3     12.3

Retail

     9.6     9.3

Industrial/Flex

     8.5     8.9
                
     52.8     53.0

Total Portfolio 1

     100.0     100.0

 

1

Excludes discontinued operations: Sold Properties - Parklawn Plaza, Saratoga Building, Lexington Building, Charleston Business Center, the Ridges, Ammendale I&II and Amvax.

 

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     Physical Occupancy - Same-Store Properties (1)  

Sector

   December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Multifamily

     95.7     96.4     95.0     94.6     94.4

Office Buildings

     88.6     88.6     90.0     90.2     91.4

Medical Office Buildings

     93.8     93.3     94.1     93.8     94.2

Retail Centers

     92.5     92.2     94.4     93.2     93.6

Industrial / Flex

     78.6     79.7     79.3     83.0     84.8
                                        

Overall Portfolio

     88.6     88.9     89.4     90.1     91.0
     Physical Occupancy - All Properties  

Sector

   December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Multifamily

     95.7     96.4     95.0     94.6     94.4

Office Buildings

     89.4     89.6     90.8     89.7     90.8

Medical Office Buildings

     88.5     87.8     88.0     87.7     87.9

Retail Centers

     92.1     92.2     94.4     93.2     93.6

Industrial / Flex

     78.6     79.5     79.2     82.8     84.4
                                        

Overall Portfolio

     88.3     88.4     88.9     89.1     89.9

 

1

Non same-store properties were:

 

Acquisitions:    Office - Quantico Corporate Center;
   Retail - Gateway Overlook;
   Medical Office - Lansdowne Medical Office Building.

 

Sold properties:

   Office - Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;
   Industrial - Crossroads Distribution Center, Charleston Business Center, Ammendale I&II and Amvax.

 

19


LOGO

 

     Economic Occupancy - Same-Store Properties(1)  

Sector

   December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Multifamily

     95.5     95.6     93.7     94.1     94.1

Office Buildings

     89.1     89.2     91.3     91.9     93.1

Medical Office Buildings

     94.5     94.8     95.7     95.9     95.9

Retail Centers

     91.4     91.7     92.0     91.3     94.4

Industrial / Flex

     81.6     83.1     82.4     85.9     88.8
                                        

Overall Portfolio

     90.4     90.7     91.4     92.1     93.4
     Economic Occupancy - All Properties  

Sector

   December 31,
2010
    September 30,
2010
    June 30,
2010
    March 31,
2010
    December 31,
2009
 

Multifamily

     95.5     95.6     93.7     94.1     94.1

Office Buildings

     90.0     90.1     91.3     91.6     92.6

Medical Office Buildings

     90.3     90.3     91.0     91.1     91.1

Retail Centers

     91.4     91.7     92.0     91.3     94.4

Industrial / Flex

     81.9     83.0     82.8     85.7     87.3
                                        

Overall Portfolio

     90.2     90.3     90.7     91.2     92.2

 

1

Non same-store properties were:

 

Acquisitions:    Office - Quantico Corporate Center;
   Retail - Gateway Overlook;
   Medical Office - Lansdowne Medical Office Building.

 

Sold properties:    Office - Parklawn Plaza, Saratoga Building, Lexington Building and the Ridges;
   Industrial - Crossroads Distribution Center, Charleston Business Center, Ammendale I&II and Amvax.

 

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    4th Quarter 2010     3rd Quarter 2010     2nd Quarter 2010     1st Quarter 2010     4th Quarter 2009  

Gross Leasing Square Footage

         

Office Buildings

    125,367        103,428        149,296        198,868        133,548   

Medical Office Buildings

    7,136        70,426        92,041        23,951        33,386   

Retail Centers

    97,055        52,501        113,878        5,805        95,037   

Industrial Centers

    152,563        103,800        285,628        45,616        44,503   
                                       

Total

    382,121        330,155        640,843        274,240        306,474   
                                       

Weighted Average Term (yrs)

         

Office Buildings

    5.4        3.8        6.7        5.6        5.2   

Medical Office Buildings

    3.9        5.3        5.4        9.0        7.2   

Retail Centers

    8.4        6.2        5.7        5.0        5.2   

Industrial Centers

    4.5        3.4        4.9        3.3        4.9   
                                       

Total

    5.8        4.4        5.5        5.5        5.4   
                                       
    GAAP     CASH     GAAP     CASH     GAAP     CASH     GAAP     CASH     GAAP     CASH  

Rental Rate Increases:

                   

Rate on expiring leases

                   

Office Buildings

  $ 28.72      $ 30.30      $ 27.65      $ 28.50      $ 29.71      $ 30.35      $ 26.85      $ 27.91      $ 29.87      $ 31.85   

Medical Office Buildings

    35.53        37.37        30.40        32.62        32.29        34.30        32.18        33.92        30.67        31.66   

Retail Centers

    15.50        16.13        26.01        26.71        16.10        16.38        25.83        27.42        13.69        14.12   

Industrial Centers

    10.82        11.45        10.36        10.73        10.05        10.46        9.29        9.93        9.33        9.62   
                                                                               

Total

  $ 18.34      $ 19.31      $ 22.54      $ 23.51      $ 18.90      $ 19.57      $ 24.37      $ 25.43      $ 21.96      $ 23.10   
                                                                               

Rate on new leases

                   

Office Buildings

  $ 31.39      $ 29.41      $ 28.29      $ 27.09      $ 31.49      $ 28.84      $ 30.97      $ 28.86      $ 29.90      $ 28.19   

Medical Office Buildings

    37.41        36.05        34.94        32.78        39.30        36.44        40.38        35.27        39.40        35.95   

Retail Centers

    21.79        20.41        30.57        29.36        16.30        16.03        31.31        29.97        13.67        13.00   

Industrial Centers

    9.80        9.19        9.23        8.92        13.62        13.50        9.47        9.20        9.02        8.41   
                                                                               

Total

  $ 20.44      $ 19.18      $ 24.08      $ 22.95      $ 21.95      $ 20.82      $ 28.22      $ 26.18      $ 22.87      $ 21.45   
                                                                               

Percentage Increase

                   

Office Buildings

    9.31     -2.93     2.34     -4.93     6.00     -5.00     15.34     3.43     0.11     -11.48

Medical Office Buildings

    5.28     -3.53     14.95     0.51     21.73     6.26     25.48     3.98     28.46     13.53

Retail Centers

    40.57     26.50     17.51     9.91     1.24     -2.15     21.21     9.30     -0.15     -7.93

Industrial Centers

    -9.41     -19.73     -10.91     -16.89     35.57     29.11     1.90     -7.38     -3.29     -12.61
                                                                               

Total

    11.47     -0.69     6.84     -2.36     16.15     6.39     15.79     2.92     4.16     -7.14
                                                                               
    Total Dollars     Dollars per
Square  Foot
    Total Dollars     Dollars per
Square  Foot
    Total Dollars     Dollars per
Square  Foot
    Total
Dollars
    Dollars per
Square  Foot
    Total Dollars     Dollars per
Square  Foot
 

Tenant Improvements

                   

Office Buildings

  $ 2,461,273      $ 19.63      $ 1,296,481      $ 12.54      $ 4,512,498      $ 30.23      $ 3,473,255      $ 17.47      $ 1,430,285      $ 10.71   

Medical Office Buildings

    86,938        12.18        859,930        12.21        1,610,073        17.49        595,969        24.88        665,314        19.93   

Retail Centers

    288,110        2.97        22,500        0.43        587,775        5.16        —          —          711,150        7.48   

Industrial Centers

    166,689        1.09        102,112        0.98        513,745        1.80        64,327        1.41        64,692        1.45   
                                                                               

Subtotal

  $ 3,003,010      $ 7.86      $ 2,281,023      $ 6.91      $ 7,224,091      $ 11.27      $ 4,133,551      $ 15.07      $ 2,871,441      $ 9.37   
                                                                               

Leasing Costs

                   

Office Buildings

  $ 1,478,644      $ 11.79      $ 781,922      $ 7.56      $ 3,316,582      $ 22.21      $ 2,064,933      $ 10.38      $ 1,713,899      $ 12.83   

Medical Office Buildings

    21,703        3.04        362,586        5.15        959,827        10.43        400,746        16.73        677,283        20.29   

Retail Centers

    423,791        4.37        120,850        2.30        195,025        1.71        7,808        1.35        416,159        4.38   

Industrial Centers

    371,620        2.44        222,983        2.15        921,870        3.23        97,391        2.14        119,606        2.69   
                                                                               

Subtotal

  $ 2,295,758      $ 6.01      $ 1,488,341      $ 4.51      $ 5,393,304      $ 8.42      $ 2,570,878      $ 9.37      $ 2,926,947      $ 9.55   
                                                                               

Tenant Improvements and Leasing Costs

                   

Office Buildings

  $ 3,939,917      $ 31.43      $ 2,078,403      $ 20.10      $ 7,829,080      $ 52.44      $ 5,538,188      $ 27.85      $ 3,144,184      $ 23.54   

Medical Office Buildings

    108,641        15.22        1,222,516        17.36        2,569,900        27.92        996,715        41.61        1,342,597        40.21   

Retail Centers

    711,901        7.34        143,350        2.73        782,800        6.87        7,808        1.35        1,127,309        11.86   

Industrial Centers

    538,309        3.53        325,095        3.13        1,435,615        5.03        161,718        3.55        184,298        4.14   
                                                                               

Total

  $ 5,298,768      $ 13.87      $ 3,769,364      $ 11.42      $ 12,617,395      $ 19.69      $ 6,704,429      $ 24.45      $ 5,798,388      $ 18.92   
                                                                               

 

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Tenant

  

Number of

Buildings

    

Weighted

Average

Remaining

Lease Term

in Months

    

Percentage

of Aggregate

Portfolio

Annualized

Rent

   

Aggregate

Rentable

Square Feet

    

Percentage

of Aggregate

Occupied

Square

Feet

 

World Bank

     1         54         4.87     210,354         2.33

Advisory Board Company

     1         101         2.77     180,925         2.01

General Services Administration

     9         36         2.59     269,740         2.99

INOVA Health System

     7         46         1.96     114,208         1.27

Patton Boggs LLP

     1         76         1.89     110,566         1.23

IBM Corporation

     1         108         1.77     123,138         1.37

Sunrise Assisted Living, Inc.

     1         33         1.59     115,289         1.28

General Dynamics

     2         20         1.33     88,359         0.98

Children’s Hospital

     3         90         1.04     69,230         0.77

George Washington University

     2         60         1.03     69,775         0.77
                                     

Total/Weighted Average

        61         20.84     1,351,584         15.00
                                     

 

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Industry Classification (NAICS)

  

Annualized

Base Rental

Revenue

    

Percentage

of Aggregate

Annualized

Rent

   

Aggregate

Rentable

Square Feet

    

Percentage

of Aggregate

Square

Feet

 

Professional, Scientific and Technical Services

   $ 62,653,569         28.82     2,263,353         25.11

Ambulatory Health Care Services

     38,621,843         17.77     1,156,168         12.83

Credit Intermediation and Related Activities

     15,963,326         7.34     343,898         3.82

Executive, Legislative & Other General Government

     10,713,393         4.93     477,776         5.30

Religious, Grantmaking, Civic, Professional

     6,991,883         3.22     207,318         2.30

Food Services and Drinking Places

     6,487,937         2.99     235,157         2.61

Educational Services

     5,869,450         2.70     220,458         2.45

Food and Beverage Stores

     4,764,876         2.19     271,247         3.01

Administrative and Support Services

     4,734,030         2.18     295,322         3.28

Nursing and Residential Care Facilities

     4,028,026         1.85     145,010         1.61

Broadcasting (except Internet)

     3,819,088         1.76     111,319         1.24

Miscellaneous Store Retailers

     3,627,989         1.67     221,591         2.46

Furniture and Home Furnishing Stores

     3,359,752         1.55     207,438         2.30

Personal and Laundry Services

     2,679,987         1.23     90,655         1.01

Health and Personal Care Services

     2,639,607         1.21     76,120         0.85

Merchant Wholesalers-Durable Goods

     2,633,967         1.21     258,880         2.87

Sporting Goods/Books/Hobby/Music Stores

     2,605,761         1.20     166,443         1.85

Clothing and Clothing Accessories Stores

     2,370,988         1.09     135,454         1.50

Electronics/Appliance Stores

     2,221,495         1.02     146,602         1.63

Hospitals

     2,070,825         0.95     62,281         0.69

Merchant Wholesalers-Non Durable Goods

     1,924,997         0.89     214,290         2.38

Real Estate

     1,675,417         0.77     59,682         0.66

General Merchandise Stores

     1,672,527         0.77     209,452         2.32

Construction of Buildings

     1,561,871         0.72     98,526         1.09

Amusement, Gambling and Recreation industries

     1,474,733         0.68     106,464         1.18

Miscellaneous Manufacturing

     1,472,313         0.68     149,604         1.66

Printing and Related Support Activities

     1,188,679         0.55     47,770         0.53

Data Processing & Hosting Services

     1,179,751         0.54     34,226         0.38

Insurance Carriers and Related Activities

     1,076,737         0.50     40,547         0.45

Specialty Trade Contractors

     981,006         0.45     108,522         1.20

Other

     14,308,941         6.57     851,723         9.43
                                  

Total

   $ 217,374,764         100.00     9,013,296         100.00
                                  

 

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Year

  

Number of

Leases

    

Rentable

Square Feet

    

Percent of

Rentable

Square Feet

   

Annualized

Rent *

    

Average

Rental

Rate

    

Percent of

Annualized

Rent *

 

Office:

                

2011

     121         502,078         13.49   $ 16,187,436       $ 32.24         12.40

2012

     89         436,841         11.74     13,336,101         30.53         10.21

2013

     83         429,878         11.55     13,173,267         30.64         10.09

2014

     73         743,311         19.98     24,773,940         33.33         18.97

2015

     58         392,536         10.55     16,674,063         42.48         12.77

2016 and thereafter

     127         1,216,222         32.69     46,447,960         38.19         35.56
                                                    
     551         3,720,866         100.00   $ 130,592,767       $ 35.10         100.00
                                                    

Medical Office:

                

2011

     71         176,256         15.47   $ 5,979,335       $ 33.92         13.62

2012

     46         151,802         13.32     5,511,216         36.31         12.56

2013

     56         163,812         14.37     5,812,076         35.48         13.24

2014

     37         115,148         10.10     4,483,834         38.94         10.21

2015

     28         95,161         8.35     3,627,483         38.12         8.26

2016 and thereafter

     99         437,456         38.39     18,483,790         42.25         42.11
                                                    
     337         1,139,635         100.00   $ 43,897,734       $ 38.52         100.00
                                                    

Retail:

                

2011

     55         176,294         9.25   $ 3,455,992       $ 19.60         8.52

2012

     42         146,706         7.70     3,482,163         23.74         8.58

2013

     37         287,441         15.09     4,304,350         14.97         10.61

2014

     22         95,661         5.02     2,248,107         23.50         5.54

2015

     32         294,831         15.48     5,733,472         19.45         14.13

2016 and thereafter

     93         904,091         47.46     21,342,296         23.61         52.62
                                                    
     281         1,905,024         100.00   $ 40,566,380       $ 21.29         100.00
                                                    

Industrial/Flex:

                

2011

     46         379,333         16.10   $ 3,751,194       $ 9.89         13.15

2012

     42         489,926         20.79     5,531,163         11.29         19.39

2013

     40         443,815         18.83     5,047,945         11.37         17.69

2014

     22         454,048         19.27     5,825,170         12.83         20.42

2015

     29         383,891         16.29     5,798,340         15.10         20.32

2016 and thereafter

     13         205,489         8.72     2,578,437         12.55         9.03
                                                    
     192         2,356,502         100.00   $ 28,532,249       $ 12.11         100.00
                                                    

Total:

                

2011

     293         1,233,961         13.53   $ 29,373,957       $ 23.80         12.06

2012

     219         1,225,275         13.43     27,860,643         22.74         11.44

2013

     216         1,324,946         14.53     28,337,638         21.39         11.63

2014

     154         1,408,168         15.44     37,331,051         26.51         15.33

2015

     147         1,166,419         12.79     31,833,358         27.29         13.07

2016 and thereafter

     332         2,763,258         30.28     88,852,483         32.15         36.47
                                                    
     1,361         9,122,027         100.00   $ 243,589,130       $ 26.70         100.00
                                                    

 

* Annualized Rent is equal to the rental rate effective at lease expiration (cash basis) multiplied by 12.

 

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Acquisition Summary

 

        Acquisition
Date
   

Square

Feet

  Leased
Percentage at
Acquisition
    December 31, 2010
Leased
Percentage
    Investment  

925 Corporate Drive

  Stafford, VA     June 3, 2010      135,000     100%        100%      $ 34,000   

1000 Corporate Drive

  Stafford, VA     June 3, 2010      136,000     100%        100%        34,000   

Gateway Overlook

  Columbia, MD     December 1, 2010      223,000     90%        90%        88,350   
                   
      Total      494,000       $ 156,350   
Disposition Summary          
        Disposition
Date
   

Property

Type

  Square
Feet
    Sale Price     GAAP Gain  

Parklawn Portfolio:

           

Parklawn Plaza

  Rockville, MD     June 18, 2010      Office     40,000       

Lexington Building

  Rockville, MD     June 18, 2010      Office     46,000       

Saratoga Building

  Rockville, MD     June 18, 2010      Office     58,000       

Charleston Business Center

  Rockville, MD     June 18, 2010      Industrial     85,000       
                 
     

Subtotal

    229,000      $ 23,430      $ 7,942   

The Ridges

  Gaithersburg, MD     December 21, 2010      Office     104,000        27,500        4,441   

Ammendale Properties:

           

Ammendale I

  Beltsville, MD     December 22, 2010      Industrial     167,000       

Ammendale II

  Beltsville, MD     December 22, 2010      Industrial     107,000       

Amvax

  Beltsville, MD     December 22, 2010      Industrial     31,000       
                 
           
     

Subtotal

    305,000        23,000        9,216   
                             
     

Total

    638,000      $ 73,930      $ 21,599   
                             

 

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PROPERTIES

   LOCATION      YEAR ACQUIRED      YEAR CONSTRUCTED      NET RENTABLE
SQUARE FEET*
 

Office Buildings

           

1901 Pennsylvania Avenue

     Washington, DC         1977         1960         97,000   

51 Monroe Street

     Rockville, MD         1979         1975         210,000   

515 King Street

     Alexandria, VA         1992         1966         76,000   

6110 Executive Boulevard

     Rockville, MD         1995         1971         198,000   

1220 19th Street

     Washington, DC         1995         1976         102,000   

1600 Wilson Boulevard

     Arlington, VA         1997         1973         166,000   

7900 Westpark Drive

     McLean, VA         1997         1972/1986/1999         523,000   

600 Jefferson Plaza

     Rockville, MD         1999         1985         112,000   

1700 Research Boulevard

     Rockville, MD         1999         1982         101,000   

Wayne Plaza

     Silver Spring, MD         2000         1970         91,000   

Courthouse Square

     Alexandria, VA         2000         1979         113,000   

One Central Plaza

     Rockville, MD         2001         1974         267,000   

The Atrium Building

     Rockville, MD         2002         1980         80,000   

1776 G Street

     Washington, DC         2003         1979         263,000   

Albemarle Point

     Chantilly, VA         2005         2001         89,000   

6565 Arlington Boulevard

     Falls Church, VA         2006         1967/1998         140,000   

West Gude Drive

     Rockville, MD         2006         1984/1986/1988         276,000   

The Crescent

     Gaithersburg, MD         2006         1989         49,000   

Monument II

     Herndon, VA         2007         2000         205,000   

Woodholme Center

     Pikesville, MD         2007         1989         73,000   

2000 M Street

     Washington, DC         2007         1971         227,000   

Dulles Station

     Herndon, VA         2005         2007         180,000   

2445 M Street

     Washington, DC         2008         1986         290,000   

925 Corporate Drive

     Stafford, VA         2010         2007         135,000   

1000 Corporate Drive

     Stafford, VA         2010         2009         136,000   
                 

Subtotal

              4,199,000   
                 

Medical Office Buildings

           

Woodburn Medical Park I

     Annandale, VA         1998         1984         71,000   

Woodburn Medical Park II

     Annandale, VA         1998         1988         96,000   

Prosperity Medical Center I

     Merrifield, VA         2003         2000         92,000   

Prosperity Medical Center II

     Merrifield, VA         2003         2001         88,000   

Prosperity Medical Center III

     Merrifield, VA         2003         2002         75,000   

Shady Grove Medical Village II

     Rockville, MD         2004         1999         66,000   

8301 Arlington Boulevard

     Fairfax, VA         2004         1965         49,000   

Alexandria Professional Center

     Alexandria, VA         2006         1968         113,000   

9707 Medical Center Drive

     Rockville, MD         2006         1994         38,000   

15001 Shady Grove Road

     Rockville, MD         2006         1999         51,000   

Plumtree Medical Center

     Bel Air, MD         2006         1991         33,000   

15005 Shady Grove Road

     Rockville, MD         2006         2002         52,000   

2440 M Street

     Washington, DC         2007         1986/2006         110,000   

Woodholme Medical Office Building

     Pikesville, MD         2007         1996         125,000   

Ashburn Office Park

     Ashburn, VA         2007         1998/2000/2002         75,000   

CentreMed I & II

     Centreville, VA         2007         1998         52,000   

Sterling Medical Office Building

     Sterling, VA         2008         1986/2000         36,000   

Lansdowne Medical Office Building

     Leesburg, VA         2009         2009         87,000   
                 

Subtotal

              1,309,000   
                 

Retail Centers

           

Takoma Park

     Takoma Park, MD         1963         1962         51,000   

Westminster

     Westminster, MD         1972         1969         151,000   

Concord Centre

     Springfield, VA         1973         1960         76,000   

Wheaton Park

     Wheaton, MD         1977         1967         72,000   

Bradlee

     Alexandria, VA         1984         1955         168,000   

Chevy Chase Metro Plaza

     Washington, DC         1985         1975         49,000   

Montgomery Village Center

     Gaithersburg, MD         1992         1969         198,000   

Shoppes of Foxchase (1)

     Alexandria, VA         1994         1960         134,000   

Frederick County Square

     Frederick, MD         1995         1973         227,000   

800 S. Washington Street

     Alexandria, VA         1998/2003         1955/1959         44,000   

Centre at Hagerstown

     Hagerstown, MD         2002         2000         332,000   

Frederick Crossing

     Frederick, MD         2005         1999/2003         295,000   

Randolph Shopping Center

     Rockville, MD         2006         1972         82,000   

Montrose Shopping Center

     Rockville, MD         2006         1970         143,000   

Gateway Overlook

     Columbia, MD         2010         2007         223,000   
                 

Subtotal

              2,245,000   
                 

 

(1)

Development on approximately 60,000 square feet of the center was completed in December 2006.

 

26


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PROPERTIES

   LOCATION      YEAR ACQUIRED      YEAR CONSTRUCTED     NET RENTABLE
SQUARE FEET*
 

Multifamily Buildings * / # units

          

3801 Connecticut Avenue / 308

     Washington, DC         1963         1951        179,000   

Roosevelt Towers / 191

     Falls Church, VA         1965         1964        170,000   

Country Club Towers / 227

     Arlington, VA         1969         1965        163,000   

Park Adams / 200

     Arlington, VA         1969         1959        173,000   

Munson Hill Towers / 279

     Falls Church, VA         1970         1963        259,000   

The Ashby at McLean / 256

     McLean, VA         1996         1982        252,000   

Walker House Apartments / 212

     Gaithersburg, MD         1996         1971/2003(2)        159,000   

Bethesda Hill Apartments / 195

     Bethesda, MD         1997         1986        226,000   

Bennett Park / 224

     Arlington, VA         2007         2007        268,000   

Clayborne / 74

     Alexandria, VA         2008         2008        87,000   

Kenmore Apartments / 374

     Washington, DC         2008         1948        270,000   
                

Subtotal (2,540 units)

             2,206,000   
                

Industrial Distribution / Flex Properties

          

Fullerton Business Center

     Springfield, VA         1985         1980        104,000   

The Alban Business Center

     Springfield, VA         1996         1981/1982        87,000   

Pickett Industrial Park

     Alexandria, VA         1997         1973        246,000   

Northern Virginia Industrial Park

     Lorton, VA         1998         1968/1991        787,000   

8900 Telegraph Road

     Lorton, VA         1998         1985        32,000   

Dulles South IV

     Chantilly, VA         1999         1988        83,000   

Sully Square

     Chantilly, VA         1999         1986        95,000   

Fullerton Industrial Center

     Springfield, VA         2003         1980        137,000   

8880 Gorman Road

     Laurel, MD         2004         2000        141,000   

Dulles Business Park Portfolio

     Chantilly, VA         2004/2005         1999-2005        324,000   

Albemarle Point

     Chantilly, VA         2005         2001/2003/2005        207,000   

Hampton Overlook

     Capital Heights, MD         2006         1989        134,000   

Hampton South

     Capital Heights, MD         2006         1989/2005        168,000   

9950 Business Parkway

     Lanham, MD         2006         2005        102,000   

270 Technology Park

     Frederick, MD         2007         1986-1987        157,000   

6100 Columbia Park Road

     Landover, MD         2008         1969        150,000   
                

Subtotal

             2,954,000   
                

TOTAL

             12,913,000   
                

 

* Multifamily buildings are presented in gross square feet.
(2)

A 16 unit addition referred to as The Gardens at Walker House was completed in October 2003.

 

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LOGO

Annualized base rent (ABR) is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.

Debt to total market capitalization is total debt from the balance sheet divided by the sum of total debt from the balance sheet plus the market value of shares outstanding at the end of the period.

Adjusted EBITDA (a non-GAAP measure) is earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities.

Ratio of earnings to fixed charges 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.

Debt service coverage ratio is computed by dividing earnings attributable to the controlling interest before interest expense, taxes, depreciation, amortization, gain on sale of real estate, gain/loss on extinguishment of debt and gain/loss from non-disposal activities by interest expense (including interest expense from discontinued operations) and principal amortization.

Funds from operations (FFO) - The National Association of Real Estate Investment Trusts, Inc. (NAREIT) defines FFO (April, 2002 White Paper) as net income atributable to the controlling interest (computed in accordance with generally accepted accounting principles (GAAP)) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. FFO is a non-GAAP measure.

Core Funds From Operations (Core FFO), a non-GAAP measure, is calculated by adjusting FFO for (1) gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties and (3) property impairments, as appropriate.

Funds Available for Distribution (FAD), a non-GAAP measure, is calculated by subtracting from FFO recurring expenditures, tenant improvements, leasing incentives and leasing costs, that are capitalized and amortized and are necessary to maintain our properties and revenue stream, non-cash gain/loss from extinguishment of debt and straight line rents, then adding non-real estate depreciation and amortization, non-cash fair value interest expense, adding or subtracting amortization of lease intangibles and amortization of restricted share compensation, as appropriate.

Core Funds Available for Distribution (Core FAD), a non-GAAP measure, is calculated by adjusting FAD for (1) cash gains or losses on extinguishment of debt, (2) costs related to the acquisition of properties and (3) property impairments, as appropriate.

Recurring capital expenditures represents 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.

Same-store portfolio properties include all properties that were owned for the entirety of the current and prior year reporting periods.

Same-store portfolio net operating income (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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