WASHINGTON REAL ESTATE INVESTMENT TRUST - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - November 26, 2013

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Exhibit 99.1

WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2013
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
WRIT
 
Disposition Group
 
 
Pro Forma
Assets
 
 
 
 
 
 
Land
$
418,008

 
 
 
 
$
418,008

Income producing property
1,624,617

 
 
 
 
1,624,617

 
2,042,625

 
 
 
 
2,042,625

Accumulated depreciation and amortization
(548,549
)
 
 
 
 
(548,549
)
Net income producing property
1,494,076

 
 
 
 
1,494,076

Properties under development or held for future development
55,580

 
 
 
 
55,580

Total real estate held for investment, net
1,549,656

 
 
 
 
1,549,656

Investment in real estate sold or held for sale, net
346,157

 
$
(346,157
)
 
(a)
—

Cash and cash equivalents
7,923

 
460,745

 
(b)
468,668

Restricted cash
7,547

 
 
 
 
7,547

Rents and other receivables, net of allowance for doubtful accounts
48,619

 
 
 
 
48,619

Prepaid expenses and other assets
110,116

 
 
 
 
110,116

Other assets related to properties sold or held for sale
18,337

 
(18,337
)
 
(a)
—

Total assets
$
2,088,355

 
$
96,251

 
 
$
2,184,606

Liabilities
 
 
 
 
 
 
Notes payable
$
846,576

 
 
 
 
$
846,576

Mortgage notes payable
290,838

 
 
 
 
290,838

Lines of credit
85,000

 
 
 
 
85,000

Accounts payable and other liabilities
57,116

 
 
 
 
57,116

Advance rents
11,749

 
 
 
 
11,749

Tenant security deposits
7,639

 
 
 
 
7,639

Liabilities related to properties sold or held for sale
31,275

 
$
(23,467
)
 
(c)
—

 
 
 
(7,808
)
 
(a)
 
Total liabilities
1,330,193

 
(31,275
)
 
 
1,298,918

Equity
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
 
Preferred shares; $0.01 par value; 10,000 shares authorized
—

 
 
 
 
—

Shares of beneficial interest, $0.01 par value; 100,000 shares authorized
665

 
 
 
 
665

Additional paid in capital
1,148,837

 
 
 
 
1,148,837

Distributions in excess of net income
(395,816
)
 
132,016

 
(d)
(266,506
)
 
 
 
(2,706
)
 
(e)
 
Total shareholders’ equity
753,686

 
129,310

 
 
882,996

Noncontrolling interests in subsidiaries
4,476

 
(1,784
)
 
(f)
2,692

Total equity
758,162

 
127,526

 
 
885,688

Total liabilities and shareholders’ equity
$
2,088,355

 
$
96,251

 
 
$
2,184,606


See accompanying notes to the pro forma condensed consolidated financial statements.



WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2012
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 
WRIT
 
Disposition Group
 
 
Pro Forma
Revenue
 
 
 
 
 
 
Real estate rental revenue
$
304,983

 
$
(50,189
)
 
(g)
$
254,794

Expenses
 
 
 
 
 
 
Real estate expenses
103,276

 
(16,731
)
 
(g)
86,545

Depreciation and amortization
103,067

 
(17,960
)
 
(g)
85,107

Acquisition costs
234

 
—

 
 
234

Real estate impairment
2,097

 
(2,097
)
 
(h), (g)
—

General and administrative
15,488

 
—

 
 
15,488

 
224,162

 
(36,788
)
 
 
187,374

Real estate operating income
80,821

 
(13,401
)
 
 
67,420

Other income (expense)
 
 
 
 
 
 
Interest expense
(64,697
)
 
4,070

 
(c), (g)
(60,627
)
Other income
975

 
—

 
 
975

 
(63,722
)
 
4,070

 
 
(59,652
)
Income from continuing operations
17,099

 
(9,331
)
 
 
7,768

Less: Income from continuing operations attributable to noncontrolling interests
—

 
—

 
 
—

Income from continuing operations attributable to the controlling interests
$
17,099

 
$
(9,331
)
 
 
$
7,768

Income from continuing operations attributable to the controlling interests per share:
 
 
 
 
 
 
Basic
$
0.25

 
 
 
 
$
0.11

Diluted
$
0.25

 
 
 
 
$
0.11

Weighted average shares outstanding - basic
66,239

 
 
 
 
66,239

Weighted average shares outstanding - diluted
66,376

 
 
 
 
66,376


See accompanying notes to the pro forma condensed consolidated financial statements.




WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 
WRIT
 
Disposition Group
 
 
Pro Forma
Revenue
 
 
 
 
 
 
Real estate rental revenue
$
284,156

 
$
(49,423
)
 
(g)
$
234,733

Expenses
 
 
 
 
 
 
Real estate expenses
95,342

 
(15,718
)
 
(g)
79,624

Depreciation and amortization
91,805

 
(17,402
)
 
(g)
74,403

Acquisition costs
3,607

 
—

 
 
3,607

Real estate impairment
14,526

 
—

 
 
14,526

General and administrative
15,728

 
—

 
 
15,728

 
221,008

 
(33,120
)
 
 
187,888

Real estate operating income
63,148

 
(16,303
)
 
 
46,845

Other income (expense)
 
 
 
 
 
 
Interest expense
(66,214
)
 
4,812

 
(c), (g)
(61,402
)
Other income
1,144

 
—

 
 
1,144

Loss on extinguishment of debt
(976
)
 
—

 
 
(976
)
 
(66,046
)
 
4,812

 
 
(61,234
)
Loss from continuing operations
(2,898
)
 
(11,491
)
 
 
(14,389
)
Less: Income from continuing operations attributable to noncontrolling interests
—

 
—

 
 
—

Loss from continuing operations attributable to the controlling interests
$
(2,898
)
 
$
(11,491
)
 
 
$
(14,389
)
Loss from continuing operations attributable to the controlling interests per share:
 
 
 
 
 
 
Basic
$
(0.04
)
 
 
 
 
$
(0.22
)
Diluted
$
(0.04
)
 
 
 
 
$
(0.22
)
Weighted average shares outstanding - basic
65,982

 
 
 
 
65,982

Weighted average shares outstanding - diluted
65,982

 
 
 
 
65,982


See accompanying notes to the pro forma condensed consolidated financial statements.




WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2010
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 
WRIT
 
Disposition Group
 
 
Pro Forma
Revenue
 
 
 
 
 
 
Real estate rental revenue
$
253,127

 
$
(48,908
)
 
(g)
$
204,219

Expenses
 
 
 
 
 
 
Real estate expenses
84,745

 
(16,055
)
 
(g)
68,690

Depreciation and amortization
78,483

 
(17,462
)
 
(g)
61,021

Acquisition costs
1,161

 
—

 
 
1,161

Real estate impairment
—

 
 
 
 
—

General and administrative
14,406

 
—

 
 
14,406

 
178,795

 
(33,517
)
 
 
145,278

Real estate operating income
74,332

 
(15,391
)
 
 
58,941

Other income (expense)
 
 
 
 
 
 
Interest expense
(66,965
)
 
5,126

 
(c), (g)
(61,839
)
Other income
1,193

 
—

 
 
1,193

Gain from non-disposal activities
7

 
—

 
 
7

Loss on extinguishment of debt
(9,176
)
 
—

 
 
(9,176
)
 
(74,941
)
 
5,126

 
 
(69,815
)
Loss from continuing operations
(609
)
 
(10,265
)
 
 
(10,874
)
Less: Income from continuing operations attributable to noncontrolling interests
—

 
—

 
 
—

Loss from continuing operations attributable to the controlling interests
$
(609
)
 
$
(10,265
)
 
 
$
(10,874
)
Loss from continuing operations attributable to the controlling interests per share:
 
 
 
 
 
 
Basic
$
(0.01
)
 
 
 
 
$
(0.17
)
Diluted
$
(0.01
)
 
 
 
 
$
(0.17
)
Weighted average shares outstanding - basic
62,140

 
 
 
 
62,140

Weighted average shares outstanding - diluted
62,140

 
 
 
 
62,140


See accompanying notes to the pro forma condensed consolidated financial statements.




WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013

Note 1: Basis of Presentation
The accompanying unaudited pro forma consolidated balance sheet at September 30, 2013 of Washington Real Estate Investment Trust (“WRIT”) gives effect to the disposition of WRIT’s entire medical office segment and two office properties as if they had occurred on September 30, 2013.
The accompanying unaudited pro forma condensed consolidated statements of income for the years ended December 31, 2012, 2011 and 2010 give effect to the disposition of WRIT’s entire medical office segment and two office properties as if these dispositions had occurred on January 1, 2010.
This unaudited pro forma condensed consolidated financial information is not necessarily indicative of what WRIT’s actual results of operations or financial position would have been had these transactions been consummated on the dates indicated, nor does it purport to represent WRIT’s results of operations or financial position for any future period. The pro forma results of operations for the periods ended December 31, 2012, 2011 and 2010 are not necessarily indicative of the operating results for these periods.
The unaudited condensed consolidated pro forma financial information should be read in conjunction with the consolidated financial statements and notes thereto included in WRIT’s Annual Report on Form 10-K for the year ended December 31, 2012 and WRIT’s Quarterly Report on Form 10-Q for the period ended September 30, 2013. In management’s opinion, all adjustments necessary to reflect these dispositions and related transactions have been made.
Note 2: Description of Transactions
On September 27, 2013, WRIT entered into four separate purchase and sale agreements with Harrison Street Real Estate Capital, LLC to effectuate the sale of WRIT’s entire medical office portfolio and two office assets (collectively, the "Disposition Group")encompassing in total approximately 1.5 million square feet. The sales prices under the four agreements aggregate to $500.8 million.

WRIT closed on Purchase and Sale Agreements #1 and #2 on November 21, 2013 (except for Woodholme Medical Office Building, which closed on November 22, 2013). WRIT had three mortgage notes secured by properties included in Purchase and Sale Agreement #1 (Woodholme Medical Office Building and Ashburn Farm Office Park I and III). WRIT extinguished the mortgage notes secured by Ashburn Farm Office Park I and III on November 21, 2013 and the mortgage note secured by Woodholme Medical Office Building on November 22, 2013. The costs and prepayment penalties related to these transactions totaled $2.7 million. WRIT expects to settle on Purchase and Sale Agreements #3 and #4 by January 31, 2014.

The properties, purchase prices and actual/projected closing dates under each of the purchase and sale agreements are as follows:
Purchase and Sale Agreement #1 ($303.4 million; closed on November 21, 2013 except for Woodholme Medical Office Building, which closed on November 22, 2013):
 
1.
2440 M Street
 
2.
Alexandria Professional Center
 
3.
8301 Arlington Boulevard
 
4.
6565 Arlington Boulevard
 
5.
Ashburn Farm Office Park I
 
6.
Ashburn Farm Office Park II
 
7.
Ashburn Farm Office Park III
 
8.
CentreMed I and II
 
9.
Sterling Medical Office Building
 
10.
19500 at Riverside Office Park (formerly Lansdowne Medical Office Building)
 
11.
Shady Grove Medical Village II
 
12.
9707 Medical Center Drive
 
13.
15001 Shady Grove Road
 
14.
15005 Shady Grove Road
 
15.
Woodholme Center
 
16.
Woodholme Medical Office Building



Purchase and Sale Agreement #2 ($3.8 million; closed on November 21, 2013):
 
1.
4661 Kenmore Avenue (undeveloped land)
Purchase and Sale Agreement #3 ($79.0 million; expected to close by January 31, 2014):
 
1.
Woodburn Medical Park I
 
2.
Woodburn Medical Park II
Purchase and Sale Agreement #4 ($114.6 million; expected to close by January 31, 2014):
 
1.
Prosperity Medical Center I and II
 
2.
Prosperity Medical Center III
Note 3: Unaudited Pro Forma Adjustments to Condensed Consolidated Financial Statements
(a) Reflects the elimination of assets and liabilities associated with the Disposition Group, as defined in note 2.
(b) Reflects the estimated net sales proceeds for the Disposition Group.
(c) Reflects the elimination of mortgage notes and related accrued interest secured by Woodholme Medical Office Building, Ashburn Farm Office Park I and Ashburn Farm Office Park III, and interest expense associated with mortgage notes secured by Woodholme Medical Office Building, Ashburn Farm Office Park I and III (see note 2).
(d) Reflects the estimated gain on sale of real estate for the Disposition Group.
(e) Reflects the estimated loss on extinguishment of debt for the mortgage notes secured by Woodholme Medical Office Building, Ashburn Farm Office Park I and III (see note 2).
(f) Reflects the elimination of noncontrolling interests related to an operating partnership agreement with a member of the entity that previously owned the undeveloped land at 4661 Kenmore Avenue.
(g) Reflects the elimination of income and expenses associated with the Disposition Group.
(h) Reflects the elimination of real estate impairment associated with 4661 Kenmore Avenue.


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