AI assistant
Elme Communities — Capital/Financing Update 2019
Jul 26, 2019
31927_rns_2019-07-26_f51cab81-e6c4-4d9f-b47d-7240522f1d44.zip
Capital/Financing Update
Open in viewerOpens in your device viewer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________
FORM 8-K
_________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 23, 2019
WASHINGTON REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)
| Maryland | 001-06622 | 53-0261100 |
|---|---|---|
| (State of incorporation) | (Commission File Number) | (IRS Employer Identification Number) |
1775 EYE STREET, NW , SUITE 1000 WASHINGTON , DC 20006
(Address of principal executive office) (Zip code)
Registrant’s telephone number, including area code: ( 202 ) 774-3200
_________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Shares of Beneficial Interest | WRE | NYSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
Washington Real Estate Investment Trust (“WashREIT”) previously reported the acquisition of seven multifamily portfolio apartments, collectively referred to as the Assembly Portfolio, which was completed in two tranches. The five Virginia assets in the Assembly Portfolio were acquired by WashREIT on April 30, 2019, and the two Maryland assets in the Assembly Portfolio were acquired by WashREIT on June 27, 2019. These acquisitions were reported on Current Reports on Form 8-K on May 1, 2019 and June 27, 2019, respectively, which Reports were amended on July 11, 2019 to provide the required financial information related to such acquisitions. The adjustments presented in the pro forma financial information therein giving effect to the acquisition of the Assembly Portfolio are repeated in the pro forma financial information included in this Report, in addition to presenting adjustments giving effect to the disposition of the Shopping Center Portfolio, described below and reported herein under Item 2.01 and Item 9.01.
Item 2.01 Completion of Acquisition or Disposition of Assets.
On June 26, 2019 , WashREIT reported in a Current Report on Form 8-K that it had entered into a purchase and sale agreement with Global Retail Investors, LLC, a Delaware limited liability company (the “Buyer”), to sell a portfolio of five retail assets (the “Shopping Center Portfolio”) for a contract sale price of $485.25 million . On July 23, 2019 , WashREIT closed on the transaction.
The five retail assets in the Shopping Center Portfolio are as follows:
-
Bradlee Shopping Center - 3600 King Street, Alexandria, Virginia 22302
-
Shoppes at Foxchase - 4500-4600 Duke Street, Alexandria, Virginia 22304
-
Gateway Overlook - Little Patuxent Pkwy/Rte 175 & Waterloo Rd/Rte 108, Columbia, Maryland 21075
-
Olney Village Shopping Center - 18100 - 18330 Village Center Drive, Olney, Maryland 20832
-
Wheaton Park Shopping Center - Georgia Avenue and Shorefield Road, Wheaton, Maryland 20902
The foregoing description of the purchase and sale agreement does not purport to be complete and is qualified in its entirety by reference to the purchase and sale agreement, a copy of which is filed as an Exhibit to this Current Report on Form 8-K.
ITEM 9.01. Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following pro forma financial statements reflecting the Shopping Center Portfolio disposition described above (as defined in Regulation S-X) are filed herein:
-
WashREIT Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2019.
-
WashREIT Unaudited Pro Forma Condensed Consolidated Statements of Income (Loss) for the quarter ended March 31, 2019 and the years ended December 31, 2018, 2017 and 2016.
(d) Exhibits
The following exhibits are furnished with this report on Form 8-K:
| Exhibit No. | Description |
|---|---|
| 10.1 | Purchase and Sale Agreement, dated as of June 26, 2019 between WashREIT and Global Retail Investors, LLC. |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File Because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Taxonomy Extension Schema Document |
| 101.CAL | Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Taxonomy Extension Label Linkbase Document |
| 101.PRE | Taxonomy Extension Presentation Linkbase Document |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| (Registrant) | |
| By: | /s/ W. Drew Hammond |
| (Signature) | |
| W. Drew Hammond | |
| Vice President, Chief Accounting Officer | |
| July 26, 2019 | |
| (Date) |
WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
The unaudited consolidated pro forma financial information should be read in conjunction with WashREIT's Current Reports on Form 8-K filed with the Securities and Exchange Commission on May 1, 2019 and June 27, 2019, reporting the acquisition of the Assembly Portfolio and amended on July 11, 2019; the consolidated financial statements and notes thereto included in WashREIT's Annual Report on Form 10-K for the year ended December 31, 2018 and WashREIT's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019; and the Statements of Revenues and Certain Expenses of the Assembly Portfolio included in the Current Report on Form 8-K/A filed on July 11, 2019, as well as associated unaudited consolidated pro forma financial information giving effect to the acquisition of the Assembly Portfolio, the adjustments from which are repeated herein. In management's opinion, all adjustments necessary to reflect these dispositions, acquisitions and related transactions have been made.
The unaudited consolidated pro forma financial information is not necessarily indicative of what WashREIT's actual results of operations would have been had the transactions been consummated on the dates indicated, nor does it purport to represent WashREIT's results of operations or financial position for any future period. The pro forma results of operations for the periods ended December 31, 2018, 2017 and 2016 and March 31, 2019 are not necessarily indicative of the operating results for these periods.
The Shopping Center Portfolio, sold on July 23, 2019 for an aggregate contract price of $485.25 million (exclusive of closing costs) consists of five retail assets as follows:
-
Bradlee Shopping Center - 3600 King Street, Alexandria, Virginia 22302
-
Shoppes at Foxchase - 4500-4600 Duke Street, Alexandria, Virginia 22304
-
Gateway Overlook - Little Patuxent Pkwy/Rte 175 & Waterloo Rd/Rte 108, Columbia, Maryland 21075
-
Olney Village Shopping Center - 18100 - 18330 Village Center Drive, Olney, Maryland 20832
-
Wheaton Park Shopping Center - Georgia Avenue and Shorefield Road, Wheaton, Maryland 20902
As of June 30, 2019, we determined that the Shopping Center Portfolio met the criteria for classification as held for sale and presentation as discontinued operations.
The Assembly Portfolio, acquired in two tranches on the dates specified below, which contains 2,113 units, consists of seven suburban Class B apartment communities in Northern Virginia and Montgomery County, Maryland. The seven assets in the portfolio are as follows:
Virginia Assets ($379.1 million (aggregate contract price, exclusive of closing costs); purchased on April 30, 2019 )
-
205 Century Place, Alexandria
-
13690 Legacy Circle, Herndon
-
2511 Farmcrest Drive, Herndon
-
10519 Lariat Lane, Manassas
-
86 Heritage Way, NE, Leesburg
Maryland Assets ($82.1 million (aggregate contract price, exclusive of closing costs); purchased on June 27, 2019 )
-
2 Observation Court, Germantown
-
99 Watkins Mill Road, Gaithersburg
On April 30, 2019, WashREIT entered into a six-month, $450.0 million unsecured term loan facility (“2019 Term Loan”), maturing on October 30, 2019 with an option to extend for an additional six-month period. The 2019 Term Loan was used to fund the acquisition of the Assembly Portfolio. On July 25, 2019, $350.0 million of the outstanding balance was repaid using proceeds from the sale of the Shopping Center Portfolio.
The pro forma balance sheet as of March 31, 2019 presents consolidated financial information as if the disposition of the Shopping Center Portfolio, the acquisition of the Assembly Portfolio and the borrowings and repayments under the 2019 Term Loan had taken place on March 31, 2019. The pro forma condensed consolidated statements of income (loss) for the year ended December 31, 2018 and the quarter ended March 31, 2019 present the pro forma results of operations as if the Shopping Center Portfolio disposition had taken place as of January 1, 2018 and the Assembly Portfolio acquisition had taken place as of January 1, 2018. The pro forma condensed consolidated statements of income (loss) for the years ended December 31, 2017 and 2016 present the pro forma results of operations as if the Shopping Center Portfolio had been classified as discontinued operations as of January 1, 2016.
The pro forma adjustments to record interest expense assume the 2019 Term Loan was obtained on January 1, 2018, with $350.0 million of the borrowings repaid on January 1, 2018 using proceeds from the sale of the Shopping Center Portfolio. The remaining $100.0 million balance is assumed to be outstanding for the entire year ended December 31, 2018 and the entire quarter ended March 31, 2019. Explanations or details of the pro forma adjustments are in the notes to the financial statements.
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2019
(IN THOUSANDS)
| WashREIT | Acquisition of Assembly Portfolio and related financing | Disposition of Shopping Center Portfolio | Repayment of 2019 Term Loan | Pro Forma | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||||||
| Land | $ 612,692 | $ 80,102 | (1) | $ (55,738 | ) | (3) | $ — | $ 637,056 | |||||
| Income producing property | 2,276,385 | 367,427 | (1) | (139,617 | ) | (3) | — | 2,504,195 | |||||
| 2,889,077 | 447,529 | (195,355 | ) | — | 3,141,251 | ||||||||
| Accumulated depreciation and amortization | (781,302 | ) | — | 60,630 | (3) | — | (720,672 | ) | |||||
| Net income producing property | 2,107,775 | 447,529 | (134,725 | ) | — | 2,420,579 | |||||||
| Properties under development or held for future development | 97,288 | — | — | — | 97,288 | ||||||||
| Total real estate held for investment, net | 2,205,063 | 447,529 | (134,725 | ) | — | 2,517,867 | |||||||
| Cash and cash equivalents | 12,025 | (9,173 | ) | (2) | 469,298 | (4) | (350,000 | ) | (10) | 122,150 | |||
| Restricted cash | 1,368 | — | — | — | 1,368 | ||||||||
| Rents and other receivables, net | 73,293 | — | (6,861 | ) | (3) | — | 66,432 | ||||||
| Prepaid expenses and other assets | 116,718 | 13,751 | (1) | (6,141 | ) | (3) | — | 123,954 | |||||
| 167 | (1) | (541 | ) | (5) | |||||||||
| Total assets | $ 2,408,467 | $ 452,274 | $ 321,030 | $ (350,000 | ) | $ 2,831,771 | |||||||
| Liabilities | |||||||||||||
| Notes payable | $ 995,750 | $ 449,012 | (2) | $ — | $ (350,000 | ) | (10) | 1,094,762 | |||||
| Mortgage notes payable | 58,805 | — | (10,999 | ) | (6) | — | 47,806 | ||||||
| Lines of credit | 228,000 | — | — | — | 228,000 | ||||||||
| Accounts payable and other liabilities | 67,279 | 1,353 | (1) | (1,745 | ) | (3) | — | 66,887 | |||||
| 708 | (1) | 2,292 | (7) | 3,000 | |||||||||
| Advance rents | 10,418 | 449 | (1) | (990 | ) | (3) | — | 9,877 | |||||
| Tenant security deposits | 10,019 | 752 | (1) | (562 | ) | (3) | — | 10,209 | |||||
| Total liabilities | 1,370,271 | 452,274 | (12,004 | ) | (350,000 | ) | 1,460,541 | ||||||
| Equity | |||||||||||||
| Shareholders’ equity | |||||||||||||
| Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding | — | — | — | — | — | ||||||||
| Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 80,029 shares issued and outstanding | 800 | — | — | — | 800 | ||||||||
| Additional paid in capital | 1,529,916 | — | — | — | 1,529,916 | ||||||||
| Distributions in excess of net income | (498,537 | ) | — | 333,771 | (8) | — | (165,503 | ) | |||||
| (737 | ) | (9) | |||||||||||
| Accumulated other comprehensive loss | 5,670 | — | — | — | 5,670 | ||||||||
| Total shareholders’ equity | 1,037,849 | — | 333,034 | — | 1,370,883 | ||||||||
| Noncontrolling interests in subsidiaries | 347 | — | — | — | 347 | ||||||||
| Total equity | 1,038,196 | — | 333,034 | — | 1,371,230 | ||||||||
| Total liabilities and shareholders’ equity | $ 2,408,467 | $ 452,274 | $ 321,030 | $ (350,000 | ) | $ 2,831,771 |
See accompanying notes to the pro forma condensed consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2019
(1) The total cost of the acquisition of the Assembly Portfolio was as follows (in thousands):
| Contract purchase price | $ | |
|---|---|---|
| Credit from seller | (2,252 | ) |
| Capitalized acquisition costs | 2,362 | |
| Total | $ 461,280 |
WashREIT accounted for the acquisition as an asset acquisition. Accordingly, we capitalized the $2.4 million of costs directly associated with the acquisition. We measured the value of the acquired physical assets (land, building and improvements) and in-place leases (absorption costs) by allocating the total cost of the acquisition on a relative fair value basis.
WashREIT has recorded the total cost of the Assembly Portfolio as follows (in thousands):
| Land | $ |
|---|---|
| Buildings and improvements | 367,427 |
| Absorption costs | 13,751 |
| Total | $ 461,280 |
The weighted average remaining life for the absorption costs is seven months.
The difference between cash paid ( $458.2 million ) and the total cost ( $461.3 million ) is comprised of the following (in thousands):
| Credit to seller for prepaid expenses | $ |
|---|---|
| Credit to WashREIT for assumed liabilities | 1,353 |
| Credit to WashREIT for advance rents | 449 |
| Credit to WashREIT for security deposits | 752 |
| Additional acquisition-related expenses not paid at settlement | 708 |
| $ 3,095 |
(2) On April 30, 2019, WashREIT entered into the 2019 Term Loan. The 2019 Term Loan bears interest, at WashREIT's option, at a rate of either LIBOR plus a margin ranging from 0.75% to 1.65% or a base rate plus a margin ranging 0.0% to 0.65% (in each case depending upon WashREIT’s credit rating). The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50% and the daily one-month LIBOR rate plus 1.0%. The 2019 Term Loan currently has an interest rate based on the weekly LIBOR rate plus 100 basis points, based on WashREIT’s current unsecured debt rating. As of June 28, 2019, the all-in rate was 3.39%. The pro forma adjustments to record interest expense assume the 2019 Term Loan was obtained on January 1, 2018, with $350.0 million of the borrowings repaid using proceeds from the sale of the Shopping Center Portfolio (see note 10). The remaining $100.0 million balance is assumed to be outstanding for the entire year ended December 31, 2018 and the entire quarter ended March 31, 2019. The impact of a 1/8% increase in the interest rate on our pro forma financial statements would be higher interest expense for the quarter ended March 31, 2019 and year ended December 31, 2018 of approximately $31,000 and $125,000, respectively.
The 2019 Term Loan was used to fund the acquisition of the Assembly Portfolio (in thousands):
| Cash paid at closings and deposits paid | $ | |
|---|---|---|
| Funding of the Assembly Portfolio acquisition from the 2019 Term Loan, net of loan costs | 449,012 | |
| Funding of the Assembly Portfolio acquisition from cash | $ (9,173 | ) |
(3) Represents the elimination of assets and liabilities associated with the Shopping Center Portfolio.
(4) Represents the estimated net sales proceeds for the Shopping Center Portfolio.
| Cash proceeds received at settlement | $ | |
|---|---|---|
| Prepayment of mortgage note secured by Olney Village Center | (11,736 | ) |
| Net cash | $ 469,298 |
(5) Represents incremental costs incurred as of March 31, 2019 in connection with the disposition of the Shopping Center Portfolio.
(6) Represents the prepayment of the mortgage note secured by Olney Village Center.
(7) Represents additional incremental disposition-related expenses not paid at settlement.
(8) Represents the estimated gain on sale of real estate for the Shopping Center Portfolio.
(9) Represents the estimated loss on extinguishment of debt for the prepayment of the mortgage note secured by Olney Village Center.
(10) Represents the repayment of $350.0 million of the borrowings outstanding on the 2019 Term Loan using sales proceeds from the Shopping Center Portfolio.
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE QUARTER ENDED MARCH 31, 2019
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| WashREIT | Acquisition of Assembly Portfolio and related financing | Disposition of Shopping Center Portfolio | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||||
| Real estate rental revenue | $ 83,174 | $ 9,816 | (1) | $ (8,333 | ) | (5) | $ 84,657 | |||
| Expenses | ||||||||||
| Real estate expenses | 29,210 | 3,976 | (1) | (1,976 | ) | (5) | 31,448 | |||
| 238 | (2) | |||||||||
| Depreciation and amortization | 29,547 | 3,768 | (3) | (1,792 | ) | (5) | 31,523 | |||
| Real estate impairment | 8,374 | — | — | 8,374 | ||||||
| General and administrative | 7,429 | — | — | 7,429 | ||||||
| Lease origination expenses | 378 | — | — | 378 | ||||||
| 74,938 | 7,982 | (3,768 | ) | 79,152 | ||||||
| Real estate operating income | 8,236 | 1,834 | (4,565 | ) | 5,505 | |||||
| Other income (expense) | ||||||||||
| Interest expense | (12,641 | ) | (846 | ) | (4) | 145 | (6) | (13,342 | ) | |
| (12,641 | ) | (846 | ) | 145 | (13,342 | ) | ||||
| Loss from continuing operations | (4,405 | ) | 988 | (4,420 | ) | (7,837 | ) | |||
| Less: Income from continuing operations attributable to noncontrolling interests | — | — | — | — | ||||||
| Loss from continuing operations attributable to the controlling interests | $ (4,405 | ) | $ 988 | $ (4,420 | ) | $ (7,837 | ) | |||
| Loss from continuing operations attributable to the controlling interests per share: | ||||||||||
| Basic | $ (0.06 | ) | $ (0.10 | ) | ||||||
| Diluted | $ (0.06 | ) | $ (0.10 | ) | ||||||
| Weighted average shares outstanding - basic | 79,881 | 79,881 | ||||||||
| Weighted average shares outstanding - diluted | 79,881 | 79,881 |
See accompanying notes to the pro forma condensed consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE QUARTER ENDED MARCH 31, 2019
(1) Represents real estate rental revenue and operating expenses of the Assembly Portfolio for the quarter ended March 31, 2019.
(2) Represents property management costs incurred by the Assembly Portfolio.
(3) Represents depreciation over 30 years, based on the relative fair value of building and improvements, plus amortization of absorption costs over the remaining life of the acquired leases.
(4) Represents interest expense related to the 2019 Term Loan. The adjustment to record interest expense assumes that the 2019 Term Loan was obtained on January 1, 2018, with $350.0 million of the borrowings repaid using proceeds from the sale of the Shopping Center Portfolio. The remaining $100.0 million balance is assumed to be outstanding for the entire year ended December 31, 2018 and the entire quarter ended March 31, 2019. The interest rate assumed for purposes of preparing this pro forma financial information is 3.27%, based on the 30 day LIBOR rate as of July 24, 2019 plus 100 basis points .
(5) Represents the elimination of income and expenses associated with the Shopping Center Portfolio.
(6) Represents the elimination of the interest expense associated with the mortgage note secured by Olney Village Center due to the prepayment of the mortgage note.
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2018
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| WashREIT | Acquisition of Assembly Portfolio and related financing | Disposition of Shopping Center Portfolio | Pro Forma | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | ||||||||||
| Real estate rental revenue | $ 336,890 | $ 38,465 | (1) | $ (32,282 | ) | (5) | $ 343,073 | |||
| Expenses | ||||||||||
| Real estate expenses | 116,230 | 16,102 | (1) | (6,863 | ) | (5) | 126,402 | |||
| 933 | (2) | |||||||||
| Depreciation and amortization | 121,228 | 28,823 | (3) | (6,606 | ) | (5) | 143,445 | |||
| Real estate impairment | 1,886 | — | — | 1,886 | ||||||
| General and administrative | 22,089 | — | — | 22,089 | ||||||
| 261,433 | 45,858 | (13,469 | ) | 293,822 | ||||||
| Other operating income | ||||||||||
| Gain on sale of real estate | 2,495 | — | — | 2,495 | ||||||
| Real estate operating income | 77,952 | (7,393 | ) | (18,813 | ) | 51,746 | ||||
| Other income (expense) | ||||||||||
| Interest expense | (51,144 | ) | (3,385 | ) | (4) | 643 | (6) | (53,886 | ) | |
| Loss on extinguishment of debt | (1,178 | ) | — | — | (1,178 | ) | ||||
| (52,322 | ) | (3,385 | ) | 643 | (55,064 | ) | ||||
| Income (loss) from continuing operations | 25,630 | (10,778 | ) | (18,170 | ) | (3,318 | ) | |||
| Less: Income from continuing operations attributable to noncontrolling interests | — | — | — | — | ||||||
| Income (loss) from continuing operations attributable to the controlling interests | $ 25,630 | $ (10,778 | ) | $ (18,170 | ) | $ (3,318 | ) | |||
| Income (loss) from continuing operations attributable to the controlling interests per share: | ||||||||||
| Basic | $ 0.32 | $ (0.05 | ) | |||||||
| Diluted | $ 0.32 | $ (0.05 | ) | |||||||
| Weighted average shares outstanding - basic | 78,960 | 78,960 | ||||||||
| Weighted average shares outstanding - diluted | 79,042 | 78,960 |
See accompanying notes to the pro forma condensed consolidated financial statements.
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2017
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| WashREIT | Disposition of Shopping Center Portfolio | Pro Forma | |||||
|---|---|---|---|---|---|---|---|
| Revenue | |||||||
| Real estate rental revenue | $ 325,078 | $ (31,745 | ) | (5) | $ 293,333 | ||
| Expenses | |||||||
| Real estate expenses | 115,650 | (6,673 | ) | (5) | 108,977 | ||
| Depreciation and amortization | 112,056 | (7,184 | ) | (5) | 104,872 | ||
| Real estate impairment | 33,152 | — | 33,152 | ||||
| General and administrative | 22,580 | — | 22,580 | ||||
| 283,438 | (13,857 | ) | 269,581 | ||||
| Other operating income | |||||||
| Gain on sale of real estate | 24,915 | — | 24,915 | ||||
| Real estate operating income | 66,555 | (17,888 | ) | 48,667 | |||
| Other income (expense) | |||||||
| Interest expense | (47,534 | ) | 740 | (6) | (46,794 | ) | |
| Other income | 507 | — | 507 | ||||
| Income tax benefit | 84 | — | 84 | ||||
| (46,943 | ) | 740 | (46,203 | ) | |||
| Income (loss) from continuing operations | 19,612 | (17,148 | ) | 2,464 | |||
| Less: Income from continuing operations attributable to noncontrolling interests | 56 | — | 56 | ||||
| Income (loss) from continuing operations attributable to the controlling interests | $ 19,668 | $ (17,148 | ) | $ 2,520 | |||
| Income from continuing operations attributable to the controlling interests per share: | |||||||
| Basic | $ 0.25 | $ 0.03 | |||||
| Diluted | $ 0.25 | $ 0.03 | |||||
| Weighted average shares outstanding - basic | 76,820 | 76,820 | |||||
| Weighted average shares outstanding - diluted | 76,935 | 76,935 |
See accompanying notes to the pro forma condensed consolidated financial statements.
WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 2016
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| WashREIT | Disposition of Shopping Center Portfolio | Pro Forma | |||||
|---|---|---|---|---|---|---|---|
| Revenue | |||||||
| Real estate rental revenue | $ 313,264 | $ (30,452 | ) | (5) | $ 282,812 | ||
| Expenses | |||||||
| Real estate expenses | 115,013 | (6,829 | ) | (5) | 108,184 | ||
| Depreciation and amortization | 108,406 | (7,042 | ) | (5) | 101,364 | ||
| Acquisition costs | 1,178 | — | 1,178 | ||||
| Casualty gain, net | (676 | ) | — | (676 | ) | ||
| General and administrative | 19,545 | — | 19,545 | ||||
| 243,466 | (13,871 | ) | 229,595 | ||||
| Other operating income | |||||||
| Gain on sale of real estate | 101,704 | — | 101,704 | ||||
| Real estate operating income | 171,502 | (16,581 | ) | 154,921 | |||
| Other income (expense) | |||||||
| Interest expense | (53,126 | ) | 831 | (6) | (52,295 | ) | |
| Other income | 297 | — | 297 | ||||
| Income tax benefit | 615 | — | 615 | ||||
| (52,214 | ) | 831 | (51,383 | ) | |||
| Income from continuing operations | 119,288 | (15,750 | ) | 103,538 | |||
| Less: Income from continuing operations attributable to noncontrolling interests | 51 | — | 51 | ||||
| Income from continuing operations attributable to the controlling interests | $ 119,339 | $ (15,750 | ) | $ 103,589 | |||
| Income from continuing operations attributable to the controlling interests per share: | |||||||
| Basic | $ 1.65 | $ 1.43 | |||||
| Diluted | $ 1.65 | $ 1.43 | |||||
| Weighted average shares outstanding - basic | 72,163 | 72,163 | |||||
| Weighted average shares outstanding - diluted | 72,339 | 72,339 |
See accompanying notes to the pro forma condensed consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 and 2016
(1) Represents real estate rental revenue and operating expenses of the Assembly Portfolio for the year ended December 31, 2018.
(2) Represents property management costs incurred by the Assembly Portfolio.
(3) Represents depreciation over 30 years, based on the relative fair value of building and improvements, plus amortization of absorption costs over the remaining life of the acquired leases.
(4) Represents interest expense related to the 2019 Term Loan. The adjustment to record interest expense assumes that the 2019 Term Loan was obtained on January 1, 2018, with $350.0 million of the borrowings repaid using proceeds from the sale of the Shopping Center Portfolio. The remaining $100.0 million balance is assumed to be outstanding for the entire year ended December 31, 2018. The interest rate assumed for purposes of preparing this pro forma financial information is 3.39%, based on the weekly LIBOR rate as of June 28, 2019 plus 100 basis points .
(5) Represents the elimination of income and expenses associated with the Shopping Center Portfolio.
(6) Represents the elimination of the interest expense associated with the mortgage note secured by Olney Village Center due to the elimination of the mortgage note.