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Washington Real Estate Investment Trust Announces Third Quarter Financial and Operating Results and Quarterly Dividend

WASHINGTON, Oct. 25, 2018 (GLOBE NEWSWIRE) -- Washington Real Estate Investment Trust (“Washington REIT” or the “Company”) (NYSE: WRE), a leading owner and operator of commercial and multifamily properties in the Washington, DC area, reported financial and operating results today for the quarter ended September 30, 2018:

Third Quarter 2018 Highlights

Net income attributable to controlling interests was $5.9 million, or $0.07 per diluted share, compared to $2.8 million, or $0.04 per diluted share in the third quarter of 2017, primarily due to the recognition of an impairment charge on Braddock Metro Center in the third quarter of 2017. NAREIT Funds from Operations (FFO) was $36.2 million, or $0.45 per diluted share, compared to $35.8 million, or $0.46 per diluted share, in the third quarter of 2017. Additional highlights are as below:

  • Reported Core FFO(1) of $0.45 per diluted share, compared to $0.46 per diluted share in third quarter 2017
  • Grew Core FFO to $36.2 million in third quarter 2018 from $35.8 million in third quarter 2017
  • Grew same-store(2) NOI by 3.4% and cash NOI(3) by 4.2% over third quarter 2017
  • Grew same-store office NOI by 4.1% and cash NOI by 5.6% over third quarter 2017
  • Grew same-store multifamily NOI and cash NOI by 3.4% over third quarter 2017
  • Grew same-store retail NOI by 2.4% and cash NOI by 3.0% over third quarter 2017
  • Increased same-store average occupancy by 40 basis points over third quarter 2017 and 70 basis points over second quarter 2018 to 93.8%
  • Increased same-store ending occupancy by 70 basis points over third quarter 2017 and second quarter 2018 to 94.0%
  • Prepaid secured debt of $31.7 million without penalty
  • Issued 1,165,140 common shares through the Company’s At-the-Market (ATM) program at an average share price of $31.18 for gross proceeds of $36.3 million and continued to keep balance sheet metrics strong

"We delivered a stable third quarter with solid same-store NOI growth across all three asset classes and continued balance sheet strength," said Paul T. McDermott, President and Chief Executive Officer. "In 2019, we expect our well-positioned re-leasing opportunities to capitalize on the demand created by increased Federal spending, which is now more certain to continue next year as the majority of annual discretionary funding for 2019 was approved prior to the end of the government's fiscal year 2018, an achievement our region hasn't experienced in over a decade."

Operating Results

The Company's overall portfolio NOI was $53.9 million for the quarter ended September 30, 2018, compared to $53.2 million in the corresponding prior year period primarily driven by an increase in same-store portfolio NOI, partially offset by a decrease in non same-store portfolio NOI due to the dispositions of 2445 M Street and Braddock Metro Center earlier this year.

Same-store portfolio NOI for the third quarter increased by 3.4%, compared to the corresponding prior year period, primarily due to average occupancy gains in the office same-store portfolio and rental rate growth in the multifamily same-store portfolio.

Same-store portfolio by sector:

  • Office: 42% of Same-Store NOI - Same-store NOI increased by 4.1% compared to the corresponding prior  year three-month period primarily due to 80 basis points of average occupancy gains driven by new lease commencements across multiple assets within the office portfolio. As a result, same-store office revenue growth more than offset higher operating expenses compared to the third quarter of 2017. The same-store office portfolio was 92.1% occupied and 93.9% leased at quarter end.
     
  • Multifamily: 32% of Same-Store NOI - Same-store NOI increased by 3.4% compared to the corresponding prior year three-month period, primarily due to 230 basis points of year-over-year rental rate growth and 20 basis points of increased average unit occupancy. Same-store effective new lease rent trade-outs increased by 3.3% and same-store effective renewal rent trade-outs increased by 4.1% during the quarter. The same-store multifamily portfolio was 95.3% occupied on a unit basis and 97.0% leased at quarter end.
     
  • Retail: 26% of Same-Store NOI - Same-store NOI increased by 2.4% compared to the corresponding prior year three-month period as new lease commencements, higher reimbursements and lower provisions for bad debt more than offset lower lease termination income and higher operating expenses. Same-store ending occupancy was 80 basis points higher year-over-year driven by seasonal specialty leasing agreements. The same-store retail portfolio was 94.3% occupied and 95.1% leased at quarter end.

Leasing Activity

During the third quarter, Washington REIT signed commercial leases totaling 103,000 square feet, including 54,000 square feet of new leases and 49,000 square feet of renewal leases, as follows (all dollar amounts are on a per square foot basis).

  Square Feet Weighted
Average Term

(in years)
Weighted
Average Free
Rent Period

(in months)
Weighted
Average
Rental Rates
Weighted
Average
Rental Rate

% Increase
Tenant
Improvements
Leasing
Commissions

 
New:                    
Office 36,000   5.9   4.7   $ 51.27   11.1 % $ 61.00   $ 17.30    
Retail 18,000   5.8   1.2   31.87   5.1 % 19.28   9.75    
Total 54,000   5.9   3.9   44.96   9.6 % 47.44   14.84    
               
Renewal:              
Office 37,000   5.7   5.3   $ 46.63   16.3 % $ 32.35   $ 13.13    
Retail 12,000   6.3     43.83   12.3 %   6.32    
Total 49,000   5.9   4.1   45.96   15.4 % 24.57   11.49    

Capital Update

In the third quarter, the Company prepaid secured debt of $31.7 million without penalty.

The Company issued 1,165,140 common shares at an average price of $31.18 per share through its  ATM program. Gross proceeds of $36.3 million were raised, which further strengthens the Company's balance sheet and provides additional capacity for development and redevelopment projects.

Earnings Guidance

Management is maintaining the mid-point of its 2018 Core FFO guidance and is tightening the range by $0.04 per fully diluted share to $1.85 to $1.87 from $1.83 to $1.89 per fully diluted share. The following GAAP assumptions underpin this guidance:

  • Same-store NOI growth is tightened and projected to range from 2.75% to 3.25% from a range of 2.5% to 3.5%
  • Same-store office NOI growth is lowered and projected to range from 4.0% to 4.5%, from a range of 4.0% to 5.0% due to a slight delay in the timing of certain lease commencements
  • Same-store multifamily NOI growth is lowered to be approximately 3.30% compared to a prior range of 3.25% to 4.0% due to higher weather-related expenses impacting the third quarter
  • Same-store retail NOI growth has been raised and is projected to range from 0.5% to 1.0% from a range of 0.25% to 1.0% due to better than expected revenue growth
  • There are no future acquisitions or dispositions assumed in guidance
  • General and administrative expense is projected to be approximately $21.5 to $22.0 million
  • Interest expense is projected to be approximately $51.0 to $51.25 million
  • Non same-store office NOI is projected to range between $35.25 to $35.5 million

Non same-store office properties in 2018 consist of Watergate 600 and Arlington Tower as these assets were acquired in 2017 and 2018, respectively; Braddock Metro Center, which was sold in January 2018; and 2445 M Street, which was sold in June of this year.

Washington REIT's 2018 Core FFO guidance is based on a number of factors, many of which are outside the Company's control and all of which are subject to change. Washington REIT may change the guidance provided during the year as actual and anticipated results vary from these assumptions.

2018 Guidance Reconciliation Table

A reconciliation of projected net income attributable to the controlling interests per diluted share to projected Core FFO per diluted share for the year ending December 31, 2018 is as follows:

  Low     High    
Net income attributable to the controlling interests per diluted share (a) $ 0.33     $ 0.35    
Gain on sale of depreciable real estate (a) (0.03 )   (0.03 )  
Real estate impairment 0.02     0.02    
Real estate depreciation and amortization (a) 1.52     1.52    
NAREIT FFO per diluted share 1.84     1.86    
Core adjustments 0.01     0.01    
Core FFO per diluted share $ 1.85     $ 1.87    

(a) Does not include any impact from future acquisitions and dispositions during the year. There are no further acquisitions or dispositions assumed in guidance.

Dividends

On September 28, 2018, Washington REIT paid a quarterly dividend of $0.30 per share.

Washington REIT announced today that its Board of Trustees has declared a quarterly dividend of $0.30 per share to be paid on January 4, 2019 to shareholders of record on December 20, 2018.

Conference Call Information

/EIN News/ -- The Conference Call for Third Quarter Earnings is scheduled for Friday, October 26, 2018 at 11:00 A.M. Eastern Time. Conference Call access information is as follows:

USA Toll Free Number:     1-877-407-9205  
International Toll Number:     1-201-689-8054  

The instant replay of the Conference Call will be available until Friday, November 9, 2018 at 11:59 P.M. Eastern Time. Instant replay access information is as follows:

USA Toll Free Number:     1-877-481-4010  
International Toll Number:     1-919-882-2331  
Conference ID:     21308  

The live on-demand webcast of the Conference Call will be available on the Investor section of Washington REIT's website at www.washreit.com. Online playback of the webcast will be available for two weeks following the Conference Call.

About Washington REIT

Washington REIT owns and operates uniquely positioned real estate assets in the Washington D.C. market. The Company’s portfolio of 48 properties consists of approximately 6.1 million square feet of commercial space and 4,268 multifamily apartment units. These 48 properties consist of 19 office properties, 16 retail centers and 13 multifamily properties. Washington REIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

Note: Washington REIT's press releases and supplemental financial information are available on the Company website at www.washreit.com or by contacting Investor Relations at (202) 774-3200.

Certain statements in our earnings release and on our conference call are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements in this earnings release preceded by, followed by or that include the words “believe,” “expect,” “intend,” “anticipate,” “potential,” “project,” “will” and other similar expressions. 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, changes in general and local economic and real estate market conditions, the potential for federal government budget reductions, the risk of failure to complete contemplated acquisitions and dispositions, the timing and pricing of lease transactions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, levels of competition, the effect of government regulation, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2017 Form 10-K and subsequent Quarterly Reports on Form 10-Q. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

(1)  Funds From Operations (“FFO”) - NAREIT FFO is a widely used measure of operating performance for real estate companies. We provide NAREIT FFO as a supplemental measure to net income calculated in accordance with GAAP. Although NAREIT FFO is a widely used measure of operating performance for REITs, NAREIT FFO does not represent net income calculated in accordance with GAAP. As such, it should not be considered an alternative to net income as an indication of our operating performance. In addition, NAREIT FFO does not represent cash generated from operating activities in accordance with GAAP, nor does it represent cash available to pay distributions and should not be considered as an alternative to cash flow from operating activities, determined in accordance with GAAP, as a measure of our liquidity. In its April, 2002 White Paper, the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines NAREIT FFO as net income (computed in accordance with GAAP) excluding gains (or losses) associated with sales of properties, impairments of depreciable real estate, and real estate depreciation and amortization. We consider NAREIT FFO to be a standard supplemental measure for REITs because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that NAREIT FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Our NAREIT FFO may not be comparable to FFO reported by other REITs. These other REITs may not define the term in accordance with the current NAREIT definition or may interpret the current NAREIT definition differently.

Core Funds From Operations (“Core FFO”) is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of Washington REIT's operating portfolio and affect the comparative measurement of Washington REIT's operating performance over time): (1) gains or losses on extinguishment of debt, (2) expenses related to acquisition and structuring activities, (3) executive transition costs and severance expense related to corporate reorganization and related to executive retirements or resignations, (4) property impairments, casualty gains, and gains or losses on sale not already excluded from FFO, as appropriate, and (5) relocation expense. These items can vary greatly from period to period, depending upon the volume of our acquisition activity and debt retirements, among other factors. We believe that by excluding these items, Core FFO serves as a useful, supplementary measure of Washington REIT's ability to incur and service debt and to distribute dividends to its shareholders.  Core FFO is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.

(2) For purposes of evaluating comparative operating performance, we categorize our properties as “same-store”, “non-same-store” or discontinued operations. Same-store properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property's development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared.

(3) Net Operating Income (“NOI”), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain or loss on sale, if any), plus interest expense, depreciation and amortization, general and administrative expenses, acquisition costs, real estate impairment and gain or loss on extinguishment of debt. We also present NOI on a cash basis ("cash NOI") which is calculated as NOI less the impact of straight-lining of rent and amortization of market intangibles. We believe that NOI and cash NOI are useful performance measures because, when compared across periods, they reflect the impact on operations of trends in occupancy rates, rental rates and operating costs on an unleveraged basis, providing perspective not immediately apparent from net income. NOI [and cash NOI] excludes certain components from net income in order to provide results more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. As a result of the foregoing, we provide each of NOI and cash NOI as a supplement to net income, calculated in accordance with GAAP. Neither represents net income or income from continuing operations, in either case calculated in accordance with GAAP. As such, NOI and cash NOI should not be considered alternatives to these measures as an indication of our operating performance.

(4) Funds Available for Distribution (“FAD”) is a non-GAAP measure. It 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 (excluding items contemplated prior to acquisition or associated with development / redevelopment of a property) and (2) straight line rents, then adding (3) non-real estate depreciation and amortization, (4) non-cash fair value interest expense and (5) amortization of restricted share compensation, then adding or subtracting the (6) amortization of lease intangibles, (7) real estate impairment and (8) non-cash gain/loss on extinguishment of debt, as appropriate. FAD is included herein, because we consider it to be a performance measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.

(5) Ending Occupancy is calculated as occupied square footage as a percentage of total square footage as of the last day of that period.

(6) Average Occupancy is based on monthly occupied net rentable square footage as a percentage of total net rentable square footage, except for the rows labeled "Multifamily (calculated on a unit basis)," on which average occupancy is based on average monthly occupied units as a percentage of total units.

Ending Occupancy Levels by Same-Store Properties (i) and All Properties   
  Ending Occupancy
 
  Same-Store Properties   All Properties
 
  3rd QTR   3rd QTR   3rd QTR   3rd QTR
 
Segment 2018   2017   2018   2017
 
Multifamily (calculated on a unit basis) 95.3 %   94.8 %   95.3 %   94.7 %  
               
Multifamily 95.4 %   94.5 %   95.4 %   94.5 %  
Office 92.1 %   91.7 %   92.7 %   93.2 %  
Retail 94.3 %   93.5 %   94.3 %   93.5 %  
               
Overall Portfolio 94.0 %   93.3 %   94.1 %   93.8 %  

(i) Same-store properties include properties that were owned for the entirety of the years being compared, and exclude properties under redevelopment or development and properties acquired, sold or classified as held for sale during the years being compared. We define development properties as those for which we have planned or ongoing major construction activities on existing or acquired land pursuant to an authorized development plan. We consider a property's development activities to be complete when the property is ready for its intended use. The property is categorized as same-store when it has been ready for its intended use for the entirety of the years being compared. We define redevelopment properties as those for which we have planned or ongoing significant development and construction activities on existing or acquired buildings pursuant to an authorized plan, which has an impact on current operating results, occupancy and the ability to lease space with the intended result of a higher economic return on the property. We categorize a redevelopment property as same-store when redevelopment activities have been complete for the majority of each year being compared. For Q3 2018 and Q3 2017, same-store properties exclude:

Acquisitions:
            Office - Arlington Tower and Watergate 600
Sold properties:
            Multifamily - Walker House
            Office - Braddock Metro Center and 2445 M Street

 WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
 
FINANCIAL HIGHLIGHTS
 
(In thousands, except per share data)
 
(Unaudited)
 
               
  Three Months Ended
September 30,
  Nine Months Ended
September 30,

 
OPERATING RESULTS 2018   2017   2018   2017
 
Revenue                    
Real estate rental revenue $ 82,502     $ 82,819     $ 253,989     $ 243,776    
Expenses              
Real estate expenses 28,571     29,646     87,975     86,200    
Depreciation and amortization 30,272     27,941     90,119     83,271    
General and administrative 5,267     5,327     16,737     16,712    
Real estate impairment     5,000     1,886     5,000    
  64,110     67,914     196,717     191,183    
Other operating income                    
Gain on sale of real estate         2,495        
Real estate operating income 18,392     14,905     59,767     52,593    
Other income (expense):                    
Interest expense (12,499 )   (12,176 )   (38,647 )   (35,634 )  
Loss on extinguishment of debt         (1,178 )      
Other income     84         209    
Income tax benefit             107    
  (12,499 )   (12,092 )   (39,825 )   (35,318 )  
                     
Net income 5,893     2,813     19,942     17,275    
Less: Net loss attributable to noncontrolling interests in subsidiaries     20         56    
Net income attributable to the controlling interests $ 5,893     $ 2,833     $ 19,942     $ 17,331    
                     
Net income $ 5,893     $ 2,813     $ 19,942     $ 17,275    
Depreciation and amortization 30,272     27,941     90,119     83,271    
Real estate impairment     5,000     1,886     5,000    
Gain on sale of depreciable real estate         (2,495 )      
NAREIT funds from operations (1) $ 36,165     $ 35,754     $ 109,452     $ 105,546    
                     
Non-cash loss on extinguishment of debt $     $     $ 1,178     $    
Tenant improvements and incentives (5,808 )   (1,822 )   (12,805 )   (10,394 )  
External and internal leasing commissions capitalized (957 )   (1,727 )   (2,300 )   (5,664 )  
Recurring capital improvements (752 )   (1,315 )   (1,844 )   (2,383 )  
Straight-line rents, net (1,058 )   (1,187 )   (3,384 )   (3,142 )  
Non-cash fair value interest expense (215 )   (223 )   (651 )   (749 )  
Non real estate depreciation & amortization of debt costs 997     880     2,898     2,594    
Amortization of lease intangibles, net 430     560     1,470     1,995    
Amortization and expensing of restricted share and unit compensation 1,694     1,245     5,064     3,561    
Funds available for distribution (4) $ 30,496     $ 32,165     $ 99,078     $ 91,364    


    Three Months Ended
September 30,
  Nine Months Ended
September 30,

 
Per share data:   2018   2017   2018   2017
 
Net income attributable to the controlling interests (Basic) $ 0.07     $ 0.04     $ 0.25     $ 0.22  
  (Diluted) $ 0.07     $ 0.04     $ 0.25     $ 0.22  
NAREIT funds from operations (Basic) $ 0.46     $ 0.46     $ 1.39     $ 1.38  
  (Diluted) $ 0.45     $ 0.46     $ 1.38     $ 1.38  
                 
Dividends paid   $ 0.30     $ 0.30     $ 0.90     $ 0.90  
                 
Weighted average shares outstanding - basic   79,076     77,291     78,695     76,292  
Weighted average shares outstanding - diluted   79,238     77,423     78,802     76,415  


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
       
  September 30, 2018    
  (unaudited)   December 31, 2017
 
Assets            
Land $ 614,659     $ 588,025    
Income producing property 2,239,917     2,113,977    
  2,854,576     2,702,002    
Accumulated depreciation and amortization (745,829 )   (683,692 )  
Net income producing property 2,108,747     2,018,310    
Properties under development or held for future development 81,765     54,422    
Total real estate held for investment, net 2,190,512     2,072,732    
Investment in real estate held for sale, net     68,534    
Cash and cash equivalents 4,810     9,847    
Restricted cash 1,352     2,776    
Rents and other receivables, net of allowance for doubtful accounts of $2,927 and $2,426, respectively 74,395     69,766    
Prepaid expenses and other assets 145,448     125,087    
Other assets related to properties held for sale     10,684    
Total assets $ 2,416,517     $ 2,359,426    
             
Liabilities      
Notes payable $ 995,130     $ 894,358    
Mortgage notes payable 60,541     95,141    
Line of credit 183,000     166,000    
Accounts payable and other liabilities 63,683     61,565    
Dividend payable     23,581    
Advance rents 10,597     12,487    
Tenant security deposits 9,857     9,149    
Liabilities related to properties held for sale     1,809    
Total liabilities 1,322,808     1,264,090    
       
Equity      
Shareholders' equity      
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued and outstanding        
Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 79,844 and 78,510 shares issued and outstanding, respectively 798     785    
Additional paid-in capital 1,526,125     1,483,980    
Distributions in excess of net income (450,749 )   (399,213 )  
Accumulated other comprehensive loss 17,181     9,419    
Total shareholders' equity 1,093,355     1,094,971    
       
Noncontrolling interests in subsidiaries 354     365    
Total equity 1,093,709     1,095,336    
             
Total liabilities and equity $ 2,416,517     $ 2,359,426    


The following tables contain reconciliations of net income to same-store net operating income for the periods presented (in thousands):
               
Three months ended September 30, 2018 Multifamily   Office   Retail   Total
 
Same-store net operating income(2) $ 14,592     $ 19,423     $ 12,205     $ 46,220    
Add: Net operating income from non-same-store properties(2) 64     7,647         7,711    
Total net operating income(3) $ 14,656     $ 27,070     $ 12,205     $ 53,931    
Add/(deduct):              
Interest expense             (12,499 )  
Depreciation and amortization             (30,272 )  
General and administrative expenses             (5,267 )  
Net income             5,893    
Less: Net loss attributable to noncontrolling interests in subsidiaries                
Net income attributable to the controlling interests             $ 5,893    
                     
Three months ended September 30, 2017 Multifamily   Office   Retail   Total

 
Same-store net operating income(2) $ 14,106     $ 18,662     $ 11,917     $ 44,685    
Add: Net operating income from non-same-store properties(2) 414     8,074         8,488    
Total net operating income(3) $ 14,520     $ 26,736     $ 11,917     $ 53,173    
Add/(deduct):              
Other income             84    
Interest expense             (12,176 )  
Depreciation and amortization             (27,941 )  
General and administrative expenses             (5,327 )  
Real estate impairment             (5,000 )  
Net income             2,813    
Less: Net loss attributable to noncontrolling interests in subsidiaries             20    
Net income attributable to the controlling interests             $ 2,833    


The following tables contain reconciliations of net income to same-store net operating income for the periods presented (in thousands):
               
Nine months ended September 30, 2018 Multifamily   Office   Retail   Total
 
Same-store net operating income(2) $ 43,177     $ 59,686     $ 35,631     $ 138,494    
Add: Net operating (loss) income from non-same-store properties(2) (21 )   27,541         27,520    
Total net operating income(3) $ 43,156     $ 87,227     $ 35,631     $ 166,014    
Add/(deduct):              
Interest expense             (38,647 )  
Depreciation and amortization             (90,119 )  
General and administrative expenses             (16,737 )  
Real estate impairment             (1,886 )  
Loss on extinguishment of debt             (1,178 )  
Gain on sale of real estate             2,495    
Net income             19,942    
Less: Net loss attributable to noncontrolling interests in subsidiaries                
Net income attributable to the controlling interests             $ 19,942    
                     
Nine months ended September 30, 2017 Multifamily   Office   Retail   Total
 
Same-store net operating income(2) $ 41,925     $ 57,309     $ 35,674     $ 134,908    
Add: Net operating income from non-same-store properties(2) 1,372     21,296         22,668    
Total net operating income(3) $ 43,297     $ 78,605     $ 35,674     $ 157,576    
Add/(deduct):              
Other income             209    
Interest expense             (35,634 )  
Depreciation and amortization             (83,271 )  
General and administrative expenses             (16,712 )  
Real estate impairment             (5,000 )  
Income tax benefit             107    
Net income             17,275    
Less: Net loss attributable to noncontrolling interests in subsidiaries             56    
Net income attributable to the controlling interests             $ 17,331    


The following table contains a reconciliation of net income attributable to the controlling interests to core funds from operations for the periods presented (in thousands, except per share data):
    Three Months Ended 
September 30,
  Nine Months Ended
September 30,

 
    2018   2017   2018   2017
 
Net income   $ 5,893     $ 2,813     $ 19,942     $ 17,275    
Add/(deduct):                
Real estate depreciation and amortization   30,272     27,941     90,119     83,271    
Gain on sale of depreciable real estate           (2,495 )      
Real estate impairment       5,000     1,886     5,000    
NAREIT funds from operations(1)   36,165     35,754     109,452     105,546    
Add/(deduct):                
Structuring expenses               319    
Loss on extinguishment of debt           1,178        
Core funds from operations(1)   $ 36,165     $ 35,754     $ 110,630     $ 105,865    
                       
    Three Months Ended
September 30,
  Nine Months Ended
September 30,

 
Per share data:   2018   2017   2018   2017
 
NAREIT FFO (Basic) $ 0.46     $ 0.46     $ 1.39     $ 1.38    
  (Diluted) $ 0.45     $ 0.46     $ 1.38     $ 1.38    
Core FFO (Basic) $ 0.46     $ 0.46     $ 1.40     $ 1.38    
  (Diluted) $ 0.45     $ 0.46     $ 1.40     $ 1.38    
                 
Weighted average shares outstanding - basic   79,076     77,291     78,695     76,292    
Weighted average shares outstanding - diluted   79,238     77,423     78,802     76,415    


CONTACT:
Tejal R. Engman
Vice President, Investor Relations
E-Mail:  tengman@washreit.com

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