Document


 
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): September 22, 2016
 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:
 o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))










Item 2.01 Completion of Acquisition or Disposition of Assets.

On September 22, 2016, Washington Real Estate Investment Trust (“Washington REIT”) closed on the second of two separate purchase and sale agreements. On April 27, 2016, Washington REIT reported in a Current Report on Form 8-K that it had entered into two separate purchase and sale agreements with BSREP II Office Holding LLC to effectuate the sale of six suburban Maryland office assets, encompassing in total approximately 1.2 million net rentable square feet. The sales prices under the two agreements aggregate to $240.0 million.

The properties, purchase prices and closing dates under each of the purchase and sale agreements are as follows:

Purchase and Sale Agreement #1 ($111.5 million; closed on June 27, 2016):
 
1.
West Gude Drive
 
2.
600 Jefferson Plaza
 
3.
6110 Executive Boulevard
 
4.
Wayne Plaza
Purchase and Sale Agreement #2 ($128.5 million; closed on September 22, 2016):
 
1.
One Central Plaza
 
2.
51 Monroe Street

The purchase and sale agreements contain representations and warranties the parties thereto made to and solely for the benefit of each other, and such representations and warranties should not be relied upon by any other person.

The assertions embodied in those representations and warranties were made solely for the purposes of the purchase and sale agreements and are subject to important qualifications and limitations agreed to by and between the Washington REIT and the other parties thereto in connection with negotiating the purchase and sale agreements. Accordingly, security holders should not rely on the representations and warranties as accurate or complete or characterizations of the actual state of facts as of any specified date because such representations and warranties are modified in important part by the underlying disclosure schedules, are subject to a contractual standard of materiality different from that generally applicable to security holders and were used only for the purposes of conducting certain limited due diligence inquiries and allocating risks and not for establishing all material facts with respect to the matters addressed.


ITEM 9.01.     Financial Statements and Exhibits.

(b)
Pro Forma Financial Information

The following pro forma financial statements reflecting the property dispositions listed above (as defined in Regulation S-X) are filed as an exhibit hereto:

1.
Washington REIT Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2016.

2.
Washington REIT Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year ended December 31, 2015 and the six months ended June 30, 2016.









(d)    Exhibits
The following exhibits are furnished with this report on Form 8-K:
Exhibit No.
Description
 
 
99.1
Press release issued September 22, 2016 regarding the completion of the second transaction of the sale of the Maryland office portfolio






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.

 
 
 
WASHINGTON REAL ESTATE INVESTMENT TRUST
 
 
 
 
(Registrant)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
By:
/s/ W. Drew Hammond
 
 
 
 
 
 
(Signature)
 
 
 
 
 
 
 
 
 
 
 
 
 
W. Drew Hammond
 
 
 
 
 
 
Vice President, Chief Accounting Officer
 
 
 
 
 
and Controller
 
 
 
 
 
 
 
 
 
September 23, 2016
 
 
 
 
 
 
(Date)
 
 
 
 
 





Exhibit Index

Exhibit No.
Description
 
 
99.1
Press release issued September 22, 2016 regarding the completion of the second transaction of the sale of the Maryland office portfolio





WASHINGTON REAL ESTATE INVESTMENT TRUST
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

The unaudited pro forma consolidated financial information should be read in conjunction with Washington REIT's the consolidated financial statements and notes thereto included in Washington REIT's Annual Report on Form 10-K for the year ended December 31, 2015 and Washington REIT's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016.

The unaudited pro forma consolidated financial information is not necessarily indicative of what Washington REIT's actual results of operations would have been had the transaction been consummated on the dates indicated, nor does it purport to represent Washington REIT's results of operations or financial position for any future period. The pro forma statements of income for the periods ended December 31, 2015 and June 30, 2016 are not necessarily indicative of the operating results for these periods.

Washington REIT entered into two separate purchase and sale agreements with BSREP II Office Holding LLC on April 27, 2016 to effectuate the sale of six suburban Maryland office assets, encompassing in total approximately 1.2 million net rentable square feet. Purchase and Sale Agreement #1, for the sales of West Gude Drive, 600 Jefferson Plaza, 6110 Executive Boulevard and Wayne Plaza for a contract sale price of $111.5 million, closed on June 27, 2016. Purchase and Sale Agreement #2, for the sale of One Central Plaza and 51 Monroe Street for a contract sale price of $128.5 million, closed on September 22, 2016. We intend to use the sales proceeds to partially fund an acquisition through a reverse tax deferred exchange and for general corporate purposes. The acquisition is not reflected in the pro forma consolidated financial statements.

The pro forma balance sheet as of June 30, 2016 presents consolidated financial information as if the sales of the properties included in Purchase and Sale Agreement #2 had taken place on June 30, 2016. Washington REIT's unaudited consolidated balance sheet as of June 30, 2016 already reflects the sales of the properties included in Purchase and Sale Agreement #1. The pro forma statements of income for the year ended December 31, 2015, and the six months ended June 30, 2016, present the pro forma results of operations as if the dispositions of the properties included in both Purchase and Sale Agreements #1 and 2 had taken place as of January 1, 2015. Explanations or details of the pro forma adjustments are in the notes to the financial statements.


1


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2016
(IN THOUSANDS)
 
 
 
 
 
 
 
Washington REIT
 
Transaction #2
 
PRO FORMA
Assets
 
 
 
 
 
Land
$
573,315

 
$
—

 
$
573,315

Income producing property
2,072,166

 
—

 
2,072,166

 
2,645,481

 
—

 
2,645,481

Accumulated depreciation and amortization
(613,194
)
 
—

 
(613,194
)
Net income producing property
2,032,287

 
—

 
2,032,287

Properties under development or held for future development
35,760

 
—

 
35,760

Total real estate held for investment, net
2,068,047

 
—

 
2,068,047

Investment in real estate sold or held for sale, net
41,704

 
(41,704
)
(a)
—

Cash and cash equivalents
22,379

 
128,500

(b)
150,879

Restricted cash
11,054

 
—

 
11,054

Rents and other receivables, net of allowance for doubtful accounts
58,970

 
—

 
58,970

Prepaid expenses and other assets
99,150

 
—

 
99,150

Other assets related to properties sold or held for sale
5,147

 
(5,147
)
(a)
—

Total assets
$
2,306,451

 
$
81,649

 
$
2,388,100

Liabilities
 
 
 
 
 
Notes payable
$
743,769

 
$
—

 
$
743,769

Mortgage notes payable
252,044

 
—

 
252,044

Lines of credit
269,000

 
—

 
269,000

Accounts payable and other liabilities
52,722

 
—

 
52,722

Advance rents
10,178

 
—

 
10,178

Tenant security deposits
8,290

 
—

 
8,290

Liabilities related to properties sold or held for sale
2,338

 
(2,338
)
(a)
—

Total liabilities
1,338,341

 
(2,338
)
 
1,336,003

Equity
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
Preferred shares; $0.01 par value
—

 
—

 
—

Shares of beneficial interest; $0.01 par value
737

 
—

 
737

Additional paid in capital
1,338,101

 
—

 
1,338,101

Distributions in excess of net income
(366,352
)
 
83,987

(c)
(282,365
)
Accumulated other comprehensive loss
(5,609
)
 
—

 
(5,609
)
Total shareholders’ equity
966,877

 
83,987

 
1,050,864

Noncontrolling interests in subsidiaries
1,233

 
—

 
1,233

Total equity
968,110

 
83,987

 
1,052,097

Total liabilities and equity
$
2,306,451

 
$
81,649

 
$
2,388,100



2


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2016
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
Washington REIT
 
Disposition Group
 
Pro Forma
Revenue
 
 
 
 
 
Real estate rental revenue
$
156,542

 
$
(16,577
)
(d)
$
139,965

Expenses
 
 
 
 
 
Real estate expenses
56,909

 
(6,178
)
(d)
50,731

Depreciation and amortization
51,199

 
(3,497
)
(d)
47,702

Acquisition costs
1,178

 
—

 
1,178

General and administrative
10,479

 
—

 
10,479

Casualty gain, net
(676
)
 
—

 
(676
)
 
119,089

 
(9,675
)
 
109,414

Other operating income
 
 
 
 
 
Gain on sale of real estate
24,112

 
(23,585
)
(d)
527

Real estate operating income
61,565

 
(30,487
)
 
31,078

Other income (expense)
 
 
 
 
 
Interest expense
(28,180
)
 
—

 
(28,180
)
Other income
122

 
—

 
122

Income tax benefit
693

 
—

 
693

 
(27,365
)
 
—

 
(27,365
)
Net income
34,200

 
(30,487
)
 
3,713

Less: Net loss attributable to noncontrolling interests in subsidiaries
20

 
—

 
20

Net income attributable to the controlling interests
$
34,220

 
$
(30,487
)
 
$
3,733

 
 
 
 
 
 
Basic net income attributable to the controlling interests per share
$
0.49

 
 
 
$
0.05

Diluted net income attributable to the controlling interests per share:
$
0.49

 
 
 
$
0.05

Weighted average shares outstanding - basic
70,010

 
 
 
70,010

Weighted average shares outstanding - diluted
70,200

 
 
 
70,200



3


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2015
(IN THOUSANDS, EXCEPT PER SHARE DATA)
 
Washington REIT
 
Disposition Group
 
Pro Forma
Revenue
 
 
 
 
 
Real estate rental revenue
$
306,427

 
$
(32,423
)
(d)
$
274,004

Expenses
 
 
 
 
 
Real estate expenses
112,234

 
(11,898
)
(d)
100,336

Depreciation and amortization
108,935

 
(10,677
)
(d)
98,258

Acquisition costs
2,056

 
—

 
2,056

Real estate impairment
5,909

 
—

 
5,909

General and administrative
20,257

 
—

 
20,257

 
249,391

 
(22,575
)
 
226,816

Other operating income
 
 
 
 
 
Gain on sale of real estate
91,107

 
—

 
91,107

Real estate operating income
148,143

 
(9,848
)
 
138,295

Other income (expense)
 
 
 
 
 
Interest expense
(59,546
)
 
—

 
(59,546
)
Other income
709

 
—

 
709

Loss on extinguishment of debt
(119
)
 
—

 
(119
)
 
(58,956
)
 
—

 
(58,956
)
Net income
89,187

 
(9,848
)
 
79,339

Less: Net loss attributable to noncontrolling interests in subsidiaries
553

 
—

 
553

Net income attributable to the controlling interests
$
89,740

 
$
(9,848
)
 
$
79,892

 
 
 
 
 
 
Basic net income attributable to the controlling interests per share
$
1.31

 
 
 
$
1.17

Diluted net income attributable to the controlling interests per share:
$
1.31

 
 
 
$
1.17

Weighted average shares outstanding - basic
68,177

 
 
 
68,177

Weighted average shares outstanding - diluted
68,310

 
 
 
68,310



4


WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016


Note 1: Basis of Presentation

The accompanying unaudited pro forma consolidated balance sheet at June 30, 2016 of Washington Real Estate Investment Trust (“Washington REIT”) gives effect to the disposition of the properties included in Purchase and Sale Agreement #2 as if it had occurred on June 30, 2016.

The accompanying unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2016 and the year ended December 31, 2015 give effect to the dispositions of the properties included in both Purchase and Sale Agreements # 1 and 2 as if these dispositions had occurred on January 1, 2015.

This unaudited pro forma condensed consolidated financial information is not necessarily indicative of what Washington REIT’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 Washington REIT’s results of operations or financial position for any future period. The pro forma results of operations for the six months ended June 30, 2016 and the year ended December 31, 2015 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 Washington REIT’s Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the period ended June 30, 2016. In management’s opinion, all adjustments necessary to reflect these dispositions and related transactions have been made.

Note 2: Description of Transactions

On April 27, 2016, Washington REIT entered into two separate purchase and sale agreements with BSREP II Office Holding LLC to effectuate the sale of six suburban Maryland office assets (collectively, the "Disposition Group"), encompassing in total approximately 1.2 million net rentable square feet. The sales prices under the two agreements aggregate to $240.0 million.

The properties, purchase prices and closing dates under each of the purchase and sale agreements are as follows:

Purchase and Sale Agreement #1 ($111.5 million; closed on June 27, 2016):
 
1.
West Gude Drive
 
2.
600 Jefferson Plaza
 
3.
6110 Executive Boulevard
 
4.
Wayne Plaza
Purchase and Sale Agreement #2 ($128.5 million; closed on September 22, 2016):
 
1.
One Central Plaza
 
2.
51 Monroe Street

Note 3: Unaudited Pro Forma Adjustments to Condensed Consolidated Financial Statements

(a) Reflects the elimination of assets and liabilities associated with the properties included in Purchase and Sale Agreement #2, as defined in note 2.

(b) Reflects the estimated net sales proceeds for the properties included in Purchase and Sale Agreement #2.

(c) Reflects the estimated gain on sale of real estate for the properties included in Purchase and Sale Agreement #2. This estimated gain has not been reflected in the pro forma condensed consolidated statements of income as it is considered to be nonrecurring in nature.

(d) Reflects the elimination of income and expenses associated with the Disposition Group, as defined in note 2.

5