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

Washington Real Estate Investment Trust ("WRIT” or the "Company”) (NYSE: WRE), a leading owner and operator of diversified properties in the Washington, D.C. region, reported financial and operating results today for the quarter ended September 30, 2011:

• Core Funds from Operations⁽¹⁾, defined as Funds from Operations⁽¹⁾ ("FFO”) excluding acquisition expense, gains or losses on extinguishment of debt and impairment, was $32.4 million, or $0.48 per diluted share for the quarter ended September 30, 2011, compared to $31.1 million, or $0.49 per diluted share for the prior year period. FFO for the quarter ended September 30, 2011 was $30.8 million, or $0.46 per share, compared to $30.9 million, or $0.49 per share, in the same period one year ago.
• Net income attributable to the controlling interests for the quarter ended September 30, 2011 was $63.0 million, or $0.95 per diluted share, compared to $6.6 million, or $0.10 per diluted share, in the same period one year ago. Included in third quarter 2011 net income are gains on sale of real estate of $56.6 million, or $0.86 per share, and acquisition costs of $1.6 million, or $0.02 per share.

Acquisitions and Dispositions

In 2011, WRIT initiated a long-term strategy to focus on acquiring office, medical office, retail and multifamily properties inside the Beltway, near major transportation nodes and in areas with strong employment drivers and superior growth demographics. As part of this strategy, WRIT also initiated the sale of its industrial assets to allow for recycling of capital proceeds into assets consistent with its long-term strategy.

"In this quarter and subsequent to quarter end, we made major strides in repositioning our portfolio by completing the majority of our industrial portfolio sale and reinvesting a large portion of the proceeds into better located and faster growing office and retail assets. Our pace of reinvestment has been slower than we expected - which has had an impact on our quarterly earnings. Nevertheless, we're exceptionally pleased with the results of our nearly $770 million of acquisition and disposition transactions this year which resulted in a significant upgrade in the quality of our portfolio. The improvement in the quality of our revenue stream from these acquisitions will help buffer the impact of a still challenging business environment in Washington, D.C. and nationwide, due to uncertainties with federal spending and a weak economic recovery,” said George F. "Skip” McKenzie, President and Chief Executive Officer of WRIT.

In the third quarter of 2011, WRIT acquired three assets totaling 767,000 square feet and $233 million: Olney Village Center, Braddock Metro Center and John Marshall II.

• WRIT acquired Olney Village Center, a 199,000 square foot grocery-anchored shopping center in Olney, Maryland for $58.0 million. The property is located in the heart of Olney near the main intersection of Georgia Avenue (Route 97) and Sandy Spring Road (Route 108). It is anchored by Shoppers Food Warehouse and is 98.7% leased to 32 tenants, including national retailers T.J. Maxx, HomeGoods, and SunTrust Bank. The center was built in 1979 and underwent a major renovation in 2003. WRIT assumed a $22.6 million mortgage, bearing interest at 6.37% per annum and maturing in 2023, and funded the remaining balance of $35.4 million using available cash and its line of credit. WRIT expects to achieve a first year unleveraged yield of 6.7% on a cash basis.
• WRIT acquired Braddock Metro Center, a 345,000 square foot office campus on the Metro in Alexandria, Virginia, for $101 million. The campus consists of four office buildings and a two-level underground parking garage and is located in the northwest quadrant of Old Town Alexandria, immediately adjacent to the Braddock Road Metro Station (Yellow and Blue lines), one stop from Reagan National Airport. The properties were built in 1985 and are 92% leased to 13 office tenants including associations and government contractors. WRIT funded the acquisition with cash proceeds from its recent sale transactions of the industrial portfolio. WRIT expects to achieve a first year unleveraged yield of 6.9% on a cash basis.
• WRIT acquired John Marshall II, a nine story, 223,000 square foot office building situated at the Tysons Central 7 Metro Station in Tysons Corner, Virginia, for $73.5 million. The property is 100% leased to Booz Allen Hamilton Inc. through January 2016 and serves as its worldwide headquarters. It was built in 1996 and renovated in 2010 and is located at 8283 Greensboro Drive. The Tysons Central 7 Metro Station is one of four metro stations currently under construction that will serve Tysons Corner upon the Dulles Corridor Metrorail's anticipated completion in 2013. WRIT assumed a $54.1 million mortgage bearing interest at 5.79% per annum and maturing in 2016. WRIT funded the remaining balance of $19.4 million using proceeds from the recent sales of its industrial assets and its line of credit and expects to achieve a first year unleveraged yield of 6.7% on a cash basis.

In the third quarter as well as subsequent to quarter end, WRIT completed four separate sale transactions involving an aggregate of approximately 2.6 million square feet of its industrial portfolio along with two office assets. The aggregate sales proceeds for the four transactions were $280.3 million. The first sale transaction included 8880 Gorman Road, Alban Business Center, Dulles South IV, Fullerton Business Center, and Hampton Overlook. The second transaction included Northern Virginia Industrial Park I and Pickett Industrial Park. The third transaction included 270 Technology Park, 8900 Telegraph Road, 9950 Business Parkway, Albemarle Point, Fullerton Industrial Center, Hampton South, and Sully Square, as well as the Albemarle Point and Crescent office buildings. The fourth transaction included Northern Virginia Industrial Park II. The buyers are affiliates of a joint venture between AREA Property Partners (AREA) and the Adler Group (Adler).

WRIT's remaining two industrial properties, 6100 Columbia Park Road and Dulles Business Park, are under one additional sale contract with AREA/Adler which is projected to close on or about November 1, 2011 for approximately $69.7 million. The aggregate sales proceeds for the entire industrial portfolio are $350 million.

Operating Results

The Company's overall portfolio Net Operating Income ("NOI”)⁽²⁾ was $47.9 million compared to $43.1 million in the same period one year ago and $47.9 million in the second quarter of 2011. Overall portfolio physical occupancy for the third quarter was 89.0%, compared to 88.4% in the same period one year ago and 87.7% in the second quarter of 2011.

Same-store⁽³⁾ portfolio physical occupancy for the third quarter was 90.7%, compared to 92.1% in the same period one year ago. Sequentially, same-store physical occupancy decreased 70 basis points (bps) compared to the second quarter of 2011. Same-store portfolio NOI for the third quarter increased 0.6% and rental rate growth was 2.0% compared to the same period one year ago.

• Multifamily: 16.1% of Total NOI - Multifamily properties' same-store NOI for the third quarter increased 1.0% compared to the same period one year ago. Rental rate growth was 4.3% while same-store physical occupancy decreased 240 bps to 94.0%. Sequentially, same-store physical occupancy decreased 160 bps compared to the second quarter of 2011.
• Office: 48.1% of Total NOI - Office properties' same-store NOI for the third quarter increased 1.3% compared to the same period one year ago. Rental rate growth was 1.0% while same-store physical occupancy decreased 130 bps to 88.1%. Sequentially, same-store physical occupancy decreased by 50 bps compared to the second quarter of 2011.
• Medical: 16.1% of Total NOI - Medical office properties' same-store NOI for the third quarter increased 2.4% compared to the same period one year ago. Rental rate growth was 3.2% while same-store physical occupancy decreased 200 bps to 91.3%. Sequentially, same-store physical occupancy decreased 40 bps compared to the second quarter of 2011.
• Retail: 19.7% of Total NOI - Retail properties' same-store NOI for the third quarter decreased 3.4% compared to the same period one year ago. Rental rate growth was 0.9% while same-store physical occupancy decreased 40 bps to 91.8%. Sequentially, same-store physical occupancy decreased 40 bps compared to the second quarter of 2011.

Leasing Activity

During the third quarter, WRIT signed commercial leases for 241,880 square feet with an average rental rate increase of 11.7% over expiring lease rates on a GAAP basis, an average lease term of 4.7 years, tenant improvement costs of $14.90 per square foot and leasing costs of $9.54 per square foot.

• Rental rates for new and renewed office leases increased 9.7% to $39.53 per square foot, with $13.52 per square foot in tenant improvement costs and $10.44 per square foot in leasing costs. Weighted average term for new and renewed leases was 4.3 years.
• Rental rates for new and renewed medical office leases increased 9.0% to $37.76 per square foot, with $3.86 per square foot in tenant improvement costs and $7.10 per square foot in leasing costs. Weighted average term for new and renewed leases was 4.9 years.
• Rental rates for new and renewed retail leases increased 31.3% to $18.56 per square foot, with $23.77 per square foot in tenant improvement costs and $8.42 per square foot in leasing costs. Weighted average term for new and renewed leases was 5.9 years.

Financing Activity

WRIT replaced and expanded its unsecured credit facility with Wells Fargo on July 1, increasing its size from $262 million to $400 million. An accordion feature allows WRIT to increase the facility to $600 million, subject to additional lender commitments. The new facility matures July 1, 2014 with a one-year extension option and bears interest at a rate of LIBOR plus a margin of 122.5 basis points based on WRIT's current credit rating.

WRIT prepaid without penalty a $9.1 million 6.98% mortgage note on Shady Grove Medical Village II, in Rockville, Maryland.

Subsequent to quarter end, WRIT prepaid two mortgage notes with an aggregate principal amount of $17.5 million at interest rates of 7.09% and 5.94% in connection with the upcoming sale of Dulles Business Park. The prepayment penalty was approximately $1 million, the majority of which will be reimbursed by the purchaser.

Guidance

Given the differences in timing of the year-to-date acquisition and disposition activity, as well as current occupancy levels versus our original projections, management is narrowing 2011 Core FFO guidance to a range of $1.96 - 1.99. Further detail will be provided on the Conference Call.

Dividends

On September 30, 2011, WRIT paid a quarterly dividend of $0.43375 per share for its 199^th consecutive quarterly dividend at equal or increasing rates.

Conference Call Information

The Conference Call for 3^rd Quarter Earnings is scheduled for Friday, October 28, 2011 at 11:00 A.M. Eastern time. Conference Call access information is as follows:

The instant replay of the Conference Call will be available until November 11, 2011 at 11:59 P.M. Eastern time. Instant replay access information is as follows:

The live on-demand webcast of the Conference Call will be available on the Investor section of WRIT's website at www.writ.com. On-line playback of the webcast will be available for two weeks following the Conference Call.

About WRIT

WRIT is a self-administered, self-managed, equity real estate investment trust investing in income-producing properties in the greater Washington metro region. WRIT owns a diversified portfolio of 73 properties totaling approximately 9 million square feet of commercial space and 2,540 residential units, and land held for development. These 73 properties consist of 26 office properties, 2 industrial/flex properties, 18 medical office properties, 16 retail centers and 11 multifamily properties. WRIT shares are publicly traded on the New York Stock Exchange (NYSE:WRE).

Note: WRIT's press releases and supplemental financial information are available on the company website at www.writ.com or by contacting Investor Relations at (301) 984-9400.

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. 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 potential for federal government budget reductions, changes in general and local economic and real estate market conditions, the timing and pricing of lease transactions, the effect of the current credit and financial market conditions, the availability and cost of capital, fluctuations in interest rates, tenants' financial conditions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2010 Form 10-K and second quarter 2011 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”) - 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) associated with sales of property plus real estate depreciation and amortization. FFO is a non-GAAP measure and does not replace net income as a measure of performance or net cash provided by operating activities as a measure of liquidity. 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.

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) real estate 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 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⁾ 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 on sale, if any), plus interest expense, depreciation and amortization and general and administrative expenses. We provide NOI as a supplement to 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. It is the primary performance measure we use to assess the results of our operations at the property level.

⁽³⁾ For purposes of evaluating comparative operating performance, we categorize our properties as "same-store” or "non-same-store”. A same-store property is one that was owned for the entirety of the periods being evaluated. A non-same-store property is one that was acquired or placed into service during either of the periods being evaluated.

⁽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 and (2) straight-line rents, then adding (3) non-real estate depreciation and amortization, (4) real estate impairments, (5) amortization of restricted share and unit compensation, and adding or subtracting amortization of lease intangibles, as appropriate. We consider FAD 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-standardized measure and may be calculated differently by other REITs.

(i) Same-Store properties include all stabilized properties that were owned for the entirety of the current and prior year reporting periods. For Q3 2011 and Q3 2010, same-store properties exclude:
Residential Acquisitions: none;
Office Acquisitions: Quantico Corporate Center, 1140 Connecticut Ave, 1227 25th Street, and John Marshall II;
Medical Office Acquisition: Lansdowne Medical Office Building;
Retail Acquisition: Gateway Overlook Shopping Center and Olney Village Center;
Industrial Acquisitions: none.

Also excluded from Same-Store Properties in Q3 2011 and Q3 2010 are:
Held for Sale and Sold Properties: The Ridges, Ammendale I & II , Amvax, Dulles Station I, and the Industrial Portfolio (all industrial properties and the Crescent and Albemarle Point).