the place. the people.
the p ortfolio.
annual report 2012
In 2012, WRIT focused on investing in its existing properties—modernizing and adapting to changing marketplace
demands in order to retain and attract the best quality tenants. The most notable example is 2000 M Street, where
a newly built conference facility is one of several new amenities. It features 3,500 square feet of fully equipped
professional meeting space available for tenant use.
(CoveR phoTo) Building Engineer Edzon Garcia and Lead Engineer James Quinn flank Sherry Kissal, Director of Interior Architecture, in
the recently renovated lobby of 1220 19th Street. This property is a certified Energy Star building and features upgraded common area lobbies,
elevator cabs and restrooms. WRIT received LEED EB Gold Certification for 1220 19th Street in 2012.
Meeting the challenges of a changing Market
We’re repositioning the Writ portfolio to focus on properties where people
live, work and shop in one of the strongest real estate markets in the world.
Washington Real Estate Investment Trust (WRIT) has owned and operated real estate in the Washington, D.C. metro region
for more than 50 years. We have a long history of delivering stable returns for our investors over the long term by practicing a
conservative, focused and diversified investment strategy. For the past four years, we have met the challenge of an uncertain economic
environment by strategically repositioning our assets, by reinvesting in new and existing properties—and by relying on our team’s
deep expertise in one of the world’s best real estate markets. As a result, our portfolio has never been stronger.
office
Medical
Multifamily
retail
John p. McDaniel george f. Mckenzie
Letter to SharehoLderS
We are engaged in the process of transforming our company for future
growth in one of the world’s leading real estate markets. two years
ago, we embarked on a plan to grow the company by sharpening our
focus on high-quality properties with strong growth potential located
in Washington, D.c. and near demand generators in the greater
Washington region. We began an aggressive repositioning strategy
of divesting properties that did not meet our strategic criteria, and
investing the proceeds in new and existing properties in the office,
multifamily and retail sectors. We believe this strategy will create
a stronger company—with more reliable earnings growth, better
properties and an improved balance sheet.
We’ve made great progress over the past two years. in 2011, we
completed the sale of our industrial portfolio for $350 million,
generating a gain on sale of $97 million. We reinvested all the proceeds
into higher quality downtown or metro-centric office buildings and
an exceptional shopping center. in 2012, we continued with this
repositioning and made significant capital improvement to properties
in the office and multifamily sectors—to attract new tenants and
retain existing ones.
in January of 2013, we announced our decision to explore the sale of our
medical office portfolio. This decision was based on the recognition
that to achieve external growth in this sector, we would have to expand
beyond the Washington, D.c. region—a move that runs contrary to
our strategic focus.
over the past decade, Writ has assembled the largest portfolio of
institutional quality medical office assets in the Washington, D.C.
metro area. it is a one-of-a-kind portfolio consisting of 1.3 million
square feet of space and 17 properties, all in affluent communities,
urban centers or near major medical centers. the development
of this business segment has created enormous value for our
shareholders. if we execute as planned, the sale of our medical
office portfolio will not only demonstrate this significant value
creation, but also will provide the most efficient cost of investment
capital to fund high-quality acquisitions and capital improvements in
our office, multifamily and retail properties. We believe focusing on
“live, work and shop” assets in urban and close-in locations is the
best strategy for generating this future growth.
Fiscal conservatism and financial strength are hallmarks of our company.
In 2012, we continued to improve all of our financial metrics. Our
balance sheet is strong with minimal maturities in 2013. in september,
we completed our largest bond offering to date at the best rate in
company history. In addition, in July, our board made the difficult
decision to set a new quarterly dividend rate of $.30 per share to
provide additional investment capital as we push forward with our
2
AnnuAl RepoRt 2012 Selected Financial and operating data
(in millions, except fully diluted per share amounts)
real estate rental revenue
net income attributable to the controlling interests
funds from operations
cash Dividends paid
average shares outstanding (Diluted)
Per Fully diluted Common Share
net income attributable to the controlling interests
funds from operations1
cash Dividends paid
at Year-end
total assets
total Debt
shareholders’ equity
2008
$ 224
27
99
86
49
$ 0.55
2.00
1.72
$2,109
1,337
637
2009
$ 251
41
122
100
57
$ 0.71
2.14
1.73
$2,045
1,182
745
2010
$ 253
37
112
109
62
$ 0.60
1.79
1.73
$2,168
1,216
857
2011
$ 284
105
110
115
66
$ 1.58
1.66
1.74
$2,121
1,184
859
2012
$ 305
24
123
98
66
$ 0.35
1.84
1.47
$2,124
1,249
792
1. see reconciliation of core funds from operations on page 120.
see the description of funds from operations and reconciliation to net income attributable to the controlling interests on page 60 and the description of core funds from operations and
reconciliation to funds from operations on page 120.
Same-Store Portfolio occupancy Levels
(as of 12/31/12)
Cash dividends Paid
(dollars per share)
Core Funds from operations1
(dollars per share)
94%
85%
89%
91%
89%
Multifamily
Office
Medical
retail
overall portfolio
$1.72
$1.73
$1.73
$1.74
$1.47
2008
2009
2010
2011
2012
$2.12
$2.06
$1.96
$1.95
$1.90
2008
2009
2010
2011
2012
plans to improve and reposition our assets for the future. our
operating results have remained steady in a difficult environment. For
2012, net operating income (“noi”) was $201.7 million compared
to $188.8 million in the prior year. core funds from operations
(“ffo”) for 2012 was $126.4 million, or $1.90 per diluted share,
compared to $129.2 million, or $1.95 per diluted share in 2011.
We have faced a challenging economic environment for some years
now, and we are very proud of what we have accomplished during
this period. WRIT not only weathered the financial crisis, but we
also significantly upgraded the quality of our assets and sharpened
our strategic focus. We delevered the balance sheet, made a series
of strategic dispositions and redeployed capital to build value for our
shareholders. We were able to accomplish all of this because of the
quality, experience and professionalism of the entire Writ team.
We are blessed to operate in one of the world’s best real estate
markets. in 2013, the association of foreign investors in real estate
(AFIRE) again ranked Washington, D.C. among the top five real
estate markets in the world—along with other great cities including
new York, london and san francisco. at this writing, the environment
in and around Washington, D.c. remains unpredictable for many of
our tenants due to budget concerns, sequestration and political
gridlock. This is not the first time in our 53-year history that WRIT
has faced political and market challenges. We know this market,
we believe in this market, and we take a long-term view. the future
is a bright one for the capital of the free world, and we believe
investing here is a prudent and profitable long-term endeavor.
In closing, as chief executive officer and a co-signer of this letter, I’d
like to address the subject of my retirement, announced in January.
i will be continuing as ceo until my successor comes aboard to
help ensure a smooth transition and to complete the disposition
of our medical office portfolio and reinvestment of the proceeds
generated therein.
i have enjoyed enormously the past 16-plus years at Writ and
have been truly honored to earn your faith and support for the
past six years as your ceo. i would also like to thank my fellow
trustees for their wisdom and counsel, and my fellow Writ
associates for their work ethic, confidence and friendship.
george f. Mckenzie
President and Chief Executive Officer
John p. McDaniel
Chairman of the Board
3
AnnuAl RepoRt 2012
2000 M street stands at the corner of 20th and M streets in
Washington’s central business district, within walking distance
of Dupont circle Metro station.
larrY carroll,
Director of energY
anD environMental
engineering
John White,
senior chief
BuilDing engineer
Jacqueline BraDBurY,
proJect Manager,
energY anD
environMental
Division
recent improvements to 2000 M street include the installation of an
energy-efficient chilled beam system in the ceilings, providing tenants
more usable square footage and enhanced temperature control.
4
AnnuAl RepoRt 2012 reinvesting
Brian Moran,
Director of
asset ManageMent,
office
christopher getz,
Director of
office leasing
taBitha Brittain,
Director of propertY
ManageMent, office
the ongoing process of reinvesting in our properties is central
to Writ’s operating strategy. in a challenging market, renovating
interiors, upgrading amenities, adding facilities and improving
energy efficiency make us more competitive. It enables us to
retain existing tenants and attract new ones—and adds value
to our portfolio.
over the past year, we have pursued an aggressive reinvestment
strategy. in 2012, Writ completed upgrades to 388 units in our
multifamily portfolio, achieving an average return on cost of
12 percent. In the office portfolio, we currently have upgrades
planned or under way at 1901 pennsylvania avenue, 1220 19th
street, and 1140 connecticut avenue in Washington, D.c.;
6110 executive Boulevard and 51 Monroe street in rockville,
Maryland; and 1600 Wilson Boulevard in arlington and Braddock
Metro center in alexandria, virginia. these include lobby and
common area renovations. in addition, ongoing multifamily unit
renovations continue throughout the portfolio as the tenancy of
individual units turns over.
2000 M street provides an excellent example of a recent renovation
process. acquired in 2007, the property is an eight-story, 227,000
square foot office building in a high-profile corner location at 20th
and M streets in the city’s golden triangle business improvement
district. over the past year, we have renovated the building’s lobby
and common areas, and added 11,000 square feet of amenities on
the lower level, including a fitness facility, conference facility and
management office. The conference center includes more than
3,500 square feet of audiovisual-equipped meeting space, pantry and
restrooms. The 5,000 square foot fitness center is top of the line,
with an on-site fitness professional, group exercise room, locker
rooms with showers, daily towel service and a massage room. the
fitness center is available to all tenants in WRIT’s downtown office
portfolio. We also replaced the building’s hvac system, a perimeter
consoled induction system, with a new, energy-efficient chilled beam
system. the new energy management system, coupled with reduced
fan power and new gas boilers, provides energy savings, better air
quality and increased comfort for our tenants.
reinvesting in our properties strengthens our portfolio and our
tenant base—and generates measurable results. for example,
following the improvements at 2000 M street, the building’s
leasing percentage rose from 75% to 90% and generated
approximately $2 million in additional rental revenue.
5
AnnuAl RepoRt 2012 recent unit upgrades have yielded higher rents at several multifamily
properties in virginia, including the ashby at Mclean, country club
towers, park adams apartments and roosevelt towers.
the Montrose center, on randolph road near rockville pike in rockville,
Maryland, features a new MoM’s organic Market, a rapidly growing regional
grocery chain that features organic produce at discount prices.
6
AnnuAl RepoRt 2012 repositioning
net operating income contribution by sector
2007
38% Office
19% Retail
11% Multifamily
15% Medical
17% Industrial
2012
48% Office
21% Retail
16% Multifamily
15% Medical
at the close of 2012, Writ owns and manages 70 properties
comprising 11 million square feet of space in four sectors—office,
medical office, multifamily and retail—in Washington, D.C. and
the greater Washington metropolitan region. all are strategically
located inside the capital Beltway or in submarkets with strong
demographics, employment drivers or proximity to transit. five
years ago, we began recycling assets to improve the quality of
our portfolio by focusing on city-center or inside-the-Beltway
locations with superior growth demographics and proximity to
major transportation nodes.
this repositioning is well under way. on the disposition side, from
2007 through 2011, we sold a number of non-core suburban office
and industrial properties in transactions totaling over $270 million.
and, at the end of 2011, we accelerated our repositioning strategy
with the sale of underperforming industrial assets for $350 million,
generating a gain on sale of $97 million. in fact, nearly every
disposition we have executed in recent years has resulted in
significant gains. We have reinvested the proceeds from these
sales to acquire infill urban and metro-centric assets in the office
and multifamily sectors, and well-located retail and medical office
assets—to create a strong portfolio for the future, capitalize on
the strongest sectors of the Washington, D.c. real estate market
and build value for our shareholders.
on the acquisition side, during the period from 2007 to 2011,
we significantly enhanced our office portfolio with 11 strategic
acquisitions, including four office buildings acquired in 2011 in
Washington, D.c. and the high-growth submarkets of tysons
corner and alexandria, virginia. We added two shopping centers
to our retail portfolio—in the strong, close-in suburban markets
of columbia and olney, Maryland—and an exceptional multifamily
property in the upper northwest quadrant of Washington, D.c.
in addition, we delivered Bennett park and the clayborne, two
class a multifamily developments, and acquired land to develop
an additional 433 class a multifamily units in the vibrant northern
virginia submarkets of Ballston and alexandria.
in 2012, we continued to execute our plan. During the course of
the year, WRIT sold an outer perimeter office property and medical
office property for a total of $23 million. In June, WRIT acquired
the Fairgate at Ballston, an eight-story, 142,000 square foot office
building in the Ballston submarket in arlington, virginia. located at
1005 north glebe road, the property is within walking distance
of the Ballston Metro station and is easily accessible to route 66.
historically, the Ballston-rosslyn corridor has been one of the top
performing real estate markets in the Washington, D.c. region.
Writ is emerging from this repositioning with the strongest
portfolio in our company’s history—a collection of metro-centric,
diversified, high-performing assets with strong, long-term growth
potential in one of the world’s leading real estate markets.
7
AnnuAl RepoRt 2012 live. Work. shop.
in 2013, Writ announced plans to explore the divestiture of its
medical office portfolio, an exceptional collection of 17 medical
office assets assembled over the past decade. Following the execution
of that sale, WRIT will be defined by a “live-work-shop” strategic
focus, with assets in three core sectors—multifamily, office and retail.
During 2012, we realigned our asset management organization
to reflect this sharper focus on three core segments. WRIT
established three separate corporate divisions to manage all
aspects of leasing, asset management, acquisition, disposition and
development opportunities in their respective sectors—office,
multifamily and retail.
Writ will continue to focus on Washington, D.c.’s city center
and on affluent, high-growth submarkets with a diverse mix of
employment drivers—close to major transportation centers,
including metro stations and access points to major transportation
corridors. By simplifying our business model into three core
sectors, we enhance our focus on property types with proven
long-term growth potential—quality office, multifamily and retail
properties where people live, work and shop in the Washington,
D.c. metropolitan region.
energY
LeaderShiP
Writ was awarded membership to the 2013
green power leadership club by the u.s.
environmental protection agency, joining an elite
group of green power partners who are demon-
strating exemplary environmental leadership.
1901 pennsylvania avenue and 1220 19th street
have received LEED EB Gold certifications for
existing buildings, a rating that encourages building
owners to implement sustainable practices and
maximize efficiency while minimizing environmental
impacts. additional leeD eB projects are currently
planned or under way at many of Writ’s other
office buildings.
8
AnnuAl RepoRt 2012 2012 foRm 10-k
Washington Real e state i nvestment tR ust
10
AnnuAl RepoRt 2012 FoRM 10-K uniteD states seCuRities anD eXChange Commission
Washington, D.C. 20549
foRm 10-k
[X] annual RePoRt PuRsuant to seCtion 13 oR 15(d) of the seCuRities eXChange aCt of 1934
For fiscal year ended December 31, 2012
oR
[ ] tRansition RePoRt PuRsuant to seCtion 13 oR 15(d) of the seCuRities eXChange aCt of 1934.
Commission file no. 1-6622
Washington Real estate investment tRust
(Exact name of registrant as specified in its charter)
maRYlanD
(State of incorporation)
53-0261100
(IRS Employer Identification Number)
6110 eXeCutive BoulevaRD, suite 800, RoCkville, maRYlanD 20852
(Zip code)
(Address of principal executive office)
Registrant’s telephone number, including area code: (301) 984-9400
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Shares of Beneficial Interest
Name of exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES [X] no [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES [ ] no [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past ninety (90) days. YES [X] no [ ]
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] no [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of the registrant’s knowledge in definitive proxy or information statements incorporated by refer-
ence in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES [ ] no [X]
As of June 29, 2012, the aggregate market value of such shares held by non-affiliates of the registrant was approximately
$1,871,915,973 (based on the closing price of the stock on June 29, 2012).
As of February 20, 2013, 66,482,564 common shares were outstanding.
DoCuments inCoRPoRateD BY RefeRenCe
Portions of our definitive Proxy Statement relating to the 2013 Annual Meeting of Shareholders, to be filed with the Securities and
Exchange Commission, are incorporated by reference in Part III, Items 10-14 of this Annual Report on Form 10-K as indicated herein.
11
FORM 10-K AnnuAl RepORt 2012
12
AnnuAl RepoRt 2012 FoRM 10-K inDeX
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Saftey Disclosures
PART II
Item 5.
Market for the Registrant’s Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
Item 6.
Selected Financial Data
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants On Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11.
Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.
Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15.
Exhibits and Financial Statement Schedules
Signatures
14
18
28
28
30
30
31
32
32
61
61
61
61
62
63
63
63
63
63
64
68
13
FORM 10-K AnnuAl RepORt 2012
PaRt i
ITEM 1. BUSINESS
WRIT Overview
Washington Real Estate Investment Trust (“we” or “WRIT”) is a self-administered, self-managed, equity real estate investment
trust (“REIT”) successor to a trust organized in 1960. Our business consists of the ownership and operation of income-
producing real property in the greater Washington metro region. We own a diversified portfolio of office buildings, medical
office buildings, multifamily buildings and retail centers.
Our geographic focus is based on two principles:
1. Real estate is a local business and is more effectively selected and managed by owners located, and with expertise, in
the region.
2. Geographic markets deserving of focus must be among the nation’s best markets with a strong primary industry foun-
dation and diversified enough to withstand downturns in their primary industry.
We consider markets to be local if they can be reached from Washington within two hours by car. While we have historically
focused most of our investments in the greater Washington metro region, in order to maximize acquisition opportunities we
will consider investments within the two-hour radius described above. In the future, we also may consider opportunities to
duplicate our Washington-focused approach in other geographic markets which meet the criteria described above.
Our current strategy is focused on properties inside the Washington metro region’s Beltway, near major transportation
nodes and in areas with strong employment drivers and superior growth demographics. We will seek to continue to upgrade
our portfolio as opportunities arise, funding acquisitions with a combination of cash, equity, debt and proceeds from property
sales. To that end, we plan to explore the potential sale of all or a portion of our medical office segment during 2013. We
believe that this sale would enhance our focus on the office, multifamily and retail segments, while providing funds to upgrade
our portfolio (see “Proposed Sale of Medical Office Segment” below).
All of our officers and employees live and work in the greater Washington metro region and all but one of our officers have
over 20 years of experience in this region.
Washington Metro Region Economy
The Washington metro region experienced slow job growth during 2012, as uncertainty about the impact of proposed cuts
to the federal budget made companies hesitant to make hiring or spending decisions. Current estimates by Delta Associates/
Transwestern Commercial Services (“Delta”), a national full service real estate firm that provides market research and evalu-
ation services for commercial property, indicate that the Washington metro region gained 37,400 jobs during the 12 month
period ending October 2012. The region’s unemployment rate was 5.1% at October 2012, down from 5.6% in the prior year.
The region’s unemployment rate remains the lowest rate among all of the nation’s largest metro areas. Projected 2012 gross
regional product growth is expected to be 2.7%, compared to the national increase of 2.2%. The federal government remains
the region’s most important industry, providing more than one-third of the region’s GRP.
Delta expects the Washington metro region’s economy to grow sluggishly in 2013, with consumers and businesses remaining
cautious about the economy.
Washington Metro Region Real Estate Markets
The Washington metro region’s slow growth is reflected in the real estate market performance in each of our segments.
Market statistics and information from Delta are set forth below:
Office and Medical Office Segments
• Average effective rents decreased 2.9% in 2012 in the region, compared to a decrease of 0.9% in 2011.
• Overall vacancy was 13.4% at December 31, 2012, up from 12.1% at December 31, 2011. The region has the seventh-
lowest vacancy rate of large metro areas in the United States.
14
AnnuAl RepoRt 2012 FoRM 10-K • Net absorption (defined as the change in occupied, standing inventory from one period to the next) totaled a negative
2.9 million square feet in 2012, compared to a positive 1.1 million square feet in 2011.
• Of the 8.0 million square feet of office space under construction at December 31, 2012 (up from 7.0 million square feet
at December 31, 2011), 51% is pre-leased, compared to 52% one year ago.
Retail Segment
• Rental rates at grocery-anchored centers were up 1.2% in the region in 2012, compared to the 2.1% increase in 2011.
• Vacancy for grocery-anchored centers was 4.9% at December 31, 2012, down from 5.5% at December 31, 2011.
Multifamily Segment
• Net effective rents for all investment grade apartments increased 1.7% in the greater Washington metro region during
2012. Class A rents increased by 1.9% in 2012, compared to an increase of 2.4% in 2011.
• The vacancy rate for all apartments was 4.3% at December 31, 2012, compared to 3.8% at December 31, 2011. The
national rate was 4.8% at December 31, 2012. Class A vacancy decreased to 4.2% at December 31, 2012 from 5.0% at
December 31, 2011.
Our Portfolio
As of December 31, 2012, we owned a diversified portfolio of 70 properties, totaling approximately 8.6 million square feet
of commercial space and 2,540 residential units, and land held for development. These 70 properties consist of 26 office
properties, 17 medical office properties, 16 retail centers and 11 multifamily properties. Our principal objective is to invest in
high quality properties in prime locations, then proactively manage, lease and direct ongoing capital improvement programs
to improve their economic performance. The percentage of total real estate rental revenue by property group for 2012, 2011
and 2010, and the percent leased as of December 31, 2012, were as follows:
PERcENT LEASEd
dEcEMBER 31, 2012(2)
87%
87%
92%
96%
Office
Medical office
Retail
Multifamily
(1) Data excludes discontinued operations.
(2) Calculated as the percentage of physical net rentable area leased.
REAL ESTATE RENTAL REVENUE(1)
2012
50%
15%
18%
17%
100%
2011
49%
15%
18%
18%
100%
2010
47%
18%
16%
19%
100%
On a combined basis, our commercial portfolio (i.e., our office, medical office and retail properties, but not our multifamily
properties) was 88% leased at December 31, 2012, 91% leased at December 31, 2011 and 91% leased at December 31, 2010.
The commercial lease expirations for the next five years and thereafter are as follows:
# Of LEASES
SqUARE fEET
GROSS ANNUAL RENT
(in thousands)
PERcENTAGE Of
TOTAL GROSS
ANNUAL RENT
2013
2014
2015
2016
2017
2018 and thereafter
Total
208
188
163
149
141
323
1,172
927,433
1,078,016
951,731
924,938
878,195
2,339,734
7,100,047
$ 24,333
36,337
32,295
28,129
31,874
81,898
$234,866
10%
15%
14%
12%
14%
35%
100%
15
FORM 10-K AnnuAl RepORt 2012 Total real estate rental revenue from continuing operations was $305.0 million for 2012, $284.2 million for 2011 and $253.1 mil-
lion for 2010. During the three year period ended December 31, 2012, we acquired seven office buildings and two retail
centers. During that same period, we sold eight office buildings, one medical office building and our entire industrial segment.
According to Delta, the professional/business services and government sectors constituted 46% of payroll jobs in the
Washington metro area at the end of 2012. Due to our geographic concentration in the Washington metro area, a significant
amount of our tenants have historically been concentrated in the professional/business services and government sectors,
although the exact amount will vary from time to time. As a result of this concentration, we are susceptible to business trends
(both positive and negative) that affect the outlook for these sectors. In particular, a significant reduction in federal govern-
ment spending would seriously impact these sectors.
No single tenant accounted for more than 3.6% of real estate rental revenue in 2012, 3.7% of real estate rental revenue in
2011 and 3.8% of real estate rental revenue in 2010. All federal government tenants in the aggregate accounted for approxi-
mately 1.6% of our 2012 real estate rental revenue. Federal government tenants include the Department of Defense, Social
Security Administration, Federal Bureau of Investigation and Office of Personnel Management.
Our ten largest tenants, in terms of real estate rental revenue, are as follows:
1. World Bank
2. Advisory Board Company
3. Booz Allen Hamilton, Inc.
4. Patton Boggs llP
5. Engility Corporation
6. General Services Administration
7. Sunrise Senior Living, Inc.
8. INOVA Health System
9. Epstein, Becker & Green, P.C.
10. General Dynamics
We expect to continue investing in additional income-producing properties. We invest in properties which we believe will
increase in income and value. Our properties typically compete for tenants with other properties throughout the respective
areas in which they are located on the basis of location, quality and rental rates.
We make capital improvements to our properties on an ongoing basis for the purpose of maintaining and increasing their
value and income. Major improvements and/or renovations to the properties during the three years ended December 31,
2012 are discussed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, under
the heading “Capital Improvements and Development Costs.”
Further description of the property groups is contained in Item 2, Properties, Note 13, Segment Information and in Schedule
III. Reference is also made to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
On February 20, 2013, we had 287 employees including 207 persons engaged in property management functions and 80 per-
sons engaged in corporate, financial, leasing, asset management and other functions.
Proposed Sale of Medical Office Segment
We plan to explore the potential sale of all or a portion of our medical office segment during 2013. We believe that this
sale would enhance our focus on the office, multifamily and retail segments, while providing funds to upgrade our portfolio.
However, we may not receive acceptable offers for these properties. If we did receive an offer we considered acceptable, the
completion of a definitive transaction with respect to such offer would still require the successful negotiation of a sale agree-
ment and the approval of our Board of Trustees. Lastly, if we identify a potential purchaser of all or a portion of the medi-
cal office segment, negotiate an acceptable sale agreement and receive approval from the Board of Trustees to execute any
16
AnnuAl RepoRt 2012 FoRM 10-K such sale, there could still be conditions to the closing of such transaction that may not be achieved, or we or the potential
purchaser otherwise may not be successful in completing such transaction. We may also not be successful in reinvesting all
or a portion of the proceeds of any such sale on a substantially concurrent basis. If we do sell all or a portion of the medical
office segment during 2013, the resulting decrease in 2013’s net income attributable to the controlling interests may not be
completely offset by income from the reinvestment of disposition proceeds.
REIT Tax Status
We believe that we qualify as a REIT under Sections 856-860 of the Internal Revenue Code and intend to continue to qualify
as such. To maintain our status as a REIT, we are required to distribute 90% of our ordinary taxable income to our sharehold-
ers. When selling properties, we have the option of (a) reinvesting the sales proceeds of properties sold, allowing for a defer-
ral of income taxes on the sale, (b) paying out capital gains to the shareholders with no tax to us or (c) treating the capital
gains as having been distributed to our shareholders, paying the tax on the gain deemed distributed and allocating the tax paid
as a credit to our shareholders.
Tax Treatment of Recent disposition Activity
We sold several properties during the three years ended December 31, 2012, as follows:
dISPOSITION dATE
PROPERTy
August 31, 2012
1700 Research Boulevard
TyPE
Office
December 20, 2012
Plumtree Medical Center
Medical Office
Total 2012
Various(1)
April 5, 2011
Total 2011
June 18, 2010
Industrial Portfolio(1)
Industrial/Office
Dulles Station, Phase I
Office
Parklawn Portfolio(2)
Office/Industrial
December 21, 2010
The Ridges
Office
December 22, 2010
Ammendale I&II/Amvax
Industrial
Total 2010
RENTABLE
SqUARE fEET
cONTRAcT
SALES PRIcE
(in thousands)
GAIN
ON SALE
(in thousands)
101,000
33,000
134,000
3,092,000
180,000
3,272,000
229,000
104,000
305,000
638,000
$ 14,250
8,750
$ 23,000
$350,900
58,800
$409,700
$ 23,430
27,500
23,000
$ 3,724
1,400
$ 5,124
$97,491
—
$97,491
$ 7,942
4,441
9,216
$ 73,930
$21,599
(1) The Industrial Portfolio consisted of every property in our industrial segment and two office properties (the Crescent and Albemarle Point), and we closed on the sale
on three separate dates. On September 2, 2011, we closed on the sale of the two office properties (the Crescent and Albemarle Point) and 8880 Gorman Road, Dulles
South IV, Fullerton Business Center, Hampton Overlook, Alban Business Center, Pickett Industrial Park, Northern Virginia Industrial Park I, 270 Technology Park,
Fullerton Industrial Center, Sully Square, 9950 Business Parkway, Hampton South and 8900 Telegraph Road. On October 3, 2011, we closed the sale of Northern
Virginia Industrial Park II. On November 1, 2011, we closed on the sale of 6100 Columbia Park Road and Dulles Business Park I and II.
(2) The Parklawn Portfolio consisted of three office properties (Parklawn Plaza, Lexington Building and Saratoga Building) and one industrial property (Charleston
Business Center).
All disclosed gains on sale are calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). A por-
tion of the sales proceeds were reinvested in replacement properties, with the remainder paid out to shareholders.
We distributed all of our ordinary taxable income for the years ended December 31, 2012, 2011 and 2010 to our shareholders.
Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes
on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS’s”). Our
TRS’s are subject to corporate federal and state income tax on their taxable income at regular statutory rates.
During the fourth quarter of 2011, we recognized a $14.5 million impairment charge at Dulles Station, Phase II, a development
property held by one of our TRS’s (see note 3 to the consolidated financial statements). The impairment charge created a
deferred tax asset of $5.7 million at this TRS, but we have determined that it is more likely than not that this deferred tax asset
will not be realized. We have therefore recorded a valuation allowance for the full amount of the deferred tax asset related to
the impairment charge at Dulles Station, Phase II.
17
FORM 10-K AnnuAl RepORt 2012 As of December 31, 2012, our TRS’s had no net deferred tax asset and a net deferred tax liability of $0.6 million. As of
December 31, 2011, our TRS’s had a net deferred tax asset and liability of $0.1 million and $0.5 million, respectively. These
are primarily related to temporary differences in the timing of the recognition of revenue, amortization and depreciation.
There were no material income tax provisions or material net deferred income tax items for our TRS’s for the year ended
December 31, 2010.
Availability of Reports
Copies of this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and any amendments to such reports are available, free of charge, on the Internet on our website www.writ.com. All required
reports are made available on the website as soon as reasonably practicable after they are electronically filed with or furnished
to the Securities and Exchange Commission. The reference to our website address does not constitute incorporation by refer-
ence of the information contained in the website and such information should not be considered part of this document.
ITEM 1A. RISK fAcTORS
Set forth below are the risks that we believe are material to our shareholders. We refer to the shares of beneficial interest in WRIT as
our “common shares,” and the investors who own shares as our “shareholders.” This section includes or refers to certain forward-looking
statements. You should refer to the explanation of the qualifications and limitations on such forward-looking statements beginning on
page 59.
Our performance and value are subject to risks associated with our real estate assets and with the real
estate industry.
Our financial performance and the value of our real estate assets are subject to the risk that if our office, medical office,
retail and multifamily properties do not generate revenues sufficient to meet our operating expenses, debt service and capital
expenditures, our cash flow and ability to pay distributions to our shareholders will be adversely affected. The following fac-
tors, among others, may adversely affect the cash flow generated by our commercial and multifamily properties:
• downturns in the national, regional and local economic climate;
• the financial health of our tenants and the ability to collect rents;
• consumer confidence, unemployment rates and consumer tastes and preferences;
• competition from similar asset type properties;
• local real estate market conditions, such as oversupply or reduction in demand for office, medical office, retail and
multifamily properties;
• changes in interest rates and availability of financing;
• vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;
• increased operating costs, including insurance premiums, utilities and real estate taxes;
• inflation;
• civil disturbances, earthquakes and other natural disasters, terrorist acts or acts of war; and
• decreases in the underlying value of our real estate.
We are dependent upon the economic climate of the Washington metropolitan region.
All of our properties are located in the Washington metro region, which may expose us to a greater amount of market
dependent risk than if we were geographically diverse. General economic conditions and local real estate conditions in the
Washington metro region are dependent upon various industries that are predominant in our area (such as government
and professional/business services). A downturn in one or more of these industries may have a particularly strong effect on
the economic climate of our region. In the event of negative economic changes in our region, we may experience a negative
impact to our profitability and may be limited in our ability to meet our financial obligations when due and/or make distribu-
tions to our shareholders.
18
AnnuAl RepoRt 2012 FoRM 10-K We may be adversely affected by any significant reductions in federal government spending.
As a REIT operating exclusively in the Washington metro region, a significant portion of our properties is occupied by
United States Government tenants or tenants that are directly or indirectly serving the United States Government as federal
contractors or otherwise. A significant reduction in federal government spending, particularly a sudden decrease due to the
sequestration process, could adversely affect the ability of these tenants to fulfill lease obligations or decrease the likelihood
that they will renew their leases with us. Further, economic conditions in the Washington metro region are significantly
dependent upon the level of federal government spending in the region. In the event of a significant reduction in federal
government spending, there could be negative economic changes in our region which could adversely impact the ability of our
tenants to perform their financial obligations under our leases or the likelihood of their lease renewal. As a result, if such a
reduction in federal government spending were to occur, we could experience an adverse effect on our financial condition,
results of operations, cash flows and ability to make distributions to our shareholders.
We face risks associated with property development.
During the first quarter of 2013, we expect to break ground on a mid-rise apartment building at 650 North Glebe Road in
Arlington, Virginia. As well, we expect our 1225 First Street high-rise apartment development project in Alexandria, Virginia
to commence construction at a future time to be determined.
Developing properties presents a number of risks for us, including risks that:
• if we are unable to obtain all necessary zoning and other required governmental permits and authorizations or cease
development of the project for any other reason, the development opportunity may be abandoned after expending
significant resources, resulting in the loss of deposits or failure to recover expenses already incurred;
• the development and construction costs of the project may exceed original estimates due to increased interest rates
and increased cost of materials, labor, leasing or other expenditures, which could make the completion of the project
less profitable because market rents may not increase sufficiently to compensate for the increase in construction costs;
• construction and/or permanent financing may not be available on favorable terms or may not be available at all, which
may cause the cost of the project to increase and lower the expected return;
• the project may not be completed on schedule as a result of a variety of factors, many of which are beyond our control,
such as weather, labor conditions and material shortages, which would result in increases in construction costs and
debt service expenses;
• the time between commencement of a development project and the stabilization of the completed property exposes
us to risks associated with fluctuations in the Washington metro region’s economic conditions; and
• occupancy rates and rents at the completed property may not meet the expected levels and could be insufficient to
make the property profitable.
Properties developed or acquired for development may generate little or no cash flow from the date of acquisition through
the date of completion of development. In addition, new development activities, regardless of whether or not they are ulti-
mately successful, may require a substantial portion of management’s time and attention.
These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent
completion of development activities once undertaken. Any of the foregoing could have an adverse effect on our financial
condition, results of operations or ability to satisfy our debt service obligations.
We face risks associated with property acquisitions.
We intend to continue to acquire properties which would increase our size and could alter our capital structure. Our acquisi-
tion activities and results may be exposed to the following risks:
• we may be unable to finance acquisitions on favorable terms;
• the acquired properties may fail to perform as we expected in analyzing our investments;
19
FORM 10-K AnnuAl RepORt 2012 • the actual returns realized on acquired properties may not exceed our average cost of capital;
• even if we enter into an acquisition agreement for a property, we may be unable to complete that acquisition after mak-
ing a non-refundable deposit and incurring certain other acquisition-related costs;
• we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisitions of portfolios of proper-
ties, into our existing operations;
• competition from other real estate investors may significantly increase the purchase price;
• our estimates of capital expenditures required for an acquired property, including the costs of repositioning or redevel-
oping, may be inaccurate;
• we may be unable to acquire a desired property because of competition from other real estate investors, including pub-
licly traded real estate investment trusts, institutional investment funds and private investors; and
• even if we enter into an acquisition agreement for a property, it is subject to customary conditions to closing, including
completion of due diligence investigations which may have findings that are unacceptable.
We may acquire properties subject to liabilities and without recourse, or with limited recourse with respect to unknown
liabilities. As a result, if liability were asserted against us based upon the acquisition of a property, we may have to pay sub-
stantial sums to settle it, which could adversely affect our cash flow. Unknown liabilities with respect to properties acquired
might include:
• liabilities for clean-up of undisclosed environmental contamination;
• claims by tenants, vendors or other persons dealing with the former owners of the properties; and
• liabilities incurred in the ordinary course of business.
Real estate investments are illiquid, and we may not be able to sell our properties on a timely basis when
we determine it is appropriate to do so.
Real estate investments can be difficult to sell and convert to cash quickly, especially if market conditions are not favorable,
and we may find that to be the case under the current economic conditions due to limited credit availability for potential buy-
ers. Such illiquidity could limit our ability to quickly change our portfolio of properties in response to changes in economic or
other conditions. Moreover, under certain circumstances, the Internal Revenue Code imposes penalties on a REIT that sells
property held for less than two years and/or sells more than a specified number of properties in a given year. In addition, for
properties that we acquire by issuing units in an operating partnership, we may be restricted by agreements with the sellers
of the properties for a certain period of time from entering into transactions (such as the sale or refinancing of the acquired
property) that will result in a taxable gain to the sellers without the sellers’ consent. Due to these factors, we may be unable
to sell a property at an advantageous time.
We plan to explore the potential sale of all or a portion of our medical office segment during 2013. We believe that this
sale would enhance our focus on the office, multifamily and retail segments, while providing funds to upgrade our portfolio.
However, we may not receive acceptable offers for these properties. If we did receive an offer we considered acceptable, the
completion of a definitive transaction with respect to such offer would still require the successful negotiation of a sale agree-
ment and the approval of our Board of Trustees. Lastly, if we identify a potential purchaser of all or a portion of the medical
segment, negotiate an acceptable sale agreement and receive approval from the Board of Trustees to execute any such sale,
there could still be conditions to the closing of such transaction that may not be achieved, or we or the potential purchaser
otherwise may not be successful in completing such transaction. We may also not be successful in reinvesting all or a portion
of the proceeds of any such sale on a substantially concurrent basis. If we do sell all or a portion of the medical office segment
during 2013, the resulting decrease in 2013’s net income attributable to the controlling interests may not be completely offset
by income from the reinvestment of disposition proceeds.
20
AnnuAl RepoRt 2012 FoRM 10-K We face potential difficulties or delays renewing leases or re-leasing space.
As of December 31, 2012, leases on our commercial properties will expire as follows:
2013
2014
2015
2016
2017
2018 and thereafter
Total
% Of LEASEd SqUARE fOOTAGE
10%
15%
14%
12%
14%
35%
100%
Multifamily properties are leased under operating leases with terms of generally one year or less. For the years ended
December 31, 2012, 2011 and 2010, the multifamily tenant retention rate was 61%, 56% and 61%, respectively.
We derive substantially all of our income from rent received from tenants. If our tenants decide not to renew their leases,
we may not be able to release the space. If tenants decide to renew their leases, the terms of renewals, including the cost of
required improvements or concessions, may be less favorable than current lease terms. As a result of the foregoing, our cash
flow could decrease and our ability to make distributions to our shareholders could be adversely affected.
We face potential adverse effects from major tenants’ bankruptcies or insolvencies.
The bankruptcy or insolvency of a major tenant may adversely affect the income produced by a property. We cannot evict
a tenant solely because of its bankruptcy. On the other hand, a court might authorize the tenant to reject and terminate its
lease. In such case, our claim against the bankrupt tenant for unpaid, future rent would be subject to a statutory cap that
might be substantially less than the remaining rent actually owed under the lease. As a result, our claim for unpaid rent would
likely not be paid in full. This shortfall could adversely affect our cash flow and results from operations. If a tenant experiences
a downturn in its business or other types of financial distress, it may be unable to make timely rental payments.
We may suffer economic harm as a result of the actions of our partners in real estate joint ventures and
other investments.
We invest in joint ventures in which we are not the exclusive investor or principal decision maker. Investments in such enti-
ties may involve risks not present when a third party is not involved, including the possibility that the other parties to these
investments might become bankrupt or fail to fund their share of required capital contributions. Our partners in these enti-
ties may have economic, tax or other business interests or goals which are inconsistent with our business interests or goals,
and may be in a position to take actions contrary to our policies or objectives. Such investments may also lead to impasses,
for example, as to whether to sell a property, because neither we nor the other parties to these investments may have full
control over the entity. In addition, we may in certain circumstances be liable for the actions of the other parties to these
investments. Each of these factors could have an adverse effect on our financial condition, results of operations, cash flows
and ability to make distributions to our shareholders.
Our properties face significant competition.
We face significant competition from developers, owners and operators of office, medical office, retail, multifamily and other
commercial real estate. Substantially all of our properties face competition from similar properties in the same market. Such
competition may affect our ability to attract and retain tenants and may reduce the rents we are able to charge. These com-
peting properties may have vacancy rates higher than our properties, which may result in their owners being willing to make
space available at lower rents than the space in our properties.
21
FORM 10-K AnnuAl RepORt 2012 We are dependent on key personnel.
The execution of our investment strategy, and management of our operations, depend to a significant degree on our senior
management team. In particular, we are dependent on the skills, knowledge and experience of George F. “Skip” McKenzie,
our Chief Executive Officer, and our other senior executive officers. In this regard, Mr. McKenzie recently announced his
intention to retire by the end of 2013. If we are unable to attract and retain skilled executives, including a new chief executive
officer, our results of operations and financial condition could be adversely affected.
We cannot assure you we will continue to pay dividends at current rates.
During the third quarter of 2012, we decreased our quarterly dividend by 31% from $0.43375 per share to $0.30 per share.
Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate. If our cash flows
from operations were to decline significantly, we may have to borrow on our lines of credit to sustain the dividend rate or
reduce our dividend further. Our ability to continue to pay dividends on our common shares at its current rate or to increase
our common share dividend rate will depend on a number of factors, including, among others, the following:
• our future financial condition and results of operations;
• real estate market conditions in the Washington metro region;
• the performance of lease terms by tenants;
• the terms of our loan covenants; and
• our ability to acquire, finance, develop or redevelop and lease additional properties at attractive rates.
Our board of trustees considers, among other factors, trends in our levels of funds from operations, together with associated
recurring capital improvements, tenant improvements, leasing commissions and incentives, and adjustments to straight-line
rents to reflect cash rents received. This level has trended lower in recent years due to the recent economic downturn and
uncertainty with the business and leasing environment in the Washington metro region. As noted above, we recently reduced
our dividend rate, and if such trend were to continue for a sustained period of time, our board of trustees could determine to
further reduce our dividend rate. If we do not maintain or increase the dividend rate on our common shares in the future, it
could have an adverse effect on the market price of our common shares.
We face risks associated with the use of debt, including refinancing risk.
We rely on borrowings under our credit facilities and offerings of debt securities to finance acquisitions and development
activities and for general corporate purposes. In the recent past, the commercial real estate debt markets have experienced
significant volatility due to a number of factors, including the tightening of underwriting standards by lenders and credit rating
agencies and the reported significant inventory of unsold mortgage backed securities in the market. The volatility resulted in
investors decreasing the availability of debt financing as well as increasing the cost of debt financing. We believe that circum-
stances could again arise in which we may not be able to obtain debt financing in the future on favorable terms, or at all. If we
were unable to borrow under our credit facilities or to refinance existing debt financing, our financial condition and results of
operations would likely be adversely affected.
We are subject to the risks normally associated with debt, including the risk that our cash flow may be insufficient to meet
required payments of principal and interest. We anticipate that only a small portion of the principal of our debt will be repaid
prior to maturity. Therefore, we are likely to need to refinance a significant portion of our outstanding debt as it matures.
There is a risk that we may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable
as the terms of the existing debt. If principal payments due at maturity cannot be refinanced, extended or repaid with pro-
ceeds from other sources, such as new equity capital, our cash flow may not be sufficient to repay all maturing debt in years
when significant “balloon” payments come due.
22
AnnuAl RepoRt 2012 FoRM 10-K Our degree of leverage could limit our ability to obtain additional financing or affect the market price of
our common shares or debt securities.
On February 21, 2012, our total consolidated debt was approximately $1.2 billion. Consolidated debt to consolidated market
capitalization ratio, which measures total consolidated debt as a percentage of the aggregate of total consolidated debt plus
the market value of outstanding equity securities, is often used by analysts to assess leverage for equity REITs such as us. Our
market value is calculated using the price per share of our common shares. Using the closing share price of $27.46 per share
of our common shares on February 21, 2012, multiplied by the number of our common shares, our consolidated debt to total
consolidated market capitalization ratio was approximately 40% as of February 21, 2012.
Our degree of leverage could affect our ability to obtain additional financing for working capital, capital expenditures, acquisi-
tions, development or other general corporate purposes. Our senior unsecured debt is currently rated investment grade
by two major rating agencies. However, there can be no assurance that we will be able to maintain this rating, and in the
event our senior debt is downgraded from its current rating, we would likely incur higher borrowing costs and/or difficulty
in obtaining additional financing. Our degree of leverage could also make us more vulnerable to a downturn in business or
the economy generally. There is a risk that changes in our debt to market capitalization ratio, which is in part a function of
our share price, or our ratio of indebtedness to other measures of asset value used by financial analysts, may have an adverse
effect on the market price of our equity or debt securities.
Disruptions in the financial markets could affect our ability to obtain financing or have other adverse
effects on us or the market price of our common shares.
The United States and global equity and credit markets have experienced significant price volatility and liquidity disruptions
which caused the market prices of stocks to fluctuate substantially and the spreads on prospective debt financings to widen
considerably. These circumstances significantly and negatively impacted liquidity in the financial markets, making terms for
certain financings less attractive or unavailable. Any disruption in the equity and credit markets could negatively impact our
ability to access additional financing at reasonable terms or at all. If such disruption were to occur, in the event of a debt
financing, our cost of borrowing in the future would likely be significantly higher than historical levels. Additionally, in the case
of a common equity financing, the disruptions in the financial markets could have a material adverse effect on the market value
of our common shares, potentially requiring us to issue more shares than we would otherwise have issued with a higher mar-
ket value for our common shares. Disruption in the financial markets also could negatively affect our ability to make acquisi-
tions, undertake new development projects and refinance our debt. In addition, it could also make it more difficult for us to
sell properties and could adversely affect the price we receive for properties that we do sell, as prospective buyers experi-
ence increased costs of financing and difficulties in obtaining financing.
Disruptions in the financial markets also could adversely affect many of our tenants and their businesses, including their ability
to pay rents when due and renew their leases at rates at least as favorable as their current rates. As well, our ability to attract
prospective new tenants in the future could be adversely affected by disruption in the financial markets.
Rising interest rates would increase our interest costs.
We may incur indebtedness that bears interest at variable rates. Accordingly, if interest rates increase, so will our interest costs,
which could adversely affect our cash flow and our ability to service debt. As a protection against rising interest rates, we may
enter into agreements such as interest rate swaps, caps, floors and other interest rate exchange contracts. These agreements,
however, increase our risks that other parties to the agreements may not perform or that the agreements may be unenforceable.
Covenants in our debt agreements could adversely affect our financial condition.
Our credit facilities contain customary restrictions, requirements and other limitations on our ability to incur indebtedness.
We must maintain a minimum tangible net worth and certain ratios, including a maximum of total liabilities to total gross asset
value, a maximum of secured indebtedness to gross asset value, a minimum of quarterly EBITDA to fixed charges, a minimum
of unencumbered asset value to unsecured indebtedness, a minimum of net operating income from unencumbered properties
to unsecured interest expense and a maximum of permitted investments to gross asset value. Our ability to borrow under
23
FORM 10-K AnnuAl RepORt 2012 our credit facilities is subject to compliance with our financial and other covenants. The recent economic downturn may
adversely affect our ability to comply with these financial and other covenants.
Failure to comply with any of the covenants under our unsecured credit facilities or other debt instruments could result in
a default under one or more of our debt instruments. In particular, we could suffer a default under one of our secured debt
instruments that could exceed a cross default threshold under our unsecured credit facilities, causing an event of default
under the unsecured credit facilities. Alternatively, even if a secured debt instrument is below the cross default threshold for
non-recourse secured debt under our unsecured credit facilities, a default under such secured debt instrument may still cause
a cross default under our unsecured credit facilities because such secured debt instrument may not qualify as “non-recourse”
under the definition in our unsecured credit facilities. Another possible cross default could occur between our unsecured
credit facilities and our senior unsecured notes. Any of the foregoing default or cross default events could cause our lenders
to accelerate the timing of payments and/or prohibit future borrowings, either of which would have a material adverse effect
on our business, operations, financial condition and liquidity.
We face risks associated with short-term liquid investments.
We have significant cash balances periodically that we invest in a variety of short-term investments that are intended to pre-
serve principal value and maintain a high degree of liquidity while providing current income. From time to time, these invest-
ments may include (either directly or indirectly):
• direct obligations issued by the U.S. Treasury;
• obligations issued or guaranteed by the U.S. government or its agencies;
• taxable municipal securities;
• obligations (including certificates of deposit) of banks and thrifts;
• commercial paper and other instruments consisting of short-term U.S. dollar denominated obligations issued by corpo-
rations and banks;
• repurchase agreements collateralized by corporate and asset-backed obligations;
• registered and unregistered money market funds; and
• other highly-rated short-term securities.
Investments in these securities and funds are not insured against loss of principal. Under certain circumstances, we may be
required to redeem all or part of our investment, and our right to redeem some or all of our investment may be delayed or
suspended. In addition, there is no guarantee that our investments in these securities or funds will be redeemable at par value.
A decline in the value of our investment or a delay or suspension of our right to redeem may have a material adverse effect on
our results of operations or financial condition.
further issuances of equity securities may be dilutive to current shareholders.
The interests of our existing shareholders could be diluted if additional equity securities are issued, including to finance future
developments and acquisitions, instead of incurring additional debt. Our ability to execute our business strategy depends on
our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unse-
cured debt and equity financing.
compliance or failure to comply with the Americans with disabilities Act and other laws and regulations
could result in substantial costs.
The Americans with Disabilities Act generally requires that public buildings, including commercial and multifamily properties,
be made accessible to disabled persons. Noncompliance could result in imposition of fines by the federal government or the
award of damages to private litigants. If, pursuant to the Americans with Disabilities Act, we are required to make substan-
tial alterations and capital expenditures in one or more of our properties, including the removal of access barriers, it could
adversely affect our results of operations.
24
AnnuAl RepoRt 2012 FoRM 10-K We may also incur significant costs complying with other regulations. Our properties are subject to various federal, state
and local regulatory requirements, such as state and local fair housing, rent control and fire and life safety requirements. If
we fail to comply with these requirements, we may incur fines or private damage awards. We believe that our properties are
currently in material compliance with regulatory requirements. However, we do not know whether existing requirements will
change or whether compliance with future requirements will require significant unanticipated expenditures that will adversely
affect our results of operations.
Some potential losses are not covered by insurance.
We carry insurance coverage on our properties of types and in amounts that we believe are in line with coverage customar-
ily obtained by owners of similar properties. We believe all of our properties are adequately insured. The property insurance
that we maintain for our properties has historically been on an “all risk” basis, which is in full force and effect until renewal in
August 2013. There are other types of losses, such as from wars or catastrophic events, for which we cannot obtain insurance
at all or at a reasonable cost.
We have an insurance policy that has no terrorism exclusion, except for non-certified nuclear, chemical and biological acts of
terrorism. Our financial condition and results of operations are subject to the risks associated with acts of terrorism and the
potential for uninsured losses as the result of any such acts. Effective November 26, 2002, under this existing coverage, any
losses caused by certified acts of terrorism would be partially reimbursed by the United States under a formula established by
federal law. Under this formula, the United States pays 85% of covered terrorism losses exceeding the statutorily established
deductible paid by the insurance provider, and insurers pay 10% until aggregate insured losses from all insurers reach $100 bil-
lion in a calendar year. If the aggregate amount of insured losses under this program exceeds $100 billion during the applicable
period for all insured and insurers combined, then each insurance provider will not be liable for payment of any amount which
exceeds the aggregate amount of $100 billion. On December 26, 2007, the Terrorism Risk Insurance Program Reauthorization
Act of 2007 was signed into law and extends the program through December 31, 2014. We continue to monitor the state of
the insurance market in general, and the scope and costs of coverage for acts of terrorism in particular, but we cannot antici-
pate what amount of coverage will be available on commercially reasonable terms in future policy years.
In the event of an uninsured loss or a loss in excess of our insurance limits, we could lose both the revenues generated from
the affected property and the capital we have invested in the affected property. Depending on the specific circumstances of
the affected property it is possible that we could be liable for any mortgage indebtedness or other obligations related to the
property. Any such loss could adversely affect our business and financial condition and results of operations.
In most cases, we have to renew our policies on an annual basis and negotiate acceptable terms for coverage, exposing us to
the volatility of the insurance markets, including the possibility of rate increases. Any material increase in insurance rates or
decrease in available coverage in the future could adversely affect our results of operations and financial condition.
Actual or threatened terrorist attacks may adversely affect our ability to generate revenues and the
value of our properties.
All of our properties are located in or near Washington D.C., a metropolitan area that has been and may in the future be the
target of actual or threatened terrorism attacks. As a result, some tenants in our market may choose to relocate their busi-
nesses to other markets. This could result in an overall decrease in the demand for commercial space in this market gener-
ally, which could increase vacancies in our properties or necessitate that we lease our properties on less favorable terms, or
both. In addition, future terrorist attacks in or near Washington D.C. could directly or indirectly damage our properties, both
physically and financially, or cause losses that materially exceed our insurance coverage. As a result of the foregoing, our abil-
ity to generate revenues and the value of our properties could decline materially.
Potential liability for environmental contamination could result in substantial costs.
Under federal, state and local environmental laws, ordinances and regulations, we may be required to investigate and clean up
the effects of releases of hazardous or toxic substances or petroleum products at our properties, regardless of our knowl-
edge or responsibility, simply because of our current or past ownership or operation of the real estate. In addition, the U.S.
25
FORM 10-K AnnuAl RepORt 2012 Environmental Protection Agency, the U.S. Occupational Safety and Health Administration and other state and local govern-
mental authorities are increasingly involved in indoor air quality standards, especially with respect to asbestos, mold, medical
waste and lead-based paint. The clean up of any environmental contamination, including asbestos and mold, can be costly. If
environmental problems arise, we may have to make substantial payments which could adversely affect our financial condition
and results of operations because:
• as owner or operator we may have to pay for property damage and for investigation and clean-up costs incurred in con-
nection with the contamination;
• the law typically imposes clean-up responsibility and liability regardless of whether the owner or operator knew of or
caused the contamination;
• even if more than one person may be responsible for the contamination, each person who shares legal liability under the
environmental laws may be held responsible for all of the clean-up costs; and
• governmental entities and third parties may sue the owner or operator of a contaminated site for damages and costs.
These costs could be substantial and, in extreme cases, could exceed the value of the contaminated property. The presence
of hazardous or toxic substances or petroleum products or the failure to properly remediate contamination may adversely
affect our ability to borrow against, sell or rent an affected property. In addition, applicable environmental laws create liens on
contaminated sites in favor of the government for damages and costs it incurs in connection with a contamination.
Environmental laws also govern the presence, maintenance and removal of asbestos. Such laws require that owners or opera-
tors of buildings containing asbestos:
• properly manage and maintain the asbestos;
• notify and train those who may come into contact with asbestos; and
• undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation
or demolition of a building.
Such laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may
allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.
It is our policy to retain independent environmental consultants to conduct Phase I environmental site assessments and asbestos
surveys with respect to our acquisition of properties. These assessments generally include a visual inspection of the properties and
the surrounding areas, an examination of current and historical uses of the properties and the surrounding areas and a review of
relevant state, federal and historical documents. However, they do not always involve invasive techniques such as soil and ground
water sampling. When appropriate, on a property-by-property basis, our general practice is to have these consultants conduct
additional testing. However, even though these additional assessments may be conducted, there is still the risk that:
• the environmental assessments and updates did not identify all potential environmental liabilities;
• a prior owner created a material environmental condition that is not known to us or the independent consultants pre-
paring the assessments;
• new environmental liabilities have developed since the environmental assessments were conducted; and
• future uses or conditions or changes in applicable environmental laws and regulations could result in environmental
liability to us.
failure to qualify as a REIT would cause us to be taxed as a corporation, which would substantially reduce
funds available for payment of dividends.
If we fail to qualify as a REIT for federal income tax purposes, we would be taxed as a corporation. We believe that we
are organized and qualified as a REIT and intend to operate in a manner that will allow us to continue to qualify as a REIT.
However, we cannot assure you that we are qualified as such, or that we will remain qualified as such in the future. This is
because qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue
Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts
26
AnnuAl RepoRt 2012 FoRM 10-K and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court
decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for
federal income tax purposes or the federal income tax consequences of such qualification.
If we fail to qualify as a REIT, we could face serious tax consequences that could substantially reduce our funds available for
payment of dividends for each of the years involved because:
• we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and could be
subject to federal income tax at regular corporate rates;
• we also could be subject to the federal alternative minimum tax and possibly increased state and local taxes;
• unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four
taxable years following the year during which we are disqualified; and
• all dividends would be subject to tax as ordinary income to the extent of our current and accumulated earnings and
profits potentially eligible as “qualified dividends” subject to the applicable income tax rate.
In addition, if we fail to qualify as a REIT, we would no longer be required to pay dividends. As a result of these factors, our
failure to qualify as a REIT could have a material adverse impact on our results of operations, financial condition and liquidity.
The market value of our securities can be adversely affected by many factors.
As with any public company, a number of factors may adversely influence the public market price of our common shares.
These factors include:
• level of institutional interest in us;
• perceived attractiveness of investment in us, in comparison to other REITs;
• attractiveness of securities of REITs in comparison to other asset classes taking into account, among other things, that a
substantial portion of REITs’ dividends are taxed as ordinary income;
• our financial condition and performance;
• the market’s perception of our growth potential and potential future cash dividends;
• government action or regulation, including changes in tax law;
• increases in market interest rates, which may lead investors to expect a higher annual yield from our distributions in
relation to the price of our shares;
• changes in federal tax laws;
• changes in our credit ratings; and
• any negative change in the level of our dividend or the partial payment thereof in common shares.
Provisions of the Maryland General corporation Law may limit a change in control.
There are several provisions of the Maryland General Corporation Law, or the MGCL, that may limit the ability of a third
party to undertake a change in control, including:
• a provision where a corporation is not permitted to engage in any business combination with any “interested stock-
holder,” defined as any holder or affiliate of any holder of 10% or more of the corporation’s stock, for a period of five
years after that holder becomes an “interested stockholder;” and
• a provision where the voting rights of “control shares” acquired in a “control share acquisition,” as defined in the
MGCL, may be restricted, such that the “control shares” have no voting rights, except to the extent approved by a vote
of holders of two-thirds of the common shares entitled to vote on the matter.
These provisions may delay, defer, or prevent a transaction or a change in control that may involve a premium price for hold-
ers of our shares or otherwise be in their best interests. Our bylaws currently provide that the foregoing provision regarding
27
FORM 10-K AnnuAl RepORt 2012 “control share acquisitions” will not apply to WRIT. However, our board of trustees could, in the future, modify our bylaws
such that the foregoing provision regarding “control share acquisitions” would be applicable to WRIT.
ITEM 1B. UNRESOLVEd STAff cOMMENTS
None.
ITEM 2. PROPERTIES
The schedule on the following pages lists our real estate investment portfolio as of December 31, 2012, which consisted of
70 properties and land held for development.
As of December 31, 2012, the percent leased is the percentage of net rentable area for which fully executed leases exist and
may include signed leases for space not yet occupied by the tenant.
Cost information is included in Schedule III to our financial statements included in this Annual Report on Form 10-K.
Schedule of Properties
PROPERTIES
Office Buildings
LOcATION
yEAR
AcqUIREd
yEAR
cONSTRUcTEd/
RENOVATEd
NET RENTABLE
SqUARE fEET(1)
PERcENT
LEASEd, AS
Of 12/31/12
1901 Pennsylvania Avenue
Washington, D.C.
51 Monroe Street
515 King Street
6110 Executive Boulevard
1220 19th Street
1600 Wilson Boulevard
7900 Westpark Drive
600 Jefferson Plaza
Wayne Plaza
Courthouse Square
One Central Plaza
The Atrium Building
1776 G Street
6565 Arlington Blvd
West Gude Drive
Monument II
Woodholme Center
2000 M Street
2445 M Street
925 Corporate Drive
1000 Corporate Drive
1140 Connecticut Avenue
1227 25th Street
Rockville, MD
Alexandria, VA
Rockville, MD
Washington, D.C.
Arlington, VA
McLean, VA
Rockville, MD
Silver Spring, MD
Alexandria, VA
Rockville, MD
Rockville, MD
Washington, D.C.
Falls Church, VA
Rockville, MD
Herndon, VA
Pikesville, MD
Washington, D.C.
Washington, D.C.
Stafford, VA
Stafford, VA
Washington, D.C.
Washington, D.C.
Braddock Metro Center
Alexandria, VA
John Marshall II
Fairgate at Ballston
Subtotal
Tysons Corner, VA
Arlington, VA
28
1977
1979
1992
1995
1995
1997
1997
1999
2000
2000
2001
2002
2003
2006
2006
2007
2007
2007
2008
2010
2010
2011
2011
2011
2011
2012
1960
1975
1966
1971
1976
1973
1972/1986/1999
1985
1970
1979
1974
1980
1979
1967/1998
1984/1986/1988
2000
1989
1971
1986
2007
2009
1966
1988
1985
1996/2010
1988
99,000
221,000
74,000
202,000
103,000
167,000
538,000
113,000
96,000
115,000
267,000
79,000
263,000
132,000
275,000
207,000
80,000
228,000
290,000
134,000
136,000
188,000
132,000
351,000
223,000
142,000
4,855,000
81%
88%
95%
69%
80%
89%
84%
83%
82%
87%
95%
64%
99%
95%
74%
73%
89%
89%
100%
100%
100%
89%
72%
76%
100%
83%
86%
AnnuAl RepoRt 2012 FoRM 10-K yEAR
AcqUIREd
yEAR
cONSTRUcTEd/
RENOVATEd
NET RENTABLE
SqUARE fEET(1)
PERcENT
LEASEd, AS
Of 12/31/12
PROPERTIES
LOcATION
Medical Office Buildings
Woodburn Medical Park I
Woodburn Medical Park II
Prosperity Medical Center I
Prosperity Medical Center II
Annandale, VA
Annandale, VA
Merrifield, VA
Merrifield, VA
Prosperity Medical Center III
Merrifield, VA
Shady Grove Medical Village II
Rockville, MD
8301 Arlington Boulevard
Fairfax, VA
Alexandria Professional Center
Alexandria, VA
9707 Medical Center Drive
15001 Shady Grove Road
15005 Shady Grove Road
2440 M Street
Woodholme Medical
Office Building
Ashburn Farm Office Park
CentreMed I & II
Rockville, MD
Rockville, MD
Rockville, MD
Washington, D.C.
Pikesville, MD
Ashburn, VA
Centreville, VA
Sterling Medical Office Building
Sterling, VA
19500 at Riverside Office Park
(formerly Lansdowne Medical
Office Building)
Subtotal
Retail centers
Takoma Park
Westminster
Concord Centre
Wheaton Park
Bradlee Shopping Center
Takoma Park, MD
Westminster, MD
Springfield, VA
Wheaton, MD
Alexandria, VA
Chevy Chase Metro Plaza
Washington, D.C.
Montgomery Village Center
Gaithersburg, MD
Shoppes of Foxchase
Frederick County Square
Alexandria, VA
Frederick, MD
1998
1998
2003
2003
2003
2004
2004
2006
2006
2006
2006
2007
2007
2007
2007
2008
1984
1988
2000
2001
2002
1999
1965
1968
1994
1999
2002
1986/2006
1996
1998/2000/2002
1998
1986/2000
1963
1972
1973
1977
1984
1985
1992
1994
1995
1962
1969
1960
1967
1955
1975
1969
1960/2006
1973
Leesburg, VA
2009
2009
800 S. Washington Street
Alexandria, VA
1998/2003
1955/1959
Centre at Hagerstown
Hagerstown, MD
Frederick Crossing
Randolph Shopping Center
Montrose Shopping Center
Gateway Overlook
Olney Village Center
Subtotal
Frederick, MD
Rockville, MD
Rockville, MD
Columbia, MD
Olney, MD
2002
2005
2006
2006
2010
2011
2000
1999/2003
1972
1970
2007
1979/2003
73,000
96,000
92,000
88,000
75,000
66,000
50,000
117,000
38,000
51,000
51,000
113,000
127,000
75,000
52,000
36,000
85,000
1,285,000
51,000
150,000
76,000
74,000
168,000
49,000
197,000
134,000
227,000
47,000
332,000
295,000
82,000
145,000
223,000
198,000
2,448,000
95%
99%
78%
100%
92%
84%
63%
91%
91%
100%
77%
96%
97%
86%
95%
80%
41%
87%
100%
94%
59%
94%
93%
100%
83%
95%
95%
94%
91%
99%
67%
92%
100%
94%
92%
29
FORM 10-K AnnuAl RepORt 2012 yEAR
AcqUIREd
yEAR
cONSTRUcTEd/
RENOVATEd
NET RENTABLE
SqUARE fEET(1)
PERcENT
LEASEd, AS
Of 12/31/12
1963
1965
1969
1969
1970
1996
1996
1997
2007
2008
2008
1951
1964
1965
1959
1963
1982
1971/2003
1986
2007
2008
1948
179,000
170,000
159,000
173,000
258,000
274,000
157,000
225,000
214,000
60,000
268,000
2,137,000
10,725,000
93%
98%
95%
97%
96%
95%
98%
98%
96%
97%
94%
96%
PROPERTIES
LOcATION
Multifamily Buildings / # of Units
3801 Connecticut Avenue / 308
Washington, D.C.
Roosevelt Towers / 191
Falls Church, VA
Country Club Towers / 227
Park Adams / 200
Arlington, VA
Arlington, VA
Munson Hill Towers / 279
Falls Church, VA
The Ashby at McLean / 256
McLean, VA
Walker House Apartments / 212
Gaithersburg, MD
Bethesda Hill Apartments / 195
Bethesda, MD
Bennett Park / 224
Clayborne / 74
Kenmore / 374
Subtotal / 2,540
total
Arlington, VA
Alexandria, VA
Washington, D.C.
(1) Multifamily buildings are presented in gross square feet.
ITEM 3. LEGAL PROcEEdINGS
None.
ITEM 4. MINE SAfTEy dIScLOSURES
N/A.
30
AnnuAl RepoRt 2012 FoRM 10-K PaRt ii
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCK-
HOLdER MATTERS ANd ISSUER PURcHASES Of EqUITy SEcURITIES
Our shares trade on the New York Stock Exchange. As of February 20, 2013, there are approximately 5,123 shareholders
of record.
The high and low sales price for our shares for 2012 and 2011, by quarter, and the amount of dividends we paid per share are
as follows:
qUARTERLy SHARE PRIcE RANGE
qUARTER
2012
Fourth
third
Second
first
2011
Fourth
third
Second
first
dIVIdENdS PER SHARE
HIGH
0.30000
0.30000
0.43375
0.43375
0.43375
0.43375
0.43375
0.43375
$27.19
$29.09
$30.50
$31.00
$31.25
$34.00
$34.54
$31.74
LOW
$24.28
$25.59
$26.87
$27.01
$25.61
$25.47
$30.07
$29.05
We have historically paid dividends on a quarterly basis.
During the period covered by this report, we did not sell equity securities without registration under the Securities Act.
Neither we nor any affiliated purchaser (as that term is defined in Securities Exchange Act Rule 10b-18(a) (3)) made any repur-
chases of our shares during the fourth quarter of the fiscal year covered by this report.
31
FORM 10-K AnnuAl RepORt 2012 ITEM 6. SELEcTEd fINANcIAL dATA
The following table sets forth our selected financial data on a historical basis, which has been revised for properties disposed
of or classified as held for sale (see note 3 to the consolidated financial statements). The following data should be read in
conjunction with our financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this Form 10-K.
(in thousands, except per share data)
2012
2011
2010
2009
2008
Real estate rental revenue
$ 304,983
$ 284,156
$ 253,127
$ 251,008
$ 223,910
Income (loss) from continuing operations
$ 17,099
$ (2,898)
$ (609)
$ 8,269
$ (10,220)
Discontinued operations:
Income from operations of properties
sold or held for sale
Gain on sale of real estate
$ 1,485
$ 11,923
$ 16,569
$ 19,331
$ 22,238
$ 5,124
$ 97,491
$ 21,599
$ 13,348
$ 15,275
Net income
$ 23,708
$ 105,378
$ 37,559
$ 40,948
$ 27,293
Net income attributable to the controlling
interests
$ 23,708
$ 104,884
$ 37,426
$ 40,745
$ 27,082
Income (loss) from continuing operations
attributable to the controlling interests
per share—diluted
Net income attributable to the controlling
$ 0.25
$ (0.04)
$ (0.01)
$ 0.14
$ (0.21)
interests per share—diluted
$ 0.35
$ 1.58
$ 0.60
$ 0.71
$ 0.55
Total assets
Lines of credit payable
Mortgage notes payable
Notes payable
Shareholders’ equity
Cash dividends paid
$2,124,376
$2,120,758
$2,167,881
$2,045,225
$2,109,407
$ — $ 99,000
$ 100,000
$ 128,000
$ 67,000
$ 342,970
$ 423,291
$ 357,348
$ 359,994
$ 374,715
$ 906,190
$ 657,470
$ 753,587
$ 688,912
$ 890,679
$ 792,057
$ 859,044
$ 857,080
$ 745,255
$ 636,630
$ 97,734
$ 115,045
$ 108,949
$ 100,221
$ 85,564
Cash dividends declared and paid per share
$ 1.47
$ 1.74
$ 1.73
$ 1.73
$ 1.72
ITEM 7. MANAGEMENT’S dIScUSSION ANd ANALySIS Of fINANcIAL cONdITION
ANd RESULTS Of OPERATIONS
We provide Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in addition to
the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations and
financial condition. We organize MD&A as follows:
• Overview. Discussion of our business, operating results, investment activity and capital requirements, and summary of
our significant transactions to provide context for the remainder of MD&A.
• Critical Accounting Policies and Estimates. Descriptions of accounting policies that reflect significant judgments and esti-
mates used in the preparation of our consolidated financial statements.
• Results of Operations. Discussion of our financial results comparing 2012 to 2011 and comparing 2011 to 2010.
• Liquidity and Capital Resources. Discussion of our financial condition and analysis of changes in our capital structure and
cash flows.
When evaluating our financial condition and operating performance, we focus on the following financial and non-financial indicators:
• Net operating income (“NOI”), calculated as real estate rental revenue less real estate expenses excluding depreciation
and amortization and general and administrative expenses. NOI is a non-GAAP supplemental measure to net income.
• Funds From Operations (“FFO”), calculated as set forth below under the caption “Funds from Operations.” FFO is a
non-GAAP supplemental measure to net income.
32
AnnuAl RepoRt 2012 FoRM 10-K • Occupancy, calculated as occupied square footage as a percentage of total square footage as of the last day of that period.
• Leased percentage, calculated as the percentage of available physical net rentable area leased for our commercial seg-
ments and percentage of apartments leased for our multifamily segment.
• Rental rates.
• Leasing activity, including new leases, renewals and expirations.
For purposes of evaluating comparative operating performance, we categorize our properties as “same-store,” “non-same-
store” or discontinued operations. A “same-store” property is one that was owned for the entirety of the periods being
evaluated, is stabilized from an occupancy standpoint and is included in continuing operations. We consider newly constructed
properties to be stabilized when they achieve 90% occupancy. A “non-same-store” property is one that was acquired or
placed into service during either of the periods being evaluated or is not stabilized from an occupancy standpoint, and is
included in continuing operations. We classify results for properties sold or held for sale during any of the periods evaluated
as discontinued operations.
Overview
Business
Our revenues are derived primarily from the ownership and operation of income-producing properties in the greater Washington
metro region. As of December 31, 2012, we owned a diversified portfolio of 70 properties, totaling approximately 8.6 million
square feet of commercial space and 2,540 multifamily units, and land held for development. These 70 properties consisted of
26 office properties, 17 medical office properties, 16 retail centers and 11 multifamily properties.
We have a fundamental strategy of regional focus and diversification by property type. In recent years, we have sought to
upgrade our portfolio by selling properties that do not fit our current strategy (as described above at “Item 1: Business—
WRIT Overview”), and acquiring or developing higher quality and better-located properties that we believe are consistent
with such strategy. We will seek to continue to upgrade our portfolio as opportunities arise, funding acquisitions with a com-
bination of cash, equity, debt and proceeds from property sales.
Operating Results
Real estate rental revenue, NOI, net income attributable to the controlling interests and FFO for the years ended December 31,
2012 and 2011 were as follows (in thousands):
Real estate rental revenue
noi(1)
Net income attributable to the controlling interests
ffo(2)
(1) See pages 43 and 47 of the MD&A for reconciliations of NOI to net income.
(2) See page 60 of the MD&A for reconciliations of FFO to net income.
yEAR ENdEd dEcEMBER 31,
2012
$304,983
$201,707
$ 23,708
$122,518
2011
$284,156
$188,814
$104,884
$110,058
cHANGE
$ 20,827
$ 12,893
$(81,176)
$ 12,460
NOI increased by $12.9 million primarily due to acquisitions. NOI from same-store properties decreased by $0.5 million, as
lower occupancy and higher real estate taxes were partially offset by lower utilities expense. The lower occupancy reflects
continuing challenges in leasing vacant space, particularly in the office segment. The higher real estate taxes are due to higher
property assessments across our portfolio, and reverses a multi-year trend of decreasing real estate taxes. The lower utilities
expense is primarily due to lower rates for electricity and gas.
The $12.5 million increase in FFO primarily reflects a $14.5 million impairment charge in 2011 to reduce the carrying value of
the land and parking garage at Dulles Station, Phase II.
33
FORM 10-K AnnuAl RepORt 2012 We anticipate continued challenges in leasing vacant space during 2013. We also anticipate circumstances where rents on
new or renewal leases will be lower than the existing portfolio rents, putting further downward pressure on NOI from
same-store properties.
The performance of our four operating segments and the market conditions in our region are discussed in greater detail
below (industry data is as reported by Delta):
• The region’s office market was very challenging during 2012, as net absorption (defined as the change in occupied,
standing inventory from one year to the next) was a negative 2.9 million square feet during 2012, compared to a posi-
tive 1.1 million square feet during 2011. Overall vacancy increased to 13.4% from 12.1% in the prior year. Vacancy in
the submarkets was 14.4% for Northern Virginia, 13.9% for Suburban Maryland and 8.7% in the District of Columbia.
The region’s effective rents decreased by 2.9%, compared to a 0.9% decrease in 2011. Delta expects improvement in
the region’s office occupancy and rental rates to remain slow during 2013, with continued uncertainty over the federal
budget affecting leasing activity. Our office segment was 86.5% leased at December 31, 2012, a decrease from 90.0%
leased at December 31, 2011. By submarket, our office segment was 86.8% leased in Northern Virginia, 82.2% leased
in Suburban Maryland and 90.4% leased in the District of Columbia at December 31, 2012.
• Our medical office segment was 87.1% leased at December 31, 2012, a decrease from 88.4% at December 31, 2011. The
segment’s leased percentage reflects the 2009 acquisition of the newly-constructed 19500 at Riverside Office Park (for-
merly Lansdowne Medical Office Building), which was 41.1% leased at December 31, 2012. Excluding 19500 at Riverside
Office Park, the segment was 90.4% leased at December 31, 2012, as compared to 92.5% at December 31, 2011.
• The region’s retail market grew slowly in 2012, with rental rates at grocery-anchored centers increasing by 1.2%, as
compared to a 2.1% increase in 2011. Vacancy rates decreased to 4.9% from 5.5% in 2011. Our retail segment was 92.2%
leased at December 31, 2012, down from 93.5% at December 31, 2011.
• The region’s multifamily market remained strong during 2012. The region’s vacancy rate for investment grade apart-
ments increased to 4.3%, up from 3.8% one year ago. During the same period rents increased by 1.7%. Our multifamily
segment was 95.7% leased at December 31, 2012, down from 95.8% at December 31, 2011.
Investment Activity
We acquired one office building located inside the Beltway during 2012, while selling an office property and a medical office
property that were located outside of the Beltway. These transactions were consistent with our current strategy of focus-
ing on properties inside the Washington metro region’s Beltway, near major transportation nodes and in areas with strong
employment drivers and superior growth demographics.
Capital Requirements
Over the past year, we continued to focus on strengthening our balance sheet in order to minimize our refinancing risk and
prepare for future acquisitions as transaction volume increases. To this end, we issued $300.0 million of 3.95% notes due in
2022, using the proceeds to repay borrowings on our lines of credit, repay several mortgage notes and for general corpo-
rate purposes.
Also in 2012, we executed unsecured credit facility agreements that had the effect of expanding the borrowing capacity on
Credit Facility No. 1 by $25.0 million and lowering the interest rate on Credit Facility No. 2. Our unsecured lines of credit
had no outstanding balances and a $0.8 million letter of credit issued at December 31, 2012, leaving a remaining borrowing
capacity of $499.2 million.
In January 2013, we repaid without penalty the remaining $30.0 million of principal on the mortgage note secured by West
Gude Drive, using borrowings on our unsecured line of credit. Our remaining debt maturity for 2013 is a $60.0 million unse-
cured note. We currently expect to pay this maturity with some combination of borrowings on our unsecured lines of credit
and proceeds from property sales.
34
AnnuAl RepoRt 2012 FoRM 10-K Significant Transactions
We summarize below our significant transactions during the two years ended December 31, 2012:
2012
• The disposition of Plumtree Medical Center, a 33,000 square foot medical office building, for a contract sales price of
$8.8 million, generating a gain on sale of $1.4 million.
• The issuance of $300.0 million of 3.95% unsecured notes due October 15, 2022, with net proceeds of $296.4 million.
The notes bear an effective interest rate of 4.018%.
• The disposition of 1700 Research Boulevard, a 101,000 square foot office building, for a contract sales price of $14.3 mil-
lion, generating a gain on sale of $3.7 million.
• The acquisition of an office building, Fairgate at Ballston, for $52.3 million, adding approximately 142,000 square feet.
We incurred $0.2 million in acquisition costs related to this transaction.
• The execution of an amended and restated credit agreement for our Credit Facility No. 1 to expand the facility from
$75.0 million to $100.0 million, with an accordion feature that allows us to increase the facility to $200.0 million, subject
to additional lender commitments. The amended and restated facility matures June 2015, with a one-year extension at
WRIT’s option, and bears interest at a rate of LIBOR plus a margin of 120.0 basis points.
• The execution of an amended and restated credit agreement for Credit Facility No. 2, our $400.0 million unsecured line
of credit, to extend the maturity date of the facility to July 2016, with a one-year extension option, and lower the inter-
est rate to LIBOR plus a margin of 120.0 basis points.
• The execution of new leases for 1.0 million square feet of commercial space, with an average rental rate increase of 11.4%
over expiring leases.
2011
• The disposition of our industrial segment and two office properties, totaling approximately 3.1 million square feet, under
five separate sales contracts for an aggregate contract sales price of $350.9 million and a gain on sale of $97.5 million.
• The disposition of Dulles Station, Phase I, a 180,000 square foot office building in Herndon, Virginia, for a contract sales
price of $58.8 million.
• The acquisition of four office buildings for $301.8 million, adding approximately 880,000 square feet.
• The acquisition of a retail property for $58.0 million, adding approximately 200,000 square feet.
• The acquisition of approximately 37,000 square feet of land in the Ballston submarket of Arlington, Virginia for $11.8 mil-
lion through a consolidated joint venture of which WRIT is the 90% owner. The joint venture intends to develop a mid-
rise apartment property on this land.
• The acquisition of approximately one acre of land in close proximity to the Braddock Road metro station in Alexandria,
Virginia for $13.9 million through a consolidated joint venture of which WRIT is the 95% owner. The joint venture
intends to develop a high-rise apartment property on this land. Subsequent to December 31, 2012, we decided to delay
commencement of construction due to market conditions and concerns of oversupply. We will reassess this project on
a periodic basis going forward.
• The execution of an unsecured credit facility agreement that replaced and expanded Credit Facility No. 2 from $262.0 mil-
lion to $400.0 million, with an accordion feature that allows us to increase the facility to $600.0 million, subject to addi-
tional lender commitments. The new unsecured line of credit matures on July 1, 2014, with a one-year extension option,
and currently bears an interest rate at LIBOR plus a margin of 122.5 basis points.
• The execution of new leases for 1.0 million square feet of commercial space, with an average rental rate increase of 9.1%
over expiring leases (excluding first generation leases at recently-built properties and sold properties).
35
FORM 10-K AnnuAl RepORt 2012 critical Accounting Policies and Estimates
We base the discussion and analysis of our financial condition and results of operations upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses. We evaluate these estimates on an on-going basis, including those related to
estimated useful lives of real estate assets, estimated fair value of acquired leases, cost reimbursement income, bad debts,
contingencies and litigation. We base the estimates on historical experience and on various other assumptions that we believe
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. We cannot assure you that actual results will not dif-
fer from those estimates.
We believe the following accounting estimates are the most critical to aid in fully understanding our reported financial results,
and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the
effect of matters that are inherently uncertain.
Allowance for Doubtful Accounts
We recognize rental income and rental abatements from our multifamily and commercial leases when earned on a straight-
line basis over the lease term. We record a provision for losses on accounts receivable equal to the estimated uncollectible
amounts. We base this estimate on our historical experience and a monthly review of the current status of our receivables.
We consider factors such as the age of the receivable, the payment history of our tenants and our assessment of our tenants’
ability to perform under their lease obligations, among other things. In addition to rents due currently, accounts receivable
include amounts representing minimum rental income accrued on a straight-line basis to be paid by tenants over the remain-
ing term of their respective leases. Our estimate of uncollectible accounts is subject to revision as these factors change and is
sensitive to the impact of economic and market conditions on tenants.
Accounting for Real Estate Acquisitions
We record acquired or assumed assets, including physical assets and in-place leases, and liabilities, based on their fair values.
We determine the estimated fair values of the assets and liabilities in accordance with current GAAP fair value provisions. We
determine the fair values of acquired buildings on an “as-if-vacant” basis considering a variety of factors, including the replace-
ment cost of the property, estimated rental and absorption rates, estimated future cash flows and valuation assumptions
consistent with current market conditions. We determine the fair value of land acquired based on comparisons to similar
properties that have been recently marketed for sale or sold.
The fair value of in-place leases consists of the following components: (a) the estimated cost to us to replace the leases, includ-
ing foregone rents during the period of finding a new tenant and foregone recovery of tenant pass-throughs (referred to as
“absorption cost”); (b) the estimated cost of tenant improvements, and other direct costs associated with obtaining a new
tenant (referred to as “tenant origination cost”); (c) estimated leasing commissions associated with obtaining a new tenant
(referred to as “leasing commissions”); (d) the above/at/below market cash flow of the leases, determined by comparing the
projected cash flows of the leases in place to projected cash flows of comparable market-rate leases (referred to as “net lease
intangible”); and (e) the value, if any, of customer relationships, determined based on our evaluation of the specific characteris-
tics of each tenant’s lease and our overall relationship with the tenant (referred to as “customer relationship value”).
We discount the amounts used to calculate net lease intangibles using an interest rate which reflects the risks associated with
the leases acquired. We include tenant origination costs in income producing property on our balance sheet and amortize
the tenant origination costs as depreciation expense on a straight-line basis over the useful life of the asset, which is typically
the remaining life of the underlying leases. We classify leasing commissions and absorption costs as other assets and amor-
tize leasing commissions and absorption costs as amortization expense on a straight-line basis over the remaining life of the
underlying leases. We classify above market net lease intangible assets as other assets and amortize them on a straight-line
basis as a decrease to real estate rental revenue over the remaining term of the underlying leases. We classify below market
net lease intangible liabilities as other liabilities and amortize them on a straight-line basis as an increase to real estate rental
revenue over the remaining term of the underlying leases. Should a tenant terminate its lease, we accelerate the amortization
36
AnnuAl RepoRt 2012 FoRM 10-K of the unamortized portion of the tenant origination cost (if it has no future value), leasing commissions, absorption costs and
net lease intangible associated with that lease over its new shorter term.
Capitalized Interest
We capitalize interest costs incurred on borrowing obligations while qualifying assets are being readied for their intended use.
We amortize capitalized interest over the useful life of the related underlying assets upon those assets being placed into service.
Real Estate Impairment
We recognize impairment losses on long-lived assets used in operations and held for sale, development assets or land held
for future development, if indicators of impairment are present and the net undiscounted cash flows estimated to be gener-
ated by those assets are less than the assets’ carrying amount and estimated undiscounted cash flows associated with future
development expenditures. If such carrying amount is in excess of the estimated cash flows from the operation and disposal
of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to
the estimated fair value.
Stock Based Compensation
We recognize compensation expense for service-based share awards ratably over the period from the service inception date
through the vesting period based on the fair market value of the shares on the date of grant. We initially measure compensa-
tion expense for awards with performance conditions at fair value at the service inception date based on probability of pay-
out, and we remeasure compensation expense at subsequent reporting dates until all of the award’s key terms and conditions
are known and the grant date is established. We amortize awards with performance conditions over the performance period
using the graded expense method. We measure compensation expense for awards with market conditions based on the grant
date fair value, as determined using a Monte Carlo simulation, and we amortize the expense ratably over the requisite service
period, regardless of whether the market conditions are achieved and the awards ultimately vest. Compensation expense
for the trustee grants, which fully vest immediately, is fully recognized upon issuance based upon the fair market value of the
shares on the date of grant.
Federal Income Taxes
Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes
on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS’s”). Our
TRS’s are subject to corporate federal and state income tax on their taxable income at regular statutory rates. During the
fourth quarter of 2011, we recognized a $14.5 million impairment charge at Dulles Station, Phase II, a development property
held by one of our TRS’s (see note 3 to the consolidated financial statements). The impairment charge created a deferred tax
asset of $5.7 million at this TRS, and we have determined that it is more likely than not that this deferred tax asset will not be
realized, as we cannot reliably project sufficient future taxable income in the TRS’s to realize all or part of the deferred tax
asset. We have therefore recorded a valuation allowance for the full amount of the deferred tax asset related to the impair-
ment charge at Dulles Station, Phase II.
Results of Operations
The discussion that follows is based on our consolidated results of operations for the years ended December 31, 2012, 2011
and 2010. The ability to compare one period to another is significantly affected by acquisitions completed and dispositions
made during those years.
37
FORM 10-K AnnuAl RepORt 2012 Properties we acquired during the three years ended December 31, 2012 were as follows:
AcqUISITION dATE
PROPERTy
June 21, 2012
Total 2012
January 11, 2011
March 30, 2011
June 15, 2011
Fairgate at Ballston
1140 Connecticut Ave
1127 25th st
650 North Glebe Road
August 30, 2011
Olney Village
September 13, 2011
Braddock Metro
September 15, 2011
John Marshall II
November 23, 2011
1225 First Street
Total 2011
June 3, 2010
925 and 1000 Corporate Drive
December 1, 2010
Gateway Overlook
Total 2010
TyPE
Office
Office
Office
land
Retail
Office
Office
land
Office
Retail
RENTABLE
SqUARE fEET
cONTRAcT
PURcHASE PRIcE
(in thousands)
142,000
142,000
188,000
132,000
N/A
198,000
351,000
223,000
N/A
1,092,000
270,000
223,000
493,000
$ 52,250
$ 52,250
$ 80,250
47,000
11,800
58,000
101,000
73,500
13,850
$385,400
$ 68,000
88,350
$156,350
Properties we sold or classified as held for sale during the three years ended December 31, 2012 were as follows:
dISPOSITION dATE
PROPERTy
August 31, 2012
1700 Research Boulevard
TyPE
Office
December 20, 2012
Plumtree Medical Center
Medical Office
N/A—Held for Sale
Atrium Building
Office
Total 2012
April 5, 2011
Various(1)
Total 2011
June 18, 2010
Dulles Station, Phase I
Office
Industrial Portfolio(1)
Industrial/Office
Parklawn Portfolio(2)
Office/Industrial
December 21, 2010
The Ridges
December 22, 2010
Ammendale I&II/Amvax
Office
Industrial
Total 2010
RENTABLE
SqUARE fEET
cONTRAcT
PURcHASE PRIcE
(in thousands)
101,000
33,000
79,000
213,000
180,000
3,092,000
3,272,000
229,000
104,000
305,000
638,000
$ 14,250
$ 8,750
N/A
$ 23,000
$ 58,800
350,900
$409,700
$ 23,430
27,500
23,000
$ 73,930
(1) The Industrial Portfolio consists of every property in our industrial segment and two office properties (the Crescent and Albemarle Point), and we closed on the sale on
three separate dates. On September 2, 2011, we closed on the sale of the two office properties (the Crescent and Albemarle Point) and 8880 Gorman Road, Dulles
South IV, Fullerton Business Center, Hampton Overlook, Alban Business Center, Pickett Industrial Park, Northern Virginia Industrial Park I, 270 Technology Park,
Fullerton Industrial Center, Sully Square, 9950 Business Parkway, Hampton South and 8900 Telegraph Road. On October 3, 2011, we closed the sale of Northern
Virginia Industrial Park II. On November 1, 2011, we closed on the sale of 6100 Columbia Park Road and Dulles Business Park I and II.
(2) The Parklawn Portfolio consists of three office properties (Parklawn Plaza, Lexington Building and Saratoga Building) and one industrial property (Charleston Business Center).
To provide more insight into our operating results, we divide our discussion into two main sections:
• Consolidated Results of Operations (page 39). An overview analysis of results on a consolidated basis; and
• Net Operating Income (page 42). A detailed analysis of same-store versus non-same-store NOI results by segment.
NOI is a non-GAAP measure calculated as real estate rental revenue less real estate expenses excluding depreciation and
amortization and general and administrative expenses.
38
AnnuAl RepoRt 2012 FoRM 10-K Consolidated Results of Operations
Real Estate Rental Revenue
Real estate rental revenue for properties classified as continuing operations for the three years ended December 31, 2012 was
as follows (in thousands, except percentage amounts):
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
2012 vs
2011
%
cHANGE
2011 vs
2010
%
cHANGE
Minimum base rent
$267,057
$251,112
$222,824
$15,945
Recoveries from tenants
Provision for doubtful accounts
Lease termination fees
29,166
(5,043)
679
Parking and other tenant charges
13,124
25,680
(4,524)
517
11,371
23,998
(4,242)
349
10,198
3,486
(519)
162
1,753
$304,983
$284,156
$253,127
$20,827
6.3%
13.6%
11.5%
31.3%
15.4%
7.3%
$28,288
12.7%
1,682
(282)
168
1,173
$31,029
7.0%
6.6%
48.1%
11.5%
12.3%
Real estate rental revenue is comprised of (a) minimum base rent, which includes rental revenues recognized on a straight-
line basis, (b) revenue from the recovery of operating expenses from our tenants, (c) provisions for doubtful accounts, which
include provisions for straight-line receivables, (d) revenue from the collection of lease termination fees and (e) parking and
other tenant charges such as percentage rents.
Minimum Base Rent: Minimum base rent increased by $15.9 million in 2012 primarily due to acquisitions ($16.3 million). Minimum
base rent from same-store properties decreased by $0.4 million primarily due to lower occupancy ($3.2 million), lower amortiza-
tion of net lease intangible liabilities ($0.6 million) and higher rent abatements ($0.3 million), partially offset by higher rental rates
($3.9 million).
Minimum base rent increased by $28.3 million in 2011 primarily due to acquisitions ($26.5 million). Minimum base rent from
same-store properties increased by $1.8 million primarily due to higher rental rates ($4.8 million), partially offset by lower
occupancy ($2.4 million) and higher amortization of capitalized lease incentives ($0.4 million).
Recoveries from Tenants: Recoveries from tenants increased by $3.5 million in 2012 primarily due to acquisitions ($2.9 million),
and higher real estate tax recoveries from same-store properties ($0.8 million) due to higher property tax assessments across
the portfolio.
Recoveries from tenants increased by $1.7 million in 2011 primarily due to acquisitions ($3.1 million), partially offset by lower real
estate tax recoveries from same-store properties ($1.2 million) due to lower property tax assessments across the portfolio.
Provision for Doubtful Accounts: Provision for doubtful accounts increased by $0.5 million in 2012 primarily due to higher provi-
sions in the retail ($0.5 million) and office ($0.3 million) segments, partially offset by lower provisions in the medical office
($0.2 million) segment.
Provision for doubtful accounts increased by $0.3 million in 2011 due to higher provisions in the retail ($0.9 million) and
medical office ($0.2 million) segments, partially offset by lower provisions in the office ($0.8 million) and multifamily
($0.1 million) segments.
Lease Termination Fees: Lease termination fees increased by $0.2 million in 2012 primarily due to higher fees in the office segment.
Lease termination fees increased by $0.2 million in 2011 primarily due to higher fees in the retail segment.
Parking and Other Tenant Charges: Parking and other tenant charges increased by $1.8 million in 2012 primarily due to
acquisitions ($0.9 million), and increases in parking income ($0.3 million) and short-term tenant rent ($0.3 million) from
same-store properties.
39
FORM 10-K AnnuAl RepORt 2012 Parking and other tenant charges increased by $1.2 million in 2011 primarily due to acquisitions ($0.7 million), and increases in
parking income ($0.3 million) and antenna rent ($0.1 million) from same-store properties.
Occupancy for properties classified as continuing operations by segment for the three years ended December 31, 2012 was
as follows:
SEGMENT
Office
Medical Office
Retail
Multifamily
Total
2012
84.8%
85.6%
91.2%
94.1%
88.2%
dEcEMBER 31,
2011
89.2%
86.3%
93.3%
94.9%
90.9%
2010
89.5%
88.4%
92.1%
95.7%
91.4%
2012 vs 2011
2011 vs 2010
(4.4%)
(0.7%)
(2.1%)
(0.8%)
(2.7%)
(0.3%)
(2.1%)
1.2%
(0.8%)
(0.5%)
Occupancy represents occupied square footage indicated as a percentage of total square footage as of the last day of that period.
Our overall occupancy decreased to 88.2% in 2012 from 90.9% in 2011, with the largest declines in the office and retail segments.
Our overall occupancy decreased to 90.9% in 2011 from 91.4% in 2010, as declines in office, medical office and multifamily
occupancy were partially offset by an increase in retail occupancy.
A detailed discussion of occupancy by sector can be found in the Net Operating Income section.
Real Estate Expenses
Real estate expenses for the three years ended December 31, 2012 were as follows (in thousands except percentage amounts):
Property operating expenses
Real estate taxes
yEAR ENdEd dEcEMBER 31,
2012
$ 71,760
31,516
$103,276
2011
$68,487
26,855
$95,342
2010
$60,101
24,644
$84,745
2012 vs
2011
%
cHANGE
2011 vs
2010
%
cHANGE
$3,273
4,661
$7,934
4.8%
17.4%
8.3%
$ 8,386
2,211
$10,597
14.0%
9.0%
12.5%
Real estate expenses as a percentage of revenue were 33.9%, 33.6% and 33.5% for the three years ended December 31, 2012,
2011 and 2010, respectively.
Property Operating Expenses: Property operating expenses include utilities, repairs and maintenance, property administration
and management, operating services, common area maintenance, property insurance, bad debt and other operating expenses.
Property operating expenses increased $3.3 million in 2012 primarily due to acquisitions ($4.5 million), partially offset by
property operating expenses from same-store properties, which decreased by $1.2 million primarily due to lower utilities
expense caused by lower electricity and gas rates.
Property operating expenses increased $8.4 million in 2011 primarily due to acquisitions ($6.4 million). Property operating
expenses from same-store properties increased by $2.0 million primarily due to higher administrative ($0.5 million), repairs
and maintenance ($0.5 million), legal ($0.5 million) and vacant space preparation ($0.2 million) expenses.
Real Estate Taxes: Real estate taxes increased $4.7 million in 2012 due to acquisitions ($2.4 million) and higher real estate taxes
at same-store properties ($2.3 million) due to higher property assessments.
Real estate taxes increased $2.2 million in 2011 due to acquisitions ($3.5 million), partially offset by lower real estate taxes at
same-store properties ($1.3 million) due to lower property assessments.
40
AnnuAl RepoRt 2012 FoRM 10-K Other Operating Expenses
Other operating expenses for the three years ended December 31, 2012 were as follows (in thousands, except percentage amounts):
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
2012 vs
2011
%
cHANGE
2011 vs
2010
%
cHANGE
Depreciation and amortization
$103,067
$ 91,805
$ 78,483
$11,262
12.3%
$13,322
Interest expense
General and administrative
64,697
15,488
66,214
15,728
66,965
14,406
(1,517)
(240)
(2.3%)
(1.5%)
(751)
1,322
$183,252
$173,747
$159,854
$ 9,505
5.5%
$13,893
17.0%
(1.1%)
9.2%
8.7%
Depreciation and Amortization: Depreciation and amortization expense increased by $11.3 million in 2012 primarily due to oper-
ating properties acquired and placed into service of $52.3 million and $359.8 million in 2012 and 2011, respectively.
Depreciation and amortization expense increased by $13.3 million in 2011 primarily due to operating properties acquired and
placed into service of $359.8 million and $156.4 million in 2011 and 2010, respectively.
Interest Expense: Interest expense by debt type for the three years ended December 31, 2012 was as follows (in thousands,
except percentage amounts):
dEBT TyPE
Notes payable
Mortgage notes payable
Lines of credit
Capitalized interest
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
2012 vs
2011
%
cHANGE
2011 vs
2010
%
cHANGE
$37,982
$38,918
$41,745
$ (936)
(2.4%)
$(2,827)
(6.8%)
24,917
3,486
(1,688)
23,246
4,788
(738)
22,306
3,772
1,671
7.2%
(1,302)
(27.2%)
(858)
(950)
128.7%
940
1,016
120
4.2%
26.9%
(14.0%)
Total
$64,697
$66,214
$66,965
$(1,517)
(2.3%)
$ (751)
(1.1%)
The $0.9 million decrease in notes payable interest during 2012 is due to the repayment of our 5.95% senior notes during 2011
and our 5.05% senior notes during 2012, partially offset by the issuance of our 3.95% senior notes in 2012. The $1.7 million
increase in mortgage interest expense is due to the assumption of mortgage notes with the acquisitions of Olney Village Center
and John Marshall II in 2011, partially offset by the repayments of several mortgage notes during 2012. The $1.3 million decrease
in interest expense on our unsecured lines of credit during 2012 is attributable to having lower borrowings outstanding on
average during 2012. Capitalized interest increased by $1.0 million during 2012 due to expenditures on our two multifamily
development projects at 650 North Glebe Road and 1225 First Street.
The $2.8 million decrease in notes payable interest during 2011 is due to the repayment of our 3.875% convertible notes
and our 5.95% senior notes during 2011, partially offset by the issuance of our 4.95% senior notes in September 2010. The
$0.9 million increase in mortgage interest expense is due to the assumption of mortgage notes with the acquisitions of Olney
Village Center and John Marshall II, partially offset by the repayment of the mortgage note secured by Shady Grove Medical
Village II during 2011. The $1.0 million increase during 2011 in interest expense on our unsecured lines of credit is attributable
to having larger borrowings outstanding on average during 2011 in order to partially finance our property acquisitions and the
pay-off of our 5.95% senior notes.
General and Administrative Expense: General and administrative expense decreased by $0.2 million in 2012 primarily due to lower
incentive compensation expense, partially offset by severance costs.
General and administrative expense increased by $1.3 million in 2011 primarily due to higher compensation expense driven by
severance costs related to the disposal of the industrial segment and annual pay increases.
41
FORM 10-K AnnuAl RepORt 2012 Real Estate Impairment
4661 Kenmore Avenue consists of undeveloped land in Alexandria, Virginia intended for development as a medical office
building. During the fourth quarter of 2012, we determined that the development of a medical office building at this site was
no longer probable due to a change in corporate strategy. As a result, we recognized a $2.1 million impairment charge dur-
ing the fourth quarter of 2012 in order to reduce the carrying value of the land at 4661 Kenmore Avenue to its fair value of
$3.8 million.
We recognized a $0.6 million impairment charge for Dulles Station, Phase I during the first quarter of 2011 to reflect the
property’s fair value less selling costs based on its contract sales price. This expense related to a sold property is included in
income from properties sold or held for sale on the consolidated statements of operation.
Dulles Station, Phase II consists of undeveloped land in Herndon, Virginia and a half interest in a parking garage that is adjacent
to this land. The land is zoned for development as an office building. In connection with the preparation of financial statements
for the 2011 Annual Report on Form 10-K, we reviewed changes in market conditions, specifically higher vacancy and lower
rental rates in the Washington metro region office market and other circumstances affecting the Herndon submarket, such
as the increased uncertainty surrounding the timing of the completion of the second phase of the Dulles Metrorail project,
and reassessed the likelihood that we would follow through on these development plans. Based upon the foregoing review and
assessment, we determined that the development of the land at Dulles Station, Phase II is not probable under those market
conditions. Due to this determination, we recognized a $14.5 million impairment charge during the fourth quarter of 2011 in
order to reduce the carrying value of the land and garage at Dulles Station, Phase II to its fair value of $12.1 million.
Discontinued Operations
Income from operations of properties sold or held for sale for the three years ended December 31, 2012 were as follows (in
thousands, except for percentages):
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
2012 vs
2011
%
cHANGE
2011 vs
2010
%
cHANGE
Revenues
Property expenses
Real estate impairment
Depreciation and amortization
Interest expense
Total
$ 4,155
$31,525
$ 53,009
$(27,370)
(86.8%)
$(21,484)
(1,542)
(9,547)
(17,163)
8,005
(83.8%)
7,616
(40.5%)
(44.4%)
—
(867)
(261)
(599)
(8,723)
(733)
—
599
(100.0%)
(599)
—
(17,263)
(2,014)
7,856
472
(90.1%)
(64.4%)
8,540
1,281
(49.5%)
(63.6%)
$ 1,485
$11,923
$ 16,569
$(10,438)
(87.5%)
$ (4,646)
(28.0%)
Income from operations of properties sold or held for sale decreased by $10.4 million and $4.6 million for the years ended
December 31, 2012 and 2011, respectively, primarily due to the sale of the Industrial Portfolio during the fourth quarter of 2011.
Net Operating Income
NOI is the primary performance measure we use to assess the results of our operations at the property level. We believe
that NOI is useful as a performance measure because, when compared across periods, NOI reflects 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 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 perfor-
mance 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 NOI as a supple-
ment to net income or income from continuing operations, calculated in accordance with GAAP. NOI does not represent net
income or income from continuing operations, in either case calculated in accordance with GAAP. As such, it should not be
considered an alternative to these measures as an indication of our operating performance. NOI is calculated as real estate
rental revenue less real estate expenses excluding depreciation and amortization and general and administrative expenses.
A reconciliation of NOI to net income follows.
42
AnnuAl RepoRt 2012 FoRM 10-K 2012 Compared to 2011
The following tables of selected operating data reconcile NOI to net income attributable to the controlling interests and pro-
vide the basis for our discussion of NOI in 2012 compared to 2011. All amounts are in thousands except percentage amounts.
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
Reconciliation to Net Income
noi
Depreciation and amortization
General and administrative expenses
Real estate impairment
Acquisition costs
Interest expense
Other income
Loss on extinguishment of debt
Discontinued operations(2):
Income from properties sold or held for sale
Income tax expense
Gain on sale of real estate
Net income
Less: Net income attributable to noncontrolling interests
yEAR ENdEd dEcEMBER 31,
2012
2011
$ cHANGE
% cHANGE
$ 265,263
39,720
$ 304,983
$ 88,654
14,622
$ 103,276
$ 176,609
25,098
$ 201,707
$264,750
19,406
$284,156
$ 87,593
7,749
$ 95,342
$177,157
11,657
$188,814
$ 513
20,314
$20,827
$ 1,061
6,873
$ 7,934
$ (548)
13,441
$12,893
0.2%
104.7%
7.3%
1.2%
88.7%
8.3%
(0.3%)
115.3%
6.8%
$ 201,707
$188,814
(103,067)
(15,488)
(2,097)
(234)
(64,697)
975
—
1,485
—
5,124
23,708
—
(91,805)
(15,728)
(14,526)
(3,607)
(66,214)
1,144
(976)
11,923
(1,138)
97,491
105,378
(494)
Net income attributable to the controlling interests
$ 23,708
$104,884
(1) Non-same-store properties include: 2012 Office acquisition—Fairgate at Ballston; 2011 Office acquisitions—1140 Connecticut Avenue, 1227 25th Street, Braddock
Metro Center and John Marshall II; 2011 Retail acquisition—Olney Village Center; 2009 Medical Office acquisition—19500 at Riverside Office Park (formerly
Lansdowne Medical Office Building).
(2) Discontinued operations include gain on disposals and income from operations for: 2012 held for sale and sold—Plumtree Medical Center, the Atrium Building, and
1700 Research Boulevard; 2011 held for sale and sold—Dulles Station, Phase I and the Industrial Portfolio.
Real estate rental revenue from same-store properties increased by $0.5 million in 2012 primarily due to higher rental rates
($3.9 million) and higher parking income ($0.3 million), partially offset by lower occupancy ($3.2 million) and higher reserves
for uncollectible revenue ($0.5 million).
Real estate expenses from same-store properties increased by $1.1 million in 2012 primarily due to higher real estate taxes
($2.3 million) due to higher assessments across the portfolio, partially offset by lower utilities expenses ($1.2 million) caused
by lower rates and usage.
43
FORM 10-K AnnuAl RepORt 2012 OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2012
89.2%
81.3%
88.2%
2011
91.4%
87.0%
90.9%
Same-store occupancy decreased to 89.2% in 2012 from 91.4% in 2011, with the largest decrease in the office segment. Non-
same-store occupancy decreased to 81.3% in 2012 from 87.0% in 2011, driven by lower occupancy at Braddock Metro Center
and Olney Village Center, partially offset by higher occupancy at 19500 at Riverside Office Park. During 2012, 58.9% of the
commercial square footage expiring was renewed as compared to 60.0% in 2011, excluding properties sold or classified as
held for sale. During 2012, 1.0 million commercial square feet were leased at an average rental rate of $32.16 per square foot,
an increase of 11.4%, with average tenant improvements and leasing commissions and incentives (including free rent) of $33.22
per square foot. These leasing statistics exclude first generation leases at recently-built properties.
An analysis of NOI by segment follows.
Office Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2012
2011
$ cHANGE
% cHANGE
$119,407
33,509
$152,916
$ 42,320
12,793
$ 55,113
$ 77,087
20,716
$ 97,803
$121,441
16,884
$138,325
$ 40,646
6,643
$ 47,289
$ 80,795
10,241
$ 91,036
$ (2,034)
16,625
$14,591
$ 1,674
6,150
$ 7,824
$ (3,708)
10,475
$ 6,767
(1.7%)
98.5%
10.5%
4.1%
92.6%
16.5%
(4.6%)
102.3%
7.4%
(1) Non-same-store properties include: 2012 acquisition—Fairgate at Ballston; 2011 acquisitions—1140 Connecticut Avenue, 1227 25th Street, Braddock Metro Center
and John Marshall II.
Real estate rental revenue from same-store properties decreased by $2.0 million in 2012 primarily due to lower occupancy
($2.8 million), higher rent abatements ($0.4 million) and higher reserves for uncollectible revenue ($0.3 million), partially
offset by higher rental rates ($1.0 million) and parking income ($0.4 million).
Real estate expenses from same-store properties increased by $1.7 million in 2012 primarily due to higher real estate taxes
($1.3 million) and lower recoveries of uncollectible receivables ($0.3 million).
OccUPANcy
Same-store
Non-same-store
Total
44
dEcEMBER 31,
2012
85.4%
82.7%
84.8%
2011
89.0%
89.9%
89.2%
AnnuAl RepoRt 2012 FoRM 10-K Same-store occupancy decreased to 85.4% in 2012 from 89.0% in 2011, primarily due to lower occupancy at 7900 Westpark
Drive and 6110 Executive Boulevard. During 2012, 51.7% of the square footage that expired was renewed compared to 45.6%
in 2011, excluding properties sold or classified as held for sale. During 2012, we executed new leases for 0.6 million square
feet of office space at an average rental rate of $35.03 per square foot, an increase of 13.1%, with average tenant improve-
ments and leasing commissions and incentives (including free rent) of $42.58 per square foot.
Medical Office Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2012
2011
$ cHANGE
% cHANGE
$43,653
1,021
$44,674
$14,357
637
$14,994
$29,296
384
$29,680
$43,801
630
$44,431
$13,465
598
$14,063
$ (148)
391
$ 243
$ 892
39
$ 931
(0.3%)
62.1%
0.5%
6.6%
6.5%
6.6%
$30,336
$(1,040)
(3.4%)
32
352
1,100.0%
$30,368
$ (688)
(2.3%)
(1) Non-same-store properties include: 2009 acquisition—19500 at Riverside Office Park (formerly Lansdowne Medical Office Building).
Real estate rental revenue from same-store properties decreased by $0.1 million in 2012 primarily due to lower occupancy
($0.6 million) and lower recoveries from tenants ($0.3 million), partially offset by higher rental rates ($0.7 million).
Real estate expenses from same-store properties increased by $0.9 million in 2012 primarily due to higher real estate taxes
($0.4 million) and lower recoveries of uncollectible receivables ($0.3 million).
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2012
89.1%
35.8%
85.6%
2011
90.5%
27.0%
86.3%
Same-store occupancy decreased to 89.1% in 2012 from 90.5% in 2011, primarily due to lower occupancy at Prosperity Medical
Center and 15005 Shady Grove Road. Non-same-store occupancy increased to 35.8% from 27.0%, reflecting the progress
made in the lease-up of 19500 at Riverside Park, which was vacant when acquired during the third quarter of 2009. During
2012, 58.5% of the square footage that expired was renewed compared to 72.1% in 2011. During 2012, we executed new leases
for 0.2 million square feet of medical office space at an average rental rate of $33.36, an increase of 8.1%, with average tenant
improvements and leasing commissions and incentives (including free rent) of $32.14 per square foot. These leasing statistics
exclude first generation leases at Lansdowne Medical Office Building, which was newly-constructed and vacant when acquired.
45
FORM 10-K AnnuAl RepORt 2012 Retail Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2012
2011
$ cHANGE
% cHANGE
$49,316
5,190
$54,506
$11,510
1,192
$12,702
$37,806
3,998
$41,804
$48,529
1,892
$50,421
$13,765
508
$14,273
$34,764
1,384
$36,148
$ 787
3,298
$ 4,085
$(2,255)
684
$(1,571)
$ 3,042
2,614
$ 5,656
1.6%
174.3%
8.1%
(16.4%)
134.6%
(11.0%)
8.8%
188.9%
15.6%
(1) Non-same-store properties include: 2011 acquisition—Olney Village Center.
Real estate rental revenue from same-store properties increased by $0.8 million in 2012 primarily due to higher occupancy
($0.6 million) and higher recoveries from tenants ($0.5 million), partially offset by higher reserves for uncollectible revenue
($0.4 million).
Real estate expenses from same-store properties decreased by $2.3 million in 2012 due to lower bad debt ($1.1 million), legal
($0.5 million) and snow removal ($0.3 million) expenses.
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2012
91.0%
94.0%
91.2%
2011
92.7%
100.0%
93.3%
Same-store occupancy decreased to 91.0% in 2012 from 92.7% in 2011, driven by lower occupancy at Concord Centre and
Randolph Shopping Center, partially offset by higher occupancy at Frederick Crossing and Frederick County Square. Non-
same-store occupancy decreased to 94.0% from 100.0% due to lower occupancy at Olney Village Center. During 2012, 75.7%
of the square footage that expired was renewed compared to 87.8% in 2011. During 2012, we executed new leases for 0.2 mil-
lion square feet of retail space at an average rental rate of $23.99, an increase of 8.9%, with average tenant improvements and
leasing commissions and incentives (including free rent) of $10.23 per square foot.
Multifamily Segment:
Real Estate Rental Revenue
Real Estate Expenses
noi
yEAR ENdEd dEcEMBER 31,
2012
$52,887
20,467
$32,420
2011
$ cHANGE
% cHANGE
$50,979
19,717
$31,262
$1,908
750
$1,158
3.7%
3.8%
3.7%
Real estate rental revenue increased by $1.9 million in 2012 primarily due to higher rental rates.
46
AnnuAl RepoRt 2012 FoRM 10-K Real estate expenses increased by $0.8 million in 2012 primarily due to higher real estate taxes.
Occupancy decreased to 94.1% in 2012 from 94.9% in 2011, driven by lower occupancy at 3801 Connecticut Avenue, Walker
House Apartments and Munson Hill Towers, partially offset by higher occupancy at Bethesda Hill Apartments.
2011 Compared to 2010
The following tables of selected operating data reconcile NOI to net income attributable to the controlling interests and pro-
vide the basis for our discussion of NOI in 2011 compared to 2010. All amounts are in thousands except percentage amounts.
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
Reconciliation to Net Income
noi
Depreciation and amortization
General and administrative expenses
Real estate impairment
Acquisition costs
Interest expense
Other income
Loss on extinguishment of debt
Gain on non disposal
Discontinued operations(2):
Income from properties sold or held for sale
Gain on sale of real estate
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests
yEAR ENdEd dEcEMBER 31,
2011
2010
$ cHANGE
% cHANGE
$248,268
35,888
$284,156
$ 83,508
11,834
$ 95,342
$164,760
24,054
$188,814
$247,474
5,653
$253,127
$ 82,808
1,937
$ 84,745
$164,666
3,716
$168,382
$ 794
30,235
$31,029
$ 700
9,897
$10,597
$ 94
20,338
$20,432
0.3%
534.8%
12.3%
0.8%
510.9%
12.5%
0.1%
547.3%
12.1%
$188,814
$168,382
(91,805)
(15,728)
(14,526)
(3,607)
(66,214)
1,144
(976)
—
11,923
97,491
(1,138)
105,378
(494)
(78,483)
(14,406)
—
(1,161)
(66,965)
1,193
(9,176)
7
16,569
21,599
—
37,559
(133)
Net income attributable to the controlling interests
$104,884
$ 37,426
(1) Non-same-store properties include: 2011 Office acquisitions—1140 Connecticut Avenue, 1227 25th Street, Braddock Metro Center and John Marshall II; 2011 Retail
acquisition—Olney Village Center; 2010 Office acquisitions—925 and 1000 Corporate Drive; 2010 Retail acquisition—Gateway Overlook; 2009 Medical Office acqui-
sition—19500 at Riverside Office Park (formerly Lansdowne Medical Office Building).
(2) Discontinued operations include gain on disposals and income from operations for: 2012 dispositions and held for sale—Plumtree Medical Center, the Atrium Building,
and 1700 Research Boulevard; 2011 dispositions—Dulles Station, Phase I and the Industrial Portfolio; 2010 dispositions—Parklawn Portfolio, the Ridges, Ammendale
I&II and Amvax.
47
FORM 10-K AnnuAl RepORt 2012 Real estate rental revenue from same-store properties increased by $0.8 million in 2011 primarily due to higher rental rates
($4.8 million), partially offset by lower occupancy ($2.4 million) and lower recoveries from tenants ($1.4 million).
Real estate expenses from same-store properties increased by $0.7 million in 2011 primarily due to higher repairs and main-
tenance ($0.5 million), administrative ($0.5 million), legal ($0.5 million) and vacant space preparation ($0.2 million) expenses,
partially offset by lower real estate taxes ($1.3 million).
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2011
91.2%
89.5%
90.9%
2010
92.0%
82.7%
91.4%
Same-store occupancy decreased to 91.2% in 2011 from 92.0% in 2010, with the largest decrease in the medical office seg-
ment. Non-same-store occupancy increased to 89.5% in 2011 from 82.7% in 2010, driven by the acquisitions in 2011 of John
Marshall II and Olney Village Center, each of which was 100.0% occupied at the end of 2011. During 2011, 60.0% of the com-
mercial square footage expiring was renewed as compared to 57.6% in 2010, excluding properties sold or classified as held
for sale. During 2011, 1.0 million commercial square feet were leased at an average rental rate of $31.34 per square foot, an
increase of 9.1%, with average tenant improvements and leasing commissions and incentives (including free rent) of $22.02 per
square foot. These leasing statistics exclude first generation leases at recently-built properties.
An analysis of NOI by segment follows.
Office Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2011
2010
$ cHANGE
% cHANGE
$112,616
25,709
$138,325
$ 38,303
8,986
$ 47,289
$ 74,313
16,723
$ 91,036
$114,412
4,947
$119,359
$ 39,379
1,297
$ 40,676
$ 75,033
3,650
$ 78,683
$ (1,796)
20,762
$18,966
$ (1,076)
7,689
$ 6,613
$ (720)
13,073
$12,353
(1.6%)
419.7%
15.9%
(2.7%)
592.8%
16.3%
(1.0%)
358.2%
15.7%
(1) Non-same-store properties include: 2011 acquisitions—1140 Connecticut Avenue, 1227 25th Street, Braddock Metro Center and John Marshall II; 2010 acquisitions—
925 and 1000 Corporate Drive.
Real estate rental revenue from same-store properties decreased by $1.8 million in 2011 primarily due to lower occupancy
($1.5 million), lower recoveries from tenants ($1.4 million) and higher rent abatements ($0.4 million), partially offset by higher
rental rates ($0.9 million) and lower provisions for uncollectible revenue ($0.8 million).
48
AnnuAl RepoRt 2012 FoRM 10-K Real estate expenses from same-store properties decreased by $1.1 million in 2011 primarily due lower real estate taxes
($1.2 million).
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2011
88.2%
92.3%
89.2%
2010
88.7%
100.0%
89.5%
Same-store occupancy decreased to 88.2% in 2011 from 88.7% in 2010, primarily due to lower occupancy at 2000 M Street and
West Gude Drive. During 2011, 45.6% of the square footage that expired was renewed compared to 39.9% in 2010, excluding
properties sold or classified as held for sale. During 2011, we executed new leases for 0.6 million square feet of office space at
an average rental rate of $32.64 per square foot, an increase of 6.4%, with average tenant improvements and leasing commis-
sions and incentives (including free rent) of $25.25 per square foot.
Medical Office Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2011
2010
$ cHANGE
% cHANGE
$43,801
630
$44,431
$13,465
598
$14,063
$30,336
32
$30,368
$44,087
79
$44,166
$14,006
510
$14,516
$30,081
(431)
$29,650
$(286)
551
$ 265
$(541)
88
$(453)
$ 255
463
$ 718
(0.6%)
697.5%
0.6%
(3.9%)
17.3%
(3.1%)
0.8%
(107.4%)
2.4%
(1) Non-same-store properties include: 2009 acquisition—19500 at Riverside Office Park (formerly Lansdowne Medical Office Building).
Real estate rental revenue from same-store properties decreased by $0.3 million in 2011 primarily due to lower occupancy
($0.8 million), lower recoveries from tenants ($0.6 million) and higher allowances for uncollectible revenue ($0.2 million),
partially offset by higher rental rates ($1.4 million).
Real estate expenses from same-store properties decreased by $0.5 million in 2011 primarily due to recoveries of bad debt
($0.3 million) and lower real estate taxes ($0.1 million).
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2011
90.5%
27.0%
86.3%
2010
93.8%
14.7%
88.4%
49
FORM 10-K AnnuAl RepORt 2012 Same-store occupancy decreased to 90.5% in 2011 from 93.8% in 2010, primarily due to lower occupancy at Woodholme
Medical Center and Shady Grove Medical Village II. Non-same-store occupancy increased to 27.0% from 14.7%, reflecting the
progress made in the lease-up of 19500 at Riverside Park, which was vacant when acquired during the third quarter of 2009.
This building was 32.0% leased as of the end of 2011. During 2011, 72.1% of the square footage that expired was renewed com-
pared to 76.3% in 2010. During 2011, we executed new leases for 0.2 million square feet of medical office space at an average
rental rate of $37.52, an increase of 13.4%, with average tenant improvements and leasing commissions and incentives (includ-
ing free rent) of $20.26 per square foot. These leasing statistics exclude first generation leases at Lansdowne Medical Office
Building, which was newly-constructed and vacant when acquired.
Retail Segment:
Real Estate Rental Revenue
Same-store
Non-same-store(1)
Total real estate rental revenue
Real Estate Expenses
Same-store
Non-same-store(1)
Total real estate expenses
NOI
Same-store
Non-same-store(1)
Total NOI
yEAR ENdEd dEcEMBER 31,
2011
2010
$ cHANGE
% cHANGE
$40,872
9,549
$50,421
$12,023
2,250
$14,273
$28,849
7,299
$36,148
$40,376
627
$41,003
$10,180
130
$10,310
$30,196
497
$30,693
$ 496
8,922
$ 9,418
$ 1,843
2,120
$ 3,963
$(1,347)
6,802
$ 5,455
1.2%
1,423.0%
23.0%
18.1%
1,630.8%
38.4%
(4.5%)
1,368.6%
17.8%
(1) Non-same-store properties include: 2011 acquisition—Olney Village Center; 2010 acquisition—Gateway Overlook.
Real estate rental revenue from same-store properties increased by $0.5 million in 2011 primarily due to higher rental rates
($0.5 million), recoveries from tenants ($0.4 million) and occupancy ($0.2 million), partially offset by higher reserves for uncol-
lectible revenue ($0.8 million).
Real estate expenses from same-store properties increased by $1.8 million in 2011 due to higher bad debt ($0.8 million), legal
expenses ($0.5 million) and vacant space preparation expenses ($0.2 million).
OccUPANcy
Same-store
Non-same-store
Total
dEcEMBER 31,
2011
93.0%
94.7%
93.3%
2010
92.5%
88.2%
92.1%
Same-store occupancy increased to 93.0% in 2011 from 92.5% in 2010, driven by higher occupancy at Randolph Shopping
Center. Non-same-store occupancy increased to 94.7% from 88.2% due to the acquisition of the fully-leased Olney Village
Center. During 2011, 87.8% of the square footage that expired was renewed compared to 72.7% in 2010. During 2011, we
executed new leases for 0.2 million square feet of retail space at an average rental rate of $21.52, an increase of 16.6%, with
average tenant improvements and leasing commissions and incentives (including free rent) of $13.69 per square foot.
50
AnnuAl RepoRt 2012 FoRM 10-K Multifamily Segment:
Real Estate Rental Revenue
Real Estate Expenses
noi
yEAR ENdEd dEcEMBER 31,
2011
$50,979
19,717
$31,262
2010
$ cHANGE
% cHANGE
$48,599
19,243
$29,356
$2,380
474
$1,906
4.9%
2.5%
6.5%
Real estate rental revenue increased by $2.4 million in 2011 primarily due to higher rental rates ($1.9 million) and lower rent
abatements ($0.4 million).
Real estate expenses increased by $0.5 million in 2011 due primarily to higher administrative ($0.3 million) and repairs and
maintenance ($0.2 million) expenses.
Occupancy decreased to 94.9% in 2011 from 95.7% in 2010, driven by lower occupancy at The Kenmore, 3801 Connecticut
Avenue and Clayborne Apartments.
Liquidity and capital Resources
Capital Structure
We manage our capital structure to reflect a long-term investment approach, generally seeking to match the cash flow of our
assets with a mix of equity and various debt instruments. We expect that our capital structure will allow us to obtain addi-
tional capital from diverse sources that could include additional equity offerings of common shares, public and private secured
and unsecured debt financings, and asset dispositions. Our ability to raise funds through the sale of debt and equity securi-
ties is dependent on, among other things, general economic conditions, general market conditions for REITs, our operating
performance, our debt rating and the current trading price of our common shares. We analyze which source of capital we
believe to be most advantageous to us at any particular point in time. However, the capital markets may not consistently be
available on terms that we consider attractive. As a result, there can be no assurance that we will be able to access the public
or private debt and equity markets at a given point in the future.
We currently expect that our potential sources of liquidity for acquisitions, development, redevelopment, expansion and
renovation of properties, and operating and administrative expenses, may include:
• Cash flow from operations;
• Borrowings under our unsecured credit facilities or other short-term facilities;
• Issuances of our equity securities and/or common units in our operating partnerships;
• Issuances of preferred stock;
• Proceeds from long-term secured or unsecured debt financings, to include construction loans;
• Investment from joint venture partners; and
• Net proceeds from the sale of assets.
During 2013, we expect that we will have significant capital requirements, including the following items. There can be no
assurance that our capital requirements will not be materially higher or lower than these expectations.
• Funding dividends on our common shares and noncontrolling interest distributions to third party unit holders;
• Approximately $55.0–$65.0 million to invest in our existing portfolio of operating assets, including approximately
$25.0–$35.0 million to fund tenant-related capital requirements and leasing commissions;
• Approximately $30.0–$35.0 million to invest in our development projects;
• Funding to cover any costs related to property acquisitions; and
51
FORM 10-K AnnuAl RepORt 2012 • Funding for potential property acquisitions throughout the remainder of 2013, offset by proceeds from potential prop-
erty dispositions (including the potential disposition of our medical office segment).
We currently believe that we will generate sufficient cash flow from operations and have access to the capital resources nec-
essary to fund our requirements in 2013. However, as a result of general market conditions in the greater Washington metro
region, economic conditions affecting the ability to attract and retain tenants, unfavorable fluctuations in interest rates or our
share price, unfavorable changes in the supply of competing properties, or our properties not performing as expected, we
may not generate sufficient cash flow from operations or otherwise have access to capital on favorable terms, or at all. If we
are unable to obtain capital from other sources, we may need to alter capital spending needs which may limit growth. If capital
were not available, we may not be able to pay the dividend required to maintain our status as a REIT, make required principal
and interest payments, make strategic acquisitions or make necessary routine capital improvements or undertake redevelop-
ment opportunities with respect to our existing portfolio of operating assets.
Debt Financing
We generally use secured or unsecured, corporate-level debt, including mortgages, unsecured notes and our unsecured
credit facilities, to meet our borrowing needs. Long-term, we generally use fixed rate debt instruments in order to match the
returns from our real estate assets. We also utilize variable rate debt for short-term financing purposes. At times, our mix
of variable and fixed rate debt may not suit our needs. At those times, we may use derivative financial instruments including
interest rate swaps and caps, forward interest rate options or interest rate options in order to assist us in managing our debt
mix. We may either hedge our variable rate debt to give it an effective fixed interest rate or hedge fixed rate debt to give it an
effective variable interest rate.
At December 31, 2012 and 2011, our debt was as follows (in thousands):
Fixed rate mortgages
Unsecured credit facilities
Unsecured notes payable
dEcEMBER 31,
2012
2011
$ 342,970
$ 423,291
—
906,190
99,000
657,470
$1,249,160
$1,179,761
If principal amounts due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such
as new equity capital, our cash flow may be insufficient to repay all maturing debt. Prevailing interest rates or other factors
at the time of a refinancing, such as possible reluctance of lenders to make commercial real estate loans, may result in higher
interest rates and increased interest expense or inhibit our ability to finance our obligations.
Mortgage Debt
At December 31, 2012, our $343.0 million in fixed rate mortgages, which includes $3.5 million in net unamortized discounts
due to fair value adjustments, bore an effective weighted average fair value interest rate of 6.1% and had a weighted average
maturity of 4.2 years. We may either initiate secured mortgage debt or assume mortgage debt from time-to-time in conjunc-
tion with property acquisitions.
On August 1, 2012, we repaid without penalty the remaining $21.3 million of the mortgage note secured by Frederick Crossing.
On October 11, 2012, we repaid without penalty the remaining $7.8 million of the mortgage note secured by 15005 Shady
Grove Road.
On November 1, 2012, we repaid without penalty the remaining $4.6 million of the mortgage note secured by 9707 Medical
Center Drive.
On November 30, 2012, we repaid without penalty the remaining $42.1 million of the mortgage notes secured by Prosperity
Medical Centers.
52
AnnuAl RepoRt 2012 FoRM 10-K On December 11, 2012, we repaid without penalty the remaining $4.3 million of the mortgage note secured by Plumtree
Medical Center.
In January 2013, we repaid without penalty the remaining $30.0 million of principal on the mortgage note secured by West
Gude Drive.
Unsecured Credit Facilities
Our primary source of liquidity is our two revolving credit facilities. We can borrow up to $500.0 million under these lines,
which bear interest at an adjustable spread over LIBOR based on our public debt rating.
Credit Facility No. 1 is a four-year, $100.0 million unsecured credit facility maturing in June 2015, and may be extended by one
year at our option. We had no borrowings outstanding and $0.8 million in letters of credit issued as of December 31, 2012,
related to Credit Facility No. 1. Borrowings under the facility bear interest at LIBOR plus a spread based on the credit rating
on our publicly issued debt. The interest rate spread is currently 120 basis points. All outstanding advances are due and payable
upon maturity in June 2015, and may be extended by one year at our option. Interest only payments are due and payable gener-
ally on a monthly basis. In addition, we pay a facility fee based on the credit rating of our publicly issued debt which currently
equals 0.25% per annum of the $100.0 million committed capacity, without regard to usage. Rates and fees may be increased or
decreased based on changes in our senior unsecured credit ratings. These fees are payable quarterly.
Credit Facility No. 2 is a four-year $400.0 million unsecured credit facility maturing in July 2016, and may be extended for one
year at our option. We had no borrowings outstanding as of December 31, 2012 related to Credit Facility No. 2. Advances
under this agreement bear interest at LIBOR plus a spread based on the credit rating of our publicly issued debt. The interest
rate spread is currently 120 basis points. All outstanding advances are due and payable upon maturity in July 2016, and may
be extended for one year at our option. Interest only payments are due and payable generally on a monthly basis. In addi-
tion, we pay a facility fee based on the credit rating of our publicly issued debt which currently equals 0.25% per annum of the
$400.0 million committed capacity, without regard to usage. Rates and fees may be increased or decreased based on changes
in our senior unsecured credit ratings. These fees are payable quarterly.
Our unsecured credit facilities contain financial and other covenants with which we must comply. Some of these covenants include:
• A minimum tangible net worth;
• A maximum ratio of total liabilities to gross asset value, calculated using an estimate of fair market value of our assets;
• A maximum ratio of secured indebtedness to gross asset value, calculated using an estimate of fair market value of our assets;
• A minimum ratio of quarterly EBITDA (earnings before interest, taxes, depreciation, amortization and extraordinary
and nonrecurring gains and losses) to fixed charges, including interest expense;
• A minimum ratio of unencumbered asset value, calculated using a fair value of our assets, to unsecured indebtedness;
• A minimum ratio of net operating income from our unencumbered properties to unsecured interest expense; and
• A maximum ratio of permitted investments to gross asset value, calculated using an estimate of fair market value of our assets.
Failure to comply with any of the covenants under our unsecured credit facilities or other debt instruments could result in a
default under one or more of our debt instruments. This could cause our lenders to accelerate the timing of payments and would
therefore have a material adverse effect on our business, operations, financial condition and liquidity. As of December 31, 2012,
we were in compliance with our loan covenants. In addition, our ability to draw on our unsecured credit facilities or incur other
unsecured debt in the future could be restricted by the loan covenants.
We anticipate that in the near term we may rely to a greater extent upon our unsecured credit facilities. To the extent that
we maintain larger balances on our unsecured credit facilities or maintain balances on our unsecured credit facilities for longer
periods, adverse fluctuations in interest rates could have a material adverse effect on earnings.
53
FORM 10-K AnnuAl RepORt 2012 Unsecured Notes
We generally issue unsecured notes to fund our real estate assets long-term. In issuing future unsecured notes, we intend to
ladder the maturities of our debt to mitigate exposure to interest rate risk in future years.
Depending upon market conditions, opportunities to issue unsecured notes on attractive terms may not be available. During
periods in the recent past, debt capital was essentially unavailable for extended periods of time. While debt markets have
improved, it is difficult to predict if the improvement is sustainable.
At December 31, 2012, our unsecured notes with maturities ranging from March 2013 through February 2028, were as fol-
lows (in thousands):
5.125% notes due 2013
5.25% notes due 2014
5.35% notes due 2015
4.95% notes due 2020
3.95% notes due 2022
7.25% notes due 2028
Total principal
Net unamortized discount
Total
$ 60,000
100,000
150,000
250,000
300,000
50,000
910,000
(3,810)
$906,190
Our unsecured notes contain covenants with which we must comply, including:
• Limits on our total indebtedness;
• Limits on our secured indebtedness;
• Limits on our required debt service payments; and
• Maintenance of a minimum level of unencumbered assets.
In September 2012, we issued $300.0 million of 3.95% unsecured notes due October 15, 2022. The notes were issued at a price
to the public of 99.438% of their principal amount, and interest is payable semiannually in arrears on April 15 and October 15 of
each year, beginning April 15, 2013. The notes bear an effective interest rate of 4.018% and our net proceeds were $296.4 mil-
lion. The notes may be redeemed in whole or in part at any time before maturity at the redemption price set forth in the terms
of the notes. The proceeds were used to repay borrowings on our lines of credit and for general corporate purposes.
We repaid our $50.0 million of 5.05% unsecured notes on their due date of May 12, 2012 using borrowings on our unsecured
lines of credit.
Failure to comply with any of the covenants under our unsecured notes could result in a default under one or more of our
debt instruments. This could cause our debt holders to accelerate the timing of payments and would therefore have a material
adverse effect on our business, operations, financial condition and liquidity. As of December 31, 2012, we were in compliance
with our unsecured notes covenants.
From time to time, we may seek to repurchase and cancel our outstanding notes through open market purchases, privately
negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors. The amounts involved may be material.
Common Equity
We have authorized for issuance 100.0 million common shares, of which 66.4 million shares were outstanding at December 31, 2012.
We are party to a sales agency financing agreement with BNY Mellon Capital Markets, LLC relating to the issuance and sale of
up to $250.0 million of our common shares from time to time over a period of no more than 36 months from June 2012. Sales
of our common shares are made at market prices prevailing at the time of sale. We would use net proceeds from the sale of
54
AnnuAl RepoRt 2012 FoRM 10-K common shares under this program for general corporate purposes. As of December 31, 2012, we have not issued any com-
mon shares under this program.
We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to
purchase common shares. The common shares sold under this program may either be common shares issued by us or com-
mon shares purchased in the open market. We used the net proceeds under this program for general corporate purposes.
During 2012, we issued 0.1 million common shares at a weighted average price of $29.67 per share, raising $1.3 million in net
proceeds. During 2011, we issued 0.2 million common shares at a weighted average price of $29.97 per share, raising $5.0 mil-
lion in net proceeds.
Preferred Equity
WRIT’s board of trustees can, at its discretion, authorize the issuance of up to 10.0 million shares of preferred stock. The
ability to issue preferred equity provides WRIT an additional financing tool that may be used to raise capital for future acquisi-
tions or other business purposes. As of December 31, 2012, no shares of preferred stock had been authorized or issued.
Dividends
We currently pay dividends quarterly at a rate of $0.30 per share. The maintenance of our dividend level is subject to various
factors reviewed by the Board of Trustees in its discretion. These factors include our results of operations, the availability of
cash to make the necessary dividend payments and the effect of REIT distribution requirements, which require at least 90% of
our taxable income to be distributed to shareholders. When setting the dividend level, our Board looks in particular at trends
in our level of funds from operations, together with associated recurring capital improvements, tenant improvements, leasing
commissions and incentives, and adjustments to straight-line rents to reflect cash rents received.
Our dividend and distribution payments for the three years ended December 31, 2012 were as follows (in thousands):
Common dividends
Noncontrolling interest distributions
yEAR ENdEd dEcEMBER 31,
2012
$97,734
—
$97,734
2011
$115,045
2,488
$117,533
2010
$108,949
163
$109,112
Dividends paid for 2012 decreased from 2011 primarily due to a decrease in the dividend paid per share offset by a small
increases in shares outstanding due to our dividend reinvestment program. The decrease in noncontrolling interests distribu-
tions reflects the sale of Northern Virginia Industrial Park.
Dividends paid for 2011 increased from 2010 primarily due to a small increase in the dividend paid per share and small
increases in shares outstanding due to our dividend reinvestment program. The increase in noncontrolling interests distribu-
tions reflects an extraordinary return of capital distribution in connection with the sale of Northern Virginia Industrial Park,
whose noncontrolling interest holder received a portion of the sale proceeds.
Capital Commitments
We will require capital for development and redevelopment projects currently underway and in the future. As of December 31,
2012, we had under development a mid-rise apartment property at 650 North Glebe Road in Arlington, VA and a high-rise
apartment property at 1225 First Street in Alexandria, VA.
Our total investment in 650 North Glebe Road is expected to be $49.5 million, including land costs and the non-controlling
partner’s 10% share. We expect to secure debt financing for approximately 70% of the project’s cost. As of December 31,
2012, we had invested $15.6 million in 650 North Glebe Road including land costs and we expect to fund approximately
$20.0–$23.0 million in 2013 on this project. We currently expect to complete this development project during the fourth
quarter of 2014.
55
FORM 10-K AnnuAl RepORt 2012 Our total investment in 1225 First Street is expected to be $95.3 million, including land costs and the non-controlling partner’s
5% share. We expect to secure or provide debt financing for approximately 70% of the project’s cost. As of December 31,
2012, we had invested $19.8 million in 1225 First Street, including land costs. Subsequent to December 31, 2012, we decided to
delay commencement of construction due to market conditions and concerns of oversupply. We will reassess this project on a
periodic basis going forward.
We expect to fund approximately $10.0 million for a redevelopment project at one of our office properties during 2013.
There were no projects placed into service in the year ended December 31, 2012. As of December 31, 2012, we had no out-
standing contractual commitments related to our development projects, and expect to fund approximately $30.0–$35.0 million
of total development spending during 2013.
We anticipate funding several major renovation projects in our portfolios during 2013, as follows (in thousands):
Office
Medical Office
Retail
Multifamily
Total
$10,716
2,325
1,619
7,624
$22,284
These projects include a new heating and air conditioning system at one of our multifamily properties; the renovation of the
lobby and front entrance at one of our office properties; the replacement of a roof at one of our retail properties; unit bath-
room and kitchen upgrades at several of our multifamily properties; and corridor, restroom and common area upgrades at
several of our office properties. Not all of the anticipated spending had been committed via executed construction contracts
at December 31, 2012. We expect to meet our requirements using cash generated by our real estate operations, through bor-
rowings on our unsecured credit facilities, or raising additional debt or equity capital in the public market.
Contractual Obligations
As of December 31, 2012, certain contractual obligations that will require significant capital (in thousands):
Long-term debt(1)
Purchase obligations(2)
Tenant-related capital(3)
Building capital(4)
Operating leases
TOTAL
$1,638,322
4,120
11,399
8,949
15,164
PAyMENTS dUE By PERIOd
LESS THAN
1 yEAR
1–3 yEARS
4–5 yEARS
$155,407
$559,161
$169,428
3,573
11,399
8,949
318
175
—
—
871
127
—
—
520
AfTER
5 yEARS
$754,326
245
—
—
13,455
(1) See notes 4, 5 and 6 of our consolidated financial statements. Amounts include principal, interest, unused commitment fees and facility fees.
(2) Represents elevator maintenance contracts with terms through 2012, electricity sales agreements with terms through 2013, and natural gas purchase agreements with
terms through 2012.
(3) Committed tenant-related capital based on executed leases as of December 31, 2012.
(4) Committed building capital additions based on contracts in place as of December 31, 2012.
We have various standing or renewable contracts with vendors. The majority of these contracts can be canceled with imma-
terial or no cancellation penalties, with the exception of our elevator maintenance, electricity sales and natural gas purchase
agreements, which are included above on the purchase obligations line. Contract terms on leases that can be canceled are
generally one year or less. We are currently committed to fund tenant-related capital improvements as described in the table
above for executed leases. However, expected leasing levels could require additional tenant-related capital improvements
which are not currently committed. We expect that total tenant-related capital improvements, including those already com-
mitted, will be approximately$18.2 million in 2013. Due to the competitive office leasing market we expect that tenant-related
capital costs will continue at this level into 2014.
56
AnnuAl RepoRt 2012 FoRM 10-K Historical Cash Flows
Cash flows from operations are an important factor in our ability to sustain our dividend at its current rate. If our cash flows
from operations were to decline significantly, we may have to reduce our dividend. Consolidated cash flows for the three
years ended December 31, 2012 were as follows (in thousands):
yEAR ENdEd dEcEMBER 31,
VARIANcE
2012
2011
2010
2012 vs 2011
2011 vs 2010
Cash provided by operating activities
$131,103
$ 117,855
$ 111,933
$ 13,248
$ 5,922
Cash (used in) provided by investing activities
Cash (used in) provided by financing activities
(88,546)
(35,998)
61,098
(111,150)
(149,644)
(244,955)
66,781
208,957
172,248
(311,736)
The increase in cash provided by operating activities in 2012 was primarily due to acquisitions made during 2011 and 2012.
The increase in cash provided by operating activities in 2011 as compared to 2010 was primarily due to acquisitions.
Net cash used in investing activities increased in 2012 due to the sale of the Industrial Portfolio in 2011, partially offset by a
higher volume of acquisition activity in 2011. The use of net cash in our investing activities in 2010 was primarily due to cash
invested in acquisitions, net of assumed debt.
The decrease in cash used by financing activities in 2012 was primarily due the issuance of the 3.95% unsecured notes and the
decrease of our quarterly dividend, partially offset by paying down the balances on our unsecured lines of credit. Our financ-
ing activities generated $66.8 million of net cash in 2010 was primarily due to proceeds from our debt offering and equity
issued under our prior sales agency financing agreement.
Capital Improvements and Development Costs
Our capital improvement and development costs for the three years ended December 31, 2012 were as follows (in thousands):
Accretive capital improvements:
Acquisition related
Expansions and major renovations
Development/redevelopment
Tenant improvements (including first generation leases)
Total accretive capital improvements
Other capital improvements:
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
$ 3,718
$ 2,549
$ 1,007
20,147
6,494
18,333
48,692
8,982
9,435
25,929
13,350
51,263
7,481
3,180
1,337
15,162
20,686
5,696
Total
$57,674
$58,744
$26,382
We consider capital improvements to be accretive to revenue and not necessarily to net income.
Accretive Capital Improvements
Acquisition Related Improvements: Acquisition related improvements are capital improvements to properties acquired during the
preceding three years which were anticipated at the time we acquired the properties. These types of improvements were made
in 2012 to Braddock Metro Center, Olney Village Center, 1140 Connecticut Avenue, The Kenmore and 1227 25th Street.
Expansions and Major Renovations: Expansion projects increase the rentable area of a property, while major renovation projects
are improvements sufficient to increase the income otherwise achievable at a property. Expansions and major renovations
during 2012 included a fitness center, conference room, management office, HVAC modifications and restroom renovations at
2000 M Street; unit renovations at The Ashby, Country Club Towers, Roosevelt Towers and Park Adams Apartments; lobby
and common restrooms renovations at Courthouse Square; elevator and lobby modernization at 1220 19th Street and West
Gude; and common area and lobby renovations at 6110 Executive Boulevard and 1901 Pennsylvania Avenue.
57
FORM 10-K AnnuAl RepORt 2012 Development/Redevelopment: Development costs represent expenditures for ground up development of new operating proper-
ties. Redevelopment costs represent expenditures for improvements intended to reposition properties in their markets and
increase income that would be otherwise achievable. Development costs in each of the years presented include costs associ-
ated with the ground up development of 1225 First Street and 650 North Glebe Road.
Tenant Improvements: Tenant improvements are costs, such as space build-out, associated with commercial lease transactions.
Our average tenant improvement costs per square foot of space leased, excluding first generation leases, during the three
years ended December 31, 2012 were as follows:
Office(1)
Medical Office(1)
Retail
(1) Excludes properties sold or classified as held for sale.
yEAR ENdEd dEcEMBER 31,
2012
$27.26
$24.33
$ 7.85
2011
$13.85
$10.72
$ 7.07
2010
$21.88
$16.95
$ 3.23
The $13.41 increase in 2012 in tenant improvement costs per square foot of office space leased was primarily due to leases
executed in 2012 requiring $5.1 million in tenant improvements at 2000 M Street, Fairgate at Ballston, Woodholme Center
and 1140 Connecticut Avenue.
The $8.03 decrease in 2011 in tenant improvement costs per square foot of office space leased was primarily due to leases
executed with single tenants in 2010 requiring $5.4 million in tenant improvements at Monument II, 2000 M Street, 7900
Westpark Drive and 1600 Wilson Boulevard.
The $13.61 increase in 2012 in tenant improvement costs per square foot of medical office space leased was primarily due to
single tenant leases executed in 2012 requiring $0.8 million in tenant improvements at Woodholme Medical Center.
The $6.23 decrease in 2011 in tenant improvement costs per square foot of medical office space leased was primarily due to
single tenant leases executed in 2010 requiring $1.3 million in tenant improvements at Shady Grove Medical Center.
The $0.78 increase in 2012 in tenant improvement costs per square foot of retail space leased was due to a lease executed
with a single tenant requiring $0.9 million in tenant improvements at Gateway Overlook.
The $3.84 increase in tenant improvement costs per square foot of retail space leased was due to leases executed with single
tenants at the Centre at Hagerstown and Frederick Crossing requiring $0.7 million in tenant improvements at each location.
Tenant improvement costs for retail tenants are substantially lower than for office and medical office tenants because the
improvements required for retail tenants tend to be substantially less extensive than for office and medical office tenants.
Excluding properties classified as sold or held for sale, approximately 59% of our tenants renewed their leases with us in 2012,
compared to 60% in 2011 and 58% in 2010. Renewing tenants generally require minimal tenant improvements. In addition, our
focus on leasing to smaller office tenants leads to lower tenant improvement costs because smaller office suites have limited
configuration alternatives. Therefore, we are often able to lease an existing suite with limited tenant improvements.
Other Capital Improvements
Other capital improvements, also referred to as recurring capital improvements, are those not included in the above catego-
ries. Over time these costs will be recurring in nature to maintain a property’s income and value. In our residential proper-
ties, these include new appliances, flooring, cabinets and bathroom fixtures. These improvements, which are made as needed
upon vacancy of an apartment, totaled $0.8 million in 2012, averaging $856 per apartment for the 39% of apartments turned
over relative to our total portfolio of apartment units. In our commercial properties and residential properties (aside from
improvements related to apartment turnover), improvements include installation of new heating and air conditioning equip-
ment, asphalt replacement, new signage, permanent landscaping, window replacements, new lighting and new finishes. In addi-
tion, we incurred repair and maintenance expense of $14.2 million during 2012 to maintain the quality of our buildings.
58
AnnuAl RepoRt 2012 FoRM 10-K Forward-Looking Statements
This Form 10-K contains forward-looking statements which involve risks and uncertainties. Such forward looking statements
include each of the statements in “Item 1: Business” and “Item 7: Management’s Discussion and Analysis of Financial Conditions
and Results of Operations” concerning the Washington metro region’s economy, gross regional product, unemployment and
job growth and real estate market performance. Such forward-looking statements also include the following statements with
respect to WRIT:
(a) our intention to invest in properties that we believe will increase in income and value;
(b) our belief that external sources of capital will continue to be available and that additional sources of capital will be
available from the sale of common shares or notes; and
(c) our belief that we have the liquidity and capital resources necessary to meet our known obligations and to make addi-
tional property acquisitions and capital improvements when appropriate to enhance long-term growth.
Forward-looking statements also include other statements in this report preceded by, followed by or that include the words
“believe,” “expect,” “intend,” “anticipate,” “potential,” “project,” “will” and other similar expressions.
We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 for the foregoing statements. The following important factors, in addition to those discussed elsewhere in this Form
10-K, could affect our future results and could cause those results to differ materially from those expressed in the forward-
looking statements:
(a) the effect of credit and financial market conditions;
(b) the availability and cost of capital;
(c) fluctuations in interest rates;
(d) the economic health of our tenants;
(e) the timing and pricing of lease transactions;
(f) the economic health of the greater Washington Metro region, or other markets we may enter;
(g) the effects of changes in Federal government spending;
(h) the supply of competing properties;
(i) consumer confidence;
(j) unemployment rates;
(k) consumer tastes and preferences;
(l) our future capital requirements;
(m) inflation;
(n) compliance with applicable laws, including those concerning the environment and access by persons with disabilities;
(o) governmental or regulatory actions and initiatives;
(p) changes in general economic and business conditions;
(q) terrorist attacks or actions;
(r) acts of war;
(s) weather conditions;
(t) the effects of changes in capital available to the technology and biotechnology sectors of the economy; and
(u) other factors discussed under the caption “Risk Factors.”
We undertake no obligation to update our forward-looking statements or risk factors to reflect new information, future
events, or otherwise.
59
FORM 10-K AnnuAl RepORt 2012 Ratios of Earnings to fixed charges and debt Service coverage
The following table sets forth our ratios of earnings to fixed charges and debt service coverage for the periods shown:
Earnings to fixed charges
Debt service coverage
yEAR ENdEd dEcEMBER 31,
2012
1.23x
2.7x
2011
(a)
2.7x
2010
(b)
2.6x
(a) Due to WRIT’s loss from continuing operations during 2011, the earnings to fixed charges ratio was less than 1:1. WRIT must generate additional earnings of $4.1 mil-
lion to achieve a ratio of 1:1.
(b) Due to WRIT’s loss from continuing operations during 2010, the earnings to fixed charges ratio was less than 1:1. WRIT must generate additional earnings of $1.6 mil-
lion to achieve a ratio of 1:1.
We computed the ratio of earnings to fixed charges by dividing earnings by fixed charges. For this purpose, earnings consist of
income from continuing operations attributable to the controlling interests plus fixed charges, less capitalized interest. Fixed
charges consist of interest expense, including amortized costs of debt issuance, and interest costs capitalized.
We computed the debt service coverage ratio by dividing EBITDA (which is earnings before interest income and expense, taxes,
depreciation, amortization, real estate impairment and gain on sale of real estate) by interest expense and principal amortization.
funds from Operations
FFO is a widely used measure of operating performance for real estate companies. We provide FFO as a supplemental mea-
sure to net income calculated in accordance with GAAP. Although FFO is a widely used measure of operating performance
for REITs, 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, 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. The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO (April, 2002 White Paper)
as net income (computed in accordance with GAAP) excluding gains (or losses) from sales of property and impairments of
depreciable real estate, if any, plus real estate depreciation and amortization. We consider 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 predict-
ably 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. Our 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.
Our FFO and a reconciliation of FFO to net income for the three years ended December 31, 2012 were as follows (in thousands):
Net income attributable to the controlling interests
$ 23,708
$104,884
$ 37,426
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
Adjustments:
Depreciation and amortization
Gain from non-disposal activities
Discontinued operations:
Depreciation and amortization
Gain on sale of real estate attributable to the controlling interests
Real estate impairment on depreciable real estate
Income tax expense (benefit)
FFO, as defined by NAREIT
103,067
—
867
(5,124)
—
—
91,805
—
8,723
(97,091)
599
1,138
78,483
(7)
17,263
(21,599)
—
—
$122,518
$110,058
$111,566
60
AnnuAl RepoRt 2012 FoRM 10-K ITEM 7A. qUANTITATIVE ANd qUALITATIVE dIScLOSURES ABOUT MARKET RISK
The principal material financial market risk to which we are exposed is interest rate risk. Our exposure to interest rate risk
relates primarily to refinancing long-term fixed rate obligations, the opportunity cost of fixed rate obligations in a falling inter-
est rate environment and our variable rate lines of credit. We primarily enter into debt obligations to support general corpo-
rate purposes, including acquisition of real estate properties, capital improvements and working capital needs. In the past we
have used interest rate hedge agreements to hedge against rising interest rates in anticipation of imminent refinancing or new
debt issuance.
The table below presents principal, interest and related weighted average fair value interest rates by year of maturity, with
respect to debt outstanding on December 31, 2012.
(in thousands)
2013
2014
2015
2016
2017
THERE-
AfTER
TOTAL
fAIR
VALUE
Unsecured fixed rate debt
Principal
$60,000
$100,000
$150,000
$ — $ — $600,000
$910,000
$968,040
Interest payments
$42,663
$ 38,500
$ 31,863
$ 27,850
$ 27,850
$134,438
$303,164
Interest rate on debt
maturities
Mortgages
Principal amortization(1)
(30 year schedule)
5.23%
5.34%
5.45% — —
4.73%
4.95%
$33,313
$ 3,519
$ 22,174
$134,715
$104,712
$ 48,086
$346,519
$374,591
Interest payments
$18,243
$ 17,877
$ 17,579
$ 12,220
$ 3,330
$ 5,339
$ 74,588
Weighted average interest
rate on principal
amortization
5.80%
5.30%
5.29%
5.73%
7.19%
5.27%
6.08%
(1) Excludes net discounts of $3.5 million on December 31, 2012.
ITEM 8. fINANcIAL STATEMENTS ANd SUPPLEMENTARy dATA
The financial statements and supplementary data appearing on pages 72 to 114 are incorporated herein by reference.
ITEM 9. cHANGES IN ANd dISAGREEMENTS WITH AccOUNTANTS
ON AccOUNTING ANd fINANcIAL dIScLOSURE
None.
ITEM 9A. cONTROLS ANd PROcEdURES
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our
Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer, Chief Financial Officer and Executive Vice President—Accounting and Administration, as appropriate, to
allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, man-
agement recognized that any controls and procedures, no matter how well designed and operated, can provide only reason-
able assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive
Officer, Chief Financial Officer and Executive Vice President—Accounting and Administration, of the effectiveness of the design
and operation of our disclosure controls and procedures as of December 31, 2012. Based on the foregoing, our Chief Executive
Officer, Chief Financial Officer and Executive Vice President—Accounting and Administration (Principal Accounting Officer)
concluded that our disclosure controls and procedures were effective at a reasonable assurance level.
61
FORM 10-K AnnuAl RepORt 2012 Internal Control over Financial Reporting
See the Report of Management in Item 8 of this Form 10-K.
See the Reports of Independent Registered Public Accounting Firm in Item 8 of this Form 10-K.
During the three months ended December 31, 2012, there was no change in our internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INfORMATION
None.
62
AnnuAl RepoRt 2012 FoRM 10-K PaRt iii
Certain information required by Part III is omitted from this Form 10-K in that we will file a definitive proxy statement pursu-
ant to Regulation 14A with respect to our 2013 Annual Meeting (the “Proxy Statement”) no later than 120 days after the end
of the fiscal year covered by this Form 10-K, and certain information included therein is incorporated herein by reference.
Only those sections of the Proxy Statement which specifically address the items set forth herein are incorporated by refer-
ence. In addition, we have adopted a code of ethics which can be reviewed and printed from our website www.writ.com.
ITEM 10. dIREcTORS, EXEcUTIVE OffIcERS ANd cORPORATE GOVERNANcE
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.
ITEM 11. EXEcUTIVE cOMPENSATION
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.
ITEM 12. SEcURITy OWNERSHIP Of cERTAIN BENEfIcIAL OWNERS ANd
MANAGEMENT ANd RELATEd STOcKHOLdER MATTERS
The information required under this Item by Item 403 of Regulation S-K is hereby incorporated herein by reference to the
Proxy Statement.
Equity compensation Plan Information(1)
NUMBER Of SEcURITIES
TO BE ISSUEd
UPON EXERcISE
Of OUTSTANdING
OPTIONS, WARRANTS
ANd RIGHTS
WEIGHTED-AvERAGE
EXERcISE PRIcE
Of OUTSTANdING
OPTIONS, WARRANTS
ANd RIGHTS
NUMBER Of SEcURITIES
REMAINING AVAILABLE
fOR fUTURE ISSUANcE
UNdER EqUITy
cOMPENSATION
PLANS (EXcLUdING
SEcURITIES REfLEcTEd
IN cOLUMN (A))
(a)
20,119
18,000(2)
38,119
(b)
$29.55
$31.52
$30.48
(c)
1,888,960
—
1,888,960
PLAN cATEGORy
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
(1) We previously maintained a Share Grant Plan for officers, trustees and non-officer employees, which expired on December 15, 2007. 322,325 shares and 27,675
restricted share units had been granted under this plan. We previously maintained a stock option plan for trustees which provided for the annual granting of 2,000 non-
qualified stock options to trustees the last of which were granted in 2004. The plan expired on December 15, 2007, and 84,000 options had been granted. See note 7
to the consolidated financial statements for further discussion.
(2) These securities are options issued under a Share Grant Plan for officers, trustees and non-officer employees. This plan expired on December 15, 2007 and options may
no longer be issued thereunder.
ITEM 13. cERTAIN RELATIONSHIPS ANd RELATEd TRANSAcTIONS, ANd
dIREcTOR INdEPENdENcE
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.
ITEM 14. PRINcIPAL AccOUNTANT fEES ANd SERVIcES
The information required by this Item is hereby incorporated herein by reference to the Proxy Statement.
63
FORM 10-K AnnuAl RepORt 2012 PaRt iv
ITEM 15. EXHIBITS ANd fINANcIAL STATEMENT ScHEdULES
(A). The following documents are filed as part of this Form 10-K:
1. financial Statements
Management’s Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Income for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
2. financial Statement Schedules
Schedule III—Consolidated Real Estate and Accumulated Depreciation
All other schedules are omitted because they are either not required or the required information
is shown in the financial statements or notes thereto.
3. Exhibits:
INcORPORATEd By REfERENcE
EXHIBIT
NUMBER EXHIBIT dEScRIPTION
fILE
fORM
NUMBER EXHIBIT
Articles of Amendment and Restatement, effective as of May 17, 2011 Def 14a 001-06622
Page
69
70
71
72
73
74
75
78
79
110
fILEd
HERE-
WITH
Amended and Restated Bylaws of Washington Real Estate
Investment Trust, as adopted on May 17, 2011
Indenture dated as of August 1, 1996 between WRIT and The
First National Bank of Chicago
Form of 2028 Notes
Officer’s Certificate Establishing Terms of the 2013 Notes, dated
March 12, 2003
Form of 2013 Notes
Officers’ Certificate Establishing Terms of the 2014 Notes, dated
December 8, 2003
Form of 2014 Notes
Form of 5.35% Senior Notes due May 1, 2015 dated April 26, 2005
Officers Certificate establishing the terms of the 2012 and 2015
Notes, dated April 20, 2005
Form of 5.35% Senior Notes due May 1, 2015 dated October 6, 2005
Officers Certificate establishing the terms of the 2015 Notes,
dated October 3, 2005
Supplemental Indenture by and between WRIT and the Bank of
New York Trust Company, N.A. dated as of July 3, 2007
Credit agreement dated June 29, 2007 by and among WRIT, as
borrower, the financial institutions party thereto as lenders, and
SunTrust Bank as agent
fILING
dATE
4/1/2011
5/23/2011
B
3.3
8-k
001-06622
8-k
001-06622
(c)
8/13/1996
8-k
8-k
8-k
8-k
8-k
8-k
8-k
8-k
8-k
001-06622
001-06622
99.1
4(a)
2/25/1998
3/17/2003
001-06622
001-06622
4(b)
4(a)
3/17/2003
12/11/2003
001-06622
4(b)
12/11/2003
001-06622
001-06622
001-06622
001-06622
4.2
4.3
4.1
4.2
4/26/2005
4/26/2005
10/6/2005
10/6/2005
8-k
001-06622
4.1
7/5/2007
8-k
001-06622
4.1
7/6/2007
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
64
AnnuAl RepoRt 2012 FoRM 10-K
EXHIBIT
NUMBER EXHIBIT dEScRIPTION
Multifamily Note Agreement (Walker House Apartments) dated
as of May 29, 2008, by and between WRIT and Wells Fargo Bank,
National Association
Multifamily Note Agreement (3801 Connecticut Avenue) dated
as of May 29, 2008, by and between WRIT and Wells Fargo Bank,
National Association
Multifamily Note Agreement (Bethesda Hill Apartments) dated
as of May 29, 2008, by and between WRIT and Wells Fargo Bank,
National Association
Form of 4.95% Senior Notes due October 1, 2020
Officers’ Certificate establishing the terms of the 4.95% Senior
Notes due October 1, 2020
Credit Agreement, dated as of July 1, 2011, by and among
Washington Real Estate Investment Trust, as borrower, the
financial institutions party thereto as lenders, each of The Bank
of New York Mellon, Citibank, N.A. and Credit Suisse AG,
Cayman Islands Branch as a documentation agent, Wells Fargo
Securities, LLC, as lead arranger and bookrunner, and Wells
Fargo Bank, National Association, as administrative agent.
Second Amendment to Credit Agreement, dated as of
December 23, 2011, with Suntrust Bank.
Amended and Restated Credit Agreement, dated as of May 17,
2012, by and among Washington Real Estate Investment Trust,
as borrower, the financial institutions party thereto as lenders,
each of The Bank of New York Mellon, Citibank, N.A. and Credit
Suisse AG, Cayman Islands Branch as a documentation agent,
Wells Fargo Securities, LLC, as lead arranger and bookrunner, and
Wells Fargo Bank, National Association, as administrative agent.
Amended and Restated Credit Agreement, dated as of June 25,
2012, by and among Washington Real Estate Investment Trust,
as borrower, the financial institutions party thereto as lenders,
SunTrust Robinson Humphrey, Inc., as sole lead arranger and
bookrunner, and SunTrust Bank, as administrative agent.
Form of 3.95% Senior Notes due October 15, 2022
Officers’ Certificate establishing the terms of 3.95% Notes due
October 15, 2022
2001 Stock Option Plan
Share Purchase Plan
Supplemental Executive Retirement Plan
Description of WRIT Short-term and Long-term Incentive Plan
Description of WRIT Revised Trustee Compensation Plan
Supplemental Executive Retirement Plan
2007 Omnibus Long Term Incentive Plan
Deferred Compensation Plan for Directors dated December 1, 2000
Deferred Compensation Plan for Officers dated January 1, 2007
Supplemental Executive Retirement Plan II dated May 23, 2007
INcORPORATEd By REfERENcE
fILE
fORM
NUMBER EXHIBIT
fILING
dATE
10-Q 001-06622
4
8/8/2008
fILEd
HERE-
WITH
10-Q 001-06622
4.0
8/8/2008
10-Q 001-06622
4.0
8/8/2008
8-k
8-k
001-06622
001-06622
4.1
4.2
9/30/2010
9/30/2010
8-k
001-06622
4.1
7/6/2011
10-k
001-06622
4.21
2/27/2012
8-k
001-06622
4.1
5/18/2012
8-k
001-06622
4.1
6/27/2012
8-k
8-k
001-06622
001-06622
4.1
4.2
9/17/2012
9/17/2012
Def 14a 001-06622
a
3/29/2001
10-Q 001-06622
10(j)
11/14/2002
10-Q 001-06622
10(k) 11/14/2002
10-k
10-k
10-k
001-06622
10(l)
3/16/2005
001-06622 10(m)
3/16/2005
001-06622
10(p)
3/16/2006
Def 14a 001-06622
B
4/9/2007
10-k
10-k
10-k
001-06622
10(ff)
2/29/2008
001-06622 10(gg)
2/29/2008
001-06622 10(hh) 2/29/2008
4.13
4.14
4.15
4.16
4.17
4.18
4.19
4.20
4.21
4.22
4.23
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
Amended Long Term Incentive Plan, effective January 1, 2008
10-Q 001-06622
10(ii)
5/9/2008
65
FORM 10-K AnnuAl RepORt 2012 EXHIBIT
NUMBER EXHIBIT dEScRIPTION
Form of Indemnification Agreement by and between WRIT and
the indemnitee
Long Term Incentive Plan, effective January 1, 2009
Short Term Incentive Plan, effective January 1, 2009
Amended and Restated Deferred Compensation Plan for
Directors, adopted October 27, 2010
Executive Stock Ownership Policy, adopted October 27, 2010
Amendment to Deferred Compensation Plan for Officers,
adopted October 27, 2010
INcORPORATEd By REfERENcE
fILE
fORM
NUMBER EXHIBIT
fILING
dATE
8-k
001-06622 10(nn) 7/27/2009
fILEd
HERE-
WITH
10-k
10-k
001-06622
10.28
2/26/2010
001-06622
10.29
2/26/2010
10-Q 001-06622
10.30
11/4/2010
8-k
8-k
001-06622
10.31
11/2/2010
001-06622
10.32
11/2/2010
Long Term Incentive Plan, effective January 1, 2011
10-Q 001-06622
10.34
5/6/2011
Short Term Incentive Plan, effective January 1, 2011
10-Q 001-06622
10.35
5/6/2011
Deferred Compensation Plan for Directors, effective January 1, 2011
10-Q 001-06622
10.36
5/6/2011
Purchase and Sale Agreement, dated as of August 5, 2011, for
8880 Gorman Road, Dulles South IV, Fullerton Business Center,
Hampton Overlook and Alban Business Center.
Purchase and Sale Agreement, dated as of August 5, 2011, for
Pickett Industrial Park and Northern Virginia Industrial Park I.
Purchase and Sale Agreement, dated as of August 5, 2011, for
Albemarle Point, 270 Technology Park I, 270 Technology Park
II, The Crescent, Fullerton Industrial Center, Sully Square, 9950
Business Parkway, Hampton South Phase I, Hampton South
Phase II and 8900 Telegraph Road.
Purchase and Sale Agreement, dated as of August 5, 2011, for
Northern Virginia Industrial Park II.
Purchase and Sale Agreement, dated as of August 5, 2011, for
6100 Colombia Park Road, Dulles Business Park I and Dulles
Business Park II.
First Amendment to Purchase and Sale Agreement, dated as of
October 5, 2011, for 6100 Columbia Park Road, Dulles Business
Park I and Dulles Business Park II.
Amended and restated change in control agreement dated
December 1, 2011 with George F. McKenzie
Amended and restated change in control agreement dated
December 1, 2011 with William T. Camp
Amended and restated change in control agreement dated
December 1, 2011 with Laura M. Franklin
Amended and restated change in control agreement dated
December 1, 2011 with Thomas C. Morey
Amended and restated change in control agreement dated
December 1, 2011 with Thomas L. Regnell
Amended and restated change in control agreement dated
December 1, 2011 with Michael S. Paukstitus
Amended and restated change in control agreement dated
December 1, 2011 with James B. Cederdahl
8-k
001-06622
10.37
8/9/2011
8-k
001-06622
10.38
8/9/2011
8-k
001-06622
10.39
8/9/2011
8-k
001-06622
10.40
8/9/2011
8-k
001-06622
10.41
8/9/2011
8-K/A
001-06622
10.42
10/6/2011
10-k
001-06622
10.31
2/27/2012
10-k
001-06622
10.32
2/27/2012
10-k
001-06622
10.33
2/27/2012
10-k
001-06622
10.34
2/27/2012
10-k
001-06622
10.35
2/27/2012
10-k
001-06622
10.36
2/27/2012
10-k
001-06622
10.37
2/27/2012
Short Term Incentive Plan, effective January 1, 2012
10-Q 001-06622
10.38
5/7/2012
Separation Agreement and General Release between
Michael S. Paukstitus and Washington Real Estate
Investment Trust dated February 7, 2013
8-k
001-06622
10.1
2/13/2013
10.12*
10.13*
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21
10.22
10.23
10.24
10.25
10.26
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
66
AnnuAl RepoRt 2012 FoRM 10-K EXHIBIT
NUMBER EXHIBIT dEScRIPTION
10.36
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
10.43*
10.44*
12
21
23.1
24
31.1
31.2
31.3
32
101
Sales Agency Financing Agreement, dated June 22, 2012
between WRIT and BNY Mellon Capital Markets, LLC
Amendment to Deferred Compensation Plan for Officers,
adopted December 31, 2012
Amended and restated change in control agreement dated
February 27, 2013 with George F. McKenzie
Amended and restated change in control agreement dated
February 27, 2013 with William T. Camp
Amended and restated change in control agreement dated
February 27, 2013 with Laura M. Franklin
Amended and restated change in control agreement dated
February 25, 2013 with Thomas C. Morey
Amended and restated change in control agreement dated
February 26, 2013 with Thomas L. Regnell
Amended and restated change in control agreement dated
February 26, 2013 with James B. Cederdahl
Change in control agreement dated February 26, 2013 with
Paul S. Weinschenk
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of Registrant
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended
(“the Exchange Act”)
Certification of the Executive Vice President—Accounting and
Administration pursuant to Rule 13a-14(a) of the Exchange Act
Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) of the Exchange Act
Certification of the Chief Executive Officer, Executive Vice
President—Accounting and Administration (Principal Accounting
Officer) and Chief Financial Officer pursuant to Rule 13a-14(b) of
the Exchange Act and 18U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
The following materials from our Annual Report on Form 10-K
for the year ended December 31, 2012 formatted in eXtensible
Business Reporting Language (“XBRL”): (i) the Consolidated
Balance Sheets, (ii) the Consolidated Statements of Income, (iii)
the Consolidated Statements of Comprehensive Income, (iv)
the Consolidated Statements of Shareholders’ Equity, (v) the
Consolidated Statements of Cash Flows, and (vi) notes to these
consolidated financial statements.
INcORPORATEd By REfERENcE
fILE
fORM
NUMBER EXHIBIT
fILING
dATE
8-k
001-06622
1.1
6/22/2012
fILEd
HERE-
WITH
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
*Management contracts or compensation plans or arrangements in which trustees or executive officers are eligible to participate.
In accordance with Item 601(b)(4)(iii)(A) of Regulation S-K, copies of certain instruments defining the rights of holders of long-term debt of WRIT or its subsidiaries are not
filed herewith. Pursuant to this regulation, we hereby agree to furnish a copy of any such instrument to the SEC upon request.
67
FORM 10-K AnnuAl RepORt 2012 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 27, 2013
Washington Real estate investment tRust
By: /s/ George F. McKenzie
George F. McKenzie
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
/s/ John P. McDaniel*
Chairman, Trustee
John P. McDaniel
dATE
February 27, 2013
/s/ George F. McKenzie
President, Chief Executive Officer and Trustee
February 27, 2013
George F. McKenzie
/s/ William G. Byrnes*
Trustee
William G. Byrnes
/s/ Edward S. Civera*
Trustee
Edward S. Civera
/s/ Terence C. Golden*
Trustee
Terence C. Golden
/s/ Charles T. Nason*
Trustee
Charles T. Nason
/s/ Thomas Edgie Russell, III*
Trustee
Thomas Edgie Russell, III
/s/ Wendelin A. White*
Trustee
Wendelin A. White
/s/ Anthony L. Winns*
Trustee
Anthony L. Winns
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
February 27, 2013
/s/ William T. Camp
Executive Vice President and Chief Financial Officer
February 27, 2013
William T. Camp
(Principal Financial Officer)
/s/ Laura M. Franklin
Executive Vice President Accounting, Administration and
February 27, 2013
Laura M. Franklin
Corporate Secretary (Principal Accounting Officer)
* By: /s/ Laura M. Franklin through power of attorney
Laura M. Franklin
68
AnnuAl RepoRt 2012 FoRM 10-K MANAGEMENT’S REPORT ON INTERNAL cONTROL OVER fINANcIAL REPORTING
Management of Washington Real Estate Investment Trust (“WRIT”) is responsible for establishing and maintaining adequate
internal control over financial reporting and for the assessment of the effectiveness of internal controls over financial report-
ing. WRIT’s internal control system over financial reporting is a process designed under the supervision of WRIT’s principal
executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of the consolidated financial statements in accordance with U.S. generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined
to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions.
In connection with the preparation of WRIT’s annual consolidated financial statements, management has undertaken an
assessment of the effectiveness of WRIT’s internal control over financial reporting as of December 31, 2012, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO Framework). Management’s assessment included an evaluation of the design of WRIT’s internal con-
trol over financial reporting and testing of the operational effectiveness of those controls.
Based on this assessment, management has concluded that as of December 31, 2012, WRIT’s internal control over financial
reporting was effective at a reasonable assurance level regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Ernst & Young LLP, the independent registered public accounting firm that audited WRIT’s consolidated financial statements
included in this report, have issued an unqualified opinion on the effectiveness of WRIT’s internal control over financial report-
ing, a copy of which appears on the next page of this annual report.
69
FORM 10-K AnnuAl RepORt 2012 REPORT Of INdEPENdENT REGISTEREd PUBLIc AccOUNTING fIRM
The Board of Trustees and Shareholders of
Washington Real Estate Investment Trust
We have audited the accompanying consolidated balance sheets of Washington Real Estate Investment Trust and Subsidiaries
as of December 31, 2012 and 2011, and the related consolidated statements of income, comprehensive income, sharehold-
ers’ equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the
financial statement schedule listed in the Index at Item 15(A). These financial statements and schedule are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based
on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial state-
ments are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Washington Real Estate Investment Trust and Subsidiaries at December 31, 2012 and 2011, and the consolidated
results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in
conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Washington Real Estate Investment Trust and Subsidiaries’ internal control over financial reporting as of December 31, 2012,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated February 27, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 27, 2013
70
AnnuAl RepoRt 2012 FoRM 10-K REPORT Of INdEPENdENT REGISTEREd PUBLIc AccOUNTING fIRM
The Board of Trustees and Shareholders of
Washington Real Estate Investment Trust
We have audited Washington Real Estate Investment Trust and Subsidiaries’ internal control over financial reporting as of
December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Washington Real Estate Investment Trust’s
management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dis-
positions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expendi-
tures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Washington Real Estate Investment Trust and Subsidiaries maintained, in all material respects, effective inter-
nal control over financial reporting as of December 31, 2012, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Washington Real Estate Investment Trust and Subsidiaries as of December 31, 2012 and
2011, and the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for
each of the three years in the period ended December 31, 2012 of Washington Real Estate Trust and Subsidiaries and our
report dated February 27, 2013 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
McLean, Virginia
February 27, 2013
71
FORM 10-K AnnuAl RepORt 2012 cONSOLIdATEd BALANcE SHEETS
As of december 31, 2012 and 2011
(in thousands, except per share data)
Assets
land
Income producing property
Accumulated depreciation and amortization
Net income producing property
Properties under development or held for future development
Total real estate held for investment, net
Investment in real estate sold or held for sale, net
Cash and cash equivalents
Restricted cash
Rents and other receivables, net of allowance for doubtful accounts
of $10,958 and $8,683, respectively
Prepaid expenses and other assets
Other assets related to properties sold or held for sale
Total assets
Liabilities
Notes payable
Mortgage notes payable
Lines of credit
Accounts payable and other liabilities
Advance rents
Tenant security deposits
Other liabilities related to properties sold or held for sale
Total liabilities
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:
66,437 and 66,265 shares issued and outstanding at December 31, 2012
and 2011, respectively
Additional paid in capital
Distributions in excess of net income
Total shareholders’ equity
Noncontrolling interests in subsidiaries
Total equity
dEcEMBER 31,
2012
2011
$ 483,198
$ 465,445
1,979,348
2,462,546
(604,614)
1,857,932
49,135
1,907,067
11,528
19,324
14,582
57,076
114,541
258
1,899,440
2,364,885
(521,503)
1,843,382
43,089
1,886,471
27,669
12,765
19,229
53,227
120,075
1,322
$2,124,376
$2,120,758
$ 906,190
342,970
$ 657,470
423,291
—
52,823
16,096
9,936
218
99,000
51,079
13,584
8,728
4,774
1,328,233
1,257,926
—
664
1,145,515
(354,122)
792,057
4,086
796,143
—
662
1,138,478
(280,096)
859,044
3,788
862,832
Total liabilities and shareholders’ equity
$2,124,376
$2,120,758
See accompanying notes to the consolidated financial statements.
72
AnnuAl RepoRt 2012 FoRM 10-K cONSOLIdATEd STATEMENTS Of INcOME
for the years Ended december 31, 2012, 2011 and 2010
(in thousands, except per share data)
Revenue
Real estate rental revenue
Expenses
Utilities
Real estate taxes
Repairs and maintenance
Property administration
Property management
Operating services and common area maintenance
Other real estate expenses
Depreciation and amortization
Acquisition costs
Real estate impairment
General and administrative
Real estate operating income
Other income (expense)
Interest expense
Other income
Gain from non-disposal activities
Loss on extinguishment of debt
Income (loss) from continuing operations
Discontinued operations:
Income from operations of properties sold or held for sale
Gain on sale of real estate
Income tax expense
Net income
Less: Net income attributable to noncontrolling interests in subsidiaries
Net income attributable to the controlling interests
Basic net income (loss) attributable to the controlling interests per share
Continuing operations
Discontinued operations, including gain on sale of real estate
Net income attributable to the controlling interests per share
Diluted net income (loss) attributable to the controlling interests per share
Continuing operations
Discontinued operations, including gain on sale of real estate
Net income attributable to the controlling interests per share
Weighted average shares outstanding—basic
Weighted average shares outstanding—diluted
Dividends declared and paid per share
See accompanying notes to the consolidated financial statements.
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
$304,983
$284,156
$253,127
19,421
31,516
14,198
10,433
10,130
14,971
2,607
103,067
234
2,097
15,488
224,162
80,821
(64,697)
975
—
—
(63,722)
17,099
1,485
5,124
—
23,708
—
23,708
19,397
26,855
13,231
9,528
8,773
14,502
3,056
91,805
3,607
14,526
15,728
221,008
63,148
(66,214)
1,144
—
(976)
(66,046)
(2,898)
11,923
97,491
(1,138)
105,378
(494)
104,884
17,608
24,644
11,685
8,527
7,158
13,236
1,887
78,483
1,161
—
14,406
178,795
74,332
(66,965)
1,193
7
(9,176)
(74,941)
(609)
16,569
21,599
—
37,559
(133)
37,426
$ 0.25
0.10
$ 0.35
$ 0.25
0.10
$ 0.35
66,239
66,376
$ 1.4675
$ (0.04)
1.62
$ 1.58
$ (0.01)
0.61
$ 0.60
$ (0.04)
1.62
$ 1.58
65,982
65,982
$ 1.7350
$ (0.01)
0.61
$ 0.60
62,140
62,140
$ 1.7313
73
FORM 10-K AnnuAl RepORt 2012 cONSOLIdATEd STATEMENTS Of cOMPREHENSIVE INcOME
for the years Ended december 31, 2012, 2011 and 2010
(in thousands)
Net income
Other comprehensive income:
Change in fair value of interest rate hedge
Comprehensive income
Less: Net income attributable to noncontrolling interests
yEAR ENdEd dEcEMBER 31,
2011
$105,378
2010
$37,559
1,469
106,847
(494)
288
37,847
(133)
2012
$23,708
—
23,708
—
Comprehensive income attributable to the controlling interests
$23,708
$106,353
$37,714
See accompanying notes to the consolidated financial statements.
74
AnnuAl RepoRt 2012 FoRM 10-K cONSOLIdATEd STATEMENTS Of SHAREHOLdERS’ EqUITy
for the years Ended december 31, 2012, 2011 and 2010
dISTRIBU-
TIONS IN
EXcESS
Of NET
INcOME
ATTRIBUT-
ABLE TO
THE cON-
TROLLING
INTERESTS
SHARES
Of BEN-
EfIcIAL
INTEREST
AT PAR
VALUE
AddI-
TIONAL
PAId IN
cAPITAL
AccU-
MULATEd
OTHER
cOMPRE-
HENSIVE
INcOME
TOTAL
SHARE-
HOLdERS’
EqUITy
NONcON-
TROLLING
INTERESTS
IN SUBSId-
IARIES
TOTAL
EqUITy
(in thousands)
SHARES
Balance, December 31, 2009
59,811
$599
$ 944,825 $(198,412)
$(1,757)
$ 745,255
$3,808
$ 749,063
Net income attributable to
the controlling interests
Net income attributable to
noncontrolling interests
Change in fair value of
interest rate hedge
Distributions to
noncontrolling interests
Dividends
Equity offerings, net of
issuance costs
Shares issued under Dividend
Reinvestment Program
Share options exercised
Share grants, net of share
grant amortization and
forfeitures
—
—
—
—
—
5,645
175
164
—
—
—
—
—
56
2
2
—
—
—
—
37,426
—
—
— (108,949)
168,824
5,284
3,961
—
—
—
—
—
—
37,426
—
37,426
—
133
288
288
—
133
288
—
—
—
—
—
—
—
(163)
(163)
(108,949)
168,880
5,286
3,963
4,931
—
—
—
—
—
(108,949)
168,880
5,286
3,963
4,931
75
—
4,931
Balance, December 31, 2010
65,870
$659
$1,127,825 $(269,935)
$(1,469)
$ 857,080
$3,778
$ 860,858
See accompanying notes to the consolidated financial statements.
75
FORM 10-K AnnuAl RepORt 2012 cONSOLIdATEd STATEMENTS Of SHAREHOLdERS’ EqUITy
for the years Ended december 31, 2012, 2011 and 2010
dISTRIBU-
TIONS IN
EXcESS
Of NET
INcOME
ATTRIBUT-
ABLE TO
THE cON-
TROLLING
INTERESTS
SHARES
Of BEN-
EfIcIAL
INTEREST
AT PAR
VALUE
AddI-
TIONAL
PAId IN
cAPITAL
AccU-
MULATEd
OTHER
cOMPRE-
HENSIVE
INcOME
TOTAL
SHARE-
HOLdERS’
EqUITy
NONcON-
TROLLING
INTERESTS
IN SUBSId-
IARIES
TOTAL
EqUITy
(in thousands)
SHARES
Balance, December 31, 2010
65,870
$659
$1,127,825 $ (269,935)
$(1,469)
$ 857,080
$ 3,778
$ 860,858
Net income attributable to
the controlling interests
Net income attributable to
noncontrolling interests
Change in fair value of
interest rate hedge
Distributions to
noncontrolling interests
Contribution from
noncontrolling interest
Dividends
Shares issued under Dividend
Reinvestment Program
Share options exercised
Share grants, net of share
grant amortization and
forfeitures
—
—
—
—
—
—
170
51
—
—
—
—
—
—
2
1
— 104,884
—
—
—
—
—
—
—
—
— (115,045)
5,041
1,291
—
—
—
—
—
104,884
—
104,884
—
494
494
1,469
1,469
—
1,469
—
—
—
—
—
—
—
—
(115,045)
5,043
1,292
4,321
(2,488)
(2,488)
2,004
2,004
—
—
—
—
(115,045)
5,043
1,292
4,321
174
—
4,321
Balance, December 31, 2011
66,265
$662
$1,138,478 $ (280,096)
$ — $ 859,044
$ 3,788
$ 862,832
See accompanying notes to the consolidated financial statements.
76
AnnuAl RepoRt 2012 FoRM 10-K cONSOLIdATEd STATEMENTS Of SHAREHOLdERS’ EqUITy
for the years Ended december 31, 2012, 2011 and 2010
dISTRIBU-
TIONS IN
EXcESS
Of NET
INcOME
ATTRIBUT-
ABLE TO
THE cON-
TROLLING
INTERESTS
SHARES
Of BEN-
EfIcIAL
INTEREST
AT PAR
VALUE
AddI-
TIONAL
PAId IN
cAPITAL
AccU-
MULATEd
OTHER
cOMPRE-
HENSIVE
INcOME
TOTAL
SHARE-
HOLdERS’
EqUITy
NONcON-
TROLLING
INTERESTS
IN SUBSId-
IARIES
TOTAL
EqUITy
(in thousands)
SHARES
Balance, December 31, 2011
66,265
$662
$1,138,478 $(280,096)
$ —
$859,044
$3,788
$862,832
Net income attributable to
the controlling interests
Contribution from
noncontrolling interest
Dividends
Shares issued under Dividend
Reinvestment Program
Share options exercised
Share grants, net of share
grant amortization and
forfeitures
—
—
—
55
45
72
—
—
—
1
—
1
—
—
—
1,315
1,153
4,569
23,708
—
(97,734)
—
—
—
Balance, December 31, 2012
66,437
$664
$1,145,515 $(354,122)
See accompanying notes to the consolidated financial statements.
—
—
—
—
—
—
$ —
23,708
—
23,708
—
(97,734)
1,316
1,153
4,570
298
—
—
—
—
298
(97,734)
1,316
1,153
4,570
$792,057
$4,086
$796,143
77
FORM 10-K AnnuAl RepORt 2012 cONSOLIdATEd STATEMENTS Of cASH fLOWS
for the years Ended december 31, 2012, 2011 and 2010
(in thousands)
Cash flows from operating activities
Net income
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
$ 23,708
$ 105,378
$ 37,559
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of real estate
(5,124)
(97,491)
(21,599)
Depreciation and amortization, including amounts in discontinued operations
103,934
100,528
Provision for losses on accounts receivable
Real estate impairment, including amounts in discontinued operations
Share-based compensation expense
Amortization of debt premiums, discounts and related financing costs
Loss on extinguishment of debt, net
Changes in other assets
Changes in other liabilities
3,847
2,097
5,856
3,867
—
(8,803)
1,721
4,005
15,125
5,597
3,194
—
(16,187)
(2,294)
95,746
4,150
—
5,852
5,532
9,176
(20,974)
(3,509)
Net cash provided by operating activities
131,103
117,855
111,933
Cash flows from investing activities
Real estate acquisitions, net(1)
Capital improvements to real estate
Development in progress
Net cash received from sale of real estate
Non-real estate capital improvements
(52,142)
(51,180)
(6,494)
21,825
(555)
(281,701)
(155,881)
(32,815)
(25,929)
402,164
(621)
(25,045)
(1,337)
71,505
(392)
Net cash (used in) provided by investing activities
(88,546)
61,098
(111,150)
Cash flows from financing activities
Line of credit repayments, net
Dividends paid
Net contributions from (distributions to) noncontrolling interests
Proceeds from dividend reinvestment program
Principal payments—mortgage notes payable
Proceeds from debt offering
Payment of financing costs
Net proceeds from equity offerings
(99,000)
(97,734)
298
1,316
(1,000)
(28,000)
(115,045)
(108,949)
(2,488)
5,043
(163)
5,286
(85,667)
(32,331)
(25,985)
298,314
—
247,998
(4,678)
(3,905)
(2,450)
—
—
168,880
Notes payable repayments, including penalties for early extinguishment
(50,000)
(96,521)
(193,799)
Net proceeds from exercise of share options
Net cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
1,153
1,292
(35,998)
(244,955)
6,559
12,765
(66,002)
78,767
3,963
66,781
67,564
11,203
$ 19,324
$ 12,765
$ 78,767
Cash paid for interest, net of capitalized interest expense
Cash paid for income taxes
$ 58,282
$ 63,916
$ 60,622
$ 84
$ 725
$ —
(1) See note 3 to the consolidated financial statements for the supplemental disclosure of non-cash investing and financing activities, including the assumption of mortgage
debt in conjunction with some of our real estate acquisitions.
See accompanying notes to the consolidated financial statements.
78
AnnuAl RepoRt 2012 FoRM 10-K NOTES TO cONSOLIdATEd fINANcIAL STATEMENTS
for the years Ended december 31, 2012, 2011 and 2010
NOTE 1. NATURE Of BUSINESS
Washington Real Estate Investment Trust (“WRIT”), a Maryland real estate investment trust, is a self-administered, self-
managed equity real estate investment trust, successor to a trust organized in 1960. Our business consists of the ownership
and operation of income-producing real estate properties in the greater Washington Metro region. We own a diversified
portfolio of office buildings, medical office buildings, multifamily buildings and retail centers.
Federal Income Taxes
We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code
and intend to continue to qualify as such. To maintain our status as a REIT, we are required to distribute 90% of our ordi-
nary taxable income to our shareholders. When selling properties, we have the option of (a) reinvesting the sale proceeds of
properties sold, allowing for a deferral of income taxes on the sale, (b) paying out capital gains to the shareholders with no
tax to WRIT or (c) treating the capital gains as having been distributed to the shareholders, paying the tax on the gain deemed
distributed and allocating the tax paid as a credit to the shareholders. During the three years ended December 31, 2012, we
sold the following properties (in thousands):
dISPOSITION dATE
PROPERTy
August 31, 2012
December 20, 2012
Total 2012
April 5, 2011
Various(1)
Total 2011
June 18, 2010
December 21, 2010
December 22, 2010
Total 2010
TyPE
Office
1700 Research Boulevard
Plumtree Medical Center
Medical Office
Dulles Station, Phase I
Industrial Portfolio(1)
Office
Office/Industrial
Parklawn Portfolio(2)
Office/Industrial
The Ridges
Ammendale I&II/Amvax
Office
Industrial
GAIN ON SALE
$ 3,724
1,400
$ 5,124
$ —
97,491
$97,491
$ 7,942
4,441
9,216
$21,599
(1) The Industrial Portfolio consists of every property in our industrial segment and two office properties (the Crescent and Albemarle Point), and we closed on the sale on
three separate dates. On September 2, 2011, we closed on the sale of the two office properties (the Crescent and Albemarle Point) and 8880 Gorman Road, Dulles
South IV, Fullerton Business Center, Hampton Overlook, Alban Business Center, Pickett Industrial Park, Northern Virginia Industrial Park I, 270 Technology Park,
Fullerton Industrial Center, Sully Square, 9950 Business Parkway, Hampton South and 8900 Telegraph Road. On October 3, 2011, we closed the sale of Northern
Virginia Industrial Park II. On November 1, 2011, we closed on the sale of 6100 Columbia Park Road and Dulles Business Park I and II.
(2) The Parklawn Portfolio consists of three office properties (Parklawn Plaza, Lexington Building and Saratoga Building) and one industrial property (Charleston Business Center).
A portion of the sales proceeds were reinvested in replacement properties, with the remainder paid out to the shareholders.
Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on
undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS’s”). Our TRS’s
are subject to corporate federal and state income tax on their taxable income at regular statutory rates, or as calculated under
the alternative minimum tax, as appropriate. On April 5, 2011, we settled on the sale of Dulles Station, Phase I, an office prop-
erty held by one of our TRS’s. After the application of available net operating loss carryforwards, we recognized $1.1 million in
net federal and state income tax liabilities during 2011 in connection with the sale and operations of the entities.
During the fourth quarter of 2011, we recognized a $14.5 million impairment charge at Dulles Station, Phase II, a development
property held by one of our TRS’s (see note 3, Real Estate Investments). The impairment charge created a deferred tax asset
of $5.7 million at this TRS, but we have determined that it is more likely than not that this deferred tax asset will not be real-
ized. We have therefore recorded a valuation allowance for the full amount of the deferred tax asset related to the impairment
charge at Dulles Station, Phase II.
79
FORM 10-K AnnuAl RepORt 2012 As of December 31, 2012, our TRS’s had no net deferred tax asset and a deferred tax liability of $0.6 million. As of December 31,
2011, our TRS’s had a net deferred tax asset of $0.1 million and a net deferred tax liability of $0.5 million. These are primarily
related to temporary differences in the timing of the recognition of revenue, amortization and depreciation. There were no
material income tax provisions or material net deferred income tax items for our TRS’s for the year ended December 31, 2010.
The following is a breakdown of the taxable percentage of our dividends for the years ended December 31, 2012, 2011 and
2010, (unaudited):
Ordinary income
Return of capital
Qualified dividends
Unrecaptured Section 1250 gain
Capital gain
2012
72%
26%
—
2%
—
2011
60%
17%
5%
13%
5%
2010
55%
31%
—
11%
3%
NOTE 2. SUMMARy Of SIGNIfIcANT AccOUNTING POLIcIES
Principles of Consolidation and Basis of Presentation
The accompanying audited consolidated financial statements include the consolidated accounts of WRIT, our majority-owned
subsidiaries and entities in which WRIT has a controlling interest, including where WRIT has been determined to be a pri-
mary beneficiary of a variable interest entity (“VIE”). See note 3 for additional information on the properties for which there
is a noncontrolling interest. All intercompany balances and transactions have been eliminated in consolidation.
We have prepared the accompanying audited consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. In addition, in the opinion of management, all adjustments (consisting of normal recur-
ring accruals) considered necessary for a fair presentation of the results for the periods presented have been included.
Use of Estimates in the Financial Statements
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires
management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and dis-
closure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2011-
04, Fair Value Measurement, which requires new disclosures about fair value measurements. Specifically, additional disclosures
are required regarding significant unobservable inputs used for Level 3 fair value measurements, a company’s valuation process,
transfers between Levels 1 and 2 and hierarchy classifications for items whose fair value is not recorded on the balance sheet,
but disclosed in the notes. For WRIT, the primary impact of this ASU was to require disclosure of the hierarchy classifications
(Level 1, 2 or 3) for our disclosures of the fair values of financial instruments in our notes to the consolidated financial state-
ments. We adopted this ASU on January 1, 2012.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income, which requires the presentation of comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This ASU
eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in
shareholders’ equity. This ASU is effective for fiscal years (including interim periods) beginning after December 15, 2011. We
adopted this ASU on January 1, 2012 with the presentation of a separate statement of comprehensive income.
80
AnnuAl RepoRt 2012 FoRM 10-K Revenue Recognition
We lease multifamily properties under operating leases with terms of generally one year or less. We lease commercial prop-
erties (our office, medical office and retail segments) under operating leases with average terms of three to five years. We
recognize rental income and rental abatements from our multifamily and commercial leases when earned on a straight-line
basis over the lease term. Recognition of rental income commences when control of the facility has been given to the tenant.
We record a provision for losses on accounts receivable equal to the estimated uncollectible amounts. We base this estimate
on our historical experience and a review of the current status of our receivables. We recognize percentage rents, which
represent additional rents based on gross tenant sales, when tenants’ sales exceed specified thresholds.
We recognize sales of real estate at closing only when sufficient down payments have been obtained, possession and other
attributes of ownership have been transferred to the buyer and we have no significant continuing involvement.
We recognize cost reimbursement income from pass-through expenses on an accrual basis over the periods in which the
expenses were incurred. Pass-through expenses are comprised of real estate taxes, operating expenses and common area
maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily represents amounts accrued and unpaid from tenants in accordance with the terms of the
respective leases, subject to our revenue recognition policy. We review receivables monthly and establish reserves when,
in the opinion of management, collection of the receivable is doubtful. We establish reserves for tenants whose rent pay-
ment history or financial condition casts doubt upon the tenants’ ability to perform under their lease obligations. When we
deem the collection of a receivable to be doubtful in the same quarter that we established the receivable, then we recognize
the allowance for that receivable as an offset to real estate revenues. When we deem a receivable that was initially estab-
lished in a prior quarter to be doubtful, then we recognize the allowance as an operating expense. Allowance for doubtful
accounts was $7.3 million and $5.1 million as of December 31, 2010 and 2009, respectively. We established reserves for
doubtful accounts of $3.8 million, $3.8 million and $3.4 million during the years ended December 31, 2012, 2011 and 2010,
respectively. Write-offs of previously reserved accounts receivable totaled $1.5 million, $2.4 million and $1.2 million for the
years ended December 31, 2012, 2011 and 2010, respectively. In addition to rents due currently, accounts receivable include
amounts representing minimal rental income accrued on a straight-line basis to be paid by tenants over the remaining term
of their respective leases.
We include the following notes receivable balances in our accounts receivable balances (in thousands):
Notes receivable, net
Deferred Financing Costs
dEcEMBER 31,
2012
$7,297
2011
$7,348
We capitalize and amortize external costs associated with the issuance or assumption of mortgages, notes payable and fees
associated with the lines of credit using the effective interest rate method or the straight-line method which approximates the
effective interest rate method, over the estimated life of the related debt. As of December 31, 2012 and 2011 deferred financ-
ing costs were included in prepaid expenses and other assets were as follows (in thousands):
dEcEMBER 31,
2012
2011
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
NET
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
Deferred financing costs
$19,622
$8,902
$10,720
$16,131
$7,580
NET
$8,551
81
FORM 10-K AnnuAl RepORt 2012 We record the amortization of deferred financing costs as interest expense. Amortization of deferred financing costs from
continuing operations for the three years ended December 31, 2012 was as follows (in thousands):
Amortization of deferred financing costs
Deferred Leasing Costs
yEAR ENdEd dEcEMBER 31,
2012
$2,478
2011
$2,262
2010
$2,413
We capitalize and amortize costs associated with the successful negotiation of leases, both external commissions and internal
direct costs, on a straight-line basis over the terms of the respective leases. As of December 31, 2012 and 2011, deferred leas-
ing costs included in prepaid expenses and other assets were as follows (in thousands):
dEcEMBER 31,
2012
2011
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
NET
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
Deferred leasing costs
$39,159
$16,348
$22,811
$33,011
$12,511
NET
$20,500
We record the amortization of deferred leasing costs as amortization expense. If an applicable lease terminates prior to the
expiration of its initial lease term, we write off the carrying amount of the costs to amortization expense. Amortization and
writes-offs of deferred leasing costs from continuing operations for the three years ended December 31, 2012 were as follows
(in thousands):
Amortization of deferred leasing costs
yEAR ENdEd dEcEMBER 31,
2012
$4,514
2011
$4,530
2010
$4,357
We capitalize and amortize against revenue leasing incentives associated with the successful negotiation of leases on a straight-
line basis over the terms of the respective leases. As of December 31, 2012 and 2011, deferred leasing incentives included in
prepaid expenses and other assets were as follows (in thousands):
dEcEMBER 31,
2012
2011
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
Deferred leasing incentives
$6,578
$1,698
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
$4,651
$909
NET
$3,742
NET
$4,880
We record the amortization of deferred leasing incentives as a reduction of revenue. If an applicable lease terminates prior to
the expiration of its initial lease term, we write off the carrying amount of the costs as a reduction of revenue. Amortization
and write-offs of deferred leasing costs from continuing operations for the three years ended December 31, 2012 were as
follows (in thousands):
Amortization of deferred leasing incentives
yEAR ENdEd dEcEMBER 31,
2012
$789
2011
$664
2010
$208
82
AnnuAl RepoRt 2012 FoRM 10-K Real Estate and Depreciation
We depreciate buildings on a straight-line basis over estimated useful lives ranging from 28 to 50 years. We capitalize all
capital improvements associated with replacements, improvements or major repairs to real property that extend its useful life
and depreciate them using the straight-line method over their estimated useful lives ranging from 3 to 30 years. We also capi-
talize costs incurred in connection with our development projects, including capitalizing interest and other internal costs dur-
ing periods in which qualifying expenditures have been made and activities necessary to get the development projects ready
for their intended use are in progress. In addition, we capitalize tenant leasehold improvements when certain criteria are met,
including when we supervise construction and will own the improvements. We depreciate all tenant improvements over the
shorter of the useful life of the improvements or the term of the related tenant lease. Real estate depreciation expense from
continuing operations for the three years ended December 31, 2012 was as follows (in thousands):
Real estate depreciation
yEAR ENdEd dEcEMBER 31,
2012
$76,824
2011
$69,753
2010
$63,372
We charge maintenance and repair costs that do not extend an asset’s life to expense as incurred.
We capitalize interest costs incurred on borrowing obligations while qualifying assets are being readied for their intended
use. We amortize capitalized interest over the useful life of the related underlying assets upon those assets being placed into
service. Interest expense from continuing operations and interest capitalized to real estate assets related to development and
major renovation activities for the three years ended December 31, 2012 were as follows (in thousands):
Total interest expense from continuing operations
Capitalized interest
Interest expense, net of capitalized interest
yEAR ENdEd dEcEMBER 31,
2012
$66,385
1,688
$64,697
2011
$66,952
738
$66,214
2010
$67,823
858
$66,965
We recognize impairment losses on long-lived assets used in operations and held for sale, development assets or land held
for future development, if indicators of impairment are present and the net undiscounted cash flows estimated to be gener-
ated by those assets are less than the assets’ carrying amount and estimated undiscounted cash flows associated with future
development expenditures. If such carrying amount is in excess of the estimated cash flows from the operation and disposal
of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its
estimated fair value, calculated in accordance with current GAAP fair value provisions. During the year ended December 31,
2012, we recognized in continuing operations an impairment charge of $2.1 million for the development project at 4661
Kenmore Avenue. During the year ended December 31, 2011, we recognized in continuing operations an impairment charge
of $14.5 million for the development project at Dulles Station, Phase II. In addition, we recognized in discontinued operations
an impairment charge of $0.6 million at Dulles Station, Phase I, which was sold during 2011 (see note 3 for further discussion).
There were no impairments recognized during the year ended December 31, 2010.
We record acquired or assumed assets, including physical assets and in-place leases, and liabilities, based on their fair values.
We determine the fair values of acquired buildings on an “as-if-vacant” basis considering a variety of factors, including the
replacement cost of the property, estimated rental and absorption rates, estimated future cash flows and valuation assump-
tions consistent with current market conditions. We determine the fair value of land acquired based on comparisons to
similar properties that have been recently marketed for sale or sold.
The fair value of in-place leases consists of the following components—(a) the estimated cost to us to replace the leases,
including foregone rents during the period of finding a new tenant and foregone recovery of tenant pass-throughs (referred to
as “absorption cost”); (b) the estimated cost of tenant improvements, and other direct costs associated with obtaining a new
tenant (referred to as “tenant origination cost”); (c) estimated leasing commissions associated with obtaining a new tenant
(referred to as “leasing commissions”); (d) the above/at/below market cash flow of the leases, determined by comparing the
83
FORM 10-K AnnuAl RepORt 2012 projected cash flows of the leases in place to projected cash flows of comparable market-rate leases (referred to as “net lease
intangible”); and (e) the value, if any, of customer relationships, determined based on our evaluation of the specific character-
istics of each tenant’s lease and our overall relationship with the tenant (referred to as “customer relationship value”). We
have attributed no value to customer relationships as of December 31, 2012 and 2011.
We discount the amounts used to calculate net lease intangibles using an interest rate which reflects the risks associated with
the leases acquired. We include tenant origination costs in income producing property on our balance sheet and amortize the
tenant origination costs as depreciation expense on a straight-line basis over the remaining life of the underlying leases. We
classify leasing commissions and absorption costs as other assets and amortize leasing commissions and absorption costs as
amortization expense on a straight-line basis over the remaining life of the underlying leases. We classify net lease intangible
assets as other assets and amortize them on a straight-line basis as a decrease to real estate rental revenue over the remain-
ing term of the underlying leases. We classify net lease intangible liabilities as other liabilities and amortize them on a straight-
line basis as an increase to real estate rental revenue over the remaining term of the underlying leases. Should a tenant termi-
nate its lease, we accelerate the amortization of the unamortized portion of the tenant origination cost, leasing commissions,
absorption costs and net lease intangible associated with that lease, over its new, shorter term.
Balances, net of accumulated depreciation or amortization, as appropriate, of the components of the fair value of in-place
leases at December 31, 2012 and 2011 were as follows (in thousands):
dEcEMBER 31,
2012
2011
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
NET
GROSS
cARRyING
VALUE
AccUMULATEd
AMORTIzATION
Tenant origination costs
$58,444
$32,839
$25,605
$55,640
$25,479
Leasing commissions/
absorption costs
Net lease intangible assets
90,327
14,794
Net lease intangible liabilities
32,093
Below-market ground lease
48,163
7,665
22,336
42,164
7,129
9,757
86,705
14,422
31,991
34,738
5,679
19,293
NET
$30,161
51,967
8,743
12,698
intangible asset
12,080
956
11,124
12,080
766
11,314
Amortization of these combined components from continuing operations for the three years ended December 31, 2012 were
as follows (in thousands):
Amortization
yEAR ENdEd dEcEMBER 31,
2012
$20,636
2011
$15,360
2010
$7,643
Amortization of these combined components from continuing operations over the next five years is projected to be as fol-
lows (in thousands):
2013
2014
2015
2016
2017
$17,382
14,837
12,228
8,984
5,548
Discontinued Operations
We classify properties as held for sale when they meet the necessary criteria, which include: (a) senior management commits
to and actively embarks upon a plan to sell the assets, (b) the sale is expected to be completed within one year under terms
84
AnnuAl RepoRt 2012 FoRM 10-K usual and customary for such sales and (c) actions required to complete the plan indicate that it is unlikely that significant
changes to the plan will be made or that the plan will be withdrawn. We generally consider that a property has met these
criteria when a sale of the property has been approved by the Board of Trustees, or a committee with authorization from the
Board, there are no known significant contingencies related to the sale and management believes it is probable that the sale
will be completed within one year. Depreciation on these properties is discontinued at the time they are classified as held for
sale, but operating revenues, operating expenses and interest expense continue to be recognized until the date of sale.
Revenues and expenses of properties that are either sold or classified as held for sale are presented as discontinued opera-
tions for all periods presented in the consolidated statements of income. Interest on debt that can be identified as specifically
attributed to these properties is included in discontinued operations. We do not have significant continuing involvement in the
operations of any of our disposed properties.
Segments
We evaluate performance based upon operating income from the combined properties in each segment. Our reportable
operating segments are consolidations of similar properties. GAAP requires that segment disclosures present the measure(s)
used by the chief operating decision maker for purposes of assessing segments’ performance. Net operating income is a key
measurement of our segment profit and loss. Net operating income is defined as segment real estate rental revenue less seg-
ment real estate expenses.
Cash and Cash Equivalents
Cash and cash equivalents include investments readily convertible to known amounts of cash with original maturities of 90 days
or less.
Restricted Cash
Restricted cash includes funds escrowed for tenant security deposits, real estate tax, insurance and mortgage escrows and escrow
deposits required by lenders on certain of our properties to be used for future building renovations or tenant improvements.
Earnings Per Common Share
We determine “Basic earnings per share” using the two-class method as our unvested restricted share awards and units have
non-forfeitable rights to dividends, and are therefore considered participating securities. We compute basic earnings per
share by dividing net income attributable to the controlling interest less the allocation of undistributed earnings to unvested
restricted share awards and units by the weighted-average number of common shares outstanding for the period.
We also determine “Diluted earnings per share” under the two-class method with respect to the unvested restricted share
awards. We further evaluate any other potentially dilutive securities at the end of the period and adjust the basic earnings per
share calculation for the impact of those securities that are dilutive. Our dilutive earnings per share calculation includes the
dilutive impact of employee stock options based on the treasury stock method and our performance share units under the
contingently issuable method. The dilutive earnings per share calculation also considers our operating partnership units.
Stock Based Compensation
We currently maintain equity based compensation plans for trustees, officers and employees and previously maintained option
plans for trustees, officers and employees.
We recognize compensation expense for service-based share awards ratably over the period from the service inception date
through the vesting period based on the fair market value of the shares on the date of grant. We initially measure compensation
expense for awards with performance conditions at fair value at the service inception date based on probability of payout, and we
remeasure compensation expense at subsequent reporting dates until all of the award’s key terms and conditions are known and
the grant date is established. We amortize awards with performance conditions over the performance period using the graded
expense method. We measure compensation expense for awards with market conditions based on the grant date fair value, as
determined using a Monte Carlo simulation, and we amortize the expense ratably over the requisite service period, regardless of
whether the market conditions are achieved and the awards ultimately vest. Compensation expense for the trustee grants, which
fully vest immediately, is fully recognized upon issuance based upon the fair market value of the shares on the date of grant.
85
FORM 10-K AnnuAl RepORt 2012 Accounting for Uncertainty in Income Taxes
We can recognize a tax benefit only if it is “more likely than not” that a particular tax position will be sustained upon exami-
nation or audit. To the extent that the “more likely than not” standard has been satisfied, the benefit associated with a tax
position is measured as the largest amount that is greater than 50% likely of being recognized upon settlement.
We are subject to U.S. federal income tax as well as income tax of the states of Maryland and Virginia, and the District of
Columbia. However, as a REIT, we generally are not subject to income tax on our net income distributed as dividends to
our shareholders.
Tax returns filed for 2008 through 2012 tax years are subject to examination by taxing authorities. We classify interest and pen-
alties related to uncertain tax positions, if any, in our financial statements as a component of general and administrative expense.
Derivatives
We enter into interest rate swaps from time to time to manage our exposure to variable interest rate risk. We do not
purchase derivatives for speculation. In February 2008, we entered into an interest rate swap that expired in February 2010.
In May 2009, we entered into a forward interest rate swap that expired in November 2011. Both interest rate swaps quali-
fied as cash flow hedges. Our cash flow hedges were recorded at fair value based on discounted cash flow methodologies
and observable inputs. We recorded the effective portion of changes in fair value of cash flow hedges in other comprehen-
sive income. The change in fair value of cash flow hedges was the only activity in other comprehensive income (loss) during
periods presented in our consolidated financial statements. We assessed the effectiveness of our cash flow hedges both at
inception and on an ongoing basis. We deemed the hedges to be effective for the year ended December 31, 2010 and for sub-
sequent periods prior to expiration in 2011. We had no derivative instruments outstanding as of December 31, 2012 and 2011.
Reclassifications
During the second quarter of 2012, we identified certain immaterial classification errors in our 2011 and 2010 consolidated
statements of income and have determined that in this Annual Report on Form 10-K and future periodic reports we will
correct these reclassification errors by including within the subtotal “real estate operating income” impairment charges and
acquisition costs, which had previously been included in “other income (expense).” These reclassifications totaled $18.1 mil-
lion and $1.2 million for the years ended December 31, 2011 and 2010, respectively. These reclassifications decrease “real
estate operating income” and increase “other income (expense)” by an equal and offsetting amount. As a result, these reclas-
sifications do not change income from continuing operations, net income, cash flows or any other operating measure for the
periods affected.
In addition, certain prior year amounts have been reclassified from continuing operations to discontinued operations to con-
form to the current year presentation (see note 3).
NOTE 3. REAL ESTATE INVESTMENTS
Continuing Operations
As of December 31, 2012 and 2011, our real estate investment portfolio, at cost, consists of properties as follows (in thousands):
Office
Medical office
Retail
Multifamily
86
dEcEMBER 31,
2012
$1,315,633
403,064
411,948
331,901
$2,462,546
2011
$1,234,499
396,532
408,897
324,957
$2,364,885
AnnuAl RepoRt 2012 FoRM 10-K The amounts above reflect properties classified as continuing operations, which means they are to be held and used in rental
operations (income producing property).
Our results of operations are dependent on the overall economic health of our markets, tenants and the specific segments in
which we own properties. These segments include general purpose office, medical office, retail and multifamily. All segments
are affected by external economic factors, such as inflation, consumer confidence, unemployment rates, etc. as well as chang-
ing tenant and consumer requirements.
As of December 31, 2012, no single property or tenant accounted for more than 10% of total assets or total real estate
rental revenue.
We had several properties under development or held for development as of December 31, 2012. In the office segment, we had
land held for development at Dulles Station, Phase II. In the medical office segment, we had land held for development at 4661
Kenmore Avenue. In the multifamily segment, we had land under development at 650 North Glebe Road and 1225 First Street.
The cost of our real estate portfolio under development or held for development as of December 31, 2012 and 2011 is as fol-
lows (in thousands):
Office
Medical office
Retail
Multifamily
dEcEMBER 31,
2012
$ 8,977
3,810
587
35,761
$49,135
2011
$ 8,953
5,758
576
27,802
$43,089
4661 Kenmore Avenue consists of undeveloped land in Alexandria, Virginia intended for development as a medical office
building. During the fourth quarter of 2012, we determined that the development of a medical office building at this site was
no longer probable due to a change in corporate strategy. Due to this determination, we recognized a $2.1 million impairment
charge during the fourth quarter of 2012 in order to reduce the carrying value of the land at 4661 Kenmore Avenue to its
estimated fair value of $3.8 million.
Dulles Station, Phase II consists of undeveloped land in Herndon, Virginia and a half interest in a parking garage that is adjacent
to this land. The land is zoned for development as an office building. During the fourth quarter of 2011, we reviewed changes in
market conditions, specifically higher vacancy and lower rental rates in the Washington metro region office market and other
circumstances affecting the Herndon submarket, such as the increased uncertainty surrounding the timing of the completion
of the second phase of the Dulles Metrorail project, and reassessed the likelihood that we would follow through on these
development plans. Based upon the foregoing review and assessment, we determined that the development of the land at
Dulles Station, Phase II was not probable under those market conditions. Due to this determination, we recognized a $14.5 mil-
lion impairment charge during the fourth quarter of 2011 in order to reduce the carrying value of the land and garage at Dulles
Station, Phase II to its fair value.
We used a combination of internal models and third-party valuation estimates to determine the fair values of 4661 Kenmore
Avenue and Dulles Station, Phase II. These fair valuations incorporated both market and income approaches, including recent
comparable land sales and return on cost of development metrics. The valuations are inherently subjective because there are
few observable market transactions for similar land, and therefore we, through discussions with market participants, made
certain significant assumptions with respect to appropriate comparable transactions to consider, cash flow estimates and
discount rates. Our estimate of the fair value of the land was further corroborated by an independent third-party valuation
specialist. These fair valuations fall into Level 3 in the fair value hierarchy due to its reliance on significant unobservable inputs.
87
FORM 10-K AnnuAl RepORt 2012 Acquisitions
Properties and land for development acquired during the years ending December 31, 2012, 2011 and 2010 were as follows:
TyPE
Office
Office
Office
Retail
Office
Office
AcqUISITION dATE
PROPERTy
June 21, 2012
Total 2012
January 11, 2011
March 30, 2011
June 15, 2011
August 30, 2011
Fairgate at Ballston
1140 Connecticut Ave
1227 25th Street
Olney Village Center
650 North Glebe Road(1)
Mutifamily
September 13, 2011
Braddock Metro Center
September 15, 2011
John Marshall II
November 23, 2011
1225 First Street(1)
Mutifamily
Total 2011
June 3, 2010
925 and 1000 Corporate Drive
December 1, 2010
Gateway Overlook
Office
Retail
Total 2010
(1) Land for development
RENTABLE
SqUARE fEET
(unaudited)
cONTRAcT
PURcHASE PRIcE
(in thousands)
142,000
142,000
188,000
132,000
N/A
198,000
351,000
223,000
N/A
1,092,000
270,000
223,000
493,000
$ 52,250
$ 52,250
$ 80,250
47,000
11,800
58,000
101,000
73,500
13,850
$385,400
$ 68,000
88,350
$156,350
The results of operations from acquired operating properties are included in the consolidated statements of income as of
their acquisition dates.
The revenue and earnings of our acquisitions during the three years ended December 31, 2012 are as follows (in thousands):
Real estate rental revenue
Net income
yEAR ENdEd dEcEMBER 31,
2012
$3,358
325
2011
$20,944
484
2010
$5,575
1,460
As discussed in Note 2, Summary of Significant Accounting Policies, we record the acquired physical assets (land, building
and tenant improvements), in-place leases (absorption, tenant origination costs, leasing commissions, and net lease intangible
assets/liabilities), and any other liabilities at their fair values.
We have recorded the total purchase price of the above acquisitions as follows (in thousands):
land
Buildings
Tenant origination costs
Leasing commissions/absorption costs
Net lease intangible assets
Net lease intangible liabilities
Fair value of assumed mortgage
Total
2012
$17,750
26,893
3,100
4,172
508
(173)
—
2011
$ 90,896
219,613
15,667
29,719
6,805
(2,454)
(78,500)
2010
$ 38,233
93,332
9,094
15,349
1,375
(1,503)
—
$52,250
$281,746
$155,880
88
AnnuAl RepoRt 2012 FoRM 10-K The weighted remaining average life for the 2012 acquisition components above, other than land and building, are 65 months
for tenant origination costs, 59 months for leasing commissions/absorption costs, 76 months for net lease intangible assets
and 29 months for net lease intangible liabilities.
The difference in the contract purchase price of $52.3 million for the 2012 acquisition and the cash paid for the acquisition per
the consolidated statements of cash flows of $52.1 million is related to credits received at settlement totaling $0.1 million.
The difference in the total contract price of $385.4 million for the 2011 acquisitions and the acquisition cost per the consoli-
dated statements of cash flows of $281.7 million is primarily related to the two mortgage notes assumed for $76.7 million relat-
ing to John Marshall II and Olney Village Center, cash paid for the acquisition of land at 650 North Glebe Road for $11.8 million
and at 1225 First Street for $13.9 million included in development, and credits received at settlement totaling $1.3 million.
The difference in total 2010 contract purchase price of $156.4 million and the acquisition cost per the consolidated statements of
cash flows of $155.9 million is due to a credit received at settlement for future tenant allowance obligations for Gateway Overlook.
The property acquired during the year ended December 31, 2012 had an immaterial impact on our consolidated results of
operations. The following unaudited pro-forma combined condensed statements of operations set forth the consolidated
results of operations for the year ended December 31, 2011 as if the above described 2011 acquisitions had occurred at the
beginning of the period of acquisition. The unaudited pro-forma information does not purport to be indicative of the results
that actually would have occurred if the acquisitions had been in effect for the entire year ended December 31, 2011. The
unaudited data for the year ended December 31, 2011 were as follows (in thousands, except per share data):
Real estate revenues
Loss from continuing operations
Net income
Diluted earnings per share
Noncontrolling Interests in Subsidiaries
$302,836
(3,471)
104,311
1.57
In August 2007, we acquired a 0.8 acre parcel of land located at 4661 Kenmore Avenue, Alexandria, Virginia for future medical
office development. The acquisition was funded by issuing operating partnership units in an operating partnership, which is
a consolidated subsidiary of WRIT. This resulted in a noncontrolling ownership interest in this property based upon defined
company operating partnership units at the date of purchase. The operating partnership units could have a dilutive impact on
our earnings per share calculation. They are not dilutive for the years ended December 31, 2012, 2011 and 2010, and, as such,
are not included in our earnings per share calculations.
In May 1998, we entered into an operating partnership agreement with a member of the entity that previously owned Northern
Virginia Industrial Park in conjunction with the acquisition of this property. We accounted for this activity by applying the
noncontrolling owner’s percentage ownership interest to the net income of the property and reporting such amount in our net
income attributable to noncontrolling interests. In October 2011, we closed on the sale of Northern Virginia Industrial Park II,
thereby terminating this noncontrolling interest in our earnings. As a result of this transaction, we recorded a gain on sale relat-
ing to the noncontrolling interest of $0.4 million in 2011. The amounts reported on the consolidated statements of income for
noncontrolling interests are related to Northern Virginia Industrial Park II and classified as discontinued operations.
Variable Interest Entities
In June 2011, we executed a joint venture operating agreement with a real estate development company to develop a mid-rise
multifamily property at 650 North Glebe Road in Arlington, Virginia. We estimate the total cost of the project to be $49.5 mil-
lion, and we expect to secure third-party debt financing for approximately 70% of the project’s cost. WRIT is the 90% owner of
the joint venture, and will have management and leasing responsibilities when the project is completed and stabilized (defined as
90% of the residential units leased). The real estate development company owns 10% of the joint venture and is responsible for
the development and construction of the property. The joint venture currently expects to complete this development project
during the fourth quarter of 2014.
89
FORM 10-K AnnuAl RepORt 2012 In November 2011, we executed a joint venture operating agreement with a real estate development company to develop a
high-rise multifamily property at 1225 First Street (formerly 1219 First Street) in Alexandria, Virginia. We estimate the total
cost of the project to be $95.3 million, with approximately 70% of the project financed with debt. WRIT is the 95% owner of
the joint venture and will have management and leasing responsibilities when the project is completed and stabilized. The real
estate development company owns 5% of the joint venture and is responsible for the development and construction of the
property. Subsequent to December 31, 2012, we decided to delay commencement of construction due to market conditions
and concerns of oversupply. We will reassess this project on a periodic basis going forward.
We have determined that the 650 North Glebe Road and 1225 First Street joint ventures are VIE’s primarily based on the fact
that the equity investment at risk is not sufficient to permit either entity to finance its activities without additional financial
support. We expect that 70% of the total development costs will be financed through debt. We have also determined that
WRIT is the primary beneficiary of each VIE due to the fact that WRIT is providing 90% to 95% of the equity contributions
and will manage each property after stabilization.
We include the joint venture land acquisitions and related capitalized development costs on our consolidated balance sheets
in properties under development or held for development, consistent with other development activity. As of December 31,
2012 and 2011, the land and capitalized development costs were as follows (in thousands):
650 North Glebe Road
1225 First Street
dEcEMBER 31,
2012
$15,646
19,807
2011
$13,406
14,396
As of December 31, 2012 and 2011, the accounts payable and accrued liabilities related to the joint ventures were as follows
(in thousands):
650 North Glebe Road
1225 First Street
Discontinued Operations
dEcEMBER 31,
2012
$ 115
1,676
2011
$ 47
235
We dispose of assets that no longer meet our long-term strategy or return objectives and where market conditions for sale
are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations
or to support other corporate needs, or distributed to our shareholders. Properties are considered held for sale when they
meet specified criteria (see “Discontinued Operations” in note 2 to the consolidated financial statements). Depreciation
on these properties is discontinued at that time, but operating revenues, other operating expenses and interest continue
to be recognized until the date of sale. Properties classified as sold or held for sale as of December 31, 2012 are included in
“Investment in real estate sold or held for sale, net” on our consolidated balance sheets as follows (in thousands):
Office
Medical Office
Total
Less accumulated depreciation
90
dEcEMBER 31,
2012
$17,450
—
17,450
(5,922)
$11,528
2011
$ 33,637
8,261
41,898
(14,229)
$ 27,669
AnnuAl RepoRt 2012 FoRM 10-K We sold or classified as held for sale the following properties during the three years ended December 31, 2012:
dISPOSITION dATE
PROPERTy
August 31, 2012
1700 Research Boulevard
TyPE
Office
December 20, 2012
Plumtree Medical Center
Medical Office
N/A—Held for Sale
Atrium Building
Office
Total 2012
Various(1)
April 5, 2011
Total 2011
June 18, 2010
Industrial Portfolio(1)
Industrial/Office
Dulles Station, Phase I
Office
Parklawn Portfolio(2)
Office/Industrial
December 21, 2010
The Ridges
Office
December 22, 2010
Ammendale I&II and Amvax
Industrial
Total 2010
RENTABLE
SqUARE fEET
(unaudited)
cONTRAcT
SALES PRIcE
(in thousands)
GAIN ON SALE
(in thousands)
101,000
33,000
79,000
213,000
3,092,000
180,000
3,272,000
229,000
104,000
305,000
638,000
$ 14,250
$ 3,724
8,750
N/A
$ 23,000
$350,900
58,800
$409,700
$ 23,430
27,500
23,000
1,400
N/A
$ 5,124
$97,491
—
$97,491
$ 7,942
4,441
9,216
$ 73,930
$21,599
(1) The Industrial Portfolio consists of every property in our industrial segment and two office properties (the Crescent and Albemarle Point), and we closed on the sale on three
separate dates. On September 2, 2011, we closed on the sale of the two office properties (the Crescent and Albemarle Point) and 8880 Gorman Road, Dulles South IV,
Fullerton Business Center, Hampton Overlook, Alban Business Center, Pickett Industrial Park, Northern Virginia Industrial Park I, 270 Technology Park, Fullerton Industrial
Center, Sully Square, 9950 Business Parkway, Hampton South and 8900 Telegraph Road. On October 3, 2011, we closed the sale of Northern Virginia Industrial Park II. On
November 1, 2011, we closed on the sale of 6100 Columbia Park Road and Dulles Business Park I and II.
(2) The Parklawn Portfolio consists of three office properties (Parklawn Plaza, Lexington Building and Saratoga Building) and one industrial property (Charleston Business Center).
Income from operations of properties sold or held for sale for the three years ended December 31, 2012 were as follows
(in thousands):
Revenues
Property expenses
Real estate impairment
Depreciation and amortization
Interest expense
2012
$ 4,155
(1,542)
—
(867)
(261)
dEcEMBER 31,
2011
$31,525
(9,547)
(599)
(8,723)
(733)
$ 1,485
$11,923
2010
$ 53,009
(17,163)
—
(17,263)
(2,014)
$ 16,569
91
FORM 10-K AnnuAl RepORt 2012 Income from operations of properties sold or held for sale for the three years ended December 31, 2012 were as follows
(in thousands):
OPERATING INcOME fOR THE yEAR ENdING dEcEMBER 31,
PROPERTy
Parklawn Plaza
Lexington Building
Saratoga Building
Charleston Business Center
The Ridges
Ammendale I&II
Amvax
Dulles Station, Phase I
Industrial Portfolio
1700 Research Boulevard
Atrium Building
SEGMENT
Office
Office
Office
Industrial
Office
Industrial
Industrial
Office
Industrial/Office
Office
Office
Plumtree Medical Center
Medical Office
2012
$ —
2011
$ —
2010
$ 132
65
225
370
678
1,023
336
492
11,647
670
883
48
—
—
—
—
—
—
(468)
10,621
651
1,052
67
$11,923
$16,569
—
—
—
—
—
—
—
—
225
1,063
197
$1,485
The impact of the disposal of our industrial segment on revenues and net income for the three years ended December 31,
2012 were as follows (in thousands, except per share data):
Real estate revenues
Net income
Basic net income per share
Diluted net income per share
yEAR ENdEd dEcEMBER 31,
2012
$ —
—
—
—
2011
$23,045
16,484
0.23
0.23
2010
$32,191
22,857
0.36
0.36
92
AnnuAl RepoRt 2012 FoRM 10-K NOTE 4. MORTGAGE NOTES PAyABLE
As of December 31, 2012 and 2011, we had outstanding mortgage notes payable, each collateralized by one or more buildings
and related land from our portfolio, as follows (in thousands):
PROPERTIES
John Marshall II
Olney Village Center
Kenmore Apartments
2445 M Street(3)
3801 Connecticut Avenue, Walker House
and Bethesda Hill(4)
Ashburn Farm Office Park
Ashburn Farm III Office Park
Woodholme Medical Office Center
West Gude Drive
15005 Shady Grove Road(5)
Plumtree Medical Center(6)
9707 Medical Center Drive(7)
Frederick Crossing(8)
Prosperity Medical Center(9)
Prosperity Medical Center(9)
ASSUMPTION/
ISSUANcE
dATE(1)
EffEcTIVE
INTEREST
RATE(2)
9/15/2011
8/30/2011
2/2/2009
12/2/2008
5/29/2008
6/1/2007
6/1/2007
6/1/2007
8/25/2006
7/12/2006
6/22/2006
4/13/2006
3/23/2005
10/9/2003
10/9/2003
5.79%
4.94%
5.37%
7.25%
5.71%
5.56%
5.69%
5.29%
5.86%
5.73%
5.68%
5.32%
5.95%
5.36%
5.34%
dEcEMBER 31,
2012
2011
$ 53,274
$ 53,936
22,343
35,535
96,848
81,029
2,313
2,024
19,608
29,996
—
—
—
—
—
—
23,873
36,097
95,593
81,029
2,438
2,159
19,954
30,761
7,974
4,419
4,780
21,700
31,169
11,828
$342,970
$427,710
PAyOff dATE/
MATURITy
dATE
5/6/2016
10/1/2023
3/1/2019
1/6/2017
6/1/2017
5/31/2025
7/31/2023
11/1/2015
1/11/2013
10/11/2012
12/11/2012
11/1/2012
8/1/2012
11/30/2012
11/30/2012
(1) Each of these mortgages was assumed with the acquisition of the collateralized properties, except for the mortgage notes secured by 3801 Connecticut Avenue, Walker
House, Bethesda Hill and Kenmore Apartments, which were originally executed by WRIT. We record mortgages assumed in an acquisition at fair value, and balances
presented include any recorded premiums or discounts.
(2) Yield on the assumption/issuance date, including the effects of any premiums, discounts or fair value adjustments on the notes.
(3) Interest only is payable monthly until the maturity date upon which all unpaid principal and interest are payable in full.
(4) Interest only is payable monthly until the maturity date, which can be extended for one year upon which the interest rate is reset on June 1, 2016. At maturity on June 1,
2017, all unpaid principal and interest are payable in full.
(5) On October 11, 2012, we repaid without penalty the remaining $7.8 million of principal on the mortgage note secured by 15005 Shady Grove Road.
(6) On December 11, 2012, we repaid without penalty the remaining $4.3 million of principal on the mortgage note secured by Plumtree Medical Center. Because Plumtree
Medical Center was sold during 2012 (see Note 3 to the consolidated financial statements), the mortgage note is included in “Other liabilities related to properties sold
or held for sale” on our consolidated balance sheets as of December 31, 2011.
(7) On November 1, 2012, we repaid without penalty the remaining $4.6 million of principal on the mortgage note secured by 9707 Medical Center Drive.
(8) On August 1, 2012, we repaid without penalty the remaining $21.3 million of principal on the mortgage note secured by Frederick Crossing.
(9) On November 30, 2012, we repaid without penalty the remaining $42.1 million of principal on the mortgage notes secured by Prosperity Medical Centers.
Except as noted above, principal and interest are payable monthly until the maturity date, upon which all unpaid principal and
interest are payable in full.
Total carrying amount of the above mortgaged properties was $510.0 million and $670.7 million at December 31, 2012 and
2011, respectively.
In January 2013, we repaid without penalty the remaining $30.0 million of principal on the mortgage note secured by West
Gude Drive.
93
FORM 10-K AnnuAl RepORt 2012 Scheduled principal payments subsequent to December 31, 2012 are as follows (in thousands):
2013
2014
2015
2016
2017
Thereafter
Net discounts/premiums
Total
$ 33,313
3,519
22,174
134,715
104,712
48,086
346,519
(3,549)
$342,970
NOTE 5. UNSEcUREd LINES Of cREdIT PAyABLE
As of December 31, 2012, we maintained a $100.0 million unsecured line of credit maturing in June 2015 (“Credit Facility No. 1”)
and a $400.0 million unsecured line of credit maturing in July 2016 (“Credit Facility No. 2”). Credit Facility No. 1 and No. 2 have
accordion features that allow us to increase the facilities to $200.0 million and $600.0 million, respectively, subject to addi-
tional lender commitments. The amounts of these lines of credit unused and available at December 31, 2012 were as follows
(in thousands):
Committed capacity
Borrowings outstanding
Letters of credit issued
Unused and available
cREdIT fAcILITy NO. 1
cREdIT fAcILITy NO. 2
$100,000
—
(815)
$ 99,185
$400,000
—
—
$400,000
We executed borrowings and repayments on the unsecured lines of credit during 2012 as follows (in thousands):
Balance at December 31, 2011
Borrowings
Repayments
Balance at December 31, 2012
cREdIT fAcILITy NO. 1
cREdIT fAcILITy NO. 2
$ 74,000
—
(74,000)
$ —
$ 25,000
158,000
(183,000)
$ —
We made borrowings to repay our 5.05% unsecured notes, to partially fund the acquisition of Fairgate at Ballston, to repay the
mortgage note secured by Frederick Crossing and for general corporate purposes. We made repayments during the year ended
December 31, 2012 using proceeds from the issuance of our 3.95% unsecured notes and the sale of 1700 Research Boulevard.
Borrowings under Credit Facility No. 1 and No. 2 bear interest at LIBOR plus a spread based on the credit rating on our pub-
licly issued debt. The interest rate spread is 120 basis points for each facility.
All outstanding advances for Credit Facility No. 1 and No. 2 are due and payable upon maturity in June 2015 and July 2016,
respectively. Credit Facility No. 1 and No. 2 may be extended for one year at our option. Interest only payments are due and
payable generally on a monthly basis. For the three years ended December 31, 2012, we recognized interest expense (exclud-
ing facility fees) as follows (in thousands):
Credit Facility No. 1
Credit Facility No. 2
94
yEAR ENdEd dEcEMBER 31,
2012
$470
783
2011
$ 355
2,735
2010
$ 91
2,684
AnnuAl RepoRt 2012 FoRM 10-K In addition, we pay a facility fee based on the credit rating of our publicly issued debt which as of December 31, 2012 equals
0.25% per annum of the committed capacity of each facility, without regard to usage. Rates and fees may be adjusted up or
down based on changes in our senior unsecured credit ratings. For the three years ended December 31, 2012, we incurred
facility fees as follows (in thousands):
Credit Facility No. 1
Credit Facility No. 2
yEAR ENdEd dEcEMBER 31,
2012
$175
887
2011
$114
658
2010
$114
398
Credit Facility No. 1 and No. 2 contain certain financial and non-financial covenants, all of which we have met as of December 31,
2012 and 2011. Included in these covenants is the requirement to maintain a minimum level of net worth, as well as limits on our
total liabilities, secured indebtedness and required debt service payments.
Information related to revolving credit facilities for the three years ended December 31, 2012 as follows (in thousands, except
percentage amounts):
Total revolving credit facilities at December 31
Borrowings outstanding at December 31
Weighted average daily borrowings during the year
Maximum daily borrowings during the year
Weighted average interest rate during the year
Weighted average interest rate on borrowings outstanding
at December 31
yEAR ENdEd dEcEMBER 31,
2012
$500,000
—
108,589
242,000
1.15%
n/a
2011
$475,000
99,000
160,090
281,000
1.90%
0.90%
2010
$337,000
100,000
112,573
141,000
2.43%
2.53%
NOTE 6. NOTES PAyABLE
Our unsecured notes outstanding as of December 31, 2012 were as follows (in thousands):
10 Year Unsecured Notes
10 Year Unsecured Notes
10 Year Unsecured Notes
10 Year Unsecured Notes
10 Year Unsecured Notes
10 Year Unsecured Notes
30 Year Unsecured Notes
Total principal
Net unamortized discount
Total
cOUPON/
STATEd RATE
EffEcTIVE
RATE(1)
5.125%
5.250%
5.350%
5.350%
4.950%
3.950%
7.250%
5.227%
5.339%
5.359%
5.490%
5.053%
4.018%
7.360%
MATURITy
dATE(2)
3/15/2013
1/15/2014
5/1/2015
5/1/2015
10/1/2020
10/15/2022
2/25/2028
PRINcIPAL
AMOUNT
$ 60,000
100,000
50,000
100,000
250,000
300,000
50,000
910,000
(3,810)
$906,190
(1) Yield on issuance date, including the effects of discounts on the notes.
(2) No principal amounts are due prior to maturity.
In September 2012, we issued $300.0 million of 3.95% unsecured notes due on October 15, 2022. The notes were issued at a
price to the public of 99.438% of their principal amount, and pay interest semiannually in arrears on April 15 and October 15
of each year, beginning April 15, 2013. The notes bear an effective interest rate of 4.018% and our net proceeds were $296.4 mil-
lion. The notes may be redeemed in whole or in part at any time before maturity at the redemption price described in the
95
FORM 10-K AnnuAl RepORt 2012 Prospectus Supplement dated September 12, 2012. The proceeds were used to repay borrowings on our lines of credit, repay
mortgage notes secured by 9707 Medical Center Drive, Prosperity Medical Centers, 15005 Shady Grove and Plumtree Medical
Center and for general corporate purposes.
We repaid the remaining $50.0 million of our 5.05% unsecured notes on their due date of May 1, 2012, using borrowings on
our unsecured lines of credit.
The required principal payments excluding the effects of note discounts or premium for the remaining years subsequent to
December 31, 2012 are as follows (in thousands):
2013
2014
2015
2016
2017
Thereafter
$ 60,000
100,000
150,000
—
—
600,000
$910,000
Interest on these notes is payable semi-annually. These notes contain certain financial and non-financial covenants, all of which
we have met as of December 31, 2012. Included in these covenants is the requirement to maintain a minimum level of unen-
cumbered assets, as well as limits on our total indebtedness, secured indebtedness and required debt service payments.
The covenants under our line of credit agreements require us to insure our properties against loss or damage in amounts cus-
tomarily maintained by similar businesses or as they may be required by applicable law. The covenants for the notes require
us to keep all of our insurable properties insured against loss or damage at least equal to their then full insurable value. We
have an insurance policy which has no terrorism exclusion, except for non-certified nuclear, chemical and biological acts of
terrorism. Our financial condition and results of operations are subject to the risks associated with acts of terrorism and the
potential for uninsured losses as the result of any such acts. Effective November 26, 2002, under this existing coverage, any
losses caused by certified acts of terrorism would be partially reimbursed by the United States under a formula established by
federal law. Under this formula the United States pays 85% of covered terrorism losses exceeding the statutorily established
deductible paid by the insurance provider, and insurers pay 10% until aggregate insured losses from all insurers reach $100 bil-
lion in a calendar year. If the aggregate amount of insured losses under this program exceeds $100 billion during the applicable
period for all insured and insurers combined, then each insurance provider will not be liable for payment of any amount which
exceeds the aggregate amount of $100 billion. On December 26, 2007, the Terrorism Risk Insurance Program Reauthorization
Act of 2007 was signed into law and extends the program through December 31, 2014.
NOTE 7. STOcK BASEd cOMPENSATION
WRIT maintains short-term and long-term incentive plans that allow for stock-based awards to officers and non-officer
employees. Stock based awards are provided to officers and non-officer employees, as well as trustees, under the Washington
Real Estate Investment Trust 2007 Omnibus Long-Term Incentive Plan which allows for awards in the form of restricted
shares, restricted share units, options, and other awards up to an aggregate of 2,000,000 shares over the ten year period in
which the plan will be in effect. Restricted share units are converted into shares of our stock upon full vesting through the
issuance of new shares.
WRIT’s Compensation Committee conducted an extensive review of our executive compensation philosophy and a fundamen-
tal redesign of our short-term and long-term incentive plans for our officers, resulting in new short-term incentive (“STIP”)
and new long-term incentive (“LTIP”) plans, which were approved by the Compensation Committee and Board of Trustees on
February 17, 2011 effective as of January 1, 2011. In addition, the Compensation Committee approved a new long-term incentive
plan for non-officer employees as of January 1, 2011, with minimal changes from the prior long-term incentive plan for non-
officer employees.
96
AnnuAl RepoRt 2012 FoRM 10-K Short-Term Incentive Plan
Under the STIP, officers earn awards, payable 50% in cash and 50% in restricted shares, based on a percentage of salary and
the achievement of various performance conditions within a one-year performance period (except for 15% of such restricted
share awards which will be exclusively service-based). With respect to the 50% of the STIP award payable in restricted shares,
(i) the restricted shares subject to performance conditions will vest over a three-year period commencing on the January 1
following the end of the one-year performance period, and (ii) the restricted shares subject only to a service condition will
vest over a three-year period commencing at the beginning of the one-year performance period.
With respect to the 50% of the award payable in cash, the officer may elect to defer up to 80% of the cash portion pursuant
to WRIT’s deferred compensation plan for officers. If the officer makes such election, the cash will be converted to restricted
share units and WRIT will match 25% of deferred amounts in restricted share units.
For the service based awards, we recognize compensation expense based on the grant date fair value, ratably over a three-
year period commencing with the start of the performance period. With respect to the restricted shares subject to perfor-
mance conditions expected to be awarded under the STIP at the end of the one-year performance period, we recognize com-
pensation expense based on the current fair market value of the probable award until the performance condition has been
met, according to a graded vesting schedule over a four-year period commencing with the date the performance targets were
established. Approximately 20% of the restricted shares subject to performance conditions awarded by the Compensation
Committee at the end of the one-year performance period are based on subjective strategic acquisition and disposition goal
criteria, for which we recognize compensation expense when the grant date occurs at the end of the one-year period through
the three-year vesting period.
Long-Term Incentive Plan
Under the LTIP, officers earn awards, payable 50% in unrestricted shares and 50% in restricted shares, based on a percentage
of salary and the achievement of various market and performance conditions during a defined three-year performance period
(e.g., commencing on January 1, 2011 and concluding on December 31, 2013).
LTIP performance is evaluated based on objective and subjective performance goals and weightings. Of the officers’ total
potential award, 40% is subject to market conditions based on absolute total shareholder return (“TSR”) and relative TSR. The
remaining 60% of the award is based primarily on strategic plan fulfillment, evaluated and determined by the Compensation
Committee in its discretion at the end of the three-year performance period.
The unrestricted shares vest immediately at the end of the three-year performance period, and the restricted shares vest over
a one-year period commencing on the January 1 following the end of the three-year performance period.
With respect to the 40% of the LTIP subject to market conditions, we recognize compensation expense ratably (over three
years for the 50% unrestricted shares and over four years for the 50% restricted shares) based on the grant date fair value,
as determined using a Monte Carlo simulation, and regardless of whether the market conditions are achieved and the awards
ultimately vest. With respect to the 60% subjective portion of the LTIP, we will recognize compensation expense for the 50%
unrestricted shares when the grant date has occurred at the end of the three-year performance period. We will recognize
compensation expense for the 50% restricted shares over the one-year vesting period commencing upon the grant date at the
end of the three-year performance period.
We use a binomial model which employs the Monte Carlo method as of the grant date to determine the fair value of the 40%
of the LTIP subject to market conditions referenced above. The market condition performance measurement is the cumula-
tive three-year total shareholder return on both an absolute basis (50% weighting) and relative to a defined population of 20
peer companies (50% weighting). The model evaluates the awards for changing total shareholder return over the term of the
vesting, on an absolute basis and relative to a peer companies, and uses random simulations that are based on past stock char-
acteristics as well as income growth and other factors for WRIT and each of the peer companies. The assumptions used to
value the 40% of the LTIP subject to market conditions were an expected volatility of 58.1%, a risk-free interest rate of 1.2%
and an expected life of 3 and 4 years. We based the expected volatility upon the historical volatility of our daily closing share
price. The price at the grant date, February 17, 2011, was $30.91. We based the risk-free interest rate used on U.S. treasury
97
FORM 10-K AnnuAl RepORt 2012 constant maturity bonds on the measurement date with a maturity equal to the market condition performance period. We
based the expected term on the market condition performance period. The officers’ total award opportunity under the new
LTIP stated as a percentage of base salary ranges from 65% to 150% at target level. The calculated grant date fair value as a
percentage of base salary for the officers ranged from 79% to 185% for the 40% of the LTIP subject to market conditions.
Non-officer employees earn restricted share awards under the LTIP based upon various percentages of their salaries and
annual performance calculations. The restricted share awards vest ratably over three years from the grant date based upon
continued employment. We recognize compensation expense for these awards according to a graded vesting schedule over
four years from the date the performance target was established.
Modification of Prior LTIP Awards
In connection with the January 1, 2011 adoption of the STIP and the LTIP, the previous long-term incentive plan (“prior LTIP”)
for officers was amended such that awards subject to performance and market conditions through 2012 under the prior LTIP
were converted when the new plans were adopted into 154,400 restricted share units as of February 17, 2011, of which 59,100
were previously granted and unvested as of December 31, 2010. Such restricted share units vested consistent with the periods
in which they otherwise would have vested under the terms of the prior LTIP (i.e., either December 31, 2011 or December 31,
2012). We accounted for the amendment of these awards as a modification.
Prior LTIP
Other non-officer members of management earned restricted share units under the prior LTIP (before January 1, 2011) based
on one-year performance targets that vest ratably over five years from the grant date based upon continued employment. We
recognize compensation expense for these awards according to a graded vesting schedule over six years from the date the
performance target was established.
Officers earned restricted share units under the prior LTIP based on various percentages of their salaries that vest ratably
over five years from the grant date based upon continued employment. We recognize compensation expense for these awards
ratably over five years from the grant date.
Trustee Awards
We award share based compensation to our trustees on an annual basis in the form of restricted shares which vest imme-
diately and are restricted from sale for the period of the trustees’ service. The value of share-based compensation for each
trustee was $55,000 for each of the years ended December 31, 2012, 2011 and 2010.
Total Compensation Expense
Total compensation expense recognized in the consolidated financial statements for the three years ended December 31, 2012
for all share based awards, was as follows (in thousands):
Stock-based compensation expense
yEAR ENdEd dEcEMBER 31,
2012
$5,856
2011
$5,597
2010
$5,852
98
AnnuAl RepoRt 2012 FoRM 10-K Restricted Share Awards
The activity for the three years ended December 31, 2012 related to our restricted share awards, excluding those subject to
market conditions, was as follows:
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
SHARES
652,803
331,003
36,884
(211,485)
(6,599)
149,803
864,288
WTd AVG
GRANT
fAIR VALUE
$30.06
28.39
26.40
28.39
27.61
27.37
29.65
WTd AVG
GRANT
fAIR VALUE
$30.20
27.71
29.48
29.80
28.10
28.39
30.06
SHARES
490,832
193,339
303,168
(161,971)
(3,533)
331,003
652,803
WTd AVG
GRANT
fAIR VALUE
$30.24
28.13
28.37
30.01
28.45
27.71
30.20
SHARES
423,145
160,276
101,870
(67,687)
(1,120)
193,339
490,832
Vested at January 1
Unvested at January 1
Granted
Vested during year
Forfeited
Unvested at December 31
Vested at December 31
The total fair value of share grants vested for the years ended December 31, 2012, 2011 and 2010 was $5.6 million, $4.9 mil-
lion and $2.1 million, respectively.
As of December 31, 2012, the total compensation cost related to non-vested share awards not yet recognized was $2.4 mil-
lion, which we expect to recognize over a weighted average period of 17 months.
Restricted and Unrestricted Shares with Market Conditions
Stock based awards with market conditions under the LTIP were granted in February 2011 with fair market values, as deter-
mined using a Monte Carlo simulation, as follows (in thousands):
Relative TSR
Absolute TSR
GRANT dATE fAIR VALUE
RESTRIcTEd
UNRESTRIcTEd
$1,066
365
$1,066
365
The unamortized value of these awards with market conditions as of December 31, 2012 and 2011 was as follows (in thousands):
dEcEMBER 31,
2012
2011
RESTRIcTEd
UNRESTRIcTEd
RESTRIcTEd
UNRESTRIcTEd
$501
172
$338
116
$742
254
$826
283
Relative TSR
Absolute TSR
Options
The previous option plans provided for the grant of qualified and non-qualified options. The last option awards to officers
were in 2002, to non-officer key employees in 2003 and to trustees in 2004. Options granted under the plans were granted
with exercise prices equal to the market price on the date of grant, vested 50% after year one and 50% after year two and
expire ten years following the date of grant. Options granted to trustees were granted with exercise prices equal to the mar-
ket price on the date of grant and were fully vested on the grant date. We accounted for option awards in accordance with
APB No. 25, and we have recognized no compensation cost for stock options.
99
FORM 10-K AnnuAl RepORt 2012 The previously issued and currently outstanding and exercisable stock options for the three years ended December 31, 2012
was as follows:
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
SHARES
WTd AVG
EX PRIcE
SHARES
WTd AVG
EX PRIcE
SHARES
WTd AVG
EX PRIcE
Outstanding at January 1
89,106
$27.69
145,950
$26.74
314,250
$25.39
Granted
Exercised
Expired/Forfeited
Outstanding at December 31
Exercisable at December 31
—
(44,987)
(6,000)
38,119
38,119
—
25.61
25.61
30.48
30.48
—
(51,081)
(5,763)
89,106
89,106
—
25.29
24.85
27.69
27.69
—
(164,300)
(4,000)
145,950
145,950
—
24.11
28.23
26.74
26.74
The options outstanding at December 31, 2012, all of which are exercisable, have exercise prices between $29.55 and $33.09,
with a weighted-average exercise price of $30.48 and a weighted average remaining contractual life of 1.2 years. The outstand-
ing exercisable shares at December 31, 2012 had no aggregate intrinsic value. The aggregate intrinsic value of options exer-
cised was $0.1 million, $0.3 million and $1.0 million in the years ended December 31, 2012, 2011 and 2010, respectively. There
were no options forfeited in the years ended December 31, 2012 and 2011. 3,350 options were forfeited in 2010.
NOTE 8. OTHER BENEfIT PLANS
We have a Retirement Savings Plan (the “401(k) Plan”), which permits all eligible employees to defer a portion of their com-
pensation in accordance with the Internal Revenue Code. Under the 401(k) Plan, we may make discretionary contributions
on behalf of eligible employees. For the three years ended December 31, 2012, we made contributions to the 401(k) plan as
follows (in thousands):
401(k) plan contributions
yEAR ENdEd dEcEMBER 31,
2012
$467
2011
$529
2010
$454
We have adopted non-qualified deferred compensation plans for the officers and members of the Board of Trustees. The
plans allow for a deferral of a percentage of annual cash compensation and trustee fees. The plans are unfunded and payments
are to be made out of the general assets of WRIT. The deferred compensation liability at December 31, 2012 and 2011 was as
follows (in thousands):
Deferred compensation liability
dEcEMBER 31,
2012
$1,314
2011
$1,221
We established a Supplemental Executive Retirement Plan (“SERP”) effective July 1, 2002 for the benefit of our prior CEO.
Under this plan, upon the prior CEO’s termination of employment from WRIT for any reason other than death, permanent
and total disability, or discharge for cause, he is entitled to receive an annual benefit equal to his accrued benefit times his
vested interest. We accounted for this plan in accordance with ASC 715-30 (formerly SFAS No. 87, Employers’ Accounting
for Pensions), whereby we accrued benefit cost in an amount that resulted in an accrued balance at the end of the prior
CEO’s employment in June 2007 which was not less than the present value of the estimated benefit payments to be made. At
100
AnnuAl RepoRt 2012 FoRM 10-K December 31, 2012 and 2011, the accrued benefit liability was $1.4 million and $1.5 million, respectively. For the three years
ended December 31, 2012, we recognized current service cost as follows (in thousands):
Prior CEO SERP current service cost
yEAR ENdEd dEcEMBER 31,
2012
$106
2011
$113
2010
$119
We currently have an investment in corporate owned life insurance intended to meet the SERP benefit liability since the prior
CEO’s retirement. Benefit payments to the prior CEO began in 2008.
In November 2005, the Board of Trustees approved the establishment of a SERP for the benefit of the officers, other than the
prior CEO. This is a defined contribution plan under which, upon a participant’s termination of employment from WRIT for
any reason other than death, discharge for cause or total and permanent disability, the participant will be entitled to receive a
benefit equal to the participant’s accrued benefit times the participant’s vested interest. We account for this plan in accor-
dance with ASC 710-10 (formerly EITF 97-14, Accounting for Deferred Compensation Arrangements Where Amounts Earned are
Held in a Rabbi Trust and Invested) and ASC 320-10 (formerly SFAS No. 115, Accounting for Certain Investments in Debt and Equity
Securities), whereby the investments are reported at fair value, and unrealized holding gains and losses are included in earn-
ings. At December 31, 2012 and 2011, the accrued benefit liability was $2.3 million and $1.7 million, respectively. For the three
years ended December 31, 2012, we recognized current service cost as follows (in thousands):
Officer SERP current service cost
NOTE 9. fAIR VALUE dIScLOSURES
Assets and Liabilities Measured at Fair Value
yEAR ENdEd dEcEMBER 31,
2012
$342
2011
$334
2010
$344
For assets and liabilities measured at fair value on a recurring basis, quantitative disclosures about the fair value measurements
are required to be disclosed separately for each major category of assets and liabilities, as follows:
Level 1: Quoted prices in active markets for identical assets
Level 2: Significant other observable inputs
Level 3: Significant unobservable inputs
The only assets or liabilities we had at December 31, 2012 and 2011 that are recorded at fair value on a recurring basis are
the assets held in the SERP. We base the valuations related to these items on assumptions derived from significant other
observable inputs and accordingly these valuations fall into Level 2 in the fair value hierarchy. The fair values of these assets at
December 31, 2012 and 2011 were as follows (in thousands):
dEcEMBER 31, 2012
dEcEMBER 31, 2011
qUOTEd
PRIcES IN
AcTIVE
MARKETS
fOR
IdENTIcAL
ASSETS
(LEVEL 1)
fAIR
VALUE
SIGNIfIcANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)
SIGNIfIcANT
UNOBSERV-
ABLE INPUTS
(LEVEL 3)
fAIR
VALUE
qUOTEd
PRIcES IN
AcTIVE
MARKETS
fOR
IdENTIcAL
ASSETS
(LEVEL 1)
SIGNIfIcANT
OTHER
OBSERVABLE
INPUTS
(LEVEL 2)
SIGNIfIcANT
UNOBSERV-
ABLE INPUTS
(LEVEL 3)
Assets:
seRP
$2,421
$ —
$2,421
$ —
$1,738
$ —
$1,738
$ —
101
FORM 10-K AnnuAl RepORt 2012 Financial Assets and Liabilities Not Measured at Fair Value
The following disclosures of estimated fair value were determined by management using available market information and
established valuation methodologies, including discounted cash flow. Many of these estimates involve significant judgment. The
estimated fair value disclosed may not necessarily be indicative of the amounts we could realize on disposition of the financial
instruments. The use of different market assumptions or estimation methodologies could have an effect on the estimated
fair value amounts. In addition, fair value estimates are made at a point in time and thus, estimates of fair value subsequent to
December 31, 2012 may differ significantly from the amounts presented.
Below is a summary of significant methodologies used in estimating fair values and a schedule of fair values at December 31, 2012.
Cash and Cash Equivalents and Restricted Cash
Cash and cash equivalents and restricted cash include cash and commercial paper with original maturities of less than 90 days, which
are valued at the carrying value, which approximates fair value due to the short maturity of these instruments (Level 1 inputs).
Notes Receivable
We acquired a note receivable (“2445 M Street note”) in 2008 with the purchase of 2445 M Street. We estimate the fair value
of the 2445 M Street note based on a discounted cash flow methodology using market discount rates (Level 3 inputs).
Debt
Mortgage notes payable consist of instruments in which certain of our real estate assets are used for collateral. We estimate
the fair value of the mortgage notes payable by discounting the contractual cash flows at a rate equal to the relevant treasury
rates (with respect to the timing of each cash flow) plus credit spreads estimated through independent comparisons to real
estate assets or loans with similar characteristics. Lines of credit payable consist of bank facilities which we use for various
purposes including working capital, acquisition funding or capital improvements. The lines of credit advances are priced at a
specified rate plus a spread. We estimate the market value based on a comparison of the spreads of the advances to market
given the adjustable base rate. We estimate the fair value of the notes payable by discounting the contractual cash flows at a
rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads derived using the
relevant securities’ market prices. We classify these fair value measurements as Level 3 as we use significant unobservable
inputs and management judgment due to the absence of quoted market prices.
As of December 31, 2012 and 2011, the carrying values and estimated fair values of our financial instruments were as follows
(in thousands):
dEcEMBER 31,
2012
2011
Cash and cash equivalents
$ 19,324
$ 19,324
$ 12,765
$ 12,765
cARRyING VALUE
fAIR VALUE
cARRyING VALUE
fAIR VALUE
Restricted cash
2445 M Street note receivable
Mortgage notes payable
Lines of credit payable
Notes payable
14,582
6,617
342,970
—
906,190
14,582
6,654
374,591
—
968,040
19,229
6,975
423,291
99,000
657,470
19,229
7,721
458,663
99,000
713,797
102
AnnuAl RepoRt 2012 FoRM 10-K NOTE 10. EARNINGS PER cOMMON SHARE
We determine “Basic earnings per share” using the two-class method as our unvested restricted share awards and units have
non-forfeitable rights to dividends, and are therefore considered participating securities. We compute basic earnings per share
by dividing net income attributable to the controlling interest less the allocation of undistributed earnings to unvested restricted
share awards and units by the weighted-average number of common shares outstanding for the period.
We also determine “Diluted earnings per share” under the two-class method with respect to the unvested restricted share
awards. We further evaluate any other potentially dilutive securities at the end of the period and adjust the basic earnings per
share calculation for the impact of those securities that are dilutive. Our dilutive earnings per share calculation includes the
dilutive impact of employee stock options based on the treasury stock method and our performance share units under the con-
tingently issuable method. The dilutive earnings per share calculation also considers our operating partnership units and 3.875%
convertible notes under the if-converted method. The 3.875% convertible notes were repaid in full as of December 31, 2011,
and were anti-dilutive for the year ended December 31, 2010.
The computation of basic and diluted earnings per share for the three years ended December 31, 2012 was as follows (in
thousands; except per share data):
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
Numerator:
Income (loss) from continuing operations
$17,099
$ (2,898)
$ (609)
Allocation of undistributed earnings to unvested restricted share
awards and units to continuing operations
(451)
—
—
Adjusted income (loss) from continuing operations attributable to
the controlling interests
16,648
(2,898)
(609)
Income from discontinued operations, including gain on sale of real
estate, net of taxes
Net income attributable to noncontrolling interests
Allocation of undistributed earnings to unvested restricted share
awards and units to discontinued operations
Adjusted income from discontinued operations attributable to
the controlling interests
Adjusted net income attributable to the controlling interests
6,609
—
(131)
108,276
(494)
(712)
38,168
(133)
(144)
6,478
$23,126
107,070
$104,172
37,891
$37,282
denominator:
Weighted average shares outstanding—basic
66,239
65,982
62,140
Effect of dilutive securities:
Employee stock options and restricted share awards
Weighted average shares outstanding—diluted
Earnings per common share, basic:
Continuing operations
Discontinued operations
Earnings per common share, diluted:
Continuing operations
Discontinued operations
137
66,376
$ 0.25
0.10
$ 0.35
$ 0.25
0.10
$ 0.35
—
65,982
—
62,140
$ (0.04)
$ (0.01)
1.62
$ 1.58
0.61
$ 0.60
$ (0.04)
$ (0.01)
1.62
$ 1.58
0.61
$ 0.60
103
FORM 10-K AnnuAl RepORt 2012 NOTE 11. RENTALS UNdER OPERATING LEASES
As of December 31, 2012, non-cancelable commercial operating leases provide for minimum rental income from continuing
operations were as follows (in thousands):
2013
2014
2015
2016
2017
Thereafter
$ 212,828
179,735
152,282
124,434
100,573
243,247
$1,013,099
Apartment leases are not included as the terms are generally for one year. Most of these commercial leases increase in future
years based on agreed-upon percentages or in some instances, changes in the Consumer Price Index. Percentage rents from
retail centers, based on a percentage of tenants’ gross sales, for the three years ended December 31, 2012 were as follows
(in thousands):
Percentage rents
yEAR ENdEd dEcEMBER 31,
2012
$150
2011
$193
2010
$140
Real estate tax, operating expense and common area maintenance reimbursement income from continuing operations for the
three years ended December 31, 2012 was as follows (in thousands):
Reimbursement income
NOTE 12. cOMMITMENTS ANd cONTINGENcIES
Development Commitments
yEAR ENdEd dEcEMBER 31,
2012
$29,166
2011
$25,680
2010
$23,998
At December 31, 2012, we had no committed contracts outstanding with third parties in connection with our development
projects at 1225 First Street and 650 North Glebe Road.
Litigation
We are involved from time to time in various legal proceedings, lawsuits, examinations by various tax authorities and claims
that have arisen in the ordinary course of business. Management believes that the resolution of any such current matters will
not have a material adverse effect on our financial condition or results of operations.
Other
At December 31, 2012, we were contingently liable under unused letters of credit in the amounts of $0.8 million, related to
our assumption of mortgage debt on West Gude to ensure the funding of certain tenant improvements and leasing commis-
sions over the term of the debt.
NOTE 13. SEGMENT INfORMATION
We have four reportable segments: office, medical office, retail, and multifamily. Office buildings provide office space for vari-
ous types of businesses and professions. Medical office buildings provide offices and facilities for a variety of medical services.
Retail centers are typically neighborhood grocery store or drug store anchored retail centers. Multifamily properties provide
rental housing for families throughout the Washington metropolitan area.
104
AnnuAl RepoRt 2012 FoRM 10-K Real estate rental revenue as a percentage of the total for each of the four reportable operating segments for the three years
ended December 31, 2012 was as follows:
Office
Medical office
Retail
Multifamily
yEAR ENdEd dEcEMBER 31,
2012
50%
15%
18%
17%
2011
49%
15%
18%
18%
2010
47%
18%
16%
19%
The percentage of total income producing real estate assets, at cost, for each of the four reportable operating segments as of
December 31, 2012 and 2011 was as follows:
Office
Medical office
Retail
Multifamily
dEcEMBER 31,
2012
53%
16%
17%
14%
2011
52%
17%
17%
14%
The accounting policies of each of the segments are the same as those described in note 2.
The following tables present revenues, net operating income, capital expenditures and total assets for the three years ended
December 31, 2012 from these segments, and reconciles net operating income of reportable segments to net income attribut-
able to the controlling interests as reported (in thousands):
yEAR ENdEd dEcEMBER 31, 2012
OffIcE
MEdIcAL
OffIcE
RETAIL
MULTIfAMILy
cORPORATE
ANd OTHER cONSOLIdATEd
Real estate rental revenue
$ 152,916
$ 44,674
$ 54,506
$ 52,887
$ —
$ 304,983
Real estate expenses
55,113
14,994
12,702
20,467
—
103,276
Net operating income
$ 97,803
$ 29,680
$ 41,804
$ 32,420
$ —
$ 201,707
Depreciation and
amortization
General and administrative
Real estate impairment
Acquisition costs
Interest expense
Other income
Discontinued operations:
Income from properties
sold or held for sale
Gain on sale of real estate
Net income
Less: Net income attributable
to noncontrolling interests
Net income attributable to
the controlling interests
Capital expenditures
Total assets
$ 35,330
$1,140,046
$ 7,004
$327,573
$ 2,977
$355,585
$ 5,869
$249,503
$ 555
$51,669
(103,067)
(15,488)
(2,097)
(234)
(64,697)
975
1,485
5,124
23,708
—
$ 23,708
$ 51,735
$2,124,376
105
FORM 10-K AnnuAl RepORt 2012 yEAR ENdEd dEcEMBER 31, 2011
OffIcE
MEdIcAL
OffIcE
RETAIL
MULTI-
fAMILy
Real estate rental revenue
$ 138,325
$ 44,431
$ 50,421
$ 50,979
Real estate expenses
47,289
14,063
14,273
19,717
Net operating income
$ 91,036
$ 30,368
$ 36,148
$ 31,262
INdUS-
TRIAL/
fLEX
$ —
—
$ —
cORPORATE
ANd OTHER
cONSOLI-
dATEd
$ — $ 284,156
—
95,342
$ — $ 188,814
Depreciation and
amortization
General and administrative
Real estate impairment
Acquisition costs
Interest expense
Other income
Loss on extinguishment
of debt
Discontinued operations:
Income from properties
sold or held for sale
Gain on sale of real estate
Income tax expense
Net income
Less: Net income attributable
to noncontrolling interests
Net income attributable to
the controlling interests
Capital expenditures
$ 21,065
$ 5,654
$ 2,922
$ 2,823
Total assets
$1,118,074
$347,735
$365,164
$247,170
(91,805)
(15,728)
(14,526)
(3,607)
(66,214)
1,144
(976)
11,923
97,491
(1,138)
105,378
(494)
$ 104,884
$351
$ —
$ 621
$ 33,436
$42,615
$2,120,758
106
AnnuAl RepoRt 2012 FoRM 10-K yEAR ENdEd dEcEMBER 31, 2010
OffIcE
MEdIcAL
OffIcE
RETAIL
MULTI-
fAMILy
INDUS-
TRIAL/
fLEX
cORPORATE
ANd OTHER
cONSOLI-
dATEd
Real estate rental revenue
$119,359
$ 44,166
$ 41,003
$ 48,599
$ — $ —
$ 253,127
Real estate expenses
40,676
14,516
10,310
19,243
—
—
84,745
Net operating income
$ 78,683
$ 29,650
$ 30,693
$ 29,356
$ — $ —
$ 168,382
Depreciation and
amortization
General and administrative
Acquisition costs
Interest expense
Other income
Loss on extinguishment
of debt
Gain from non-disposal
activities
Discontinued operations:
Income from properties
sold or held for sale
Gain on sale of real estate
Net income
Less: Net income attributable
to noncontrolling interests
Net income attributable to
the controlling interests
(78,483)
(14,406)
(1,161)
(66,965)
1,193
(9,176)
7
16,569
21,599
37,559
(133)
$ 37,426
Capital expenditures
$ 13,983
$ 4,986
$ 1,982
$ 2,387
$ 1,707
$ 392
$ 25,437
Total assets
$938,638
$353,508
$313,003
$228,769
$225,206
$108,757
$2,167,881
107
FORM 10-K AnnuAl RepORt 2012 NOTE 14. SELEcTEd qUARTERLy fINANcIAL dATA (UNAUdITEd)
Unaudited financial data by quarter for each of the three months in the years ended December 31, 2012 and 2011 were as fol-
lows (in thousands, except for per share data):
2012
Real estate rental revenue
Income from continuing operations
Effect of disposal of industrial segment on net income
Net income
Net income attributable to the controlling interests
Income from continuing operations per share
Basic
Diluted
Net income per share
Basic
Diluted
2011
Real estate rental revenue
Income (loss) from continuing operations
Effect of disposal of industrial segment on net income
Net income
Net income attributable to the controlling interests
Income (loss) from continuing operations per share
Basic
Diluted
Net income per share
Basic
Diluted
qUARTER(1)(2)
fIRST
SEcONd
THIRd
fOURTH
$75,214
$ 4,834
$ —
$ 5,181
$ 5,181
$ 0.07
$ 0.07
$ 0.08
$ 0.08
$67,872
$ 1,708
$ 5,719
$ 4,688
$ 4,665
$ 0.03
$ 0.03
$ 0.07
$ 0.07
$75,590
$ 5,694
$ —
$ 6,008
$ 6,008
$ 0.08
$ 0.08
$ 0.09
$ 0.09
$70,321
$ 3,963
$ 5,978
$ 6,556
$ 6,522
$ 0.08
$ 0.08
$ 0.10
$ 0.10
$77,108
$ 5,323
$ —
$ 9,561
$ 9,561
$ 0.08
$ 0.08
$ 0.14
$ 0.14
$70,550
$ 2,275
$ 4,388
$63,036
$63,008
$ 0.03
$ 0.03
$ 0.95
$ 0.95
$ 77,071
$ 1,248
$ —
$ 2,958(3)
$ 2,958
$ 0.02
$ 0.02
$ 0.04
$ 0.04
$ 75,413
$(10,844)(3)
$ 399
$ 31,098
$ 30,689
$ (0.16)
$ (0.16)
$ 0.46
$ 0.46
(1) With regard to per share calculations, the sum of the quarterly results may not equal full year results due to rounding.
(2) The prior quarter results have been restated to conform to the current quarter presentation. Specifically, results related to properties sold or held for sale have been
reclassified into discontinued operations.
(3) The three months ended December 31, 2012 and 2011 include the impact of real estate impairments of $2.1 million and $14.5 million, respectively.
108
AnnuAl RepoRt 2012 FoRM 10-K NOTE 15. SHAREHOLdERS’ EqUITy
We are party to a sales agency financing agreement with BNY Mellon Capital Markets, LLC relating to the issuance and sale of
up to $250.0 million of our common shares from time to time over a period of no more than 36 months from June 2012. Sales
of our common shares are made at market prices prevailing at the time of sale. Net proceeds for the sale of common shares
under this program are used for general corporate purposes. As of December 31, 2012, we have not issued any common shares
under this sales agency financing agreement. We executed issuances under a previous sales agency financing agreement during
the year ended December 31, 2010 as follows (in thousands, except for weighted average issue price):
Common shares issued
Weighted average issue price
Net proceeds
yEAR ENdEd dEcEMBER 31, 2010
5,645
$ 30.34
$168,881
We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to
purchase common shares. The common shares sold under this program may either be common shares issued by us or com-
mon shares purchased in the open market. Net proceeds under this program are used for general corporate purposes. We
executed issuances under this program for the three years ended December 31, 2012 as follows (in thousands, except for
weighted average issue price):
Common shares issued
Weighted average issue price
Net proceeds
yEAR ENdEd dEcEMBER 31,
2012
55
$29.67
$1,316
2011
171
$29.97
$5,043
2010
175
$30.36
$5,286
109
FORM 10-K AnnuAl RepORt 2012 ScHEdULE III
PROPERTIES
LOcATION
LANd
INITIAL cOST(b)
GROSS AMOUNTS AT WHIcH cARRIEd AT dEcEMBER 31, 2012 AccUMULATEd
BUILdINGS ANd
IMPROVEMENTS
NET IMPROVEMENTS
(RETIREMENT)
SINcE AcqUISITION
LANd
BUILdINGS ANd
IMPROVEMENTS
dEPREcIATION
yEAR
NET
AT dEcEMBER 31,
Of cON-
dATE Of
RENTABLE
dEPRE-
cIATION
TOTAL(c)
2012
STRUcTION
AcqUISITION
SqUARE fEET(e) UNITS
LIfE(d)
Multifamily Properties
3801 Connecticut Avenue(a)
Roosevelt Towers
Country Club Towers
Park Adams
Munson Hill Towers
The Ashby at McLean
Walker House Apartments(a)
Bethesda Hill Apartments(a)
Bennett Park
The Clayborne
The Kenmore(a)
650 N. Glebe Rd(g)
1225 First Street(g)
Office Buildings
1901 Pennsylvania Avenue
51 Monroe Street
515 King Street
6110 Executive Boulevard
1220 19th Street
1600 Wilson Boulevard
7900 Westpark Drive
600 Jefferson Plaza
Wayne Plaza
Courthouse Square
One Central Plaza
Atrium Building
1776 G Street
Dulles Station II(f)
6565 Arlington Boulevard
West Gude(a)
Monument II
Woodholme Center
2000 M Street
2445 M Street(a)
Quantico Building E
Quantico Building G
1140 Connecticut Avenue, NW
1227 25th Street
Braddock Metro
John Marshall II(a)
Fairgate at Ballston
Washington, DC
virginia
virginia
virginia
virginia
virginia
Maryland
Maryland
virginia
virginia
Washington, DC
virginia
virginia
Washington, DC
Maryland
virginia
Maryland
Washington, DC
virginia
virginia
Maryland
Maryland
virginia
Maryland
Maryland
Washington, DC
virginia
virginia
Maryland
virginia
Maryland
Washington, DC
Washington, DC
virginia
virginia
Washington, DC
Washington, DC
virginia
virginia
virginia
420,000
$
336,000
$
299,000
$
287,000
$
322,000
$
4,356,000
$
2,851,000
$
3,900,000
$
2,861,000
$
269,000
$
$ 28,222,000
$ 12,787,000
$ 14,046,000
$ 70,956,000
892,000
$
840,000
$
4,102,000
$
4,621,000
$
7,803,000
$
6,661,000
$
$ 12,049,000
2,296,000
$
1,564,000
$
—
$
5,480,000
$
$
3,182,000
$ 31,500,000
$ 15,001,000
$
5,584,000
$ 11,580,000
$ 10,244,000
2,194,000
$
$
—
$ 46,887,000
4,518,000
$
$
4,897,000
$ 25,226,000
$ 17,505,000
$ 18,817,000
$ 13,490,000
$ 17,750,000
$ 274,683,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,678,000
1,996,000
2,562,000
1,654,000
3,337,000
17,102,000
7,946,000
13,412,000
917,000
—
33,955,000
—
—
85,559,000
3,481,000
$
10,869,000
$
3,931,000
$
11,926,000
$
11,366,000
$
16,742,000
$
71,825,000
$
12,188,000
$
6,243,000
$
17,096,000
$
39,107,000
$
11,281,000
$
54,327,000
$
494,000
$
23,195,000
$
43,240,000
$
65,205,000
$
16,711,000
$
$
61,101,000
$ 106,743,000
24,801,000
$
25,376,000
$
50,495,000
$
21,319,000
$
71,250,000
$
53,024,000
$
$
29,885,000
$ 863,221,000
9,023,000
$
$
9,881,000
$ 14,461,000
$
9,141,000
$ 14,847,000
$ 15,148,000
6,688,000
$
$ 11,903,000
$ 78,855,000
$ 30,451,000
2,130,000
$
2,858,000
$
$
5,761,000
$ 211,147,000
$ 15,100,000
$ 24,173,000
5,125,000
$
$ 11,947,000
$
9,690,000
$ 14,806,000
$ 36,150,000
5,512,000
$
7,928,000
$
6,677,000
$
$ 16,745,000
2,987,000
$
$
4,383,000
$ (3,425,000)
4,677,000
$
8,208,000
$
$
3,737,000
1,794,000
$
$ 16,427,000
2,634,000
$
165,000
$
126,000
$
5,306,000
$
668,000
$
2,238,000
$
95,000
$
$
284,000
$ 204,157,000
110
$ 81,918,000
$ 285,743,000
$ 367,661,000
$ 120,036,000
2,137,000
2,540
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
420,000
336,000
299,000
287,000
322,000
4,356,000
2,851,000
3,900,000
4,774,000
699,000
$ 28,222,000
$ 15,645,000
$ 19,807,000
892,000
840,000
4,102,000
4,621,000
7,802,000
6,661,000
2,296,000
1,564,000
5,480,000
3,182,000
$ 31,500,000
4,130,000
5,584,000
$ 11,580,000
$ 10,244,000
2,194,000
4,518,000
4,898,000
$ 25,226,000
$ 17,505,000
$ 18,817,000
$ 13,490,000
$ 17,750,000
— $
15,645,000
— $
19,807,000
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
11,702,000
11,877,000
17,023,000
10,795,000
18,183,000
32,250,000
14,634,000
25,315,000
77,859,000
30,020,000
36,085,000
18,581,000
35,042,000
9,056,000
23,873,000
21,057,000
31,548,000
17,700,000
14,171,000
55,852,000
14,268,000
58,710,000
7,940,000
27,872,000
51,448,000
68,942,000
18,505,000
24,966,000
25,501,000
55,801,000
21,987,000
73,488,000
53,119,000
30,169,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
12,122,000
12,213,000
17,322,000
11,082,000
8,504,000
7,180,000
9,472,000
7,386,000
18,505,000
$ 12,589,000
36,606,000
$ 17,975,000
17,485,000
$
8,508,000
29,215,000
$ 13,593,000
82,633,000
$ 20,017,000
30,719,000
64,307,000
8,994,000
5,818,000
19,473,000
$ 13,478,000
35,882,000
$ 24,898,000
13,158,000
$
4,662,000
28,494,000
$ 15,372,000
28,859,000
$ 10,065,000
38,209,000
$ 15,163,000
19,996,000
15,735,000
23,773,000
8,346,000
6,537,000
9,844,000
61,332,000
$ 23,755,000
17,450,000
5,922,000
90,210,000
$ 20,958,000
12,070,000
33,456,000
179,000
7,719,000
63,028,000
$ 12,807,000
79,186,000
$ 15,247,000
20,699,000
$
4,039,000
29,484,000
30,399,000
81,027,000
39,492,000
92,305,000
66,609,000
47,919,000
3,692,000
3,921,000
4,712,000
2,010,000
5,009,000
2,856,000
895,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
77,528,000
77,528,000
$ 13,671,000
$ 46,887,000
$ 109,377,000
$ 156,264,000
$ 17,462,000
$ 12,049,000
$ 107,975,000
$ 120,024,000
$ 56,264,000
— $
23,773,000
1951
1964
1965
1959
1963
1982
1971
1986
2007
2008
1948
N/A
N/A
1960
1975
1966
1971
1976
1973
1972
1985
1970
1979
1974
1980
1979
N/A
1967
1984
2000
1989
1971
1986
2007
2009
1966
1988
1985
1996
1988
Jan 1963
May 1965
Jul 1969
Jan 1969
Jan 1970
Aug 1996
mar 1996
Nov 1997
Feb 2001
Jun 2003
Sep 2008
Jun 2011
Nov 2011
May 1977
Aug 1979
Jul 1992
Jan 1995
Nov 1995
Oct 1997
Nov 1997
May 1999
May 2000
Oct 2000
Apr 2001
Jul 2002
Aug 2003
Dec 2005
Aug 2006
Aug 2006
mar 2007
Jun 2007
Dec 2007
Dec 2008
Jun 2010
Jun 2010
Jan 2011
mar 2011
Sep 2011
Sep 2011
Jun 2012
179,000
170,000
159,000
173,000
258,000
274,000
157,000
225,000
214,000
60,000
268,000
—
—
99,000
221,000
74,000
202,000
103,000
167,000
538,000
113,000
96,000
115,000
267,000
79,000
263,000
—
132,000
275,000
207,000
80,000
228,000
290,000
134,000
136,000
188,000
132,000
351,000
223,000
142,000
308
191
227
200
279
256
212
195
224
74
374
—
—
30 years
40 years
35 years
35 years
33 years
30 years
30 years
30 years
28 years
26 years
30 years
N/A
N/A
28 years
41 years
50 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
N/A
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
$ 263,812,000
$ 1,078,249,000
$ 1,342,061,000
$ 309,483,000
4,855,000
AnnuAl RepoRt 2012 FoRM 10-K PROPERTIES
LOcATION
LANd
INITIAL cOST(b)
BUILdINGS ANd
IMPROVEMENTS
NET IMPROVEMENTS
(RETIREMENT)
SINcE AcqUISITION
1901 Pennsylvania Avenue
Washington, DC
85,559,000
$ 211,147,000
ScHEdULE III
Multifamily Properties
3801 Connecticut Avenue(a)
Roosevelt Towers
Country Club Towers
Park Adams
Munson Hill Towers
The Ashby at McLean
Walker House Apartments(a)
Bethesda Hill Apartments(a)
Bennett Park
The Clayborne
The Kenmore(a)
650 N. Glebe Rd(g)
1225 First Street(g)
Office Buildings
51 Monroe Street
515 King Street
6110 Executive Boulevard
1220 19th Street
1600 Wilson Boulevard
7900 Westpark Drive
6565 Arlington Boulevard
600 Jefferson Plaza
Wayne Plaza
Courthouse Square
One Central Plaza
Atrium Building
1776 G Street
Dulles Station II(f)
West Gude(a)
Monument II
Woodholme Center
2000 M Street
2445 M Street(a)
Quantico Building E
Quantico Building G
1227 25th Street
Braddock Metro
John Marshall II(a)
Fairgate at Ballston
1140 Connecticut Avenue, NW
Washington, DC
Washington, DC
Washington, DC
virginia
virginia
virginia
virginia
virginia
Maryland
Maryland
virginia
virginia
virginia
virginia
Maryland
virginia
Maryland
virginia
virginia
Maryland
Maryland
virginia
Maryland
Maryland
virginia
virginia
Maryland
virginia
Maryland
virginia
virginia
virginia
virginia
virginia
Washington, DC
Washington, DC
Washington, DC
Washington, DC
Washington, DC
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
420,000
336,000
299,000
287,000
322,000
4,356,000
2,851,000
3,900,000
2,861,000
269,000
$ 28,222,000
$ 12,787,000
$ 14,046,000
$ 70,956,000
892,000
840,000
4,102,000
4,621,000
7,803,000
6,661,000
2,296,000
1,564,000
—
5,480,000
3,182,000
$ 12,049,000
$ 31,500,000
$ 15,001,000
$
5,584,000
$ 11,580,000
$ 10,244,000
2,194,000
—
4,518,000
4,897,000
$ 25,226,000
$ 17,505,000
$ 18,817,000
$ 13,490,000
$ 17,750,000
$ 274,683,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,678,000
1,996,000
2,562,000
1,654,000
3,337,000
17,102,000
7,946,000
13,412,000
917,000
33,955,000
—
—
—
3,481,000
10,869,000
3,931,000
11,926,000
11,366,000
16,742,000
71,825,000
12,188,000
6,243,000
17,096,000
39,107,000
11,281,000
54,327,000
494,000
23,195,000
43,240,000
65,205,000
16,711,000
61,101,000
24,801,000
25,376,000
50,495,000
21,319,000
71,250,000
53,024,000
29,885,000
$ 46,887,000
$ 106,743,000
9,023,000
9,881,000
$ 14,461,000
9,141,000
$ 14,847,000
$ 15,148,000
$
6,688,000
$ 11,903,000
$ 78,855,000
$ 30,451,000
2,130,000
2,858,000
5,761,000
$ 15,100,000
$ 24,173,000
5,125,000
$ 11,947,000
9,690,000
$ 14,806,000
$ 36,150,000
5,512,000
7,928,000
6,677,000
$ 16,745,000
2,987,000
4,383,000
$ (3,425,000)
$ 16,427,000
4,677,000
8,208,000
3,737,000
1,794,000
2,634,000
165,000
126,000
5,306,000
668,000
2,238,000
95,000
284,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$ 863,221,000
$ 204,157,000
GROSS AMOUNTS AT WHIcH cARRIEd AT dEcEMBER 31, 2012 AccUMULATEd
dEPREcIATION
AT dEcEMBER 31,
2012
BUILdINGS ANd
IMPROVEMENTS
TOTAL(c)
LANd
yEAR
Of cON-
STRUcTION
dATE Of
AcqUISITION
NET
RENTABLE
SqUARE fEET(e) UNITS
dEPRE-
cIATION
LIfE(d)
420,000
$
336,000
$
299,000
$
287,000
$
322,000
$
4,356,000
$
2,851,000
$
3,900,000
$
4,774,000
$
699,000
$
$ 28,222,000
$ 15,645,000
$ 19,807,000
$ 81,918,000
11,702,000
11,877,000
17,023,000
10,795,000
18,183,000
32,250,000
14,634,000
25,315,000
77,859,000
30,020,000
36,085,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$ 285,743,000
$
$
$
$
$
$
$
$
$
$
$
— $
— $
12,122,000
12,213,000
17,322,000
11,082,000
18,505,000
36,606,000
17,485,000
29,215,000
82,633,000
30,719,000
64,307,000
15,645,000
19,807,000
$ 367,661,000
892,000
$
840,000
$
4,102,000
$
4,621,000
$
7,802,000
$
6,661,000
$
$ 12,049,000
2,296,000
$
$
1,564,000
$
5,480,000
$
$
3,182,000
$ 31,500,000
4,130,000
$
$
5,584,000
$ 11,580,000
$ 10,244,000
2,194,000
$
$
$ 46,887,000
4,518,000
$
$
4,898,000
$ 25,226,000
$ 17,505,000
$ 18,817,000
$ 13,490,000
$ 17,750,000
$ 263,812,000
18,581,000
$
35,042,000
$
9,056,000
$
23,873,000
$
21,057,000
$
31,548,000
$
$ 107,975,000
17,700,000
$
14,171,000
$
23,773,000
— $
55,852,000
$
14,268,000
$
58,710,000
$
7,940,000
$
27,872,000
$
51,448,000
$
68,942,000
$
18,505,000
$
77,528,000
— $
$ 109,377,000
24,966,000
$
25,501,000
$
55,801,000
$
21,987,000
$
73,488,000
$
53,119,000
$
$
30,169,000
$ 1,078,249,000
19,473,000
$
35,882,000
$
13,158,000
$
28,494,000
$
28,859,000
$
38,209,000
$
$ 120,024,000
19,996,000
$
15,735,000
$
23,773,000
$
61,332,000
$
17,450,000
$
90,210,000
$
12,070,000
$
33,456,000
$
63,028,000
$
79,186,000
$
20,699,000
$
$
77,528,000
$ 156,264,000
29,484,000
$
30,399,000
$
81,027,000
$
39,492,000
$
92,305,000
$
66,609,000
$
$
47,919,000
$ 1,342,061,000
8,504,000
$
7,180,000
$
9,472,000
$
$
7,386,000
$ 12,589,000
$ 17,975,000
8,508,000
$
$ 13,593,000
$ 20,017,000
8,994,000
$
5,818,000
$
—
$
$
—
$ 120,036,000
$ 13,478,000
$ 24,898,000
4,662,000
$
$ 15,372,000
$ 10,065,000
$ 15,163,000
$ 56,264,000
8,346,000
$
6,537,000
$
9,844,000
$
$ 23,755,000
$
5,922,000
$ 20,958,000
179,000
$
$
7,719,000
$ 12,807,000
$ 15,247,000
4,039,000
$
$ 13,671,000
$ 17,462,000
3,692,000
$
3,921,000
$
4,712,000
$
2,010,000
$
5,009,000
$
2,856,000
$
$
895,000
$ 309,483,000
1951
1964
1965
1959
1963
1982
1971
1986
2007
2008
1948
N/A
N/A
1960
1975
1966
1971
1976
1973
1972
1985
1970
1979
1974
1980
1979
N/A
1967
1984
2000
1989
1971
1986
2007
2009
1966
1988
1985
1996
1988
Jan 1963
May 1965
Jul 1969
Jan 1969
Jan 1970
Aug 1996
mar 1996
Nov 1997
Feb 2001
Jun 2003
Sep 2008
Jun 2011
Nov 2011
May 1977
Aug 1979
Jul 1992
Jan 1995
Nov 1995
Oct 1997
Nov 1997
May 1999
May 2000
Oct 2000
Apr 2001
Jul 2002
Aug 2003
Dec 2005
Aug 2006
Aug 2006
mar 2007
Jun 2007
Dec 2007
Dec 2008
Jun 2010
Jun 2010
Jan 2011
mar 2011
Sep 2011
Sep 2011
Jun 2012
179,000
170,000
159,000
173,000
258,000
274,000
157,000
225,000
214,000
60,000
268,000
—
—
2,137,000
99,000
221,000
74,000
202,000
103,000
167,000
538,000
113,000
96,000
115,000
267,000
79,000
263,000
—
132,000
275,000
207,000
80,000
228,000
290,000
134,000
136,000
188,000
132,000
351,000
223,000
142,000
4,855,000
308
191
227
200
279
256
212
195
224
74
374
—
—
2,540
30 years
40 years
35 years
35 years
33 years
30 years
30 years
30 years
28 years
26 years
30 years
N/A
N/A
28 years
41 years
50 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
N/A
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
111
FORM 10-K AnnuAl RepORt 2012 ScHEdULE III (cont.)
PROPERTIES
LOcATION
LANd
INITIAL cOST(b)
GROSS AMOUNTS AT WHIcH cARRIEd AT dEcEMBER 31, 2012 AccUMULATEd
BUILdINGS ANd
IMPROVEMENTS
NET IMPROVEMENTS
(RETIREMENT)
SINcE AcqUISITION
LANd
BUILdINGS ANd
IMPROVEMENTS
dEPREcIATION
yEAR
NET
AT dEcEMBER 31,
Of cON-
dATE Of
RENTABLE
dEPRE-
cIATION
TOTAL(c)
2012
STRUcTION
AcqUISITION
SqUARE fEET(e) UNITS
LIfE(d)
Medical Office
Woodburn Medical Park I
Woodburn Medical Park II
8501 Arlington Boulevard(a)
8503 Arlington Boulevard(a)
8505 Arlington Boulevard(a)
Shady Grove Medical II
8301 Arlington Boulevard
Alexandria Professional Center
9707 Medical Center Drive(a)
15001 Shady Grove Road
15005 Shady Grove Road(a)
2440 M Street
Woodholme Medical Center(a)
Ashburn Farm Professional Center(a)
CentreMed I & II
4661 Kenmore Avenue(f)
Sterling Medical Office
19500 at Riverside Office Park
Retail centers
Takoma Park
Westminster
Concord Centre
Wheaton Park
Bradlee
Chevy Chase Metro Plaza
Montgomery Village Center
Shoppes of Foxchase
Frederick County Square
800 S. Washington Street
Centre at Hagerstown
Frederick Crossing(a)
Randolph Shopping Center
Montrose Shopping Center
Gateway Overlook
Olney Village Center(a)
Total
virginia
virginia
virginia
virginia
virginia
Maryland
virginia
virginia
Maryland
Maryland
Maryland
Washington, DC
Maryland
virginia
virginia
virginia
virginia
virginia
Maryland
Maryland
virginia
Maryland
virginia
Washington, DC
Maryland
virginia
Maryland
virginia
Maryland
Maryland
Maryland
Maryland
Maryland
Maryland
2,563,000
$
2,632,000
$
2,071,000
$
1,598,000
$
2,819,000
$
1,995,000
$
1,251,000
$
6,783,000
$
3,069,000
$
4,094,000
$
$
4,186,000
$ 12,500,000
3,744,000
$
3,770,000
$
2,062,000
$
3,764,000
$
$
970,000
1,308,000
$
$ 61,179,000
415,000
$
519,000
$
413,000
$
796,000
$
4,152,000
$
$
1,549,000
$ 11,625,000
5,838,000
$
6,561,000
$
$
2,904,000
$ 13,029,000
$ 12,759,000
4,928,000
$
$ 11,612,000
$ 28,816,000
$ 15,842,000
$ 121,758,000
$ 528,576,000
$
12,460,000
$
17,574,000
$
26,317,000
$
25,850,000
$
19,680,000
$
16,601,000
$
6,589,000
$
19,676,000
$
11,777,000
$
16,410,000
$
17,548,000
$
37,321,000
$
24,587,000
$
19,200,000
$
12,506,000
$
—
$
5,274,000
18,778,000
$
$ 308,148,000
1,084,000
$
1,775,000
$
850,000
$
857,000
$
5,383,000
$
4,304,000
$
9,105,000
$
2,979,000
$
6,830,000
$
5,489,000
$
25,415,000
$
35,477,000
$
13,025,000
$
22,410,000
$
52,249,000
$
39,133,000
$
$ 226,365,000
$ 1,483,293,000
$
4,328,000
$
4,310,000
$
1,281,000
$
1,478,000
$
692,000
$
1,524,000
$
1,766,000
$
5,955,000
$
1,151,000
$
1,688,000
$
691,000
$
5,099,000
$
2,015,000
$
1,458,000
$
759,000
$
46,000
$
895,000
2,410,000
$
$ 37,546,000
155,000
$
9,140,000
$
3,437,000
$
4,526,000
$
8,114,000
$
4,870,000
$
$
3,178,000
$ 13,135,000
3,169,000
$
5,992,000
$
2,165,000
$
2,127,000
$
650,000
$
2,529,000
$
335,000
$
892,000
$
$ 64,414,000
$ 517,264,000
(a) At December 31, 2012, our properties were encumbered by non-recourse mortgage amounts as follows: $35,399,000 on 3801 Connecticut Avenue, $16,531,000 on Walker
House, $29,099,000 on Bethesda Hill, $35,535,000 on The Kenmore, $29,996,000 on West Gude Drive, $96,848,000 on 2445 M Street, $53,274,000 on John Marshall II,
$19,608,000 on Woodholme Medical Center, $4,337,000 on Ashburn Farm, and $22,343,000 on Olney Village Center.
(b) The purchase cost of real estate investments has been divided between land and buildings and improvements on the basis of management’s determination of the fair values.
(c) At December 31, 2012, total land, buildings and improvements are carried at $2,148,544,000 for federal income tax purposes.
(d) The useful life shown is for the main structure. Buildings and improvements are depreciated over various useful lives ranging from 3 to 50 years.
(e) Residential properties are presented in gross square feet.
112
$ 12,500,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,563,000
2,632,000
2,071,000
1,598,000
2,819,000
1,995,000
1,251,000
6,783,000
3,069,000
4,094,000
4,186,000
3,744,000
3,770,000
2,062,000
3,810,000
970,000
1,308,000
415,000
519,000
413,000
796,000
4,152,000
1,549,000
5,838,000
6,561,000
2,904,000
$ 11,625,000
$ 13,029,000
$ 12,759,000
$
4,928,000
$ 11,612,000
$ 29,394,000
$ 15,842,000
19,351,000
8,105,000
24,516,000
$ 10,261,000
— $
3,810,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
16,788,000
21,884,000
27,597,000
27,328,000
20,372,000
18,125,000
8,355,000
25,631,000
12,928,000
18,098,000
18,239,000
42,420,000
26,602,000
20,658,000
13,265,000
6,169,000
21,188,000
1,239,000
10,915,000
4,287,000
5,383,000
13,497,000
9,174,000
12,283,000
16,114,000
9,999,000
11,481,000
27,580,000
37,604,000
13,675,000
24,939,000
52,006,000
40,025,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
29,668,000
28,926,000
23,191,000
20,120,000
9,606,000
32,414,000
15,997,000
22,192,000
22,425,000
54,920,000
30,346,000
24,428,000
15,327,000
7,139,000
22,496,000
1,654,000
11,434,000
4,700,000
6,179,000
17,649,000
10,723,000
23,908,000
21,952,000
16,560,000
14,385,000
40,609,000
18,603,000
36,551,000
81,400,000
55,867,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
9,061,000
8,754,000
6,825,000
5,129,000
2,598,000
6,019,000
3,246,000
4,694,000
4,227,000
9,787,000
5,881,000
4,412,000
2,703,000
—
1,434,000
2,661,000
1,170,000
6,183,000
2,885,000
3,207,000
9,216,000
5,698,000
5,139,000
4,829,000
5,958,000
3,714,000
9,815,000
3,366,000
6,009,000
5,588,000
2,124,000
50,363,000
$ 10,319,000
1984
1988
2000
2001
2002
1999
1965
1968
1994
1999
2002
1986
1996
1998
1998
N/A
1986
2009
1962
1969
1960
1967
1955
1975
1969
1960
1973
1951
2000
1999
1972
1970
2007
1979
Nov 1998
Nov 1998
Oct 2003
Oct 2003
Oct 2003
Aug 2004
Oct 2004
Apr 2006
Apr 2006
Apr 2006
Jul 2006
mar 2007
Jun 2007
Jun 2007
Aug 2007
Aug 2007
May 2008
Aug 2009
Jul 1963
Sep 1972
Dec 1973
Sep 1977
Dec 1984
Sep 1985
Dec 1992
Jun 1994
Aug 1995
Jun 1998
Jun 2002
mar 2005
May 2006
May 2006
Dec 2010
Aug 2011
73,000
96,000
92,000
88,000
75,000
66,000
50,000
117,000
38,000
51,000
51,000
113,000
127,000
75,000
52,000
—
36,000
85,000
51,000
150,000
76,000
74,000
168,000
49,000
197,000
134,000
227,000
47,000
332,000
295,000
82,000
145,000
223,000
198,000
$ 61,225,000
$ 345,647,000
$ 406,872,000
$ 95,797,000
1,285,000
$ 122,336,000
$ 290,201,000
$ 412,537,000
$ 85,220,000
$ 529,291,000
$ 1,999,840,000
$ 2,529,131,000
$ 610,536,000
2,448,000
10,725,000
2,540
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
N/A
30 years
30 years
50 years
37 years
33 years
50 years
40 years
50 years
50 years
50 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
AnnuAl RepoRt 2012 FoRM 10-K Woodholme Medical Center(a)
Maryland
Ashburn Farm Professional Center(a)
Washington, DC
$ 12,500,000
PROPERTIES
Medical Office
Woodburn Medical Park I
Woodburn Medical Park II
8501 Arlington Boulevard(a)
8503 Arlington Boulevard(a)
8505 Arlington Boulevard(a)
Shady Grove Medical II
8301 Arlington Boulevard
Alexandria Professional Center
9707 Medical Center Drive(a)
15001 Shady Grove Road
15005 Shady Grove Road(a)
2440 M Street
CentreMed I & II
4661 Kenmore Avenue(f)
Sterling Medical Office
19500 at Riverside Office Park
Retail centers
Takoma Park
Westminster
Concord Centre
Wheaton Park
Bradlee
Chevy Chase Metro Plaza
Montgomery Village Center
Shoppes of Foxchase
Frederick County Square
800 S. Washington Street
Centre at Hagerstown
Frederick Crossing(a)
Randolph Shopping Center
Montrose Shopping Center
Gateway Overlook
Olney Village Center(a)
Total
LOcATION
LANd
INITIAL cOST(b)
BUILdINGS ANd
IMPROVEMENTS
NET IMPROVEMENTS
(RETIREMENT)
SINcE AcqUISITION
virginia
virginia
virginia
virginia
virginia
Maryland
virginia
virginia
Maryland
Maryland
Maryland
virginia
virginia
virginia
virginia
virginia
Maryland
Maryland
virginia
Maryland
virginia
Maryland
virginia
Maryland
virginia
Maryland
Maryland
Maryland
Maryland
Maryland
Maryland
Washington, DC
$ 61,179,000
$ 308,148,000
$ 37,546,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,563,000
2,632,000
2,071,000
1,598,000
2,819,000
1,995,000
1,251,000
6,783,000
3,069,000
4,094,000
4,186,000
3,744,000
3,770,000
2,062,000
3,764,000
970,000
1,308,000
415,000
519,000
413,000
796,000
4,152,000
1,549,000
5,838,000
6,561,000
2,904,000
$ 11,625,000
$ 13,029,000
$ 12,759,000
$
4,928,000
$ 11,612,000
$ 28,816,000
$ 15,842,000
$ 121,758,000
$ 528,576,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
12,460,000
17,574,000
26,317,000
25,850,000
19,680,000
16,601,000
6,589,000
19,676,000
11,777,000
16,410,000
17,548,000
37,321,000
24,587,000
19,200,000
12,506,000
—
5,274,000
18,778,000
1,084,000
1,775,000
850,000
857,000
5,383,000
4,304,000
9,105,000
2,979,000
6,830,000
5,489,000
25,415,000
35,477,000
13,025,000
22,410,000
52,249,000
39,133,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,328,000
4,310,000
1,281,000
1,478,000
692,000
1,524,000
1,766,000
5,955,000
1,151,000
1,688,000
691,000
5,099,000
2,015,000
1,458,000
759,000
46,000
895,000
2,410,000
155,000
9,140,000
3,437,000
4,526,000
8,114,000
4,870,000
3,178,000
3,169,000
5,992,000
2,165,000
2,127,000
650,000
2,529,000
335,000
892,000
$ 13,135,000
$ 226,365,000
$ 1,483,293,000
$ 64,414,000
$ 517,264,000
GROSS AMOUNTS AT WHIcH cARRIEd AT dEcEMBER 31, 2012 AccUMULATEd
dEPREcIATION
AT dEcEMBER 31,
2012
BUILdINGS ANd
IMPROVEMENTS
TOTAL(c)
LANd
yEAR
Of cON-
STRUcTION
dATE Of
AcqUISITION
NET
RENTABLE
SqUARE fEET(e) UNITS
dEPRE-
cIATION
LIfE(d)
2,563,000
$
2,632,000
$
2,071,000
$
1,598,000
$
2,819,000
$
1,995,000
$
1,251,000
$
6,783,000
$
3,069,000
$
4,094,000
$
$
4,186,000
$ 12,500,000
3,744,000
$
3,770,000
$
2,062,000
$
3,810,000
$
$
970,000
1,308,000
$
$ 61,225,000
415,000
$
519,000
$
413,000
$
796,000
$
4,152,000
$
$
1,549,000
$ 11,625,000
5,838,000
$
6,561,000
$
$
2,904,000
$ 13,029,000
$ 12,759,000
4,928,000
$
$ 11,612,000
$ 29,394,000
$ 15,842,000
$ 122,336,000
$ 529,291,000
16,788,000
21,884,000
27,597,000
27,328,000
20,372,000
18,125,000
8,355,000
25,631,000
12,928,000
18,098,000
18,239,000
42,420,000
26,602,000
20,658,000
13,265,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
6,169,000
21,188,000
$
$ 345,647,000
$
19,351,000
$
24,516,000
$
29,668,000
$
28,926,000
$
23,191,000
$
20,120,000
$
9,606,000
$
32,414,000
$
15,997,000
$
22,192,000
$
22,425,000
$
54,920,000
$
30,346,000
$
24,428,000
$
15,327,000
— $
3,810,000
$
7,139,000
22,496,000
$
$ 406,872,000
1,239,000
$
10,915,000
$
4,287,000
$
5,383,000
$
13,497,000
$
9,174,000
$
12,283,000
$
16,114,000
$
9,999,000
$
11,481,000
$
27,580,000
$
37,604,000
$
13,675,000
$
24,939,000
$
52,006,000
$
40,025,000
$
$ 290,201,000
$ 1,999,840,000
1,654,000
$
11,434,000
$
4,700,000
$
6,179,000
$
17,649,000
$
10,723,000
$
23,908,000
$
21,952,000
$
16,560,000
$
14,385,000
$
40,609,000
$
50,363,000
$
18,603,000
$
36,551,000
$
81,400,000
$
55,867,000
$
$ 412,537,000
$ 2,529,131,000
1984
1988
2000
2001
2002
1999
1965
1968
1994
1999
2002
1986
1996
1998
1998
N/A
1986
2009
1962
1969
1960
1967
1955
1975
1969
1960
1973
1951
2000
1999
1972
1970
2007
1979
$
8,105,000
$ 10,261,000
9,061,000
$
8,754,000
$
6,825,000
$
5,129,000
$
2,598,000
$
6,019,000
$
3,246,000
$
4,694,000
$
4,227,000
$
9,787,000
$
5,881,000
$
4,412,000
$
2,703,000
$
—
$
$
1,434,000
2,661,000
$
$ 95,797,000
1,170,000
$
6,183,000
$
2,885,000
$
3,207,000
$
9,216,000
$
5,698,000
$
5,139,000
$
4,829,000
$
5,958,000
$
3,714,000
$
$
9,815,000
$ 10,319,000
3,366,000
$
6,009,000
$
5,588,000
$
2,124,000
$
$ 85,220,000
$ 610,536,000
Nov 1998
Nov 1998
Oct 2003
Oct 2003
Oct 2003
Aug 2004
Oct 2004
Apr 2006
Apr 2006
Apr 2006
Jul 2006
mar 2007
Jun 2007
Jun 2007
Aug 2007
Aug 2007
May 2008
Aug 2009
Jul 1963
Sep 1972
Dec 1973
Sep 1977
Dec 1984
Sep 1985
Dec 1992
Jun 1994
Aug 1995
Jun 1998
Jun 2002
mar 2005
May 2006
May 2006
Dec 2010
Aug 2011
73,000
96,000
92,000
88,000
75,000
66,000
50,000
117,000
38,000
51,000
51,000
113,000
127,000
75,000
52,000
—
36,000
85,000
1,285,000
51,000
150,000
76,000
74,000
168,000
49,000
197,000
134,000
227,000
47,000
332,000
295,000
82,000
145,000
223,000
198,000
2,448,000
10,725,000
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
N/A
30 years
30 years
50 years
37 years
33 years
50 years
40 years
50 years
50 years
50 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
30 years
2,540
(f) As of December 31, 2012, WRIT had land held for development in Herndon, VA (Dulles Station, Phase II). WRIT also held a 0.8 acre parcel of land at 4661 Kenmore for
future development. Additionally, WRIT had investments in various smaller development or redevelopment projects. The total land value not yet placed in service of these
development projects at December 31, 2012 was $7.5 million. $0.5 million of Dulles Station, Phase II land was placed into service upon the completion of a portion of the
parking garage structure.
(g) As of December 31, 2012, WRIT had under development via joint venture arrangements, a mid-rise multifamily property in Arlington, Virginia (650 North Glebe) and a high-
rise multifamily property in Alexandria, Virginia (1225 First Street). The total value not yet placed into service of these development projects via joint venture arrangements at
December 31, 2012 was $35.5 million.
113
FORM 10-K AnnuAl RepORt 2012 SUMMARy Of REAL ESTATE INVESTMENTS ANd AccUMULATEd dEPREcIATION
The following is a reconciliation of real estate assets and accumulated depreciation for the three years ended December 31,
2012 (in thousands):
(in thousands)
Real estate assets
Balance, beginning of period
Additions:
Property acquisitions(1)
Improvements(1)
Deductions:
Impairment write-down
Write-off of disposed assets
Property sales
Balance, end of period
Accumulated depreciation
Balance, beginning of period
Additions:
Depreciation
Deductions:
Impairment write-down
Write-off of disposed assets
Property sales
Balance, end of period
(1)
Includes non-cash accruals for capital items and assumed mortgages.
yEAR ENdEd dEcEMBER 31,
2012
2011
2010
$2,449,872
$2,443,127
$2,341,461
47,772
59,664
(2,097)
(1,450)
(24,630)
352,658
36,386
(16,416)
(1,648)
(364,235)
140,584
28,196
—
(866)
(66,248)
$2,529,131
$2,449,872
$2,443,127
$ 535,732
$ 538,786
$ 475,245
84,949
84,167
83,302
—
(1,124)
(9,021)
(1,291)
(1,648)
(84,282)
—
(866)
(18,895)
$ 610,536
$ 535,732
$ 538,786
114
AnnuAl RepoRt 2012 FoRM 10-K Exhibit 31.1
cERTIfIcATION
I, George F. McKenzie, certify that:
1. I have reviewed this annual report on Form 10-K of Washington Real Estate Investment Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted account-
ing principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 27, 2013
By: /s/ George F. McKenzie
George F. McKenzie
Chief Executive Officer
115
FORM 10-K AnnuAl RepORt 2012 Exhibit 31.2
cERTIfIcATION
I, Laura M. Franklin, certify that:
1. I have reviewed this annual report on Form 10-K of Washington Real Estate Investment Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted account-
ing principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 27, 2013
By: /s/ Laura M. Franklin
Laura M. Franklin
Executive Vice President
Accounting, Administration and Corporate Secretary
(Principal Accounting Officer)
116
AnnuAl RepoRt 2012 FoRM 10-K Exhibit 31.3
cERTIfIcATION
I, William T. Camp, certify that:
1. I have reviewed this annual report on Form 10-K of Washington Real Estate Investment Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted account-
ing principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonable likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: February 27, 2013
By: /s/ William T. Camp
William T. Camp
Chief Financial Officer
(Principal Financial Officer)
117
FORM 10-K AnnuAl RepORt 2012 Exhibit 32
WRITTEN STATEMENT Of cHIEf EXEcUTIVE OffIcER ANd cHIEf fINANcIAL
OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the President and Chief Executive Officer, the Executive Vice President Accounting, Administration and
Corporate Secretary, and the Chief Financial Officer of Washington Real Estate Investment Trust (“WRIT”), each hereby
certifies on the date hereof, that:
(a) the Annual Report on Form 10-K for the year ended December 31, 2012 filed on the date hereof with the Securities
and Exchange Commission (the “Report”) fully complies with the requirements of Section 13 (a) or 15(d) of the
Securities Exchange Act of 1934; and
(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of WRIT.
Dated: February 27, 2013
By: /s/ George F. McKenzie
George F. McKenzie
Chief Executive Officer
Dated: February 27, 2013
By: /s/ Laura M. Franklin
Laura M. Franklin
Executive Vice President
Accounting, Administration and Corporate Secretary
(Principal Accounting Officer)
Dated: February 27, 2013
By: /s/ William T. Camp
William T. Camp
Chief Financial Officer
(Principal Financial Officer)
118
AnnuAl RepoRt 2012 FoRM 10-K This page intentionally left blank.
119
FORM 10-K AnnuAl RepORt 2012 CoRPoRate infoRmation
PERfORMANcE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return (assumes reinvestment of dividends) on WRIT shares with the
cumulative total return of companies making up the Standard & Poor’s
500 Stock Index and the MSCI US REIT Index. The MSCI US REIT
Index is a total-return index representing approximately 85% of the
US REIT universe.
comparison of five year cumulative Total Return
$200
$150
$100
$50
$0
2007
2008
2009
2010
2011
2012
WRit
msCi us Reit Index
S&P 500
Reconciliation of core funds from Operations(1,2)
2008
2009
2010
2011
2012
Funds from Operations
$2.00
$ 2.14 $1.79 $1.66
$1.84
Loss (Gain) on Extinguishment
of Debt
0.12
(0.09)
0.15
0.02
—
Real Estate Impairment
—
—
— 0.22
0.03
Acquisition Costs
Severance Expense
— 0.01
0.02
0.05
—
—
—
—
— 0.02
Core Funds from Operations
$2.12
$ 2.06 $1.96 $1.95
$1.90
(1) Columns may not foot due to rounding.
(2) 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) real estate impairment not already excluded
from FFO and (3) costs related to the acquisition of properties, 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.
corporate Headquarters
Washington Real Estate Investment Trust
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852-3927
301.984.9400
800.565.9748
301.984.9610 Fax
www.writ.com
counsel
Arent Fox LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Independent Registered
Public Accounting firm
Ernst & Young LLP
8484 Westpark Drive
McLean, Virginia 22102
Transfer Agent
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
Annual Meeting
WRIT will hold its annual meeting of stockholders
on May 16, 2013, at 11:00 a.m. at the Bethesda
North Marriott Hotel & Conference Center,
5701 Marinelli Road, North Bethesda, Maryland.
WRIT direct
WRIT’s dividend reinvestment plan permits cash
investment of up to the amount specified in the
plan, plus dividends, and is IRA eligible.
Stock Information
WRIT is traded on the New York Stock Exchange.
The symbol listed in the newspaper is WRIT. The
trading symbol is WRE.
Member
National Association of Real
Estate Investment Trusts®
1875 Eye Street, N.W., Suite 600
Washington, D.C. 20006-5413
Annual CEO Certification
WRIT submitted the CEO Certification required
by the NYSE under Section 303A. 12(a) without
qualifications.
120
AnnuAl RepoRt 2012 FoRM 10-K Writ o fficers (FROM LEFT TO RIGhT)
thomas L. regnell, Senior Vice President and Managing Director, Office Division, Laura M. Franklin, Executive Vice President Accounting,
Administration and Corporate Secretary, thomas C. Morey, Senior vice president and General Counsel, george F. McKenzie, president and
Chief Executive Officer, William t. Camp, Executive Vice President and Chief Financial Officer, James B. Cederdahl, Senior vice president,
property operations
Writ trustees (FROM LEFT TO RIGhT)
edward S. Civera, Retired Chairman, Catalyst health Solutions, Inc., Wendelin a. White, partner, pillsbury Winthrop Shaw pittman LLp,
William g. Byrnes, Retired Managing Director, Alex. Brown & Sons, Vice adm. anthony L. Winns (ret.), President, Middle East-Africa Region,
Corporate International Business Development, Lockheed Martin Corporation, John P. Mcdaniel, Chairman, WRIT; Retired Chief Executive Officer,
MedStar health, george F. McKenzie, President and Chief Executive Officer, WRIT, Charles t. nason, Retired Chairman, president and
Chief Executive Officer, The Acacia Group, thomas edgie russell, iii, Retired president, partners Realty Trust, Inc.
m
o
c
e
v
.
i
t
a
e
r
c
i
c
f
.
w
w
w
D
M
,
a
d
s
e
h
t
e
B
e
v
i
t
a
e
r
C
I
C
F
:
n
g
i
s
e
D
t
s
u
r
T
t
n
e
m
t
s
e
v
n
I
e
t
a
t
s
E
l
a
e
R
n
o
t
g
n
h
s
a
i
W
3
1
0
2
©
returns
$10,000 invested in Writ since December 31, 1971, with dividends
reinvested, would be worth $3.2 million as of December 31, 2012.
annualizeD coMpounD
total return
Writ
nareit equity
s&p 500
15.1%
12.1%
9.8%
price return
Writ
nasDaq
DJia
8.1%
8.3%
6.8%
$3,000,000
$2,000,000
$1,000,000
1971
Source: Bloomberg, NAREIT, WRIT
2012
6110 executive Boulevard, suite 800, rockville, Maryland 20852-3927 301.984.9400 800.565.9748 fax 301.984.9610 www.writ.com