WashREIT (NYSE: WRE) (“WashREIT” or the “Company”), as part of its
multi-year strategic transformation into a multifamily REIT,
announced today that it has entered into a definitive agreement to
sell substantially all its office portfolio to a Brookfield Asset
Management private real estate fund for an aggregate purchase price
of $766 million. This office portfolio sale consists of twelve
office assets, comprising 2,371,000 square feet, located in the
Washington, DC metro area. The transaction is expected to close in
the third quarter of 2021, subject to the satisfaction of customary
closing conditions.
The Company has also signed a letter of intent
to sell its remaining eight retail assets and expects to complete
this sale in the third quarter. No assurance can be given as to the
timing or ultimate completion of these sales.
The Company plans to use the net proceeds from
this office portfolio sale and future retail sales to fund the
expansion of its multifamily platform through acquisitions in
Southeastern markets and to reduce its leverage by repaying
outstanding debt.
After the office transaction is complete,
WashREIT will own only one office asset, Watergate 600, which is a
Class A, 295,000 square foot office building located in Washington,
DC. The company intends to dispose of Watergate 600 when
practicable to become a 100% pure-play multifamily REIT.The
Company’s multifamily strategies target the Class A-, Class B
Value-Add and Class B segments of the market, focusing on the
deepest part of the demand curve – the mid-market renter.
WashREIT’s research on under-served middle income renters and
markets poised for strong, sustained demand has led it to
concentrate on expanding its geographic presence into the
high-growth Southeastern markets of Atlanta, Raleigh-Durham and
Charlotte. Expansion into these markets will diversify WashREIT’s
geographic concentration risk, while providing opportunities for
additional growth - driven both by current and projected long-term
rental-rate outperformance.
"We are announcing the most significant
milestone to date in our transformation into a multifamily REIT,"
said Paul McDermott, President and CEO of WashREIT. "This
transaction, along with sourcing multifamily expansion
opportunities and our retail sales process, signals our belief that
the multifamily asset class is the best vehicle to harness
long-term growth for our investors."
"Completing this sale will allow us to
strengthen our balance sheet by eliminating near-term debt
maturities until 2023. The Company also intends to sell its
remaining retail assets and use the proceeds from both sales to pay
down debt and invest in new multifamily assets, which we believe
will enable us to reduce our leverage to the mid to high 5x range
for Net Debt to Adjusted EBITDA and further lower our long-term
leverage guideposts to stay between 5.0x and 6.0x. With this
transaction, we have the resources to expand the scope of our
successful research-led, value-creation strategies into high-growth
Southeastern markets that we have studied for the past several
years. These strategies include serving the underserved mid-market
renter and delivering the best resident experience across several
price points, thereby creating the greatest value for all of our
stakeholders,” added McDermott.
The financial impacts of the proposed
transactions described in this press release were not included in
the Company’s outlook with respect to general and administrative
expense and interest expense for full year 2021 provided on April
28, 2021, and that prior outlook information will be impacted by
the proposed transactions. Given that these proposed transactions
have not yet been completed, the Company is not providing an
updated 2021 full year outlook for general and administrative
expense or interest expense at this time and the outlook with
respect to such items is no longer in effect.
WashREIT is holding an investor webcast today,
Tuesday, June 15, 2021 at 8 AM ET, to discuss the transformative
transactions, its de-leveraging and multifamily growth plans and
the expected financial impacts of these actions. During the
presentation, the Company will discuss its plan to continue to
execute its research-driven strategy to expand its multifamily
portfolio presence to create value and increase future growth
prospects followed by a brief question and answer session.
JLL served as the Company’s exclusive real
estate advisor in connection with the office and retail portfolio
sales and Goldman Sachs & Co. LLC is serving as exclusive
strategic financial advisor to the Company.
Office PortfolioThe office
portfolio under contract to be sold consists of 12 office
properties, with six properties located in Northern Virginia and
six properties located in Washington, DC. As of May 31, 2021, the
portfolio was approximately 83% occupied.
Properties |
Location |
Net Rentable Square Feet |
515 King Street |
Alexandria, VA |
75,000 |
Courthouse Square |
Alexandria, VA |
121,000 |
1600 Wilson Boulevard |
Arlington, VA |
171,000 |
Fairgate at Ballston |
Arlington, VA |
144,000 |
Arlington Tower |
Arlington, VA |
389,000 |
Silverline Center |
Tysons, VA |
552,000 |
Northern VA Subtotal |
|
1,452,000 |
|
|
|
1901 Pennsylvania Avenue |
Washington, DC |
101,000 |
1220 19th Street |
Washington, DC |
103,000 |
2000 M Street |
Washington, DC |
34,000 |
1140 Connecticut Avenue |
Washington, DC |
184,000 |
Army Navy Building |
Washington, DC |
108,000 |
1775 Eye Street |
Washington, DC |
189,000 |
Washington, DC Subtotal |
|
919,000 |
|
|
|
TOTAL |
|
2,371,000 |
PresentationA presentation
highlighting the transaction and strategic overview can be accessed
through the Investor section of the Company’s website at
www.washreit.com.
Investor Webcast Information
Today, Tuesday, June 15, 2021, at 8 AM ET,
WashREIT is holding an investor presentation webcast presenting the
transaction and strategic plans followed by a brief question and
answer session.
The live, on-demand webcast will be available on
the Investor section of WashREIT's website at www.washreit.com or
at https://www.webcaster4.com/Webcast/Page/2091/41585. Online
playback of the webcast will be available following the on-demand
webcast until July 6, 2021.
For those unable to access the live on-demand
webcast, the remarks can also be accessed in a simultaneous
conference call as follows:
USA Toll Free Number: 877-407-9205International
Toll Number 201-689-8054
WashREIT owns and operates uniquely positioned
real estate assets. Backed by decades of experience, expertise, and
ambition, we create value by transforming insights into strategy
and strategy into action. Our shares trade on the NYSE. With a
track record of driving returns and delivering satisfaction, we are
a trusted authority in one of the nation’s most competitive real
estate markets.
Certain statements in this press release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and involves risk and
uncertainties. Forward-looking statements relate to expectations,
beliefs, projections, future plans and strategies, anticipated
events or trends and similar expressions concerning matters that
are not historical facts. In some cases, you can identify forward
looking statements by the use of forward-looking terminology such
as “may,” “will,” “should,” “expects,” “intends,” “plans,”
“anticipates,” “believes,” “estimates,” “predicts,” or “potential”
or the negative of these words and phrases or similar words or
phrases which are predictions of or indicate future events or
trends and which do not relate solely to historical matters. Such
statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or
achievements of WashREIT to be materially different from future
results, performance or achievements expressed or implied by such
forward looking statements. Currently, one of the most significant
factors continues to be the adverse effect of the COVID-19 virus,
including any variants and mutations thereof, the actions taken to
contain the pandemic or mitigate the impact of COVID-19, and the
direct and indirect economic effects of the pandemic and
containment measures. The extent to which COVID-19 continues to
impact WashREIT and its tenants will depend on future developments,
which are highly uncertain and cannot be predicted with confidence,
including the scope, severity and duration of the pandemic, the
actions taken to contain the pandemic or mitigate its impact, and
the direct and indirect economic effects of the pandemic and
containment measures, the continued speed and success of the
vaccine rollout, effectiveness and willingness of people to take
COVID-19 vaccines, and the duration of associated immunity and
their efficacy against emerging variants of COVID-19, among others.
Moreover, investors are cautioned to interpret many of the risks
identified in the risk factors discussed in our Annual Report on
Form 10-K for the year ended December 31, 2020 filed on February
16, 2021, as being heightened as a result of the ongoing and
numerous adverse impacts of COVID-19. Additional factors which may
cause the actual results, performance, or achievements of WashREIT
to be materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements include, but are not limited to the risks associated
with the failure to enter into and/or complete contemplated
acquisitions or dispositions (including the announced office
portfolio sale transaction and expected retail asset sales) within
the price ranges anticipated and on the terms and timing
anticipated, or at all; our ability to execute on our strategies,
including new strategies with respect to our operations and our
portfolio, including the acquisition of multifamily properties and
the repayment of debt, and to realize any anticipated benefits,
including the performance of any acquired multifamily properties at
the levels anticipated; our ability to reduce actual net leverage
to levels consistent with our targeted net leverage range; the
ownership of real estate in general and our real estate assets in
particular; the economic health of the greater Washington, DC metro
region and the larger Southeastern region; changes in the
composition and geographic location of our portfolio; fluctuations
in interest rates; reductions in or actual or threatened changes to
the timing of federal government spending; the risks related to use
of third-party providers and joint venture partners; the economic
health of our tenants; shifts away from brick and mortar stores to
e-commerce; the availability and terms of financing and capital and
the general volatility of securities markets; compliance with
applicable laws, including those concerning the environment and
access by persons with disabilities; the risks related to not
having adequate insurance to cover potential losses; the risks
related to our organizational structure and limitations of stock
ownership; changes in the market value of securities; terrorist
attacks or actions and/or cyber-attacks; failure to qualify and
maintain our qualification as a REIT and the risks of changes in
laws affecting REITs; and other risks and uncertainties detailed
from time to time in our filings with the SEC, including our 2020
Form 10-K filed on February 16, 2021. While forward-looking
statements reflect our good faith beliefs, they are not guarantees
of future performance. We undertake no obligation to update our
forward-looking statements or risk factors to reflect new
information, future events, or otherwise.
IR Contact: Steven FreishtatVice
President, FinancePhone:
202-774-3200E-Mail:
sfreishtat@washreit.comPR Contact: Liz Wainger
Wainger Group Phone:
301-461-3780E-Mail: liz@waingergroup.com
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