Investor Presentation Reit Week 2013

Investor Presentation REIT Week 2013

Repositioning for the future.

Investor Presentation First Quarter 2012

Forward Looking Statements

Certain statements in this presentation are “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements involve known and unknown risks, uncertainties, and other

factors that may cause actual results to differ materially. Such risks,

uncertainties and other factors include, but are not limited to, the potential for

federal government budget reductions, changes in general and local economic

and real estate market conditions, the timing and pricing of lease

transactions, the availability and cost of capital, fluctuations in interest rates,

tenants’ financial conditions, levels of competition, the effect of government

regulation, the impact of newly adopted accounting principles, and other risks

and uncertainties detailed from time to time in our filings with the SEC,

including our 2012 Form 10-K and first quarter 2013 form 10-Q. We assume

no obligation to update or supplement forward-looking statements that

become untrue because of subsequent events.

2 REIT Week 2013 WASHINGTON REAL ESTATE INVESTMENT TRUST



Table of Contents

Company Profile

2013 Strategic Initiatives

Investment Highlights − Property Profile − First Quarter News − 2013 Guidance

Dividend Discussion

Washington, DC Market

− Excellent Demographics − Favorable Employment Numbers − Federal Government Influence

Strategic Plan

− Portfolio Repositioning − Asset Recycling

Portfolio Metrics − Diversification Strategy − Top Ten Tenants

Appendix



Company Profile We have 52+ years of experience of owning and operating real estate in the Washington, DC metro

region, delivering stable returns to our investors over a long investment horizon

We own 69 properties in four sectors in DC, Virginia and Maryland − Office, multifamily, retail, and medical office − 11 million square foot portfolio owned and managed

We believe in a conservative philosophy

− 40% debt to market capitalization as of 3/31/13 − Investment grade debt ratings

• S&P: BBB / Moody’s: Baa2

NOI Contribution by Sector - First Quarter 2013

Medical Office, 14% 17 properties, 1.3 million sq ft

Retail, 21% 16 properties, 2.4 million sq ft

Multifamily, 16% 11 properties, 2,540 units

Office, 49% 25 properties, 4.7 million sq ft




2013 Strategic Initiatives

Exploring the sale of our 1.3 million square foot Medical Office Division

− Simplify business model to focus on core office, multifamily and retail divisions − Capture embedded value from building portfolio to encompass 20% of the institutional quality

medical office market in DC over the past 10 years − Leverage broker relationships and experience from 2011 Industrial Division sale − Reinvest capital into high quality office, multifamily and retail assets in core submarkets

Ramping up apartment development

− Broke ground in Q1 on a Class A multifamily development project in desirable Ballston submarket of Arlington, Virginia

Continuing to upgrade existing properties to increase tenant retention and attract new prospects

− Lobby and common area renovations at several office buildings − Multifamily unit renovations (average return on cost of 12%)




Investment Highlights



Investment Highlights

52 Year History Resulting in Unmatched Expertise and Network − 52 years of continuous operations in the same markets − Broad relationship base across all property types

Strong Washington, DC market − Consistently one of the top real estate markets in the world year in and year out − Presence of the Federal Government combined with excellent population demographics − Active infrastructure improvement: $10 billion spent on highway/airport expansions and

Metro transit − Attractive business environment: recent corporate relocations of Hilton, Volkswagen,

Northrop Grumman, SAIC, Computer Sciences Corporation, as well as start-ups like Living Social and Advisory Board

Property Type Diversification

− Acquisitions in the past two years include 5 office buildings, 2 retail centers and 2 joint venture apartment developments totaling approximately $520 million

Active Asset Management Plan

− Improving our portfolio quality by acquiring well located assets in superior locations while disposing of properties that no longer fit this criteria – we sold $445 million of assets over the past two years, recognizing over $100 million in gains

− Investing in renovations and improvements to existing assets, leading to significant leasing progress in improved buildings

Conservative Capital Structure

− Ensures liquidity to fund upcoming obligations and provides fire power to fuel growth through acquisitions and development

− $430 million line of credit capacity, no 2013 debt maturities



Property Portfolio

Q1 2013 Net Operating Income Contribution by Region

26%

46%

31% Washington, DCVirginiaMaryland

53% 47% Inside BeltwayOutside Beltway

As we reduce our exposure to suburban office buildings, we are focusing our strategy more on urban core markets in the DC region

Most remaining “outside the Beltway” NOI comes from retail and medical office properties; only 20% of our NOI comes from office buildings located outside the Beltway




First Quarter News

Sold the Atrium Building, an 80,000 square foot suburban office building in Rockville, Maryland − $15.75 million, net book gain of $3.2 million and unleveraged IRR of 11% − Sold to a user − Built in 1980 and acquired in 2002

Repaid $60 million 5.125% bonds using line of credit

Prepaid an additional $30 million mortgage at 5.855% (West Gude Office Park)

Announced hiring of two Division Heads in Retail and Multifamily Divisions

Commenced marketing of Medical Office Division




2013 Core FFO Guidance

Range of $1.82 - $1.90 includes the following assumptions: − Same-store multifamily NOI growth is projected to range from 3% to 5%, with flat same-store

occupancy

− Same-store retail NOI growth is projected to range from 1% to 3%, with same-store occupancy improving incrementally

− Same-store office NOI is projected to decrease by 1% to 2%, with same-store occupancy improving incrementally

− General and administrative expense is projected to be approximately $16.5 million, an increase over the third quarter 2012 run rate, due to the projected three-year long-term incentive compensation plan payout in the fourth quarter of 2013

− Interest expense is projected to be approximately $66 million, an increase over the third quarter 2012 run rate, due to the full year impact of the third quarter 2012 $300 million unsecured debt issuance, offset in part by recent mortgage prepayments totaling approximately $88.5 million, and capitalized interest on development

− Acquisition and disposition activities, including the effects of the proposed Medical Office Division sale and any potential reinvestment, are not included in guidance




Dividend Discussion


Dividend Discussion

Source: SNL Financial data

Annual FAD Payout Ratio Estimates

In Q3 2012, we right sized our dividend to an annual rate of $1.20 − Estimated positive cash flow impact of $35 million per year to be used for property

acquisitions, development projects, improvements to existing assets or debt reduction − New rate is more aligned with taxable income

By decreasing our dividend payment, our future estimated FAD payout ratio (as calculated by SNL) is more in line with our peer group

This level of dividend payout more closely approximates taxable income, a comfortable level that should allow us more upside to grow future dividends

Current yield is still approximately 50 basis points higher than the equity REIT average %

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140

2007 2008 2009 2010 2011 2012 2013

WRE Peer Group Average




Washington, DC Market



Washington Metro Demographics

Aligning our portfolio with strong metro area demographics...

Four of the top five wealthiest counties in the U.S. are located here, and the top five most educated counties in the U.S. are all located here, contributing a total of 45% of our NOI

This is in addition to the 25% NOI contribution from our properties in the urban core of Washington, DC

Source: Main Street, Greater Washington Initiative, WRIT research

Top 5 Wealthiest Counties in the U.S.

1. Loudoun County, Virginia

2. Fairfax County, Virginia

3. Howard County, Maryland

4. Hunterdon County, New Jersey

5. Arlington County, Virginia

Top 5 Most Educated Counties in the U.S.

1. Arlington County, Virginia

2. Howard County, Maryland

3. Fairfax County, Virginia

4. Loudoun County, Virginia

5. Alexandria City, Virginia


Washington Metro Employment The Washington metro region’s unemployment rate continues to improve and outperform the national rate Job growth is still not as robust as it has been historically, but is projected to return to average levels over

the next 5 years


Federal Government Influence Despite talk of sequestration and government spending overhauls, the Washington, DC metro area

has consistently been a beneficiary of annually increasing spending regardless of which political party is in power

Over the next few years, we expect this trend to continue given increased employment from BRAC initiatives as well as the implementation of new healthcare and financial reform programs

Source: Cassidy Turley, Center for Regional Analysis (George Mason University), WRIT research.

Federal Spending – Washington, DC Metro Area

Gingrich attempts to balance the budget

Increased spending post-9/11 (Homeland Security, etc)

Increased spending post-financial meltdown (Dodd-Frank, etc)

Republican Controlled House

Democrat Controlled House

Light Colored Bar = Opposite Party President




Strategic Plan



Portfolio Repositioning

Over the past several years, we have actively shifted our investment focus to properties located inside the Capital Beltway as well as increased our holdings in Virginia and the District of Columbia



Asset Recycling

The chart below illustrates WRIT’s active asset recycling program over the past five years – acquisitions are shown on the positive axis and dispositions are shown on the negative axis

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1Q2012

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1Q2013

Inside the Beltway Near demand drivers and/or transportation nodes (Metro, hospitals, BRAC, I-95) Outside the Beltway




Portfolio Metrics




Diversification Strategy

Our property sector diversification serves as a balance, with better-performing sectors stabilizing other sectors experiencing downward trends

For the first quarter, same-store portfolio physical occupancy was 89.1%, an increase of 40 basis points over last quarter

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85

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1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013

%

Multifamily Office Medical Office Retail Same-Store Physical Occupancy

Same-Store Physical Occupancy




Top Ten Tenants

Top Ten Tenants – Based on Annualized Rent

Tenant

Number of

Buildings

Weighted Avg

Remaining Lease Term

(Mos.)

Percentage of Aggregate

Portfolio Annualized

Rent

Aggregate Rentable Sq

Ft

Percentage of Aggregate Occupied Sq

Ft

World Bank 1 27 5.11% 210,354 2.92%Advisory Board Company 1 74 2.88% 180,925 2.51%Booz Allen Hamilton, Inc. 1 34 2.35% 222,989 3.10%Engility Corporation (formerly L-3 Communications) 1 54 2.25% 140,400 1.95%INOVA Health System 7 36 2.08% 114,917 1.60%Patton Boggs LLP 1 49 2.05% 110,566 1.54%Sunrise Assisted Living, Inc. 1 15 1.66% 115,289 1.60%General Services Administration 4 50 1.33% 66,170 0.92%General Dynamics 2 15 1.22% 88,359 1.23%Epstein, Becker & Green, P.C. 1 45 1.14% 53,427 0.74%

Total/Weighted Average 40 22.07% 1,303,396 18.11%




Appendix/Disclosures




Core FFO and Core FAD Per Share Reconciliation

In thousands, except per share data

Fully Diluted Depreciation and

Weighted Average Adjusted Net Income Other FFO Core FFO FAD Core FAD

Year For All Stock Splits Net Income Per Share Adjustments Core FFO Per Share Adjustments Core FAD Per Share

2012 66,376 $ 23,708 $ 0.35 $ 102,724 $ 126,432 $ 1.90 $ 26,430 $ 100,002 $ 1.50

2011 65,982 104,884 1.58 24,283 129,167 1.95 -22,129 107,038 1.61

2010 62,264 37,426 0.60 84,477 121,903 1.96 -21,830 100,073 1.60

2009 56,968 40,745 0.71 81,026 117,223 2.06 -19,047 98,176 1.72

2008 49,217 27,082 0.55 71,606 104,271 2.12 -29,435 74,836 1.52

2007 46,115 61,881 1.34 69,775 106,581 2.31 -31,109 75,472 1.64




Non-GAAP Financial Measures

Funds From Operations (“FFO”) – The National Association of Real Estate Investment Trusts, Inc. (“NAREIT”) defines FFO (April, 2002 White Paper) as net income (computed in accordance with generally accepted accounting principles (“GAAP”)) excluding gains (or losses) from sales of property plus real estate depreciation and amortization. FFO is a non-GAAP measure and does not replace net income as a measure of performance or net cash provided by operating activities as a measure of liquidity. We consider FFO to be a standard supplemental measure for equity real estate investment trusts (“REITs”) because it facilitates an understanding of the operating performance of our properties without giving effect to real estate depreciation and amortization, which historically assumes that the value of real estate assets diminishes predictably over time. Since real estate values have instead historically risen or fallen with market conditions, we believe that FFO more accurately provides investors an indication of our ability to incur and service debt, make capital expenditures and fund other needs. Core Funds From Operations (“Core FFO”) is calculated by adjusting FFO for the following items (which we believe are not indicative of the performance of WRIT's operating portfolio and affect the comparative measurement of WRIT's operating performance over time): (1) gains or losses on extinguishment of debt, (2) 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. Net Operating income (“NOI”), defined as real estate rental revenue less real estate expenses, is a non-GAAP measure. We provide NOI as a supplement to net income calculated in accordance with GAAP. As such, it should not be considered an alternative to net income as an indication of our operating performance. It is the primary performance measure we use to assess the results of our operations at the property level. NOI is calculated as net income, less non-real estate revenue and the results of discontinued operations (including the gain on sale, if any), plus interest expense, depreciation and amortization and general and administrative expenses. Funds Available for Distribution (“FAD”) is a non-GAAP measure. It is calculated by subtracting from FFO (1) recurring expenditures, tenant improvements and leasing costs that are capitalized and amortized and are necessary to maintain our properties and revenue stream and (2) straight-line rents, then adding (3) non-real estate depreciation and amortization, (4) amortization of restricted share and unit compensation, and adding or subtracting amortization of lease intangibles, as appropriate. We consider FAD to be a measure of a REIT’s ability to incur and service debt and to distribute dividends to its shareholders. FAD is a non-standardized measure and may be calculated differently by other REITs.


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Investor Presentation Reit Week 2013