Welcome to the Washington Real Estate Investment Trust Second Quarter 2010 Earnings Call. As a reminder, today's call is being recorded. Before turning over the call to the Company's President and Chief Executive Officer, Skip McKenzie, Kelly Shiflett, Director of Finance, who will provide some introductory information. Ms. Shiflett, please go ahead.

Thank you and good morning, everyone. After the market closed yesterday, we issued our earnings press release. If there is anyone on the call who would like a copy of the release, please contact me at 301-984-9400 or you may access the document from our website at www.writ.com. Our second quarter financial supplemental information is also available on our website. Our conference call today will contain financial measures such as FFO and NOI that are non-GAAP measures, and in accordance with Reg G, we have provided a reconciliation to those measures in our supplementals. The per-share information being discussed on today's call is reported on a fully diluted share basis. Please bear in mind that certain statements during this call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risks, uncertainties, and other factors include, but are not limited to, the effect of the recent credit and financial market conditions; the availability and cost of capital; fluctuations in interest rates, tenant financial conditions, the timing and pricing of lease transactions, levels of competition, the effect of government regulation, the impact of newly adopted accounting principles, changes in general and local economic and real estate market conditions and other risks and uncertainties detailed from time to time in our filings with the SEC, including our 2009 Form 10-K. We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events. Participating in today's call with me will be Skip McKenzie, President and Chief Executive Officer; Bill Camp, Executive Vice President and Chief Financial Officer; Laura Franklin, Executive Vice President and Chief Accounting and Administrative Officer; and Mike Paukstitus, Senior Vice President, Real Estate. Now, I'd like to turn the call over to Skip.

Thanks, Kelly. Good morning and thank you for joining the Washington Real Estate Investment Trust earnings conference call this morning. Since we last reported economic recovery in the Washington region has continued on a slow, steady, and upper trajectory. While some market pundits have forecasted a more robust recovery, our experience suggest this recovery phase is not atypical and we anticipate leasing activity and rental rate stabilization will become more pronounced in 2011 and beyond. Regionally, the US government leasing in large blocks have dominated the early endings of this game, but as vacancies are reduced and the private sector's confidence, and as a result the participation increases, this recovery will become more broad based, and leasing velocities will accelerate to the more normal levels we have enjoyed in the past. We have already seen a dramatic improvement in the investment sales markets. As cap rate have compressed to near pre-crisis levels, property owners are again listing assets for sale, and I believe that this trend will continue and increase for the balance of the year and into 2011. We were very pleased to be active this quarter with both acquisitions and dispositions. On June 10, WRIT purchased two buildings in Quantico Corporate Center for $68 million at a very attractive 8.8% cash yield within A++ Tenant Roster. This Class A office acquisition is strategically poised to capitalize on existing DoD demand at the Quantico Marine Base as well as the new 719,000 square feet BRAC facility that is expected to open in 2011. We are optimistic that we will be increasing our investment in the part over the next several years as BRAC needs and the military demand increases in Quantico. On the disposition side, we sold three office properties and one industrial property in Rockville, Maryland for $23.4 million. These assets have been in the REIT portfolio for quite a while. Three of them for 17 years and one for 11 years and the disposition is consistent with our stated strategy of recycling slower growth assets and repositioning investments in to locations with better growth potential, and revenues and asset valuation. Operationally, same-store results were generally flat compared to last quarter, but leasing activity was up across all sectors, which Mike will discuss further in a few minutes. We accomplished several key strategic leasing achievements this quarter. A 46,000 square foot lease for the pending LaFarge vacancy in Herndon, Virginia, as well as the renewal of our largest industrial tenant, a 129,000 square feet, FDI lease in our Pickett Industrial Park in Alexandria at an attractive rental rate increase. We have seen a pronounced reduction in credit loss this quarter, which we believe is emblematic of the early stages of an economic recovery. Now, I would like to turn the call over to Bill Camp who will discuss our financial results and capital market activities and then Mike will discuss our real estate operations.

Thanks Skip and good morning everyone. As we reported the $0.50 FFO per for share number was higher than the first quarter results mostly due to this snow expense in the first quarter and lower G&A expense in the second quarter. As Skip noted this quarter, we signed a significant renewal for the GSA at our Pickett Industrial Park. This lease expired last year and the rent differential on the new lease was $6 per square foot higher on the 129,000 feet. We collected a catch up payment for the 10-month holdover period and the accounting treatment required us to amortize that amount over the remaining 50 months of lease rather than book a one-time straight line catch up payment for the prior periods. In terms of the core portfolio, our Multifamily, medical and retail portfolios maintained steady occupancy sequentially. We lost occupancy in our office and industrial sectors, however the 320 basis point sequential decrease in the same-store industrial portfolio occupancy was in part to our more aggressive stance on evicting non-paying tenants as we anticipate improving market conditions. Bad debt for industrial improved 280 basis points as compared to the first quarter. This quarter, the combination of bad debt, vacancy losses and rent abatements were 12.7% of minimum rent on a GAAP basis, slightly worse than the first quarter, which is just outside of our guidance range of 11.5% to 12.5% for the year. On the capital side, since we last reported to you, we raised an additional $48.4 million through our ATM program with BNY Mellon, bringing the total issuance for the year to $70.5 million. The $48.4 million breaks down into 1.7 million shares at an average price of $29.26 per share. The proceeds were used to pay down the line and for general corporate purposes.…

Thanks, Bill, and good morning. This quarter, our real estate portfolio occupancy was generally stable compared to the first quarter with high volumes of leasing completed at the medical, office, retail and industrial sectors. Sequentially, same-store NOI increased 2.9% and rental rate growth was 0.5%. In our multifamily sector, we experienced a slight occupancy decline compared to the first quarter, due to the fact we are pushing significant rent increase at many of our owned properties. The end result of higher rent and lower occupancy is higher NOI. So our formula worked. Market wide, we are experiencing reduced rental concessions and we continue to look for opportunities to push rents and increase revenues through our portfolio. On the commercial portfolio this quarter, WRIT executed 641,000 square feet of lease transactions, which represents nearly 2.5 times first quarter's volume and the highest leasing velocity for any quarter in the last five years. The average rental rate increase was 16.2% over expiring leases on a GAAP basis and 6.4% on a cash basis, for an average lease term of 5.5 years. In the office sector overall economic occupancy declined by 30 basis points compared to the first quarter. This decline was due to small tenant move out at 7900 Westpark, 1220 19th Street and 1901 Pennsylvania Avenue. As Skip mentioned we signed a tenant to take 46,000 square feet of our upcoming LeFarge vacancy in Monument II, in the Herndon, Virginia market and we continue to healthy activity in terms of marketing the rest of the space. We're seeing good activity in Monument given its premium location on the Dulles Park road as well as the adjacent retail amenities. In the medical office sector we maintained occupancy of 91% from the first quarter to the second. At Lansdowne, we have signed leases…

Okay. Before I open up the call for your questions, I would like to reiterate a couple of points that are the hallmarks of the WRIT story. First, we exclusively operate perhaps in the most desirable real estate market in the country, if not the world as demonstrated by the remarkable rebound in the pricing and valuation of investment grade properties in our region. Second, I think our market fundamentals are second to none with positive net absorption of office space, actual job growth and the greatest opportunities to benefit from the initiatives of government stimulus program. Lastly, we've got some of the best real estate professionals working in a market they live in and have known for years, which enable us to respond effectively and efficiently to the needs of current prospective tenants and to source and evaluate investment opportunities faster and better than our national competitors. With that, we will now open up the call for your questions.

(Operator Instructions) Our first question is coming from the line of Brendan Maiorana with Wells Fargo. Please proceed with your question.

Skip, you talked at the beginning of the call just about how there's been cap rate compression in the market, but the commentary in the press release suggested that you think you guys would be pretty active, I think both in terms of the buys and sells in the portfolio. Should we think about the acquisition potential as more like the deals down in Quantico or do you think there are assets that where you can be competitive with some of these assets that have come to market and where there have been a fair bit of cap rate compression?

Though we are looking at a broad base of acquisitions right now, it's hard for me to give you any specific guidance on that, because we are looking at a number of different things, and a number of different factors. We certainly are looking at core acquisitions, and we are also looking at some value added opportunities as well. There are some assets out there, that we feel like there is a decent chance of acquisition that have vacancy, that can be leased to fairly attractive returns, as well as some stabilized assets that have leasing in them. So I know, I am sort of talking around the circle there, but there is a number of opportunities out there, that we think that we will be active in, but I would say we're optimistic we will be active enough before the end of the year.

Where do you place kind of the discount, is it on price per square foot, or state wise deals or what have you, the value add opportunities relative to, may be to stabilize the acquisition?

I would say that, depending on the location of the asset, you are probably a 100 to 200 basis points, in return preferential, in other words.

Okay.

So let me just clarify what I am saying, lets say a stabilized asset could be acquired lets say at a 6.5 cap, you are looking at assets that can be stabilized in the 7.5 to low 8 in general, that sort of dynamic, if that answers your question.

Right, no, that is helpful, yes. Then just on the flip side in terms of disposition is now, I guess the low end of kind of a guidance, it seems like the market will become stable in terms of the assets that you may like to sell. How do you think about, kind of the range of what maybe disposed of this year and are you thinking of maybe getting a little bit more aggressive with your disposition program in the near-term?

That's an excellent question. We certainly are evaluating our portfolio right now. We think it's a great time to sell into this market and we are looking for the right assets to put on the market before the end of the year and yes, I expect us to be active in that area. I would project that we will be at least at the high end of that guidance, but we haven't put anything on the market at this point, but we expect to soon.

Okay. Then I don't know but this maybe for Bill, but it seem like the CapEx cost on the office side in terms of the leasing went up fairly significantly in terms of the deals that were signed in the quarter, is there something that's driving that number up to north of $50 or so.

Well, there is couple of things that are driving it quite actually but one thing I do want to highlight is, with the way we report that, when you look at that page in the supplemental and you see obviously TIs are broken out separately but then we have leasing cost and some of those leasing costs this quarter look pretty high. Those leasing costs include abatements, so it not just like we are making all the brokers rich just so you know. We had a couple of bigger transactions that took some TIs, the biggest one obviously is the lease that we signed out at Monument that are tendered out there and there was a pretty good package that we gave them to move into that space. We had to rework that place little bit from what LaFarge had and then we had a fairly significant renewal in the medical office space, which was a renewal and expansion. So, on the expansion space that took some TIs. So, those are a few one-time things, but in general there is certainly more in the market place for TIs and lease commission dollars to get tenants to take your space right now, it's just more competitive.

Okay. That's helpful. Then just lastly on the industrial side, I seemed to recall that, I think last quarter you were talking about the GSA lease was 130,000 square feet space. Is my recollection right and is the remainder of the balance of leasing that was done I guess would be around 160,000 square feet or 150,000 or so. Are you seeing increased traffic in the industrial portfolio for the balance?

The lease I think for the 128,000 square feet to be exact.

We did about 286,000 in the industrial sector.

Then to answer probably the more compelling part of your question about the prospect for increasing activity there, I would say, yes, we are seeing better leasing activity, but it's not as good as we like it to be. It's still down, and we still see like we're balancing on the bottom of that industrial market and while we've seen signs of life, we don't feel super good about that sector right now to be honest with you. We're still balancing on the bottom. So, yes, there are more to us.

Our next question is from the line of Mitch Germain with JMP Asset Management.

I still see musical chairs in the leasing markets or are you seeing real expansions yet?

I would say yes and yes. I mean the big news, the headline news on leasing is the impact of the government right now. The government is taking huge blocks of space, and that's really what's dominated the absorption in the market. What has been less emblematic is the private sector. There has been increased activity from the private sector, but it's still significantly below the levels we've enjoyed in the past, particularly in the private sector. So what I tried to capture in my opening remarks is that, while we are seeing increase in the private sector its below historical, but those guys will start coming to the party as more of the vacancy gets stocked up. They still don't feel there's that quite sense of urgency to hit the market right now. So while we are seeing some bigger users out there particularly in the Herndon market. The sort of the 10 to 20,000, the 5,000 square foot tenant out there are well below historical norms particularly in the suburbs.

Have you seen any change in the pace of leasing or client decisions over the last 30-60 days relative to the first half of the year?

Yes. It's increased slightly.

It's indicative in our absorption numbers and what we are seeing also in the market.

Okay. Last question, Mike, you mentioned some reduced concessions, can you add some color on that please?

I think the market generally; this is on the multi-family sector that we were talking about with respect to those. For us, I mean, you are right, you recall, we had development projects that were coming online in the soft market that created those. Those buildings or portfolio is all now stabilized. Generally speaking, they can see the dropping of rents are increasing, which is pressing down the concession package that's all we have to give.

Thank you, our next question is from the line of Tony Paolone with JPMorgan.

Sarah King here for Tony. Questions for you, first on the industrial occupancy, if look at all properties, not just as a core portfolio, the decrease of 300 basis points sequentially be plus or minus, yet rental revenue for industrials seem perhaps flat with that largely due to the one-time benefit related to the FDI lease or what really drove that, given the flat rates that they've got to?

Certainly this spreads on that industrial leads on the GSA lease, skewed us. We think maybe percentage increases on rent, they skewed those numbers clearly. I mean that leads basically, was a in the 60% to 70% increase range. So that moved those numbers dramatically. I think the important part that I wanted everyone to understand on the occupancy in the industrial side, is, yes there was 300 basis points on the total occupancy and quite honestly in the quarter, we forced 280 basis points of that, through shipping bad debt to vacancy. They weren't paying anyway, so it doesn't really make any difference to what bucket I put it in.

That's helpful. The second question is more definitional, on page 7, was the deduct, you got some improvements in leasing commissions in calculating FFO, what is page 17, what you report was an improvement in leading commissions, the difference there to consistently be that, what you portray FFO is a lot lower. Is it just definitional here or is there anything?

It's not definitional its timing. The one that we report on the financial statements, are actual expenditures that we have written a check for, and the other ones are contractual and those are the ones that they are on the new leases that we did sign, it's just that we haven't spent any money on it yet.

Okay. Thank you.

Spread, you know the thing is that can be spread over an extended period of time, its not like next quarter we are going to have that number that won't happen as we spend the money on this space. Sometimes the contractual obligations depending on who is doing a work may come in at a number less than what the contract is? So we are doing the work for instance that we estimate that we are going to give somebody $50 a foot and we can do the work for $40 of course, so we don't have to pay them extra $10, we just do the work.

(Operator Instructions) Our next question is coming from Chris Lucas with Robert W. Baird.

I guess Bill quick questions, just on the operating expense improvement. Can you give us some of the drivers of that for the year-over-year period on a same-store basis?

It's almost exclusively utilities and real estate taxes and I would say real estate taxes are coming in certainly better than our expectations. It was hard to judge when, I don't know if that's the long term, that's certainly not going to be a long term impact. Our impression is that these local jurisdictions are going to have to raise tax rates to collect more revenue at some point in the future but right now we are benefiting. That is primarily DC and Virginia.

So, the delta in bad debt was not a driver?

The delta in bad debt was a driver. It was, but it was not as big a driver as real estate taxes and utility.

Okay. Then I guess, Skip on just the competitive nature of the market right now, with the more aggressive secured market out there right now, are you seeing more private equity shops and private investors competing for acquisitions than say three months ago even?

That's a good question. I think you're seeing just about increase in everybody out there. Certainly the debt markets have recovered dramatically and the access to that sort of avenue of financing is significantly better than it was even six months ago. The primary drivers out there are the institutions, Chris. I'll have to say they are still the major competitors for assets.

Then just in terms of the opportunities, is that going forward, I mean it's always been that, there's been certain properties types had been more liquid and more available. Is there any change to that and what do you see between now and the end of your first quarter in terms of the kinds of assets types that will be more likely available or you'll be bidding on more likely?

Well, certainly and I think you could almost answer this the same way, I recall that office buildings always seem to be the largest predominance and certainly that's the case today, it's almost always the case. I think that I feel a little bit better seeing some of the other asset classes out there. I mean we are actually seen a couple even retail properties that are interesting, you almost never see and I would say there's a handful in medical, office. I would say, that's somewhat thin right now. We are not spending a lot of time in industrial, so you are not seeing a lot of that, but certainly office. Multi; there's an abundance of multi-family and very aggressive numbers out there. So you are really starting to see a fairly healthy supply of opportunities out there.

Are you bidding across all spectrums right now, or are you…?

We are not bidding on industrial.

Okay.

We probably have irons in the fire in every other sector.

Okay. Then the last question, Bill, do you have a calculation for the lease spreads for the industrial excluding the Pickett lease?

I knew you were going to ask me that. The funniest thing is that I wrote that on a piece of paper as I was going through the opening remarks. No, I don't, but I will get it for you.

Thank you. There are no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Okay. Thank you, everyone for listening to our conference call this morning and have a good weekend.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.