Welcome to the Washington Real Estate Investment Trust Fourth Quarter 2011 Earnings Conference 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 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 fourth quarter supplemental financial information is also available on our website. Our conference call today will contain financial measures such as Core FFO and NOI that are non-GAAP measures, and in accordance with Reg G, we have provided a reconciliation to those measures in the supplemental. 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. We provide a detailed discussion of these risks from time to time in our filings with the SEC, please refer to pages 7 to 14 of our Form 10-K for a complete risk factor disclosure. 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 of Real Estate. Now, I would like to turn the call over to Skip.

Thanks, Kelly. Good morning and thank you for joining the Washington Real Estate Investment Trust fourth quarter earnings conference call this morning. At the beginning of last year we laid out a strategic plan for our company. This plan called for the increased investment through acquisitions and development in high-quality office, multifamily, retail and medical office property in excellent locations inside the Beltway near major transportation nodes, and in areas with strong employment drivers and superior growth demographic. To help pay for this investment activity, we committed ourselves to a much more active asset recycling program, such that we have the guideline to pay for approximately a quarter to one third of our investment activity through asset sales. The largest part of this recycling program was the announced completion of the sale our entire industrial flex portfolio. I am proud to say that we executed this plan on all fronts and had a record year in terms of acquisition and disposition transaction volumes. We acquired five income producing assets for a total of $360 million, including two downtown Washington DC office properties, a grocery anchored shopping center in an affluent suburb, and two office properties located at Metro station in Alexandria in Tysons Corner. In addition we entered in tow joint ventures to develop two apartment projects at or near metro stations, totaling 430 multifamily units in Arlington and Alexandria, Virginia, two of the best submarkets in the region. These 430 units will increase our total multifamily portfolio unit count by 17% over the coming year. Finally, and most notably, we completed the sale of our industrial portfolio along with three non-strategic suburban office assets for proceeds of $409 million, resulting in $97 million in gain. While by my account the team here did an exception job executing this record…

Thank, Skip. Good morning, everyone. Last night we reported 2011 Core FFO of $1.95 per share which included a onetime $0.01 charge in the fourth quarter related to the lawsuit with a former tenant at our Westminster Shopping Center. Excluding the charge, these results were at the low-end of our original guidance range of $1.96 to $2.08, which we narrowed in to $1.96 to $1.99 on our third quarter call. These results were driven by two primary factors. First and foremost, the timing and the volume differences between the sale of industrial and the three office buildings, compared to asset purchases throughout the year, brought our numbers lower than our original projection. Secondly, leasing fundamentals prove much more challenging in the second half of the year than we anticipated. At the beginning of 2011, we saw improvement in the national and Washington DC economies, and it appears that leasing activity was beginning to take hold. The momentum built throughout the first half of the year have been a combination of headline events including the downgrade of the federal government debt, the Congressional debate over the national debt, the European financial crisis that still tops the news. National news or the potential of a double-dip recession, and the continuous ramp up of the 2012 election banter, slowed the momentum in the Washington DC real estate market. With all that said, we believe we had a very solid year on the operational side of the business. Executing over 350 lease transactions throughout the year, ending the year with the highest same-store occupancy since the end of the first quarter, generating lease increases in rents on renewals and newly leases throughout the year, and positive same-store NOI growth compared to last year. Not to mention ending the year with an uptick in occupancy.…

Thanks, Bill, and good morning everyone. We ended 2011 on strong note. Overall portfolio physical and economic occupancy ended the year higher than it has been since second quarter 2010. The same store occupancy numbers improved in the final quarter of the year, driven by these improvements of three of our four property types. Combining this occupancy improvement with GAAP, rent increases in these property sector continues to demonstrate the resilience of our portfolio. While our same store, internal pools of properties are over 90% occupied, we want this number to be better. We have a number of capital projects, promotional plans and additional manpower underway to support our objective of superior occupancies. While Bill mentioned that we are projecting generally flat results for 2012 compared to 2011, we believe we are beginning to see small signs of market improvement and are cautiously optimistic the momentum in the market will build off fourth quarter. Now let's take a closer look at each of our four sectors. Starting with multifamily, this sector continues to be our strongest. It is important to remember that we felt the typical seasonal slowdown in the fourth quarter. With that said, we still successfully improved occupancy over the third quarter, while still achieving solid rental rent growth and NOI growth. On a full year to full year comparison of 2011 to 2010, NOI improved 6.5%, which is outstanding given a portion of our portfolio was older DC product that is rent controlled. Going forward, we continue to expect strong performance this year as new deliveries in the market remain further out into the future. We started to begin our renovation program at four of our 11 apartment properties. These improvements include upgraded kitchens, bathrooms and finishes. Or total program will encompass 20% of our overall units…

Thanks, Mike. We have all heard speculation over the last six months regarding the potential for adverse impacts to our region from possible government cutbacks and the negative effect of our dysfunctional legislators on Capitol Hill. No one can say for certain what the short-term effects on the region may be at this time. But notwithstanding these short-term concerns, I could not be more optimistic about the future of the Washington DC region. The undeniable facts are, we will always be the capital of the free world, one of the great cities of the world, home to the most powerful person, the most powerful legislative body, the headquarters of the strongest military and intelligence services. And over the past decade, we have added approximately $10 billion to major transportation initiatives in our region. Including, but not limited to, a new bridge across the Potomac, a massive highway interchange at the Beltway and I-95 in Virginia, a new metro line, new high occupancy transit lanes on the Beltway in Virginia, the inter-county connector in Maryland, in addition to enhancements at our three major airports. Beyond that, in the last several years, we have had corporate headquarters for Hilton, Volkswagen, Northrop Grumman, Computer Science Corporation, and SAIC, to name a few. And underpinning it all is the most affluent, most intelligent resident base and workforce in the United States. I truly believe the best days are ahead for our region and I am excited to face the future with our $3 billion investment portfolio of 71 real estate investment assets, all within a one hour drive of the very spot from which we are making this call. With that said, let's open the call for your questions.

(Operator Instructions) Our first question comes from Michael Knott with Green Street Advisors. Please proceed with your question.

Skip, can you talk a little bit more about the -- I think you said about 10% of your NOI is slated for sale over the next few years. I might have missed some of your comments on that but can you just maybe flex that out a little bit more?

Yeah, I don’t know if I had used those exact words slated for sale, but as we look through our portfolio -- and this is not, I don’t think this is a news clash in general, but as we visited our strategic plan we have identified assets that we don’t think are what I would call long-term keepers. May or may not be long-term keepers, depending on the number of variables including what timing of the market is, how the leasing is at a given property, and a lot of external variables. And those assets are primarily certain suburban office buildings. In one case we have a small medical office building that we might sell as well. So that’s pretty much it. It’s just something we have been saying. Over the last year that we have a number of small -- a small number, I would like to add, of some suburban office assets we would like to lighten up on over the next, as I said in my comments, three years.

It seems like you guys are focused on being net acquirers in 2012. Would you expect that to be the case over the next couple of years too as you finish out that strategic plan that you just mentioned?

Absolutely. We absolutely expect to be net acquirers as Bill and I mentioned in the comments, this year in the guidance numbers, we only have a net of $50 million. That’s not necessary what we are hopeful for. We are hopeful to be much more acquisitive to that. But the number that’s baked into the acquisition, net acquisition number that’s baked into the numbers that Bill outlined is $50 million.

Okay. And then in general, how much, sort of non-recurring CapEx are you guys talking about. It sounded like there were some, various capital improvement plans for the multifamily portfolio, the office portfolio and maybe some free standing projects downtown. I didn’t which ones in particular that gotten slated for, but how much higher is the CapEx budget than normal?

The normal CapEx budget is usually around -- in terms of FAD Michael, so there is two separate capital buckets that everyone uses. The FAD one is the recurring capital, that one’s going to be pretty consistent. This is the major CapEx that we think is revenue enhancing that is generally in the $12 million to $15 million. It’s probably going to bump up to $20 million to $25 million.

Our next question comes from Erin Aslakson from Stifel Nicolaus. Please proceed with your question.

Hi, thanks for taking my question. I just wanted to ask about the dividend policy going forward again, given the additional CapEx needs going forward.

Well, obviously, I can't -- we announce our, I guess it was 201st consecutive dividend. As of the board meeting this week, I can't tell you what the board’s going to say going into the future. But you understand that this is a very important part of the WRIT story. The track record is part of our franchise, it’s something that we look at. So our expectation is that it will more the same, but it all depends on what happens in the future.

(Operator Instructions) Our next question comes from Mitch Germain with JMP Securities. Please proceed with your question.

Just curious, are you seeing fewer bidders for properties in your region?

That question has two parts to it. With respect to high quality properties inside the Beltway, shopping centers, residential -- high-rise residential properties, and properties like that the answer is no. There is still pretty robust environment for those. If you are talking to commodity things in the Netherlands, it depends on the specific asset and lease status.

Are you seeing a shift in underwriting assumptions? Is it negative?

I would say, that the jury is out on that. It’s hard to tell. And the reason I am hedging a little bit there is over the last -- from the fourth quarter to the first quarter, the activity has been down quite a bit. And there have been several properties that have been pulled off the market. I can't say why I know that the sellers were thinking. Perhaps maybe they didn’t get the numbers they wanted. But it’s an interesting period. I am not sure exactly if underwriting is changing. But as I said to start this response off, I think still the really high demand properties, it’s still a pretty robust environment for the seller really.

(Operator Instructions) We have a question coming from Mr. Chris Lucas with Robert W. Baird. Please proceed with your question.

I missed the beginning, so I apologize, but I guess I just wanted to understand, what are your thoughts about the acquisition environment today as it relates to just the quality of the product and the amount of availability out there of stuff that you guys will be interested in. And maybe if you could talk a little bit about the buckets in terms of the property types that you guys currently own? In terms of the relative amount of availability there.

Yeah. I think I touched on softly that the offerings are down. There is no question that the fourth quarter and coming out of the chute this year, offerings are down by historical standards. I think that’s something that it would be very few people that would dispute that. Having said that, and I have talked to a number of the better placed investment brokers in our region, they tell me that it’s going to be picking up. So I think we are seeing a few more offerings coming out of the chute. But I would say, without a doubt, that it’s down. From what we are used by historical standards. And I think I said specifically in my comments that I was cautiously optimistic that it was increasing. And that’s based on what brokers are telling me. And then with regard to the second part of your question, that said, that commented on the specific categories, I mean that certainly the most, broadest market is still office buildings. And we are really very light activity in areas like medical office building specifically. Residential is still -- you could buy any number of residential but the ones inside the Beltway are selling at still very aggressive cap rates.

I guess the other thing I wanted to understand a little bit is, everybody is concerned sort of budge issues but what's your historic take on election year activity in the DC market. This is obviously a big election.

I think we certainly get asked that question every year. You know what's the takeaway, what's the market reaction to different parties, all these different things. And I think the biggest impact that we see -- and I think we are seeing it this year and I think we see it very election cycle, is that you do have tendency of slowdown in activity leading up to an election, especially a big election. As people are trying to underwrite where they think the direction of the world is going, who is going to be the winner, who is going to be the loser. And the period before elections tends to be -- characterized by the uncertainty of what's going to happen from that election. And I think, if anything, we are seeing that, I don’t want to say magnified but maybe a little bit more then we normally do, that, yes, market activity is somewhat slow because tenant and sellers and everybody is concerned -- not concerned, but uncertain. It’s uncertain as to what's going to happen. And typically after an election, we know how the winner is, and things tend to pick up. So hopefully that will be the case this year as it is historically.

And then, Bill, just a quick question on the guidance. As it relates to some of the component pieces for you NOI guidance, can you give us a sense as to what sort of heavy tenant retention, brand expectations, and leasing velocity for your office, medical office and retail side?

Yeah, I can. I mean the rent expectations I think are pretty consistent with what posted this year, Chris, is that -- I am just kind of running through it be sector. Office, we generally think it’s single digit down on a cash basis, and single digit up on GAAP basis, throughout the portfolio. Obviously, that will vary by location and building and various other things. The thing in the office that we are seeing is that with the competitive market and kind of the slowness in the market that we have experienced at least the last couple of quarters, is that IT packages are elevated, tenants are asking for more and they are getting it. So that’s on the negative side on the leasing front in the office. But activity wise, we are seeing more, maybe Mike can comment too, is we are just seeing more people interested in pretty much since the beginning of the year. It’s just been more tours. So that’s the good side of the office. On the medical office, the same as have been in - and Mike said in his comments that it’s a market where our buildings are kind of the best buildings out there with the highest rent and people are cherry picking us. But the tenant itself is very reluctant to make any kind of decisions right now. Given the election year, given the healthcare bill debates, all kinds of things are just going into that mode. We are seeing a little shift in medical office in the fact that more and more doctors are joining the big practices and so it’s changing the dynamics a little bit in that market place. In retail, it’s kind of hanging in there. We think there is pretty good activity on most of our bigger vacancies in our portfolio. There are some that are leased that are building out space that are not in the occupancy numbers yet. We thought they would be open by now but, you know retail is retail. They kind of do things on their own pace. So does that answer your question?

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

Okay. Thank you, everyone. Have a great long weekend and look forward to talking to you in the next conference call. Good buy.

This concludes today's call conference. You may disconnect your lines at this time and thank you for your participation.