Welcome to the Washington Real Estate Investment Trust Fourth Quarter and 2013 Earnings Conference Call. As a reminder, today’s call is being recorded. Before turning the call over to the Company’s President and Chief Executive Officer, Paul McDermott’ Kelly Shiflett, Director of Finance, who will provide the 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 conference call today will contain financial measures such as Core FFO and NOI that are non-GAAP measures, as defined in Reg G. Please refer to the definitions found in our most recent financial supplements. 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 provided detailed discussion of these risks from time to time in our filings with the SEC. Please refer to pages 8 to 15 of our Form 10-K for our complete risk factor disclosure. Participating in today’s call with me will be Paul McDermott, President and Chief Executive Officer; Bill Camp, Executive Vice President and Chief Financial Officer and Laura Franklin, Executive Vice President and Chief Accounting and Administrative Officer. Now I’d like to turn the call over to Paul.

Thank you, Kelly. Good morning, everyone and thank you for joining us on our year-end 2013 earnings call. Today, I’d like to spend our time on the future of Washington Real Estate Investment Trust. Many of you on the call today are aware that we’ve been focused over the past 120 days on a comprehensive review of the operations and performance of every asset in the portfolio. This deep dive provided us greater insights after the opportunities and risk of each asset. The process culminated with a presentation of our strategic plan to our Board of Trustees, a few weeks ago. As we said in our meetings at NAREIT in November, we will be in a position to speak with greater clarity about the portfolio and any change in strategy going forward after our triage process was complete. Let me start by saying that we are firm believers in the long-term viability of the Washington, D.C. real estate market. We believe this market can support our desired growth over the coming years, and we are committed to our three remaining lines of business; office, retail and residential. With that said, there will be much more focus in terms of the type of assets that we are looking for in each one of our portfolios as well as the location of these assets within the region, and let me expand on this concept. In office, the shift away from suburban office into urban metro-centric locations will continue. In particular, we favor downtown metro locations primarily in the CBD and east end. We will continue to explore opportunities in the other D.C. sub market. But given our current portfolio composition any future acquisitions in these markets will be as much opportunistic as strategic. Outside of D.C. we will continue to see metro…

Thanks, Paul. Good morning, everyone. Operationally, we accomplished a tremendous amount over the last year. We completed the sale of the Medical Office Portfolio, improved our balance sheet by reducing debt and having the highest level of commercial leasing volumes since 2007 by signing 1.7 million square feet of new and renewal leases. While same-store NOI growth was flat for the year there were significant highlights to demonstrate we are continuing to see signs of improving conditions in our portfolio. The office portfolio led the way driving our successful year of leasing. Office leasing totaled over 1.1 million square feet, improving same-store occupancy by 140 basis points. While same-store NOI growth in our office was slightly negative it is important to note the NOI in our downtown office assets, representing 22% of our total portfolio, increased 8% over 2012 and occupancy increased over 300 basis points throughout the year. This strong performance helped us offset the softer conditions in suburban office markets. It also helped to offset the effects of our redevelopment project at 7900 Westpark in Tysons Corner where we have lowered occupancy to prepare for removing and replacing the skin of the building. Just a reporting footnote, we removed this building from our same-store pool during the redevelopment. Including 7900 in the pool generates the same-store office NOI change of minus 0.8%. The residential portfolio performance continues to be a function of our two Connecticut Avenue properties as we are finishing the HVAC project at the Kenmore and we are beginning unit renovations at 3801. These projects have brought occupancy down in each of these assets to the mid-80% area, with residential same-store portfolio occupancy ending the year at 92.6%. Same-store NOI performance was minus 1.9% for 2013. Excluding these two properties, same-store portfolio will end the year…

Thanks, Bill. Before we open the call for questions, I want to follow-up on something Bill mentioned earlier. This Company executed on several key initiatives in 2013. There are two that I feel are noteworthy for our investors. First, that the leasing volume in our portfolio was near record high at a time when the market remain challenged. The other is that the Medical Office Portfolio sale accomplished submission of not only streamlining our operating platform, but allowing this organization to regain its focus and execution on expanding its core lines of business; office, retail and residential. We are beginning to see signs of improving market conditions and we will continue to aggressively pursue strategic opportunities to not only put our sales proceeds back to work, but to restore a path of growth for this company and its investors. Now, we would like to open the call to answer your questions.

Thank you. (Operator Instructions) Our first question comes from John Bejjani from Green Street Advisors.

Good morning, all.

Hey, John.

So there have been a few stories floating around suggesting that the World Bank is shopping for office space to consolidate the space it currently leases. Can you guys comment on your World Bank renewal prospects?

Yes, John, I’ll talk a little bit about that because that has been in the news a little bit. First reported, I think, by Bisnow and I think they were talking about buying, building out in types and all these things and all I can say is that we are working with World Bank. Our building is right across the street from World Bank’s headquarters. We just renewed World Bank last year. They have staggered leased terms in that building. We just renewed them for a six-year term out to 2019 last year and rents were pretty much in line with market. So, while I can’t anticipate exactly what World Bank is going to be doing, I know they’ve talked about consolidating quite honestly. They talked about consolidating back in 2009 when we re-opened them for five years. So, it’s a little bit of a wild card right now. We are working with them, obviously our building remains an option for them and that is but all I can say right now. I will say one more thing I will point out is after Bisnow came out with their report, the Business Journal came out with a different report that said, Bisnow wasn’t quite as accurate as they thought. I don’t think USA Today or Connaught is going to sell their building as much as they are going to just lease part of it.

Okay, that is helpful. Can you comment, do the World Bank leases have any early termination options?

No I don’t think so, the one the next one expires on in December of 2015.

Okay. I guess a couple other leases. Can you guys provide any updates on the general dynamic leases?

Yes, so general dynamics gets in two different places. The one out in Monument and earned in on the Toll Road, we’ve known for a long time those guys are exiting that building or planning to exit that building. We’ve actually are working out a lease termination with them for a portion of their space, because we’ve already released it. So I think we will be successful negotiating with them. And then, the second lease is at Quantico and quite honestly even though it comes up this year, the way their contracts and working they are not ready to talk to us yet.

Okay. And then last question for Paul, just a bigger picture question. Paul, you mentioned that the planned continue shifting from suburban to urban office. But how wide of a cap rate spread between the district and suburb would have take for you, consider the opposite side of that trade.

How wider spread?

Yes.

I mean, right now we are seeing – I mean there is definitely a widening gap between the downtown and the suburbs. So, I don’t think it’s going to be quite frankly, I don’t think it’s going to be something that it’s going to be on the radar in the near term future. The spread right now, we are seeing downtown deals if one of the assets is going off at a number that we think it’s is going to go off, compared to one of the most recent trades in the suburb. I think you could see spreads right now that 350 basis points wide. So, as that compresses and comes in, I think we could probably be more opportunistic for our suburban assets.

All right, great thanks guys.

Thank you.

Our next question comes from Brendan Maiorana from Wells Fargo.

Hey, thanks. Good morning. Paul, if I heard your comments correctly, it sounds like on office outside the beltway there is really not much that you think is long-term hold for WRIT. Is that an accurate characterization of your comments and if so, that’s probably around $40 million maybe $45 million of annualized NOI, which is probably give or take $500 million of asset value?

Not all of those. Not all of those assets we would sell. I think what my comments referred to where now increasing the quality of the portfolio and being opportunistic that when we could monetize some suburban assets that we would indeed liquidate those and try to recycle that capital into downtown assets. I think right now, the biggest challenge not just for watch WRIT but for any owner suburban assets is really keeping those assets stabilize and occupied and I don’t think that we can derive the maximum value by monetizing those assets today. So, our goal going forward in 2014 and into 2015 will be to continue the aggressive leasing efforts that our asset managers are doing right now, and as we can opportunistically recycle out of those we will do so.

Oh, yes, go ahead Bill, sorry.

Just one thing to add to that. Keep in mind obviously just from the math that you did, Westpark – this 7900 Westpark and our Blues Alley buildings in Kissinger, technically outside the beltway, but they won’t be necessarily assets that we would consider not falling into this strategy.

Sure okay.

Why we out there when you threw out your numbers. There is some NOI out in the outer ring that do certainly fall in this strategy.

I think they have to meet kind of the metro strategies, sure I’ll understand. I know it’s difficult and it sounds like maybe if I’m hearing your comments correctly, that the disposition of those assets maybe a little bit more dependent on the opportunities that you see requiring assets in the district or closer, and is that correct and we’ve got to wait until that market, maybe creates a little bit more opportunity in terms of how you redeploy those assets before we think about selling the non-core?

Yes, I mean first off, obviously we have the medical office profit that are at most priority and we will continue and are aggressively presuming right now opportunities within the conscience of the district. Secondly, we look at our current portfolio quite frankly as our lowest cost of capital when we monetize those assets, we think that if we do our jobs correctly that we can recycle those assets and match fund to go into probably more urban metro-centric locations and that’s what we’re going to tend to do.

And what – are you guys the second tranche of the MOB close I think sometime in the mid to late January, yes, I think you had the reverse 10-31 on the Paramount deal that you guys did late last year. What’s remaining to find to identify in terms of dollar amount acquisition and what’s the timeframe that’s left to be able to identify those for you now to pay tax?

Well the identity guys could do the dates first and I will talk about amounts. So the dates – the way that everything works out the identification date is March 7, but as you know you can put a list together, there is couple of different ways you can put that list together and obviously, you don’t have to disclose on everything that’s on the list. In terms of amounts, so we have two buckets; one is, roughly $80 million and one is roughly $115 million. The first bucket we did the reverse as you mentioned so that was $48 million of it, so that leaves call it there part of $3 million roughly, and we are working on some things that we are pretty confident that rest of that bucket will be kind of taken care of. The second bucket of $115 million is the one we are working on, and we are working diligently to make sure we have identification of the properties that we are pretty certain that we can close.

Okay. And then just last one, Bill in the guidance what is the timing that – did the range on the acquisitions of 250 to 350, I guess as a midpoint, what sort of the assumed timing of when that would close?

We have about half of the range little better than half of the range built into the first half of the year, because we have to close the 10-31 money by July 20. So, it’s kind of spread out beginning of second quarter and beginning of the third quarter right at the beginning of the third quarter kind of assuming that it closes before we hit the July 20 date. And then the rest of it is kind of towards the end of the year and it doesn’t draw much of an impact of the 2014 numbers as much as it does for 2015, that’s currently.

Okay. All right, I’ll get back in the queue. Thanks guys.

Sure. Thanks.

Thank you. Our next question comes from Dave Rodgers from Baird.

Yes, good morning guys. Paul, maybe your comments about kind of what you view now than you finish the processes of non-core, can you quantify that in dollar terms, you could have little bit of there – little bit the way there on the office side, but can you kind of give us through the broader sense of the portfolio, what doesn’t fit that strategy?

I think in terms of – I don’t have specific numbers in terms of what doesn’t fit the strategy and what does. What I do have is that after we are going through the triage process that we discussed. Obviously, we’re going to continue on our past of which assets are inside the beltway and outside the beltway, we’re going to be selective about the ones that we liquidate there. In terms of the multifamily properties, there aren’t many that really don’t fit our strategy right now. So the question is really we have to – we are like a number of other apartment owners in Washington. We are keeping our eye on the supply pipeline that is delivering and that’s going to impact quite frankly how much we had in terms of Class A inventory and then how quickly we continue to implement our unit renovation program. In terms of our retail portfolio, I think there are some assets that we will position for growth over the next one to two years. But, again the bulk of that portfolio I think that we’re comfortable with its performance right now, but like any owner we’re going to try to be opportunistic and sell when we think, we can command a premium for the assets.

Great. And in your multifamily the same-store NOI guidance is zero to negative 3, it look like the two Connecticut Avenue assets have about 2.5% impact in 2013. Can you quantify the impact on your 2014 expectations, and then maybe more broadly. Talk about kind of the market conditions for apartments and how you see that same-store NOI trending throughout the year. Does it get better by year-end or does it continue to kind of struggle into 2015?

For residential Dave?

Yes

So the two, let’s talk about the two buildings first. So, one, can more is under the HVAC renovation and just so everyone knows on the call that renovation is fairly expensive. It’s actually doing core drilling in every apartment for ceiling and floor, and putting new units in each unit – I mean putting new HVAC in each unit of the building. So, it’s that fairly extensive construction project. So, anyway with that said, it’s done and we are trying to flip the switch to the new system in April of this year, ahead of the new leasing period, so that building we fully expect to perform better on going forward throughout nice this spring and the summer leasing season in 2014, so to your question that building should improve as the year goes on. In 3801 it’s going to be a matter of we are doing of unit renovations on the empty units right now, and we are just beginning that process, obviously we expect to fill renovated units. A question will really be is can we get more how many more units can we get our hands on throughout the year, and turn make them a little more competitive product for that building in that market. So we have quite honestly we answered question a long way or in shorter way as we expect both of those assets to materially gain ground on the occupancy level. I don’t think rents necessarily will be moving all that much in those buildings, but we are going from zero right now to a real rent.

What’s happening with market rents for multifamily in your portfolio, I guess maybe excluding the renovation impact at revenue that you can separate it out, if you have any idea and again are those getting better or worse stabilizing?

The market rents in multifamily have been softer, I mean Delta came out with a fourth quarter report so that the Class A rents in the vast metropolitan area probably down almost close to 3% after the fourth quarter. I think that given the supply pipeline that takes the number that is out there, that’s being becoming more and more consistent of 39,000 units being added to the inventory, when we look at adding Class A inventory right now, we are not showing a lot of growth in our underwriting for any of our new acquisitions. So, we are trying like everybody else, we’re trying to gauge how much the supply is going to impact the movement on rents, but we don’t think it’s going to be, it’s going to have a positive impact in the near term.

There are certain some markets out there that we think are less impacted than others and there is sub markets that we don’t have exposure to right now that we would like to have some exposure. So the interesting part will be is, can we find products in those sub markets and we think that are good long-term holds.

Last question on the office side, thanks for that color. Obviously, you’ve done a great job leasing out office space, over the course of the last year, the economic on the leases continue to be more challenged. The market has been tough obviously margins on the leasing has been challenged because of that, but is there anything within your portfolio or the spaces that you’re leasing that maybe exasperate kind of decline in the economics in office just kind of the reality, do you see today?

I think that’s just the reality that you see today I mean it is hand to hand combat to get a deal on. I think the good news for us is, we step back and look at that D.C. office market we did have positive absorption this year versus last year. We are seeing full service rents in that, kind of $49 to $50 delta. In our portfolio, everybody is thinking hard on D.C. because of the GSA, we obviously have minimal exposure to the GSA in our portfolio, but I don’t really consider the GSA this year to be, a market mover. They are going to continue on their trends of consolidation and short-term renewals. We are really looking at kind of we want to be downtown and what’s the supply look like going forward that you only have three building this year deliver, 1700 in New York and then two buildings [indiscernible] for just over a 600,000 square feet of what is on the board delivering in 2014, I think 80% of it’s pre-leased. So I think when we look at downtown D.C., we really don’t see a supply issue and hopefully, I think there were some good deals all ready done things in the first quarter this year, so we are expecting see better leasing results both in our portfolio, and in the market place and we think that we are going to end the year probably just around a 10% vacancy maybe a little bit lower and I think a 10 year average in Washington the vacancy is around 9%. So I think we are kind of approaching what our historical averages to be in and we are optimistic about it, but we made no mistake that it’s going to be – we’re going to have to be aggressive to keep our assets leased.

Thank you for the detail.

(Operator Instructions) Our next question comes from Erin Aslakson from Stifel.

Hey, good morning. Thanks for taking my question guys. In terms of Bill you alluded to about $40 million of TIs expect 2014, how does that compare with one, how much pressure does that put on the dividend, going forward it looks like, that could be below that level going forward?

That is a good observation. I would say that since we saw $30 million of NOI and TIs were up basically $10 million from kind of historical averages or even more a little bit more than $10 million. It’s quite Q temporarily would pressure on, but keep in mind that $40 million of lot of that is already committed and done in leases and we think we are kind of going back to a more normal level. And the reason I say that is the most expensive deals we’ve done FM deals either downtown or inside the beltway, and those deals downtown of 95%ish lease. So there is not a lot of holes left, quite honestly a lot of the renewals we are trying to knockout on 2014 in the area that have higher rents and higher TIs. Those are already have been done and so we think we’re going to fall kind of more towards more normal level and then once we replace the assets, that proceeds is the medical office sale back out into the market and new acquisitions, I don’t think we’ll be having this discussion anymore.

Okay, so it’s cap rate of the financial side is really better?

Yes.

Great and then in terms of net effective rents in the office, so do you seeing any positive movements in your markets or you’re just seeing still declining that effective?

The only thing I can see Erin is that when you get your buildings kind of into that as low 90’s to mid 90’s trade back you can see, you can start moving rents as people when being in your building and we are seeing some of that downtown versus what we were signing a year-ago. But it’s hard to say that you’re getting any kind of market movement in rents.

And you’re talking about all of your sub-markets not just downtown?

Suburban markets are…

Was it right.

Yes, suburban markets are challenged.

How much negative net effective mark-to-market are you seeing there in the suburbs? If you go through Northern Virginia, what is that looking like?

It varies by lease and by building quite honestly. Obviously anything that’s coming due that’s a shorter term lease as already kind of being marked down. So your impact is less. On average we’re seeing rents in office kind of down, single-digit type negative on a cash basis and still positive on a GAAP basis. It’s been that way for better part of two years, if I kind of look back among what we’ve had historically and what we’ve talked about on the various calls. And I think in the supplemental package of course that five quarters and you can kind of see where it’s been. I think that trend will continue for the foreseeable future.

Okay. Thank you, guys.

Sure.

Thank you. Our next question comes from Bill Crow from Raymond James.

Good morning. Paul, as you proceeded through the triage process, as you call it, was there any consideration given towards further simplifying and concentrating the strategy by kind of going along that path? You went through with the industrial and MOB sales and just kind of going down to two property types either on a shorter term basis or maybe given the proceeds you already have to invest two or three years out. How did that process play out?

As I said in my comments, we did go through each product and each asset. I think our conclusion remains that we are very comfortable with the live workshop strategy. We look at it as not all – not all cylinders in the engine are going to fire at the same time and I think it offers our portfolio some balance. So I’m very comfortable staying with that strategy right now. So we don’t have any plans to execute out of one of the three remaining asset classes.

Okay. Thanks. And then, the other question is just if you could tell us what you’re seeing trends on new multifamily starts up in that region? Is there any let up inside?

No, there is not. I mean, I think if I look at the fourth quarter, our typical absorption per quarter in this area is just over 1,400 units and we had over 3,800 units start in the fourth quarter. So we are aware of the oncoming supply challenge. And as I said earlier, we will address it in any type of acquisition or any type of unit renovation or expansion of the inventory in our multifamily portfolio.

Okay. Thank you.

Sure.

(Operator Instructions) Our next question comes from Mike Roarke from McAdams Wright Ragen.

Well, good morning.

Hi, Mike.

Hi. Do you think we’re at the bottom for where funds from operations are? And I guess what I mean by that is what do you think the odds are that at this time next year you’ll be guiding for $1.40 in funds from operations or something?

That’s a hard question to answer, but I would say it’s highly unlikely. I don’t see any reason that we’re selling another portfolio of properties. I can’t imagine that it continues to fall. The only reason there is any hesitation in my mind is that we need to put these MOB sale proceeds back to work in the marketplace and the guidance that we’ve given is dependent upon that. And if we don’t then it could be a little bit lower in what we’ve said, but I can’t imagine that we’re at here a year from now talking about lower guidance.

Okay. So is this then kind of a comfortable level to consider a base from which you’re able to resume growth?

That’s what we think.

So as part of your review plan, I have been very hopeful that you would come out with mid-range targets that investors could kind of keep pace with as far as how you’re going to grow revenue, how you’re going to grow NOI and then eventually resume growth of the dividend. Did you establish that as part of your review process, are you able to share any kind of those mid-range ambitions?

Well, certainly we’re not giving guidance out longer than in that one year, I mean it’s really hard to predict with the markets the way they are today. Our goal of course, and certainly it’s something that we talk to our Board about every quarter, is to get into a position to grow that dividend.

So you don’t have any mid-range plans then to share with us?

Not at this time. You are talking about going out two or three years. Tell me what the forecast looks like?

Were you not able to come up with those or is it just…

We don’t share them.

Okay. You have them, but you don’t share them?

No, we don’t – I mean, we share them with our Board. We have long range forecast, but they’re highly dependent on the acquisition volume, disposition volume. They are harder to predict with any kind of certainty.

Okay. Being able to share those I think would really help in developing a better understanding of where you want the company to be fundamentally over the next few years just from an outside investor standpoint?

I understand.

Thanks.

Thank you. At this time we have no further questions. I would like to turn the call back over to Paul McDermott for closing comments.

Thank you very much everyone.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.