Welcome to the Washington Real Estate Investment Trust’s Third Quarter 2016 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; Tejal Engman, Director of Investor Relations will provide some information. Ms. Engman, please go ahead.

Thank you and good afternoon everyone. Please note that our conference call today will contain financial measures such as FFO, core FFO, NOI and core FAD that are non-GAAP measures as defined in Reg G. Please refer to our most recent financial supplement and to our earnings press release both available on the investor page on four Web site, and to our periodic reports furnished or filed with the SEC for definitions and further information regarding our use of these non-GAAP financial measures and a reconciliation of them to our GAAP results. Please also note that some statements during this call are forward-looking statements within the Private Securities Litigation Reform Act. Forward-looking statements in the earnings release along with our remarks are made as of today, and we undertake no duty to update them as actual events unfold. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. We provide these risks in our SEC filings. Please refer to Pages 9 through 24 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; Steve Riffee, Executive Vice President and Chief Financial Officer; Tom Bakke, Executive Vice President and Chief Operating Officer; Drew Hammond, Vice President, Chief Accounting Officer and Controller; and Kelly Shiflett, Vice President, Finance and Treasurer. Now, I’d like to turn the call over to Paul.

Thank you Tejal, and good afternoon everyone. Thanks for joining us on our third quarter 2016 earnings conference call. Washington REIT delivered core FFO of $0.45 per diluted share, and raised elements of our full-year guidance primarily due to a strong operational performance that exceeded expectations. In addition, we achieved major capital recycling goals by quarter end, enabling us to improve our asset mix, further pave down debt, and thereby strengthen both the left and right sides of our balance sheet. Overall there are four key achievements I would like to highlight this quarter. First, we improved overall portfolio physical occupancy sequentially by 210 basis points, to 93.2% at quarter end, which is the highest rate achieved in over five years. Second, we raised the bottom end of our 2016 core FFO range as well as our projections for retail same-store NOI growth, and for Silverline Center’s expected NOI contribution in 2016. Third, we completed the sale of the suburban Maryland office portfolio by successfully executing the final sale transaction which we structured in a reverse 1031 exchange in conjunction with the acquisition of Riverside Apartments in Alexandria, Virginia. And finally, we further deleveraged to end the quarter at approximately six times net debt to adjusted EBITDA creating additional flexibility on our balance sheet to continue to execute value-add opportunities in 2017. Let me start by placing our year-to-date 2016 capital allocation in the context of our broader strategic plan to elevate the quality of our portfolio and strengthen our balance sheet. Since we put the plan in motion in late-2013, Washington REIT has sold approximately $900 million of mostly legacy suburban office and suburban medical office assets. Over the same period we have reinvested approximately $750 million into higher quality urban infill transit-linked assets of which the majority are…

Thanks, Paul, and good afternoon everyone. First quarter net income was $79.7 million or $1.07 per diluted share compared to net income of $600,000 or $0.01 per diluted share in the third quarter 2015. The difference is primarily due to the recognition of $77.6 million gain on the second cell transaction of the Suburban Maryland office portfolio this quarter. Third quarter 2016 core FFO of $0.45 per diluted share was unchanged over the prior year and included positive same-store NOI growth and interest expense savings, as well as non-same-store NOI contribution from Silverline Center, Riverside and Wellington all of which help offset the FFO dilution from asset sales and additional shares issued this year. Third quarter same-store NOI increased 1.9% over the prior year. Same-store rents increased 150 basis points over third quarter 2015 and same-store physical occupancy improved 130 basis points to 94.2% at the end of the quarter. Core funds available for distribution or core fad was approximately $27 million for the quarter and $78 million for the first nine months of 2016 representing an 81.1% and 82.6% payout ratio respectively. We continue to project a full-year core fad payout ratio in the mid-80s. Starting with office, same-store NOI grew 1% over the third quarter 2015. Annual rent increases across the portfolio led to 170 basis points of year-over-year rental growth and lease commencements particularly at 1775 I Street contributed to higher occupancy gains over the corresponding prior year period. Same-store office physical occupancy increased 60 basis points sequentially and 150 basis point over third quarter 2015 to end the quarter at 92.3% primarily due to the aforementioned lease commencement at 1775 I Street and also at 1600 Wilson Boulevard and Fairgate. Overall office physical occupancy increased by 300 basis points sequentially to 90.5% primarily due to the…

Thank you, Steve. With the sale of the suburban Maryland office portfolio now complete we believe Washington REIT is a unique pure-play on the Washington metro region. We have a predominantly urban-centric well-located portfolio that creates a compelling value proposition for office, multi-family, and retail tenants in our regions, addressing those segments of the market that have steady demand and limited supply. Importantly, we have a strong balance sheet with solid leverage ratios that will enable us to generate multiple phases of NOI growth through a strategically-timed series of six relatively low risk growth projects. The renovation programs at Army Navy, The Wellington, and Riverside are beginning to validate our expected returns through ongoing lease up. The ground-up developments of Spring Valley, The Wellington, and Riverside are differentiated in that we are adding density on sites already controlled by Washington REIT. And where we have a deep knowledge of the sub market and our customers, and where we can leverage our existing operating platform. Our continued goal is to raise our long-term risk-adjusted growth profile by taking targeted, calculated bets in a market where we have the knowledge and expertise to make the best long-term capital allocation decisions for our shareholders. Furthermore, we believe the relative defensiveness and lower volatility of our region, our sub markets, and our assets combined with the solid job growth our region continues to generate makes us stronger and better positioned for the future. With that, Operator, please open up the call for questions.

Thank you. At this time we’ll be conducting a question-and –answer session. [Operator Instructions] Our first question comes from Dave Rodgers with Robert W. Baird. Please proceed with your question.

Yes, hi guys, good afternoon. Wanted to maybe talk a little bit more about the acquisition market, Paul, in your comments you talked about kind of this mid-market be in the $40 to $50 gross range and the opportunities that you have there. But I guess maybe talk a little bit more about the portfolio opportunities that maybe you haven’t explored yet in your own portfolio. And then maybe more even specifically what you can buy today. Is that product available, priced right, et cetera.

Let’s talk about what’s on the market right now. There have been a couple of trades in D.C., like one time circle, [ph], I would consider that more kind of A-minus to B-plus type product. And, Dave, I’d say you have to really believe in the sub market and your ability to create value. That has been our mantra. Downtown, we clearly haven’t seen the volume of kind of the metro-centric walkable retail amenity type trades that we normally look for. I think the suburbs are kind of littered with commodity suburban office product that I would call kind of bordering, not obsolete, but bordering on major CapEx, and major renovation potential, and just not sure you’re going to be compensated with the current market rents to do that. On the multi-family side, I think it continues to be competitive. I think class A high rise, based on our numbers, I think last year’s numbers I think we’re probably around $390 a door number –- I’m hearing year-to-date is probably in the $410 to $415 range. So let’s call it 5% increase in that product. And then probably about a 3% increase in the B product in terms of sales, I think we’ve had, I want to say, about $2 billion or class A product clear, and I think so clearly there is still an appetite there. But we just haven’t -- I would say in terms of what we look for, in terms of the value-creation potential, multi-family we look at renovation potential with additional FAR [ph]. We haven’t seen a lot of those deals trade. I think there are folks that are looking for a core product right now. And that’s being priced accordingly in terms of back to downtown and the office; I would like to say that we talked to the brokerage community pretty frequently, obviously weekly. A lot of people threatening to come to the market with product but we haven’t really seen that materialize. And if we have seen it materialize, Dave, it appears to be a little bit more risk off because it’s either coming with debt, it’s got near-term lease expirations or probably some unrealistic pricing, and so for that type of product, quite frankly, we’re seeing that bid-ask spread widening, not contracting.

Yes, that’s good color, Paul. And thanks for that. So it doesn’t sound like we’ll expect to see your name in the headlines any time soon with acquisitions. But if I’m wrong correct me, and I guess maybe a second question just on some of the renovations. I think, and maybe I took this comment wrong, you said something about proving out the returns on the renovations for apartments before maybe moving forward with a lot of the density or most of the density efforts, but I guess what are those return hurdles, are you really achieving those, and maybe run through some of the maps that get you comfortable with moving forward with a new construction project.

Okay, well I’ll ask Bakke to ham-and-egg this with me. But when we underwrote these, and I think when we’ve been out on our numerous NDRs, I think we were pretty transparent on what we were looking for, and we were looking for kind of mid-teens returns on those renovations. We are seeing those right now on the units that we have renovated. I think your question, Dave, on needed the renovations to prove out to move forward with development, I’d like to separate those two concepts. We specifically targeted the Arlington and Alexandria sub markets just because of the lack of new supply that we saw coming online. The renovations are geared specifically towards the affordability gaps between class A and class B. And then the development potential was really on pending supply. Right now, and I’ll specifically focus on the Wellington, since that was our ’15 purchase which we said we wanted to go in the ground on 1Q ’17. We haven’t seen anything that has dissuade us from proceeding with that project. And then Riverside I think probably that will be in early ’18, so let’s call that 18 months out. I think we’d like to go back, validate our market assumptions. But at this time we don’t see a surge in supply or anything that would say, okay these are the rents that we underwrote. But I think we’ve tried to build in the flexibility on the start on that. The good news is both of those, we already control the projects. We already have existing income coming off of those, so those are really probably tweaking what we underwrite, Dave.

Okay, great. Thanks, Paul.

Thank you, Dave.

Our next question comes from Blaine Heck with Wells Fargo Securities. Please proceed with your question.

Thanks, good afternoon. Paul or Tom, can you just comment on what you think the magnitude of net effective rent growth that could be seen in D.C. office, in particular the kind of sweet spot that you guys talked about kind of over the next 12 months?

Hi, Blaine, it’s Tom. So I think you’ve got to keep in mind that the effective rent growth we’re seeing is in the B segment and -- which is a big part of our portfolio in the CBD, and in the small-to-midsize tenant, where you get an asset leased up and you’ve got some pricing power as tenants renew and expand. And we’ve seen low single-digit cash in upper single-digit, double-digit gap on some of those recently. We think that is going to continue but if you just talk about broad rent growth for the market, I think in general with all the new A supply coming into the market, and this is B that’s been renovated to A, that’s going to put pressure on rents and I think that’s going to be flat generally in the market overall, so it's really asset by asset and sort of the deal by deal for us. So I think it's just - we've been fortunate to have a good solid B portfolio with small floor plates that cater well to the kind of tenant demand we’re seeing in the market.

The only thing I would qualify that with that – that sweet spot that we talked about that price range let's call it mid-50s down like, upper 40s 48, that market the vacancy in that market is about 8% and you know we see continued that type of product continually being removed from the supply to Tom's point that's why I think that in any segment of the office market, that’s what we’re probably seeing landlord pricing power.

Okay. So you think in that segment you could probably seize better than kind of the flat overall expectation?

Yes Blaine.

Okay, helpful. And then I think last quarter you guys mentioned that you are evaluating bringing some more office assets to the market and kind of ties and with the question. But can you give any update on that process and in the amount of interest you're getting there and maybe handicap the chances of additional sales getting done in the near to midterm.

I think the only asset right now that we that the – let me start with the office. The office segment is closing out our sale of Suburban Maryland that was really, that the transformational transaction in the portfolio I think if I recall my words were more that we would get back to a traditional portfolio management model and evaluate opportunities on a one-off basis. I think there is there definitely some office assets, probably in the next 2 to 3 years that once we've pegged down some leasing or we finished some CapEx, like we do every annually every year, they could hit an inflection point and could be a sales candidate. Right now the main sales candidate is the Walker House and that is something that you we will execute upon in the first half of 2017.

Okay, that's good color. And then, Paul, can you just give us an update on what's going at 2445 M Street [ph] advisory board is leading, have you continued to see interest from prospective tenants there and what's the possibility of giving that bankrupt?

Paul is looking to me, looks like he wants me to answer. These are share from way back. So that's an asset we love the asset and the location, the unique location the West End. We do have good activity on it from several large users. We're exploring couple of options with that. One is in office redevelopment and the other is in fact the multifamily conversion which we think it has some challenges but if that was possible that could be a unique opportunity for us. So we're looking at a couple of options that we like both of them and we will try to see which one is going to deliver the most value for us.

Interesting, okay. Thanks guys.

Our next question comes from John Guinee with Stifel. Please proceed with your question.

You may have already answered or may have been in your prepared remarks. So if you have don’t answer it again, and tell me to shut up. First what's the expected proceeds on Walker House and then two, if you assume that you're not going to access ATM but this is kind price, you assume Walker House closes, you assume you want to keep your dollars for near-term development redevelopment, how much dry powder do you have to acquire in 2017 before you bounce up against for provided that limitations. Is it 50 million or 500 million, I just don’t know.

John I'll take the first part of that question and before I get started I want to thank you for spelling your name out on the list. We enjoyed it. So I’m not going to comment on the proceeds to Walker House because you never know is on the other side of this call and we don’t want to telegraph our expected proceeds number and I'm sure you'll understand that. I'll turn it over to Steve to maybe just talk about the capital that we're looking at for 2017.

And I’m not going to give our 2017 guidance right now either John but we said all along that we want to operate in the low sixes – we got six right now, we're comfortable where we want to be in that range as the end of the year. We think that we haven't given our all of our sourcing use layout because we are still planning for 2017 and we will update that. but when we look at development based on my early estimates I think we've taken care of through this quarter's ATM probably will be the equity requirement for next year's development spend. I think we have you it anytime we decide to purchase something we'll look at the capital allocation decision it'll be what kind of asset and how does it improve of the left side of the balance sheet, the NAV of the company and what kind of returns we’re going to get on it, what's the best capital the match up with it. And one of the things that we've worked hard to do over the last couple years is continue to increase the flexibility and the optionality we have to make capital allocation decisions by encumbering the balance sheet, by deleveraging and by recycling. So it's quite frankly it will depend on all of our options when we get there, when we look at it evaluate opportunity. We could have our currency. We could have another asset but it’s for trading out off so will make that call, we get a little bit further down the line with our 2017 guidance.

Okay. And just to clarify, can you give us third and fourth quarter GAAP cash Silverline and Natural house so what we’re trying to do is just figure out when those assets stabilize. Have they already stabilized, do they stabilize mid next year. I just can’t get the numbers straight.

We do not have that with us and we have not separately disclosed the individual asset numbers . The Maxwell is stabilized. We have tried to provide some understanding to the guidance that we gave in terms of the relative impact of Silverline. So we increased this contribution for this year and if you look at the midpoint of our guidance on the last call for the Silverline Center to the midpoint of our guidance this call on the Silverline Center that implies at $350,000 so additional contribution. That comes partially because our anchor tenant we were able to get the men at one point in August instead of September and also we had another lease commencing the building.

So the Silverline stabilized in August or September?

There is still lease up to go. Our anchor tenant moved in August but there's still some space, Tom do you want to comment in terms of…

Guinee, we’re 93% leased at Silverline which for the suburbs is reasonably stable I guess. There's still little more lease we hold a rollover.

Got you. Okay, that’s been very helpful. Thank you.

Thank you, John.

Our next question comes from Jed Reagan, Green Street Advisors. Please proceed with your questions.

Good afternoon guys. So it sounds like the trove is going to break ground in the first quarter just want to confirm that’s correct. And I think you previously pointed to mid to high 6% cash on cost yield at that project is that that's on the range?

Yes, right now we are planning, we're targeting our first quarter groundbreaking and we are the first deliveries of those units will deliver - will deliver in the second quarter of '19. Construction should be complete in the second quarter of '20 with stabilization in the fourth quarter of '20 and we are looking at the days – those were initial yields you are correct on in stabilizing in the low sevens and growing from their.

Okay, that’s helpful. You guys mentioned it looked like you’ve modestly reduced the multifamily same-store NOI guidance. Is that indicative of any softening you’re seeing or is that just noise for that small amount of change.

That was just third quarter expenses being a little bit higher than them and so we went to the bottom end of our range. A lot of that actually was what we were trying to message on the last call that we were having a hot summer so utility is a little bit of real estate factors but we had a little bit hotter third quarter, I think it's temporary noise.

Global warming and affect, okay. Thanks and then I think I heard you say the bid out spread for the tougher suburban product is widening at this point. Are you seeing any of that type of stuff transacting and can buyers get financing for it and when you say you're seeing more folks kind of chasing those kind of deals as the cap rate spreads widen?

I think that Jed I think that number one, I am glad you highlighted it. The capital markets have a lot to do with it. We’ve definitely seeing first off I think it's you look at the time of the year and a lot of these lenders have already kind of blown through their quotas and they were pretty both multifamily and office lenders in this region were pretty aggressive in the first and second quarters of this year. And that’s again that’s why I am glad we hit the window that we did. I would also say that in talking to the folks that we talk to and these are more the regional players, the local operators that use third-party capital. They are getting a higher equity percentage demand from the lenders, getting a lot more creative doing mezz slices or preferred equity slices to try to round out the capital stack. I think it's really just been, how much risk do people want to take here and I think that you know people are doing a little bit more wait and see because that type of commodity product is so plentiful right now in this region Jed that I think you have your choice and people think that there could be some further price dislocation especially if there's some type of rate movement in December; and just my personal observations, Jed.

Okay. I appreciate it. Thank guys.

Thank you.

[Operator Instruction] Our next question comes from Chris Lucas with Capital One Securities. Please proceed with your question.

Good afternoon everyone. Just a couple of quick follow-ups and then one more general question, as it relates to Silverline, Tom just what are your thoughts about additional leasing activity there. You mentioned that these sort of certainly outperform the market. Is the momentum still with that asset at this point?

I said Chris, we’ve got good activity. We are achieving rents that frankly are at or above our expectations. We do have 35,000 feet or so to lease right now granted that CNO [ph] as you know and when you get leased up about 90% your left with generally the less desirable space but we do have activity on it. We've got some rollover coming in 17 of which we should have some rent roll out there. So I think it’s still performing well in the market in spite of other competitive product.

And then just curious about the 2445 perspective, what is sort of the timeframe under which you have to make a decision about whether or not you go full forward on just redeveloping the office space and in releasing or conversion. I know the leases doesn’t expire for a while but how much time do you have to sort of walk through the exercise of figuring out which is the right way to go.

I think we need to get -- we’re in the market with the office leasing plan where we’re working on several different design options. We need to be in the market with something more specific I think probably within the next couple months. The other option we want to try to get that figured out here in the next few months as well so that we’re full speed ahead with the option we’re going pursue in the next year.

Okay. And then last question just in terms of general activity given we’re heading into the election what's sort of historical impact in on particularly office leasing activity going into an election and then coming out sort of when should we expect or should we expect any sort of slow down and then and build-up of activity?

Well, I think what we've seen and this is not surprising. We’ve seen the election create quite a bit of uncertainty in the leasing market especially for large users, government users, defense contractors and that is probably going to take even some time after the election for that to settle down. That being said I think the election will pose some interesting dynamics depending on who gets elected. I think at Paul has got some interesting ideas on that that he may want to share.

Or I will have some ideas on that, Chris. So look we get asked and you’ve been kind enough to go on the road with us as well as other folks and everybody asked us to really you wax philosophic on the GSA. So like JOL put out and nice today, Scott did. And when we step back and look at kind off where we've come from, what the budget control actor or sequestration did to us. They’ve reduced GAS footprint by over 26,000 jobs or 7%. So since that has kind of burned off let’s call it a late ‘14 where the GSA has added I think about 8800 jobs. What we're seeing now relative to the election is there is as much delaying on decision-making and there is downsizing. And I think you just look at the FBI's decision to kick the can again till March and that clearly will be under a new administration. So are there folks, are there GSA folks downsizing, yes, FEMA just downsized in about upper 60,000 square feet in and Southwest, I think GSA just contracted about 40,000. We kind of look at the strongholds for the GSA that the Noma, Southwest, Springfield and probably Crystal City. Those are probably going to be little bit more higher impact areas. Our observations would be on the election. Clinton has run on a platform to reduce the contractor workforce by about 500,000 jobs and make those jobs GSA jobs. And then Trump had done the exact opposite. He wants to freeze the GSA footprint, shift the federal resources to the private sector and so I think if Trump gets elected you'll see an acceleration in that GSA compression and a shift to the private sector where if Clinton gets elected we think the GSA would hold steady and I dare say could potentially expand. It would be a question of timing and were those all go. You have to remember under a backdrop and I know Washington REIT felt in it’s in the portfolio here. Those contractors really already went through some critical pre-radical shrinking from ‘11 to ‘14 and haven’t really caught back up to the expansion that we were used to seeing. And then we all have, we all wrestle with those GSA contractors you know these as the dreaded buyout provision that’s tethered to every lease. But I definitely think you'll see a shifting of federal versus nonfederal resources being messaged pretty clearly in the next 60 to 90 days Chris.

Thank you very much. I appreciate the time.

Sure, thank you Chris.

Our next question is from Bill Crow with Raymond James. Please proceed with your question.

Hey, good afternoon guys. Paul, now that you’ve been in the lead chair for a while, I want to go back to a topic that's come up before kind of gauge your reaction to it which is really your commitment to the retail sector is the third leg of the stool. I bring that up because you know before you’ve talked about how difficult it is to expand your footprint in that sector. We know the cap rates are low. And I guess one weak transition or thought process from a kind of depressed fundamental environment for office and multi-family into a recovery mode, you know, will retail act more as an anchor compared to kind of the stabilizing factor today? So, how do you think about that when you are doing longer term planning for the company?

Great question, Bill. Let me just step back for a second, and you know, let's talk about retail. I think this question in retail, our retention rate was 98%, and year-to-date I think we are probably about 80%. Retail has performed well, probably the best not only in Washington REIT portfolio, but probably the best and most consistent in terms of asset performance in this region. We always look at opportunities build to scale the retail, and again, you've been kind enough to go out on the road with us. I look at our retail portfolio and I just see a lot of embedded growth. I see an ability to add additional FAR. I look at something like Chevy Chase Metro, I look at [indiscernible], I look at what the Purple Line could do to Ticomo [ph] Center. I think that those are drivers that we're not actively out messaging right now. And when we look at the long-term vision of the company, we look at that as additional upside to the potential drivers that we have already outlined. We're always going to evaluate every asset class and we are always going to do what's best for the shareholders, but right now what I hate to do is sit here and tell you that, okay, we are going to monetize and [indiscernible] another and leave potential FAR, potential density, potential upside for our shareholders on the table.

That's very helpful. Thanks, guys, appreciate it.

Now I would like to turn the call back to Mr. McDermott for a final remark.

Thank you. Again, I would like to thank everyone for your time today. And we look forward to seeing many of you in Arizona next month. Hope you have a good weekend. And we thank you all for your time.

This concludes the third quarter earnings call for Washington REIT. Thank you for your participation. You may disconnect your lines at this time.