Elme Communities · NYSE:ELME
Elme Communities — Washington Real Estate Investment Trust — NAREIT REITweek June 2019
82 slides from Elme Communities's conference presentation, May 31, 2019
Slide 1: De-Risking for Better Growth – NAREIT June 2019
1 DE-RISKING FOR BETTER GROWTH Investor Presentation – NAREIT June 2019
Slide 2: Forward-Looking Statements and Use of Non-GAAP Financial Measures
2 FORWARD-LOOKING STATEMENTS AND USE OF NON-GAAP FINANCIAL MEASURES Forward-Looking Statements Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beli
Slide 3: We're Looking Forward To
3 WE’RE LOOKING FORWARD TO De-risking and stabilizing our cash flows and NOI by acquiring value-add multifamily assets selling retail and office assets leasing up key vacancies across our commercial portfolio and delivering our multifamily development, the Trove Through strong, swift execution in as
Slide 4: Agenda
01 TRANSACTION SUMMARY 4 Strategic rationale and timing update 02 TRACK OUR PROGRESS Progression toward lower risk and higher quality cash flows 03 CAPITAL ALLOCATION STRATEGY Multifamily growth strategy and capital allocation strategy 04 THE ACQUISITION PORTFOLIO Map and overview of the seven value
Slide 5: Transaction Summary: Strategic Rationale
5 TRANSACTION SUMMARY STRATEGIC RATIONALE Expand Class B Multifamily Portfolio To address the fast-growing cohort of 35 – 44 year olds who can’t afford homeownership or urban-infill rents and are drawn to well-located Class B suburban multifamily with its larger living spaces and excellent community
Slide 6: Track Our Progress: FY 2019 Capital Allocation Execution
6 TRACK OUR PROGRESS FY 2019 CAPITAL ALLOCATION EXECUTION TRACKING ACQUISITION DISPOSITION 1 DISPOSITION 2 2,113 units / 7 assets To fund these Previously $461M value-add acquisitions contemplated Class B Process $175M - $200M PREVIOUSLY Includes: ANNOUNCED multifamily units. underway All five North
Slide 7: Strategic Capital Allocation
7 STRATEGIC CAPITAL ALLOCATION Capital Allocation Strategy To continue to allocate capital out of commercial and into multifamily (2013 - 2018) (2019) Net Acquired Plan to Acquire Improve cash flow stability $406 million & $461 million FAD growth OF MULTIFAMILY ASSETS OF MULTIFAMILY ASSETS (CLOSED O
Slide 8: Strategic Multifamily Growth
8 STRATEGIC MULTIFAMILY GROWTH Multifamily Growth Strategy To grow our Class B multifamily portfolio Urban In-fill Suburban TARGET TARGET Strategically address Renters who can’t afford Class A the need for quality Renters who can’t afford urban in-fill multifamily affordable housing homeownership or
Slide 9: Assembly Portfolio Overview
9 ASSEMBLY PORTFOLIO OVERVIEW Well-located, accessible portfolio LOCATION MD 20% UNITS VA 80% VINTAGE 2000s 15% 1990s 49% 1970s UNITS 10% 1980s 26%
Slide 10: Assembly Portfolio Overview (cont'd)
10 ASSEMBLY PORTFOLIO OVERVIEW (cont’d) Seven high-quality assets with 2,113 units – 95% occupied 205 CENTURY PLACE, 13690 LEGACY CIRCLE, 2511 FARMCREST DRIVE, ALEXANDRIA, VA HERNDON, VA HERNDON, VA 532 UNITS 328 UNITS 283 UNITS 10519 LARIAT LANE, 86 HERITAGE WAY NE, 2 OBSERVATION MANASSAS, VA LEESB
Slide 11: Multifamily Demand: Largest Renter Cohort Needs Class B
11 MULTIFAMILY DEMAND DC METRO’S LARGEST RENTER COHORT NEEDS CLASS B APARTMENTS DC Metro region’s largest renter cohort, comprising 35% of all market renters, earns $50,000 – $80,000 per annum. This creates strong demand for units with average monthly rents between $1,250 and $2,000 that is largely
Slide 12: Multifamily: Existing and New Supply Remains Unaffordable
12 MULTIFAMILY EXISTING AND NEW SUPPLY REMAINS UNAFFORDABLE FOR THE MAJORITY OF MARKET RATE RENTERS There is a significant dearth of quality, affordable multifamily supply in the DC Metro region. Particularly for households earning $50,000 to $80,000 per annum who comprise the largest pool of market
Slide 13: Growth in Regional Multifamily Demand Led by Older Millennial Renters
13 GROWTH IN REGIONAL MULTIFAMILY DEMAND TO BE LED BY OLDER MILLENNIAL RENTERS We expect the population of 35 – 44 year old renters to grow strongly as: 1 2 MILLENNIALS HOME OWNERSHIP REMAINS AGE UNAFFORDABLE POPULATION GROWTH BY AGE COHORT WASHINGTON METRO 400% growth 20,000 18,098 per annum over $
Slide 14: Assembly Portfolio Rent vs. Homeownership
14 ASSEMBLY PORTFOLIO RENT VS. HOMEOWNERSHIP Washington Assembly Assembly Assembly Assembly Assembly Assembly Assembly Metro Alexandria Dulles Herndon Germantown Leesburg Manassas Watkins Mill 2018 Median HH Income (3 $99,481 $88,260 $114,209 $112,943 $93,530 $113,895 $69,832 $83,068 mi radius) Expe
Slide 15: Assembly Portfolio Rent vs. Homeownership
15 ASSEMBLY PORTFOLIO RENT VS. HOMEOWNERSHIP Even if a renter saves for the 20% down payment necessary for a mortgage, the estimated monthly mortgage is significantly higher than the average monthly rent across nearly all the Assembly assets. AFFORDABILITY GAP BETWEEN RENTING AND OWNING $3,500 Estim
Slide 16: Investment Rationale: Older Millennial Renters
16 INVESTMENT RATIONALE: GROWTH IN REGIONAL MULTIFAMILY DEMAND TO BE LED BY OLDER MILLENNIAL RENTERS As millennials age, it’s becoming evident that they are renting for much longer than the generations that preceded them: RENTERSHIP RATE BY AGE OF HOUSEHOLDER Boomers Gen X Millennials Silent 100.00%
Slide 17: Growth in Regional Multifamily Demand (cont'd)
17 GROWTH IN REGIONAL MULTIFAMILY DEMAND (cont’d) TO BE LED BY OLDER MILLENNIAL RENTERS NEW RENTAL HOUSEHOLDS BY AGE COHORT WASHINGTON, DC METRO | 2016-2030 Over the next decade, the 20 35-44 age cohort is projected to grow from 29% to 70% of new rental households. 15 10 5 Thousands 0 -5 2016 2017 2
Slide 18: Assembly Portfolio Serves Older, Value-Conscious Millennial Renters
18 ASSEMBLY PORTFOLIO SERVES OLDER, VALUE-CONSCIOUS MILLENNIAL RENTERS AVERAGE LESSEE AGE REFLECTS FAST-GROWING RENTAL PRICE POINT MATCHES LARGEST POOL OF 35 - 44 YEAR OLD DEMOGRAPHIC POTENTIAL RENTERS IN THE REGION EARNING $50,000 - $80,000 PER ANNUM 140 Market Rate Rental Housing ACQUISITION ASSET
Slide 19: Assembly Portfolio Key Attributes Appealing to Millennial Renters
19 ASSEMBLY PORTFOLIO POSSESSES KEY ATTRIBUTES THAT APPEAL TO OLDER, VALUE-CONSCIOUS MILLENNIAL RENTERS We believe the fast-growing 35 – 44 year old, value-conscious renter cohort is drawn to the acquisition portfolio’s mature suburban locations for the following reasons: ACCESS TO: LARGER UNIT SIZE
Slide 20: Assembly Portfolio Has Excellent Access to Jobs
20 ASSEMBLY PORTFOLIO HAS EXCELLENT ACCESS TO JOBS The acquisition portfolio is well located and in close proximity to some of the largest employment concentrations in the region including: Downtown Washington, DC; Crystal City; Tysons; Reston; Route 28 South and the I-270 Corridor. ASSEMBLY PORTFOL
Slide 21: Assembly Portfolio Is Insulated from New Supply
21 ASSEMBLY PORTFOLIO IS INSULATED FROM NEW SUPPLY The Assembly portfolio is relatively insulated from recent multifamily supply increases that have been concentrated in the District. Even within Northern Virginia, the Assembly portfolio doesn’t directly compete with the supply pipeline in Arlington
Slide 22: Assembly Submarkets with Strong Fundamentals
22 ASSEMBLY PORTFOLIO IS LOCATED IN SUBMARKETS WITH STRONG FUNDAMENTALS (cont’d) The Assembly portfolio’s submarkets have a better supply outlook than the Washington Metro region as a whole: UNDER CONSTRUCTION INVENTORY CHANGE % ALL APARTMENT CLASSES | WASHINGTON METRO & ASSEMBLY PORTFOLIO’S SUBMARK
Slide 23: Assembly Portfolio Medium and Near Term Rent Growth
23 ASSEMBLY PORTFOLIO MEDIUM AND NEAR TERM RENT GROWTH The Assembly portfolio’s submarkets have stronger Class B rent growth than the Washington Metro Class B average: YEAR OVER YEAR EFFECTIVE RENT CHANGE AND EFFECTIVE RENT CLASS B APARTMENTS | WASHINGTON METRO & ASSEMBLY PORTFOLIO’S SUBMARKETS 2013
Slide 24: Assembly Portfolio Long Term Rent Growth
24 ASSEMBLY PORTFOLIO LONG TERM RENT GROWTH The Assembly portfolio’s submarkets have stronger Class B rent growth than the Washington Metro Class B average (red line) as well as the urban core (green line) YEAR OVER YEAR EFFECTIVE RENT CHANGE CLASS B APARTMENTS | WASHINGTON METRO, URBAN CORE & ASSEM
Slide 25: Assembly Portfolio Long-Term Rent Growth
25 ASSEMBLY PORTFOLIO LONG-TERM RENT GROWTH The Assembly portfolio’s submarkets’ rent growth has outperformed that of both the Urban Core and the DC Metro at large on a 5 (from Q2 ’14) and 10 year (Q2 ’19) view. Average Annual Class B Rent Growth Years 10 5 Central Alexandria 2.04% 1.93% Gaithersbur
Slide 26: WashREIT Has a Strong Multifamily Track Record
26 WASHREIT HAS A STRONG MULTIFAMILY TRACK RECORD Our value-oriented, Northern Virginia centric portfolio combined with our research- led ‘affordability gap’ strategy has significantly improved its same-store NOI growth trajectory despite elevated levels of multifamily supply. WASHREIT FULL YEAR SAM
Slide 27: WashREIT Offers Excellent Exposure to DC Metro Class B Multifamily
27 WASHREIT OFFERS EXCELLENT EXPOSURE TO DC METRO CLASS B MULTIFAMILY PRO- FORMA UNIT COUNT PRO- FORMA UNIT SPLIT Class A, 7000 6381 Growing multifamily 10% 6000 portfolio by 50% to 5000 4268 ~6,400 units 4000 3000 2000 Growing Class B 1000 multifamily by 60% to Class B, 0 ~5,700 units 90% Existing
Slide 28: Embedded Opportunities
28 EMBEDDED OPPORTUNITIES NORTHERN VIRGINIA OFFICE (1.9M SF) THE DC METRODC OFFICE REGION (1.6M SF) Arlington Tower, Rosslyn, VA Courthouse Sq., Alexandria, VA WhereWatergate to 600,be Waterfront, in DC DC 2000 M, CBD, DC SILVERLINE / RB CORRIDOR ALEXANDRIA ICONIC VALUE-ORIENTED Office METRO DRIVEN
Slide 29: November 2018 8-K Office Leasing Update
29 NOVEMBER 2018 8-K OFFICE LEASING UPDATE As of May 2019, WashREIT has successfully leased up 65%(1)(2) of the expected ~357K SF of expiring and renewal office leases disclosed in our 8-K filed on November 26, 2018 2019 PROGRESS ON OFFICE LEASING REFERENCED 120,000 IN THE 8K FILED IN NOVEMBER 2018
Slide 30: Northern Virginia Office – Submarkets Are Rising
30 NORTHERN VIRGINIA OFFICE – WASHREIT’S SUBMARKETS ARE RISING THE DC METRO REGION Where to be in DC SUBMARKET ACCESS OUTLOOK JLL: “Rising Phase” Silverline Corridor 100% Metro-Served Driver Tech & Defense 979,000 SF Growth Infrastructure – 3 Assets Catalyst Silverline Metro Rosslyn - Ballston JLL:
Slide 31: Northern Virginia Office – Opportunity
31 NORTHERN VIRGINIA OFFICE – OPPORTUNITY Our Northern Virginia office portfolio is in areas with high median household incomes, where the majority of the region’s decision-makers live. Key: WashREIT NoVA Office Properties 2018 Median HH Income $173,000 - $200,000 $150,000 - $172,999 Source: ESRI da
Slide 32: Northern Virginia Office – Arlington Tower Opportunity
32 NORTHERN VIRGINIA OFFICE – ARLINGTON TOWER OPPORTUNITY Acquired at a mid-6s cap rate and expect to generate an 8-10% premium for the majority of the 70,000 square feet of space available for re-lease in 2019. UNIQUE: Less than 10% of Rosslyn office buildings have roof decks with views that are ac
Slide 33: Space+ Leasing Update at Arlington Tower
33 SPACE+ LEASING UPDATE AT ARLINGTON TOWER ~30,000 SF of AWARD-WINNING Space+ space Space+ won the award for “Best in the leased or under Industry – Flexible LOI in 4 months Office Space Provider” from CREBA 5th floor just 8th floor delivered delivered is 53% in Jan ’19, is 90% leased or under leas
Slide 34: Space+ Is Flexible Office with a Difference
34 SPACE+ IS FLEXIBLE OFFICE WITH A DIFFERENCE The fastest-growing segment of office Space+ addresses these needs while demand is looking for: differentiating its value proposition Offers better value for SPEED Strong corporate small and mid-size identity tenants vs. Co-working as it offers strong i
Slide 35: Space+ Achieves Key Strategic Objectives
35 SPACE+ ACHIEVES KEY STRATEGIC OBJECTIVES Space+ at Arlington Tower, Rosslyn, VA A strategy that solves for tenant needs of speed, flexibility and amenities AND a landlord’s need for: CASHFLOW MARGIN RE-USABLE CAPEX Reduced downtime from delivery to lease Higher rents => higher margins Lower initi
Slide 36: Northern Virginia Office – Space+ Track Record
36 NORTHERN VIRGINIA OFFICE – SPACE+ TRACK RECORD The first proof of concept for Space+ was at 1600 Wilson in 2014. Today, Space+ is a portfolio-wide flexible space program that is currently ~3.5% of our total office portfolio square footage and expected to stabilize at around ~5% - 10%. PROOF OF CO
Slide 37: Northern Virginia Office – Opportunity
37 NORTHERN VIRGINIA OFFICE – OPPORTUNITY In submarkets with strong demographics, rising fundamentals and excellent Metro-access. Silverline Center, Tysons, VA 549,000 SF 1600 Wilson Arlington Tower Rosslyn, VA Rosslyn, VA 170,000 SF 391.000 SF Monument II Herndon, VA 209,000 SF John Marshall II Tys
Slide 38: Washington DC Office – WashREIT Owns the Right Product
38 WASHINGTON DC OFFICE – WASHREIT OWNS THE RIGHT PRODUCT THE DC METRO REGION Where to be in DC SUBMARKET / SEGMENT ACCESS OUTLOOK JLL: Double Digit Rent Premiums for Waterfront Views WATERFRONT, CLASS A 100% Metro-Served River and Monument Driver 278,000 SF Views + Iconic Status 1 Asset Re-leasing
Slide 39: Washington DC Office – WashREIT Owns the Right Product
39 WASHINGTON DC OFFICE – WASHREIT OWNS THE RIGHT PRODUCT THE DC METRO REGION Where to be in DC In the DC core with the right product and excellent Metro access 2000 M Street NW 1220 19th St NW 1140 Connecticut Ave CBD, DC CBD, DC CBD, DC 232,000 SF 102,000 SF 184,000 SF 1227 25th St NW West End, DC
Slide 40: Washington DC Office – Watergate Leasing Success
40 WASHINGTON DC OFFICE – WATERGATE 600 LEASING SUCCESS Watergate 600 Waterfront DC RENOVATION LEASING BEFORE AFTER ~72,000 SF OF EXECUTED LEASES ~50,000 SF IN LEASE-UP (INCL. RENEWALS)
Slide 41: Washington DC Office – Supply of Value Office Product
41 WASHINGTON DC OFFICE – SUPPLY OF VALUE OFFICE PRODUCT As Class B office product is removed from the market, WashREIT’s value-oriented DC office portfolio benefits from a growing dearth of Class B office options Value Product - Supply Shrinking Class A Product - Oversupply Average Class B Rent Gro
Slide 42: Washington DC Office – Demand for Value Office Product
42 WASHINGTON DC OFFICE – DEMAND FOR VALUE OFFICE PRODUCT WashREIT’s research supports the view that Class B office in Washington, DC is a product type that attracts the greatest volume of tenant demand. 600,000 35% OF LEASING VOLUME IN THE DC CORE TAKES PLACE BETWEEN $45 TO $55 GROSS 500,000 PSF Q1
Slide 43: Washington DC Office: Value Product Track Record
43 WASHINGTON DC OFFICE: VALUE PRODUCT TRACK RECORD 75% of WashREIT’s DC office square footage is in a value sweet spot of mid-$40s to mid-$50s/foot full service rents – where supply is shrinking, concessions are falling and net effective rents are rising DC ‘VALUE’ OFFICE PORTFOLIO1 WASHREIT’S DC O
Slide 44: Washington DC Office – Repositioning / Leasing Track Record
44 WASHINGTON DC OFFICE – REPOSITIONING / LEASING TRACK RECORD THE DC METRO REGION Where to be in DC Track record of value-creation through leasing in Washington DC 1775 EYE STREET - CBD, WASHINGTON, DC ARMY NAVY BUILDING - CBD, WASHINGTON, DC . Acquired in May 2014 for $104.5 million at 62% leased
Slide 45: Multifamily – Overview
45 MULTIFAMILY – OVERVIEW Northern Virginia-centric and value- With strong performance metrics oriented portfolio And 4.4% Q1’19 SS NOI growth achieved 1Q19 MULTIFAMILY NOI BY MARKET (1) Maryland 5% 95.6% 1Q 2019 Ending Occupancy DC 20% NOI Virginia 75% 54% 4.0% 1Q 2019 Resident Retention 1Q 2019 Re
Slide 46: Multifamily – Affordability Gap Strategy
46 MULTIFAMILY – AFFORDABILITY GAP STRATEGY WashREIT’s proprietary research maximizes Class B rental growth by uncovering submarkets offering a wider than average differential, i.e. “affordability gap,” between Class A and Class B unit rents. These provide an opportunity for Class B unit renovations
Slide 47: Multifamily – Value-Oriented Product
47 MULTIFAMILY – VALUE-ORIENTED PRODUCT VALUE-ORIENTED PORTFOLIO WITH STRONG RENT GROWTH DRIVERS 84% of WashREIT’s multifamily units caters to value- conscious renters Class A AFFORDABILITY GAPS 16% Overall, WashREIT’s Class B multifamily portfolio has a weighted average rent gap that is nearly doub
Slide 48: Multifamily – Value-Oriented Product
48 MULTIFAMILY – VALUE-ORIENTED PRODUCT Greater demand for Class B multifamily product has led to Class B rent growth outperforming that of Class A CLASS A VS. CLASS B RENT GROWTH IN THE DC METRO REGION 4% Class A Rent Growth Class B Rent Growth 63 BASIS POINTS OF CLASS B RENT GROWTH OUTPERFORMANCE
Slide 49: Multifamily – Programmatic Unit Renovations
49 MULTIFAMILY – PROGRAMMATIC UNIT RENOVATIONS ~449 more units to renovate within unit renovation programs, which provide additional NOI growth The Wellington 39% Riverside Apartments 21% South Arlington, VA or 268 units left Alexandria, VA or 181 units left KEY METRICS THE WELLINGTON RIVERSIDE APAR
Slide 50: Multifamily – Relatively Insulated from New Supply
50 MULTIFAMILY – RELATIVELY INSULATED FROM NEW SUPPLY WashREIT has been relatively insulated from multifamily supply increases that have been concentrated in the District. Even within Northern Virginia, WashREIT’s portfolio doesn’t directly compete with the supply pipeline in Tysons. WASHREIT’S MULT
Slide 51: Multifamily – Trove Ground-Up Development
51 MULTIFAMILY – TROVE GROUND-UP DEVELOPMENT 401 New Units called Trove, onsite The Wellington Exterior Lobby KEY METRICS TROVE Commencement of unit Phase I – Q4 2019 delivery (1) (2) Phase II – Q3 2020 Anticipated total cash cost $122.25M ROI 6’s Scope 401 units Rooftop Lounge 1 Expected timing is
Slide 52: Multifamily – NoVA Centric Portfolio Benefits from HQ2
52 MULTIFAMILY – NOVA CENTRIC PORTFOLIO BENEFITS FROM HQ2 ~70% of WashREIT’s multifamily units are located within a 5 mile radius of HQ2 1 mile 3 miles 5 miles WRE multifamily
Slide 53: Multifamily – NoVA Centric Portfolio Benefits from HQ2
53 MULTIFAMILY – NOVA CENTRIC PORTFOLIO BENEFITS FROM HQ2 74% of our units are located within a 35 minute public transit commute to HQ2 WRE multifamily Source: Apartments.com
Slide 54: Retail – Overview
54 RETAIL – OVERVIEW Portfolio is diversified and well-positioned in submarkets that benefit from high average household income levels WashREIT data as of 12/31/2018
Slide 55: Retail – Strengths
55 RETAIL – STRENGTHS SHOPPING CENTER ORIENTED HIGH ANNUALIZED BASE RENT /SF Shopping Centers 82% $23.12 $18.68 Power Centers 18% 1Q 2019 NOI WashREIT Retail Average 81% of our retail property NOI is Key Metrics WRE Retail Average derived from community and 3-mile Median Household $122,000 $85,349 n
Slide 56: Retail: Leasing Opportunities
56 Centre at Hagerstown Frederick Crossing ~28,000 SF ~23,000 SF Lease executed Lease executed Retail: Leasing Opportunities Spring Valley Village Concord Shopping Center Shopping Centre Expected to ~15,000 SF Commence by ~7,200 SF Lease executed and Under negotiation expected to commence 2020 by 20
Slide 57: Retail – Well Diversified and E-Commerce Resistant
57 RETAIL – WELL DIVERSIFIED AND E-COMMERCE RESISTANT WashREIT’s retail portfolio is well-diversified and Key Grocery Tenants e-commerce resistant Other 1% Grocery Related 14% Specialty Retail 30% Key Dining Tenants Dining 16% Craft 6% Health & Wellness 4% Services 19% Finance 8% Education 1% Key Sp
Slide 58: Balance Sheet: Continued Strength
58 BALANCE SHEET: CONTINUED STRENGTH Deleveraged and unencumbered to further de-risk the company and create greater flexibility NET DEBT TO ADJUSTED EBITDA % SECURED INDEBTEDNESS TO TOTAL ASSETS 14.9% 7.64x Deleveraged Unencumbered Mid-to-low 6s 1.9% Q3 2015 Q1 2019 Q3 2015 Q1 2019 • Tracking to mai
Slide 59: Balance Sheet: Debt Maturity Ladder
59 BALANCE SHEET: DEBT MATURITY LADDER No maturities until 2020 and a manageable debt ladder thereafter. Provides opportunity to access public bond markets in multiple years. DEBT MATURITY LADDER In thousands of dollars as of 3/31/2019 600,000 3.2% 500,000 400,000 4.0% 300,000 5.1% Thousands $ Thous
Slide 60: Market Growth Opportunities
60 MARKET GROWTH OPPORTUNITIES
Slide 61: Market Growth: A New Era
61 MARKET GROWTH: A NEW ERA Following the largest Federal spending increase since 2011 and the Amazon HQ2 win, the DC Metro region has better real estate demand fundamentals today, relative to 2011 – 2017. Moreover, following 5 years of repositioning, WashREIT’s portfolio is well- positioned to capi
Slide 62: Authorized Federal Spending: Quantifying the Catalyst
62 AUTHORIZED FEDERAL SPENDING: QUANTIFYING THE CATALYST On February 9, 2018, Congress passed a discretionary spending increase that is more than twice the increase authorized in the previous two budget deals combined. Bi-Partisan Budget Acts Compared Ryan – Murray Deal Obama – Boehner Deal Bipartis
Slide 63: Overall Budget by Fiscal Year: Historical Context
63 OVERALL BUDGET BY FISCAL YEAR: HISTORICAL CONTEXT FY18 was expected to experience the largest spending increase since 2011. Overall Budget by Fiscal Year +0.1% $1,300 +9.8% % YOY Change $1,200 +4.5% -4.8% $1,100 -0.5% - 1.6% $1,339 $1,340 $1,000 $1,198 $1,220 $1,166 $1,140 $1,134 $900 $1,116 Disc
Slide 64: FY '17 to FY '18: Growth in Govt. Contract Awards (National)
64 FY ’17 TO FY ’18: GROWTH IN GOVT. CONTRACT AWARDS (NATIONAL) Government-wide, total unclassified contract spending rose 8.8% year-over-year in FY18, which was slightly below expectations of a 9.8% increase. While defense spending met expectations, civilian agencies spent less than anticipated on
Slide 65: FY '17 to FY '18: Growth in Govt. Contract Awards (DC Metro)
65 FY ’17 TO FY ’18: GROWTH IN GOVT. CONTRACT AWARDS (DC METRO) Region-wide, total unclassified contract spending rose 6.1% year-over-year in FY18 and was below expectations of an 8.2% increase. Contract spending in Virginia was closer to expectations than in DC or Maryland. FY18 YEAR-OVER-YEAR GROW
Slide 66: Pace of 2018 Contract Awards: Back-End Loaded
66 PACE OF 2018 CONTRACT AWARDS: BACK-END LOADED Contract awards were significantly back-end loaded with ~37% of Defense and ~44% of Civilian contracts awarded in the fourth fiscal quarter (July – Sep). DOD CIVILIAN $8.0 $7.6 $7.0 $6.0 $5.3 $5.0 $4.0 $3.3 Billions of DollarsBillions $2.7 $3.0 $2.6 $
Slide 67: Expectations: Growth in Govt. Contract Awards DC Metro
67 FY 18 TO FY 19 EXPECTATIONS: GROWTH IN GOVT. CONTRACT AWARDS DC METRO Based on FY18 spending patterns, CQ’S FY19 contract award projections have been revised downward as below. Previous Projection New Projection 5.0% 4.6% 4.5% 4.0% 3.5% 3.2% 3.0% 2.7% 2.4% 2.5% 2.2% 2.3% 2.3% 2.0% 1.7% 1.5% 1.0%
Slide 68: Major New Demand Drivers: Amazon HQ2
68 MAJOR NEW DEMAND DRIVERS: AMAZON HQ2 Amazon has committed to bring at least 25,000 employees to the DC Metro Region over 10 years, with state and local incentives that continue for up to 37,850 employees Amazon Employment Multiplier An ADDITIONAL 50,000 – 125,000 jobs to 1 Amazon Job 2 – 5 Additi
Slide 69: Within a Mile Radius of HQ2
69 WITHIN A 5 MILE RADIUS OF HQ2 ~70% Multifamily NOI and ~80% Office NOI(1) + 3 Retail Assets 1 mile 3 miles 5 miles WRE multifamily WRE office WRE retail
Slide 70: Strong Senior Leadership Team
70 STRONG SENIOR LEADERSHIP TEAM PAUL MCDERMOTT STEVE RIFFEE TARYN FIELDER ED MURN CHAIRMAN, PRESIDENT AND EXECUTIVE VICE PRESIDENT SENIOR VICE PRESIDENT MANAGING DIRECTOR CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL GENERAL COUNSEL AND MULTIFAMILY AND >34 Years Real Estate OFFICER CORPORATE SECRETAR
Slide 71: Strong Senior Leadership Team
71 STRONG SENIOR LEADERSHIP TEAM BRIAN GUTTMAN SUSAN GEROCK DREW HAMMOND TEJAL ENGMAN VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT CHIEF VICE PRESIDENT HUMAN RESOURCES INFORMATION TECHNOLOGY ACCOUNTING OFFICER AND INVESTOR RELATIONS >16 Years Real Estate AND CHIEF INFORMATION TREASURER >5 Years Real
Slide 72: Appendix
72 MULTIFAMILY 01 Deliveries outlook, absorption and occupancy trends 02 DC OFFICE Appendix: 2019 – 2020 supply projections for Glass Box A Everything else you may want to know 03 SUSTAINABILITY Key achievements and Long-term Goals 04 FINANCIAL SUPPLEMENTAL Key pages
Slide 73: Multifamily Supply: Delivery Projections
73 MULTIFAMILY SUPPLY: DELIVERY PROJECTIONS APARTMENT DELIVERIES Washington Metro 2012-2023 Projected 20,000 Annual Supply YOY Net Inv Change % 3.0% Year Over 17,500 2.5% 15,000 Year Net Change Inventoryin PROJECTED 2.0% 12,500 10,000 1.5% 7,500 1.0% Number of Apartment Units Apartment of Number 5,0
Slide 74: Multifamily Supply: Submarket Demographics
74 MULTIFAMILY SUPPLY: SUBMARKET DEMOGRAPHICS TARGET MARKETS VS. WASHINGTON METRO AGE DISTRIBUTION 25% Wash Metro Arlington Alex The District ARLINGTON AND ALEXANDRIA HAVE A SIGNIFICANTLY LARGER POPULATION OF THE PRIME 20% RENTER COHORT (25-34 year olds) 15% 10% 5% % 0-4 5-9 10-14 15-24 25-34 35-44
Slide 75: DC Office Supply: Repositioned Office Supply
75 DC OFFICE SUPPLY: REPOSITIONED OFFICE SUPPLY DELIVERIES 2019 + 2020 CONVERSIONS OF B SPACE TO GLASS BOX A SPACE 2019 will see the bulk of the remaining commodity Class A conversions deliver 2019: 753K SF DELIVERING 2020: 148K SF DELIVERING Pre-leased 7% Not leased 44% Pre-leased 66% Not leased 93
Slide 76: Sustainability: Goals
76 SUSTAINABILITY: GOALS Winner of the 2019 District Sustainability Award 20% REDUCTION IN ENERGY 20% REDUCTION IN USAGE GREENHOUSE GAS EMISSIONS 21 9.2% OUT OF 100 7 19.7 YEARS 20 Progress 9.9% 6.4 Progress 19 18.5 6.5 17.9 6.0 18 6 5.8 17 60% 5.5 16 WASTE 5 15 DIVERSION 4.5 14 4 13 2015 2016 2017
Slide 77: Financials from Q1 2019 Supplemental
77 FINANCIALS FROM Q1 2019 SUPPLEMENTAL
Slide 78: Financials from Q1 2019 Supplemental
78 FINANCIALS FROM Q1 2019 SUPPLEMENTAL
Slide 79: Financials from Q1 2019 Supplemental
79 FINANCIALS FROM Q1 2019 SUPPLEMENTAL
Slide 80: Financials from Q1 2019 Supplemental
80 FINANCIALS FROM Q1 2019 SUPPLEMENTAL
Slide 81: Definitions from Q1 2019 Supplemental
81 DEFINITIONS FROM Q1 2019 SUPPLEMENTAL
Slide 82: Definitions from Q1 2019 Supplemental
82 DEFINITIONS FROM Q1 2019 SUPPLEMENTAL
Washington Real Estate Investment Trust — NAREIT REITweek June 2019 on 6ix