Washington Real Estate Investment Trust (NYSE:WRE) Q4 2019 Earnings Conference Call - Final Transcript

Feb 14, 2020 • 11:00 am ET

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Washington Real Estate Investment Trust (NYSE:WRE) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to the Washington Real Estate Investment Trust Year-End 2019 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; Amy Hopkins, Vice President of Investor Relations will provide some introductory information. Amy, please go ahead.

Executive
Amy Hopkins

Thank you and good morning everyone. Before we begin, please note that forward-looking statements may be made during this discussion. Such statements involve known and unknown risks and uncertainties that may cause actual results to differ materially. We undertake no duty to update them as actual events unfold. We refer to certain of these risks in our SEC filings. Reconciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement, which we distributed yesterday and can be found on the Investor Relations page of our website. 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; Drew Hammond, Vice President, Chief Accounting Officer and Treasurer; and Grant Montgomery, Director of Research. Now, I'd like to turn the call over to Paul.

Executive
Paul T. McDermott

Thank you and good morning everyone. Thanks for joining us on our year-end 2019 earnings conference call. Today, I'll discuss our growth outlook in the context of our strategy for long term value creation, but before focusing on the path ahead, I think it's important to take stock of our recent accomplishments. I'm going to begin with a recap how we delivered shareholder value through strategic capital allocation and leasing during 2019. 2019 was a pivotal year for WashREIT on multiple fronts. We executed the largest and most transformative strategic capital allocation in the history of the company. We delivered strong results from our multifamily portfolio and further validated our value oriented investment strategy. We also achieved the primary goal that was laid out at the beginning of last year, which was to create visibility on future revenue growth by executing commercial leases.

Starting with our strategic capital allocation, we executed $1.3 billion of transactions that recycled capital out of high-risk, capital intensive commercial assets into multifamily assets with value-add potential. These transactions improved our risk-adjusted growth profile, lowered the volatility of our cash flows,and improved our FAD growth prospects. The multifamily acquisition doubled our pipeline for unit reservations, which generated an average return on investment of 14% in 2019 and are expected to generate double-digit returns in the future. With lower capital requirements and a fully scoped renovation pipeline, we have solidified a foundation for multiple years of value creation within our multifamily portfolio. We were able to do all of this while maintaining our balance sheet flexibility and liquidity.

The assets that we acquired in 2019 follow our stated multifamily investment strategy. The Washington area continues to under-produce new housing units of all types despite the housing shortage in the region. Over the past decade, the Washington region has