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WashREIT (WRE) Expects 14% Core FFO Growth in 2023

Washington Real Estate Investment Trust WRE, popularly known as WashREIT, expects 2023 core funds from operations (FFO) in the range of 96 cents to $1.04 per share. This reflects around 14% year-over-year growth at the mid-point.

The guidance is in line with the Zacks Consensus Estimate of $1.03 per share and excludes the impact of any acquisitions beyond $125 million, which is expected to be completed this year. WRE also reaffirmed its 2022 core FFO guidance at 86-90 cents per share.

With “strong operating trends” across its portfolio, Paul T. McDermott, president and CEO of Washington Real Estate, commented that the company is “on-track” to deliver its “strongest Core FFO growth in over 20 years in 2023.”

WRE’s 2023 core FFO guidance assumes same-store multifamily net operating income (NOI) growth in the range of 9.0-11.0%. This suggests a year-over-year growth of 10% at the mid-point. Non-same-store multifamily NOI is projected to be $19-$20.5 million in 2023. This includes NOI from the $125 million Southeast acquisitions mentioned above.

Washington Real Estate also experienced strong performance during its peak leasing months on the back of healthy demand and pricing power. Growth in renter income, housing shortages, and the rising cost of single-family homeownership in the Washington Metro and Atlanta areas acted as the tailwind.

With respect to its same-store multifamily operating metrics, Washington Real Estate noted its average occupancy in July and August 2022 was 95.6% and 95.7%, respectively, while blended effective lease rate growth was 11.1% and 10.6%. Also, retention came at 59.9% and 58.9% in July and August, respectively.

In its non-same-store multifamily portfolio, average occupancy in July and August 2022 was 94.2% and 94.3%, respectively, while blended effective lease rate growth was 17.4% for both months. Also, retention came at 58.7% and 66.7% in July and August, respectively.

With ownership of around 8,900 residential apartment homes in the Washington, DC metro and the Southeast, WRE remains well-poised to gain from the rebounding fundamentals of the residential real estate market.

The company is diversifying into the Southeastern markets. With the deployment of the residual $125 million in its 2022 acquisition guidance, WRE would achieve around 25% of its apartment homes in the Southeast by this year-end.

However, reflecting broader market concerns, shares of this Zacks Rank #3 (Hold) company have lost 11.6% over the past month, narrower than the 12.3% decline of the real estate market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Some key picks from the REIT sector include Extra Space Storage Inc. EXR and Terreno Realty Corporation TRNO.

Extra Space Storage presently carries a Zacks Rank of 2 (Buy). The Zacks Consensus Estimate for EXR’s 2022 FFO per share has moved marginally upward in the past week to $8.49. Extra Space Storage’s long-term growth rate is projected at 8.7%.

The Zacks Consensus Estimate for Terreno Realty’s 2022 FFO per share has moved marginally upward in the past two months to $1.93. TRNO presently carries a Zacks Rank of 2.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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