What changed in this filing

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Item 9A. Controls and Procedures

2022-02-18 compared with 2021-02-16 · 416 added, 533 removed, 2040 unchanged (32% of the section changed)

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OTHER INFORMATION

Amendment to the Articles of Amendment and Restatement, as amended

On February 10, 2021, the Board of Trustees (the “Board”) approved an amendment to our Articles of Amendment and Restatement, as amended (the “Charter”) to increase the number of common shares of beneficial interest, $0.01 par value per share (“Common Shares”), authorized by the Charter from 100,000,000 to 150,000,000, and a corresponding increase in the total number of authorized shares of beneficial interest of the Company from 110,000,000 to 160,000,000 (the “Amendment”).

The Company filed the Amendment with the State Department of Assessments and Taxation of Maryland on February 10, 2021, which became effective upon filing.

Prior to the filing of the Amendment, the Company had approximately 15.5 million, or less than 16%, of the total number of authorized Common Shares available for future issuance.

The Amendment was intended to preserve operational flexibility in the current business environment and ensure the Company has adequate available authorized capacity to take advantage of favorable market conditions and strategic opportunities that may arise, including the ability to access the capital markets, finance the acquisition and development of properties and pursue other opportunities integral to the Company’s growth and success.

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the complete Amendment, a copy of which is filed as Exhibit 3.2 to this Annual Report on Form 10-K and is incorporated herein by reference.

Material U.S.

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The following is a summary of certain material U.S.

shares and depositary shares (together with common shares and preferred shares, the “shares”) as well as our warrants and rights, and (ii) certain debt securities that we may offer (together with the shares, the “securities”).

federal income tax considerations relating to our qualification and taxation as a real estate investment trust, a “REIT,” and the acquisition, holding, and disposition of (i) our common shares, preferred shares and depositary shares (together with common shares and preferred shares, the “shares”) as well as our warrants and rights, and (ii) certain debt securities that we may offer (together with the shares, the “securities”).

For purposes of this discussion, references to “our Company,” “we” and “us” mean only Washington Real Estate Investment Trust and not its subsidiaries or affiliates.

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• tax-exempt organizations, except to the extent discussed below in “—Taxation of U.S.

Shareholders—Taxation of Tax-Exempt Shareholders” and “Taxation of Holders of Debt Securities-Tax-Exempt Holders of Debt Securities,”

Shareholders—Taxation of

Tax-Exempt Shareholders” and “Taxation of Holders of Debt Securities-Tax-Exempt Holders of Debt Securities,”

• broker-dealers,

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• subchapter S corporations,

• foreign (non-U.S.

governments),

• foreign (non-U.S.) governments,

• persons subject to the alternative minimum tax provisions of the Code,

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• corporations subject to the provisions of Section 7874 of the Code,

expatriates, or

• persons required for U.S.

federal income tax purposes to accelerate the recognition of any item of gross income as a result of such income being recognized on an applicable financial statement, or

• persons otherwise subject to special tax treatment under the Code.

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A REIT generally is not subject to U.S.

federal income tax on the “REIT taxable income” (generally, taxable income of the REIT subject to specified adjustments, including a deduction for dividends paid and excluding net capital gain) that it distributes to shareholders, provided that the REIT meets the annual REIT distribution requirement and the other requirements for qualification as a REIT under the Code.

under the Code.

We believe that we are organized and have operated, and we intend to continue to operate, in a manner so as to qualify for taxation as a REIT under the Code.

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shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.

Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate.

Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate (excluding the 3.8% tax on “net investment income”).

Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to our shareholders, subject to special rules for certain items such as the net capital gain that we recognize.

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• any undistributed taxable income from prior taxable years.

We will be subject to a 100% penalty tax on certain rental income we receive when a taxable REIT subsidiary provides services to our tenants, on certain expenses deducted by a taxable REIT subsidiary on payments made to us and, effective for our taxable years beginning after December 31, 2015, on income for services rendered to us by a taxable REIT subsidiary, if the arrangements among us, our tenants, and our taxable REIT subsidiaries do not reflect arm’s-length terms.

We will be subject to a 100% penalty tax on certain rental income we receive when a taxable REIT subsidiary provides services to our tenants, on certain expenses deducted by a taxable REIT subsidiary on payments made to us and on income for services rendered to us by a taxable REIT subsidiary, if the arrangements among us, our tenants, and our taxable REIT subsidiaries do not reflect arm’s-length terms.

If we acquire any assets from a non-REIT C corporation in a carry-over basis transaction, we would be liable for corporate income tax, at the highest applicable corporate rate, on the “built-in gain” inherent in those assets if we disposed of those assets within five years after they were acquired.

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If we did not have reasonable cause for a failure, we would fail to qualify as a REIT.

Whether we would have reasonable cause for any such failure cannot be known with certainty, because the determination of whether reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause.

Whether we would have reasonable cause for any such failure cannot be known with certainty, because the determination of whether

reasonable cause exists depends on the facts and circumstances at the time and we cannot provide any assurance that we in fact would have reasonable cause for a particular failure or that the IRS would not successfully challenge our view that a failure was due to reasonable cause.

Moreover, we may be unable to actually rectify a failure and restore asset test compliance within the required timeframe due to the inability to transfer or otherwise dispose of assets, including as a result of restrictions on transfer imposed by our lenders or undertakings with our co-investors and/or the inability to acquire additional qualifying assets due to transaction risks, access to additional capital or other considerations.

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However, there is no assurance that we will qualify under those rules or that we will have the authority to use those rules under the operating agreements for certain of our subsidiary partnerships.

We may from time to time be a limited partner or non-managing member in some of our partnerships and limited liability companies.

If a partnership or limited liability company in which we own an interest takes or expects to take actions that could jeopardize our status as a REIT or requires us to pay tax, we may be forced to dispose of our interest in such entity.

In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a gross income or asset test, and that we would not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis.

In that case, we could fail to qualify as a REIT unless we were entitled to relief, as described below.

Ownership of Disregarded Subsidiaries .

If a REIT owns a corporate subsidiary that is a “qualified REIT subsidiary,” or QRS, that subsidiary is generally disregarded for U.S.

federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs, as described below.

federal income tax purposes, and all assets, liabilities and items of income,

deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs, as described below.

A QRS is any corporation, other than a taxable REIT subsidiary, that is directly or indirectly wholly owned by a REIT.

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Ownership of Interests in Taxable REIT Subsidiaries .

A taxable REIT subsidiary of ours is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary under Section 856(l) of the Code.

Each our our taxable REIT subsidiaries is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary under Section 856(l) of the Code.

A taxable REIT subsidiary also includes any corporation other than a REIT in which a taxable REIT subsidiary of ours owns, directly or indirectly, securities (other than certain “straight debt” securities), which represent more than 35% of the total voting power or value of the outstanding securities of such corporation.

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federal income taxation.

For example, taxable REIT subsidiaries are limited in their ability to deduct interest payments in excess of a certain amount, including interest payments made directly or indirectly to us, as described below in “— Interest Deduction Limitation Enacted by the TCJA ” In addition, we will be obligated to pay a 100% penalty tax on some payments we receive or on certain expenses deducted by our taxable REIT subsidiaries, and on income earned by our taxable REIT subsidiaries for services provided to, or on behalf of, us, if the economic arrangements between us, our tenants and such taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties.

For example, taxable REIT subsidiaries are limited in their ability to deduct interest payments in excess of a certain amount, including interest payments made directly or indirectly to us, as described below in “—Annual Distribution Requirements.” In addition, we will be obligated to pay a 100% penalty tax on some payments we receive or on certain expenses deducted by our taxable REIT subsidiaries, and on income earned by our taxable REIT subsidiaries for services provided to, or on behalf of, us, if the economic arrangements between us, our tenants and such taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties.

Our taxable REIT subsidiaries, and any future taxable REIT subsidiaries acquired by us, may make interest and other payments to us and to third parties in connection with activities related to our properties.

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In addition, there can be no assurance that the IRS might not seek to impose the 100% excise tax on a portion of payments received by us from, or expenses deducted by, or service income imputed to, our taxable REIT subsidiaries.

We own subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

We own two subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

federal income tax purposes.

Each of our taxable REIT subsidiaries is taxable as a regular corporation and has elected, together with us, to be treated as our taxable REIT subsidiary or is treated as our taxable REIT subsidiary under the 35% subsidiary rule discussed above.

Our taxable REIT subsidiaries are taxable as regular corporations and have elected, together with us, to be treated as our taxable REIT subsidiaries.

We may elect, together with other corporations in which we may own directly or indirectly stock, for those corporations to be treated as our taxable REIT subsidiaries.

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Second, at least 95% of our gross income in each taxable year (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as (a) other dividends, (b) interest (including interest income from debt instruments issued by publicly offered REITs), and (c) gain from the sale or disposition of stock or securities (including gain from the sale or other disposition of debt instruments issued by publicly offered REITs), in either case, not held for sale to customers.

Beginning with the Company’s taxable year beginning on or after January 1, 2005, gross income from certain hedging transactions are excluded from gross income for purposes of the 95% gross income requirement.

Gross income from certain hedging transactions is excluded from gross income for purposes of the 95% gross income requirement.

Similarly, gross income from certain hedging transactions is excluded from gross income for purposes of the 75% gross income test.

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• Fourth, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an “independent contractor” who is adequately compensated and from whom we derive no revenue or through a taxable REIT subsidiary.

To the extent that impermissible services are provided by an independent contractor, the

cost of the services generally must be borne by the independent contractor.

To the extent that impermissible services are provided by an independent contractor, the cost of the services generally must be borne by the independent contractor.

We anticipate that any services we provide directly to tenants will be “usually or customarily rendered” in connection with the rental of space for occupancy only and not otherwise considered to be provided for the tenants’ convenience.

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If the impermissible tenant services income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property.

If the total amount of impermissible tenant services income does not exceed 1% of our total income from the property, the services will not “taint” the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property.

If the total amount of impermissible tenant

services income does not exceed 1% of our total income from the property, the services will not “taint” the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property.

We will be deemed to have received income from the provision of impermissible services in an amount equal to at least 150% of our direct cost of providing the service.

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Income from Prohibited Transactions .

Any gain that we realize on the sale of any property held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, either directly or through subsidiary partnerships and limited liability companies, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax.

Any gain that we realize on the sale of any property held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, either directly or through pass-through subsidiaries, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax.

Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction.

However, we will not be treated as a dealer in real property for purposes of the 100% tax with respect to a real estate asset that we sell if (i) we have held the property for at least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale or (b) the aggregate adjusted basis of property sold during the year is 10% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year or (c) the fair market value of property sold during the year is 10% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year, or (d) the aggregate adjusted basis of property sold during the year is 20% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year and the aggregate adjusted basis of property sold during the 3-year period ending with the year of sale is 10% or less of the aggregate tax basis of all of our assets as of the beginning of each of the 3 taxable years ending with the year of sale;

However, we will not be treated as a dealer in real property for purposes of the 100% tax with respect to a real estate asset that we sell if (i) we have held the property for at

least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale;

or (b) the aggregate adjusted basis of property sold during the year is 10% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year;

or (c) the fair market value of property sold during the year is 10% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year;

or (d) the aggregate adjusted basis of property sold during the year is 20% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year and the aggregate adjusted basis of property sold during the 3-year period ending with the year of sale is 10% or less of the aggregate tax basis of all of our assets as of the beginning of each of the 3 taxable years ending with the year of sale;

or (e) the fair market value of property sold during the year is 20% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year and the fair market value of property sold during the 3-year period ending with the year of sale is 10% or less of the aggregate fair market value of all of our assets as of the beginning of each of the 3 taxable years ending with the year of sale.

If we rely on clauses (b), (c), (d), or (e) in the preceding sentence, substantially all of the marketing and development expenditures with respect to the property sold must be made through an independent contractor from whom we derive no income or, our taxable REIT subsidiary.

The sale of more than one property to one buyer as part of one transaction constitutes one sale for purposes of this “safe harbor.” We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties and to make occasional sales of the properties as are consistent with our investment objectives.

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We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the income tests applicable to REITs.

Any redetermined rents, redetermined deductions, excess interest, or redetermined TRS service income we generate will be subject to a 100% penalty tax.

In general, redetermined rents are rents from real property that are overstated as a result of services furnished by one of our taxable REIT subsidiaries to any of our tenants, redetermined deductions and excess interest represent amounts that are deducted by a taxable REIT subsidiary for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations, and redetermined TRS service income is gross income (less deductions allocable thereto) of a taxable REIT subsidiary attributable to services provided to, or on behalf of, us that is less than the amounts that would have been paid by us to the taxable REIT subsidiary if based on arm’s-length negotiations.

Any redetermined rents, redetermined deductions, excess interest, or redetermined taxable REIT subsidiary service income we generate will be subject to a 100% penalty tax.

In general, redetermined rents are rents from real property that are overstated as a result of services furnished by one of our taxable REIT subsidiaries to any of our tenants, redetermined deductions and excess interest represent amounts that are deducted by a taxable REIT subsidiary for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations, and redetermined taxable REIT subsidiary service income is gross income (less deductions allocable thereto) of a taxable REIT subsidiary attributable to services provided to, or on behalf of, us that is less than the amounts that would have been paid by us to the taxable REIT subsidiary if based on arm’s-length negotiations.

Rents we receive will not constitute redetermined rents if they qualify for the safe harbor provisions contained in the Code.

harbor provisions are provided where:

Safe harbor provisions are provided where:

• amounts are excluded from the definition of impermissible tenant service income as a result of satisfying the 1% de minimis exception;

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(2) obligations to pay rent from real property;

(3) rental agreements described in Section 467 of the Code;

(3) rental agreements described in Section 467

(4) any security issued by other REITs;

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and (3) any debt instrument issued by a partnership (other than straight debt or other excluded security) will not be considered a security issued by a partnership to the extent of the REIT’s interest as a partner in the partnership.

For purposes of the 10% value test, debt will meet the “straight debt” safe harbor if (1) neither us, nor any of our controlled taxable REIT subsidiaries (i.e., taxable REIT subsidiaries more than 50% of the vote or value of the outstanding stock of which is directly or indirectly owned by us), own any securities not described in the preceding paragraph that have an aggregate value greater than one percent of the issuer’s outstanding securities, as calculated under the Code, (2) the debt is a written unconditional promise to pay on demand or on a specified date a sum certain in money, (3) the debt is not convertible, directly or indirectly, into stock, and (4) the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion or similar factors.

For purposes of the 10% value test, debt will meet the “straight debt” safe harbor if (1) neither us, nor any of our controlled taxable REIT subsidiaries (i.e., taxable REIT subsidiaries more than 50% of the vote or value of the outstanding stock of which is directly or indirectly owned by us), own any securities not described in the preceding paragraph that have an aggregate value greater than 1% of the issuer’s outstanding securities, as calculated under the Code, (2) the debt is a written unconditional promise to pay on demand or on a specified date a sum certain in money, (3) the debt is not convertible, directly or indirectly, into stock, and (4) the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion or similar factors.

However, contingencies regarding time of payment and interest are permissible for purposes of qualifying as a straight debt security if either (1) such contingency does not have the effect of changing the effective yield of maturity, as determined under the Code, other than a change in the annual yield to maturity that does not exceed the greater of (i) 5% of the annual yield to maturity or (ii) 0.25%, or (2) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt instruments held by the REIT exceeds $1,000,000 and not more than 12 months of unaccrued interest can be required to be prepaid thereunder.

In addition, debt will not be disqualified from being treated as “straight debt” solely because the time or amount of payment is subject to a contingency upon a default or the exercise of a prepayment right by the issuer of the debt, provided that such contingency is consistent with customary commercial practice.

We own subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

We own two subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S.

federal income tax purposes.

Each of our taxable REIT subsidiaries is taxable as a non-REIT C corporation and has elected, together with us, to be treated as our taxable REIT subsidiary or is treated as a taxable REIT subsidiary under the 35% subsidiary rule discussed above.

So long as each taxable REIT subsidiary qualifies as such, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership interest in each taxable REIT subsidiary.

Our taxable REIT subsidiaries are taxable as non-REIT C corporations and have elected, together with us, to be treated as our taxable REIT subsidiaries.

So long as our taxable REIT subsidiaries qualify as such, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership interest in the taxable REIT subsidiaries.

We may acquire securities in other taxable REIT subsidiaries in the future.

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No independent appraisals have been obtained to support these conclusions.

In this regard, however, we cannot provide any assurance that the IRS might disagree with our determinations.

In this regard, however, we cannot provide any assurance that the IRS will agree with our determinations.

Failure to Satisfy the Asset Tests .

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Although we plan to take steps to ensure that we satisfy such tests for any quarter with respect to which testing is to occur, there can be no assurance that such steps will always be successful.

If we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT, unless we satisfy certain relief provisions.

If we fail to timely cure any noncompliance with the asset tests, we will cease to qualify as a REIT, unless we satisfy certain relief provisions.

The failure to satisfy the 5% asset test, or the 10% vote or value asset tests can be remedied even after the 30-day cure period under certain circumstances.

Specifically, if we fail these asset tests at the end of any quarter and such failure is not cured within 30 days thereafter, we may dispose of sufficient assets (generally within six months after the last day of the quarter in which our identification of the failure to satisfy these asset tests occurred) to cure such a violation that does not exceed the

lesser of 1% of our assets at the end of the relevant quarter or $10,000,000.

If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury Regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s).

If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable

cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury Regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s).

We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the asset tests applicable to REITs.

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Accordingly, we anticipate that we will generally have sufficient cash or liquid assets to enable us to satisfy the distribution requirements described above.

However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due

to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in arriving at our taxable income.

The Internal Revenue Code limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income,” subject to certain exceptions.

However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in arriving at our taxable income.

The Code limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income,” subject to certain exceptions.

Any deduction in excess of the limitation is carried forward and may be used in a subsequent year, subject to the 30% limitation.

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If we do not make the election or if the election is determined not to be available with respect to all or certain of our business activities, this interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax.

Similarly, the limitation could cause our TRSs to have greater taxable income and thus potentially greater corporate tax liability.

Furthermore, under amendments to Section 451 of the Code made by the TCJA, subject to certain exceptions, we must accrue income for U.S.

Similarly, the limitation could cause our taxable REIT subsidiaries to have greater taxable income and thus potentially greater corporate tax liability.

Furthermore, under amendments to Section 451 of the Code made by 2017 legislation informally called the Tax Cuts and Jobs Act (the “TCJA”), subject to certain exceptions, we must accrue income for U.S.

federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income.

In addition, Section 162(m) of the Code places a per-employee limit of $1 million on the amount of compensation that a publicly held corporation may deduct in any one year with respect to its chief executive officer and certain other highly compensated executive officers.

Recent changes to Section 162(m) made by the TCJA eliminated an exception that formerly permitted certain performance-based compensation to be deducted even if in excess of $1 million, which may have the effect of increasing our REIT taxable income.

Changes to Section 162(m) made by the TCJA eliminated an exception that formerly permitted certain performance-based compensation to be deducted even if in excess of $1 million, which may have the effect of increasing our REIT taxable income.

If these timing differences occur, we may need to arrange for short-term, or possibly long-term, borrowings or need to pay dividends in the form of taxable stock dividends in order to meet the distribution requirements.

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In addition, if we fail to qualify for taxation as a REIT, all distributions to shareholders, to the extent of our current and accumulated earnings and profits, will be taxable as regular corporate dividends.

For taxable years beginning after December 31, 2017, and before January 1, 2026, generally U.S.

For taxable years before January 1, 2026, generally, U.S.

shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.

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shareholders that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 20% maximum U.S.

federal rate) for qualified dividends.

federal rate (excluding the 3.8% tax on “net investment income”)) for qualified dividends.

In addition, subject to the limitations of the Code, corporate distributees may be eligible for the dividends-received deduction,

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In addition, if we merge with another REIT and we are the “successor” to the other REIT, the other REIT’s disqualification from taxation as a REIT would prevent us from being taxed as a REIT for the four taxable years following the year during which the other REIT’s qualification was lost.

There can be no assurance that we would be entitled to any statutory relief.

There can be no

assurance that we would be entitled to any statutory relief.

We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the requirements applicable to REITs.

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shareholders to the extent that we have current or accumulated earnings and profits.

The maximum amount of dividends that we may designate as capital gain and as “qualified dividend income” (discussed below) with respect to any taxable year (effective for distributions in tax years beginning after December 31, 2014) may not exceed the dividends actually paid by us with respect to such year, including dividends paid by us in the succeeding tax year that relate back to the prior tax year for purposes of determining our dividends paid deduction.

The maximum amount of dividends that we may designate as capital gain and as “qualified dividend income” (discussed below) with respect to any taxable year may not exceed the dividends actually paid by us with respect to such year, including dividends paid by us in the succeeding tax year that relate back to the prior tax year for purposes of determining our dividends paid deduction.

Qualified Dividend Income .

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Distributions we make, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation.

shareholder may elect, depending on its particular situation, to treat capital gain dividends, capital gains from the disposition of shares and income designated as qualified dividend income as investment income for purposes of the investment interest limitation, in which case the applicable capital gains will be taxed at ordinary income rates.

shareholder may elect, depending on its particular situation, to treat capital gain dividends, capital gains from the

disposition of shares and income designated as qualified dividend income as investment income for purposes of the investment interest limitation, in which case the applicable capital gains will be taxed at ordinary income rates.

We will notify shareholders regarding the portions of our distributions for each year that constitute ordinary income, return of capital and qualified dividend income.

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In general, a holder of our preferred shares will recognize capital gain or loss measured by the difference between the amount received by the holder of such shares upon the redemption and such holder’s adjusted tax basis in the preferred shares redeemed (provided the preferred shares are held as a capital asset) if such redemption (i) is ‘‘not essentially equivalent to a dividend’’ with respect to the holder of the preferred shares under Section 302(b)(1) of the Code, (ii) is a “substantially disproportionate” redemption with respect to the shareholder under Section 302(b)(2) of the Code, or (iii) results in a ‘‘complete termination’’ of the holder’s interest in all classes of our shares under Section 302(b)(3) of the Code.

In applying these tests, there must be taken into account not only any series or class of the preferred shares being redeemed, but also such holder’s ownership of other classes of our shares and any options (including stock purchase rights) to acquire any of the foregoing.

acquire any of the foregoing.

The holder of our preferred shares also must take into account any such securities (including options) which are considered to be owned by such holder by reason of the constructive ownership rules set forth in Sections 318 and 302(c) of the Code.

considered to be ‘‘not essentially equivalent to a dividend.’’ However, whether a distribution is ‘‘not essentially equivalent to a dividend’’ depends on all of the facts and circumstances, and a holder of our preferred shares intending to rely on any of these tests at the time of redemption should consult its tax advisor to determine their application to its particular situation.

If the holder of preferred shares owns (actually or constructively) none of our voting shares, or owns an insubstantial amount of our voting shares, based upon current law, it is probable that the redemption of preferred shares from such a holder would be considered to be ‘‘not essentially equivalent to a dividend.’’ However, whether a distribution is ‘‘not essentially equivalent to a dividend’’ depends on all of the facts and circumstances, and a holder of our preferred shares intending to rely on any of these tests at the time of redemption should consult its tax advisor to determine their application to its particular situation.

Satisfaction of the “substantially disproportionate” and “complete termination” exceptions is dependent upon compliance with the respective objective tests set forth in Section 302(b)(2) and Section 302(b)(3) of the Code.

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Expansion of Medicare Tax .

The Health Care and Reconciliation Act of 2010 requires that, in certain circumstances, certain U.S.

holders that are individuals, estates, and trusts pay a 3.8% tax on “net investment income,” which includes, among other things, dividends on and gains from the sale or other disposition of REIT shares.

The temporary 20% deduction allowed by Section 199A of the Code, as added by the TCJA, with respect to ordinary REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code.

The temporary 20% deduction allowed by Section 199A of the Code, as added by the TCJA, with respect to ordinary REIT dividends received by non-corporate taxpayers is allowed only for purposes of Chapter 1 of the Code and thus is apparently not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income, described above, subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code.

Prospective investors should consult their own tax advisors regarding this legislation.

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Tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, or qualified group legal services plans exempt from U.S.

federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code, respectively, or single parent title-holding corporations exempt under Section 501(c)(2) and whose income is payable to any of the aforementioned tax-exempt organizations, are subject to different UBTI rules, which generally

require such shareholders to characterize distributions from us as UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its investment in our shares.

federal income taxation under Sections 501(c)(7), (c)(9) or (c)(17) of the Code, respectively, or single parent title-holding corporations exempt under Section 501(c)(2) and whose income is payable to any of the aforementioned tax-exempt organizations, are subject to different UBTI rules, which generally require such shareholders to characterize distributions from us as UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its investment in our shares.

These shareholders should consult with their tax advisors concerning these set aside and reserve requirements.

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Certain non-U.S.

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Internal Revenue Code and certain non-U.S.

publicly traded entities that are “qualified shareholders” as defined by Section 897(k) of the Internal Revenue Code may be entitled to exceptions to the FIRPTA tax with respect to distributions we pay.

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Code and certain non-U.S.

publicly traded entities that are “qualified shareholders” as defined by Section 897(k) of the Code may be entitled to exceptions to the FIRPTA tax with respect to distributions we pay.

shareholders should consult with their tax advisors regarding the application of these exceptions.

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Generally, subject to the discussion below regarding dispositions by “qualified shareholders” and “qualified foreign pension funds,” with respect to any particular shareholder, our shares will constitute a USRPI only if each of the following three statements is true:

• Fifty percent or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;

• 50% or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;

• We are not a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S.

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Certain non-U.S.

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Internal Revenue Code and certain non-U.S.

pension funds that are “qualified foreign pension funds” as defined by Section 897(l) of the Code and certain

publicly traded entities that are “qualified shareholders” as defined by Section 897(k) of the Code may be entitled to exceptions to the FIRPTA tax with respect to the sale of our shares.

shareholders should consult with their tax advisors regarding the application of these exceptions.

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shareholder (1) disposes of our shares within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been taxable to such non-U.S.

shareholder as gain from the sale or exchange of a USRPI, (2) acquires, or enters into a contract or option to acquire, other shares of our shares during the 61-day period that begins 30 days prior to such ex-dividend date, and (3) if our shares are “regularly traded” on an established securities market in the United States, such non-US stockholder has owned more than 10%

of our outstanding shares at any time during the one-year period ending on the date of such distribution.

If gain on the sale of our shares were subject to taxation under FIRPTA, the non-U.S.

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• A shareholder who participates in the dividend reinvestment feature of the DRIP and whose dividends are reinvested in our shares purchased in the open market, will be treated for U.S.

federal income tax purposes as having received (and

will receive a Form 1099-DIV reporting) a distribution from us with respect to its shares equal to the fair market value of our shares credited to the shareholder’s DRIP account (plus any brokerage fees and any other expenses deducted from the amount of the distribution reinvested) on the date the dividends are reinvested.

federal income tax purposes as having received (and will receive a Form 1099-DIV reporting) a distribution from us with respect to its shares equal to the fair market value of our shares credited to the shareholder’s DRIP account (plus any brokerage fees and any other expenses deducted from the amount of the distribution reinvested) on the date the dividends are reinvested.

• A shareholder who participates in the optional cash purchase through the DRIP (or a newly enrolled participant not currently our shareholder making their initial investment in our common shares through the DRIP’s optional cash purchase feature) will not be treated as receiving a distribution from us.

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shareholders, unless an exception applies.

Further, the payer will be required to withhold backup withholding tax on such payments at the rate of 28% if:

Further, the payer will be required to withhold backup withholding tax on such payments if:

(1) the payee fails to furnish a taxpayer identification number (“TIN”) to the payer or to establish an exemption from backup withholding;

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If withholding is required under FATCA on a payment related to our shares, investors that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available).

investors should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

Prospective investors should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

Taxation of Holders of Debt Securities

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Holder’s regular method of tax accounting for U.S.

federal income tax purposes.

federal income tax

Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Debt Securities .

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Holder is an exempt recipient (such as a corporation), or (2) prior to payment, the U.S.

Holder provides a

taxpayer identification number and certifies as required on a duly completed and executed IRS Form W-9 (or permitted substitute or successor form), and otherwise complies with the requirements of the backup withholding rules.

Holder provides a taxpayer identification number and certifies as required on a duly completed and executed IRS Form W-9 (or permitted substitute or successor form), and otherwise complies with the requirements of the backup withholding rules.

Backup withholding is not an additional tax.

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federal tax laws and on an investment in our shares.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not applicable.

Certain information required by Part III is omitted from this Form 10-K in that we will file a definitive proxy statement pursuant to Regulation 14A with respect to our 2022 Annual Meeting (the “Proxy Statement”) no later than 120 days after the end of the fiscal year covered by this Form 10-K, and certain information included therein is incorporated herein by reference.

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In addition, we have adopted a code of ethics that applies to all of our trustees, officers and employees, which can be reviewed and printed from our website www.washreit.com.

The reference to our website address does not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this document.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Executive Officers

McDermott Chairman and Chief Executive Officer, WashREIT

Riffee Executive Vice President and Chief Financial Officer

Fielder Senior Vice President, General Counsel and Corporate Secretary

Gerock Senior Vice President and Chief Information Officer

The other information required by this Item is hereby incorporated herein by reference to our Proxy Statement.

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Management's Report on Internal Control Over Financial Reporting 81

Report of Independent Registered Public Accounting Firm 83

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting 84

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3.1 Articles of Amendment and Restatement of Declaration of Trust of the Company, as amended

3.2 Articles of Amendment as filed with the State Department of Assessments and Taxation of Maryland on February 10, 2021

10-K 001-06622 3.1 2/16/2021

3.2 Amended and Restated Bylaws of Washington Real Estate Investment Trust, as adopted on February 8, 2017

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8-K 001-06622 4.1 7/5/2007

4.4 Form of 4.95% Senior Notes due October 1, 2020

8-K 001-06622 4.1 9/30/2010

4.5 Officers’ Certificate establishing the terms of the 4.95% Senior Notes due October 1, 2020

8-K 001-06622 4.2 9/30/2010

4.6 Form of 3.95% Senior Notes due October 15, 2022

8-K 001-06622 4.1 9/17/2012

4.7 Officers' Certificate establishing the terms of 3.95% Notes due October 15, 2022

8-K 001-06622 4.2 9/17/2012

4.4 Description of Registrant's Securities

10-K 001-06622 3.2 2/16/2021

10.1* Share Purchase Plan

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8-K 001-06622 10.32 11/2/2010

Incorporated by Reference

Number Exhibit Description Form File

Number Exhibit Filing Date Filed

10.10* Amendment to Deferred Compensation Plan for Officers, adopted December 31, 2012

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10-Q 001-06622 10.53 11/1/2013

Incorporated by Reference

Number Exhibit Description Form File

Number Exhibit Filing Date Filed

10.15* Employment Agreement dated August 19, 2013 with Paul T.

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10-Q 001-06622 10.54 10/30/2014

10.23* Change in control agreement dated April 1, 2013 with Edward J.

10-K 001-06622 10.52 3/2/2015

10.23* Description of Washington REIT Trustee Compensation Plan, effective January 1, 2015

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10-Q 001-06622 10.1 7/31/2017

10.35 Amended and Restated Credit Agreement, dated March 29, 2018, by and among Washington Real Estate Investment Trust, as borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent

10-Q 001-06622 10.53 5/1/2018

10.34* Amendment Number Two to Washington Real Estate Investment Trust 2014 Long-Term Incentive Plan (effective January 1, 2018)

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10-Q 001-06622 10.1 10/30/20

Incorporated by Reference

Number Exhibit Description Form File

Number Exhibit Filing Date Filed

10.44 Purchase and Sale Agreement, dated as of June 14, 2021 between Washington REIT and BPG Acquisitions, LLC

10-Q 001-06622 10.1 08/03/21

10.45 Second Amended and Restated Credit Agreement, dated August 26, 2021, by and among Washington Real Estate Investment Trust, as borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as administrative agent

10-Q 001-06622 10.2 10/29/21

21 Subsidiaries of Registrant

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31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act

Incorporated by Reference

Number Exhibit Description Form File

Number Exhibit Filing Date Filed

31.3 Certification of the Chief Accounting Officer pursuant to Rule 13a-14(a) of the Exchange Act

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Washington Real Estate Investment Trust and Subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive (loss) income, equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Washington Real Estate Investment Trust and Subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedules listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S.

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We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for assessing impairment of income producing properties.

For example, we tested controls over management’s review of properties’ expected future cash flows, which is used to evaluate qualitative and quantitative indicators of impairment and in the recoverability evaluation, and we tested management’s review of the sensitivity of assumptions used in their impairment assessment.

For example, we tested controls over management’s review of qualitative and quantitative indicators of impairment and properties’ expected future cash flows used in the recoverability evaluation, and we tested management’s review of the significant assumptions used in their impairment assessment.

Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions and testing the completeness and accuracy of the underlying data used by the Company to develop its estimated future cash flows for individual income producing properties.

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Notes payable, net $ 496,946 $ 945,370

Mortgage notes payable, net — 47,074

Line of credit — 42,000

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Shares of beneficial interest, $ 0.01 par value;

100,000 shares authorized;

150,000 and 100,000 shares authorized;

86,261 and 84,409 shares issued and outstanding, as of December 31, 2021 and December 31, 2020, respectively

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Distributions in excess of net income ( 362,494 ) ( 298,860 )

Accumulated other comprehensive (loss) income ( 30,563 ) 1,823

Accumulated other comprehensive loss ( 19,091 ) ( 30,563 )

Total shareholders’ equity 1,316,755 1,320,787

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$ 169,151 $ 176,004 $ 176,748

Real estate expenses

112,909 115,580 105,592

Property operating and maintenance 38,741 39,625 40,408

Real estate taxes and insurance 22,041 23,357 22,918

Property management 6,133 6,145 6,098

General and administrative 27,538 23,951 26,068

Transformation costs 6,635 — —

Depreciation and amortization

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Real estate impairment — — 8,374

General and administrative expenses

173,744 163,414 187,228

256,890 286,275 241,393

Other operating income

(Loss) gain on sale of real estate ( 15,009 ) 59,961 2,495

Real estate operating income 22,219 82,866 52,832

(Loss) gain on sale of real estate, net — ( 15,009 ) 59,961

Real estate operating (loss) income ( 4,593 ) ( 2,419 ) 49,481

Other income (expense)

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Loss on interest rate derivatives ( 5,866 ) ( 560 ) —

Loss on extinguishment of debt ( 34 ) — ( 1,178 )

Loss on extinguishment of debt, net ( 12,727 ) ( 34 ) —

Other income 4,109 — —

( 48,547 ) ( 37,899 ) ( 53,734 )

(Loss) income from continuing operations ( 15,680 ) 29,132 1,153

Loss from continuing operations ( 53,140 ) ( 40,318 ) ( 4,253 )

Discontinued operations:

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23,083 24,638 49,543

Gain on sale of real estate

Gain on sale of real estate, net 46,441 — 339,024

Loss on extinguishment of debt

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69,524 24,638 387,803

Net (loss) income $ ( 15,680 ) $ 383,550 $ 25,630

Basic net (loss) income per share

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Basic net income (loss) per share

Continuing operations

$ ( 0.63 ) $ ( 0.50 ) $ ( 0.05 )

Discontinued operations, including gain on sale of real estate

Net (loss) income per share $ ( 0.20 ) $ 4.75 $ 0.32

Diluted net (loss) income per share

Discontinued operations 0.82 0.30 4.81

Basic net income (loss) per share (1)

$ 0.19 $ ( 0.20 ) $ 4.75

Diluted net income (loss) per share

Continuing operations

$ ( 0.63 ) $ ( 0.50 ) $ ( 0.05 )

Discontinued operations, including gain on sale of real estate

Net (loss) income per share $ ( 0.20 ) $ 4.75 $ 0.32

Discontinued operations 0.82 0.30 4.81

Diluted net income (loss) per share (1)

$ 0.19 $ ( 0.20 ) $ 4.75

Weighted average shares outstanding – basic 84,544 82,348 80,257

Weighted average shares outstanding – diluted 84,544 82,348 80,257

______________________________

(1) Earnings per share may not sum due to rounding

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(IN THOUSANDS)

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2021 2020 2019

Net (loss) income $ ( 15,680 ) $ 383,550 $ 25,630

Other comprehensive (loss) income:

Unrealized (loss) gain on interest rate derivatives ( 33,025 ) ( 8,016 ) 420

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Other comprehensive income (loss):

Unrealized gain (loss) on interest rate derivatives 3,673 ( 33,025 ) ( 8,016 )

Reclassification of unrealized loss on interest rate derivatives to earnings 7,799 639 —

Comprehensive (loss) income $ ( 48,066 ) $ 375,534 $ 26,050

Comprehensive income (loss) $ 27,856 $ ( 48,066 ) $ 375,534

See accompanying notes to the financial statements.

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Balance, December 31, 2018 79,910 $ 799 $ 1,526,574 $ ( 469,085 ) $ 9,839 $ 1,068,127 $ 351 $ 1,068,478

Cumulative effect of change in accounting principle (see note 4) — — — ( 906 ) — ( 906 ) — ( 906 )

Net income — — — 383,550 — 383,550 — 383,550

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Balance, December 31, 2019 82,099 821 1,592,487 ( 183,405 ) 1,823 1,411,726 336 1,412,062

Cumulative effect of change in accounting principle (see note 4) — — — ( 906 ) — ( 906 ) — ( 906 )

Net income — — — ( 15,680 ) — ( 15,680 ) — ( 15,680 )

Unrealized loss on interest rate derivatives — — — — ( 33,025 ) ( 33,025 ) — ( 33,025 )

Loss on interest rate derivatives — — — — 560 560 — 560

Amortization of swap settlements — — — — 79 79 — 79

Distributions to noncontrolling interests — — — — — — ( 14 ) ( 14 )

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Balance, December 31, 2020 84,409 844 1,649,366 ( 298,860 ) ( 30,563 ) 1,320,787 322 1,321,109

Net loss — — — ( 15,680 ) — ( 15,680 ) — ( 15,680 )

Unrealized loss on interest rate derivatives — — — — ( 33,025 ) ( 33,025 ) — ( 33,025 )

Net income — — — 16,384 — 16,384 — 16,384

Unrealized gain on interest rate derivatives — — — — 3,673 3,673 — 3,673

Loss on interest rate derivatives — — — — 5,760 5,760 — 5,760

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Cash flows from operating activities

Net (loss) income $ ( 15,680 ) $ 383,550 $ 25,630

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Net income (loss) $ 16,384 $ ( 15,680 ) $ 383,550

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization 95,560 120,030 141,179

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Real estate impairment — — 8,374

Loss (gain) on sale of real estate 15,009 ( 398,985 ) ( 2,495 )

(Gain) loss on sale of real estate ( 46,441 ) 15,009 ( 398,985 )

Share-based compensation expense 8,553 7,874 7,743

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Loss on interest rate derivatives 5,866 560 —

Loss on extinguishment of debt 34 764 1,178

Loss on extinguishment of debt, net 12,727 34 764

Changes in other assets ( 4,681 ) ( 7,271 ) ( 10,086 )

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Non-real estate capital improvements ( 49 ) ( 222 ) ( 491 )

Net cash provided by (used in) investing activities 65,760 61,036 ( 38,942 )

Real estate deposits ( 1,000 ) — —

Net cash provided by investing activities 702,170 65,760 61,036

Cash flows from financing activities

Line of credit (repayments) borrowings, net ( 14,000 ) ( 132,000 ) 22,000

Line of credit repayments, net ( 42,000 ) ( 14,000 ) ( 132,000 )

Dividends paid ( 90,728 ) ( 99,080 ) ( 96,361 )

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Net cash used in financing activities ( 565,396 ) ( 185,199 ) ( 184,848 )

Net (decrease) increase in cash, cash equivalents and restricted cash ( 6,448 ) 7,111 ( 4,983 )

Net increase (decrease) in cash, cash equivalents and restricted cash 225,930 ( 6,461 ) 7,111

Cash, cash equivalents and restricted cash at beginning of year 8,290 14,751 7,640

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Washington Real Estate Investment Trust (“WashREIT”), a Maryland real estate investment trust, is a self-administered equity real estate investment trust, successor to a trust organized in 1960.

Our business consists of the ownership and operation of income-producing real estate properties in the greater Washington metro region.

We own a portfolio of multifamily and commercial properties.

Our business consists of the ownership and operation of income-producing real estate properties primarily in the greater Washington, DC metro region, the majority of which are residential properties.

Federal Income Taxes

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Disposition Date Property Type (Loss) Gain on Sale

July 26, 2021 Office Portfolio (1)

Office $ ( 11,220 )

September 22, 2021 Retail Portfolio (2)

Retail 57,661

Total 2021 $ 46,441

April 21, 2020 John Marshall II Office $ ( 6,855 )

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Total 2019 $ 398,985

January 19, 2018 Braddock Metro Center Office $ —

June 28, 2018 2445 M Street Office 2,495

Total 2018 $ 2,495

______________________________

(1) Consists of twelve office properties:

1901 Pennsylvania Avenue, 515 King Street, 1220 19th Street, 1600 Wilson Boulevard, Silverline Center, Courthouse Square, 2000 M Street, 1140 Connecticut Avenue, Army Navy Club, 1775 Eye Street, Fairgate at Ballston and Arlington Tower.

(2) Consists of eight retail properties:

Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.

Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village .

(3) Consists of 925 and 1000 Corporate Drive.

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Gateway Overlook, Wheaton Park, Olney Village Center, Bradlee Shopping Center and Shoppes of Foxchase.

Seven of the eight retail properties sold during 2019 were identified for deferred exchanges under Section 1031 of the Code (see note 3).

We acquired eight multifamily replacement properties (see note 3) during 2019.

The taxable gains for 1776 G Street and a portion of the Shopping Center Portfolio proceeds not reinvested in the deferred exchange were distributed to shareholders through quarterly dividends in 2019.

Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on undistributed taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRSs”).

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As of both December 31, 2021 and 2020, our TRSs had a deferred tax asset of $ 1.4 million that was fully reserved.

As of December 31, 2019, we had deferred state and local tax liabilities of $ 0.6 million.

These deferred tax liabilities were primarily related to temporary differences in the timing of the recognition of revenue, amortization and depreciation.

We did no t have deferred state or local

tax liabilities as of December 31, 2020.

Beginning in 2018, ordinary taxable income per share is equal to the Section 199A dividend that was created by the Tax Cuts and Jobs Act.

The following is a breakdown of the taxable percentage of our dividends for the three years ended December 31, 2020, 2019 and 2018 (unaudited):

The following is a breakdown of the taxable percentage of our dividends for the three years ended December 31,

2021 (unaudited):

2021 2020 2019

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Actual results could differ from those estimates.

Recent Accounting Standards

Standards Adopted

Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other significant Matters

ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

This standard requires financial assets measured at an amortized cost basis, including trade receivables, to be presented at the net amount expected to be collected.

This standard does not apply to receivables arising from operating leases accounted for in accordance with Topic 842.

We adopted the new standard as of January 1, 2020.

The adoption of the new standard did not have a material impact on our consolidated financial statements.

ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software .

This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets.

We adopted the new standard as of January 1, 2020.

The adoption of the new standard did not have a material impact on our consolidated financial statements.

Standard/Description Effective Date and Adoption Considerations Effect on Financial Statements or Other significant Matters

ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting .

This standard contains optional practical expedients and exceptions for applying Generally Accepted Accounting Principles (“GAAP”) to contracts, hedging relations, and other transactions affected by reference rate reform if certain criteria are met.

We elected certain optional practical expedients as of January 1, 2020.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

As of January 1, 2020, we have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

COVID-19 Lease Modification Accounting Relief

In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question-and-answer document (“Q&A”) that addresses their belief that the guidance on lease modifications in GAAP does not contemplate concessions being executed as rapidly as they were executed as a result of the major financial crisis arising from the COVID-19 pandemic.

Under ASC 842, Leases , we evaluate, on a lease by lease basis, if a lease concession is the result of a new arrangement reached with the tenant, which could result in lease modification accounting, or if a lease concession is contemplated in the existing lease agreement, which is precluded from lease modification accounting.

In the Q&A, the staff stated that entities may elect to not evaluate whether a concession provided by a lessor to a lessee in response to the COVID-19 pandemic is a lease modification.

This election must be applied consistently to leases with similar characteristics and circumstances.

The election permits entities, if certain criteria are met, to account for concessions as if they were contemplated in the existing contract or evaluate the lease concessions for lease modification accounting.

If elected, abatement concessions are accounted for as negative variable rental revenue and rent deferrals are accounted for as if the lease is unchanged.

We have elected to utilize the relief provided by the FASB staff.

This election did not have a material impact on our consolidated financial statements as of December 31, 2020, and we do not expect material impacts in future periods.

Revenue Recognition

We lease multifamily properties under operating leases with terms of generally one year or less.

We lease commercial properties under operating leases with an average term of seven years .

Substantially all commercial leases contain fixed escalations or, in some instances, changes based on the Consumer Price Index, which occur at specified times during the term of the lease.

In certain commercial leases, variable lease income, such as percentage rent, is recognized when rents are earned.

We recognize rental income and rental abatements from our multifamily and commercial leases on a straight-line basis over the lease term.

Recognition of rental income commences when control of the leased space has been transferred to the tenant.

We primarily lease residential properties under operating leases with terms of generally one year or less.

Rental revenues are recognized in accordance with ASC Topic 842, Leases , using a method that represents straight-line basis over the term of the leases.

In circumstances where a lease concession is provided to the resident, primarily in lease-up, we recognize a reduction of rental revenues on a straight-line basis.

We also generate other property-related revenue associated with the leasing of apartment homes, including parking income, move-in charges, pet rent and other miscellaneous revenue.

Similar to rental income, such revenues are recorded when due from tenants and recognized monthly as they are earned.

We recognize cost reimbursement income at our residential properties from pass-through expenses on an accrual basis over the periods in which the expenses were incurred.

Pass-through expenses are primarily comprised of utility costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements.

We recognize gains on sales of real estate when we have executed a contract for sale of the asset, transferred controlling financial interest in the asset to the buyer and determined that it is probable that we will collect substantially all of the consideration for the asset.

Our real estate sale transactions typically meet these criteria at closing.

We recognize cost reimbursement income from pass-through expenses on an accrual basis over the periods in which the expenses were incurred.

Pass-through expenses are comprised of real estate taxes, operating expenses and common area maintenance costs which are reimbursed by tenants in accordance with specific allowable costs per tenant lease agreements.

Parking revenues are derived from leases, monthly parking agreements and transient parking.

We recognize parking revenues from leases on a straight-line basis over the lease term and monthly parking revenues as earned.

We recognize transient parking revenue when our performance obligation is met.

Rents and Other Receivables

Lease related receivables, which include contractual amounts accrued and unpaid from tenants and accrued straight-line rents receivable, are reduced for credit losses.

Lease related receivables, which include contractual amounts accrued and unpaid from residents and accrued straight-line rents receivable, are reduced for credit losses.

Such amounts are recognized as a reduction to real estate rental revenues.

We evaluate the collectability of lease receivables monthly using several factors including a lessee’s creditworthiness.

We evaluate the collectability of lease receivables on a lease-by-lease basis.

We recognize the credit loss on lease related receivables when, in the opinion of management, collection of substantially all lease payments is not probable.

When collectability is determined not probable, any lease income recognized subsequent to recognizing the credit loss is limited to the lesser of the lease income reflected on a straight-line basis or cash collected.

The adoption of ASU 2016-02

resulted in an adjustment to our opening distributions in excess of net income balance of $ 0.9 million, associated with lease related receivables where collection of substantially all operating lease payments was not probable as of January 1, 2019.

Debt Issuance Costs

We amortize external debt issuance costs using the effective interest rate method or the straight-line method, which approximates the effective interest rate method over the estimated life of the related debt.

We record debt issuance costs related to notes and mortgage notes, net of amortization, on our consolidated balance sheets as an offset to their related debt.

We record debt issuance costs related to notes, net of amortization, on our consolidated balance sheets as an offset to their related debt.

We record debt issuance costs related to revolving lines of credit on our consolidated balance sheets with Prepaid expenses and other assets, regardless of whether a balance on the line of credit is outstanding.

We record the amortization of all debt issuance costs as interest expense.

Deferred Leasing Costs

We capitalize and amortize direct and incremental costs associated with the successful negotiation of leases, both external commissions and internal direct costs, on a straight-line basis over the terms of the respective leases.

We record the amortization of deferred leasing costs in Depreciation and amortization on the consolidated statements of operations.

If an applicable lease terminates prior to the expiration of its initial lease term, we write off the carrying amount of the costs to amortization expense.

We capitalize and amortize leasing incentives associated with the successful negotiation of leases on a straight-line basis against revenue over the terms of the respective leases.

We record the amortization of deferred leasing incentives as a reduction in revenue.

If an applicable lease terminates prior to the expiration of its initial lease term, we write off the carrying amount of the costs as a reduction in revenue.

Real Estate and Depreciation

We depreciate buildings on a straight-line basis over estimated useful lives ranging from 28 to 50 years.

We depreciate buildings on a straight-line basis over an estimated useful life of 26 to 40 years.

We capitalize all capital improvements associated with replacements, improvements or major repairs to real property that extend its useful life and depreciate them using the straight-line method over their estimated useful lives ranging from 3 to 40 years.

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Capitalization of these costs begins when the activities and related expenditures commence and ceases when the project is substantially complete and ready for its intended use, at which time the project is placed into service and depreciation commences.

In addition, we capitalize tenant leasehold improvements when certain criteria are met, including when we supervise construction and will own the improvements.

We depreciate all tenant improvements over the shorter of the useful life of the improvements or the term of the related tenant lease.

Real estate depreciation expense from continuing operations was $ 66.2 million, $ 64.6 million and $ 62.5 million during the years ended December 31, 2021, 2020 and 2019, respectively.

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Such assumptions involve a high degree of judgment and could be affected by future economic and market conditions.

When determining if a property has indicators of impairment, we evaluate the property's occupancy, our expected holding period for the property,

strategic decisions regarding the property's future operations or development and other market factors.

When determining if a property has indicators of impairment, we evaluate the property's occupancy, our expected holding period for the property, strategic decisions regarding the property's future operations or development and other market factors.

If such carrying amount is in excess of the estimated undiscounted cash flows from the operation and disposal of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair value, calculated in accordance with current GAAP fair value provisions.

Assets held for sale are recorded at the lower of cost or fair value less costs to sell.

Asset Acquisitions

The properties we acquire typically are not businesses as defined by ASU 2017-01, Business Combinations (Topic 805) - Clarifying the Definition of a Business .

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We determine the fair values of acquired buildings on an “as-if-vacant” basis considering a variety of factors, including the replacement cost of the property, estimated rental and absorption rates, estimated future cash flows and valuation assumptions consistent with current market conditions.

We determine the fair value of land acquired based on comparisons to similar properties that have been recently marketed for sale or sold.

The fair value of in-place leases consists of the following components – (a) the estimated cost to replace the leases, including foregone rents during the period of finding a new tenant and foregone recovery of tenant pass-throughs (referred to as “absorption cost”);

(b) the estimated cost of tenant improvements and other direct costs associated with obtaining a new tenant (referred to as “tenant origination cost”);

(d) the above/at/below market cash flow of the leases, determined by comparing the projected cash flows of the leases in place, including consideration of renewal options, to projected cash flows of comparable market-rate leases (referred to as “net lease intangible”);

and (e) the value, if any, of customer relationships, determined based on our evaluation of the specific characteristics of each tenant’s lease and our overall relationship with the tenant (referred to as “customer relationship value”).

We have attributed no value to customer relationships as of December 31, 2020 and 2019.

We discount the amounts used to calculate net lease intangibles using an interest rate which reflects the risks associated with the leases acquired.

We classify tenant origination costs as income producing property on our consolidated balance sheets and amortize the tenant origination costs as depreciation expense on a straight-line basis over the remaining life of the underlying leases.

We classify leasing commissions and absorption costs as other assets and amortize leasing commissions and absorption costs as amortization expense on a straight-line basis over the remaining life of the underlying leases.

We classify net lease intangible assets as other assets and amortize them on a straight-line basis as a decrease to real estate rental revenue over the remaining term of the underlying leases.

We classify net lease intangible liabilities as other liabilities and amortize them on a straight-line basis as an increase to real estate rental revenue over the remaining term of the underlying leases.

If any of the fair value of below market lease intangibles includes fair value associated with a renewal option, such amounts are not amortized until the renewal option is executed, else the related value is expensed at that time.

Should a tenant terminate its lease prior to the expiration date, we accelerate the amortization of the unamortized portion of the tenant origination cost, leasing commissions, absorption costs and net lease intangible associated with that lease, over its new, shorter term.

We determine the fair value of land acquired based on comparisons to similar

properties that have been recently marketed for sale or sold.

The fair value of in-place leases are based upon our evaluation of the specific characteristics of the leases.

Factors considered in the fair value analysis include the estimated cost to replace the leases, including foregone rent and expense reimbursements during the hypothetical expected lease-up periods (referred to as “absorption cost”), consideration of current market conditions and costs to execute similar leases.

We classify leasing absorption costs as other assets and amortize absorption costs as amortization expense on a straight-line basis over the remaining life of the underlying leases.

Software Developed for Internal Use

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(c) an active program to locate a buyer and other actions required to complete the plan to sell the assets has been initiated;

(d) the sale of the assets is probable and transfer of the assets is expected to qualify for

recognition as a completed sale within one year;

(d) the sale of the assets is probable and transfer of the assets is expected to qualify for recognition as a completed sale within one year;

(e) the assets are being actively marketed for sale at a price that is reasonable in relation to its current fair value;

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We evaluate performance based upon net operating income from the combined properties in each segment.

Our reportable operating segments are consolidations of similar properties.

Our reportable operating segment is a consolidation of similar properties.

GAAP requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing segments’ performance.

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Net operating income is defined as segment real estate rental revenue less segment real estate expenses.

Cash and Cash Equivalents

Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents include cash and commercial paper with original maturities of 90 days or less.

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We reduce this risk by maintaining such deposits with high quality financial institutions that management believes are credit-worthy.

Restricted Cash

Restricted cash includes funds escrowed for tenant security deposits, real estate tax, insurance and mortgage escrows and escrow deposits required by lenders on certain of our properties to be used for future building renovations or tenant improvements.

Restricted cash includes funds escrowed for tenant security deposits.

Transformation Costs

Transformation costs include costs related to the strategic transformation, including the allocation of internal costs, consulting, advisory and termination benefits.

Earnings Per Common Share

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We amortize awards with performance conditions using the graded expense method.

We measure compensation expense for awards with market conditions based on the grant date fair value, as determined using a Monte Carlo simulation, and we amortize the expense ratably over the requisite service period, regardless of whether the market conditions

are achieved and the awards ultimately vest.

Compensation expense for the trustee grants, which fully vest immediately, is fully recognized upon issuance based upon the fair market value of the shares on the date of grant.

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We do not believe that there will be any material changes to our uncertain tax positions over the next twelve months.

We are subject to federal income tax as well as income tax of the states of Maryland and Virginia, and the District of Columbia.

We are subject to federal income tax as well as income tax of the states of Maryland, Virginia and Georgia, and the District of Columbia.

However, as a REIT, we generally are not subject to income tax on our taxable income to the extent it is distributed as dividends to our shareholders.

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As of December 31, 2021 and 2020, our real estate investment portfolio classified as income producing property that is held and used, at cost, consists of properties valued as follows (in thousands):

Multifamily $ 1,606,085 $ 1,469,011

Office 1,214,481 1,329,722

Other 163,051 160,489

Residential $ 1,790,914 $ 1,606,193

173,856 168,851

Our results of operations are dependent on the overall economic health of our markets, tenants and the specific segments in which we own properties.

All property types are affected by external economic factors, such as inflation, consumer confidence and unemployment rates, as well as changing tenant and consumer requirements.

As of December 31, 2020, no property accounted for more than approximately 10% of total assets.

No single property or tenant accounted for more than 10% of real estate rental revenue.

We have properties under development/redevelopment and held for current or future development.

The cost of our real estate portfolio under development or held for future development as of December 31, 2020 and 2019 is as follows (in thousands):

Multifamily $ 36,493 $ 123,071

Office 478 478

Other 644 644

$ 1,964,770 $ 1,775,044

As of December 31, 2020, we have invested $ 133.5 million, including the cost of acquired land, in Trove, a 401-unit multifamily development adjacent to The Wellington.

During 2020, we substantially completed major construction activities for Trove's base building and garage and delivered 374 units.

As of December 31, 2020, we have placed into service assets totaling $ 126.4 million.

We expect to place the remainder of the Trove development costs into service during the first quarter of 2021.

We have also invested $ 28.6 million, including the cost of acquired land, in a multifamily development adjacent to Riverside Apartments.

In addition, in our multifamily and office segments, we continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use.

Our current strategy is to recycle legacy assets that lack the income growth potential we seek and to invest in high-quality assets with compelling value-add returns through redevelopment opportunities in our existing portfolio and acquisitions that meet our stringent investment criteria.

We focus on properties near major transportation nodes and in areas with strong employment drivers and superior growth demographics.

______________________________

(1) Consists of Watergate 600

Our results of operations are dependent on the overall economic health of our markets and residents which are affected by external economic factors, such as inflation, consumer confidence and unemployment rates, as well as changing residents and consumer requirements.

As of December 31, 2021, one property, Riverside Apartments, accounted for more than approximately 10 % of total assets and two properties, Riverside Apartments and Watergate 600, each accounted for more than approximately 10 % of real estate rental revenue.

We have properties under development/redevelopment and held for current or future development.

The cost of our real estate portfolio under development or held for future development as of December 31, 2021 and 2020 was $ 30.6 million and $ 36.5 million, respectively.

As of December 31, 2021, we have invested $ 29.8 million, including the cost of acquired land, in a residential development adjacent to Riverside Apartments.

In addition we continue to capitalize qualifying costs on several other projects with minor development activity necessary to ready each project for its intended use.

We placed the remainder of the Trove development costs into service during the first quarter of 2021.

Properties and land for development acquired during the three years ended December 31, 2021 were as follows:

Acquisition Date Property Type # of units (unaudited) Rentable

(unaudited) Contract

Acquisition Date Property Type # of Homes (unaudited) Contract

Purchase Price

(in thousands)

August 10, 2021 The Oxford Residential 240 $ 48,000

November 19, 2021 Assembly Eagles Landing Residential 490 106,000

730 $ 154,000

April 30, 2019 Assembly Portfolio - Virginia (1)

Multifamily 1,685 N/A $ 379,100

Residential 1,685 $ 379,100

June 27, 2019 Assembly Portfolio - Maryland (2)

Multifamily 428 N/A 82,070

July 23, 2019 Cascade at Landmark Multifamily 277 N/A 69,750

Residential 428 82,070

July 23, 2019 Cascade at Landmark Residential 277 69,750

2,390 $ 530,920

January 18, 2018 Arlington Tower Office N/A 391,000 $ 250,000

______________________________

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The Assembly Portfolio - Virginia and Assembly Portfolio - Maryland properties are collectively the “Assembly Portfolio.”

The purchases of the Assembly Portfolio and Cascade at Landmark were structured as exchanges under Section 1031 of the Code in a manner such that legal title was held by a 1031 exchange facilitator until certain identified properties were sold and the deferred exchanges were completed.

We retained all of the legal and economic benefits and obligations related to the Assembly Portfolio and Cascade at Landmark.

As such, the Assembly Portfolio and Cascade at Landmark were considered to be variable interest entities until legal title was transferred to us upon completion of the 1031 exchanges, which occurred during the third quarter of 2019.

We consolidated the assets and liabilities of the Assembly Portfolio and Cascade at Landmark because we determined that WashREIT was the primary beneficiary of these properties.

The results of operations from acquired operating properties are included in the consolidated statements of operations as of their acquisition dates.

We did no t have any acquisition activity for the year ended December 31, 2020.

The revenue and earnings of our acquisitions during their year of acquisition for the two years ended December 31, 2019 are as follows (in thousands):

The revenue and earnings of our acquisitions during their year of acquisition for the three years ended December 31, 2021 are as follows (in thousands):

Year Ended December 31,

2021 2020 2019

Real estate rental revenue $ 2,262 $ — $ 27,641

Net (loss) income ( 10,167 ) 3,623

As discussed in note 2, we record the acquired physical assets (land, building and tenant improvements), in-place leases (absorption, tenant origination costs, leasing commissions and net lease intangible assets/liabilities) and any other assumed liabilities on a relative fair value basis.

Net loss ( 1,921 ) — ( 10,167 )

As discussed in note 2, we record the acquired physical assets (land and building) and in-place leases (absorption costs) and any other assumed liabilities by allocating the total cost of the acquisitions on a relative fair value basis.

We recorded the total cost of the above acquisitions as follows (in thousands):

2021 2020 2019

Land $ 20,914 $ — $ 92,391

Buildings and improvements 128,540 — 423,663

Tenant origination costs — 13,625

Leasing commissions/absorption costs 4,786 — 15,474

Net lease intangible assets — 3,142

Net lease intangible liabilities — ( 545 )

Total $ 154,240 $ — $ 531,528

The weighted average remaining life for the absorption costs is 4 months.

The difference in the total cost of the 2021 acquisitions of $ 154.2 million and the cash paid for the acquisitions per the consolidated statements of cash flows of $ 153.7 million is primarily due to credits received at settlement totaling $ 0.5 million.

The difference in the total contract purchase price of $ 250.0 million for the 2018 acquisition and cash paid for the acquisition per the consolidated statements of cash flows of $ 106.4 million is primarily due to a mortgage note assumed and repaid at settlement ($ 135.5 million), an acquisition deposit made during 2017 ($ 6.3 million) and a net credit to the buyer for certain expenditures ($ 2.4 million), partially offset by capitalized acquisition related costs ($ 0.6 million).

The difference in the total cost of the 2019 acquisitions of $ 531.5 million and the cash paid for the acquisitions per the consolidated statements of cash flows of $ 528.6 million is primarily due to credits received at settlement totaling $ 2.9 million.

Fair Value of In-place Leases

Balances, net of accumulated depreciation or amortization, as appropriate, of the components of the fair value of in-place leases at December 31, 2021 and 2020 were as follows (in thousands):

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Net lease intangible liabilities 13,340 9,021 4,319 13,340 8,245 5,095

Below-market ground lease intangible asset 12,080 2,472 9,608 12,080 2,282 9,798

Amortization of these combined components during the three years ended December 31, 2020, 2019 and 2018 was as follows (in thousands):

Amortization of these combined components during the three years ended December 31, 2021, was as follows (in thousands):

Year Ended December 31,

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Depreciation on these properties is discontinued when classified as held for sale, but operating revenues, other operating expenses and interest continue to be recognized through the date of sale.

We classified as held for sale or sold our interests in the following properties during the three years ended December 31, 2020:

Disposition Date Property Type # of units (unaudited) Rentable

We sold our interests in the following properties during the three years ended December 31, 2021:

Disposition Date Property Type Rentable

(unaudited) Contract

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(in thousands)

April 21, 2020 John Marshall II Office N/A 223,000 $ 57,000 $ ( 6,855 )

December 2, 2020 Monument II Office N/A 207,000 53,000 ( 8,595 )

December 17, 2020 1227 25th Street Office N/A 135,000 53,500 1,125

July 26, 2021 Office Portfolio (1)

Office 2,370,000 $ 766,000 $ ( 11,220 )

September 22, 2021 Retail Portfolio (2)

Retail 693,000 168,314 57,661

Total 2021 3,063,000 $ 934,314 $ 46,441

April 21, 2020 John Marshall II Office 223,000 $ 57,000 $ ( 6,855 )

December 2, 2020 Monument II Office 207,000 53,000 ( 8,595 )

December 17, 2020 1227 25th Street Office 135,000 53,500 1,125

Total 2020 565,000 $ 163,500 $ ( 14,325 )

June 26, 2019 Quantico Corporate Center (3)

Office N/A 272,000 $ 33,000 $ ( 1,046 )

Office 272,000 $ 33,000 $ ( 1,046 )

July 23, 2019 Shopping Center Portfolio (4)

Retail N/A 800,000 485,250 333,023

August 21, 2019 Frederick Crossing and Frederick County Square Retail N/A 520,000 57,500 9,507

August 27, 2019 Centre at Hagerstown Retail N/A 330,000 23,500 ( 3,506 )

December 19, 2019 1776 G Street Office N/A 262,000 129,500 61,007

Total 2019 2,184,000 $ 728,750 $ 398,985

January 19, 2018 Braddock Metro Center Office N/A 356,000 $ 93,000 $ —

June 28, 2018 2445 M Street Office N/A 292,000 101,600 2,495

Retail 800,000 485,250 333,023

August 21, 2019 Frederick Crossing and Frederick County Square Retail 520,000 57,500 9,507

August 27, 2019 Centre at Hagerstown Retail 330,000 23,500 ( 3,506 )

December 19, 2019 1776 G Street Office 262,000 129,500 61,007

Total 2019 2,184,000 $ 728,750 $ 398,985

______________________________

(1) Consists of twelve office properties:

(2) Consists of eight retail properties:

Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.

Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village .

(3) Consists of 925 and 1000 Corporate Drive.

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We have fully transferred control of the assets associated with these disposed properties and do not have continuing involvement in the operations of these properties.

In November 2020, we executed a purchase and sale agreement to sell 1227 25th Street for a contract sale price of $ 53.5 million and closed on the sale on December 17, 2020, recognizing a gain on sale of real estate of $ 1.1 million.

In December 2020, we executed a purchase and sale agreement to sell Monument II for a contract sale price of $ 53.0 million and closed on the sale on December 2, 2020, recognizing a loss on sale of real estate of $ 8.6 million.

In December 2019, we executed a purchase and sale agreement to sell John Marshall II for a contract sale price of $ 63.4 million.

Upon execution of the purchase and sale agreement, the property met the criteria for classification as held for sale.

In April 2020, we executed an amendment to the purchase and sale agreement which decreased the contract sale price to $ 57.0 million and closed on the sale on April 21, 2020, recognizing a loss on sale of real estate of $ 6.9 million.

During the second quarter of 2019, we sold Quantico Corporate Center, an office property in Stafford, Virginia, consisting of two office buildings totaling 272,000 square feet, for a contract sale price of $ 33.0 million, recognizing a loss on sale of real estate of $ 1.0 million.

Prior to the sale, due to the negotiations to sell the property, we evaluated Quantico Corporate Center for impairment and recognized an $ 8.4 million impairment charge during the first quarter of 2019 in order to reduce the carrying value of the property to its estimated fair value.

We based this fair valuation on the expected sale price from a potential sale.

There were few observable market transactions for similar properties.

This fair valuation falls into Level 2 of the fair value hierarchy due to its reliance on a quoted price in a market that is not active.

In June 2019, we had entered into two separate purchase and sale agreements with two separate buyers to sell the Shopping Center Portfolio and the Power Center Portfolio (Frederick Crossing, Frederick County Square and Centre at Hagerstown).

As of June 30, 2019, we received a non-refundable deposit from the potential buyer of the Shopping Center Portfolio and expected to receive a non-refundable deposit from the potential buyer of the Power Center Portfolio in July 2019, and the properties in the Retail Portfolio (as defined below) met the criteria for classification as held for sale.

We closed on the Shopping Center Portfolio sale transaction on July 23, 2019 for a contract sales price of $ 485.3 million, recognizing a gain on sale of real estate of $ 333.0 million.

Prior to closing on the disposition of the Shopping Center Portfolio, we prepaid the mortgage note secured by Olney Village Center (a property in the Shopping Center Portfolio), incurring a loss on extinguishment of debt of approximately $ 0.8 million which we recognized in the third quarter of 2019.

In the third quarter of 2019, the purchase and sale agreement to sell the Power Center Portfolio was amended to include only Frederick Crossing and Frederick County Square.

We closed on the sales of these assets on August 21, 2019 for a contract sales price of $ 57.5 million, recognizing a gain on sale of real estate of $ 9.5 million.

Following the amendment to the purchase and sale agreement to sell the Power Center Portfolio, we marketed Centre at Hagerstown for sale and identified a separate buyer.

We closed on the sale of this asset on August 27, 2019, recognizing a loss on sale of real estate of $ 3.5 million.

References to the “Retail Portfolio” include the Shopping Center Portfolio and the Power Center Portfolio.

The disposition of the Retail Portfolio represents a strategic shift that had a major effect on our financial results and we have accordingly reported the Retail Portfolio as discontinued operations.

The Retail Portfolio represents assets generating a majority of the revenue from our retail properties and we have determined that our retail line of business is no longer a reportable segment (see note 14).

In October 2019, we renewed and extended our lease with the World Bank at 1776 G Street NW, an office property in Washington, D.C., through December 31, 2025.

In December 2019, we sold the property to the World Bank for a contract sale price of $ 129.5 million, recognizing a gain on sale of real estate of $ 61.0 million.

During the first quarter of 2018, we sold Braddock Metro Center, a 356,000 square foot office property in Alexandria, Virginia for a contract sales price of $ 93.0 million.

Due to then-ongoing negotiations to sell the property, we evaluated Braddock Metro Center for impairment and recognized a $ 9.1 million impairment charge during 2017 in order to reduce the carrying value of the property to its estimated fair value, less selling costs.

We based this fair valuation on the expected sale price from a potential sale.

There are few observable market transactions for similar properties.

This fair valuation falls into Level 2 of the fair value hierarchy due to its reliance on a quoted price in a market that is not active.

During the first quarter of 2018, we executed a purchase and sale agreement to sell 2445 M Street, a 292,000 square foot office property in Washington, D.C., for a contract sales price of $ 100.0 million, with settlement originally scheduled for the third quarter of 2018.

During 2017, we evaluated 2445 M Street for impairment and recognized a $ 24.1 million impairment charge in order to reduce the carrying value of the property to its estimated fair value.

Upon execution of the purchase and sale agreement, the property met the criteria for classification as held for sale.

Due to the property’s classification as held for sale, we recorded an additional impairment charge of $ 1.9 million in the first quarter of 2018 in order to reduce the carrying value of the property to its estimated fair value, less estimated selling costs.

We based this fair value on the expected sales price from a potential sale.

There are few observable market transactions for similar properties.

This fair valuation falls into Level 2 of the fair value hierarchy due to its reliance on a quoted price in a market that is not active.

During the second quarter of 2018, we executed an amendment to the purchase and sale agreement which increased the contract sales price to $ 101.6 million and advanced the settlement date.

On June 28, 2018, we sold 2445 M Street, recognizing a gain on sale of real estate of $ 2.5 million.

In June 2021, we entered into a purchase and sale agreement with a single buyer to sell the Office Portfolio for a purchase price of $ 766.0 million.

Upon execution of the purchase and sale agreement, the properties in the Office Portfolio met the criteria for classification as held for sale.

We closed on the sale of the Office Portfolio on July 26, 2021, recognizing a loss on sale of real estate of $ 11.2 million.

In June 2021, we executed a letter of intent to sell the Retail Portfolio.

During the 2021 Quarter, we executed a purchase and sale agreement for the sale of our remaining eight retail properties for a purchase price of $ 168.3 million and closed on the sale on September 22, 2021, recognizing a gain on real estate of $ 57.7 million.

The dispositions of the Office Portfolio and the Retail Portfolio represent a strategic shift that will have a major effect on our financial results and we have accordingly reported the Office Portfolio and Retail Portfolio as discontinued operations.

As of December 31, 2021, we assessed our properties for impairment and did no t recognize any impairment charges during 2021.

We applied reasonable estimates and judgments in evaluating each of the properties as of December 31, 2021.

Should external or internal circumstances change requiring the need to shorten holding periods or adjust future estimated cash flows from our properties, we could be required to record impairment charges in the future.

Discontinued Operations

The results of the Retail Portfolio are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):

The results of the Office and Retail Portfolios, which were sold in 2021, are classified as discontinued operations and are summarized as follows (amounts in thousands, except for share data):

Year Ended December 31,

2021 2020 2019

Real estate rental revenue $ 70,519 $ 118,114 $ 160,632

Real estate expenses ( 6,803 ) ( 10,638 )

Property operating and maintenance ( 11,201 ) ( 20,967 ) ( 25,831 )

Real estate taxes and insurance ( 11,136 ) ( 19,050 ) ( 22,283 )

Property management ( 2,195 ) ( 3,765 ) ( 4,845 )

Depreciation and amortization ( 22,904 ) ( 49,694 ) ( 57,817 )

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Loss on extinguishment of debt — — ( 764 )

Gain on sale of real estate 339,024 —

Gain on sale of real estate, net 46,441 — 339,024

Income from discontinued operations $ 69,524 $ 24,638 $ 387,803

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Capital expenditures $ 3,316 $ 20,812 $ 42,013

All assets and liabilities related to the Retail Portfolio were sold as of December 31, 2019.

All assets and liabilities related to the Office Portfolio and Retail Portfolio were sold as of December 31, 2021.

As of December 31, 2020, assets and liabilities related to the Office Portfolio and Retail Portfolio were as follows (in thousands):

December 31, 2020

Land $ 249,869

Income producing property 958,704

Accumulated depreciation and amortization ( 414,008 )

Income producing property, net 794,565

Development in progress and land held for development 1,122

Investment in real estate, net 795,687

Cash and cash equivalents 3

Restricted cash 10

Rents and other receivables 46,369

Prepaid expenses and other assets 41,452

Total assets $ 883,521

Accounts payable and other liabilities $ 14,706

Advance rents 4,754

Tenant security deposits 5,769

Liabilities related to properties sold or held for sale $ 25,229

LEASE ACCOUNTING

Leasing as a Lessee

For leases where we are the lessee, primarily in our corporate office operating lease, we recognize a right-of-use asset and a lease liability in accordance with Accounting Standards Codification (“ASC”) Topic 842.

The right-of-use asset and associated liability is equal to the present value of the minimum lease payments, applying our incremental borrowing rate.

Our borrowing rate is computed based on observable borrowing rates taking into consideration our credit quality and adjusting to a secured borrowing rate for similar assets and term.

As of December 31, 2021, we had $ 4.6 million in right-of-use assets and liabilities recorded within Income producing property and Accounts payable and other liabilities on our consolidated balance sheets, respectively.

Lease expense for the operating lease is recognized on a straight-line basis over the expected lease term and is included in “General and administrative expense.”

Leasing as a Lessor

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Rental income under most of these commercial leases increase in future years based on agreed-upon percentages or in some instances, changes in the Consumer Price Index.

Leasing as a Lessee

2000 M Street, an office property in Washington, D.C., is subject to an operating ground lease with a remaining term of 50 years.

Rental payments under this lease are subject to percentage rent variable payments, which are not included as part of our measurement of straight-line rental expense.

We recognized straight-line rental expense of $ 0.3 million during each of the three years ended December 31, 2020.

We recognized variable rental payments of $ 0.8 million, $ 0.9 million and $ 0.9 million during the years ended December 31, 2020, 2019 and 2018 respectively.

We recognized a right-of-use asset (included in Income producing property) and lease liability (included in Accounts payable and other liabilities) of $ 4.2 million.

We used a discount rate of approximately 5.9 %, which was derived from our assessment of securitized rates for similar assets and credit quality.

We recognized $ 0.2 million and $ 0.3 million of right-of-use asset and lease liability amortization during the years ended December 31, 2020 and 2019, respectively.

The following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments on our operating ground lease as of December 31, 2020 and a reconciliation of those cash flows to the operating lease liability as of December 31, 2020 (in thousands):

Thereafter 11,635

Imputed interest ( 9,203 )

Lease liability $ 3,732

MORTGAGE NOTE PAYABLE

In January 2020, we prepaid the $ 45.6 million mortgage note secured by Yale West, which was scheduled to mature in 2052.

As a result of the transaction, we recognized a gain on extinguishment of debt of $ 0.5 million related to the write-off of an unamortized mortgage premium of $ 1.4 million, partially offset by a prepayment penalty of $ 0.9 million.

Following this repayment, we have no outstanding mortgage notes as of December 31, 2020.

As of December 31, 2019, we had one outstanding mortgage notes payable, collateralized by a building and related land from our portfolio, as follows (in thousands):

Properties Assumption/Issuance Date (1)

Effective Interest Rate (2)

December 31, 2019

Yale West 2/21/2014 3.75 % $ 45,654

Premiums and discounts, net 1,470

Debt issuance costs, net ( 50 )

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(1) This mortgage was assumed with the acquisition of the collateralized property.

We record mortgages assumed in an acquisition at fair value.

(2) Yield on the assumption/issuance date, including the effects of any premiums, discounts or fair value adjustments on the notes.

Principal and interest were payable monthly until the maturity date, at which time all unpaid principal and interest were payable in full.

Total cost basis of the above mortgaged property was $ 77.4 million at December 31, 2019.

UNSECURED LINES OF CREDIT PAYABLE

During the first quarter of 2018, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for a $ 700.0 million unsecured revolving credit facility (“Revolving Credit Facility”), the continuation of an existing $ 150.0 million unsecured term loan (“2015 Term Loan”) and an additional $ 250.0 million unsecured term loan (“2018 Term Loan”).

The Revolving Credit Facility has a four-year term ending in March 2022, with two six-month extension options.

The Credit Agreement has an accordion feature that allows us to increase the facility up to $ 1.5 billion in the aggregate, to the extent the lenders agree to provide additional revolving loan commitments or term loans.

The 2018 Term Loan increases and replaces the $ 150.0 million unsecured term loan, initially entered into on July 22, 2016 (“2016 Term Loan”), that was scheduled to mature in July 2023.

During the third quarter of 2021, we entered into an amended and restated credit agreement (“Credit Agreement”) which provides for a $ 700.0 million unsecured revolving credit facility (“Revolving Credit Facility”) and the continuation of an existing $ 250.0 million unsecured term loan (“2018 Term Loan”).

The Revolving Credit Facility has a four-year term ending in August 2025, with two six-month extension options.

The Credit Agreement has an accordion feature that allows us to increase the aggregate facility to $ 1.5 billion, subject to the lenders’ agreement to provide additional revolving loan commitments or term loans.

As a result of the transaction, we recognized a loss on extinguishment of debt of $ 0.2 million related to the write-off of unamortized loan origination costs.

We incurred $ 4.8 million of additional loan origination costs which will be amortized as interest expense over the term of the Revolving Credit Facility.

The 2018 Term Loan increased and replaced the $ 150.0 million unsecured term loan, initially entered into on July 22, 2016 (“2016 Term Loan”), that was scheduled to mature in July 2023.

The 2018 Term Loan is scheduled to mature in July 2023 and bears interest at a rate of either one month LIBOR plus a margin ranging from 0.85 % to 1.75 % or the base rate plus a margin ranging from 0.0 % to 0.75 % (in each case depending upon WashREIT’s credit rating).

We used the $ 100.0 million of additional proceeds from the 2018 Term Loan primarily to repay outstanding borrowings on the Revolving Credit Facility.

We had previously used interest rate derivatives to effectively fix the interest rate of the 2016 Term Loan.

These interest rate

derivatives now effectively fix the interest rate on a $ 150.0 million portion of the 2018 Term Loan at 2.31 %.

In March 2018, we entered into interest rate derivatives that commenced on June 29, 2018 to effectively fix the interest rate on the remaining $ 100.0 million of the 2018 Term Loan at 3.71 %.

The 2018 Term Loan has an all-in fixed interest rate of 2.87 %.

On September 27, 2021, we prepaid a $ 150.0 million portion of the 2018 Term Loan using proceeds from the sale of the Office Portfolio and Retail Portfolio (see note 3).

As a result of the prepayment, we recognized a loss on extinguishment of debt of $ 0.3 million related to the write-off of unamortized loan origination costs.

Simultaneous with the prepayment, we terminated five interest rate swap arrangements (see note 6).

We currently expect to hold the remaining $ 100.0 million portion of the 2018 Term Loan until maturity.

The amount of the Revolving Credit Facility unused and available at December 31, 2021 was as follows (in thousands):

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We executed borrowings and repayments on the Revolving Credit Facility during 2021 as follows (in thousands):

Balance at December 31, 2019 $ 56,000

Balance, December 31, 2020 $ 42,000

Borrowings 108,000

Repayments ( 150,000 )

Balance at December 31, 2020 $ 42,000

Balance, December 31, 2021 $ —

The Revolving Credit Facility bears interest at a rate of either one month LIBOR plus a margin ranging from 0.70 % to 1.40 % or the base rate plus a margin ranging from 0.0 % to 0.40 % (in each case depending upon WashREIT’s credit rating).

The base rate is the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50 % and the LIBOR market index rate plus 1.0 %.

In addition, the Revolving Credit Facility requires the payment of a facility fee ranging from 0.10 % to 0.30 % (depending on WashREIT’s credit rating) on the $ 700.0 million committed capacity, without regard to usage.

As of December 31, 2020, the interest rate on the facility was LIBOR plus 1.00 %, the one month LIBOR was 0.14 % and the facility fee was 0.20 %.

All outstanding advances for the Revolving Credit Facility are due and payable upon maturity in March 2022, unless extended pursuant to one or both of the two six-month extension options.

As of December 31, 2021, the interest rate on the Revolving Credit Facility is one month LIBOR plus 0.85 %, the one month LIBOR is 0.10 % and the facility fee is 0.20 %.

All outstanding advances for the Revolving Credit Facility are due and payable upon maturity in August 2025, unless extended pursuant to one or both of the two six-month extension options.

Interest only payments are due and payable generally on a monthly basis.

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The covenants for the notes require us to keep all of our insurable properties insured against loss or damage at least equal to their then full insurable value.

insurance policy that has no terrorism exclusion, except for non-certified nuclear, chemical and biological acts of terrorism.

We have an insurance policy that has no terrorism exclusion, except for non-certified nuclear, chemical and biological acts of terrorism.

Our financial condition and results of operations are subject to the risks associated with acts of terrorism and the potential for uninsured losses as the result of any such acts.

Effective November 26, 2002, under this existing coverage, any losses caused by certified acts of terrorism would be partially reimbursed by the United States under a formula established by federal law.

Under this formula, the United States pays 85 % of covered terrorism losses exceeding the statutorily established deductible paid by the insurance provider, and insurers pay 10 % until aggregate insured losses from all insurers reach $ 100 billion in a calendar year.

this formula, the United States pays 85 % of covered terrorism losses exceeding the statutorily established deductible paid by the insurance provider, and insurers pay 10 % until aggregate insured losses from all insurers reach $ 100 billion in a calendar year.

If the aggregate amount of insured losses under this program exceeds $ 100 billion during the applicable period for all insured and insurers combined, then each insurance provider will not be liable for payment of any amount which exceeds the aggregate amount of $ 100 billion.

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30-Year Unsecured Notes 7.25 % 7.36 % 50,000 50,000 2/25/2028

2018 Term Loan (3)

1 Month LIBOR + 110 basis points

2.87 % 250,000 250,000 7/21/2023

30-Year Unsecured Notes 7.25 % 7.36 % 50,000 50,000 2/25/2028

Green Bonds 3.44 % 4.09 % 350,000 350,000 12/29/2030

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(2) No principal amounts are due prior to maturity.

(3) The 2018 Term Loan increased and replaced the 2016 Term Loan (see note 6).

In August 2021, we redeemed $ 300.0 million of our existing unsecured notes that were scheduled to mature in 2022.

As a result of the prepayment, we recognized a loss on extinguishment of debt of $ 12.3 million comprised of a prepayment penalty of $ 11.9 million and the write-off of unamortized loan origination costs of $ 0.4 million.

In April 2020, we used borrowings from our Revolving Credit Facility to prepay all $ 250.0 million of our 4.95 % 10-year unsecured notes without penalty.

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The Green Bonds are senior unsecured obligations of WashREIT and rank equal in right to payment with all other senior unsecured indebtedness of WashREIT.

The proceeds of the sale of the Green Bonds were and will be used to finance or refinance recently completed and future green building and energy efficiency, sustainable water and wastewater management and renewable energy projects (“Eligible Green Projects”).

The proceeds of the sale of the Green Bonds were used to finance or refinance recently completed and future green building and energy efficiency, sustainable water and wastewater management and renewable energy projects.

In the fourth quarter of 2020, we repaid all $ 150.0 million of borrowings on the 2015 Term Loan and all $ 150.0 million of borrowings on the 2020 Term Loan.

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In the event of a change in control of WashREIT, we must offer to prepay the Green Bonds at par.

On April 30, 2019, we entered into a six-month , $ 450.0 million unsecured term loan facility (“2019 Term Loan”), maturing on October 30, 2019 with an option to extend for a six-month period.

The 2019 Term Loan bore interest, at WashREIT’s option, at a rate of either LIBOR plus a margin ranging from 0.75 % to 1.65 % or the base rate plus a margin ranging 0.0 % to 0.65 % (in each case depending upon WashREIT’s credit rating).

The base rate was the highest of the administrative agent’s prime rate, the federal funds rate plus 0.50 % and the daily one-month LIBOR rate plus 1.0 %.

At WashREIT’s election, the 2019 Term Loan had an interest rate of one-week LIBOR plus 100 basis points, based on WashREIT’s current unsecured debt rating.

The 2019 Term Loan was used to fund the acquisition of the Assembly Portfolio (see note 3).

During the third quarter of 2019, we repaid the $ 450.0 million of borrowings on the 2019 Term Loan with proceeds from the sale of the Retail Portfolio (see note 3).

The required principal payments on the unsecured notes and term loans as of December 31, 2021 are as follows (in thousands):

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DERIVATIVE INSTRUMENTS

On September 15, 2015, we entered into two interest rate swap arrangements with a total notional amount of $ 150.0 million to swap the floating interest rate under the $ 150.0 million 2015 Term Loan (see note 6) to an all-in fixed interest rate of 2.72 % starting on October 15, 2015 and extending until the maturity of the 2015 Term Loan on March 15, 2021.

On July 22, 2016, we entered into two forward interest rate swap arrangements with a total notional amount of $ 150.0 million to swap the floating interest rate under the $ 150.0 million 2016 Term Loan (see note 6) to an all-in fixed interest rate of 2.86 %, starting on March 31, 2017 and extending until the scheduled maturity of the 2016 Term Loan on July 21, 2023.

On July 22, 2016, we entered into two forward interest rate swap arrangements with total notional amounts of $ 100.0 million and $ 50.0 million to swap the floating interest rate under the $ 150.0 million 2016 Term Loan (see note 5) to an all-in fixed interest rate of 2.86 %, starting on March 31, 2017 and extending until the scheduled maturity of the 2016 Term Loan on July 21, 2023.

On March 29, 2018, we entered into the $ 250.0 million 2018 Term Loan (see note 5) maturing on July 21, 2023, which increased and replaced the 2016 Term Loan.

The interest rate swap arrangements that had effectively fixed the 2016 Term Loan now effectively fix the interest rate on a $ 150.0 million portion of the 2018 Term Loan at 2.31 %.

The interest rate swap arrangements that had effectively fixed the 2016 Term Loan effectively fixed the interest rate on a $ 150.0 million portion of the 2018 Term Loan at 2.31 %.

On March 29, 2018, we entered into four interest rate swap arrangements with a total notional amount of $ 100.0 million to effectively fix the interest rate on the remaining $ 100.0 million of the 2018 Term Loan at 3.71 %, that commenced on June 29, 2018 and extending until the maturity of the 2018 Term Loan on July 21, 2023.

The $ 250.0 million 2018 Term Loan has an all-in fixed interest rate of 2.87 % (see note 6 and note 7).

In November 2019, we entered into four forward interest rate swap arrangements, each effective as of April 1, 2020 (“Forward Swaps”) with a total notional amount of $ 200.0 million to reduce our exposure to adverse fluctuations in interest rates on future

fixed-rate debt to replace all $ 250.0 million of our 4.95 % 10 -year unsecured notes that were scheduled to mature in October 2020.

In April 2020, we used borrowings from our Revolving Credit Facility to prepay all $ 250.0 million of our 4.95 % 10 -year unsecured notes without penalty.

In September 2020, in conjunction with the entry into the note purchase agreement to issue the Green Bonds, we terminated the Forward Swaps.

At the time of termination, the Forward Swaps had a liability fair value of $ 20.4 million, which will be amortized as interest expense over the 10 -year term of the Green Bonds.

On October 2, 2020, we paid the $ 20.4 million liability associated with the termination of the Forward Swaps.

In December 2020, in connection with the prepayment of our 2015 Term Loan, we terminated interest rate swap agreements with notional amounts in the aggregate of $ 150.0 million (see note 7).

As a result of the termination, the accumulated fair value of the interest rate swaps was reclassified from Accumulated other comprehensive loss to Loss on interest rate derivatives on our consolidated income statements, which resulted in a realized loss of approximately $ 0.6 million.

The interest rate swaps qualify as cash flow hedges and are recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs.

We record the effective portion of changes in fair value of the cash flow hedges in other comprehensive income.

The resulting unrealized loss on the effective portions of the cash flow hedges was the only activity in other comprehensive income (loss) during the periods presented in our consolidated financial statements.

We assess the effectiveness of our cash flow hedges both at inception and on an ongoing basis.

The cash flow hedges were highly effective for all periods presented.

The $ 250.0 million 2018 Term Loan had an all-in fixed interest rate of 2.87 % (see note 5 and note 6).

In the second quarter of 2021 we determined that the hedged transactions for five interest rate swap arrangements with an aggregate notional value of $ 150.0 million were probable not to occur and that these interest swap arrangements were no longer effective cash flow hedges as of June 30, 2021 due to our intention to prepay a $ 150.0 million portion of the 2018 Term Loan.

As a result, we recognized a loss of $ 5.8 million for the second quarter of 2021, which was recorded to Loss on interest rate derivatives on our consolidated statements of operations.

On September 27, 2021, we prepaid the $ 150.0 million portion of the 2018 Term Loan (see note 5).

In connection with the prepayment, we terminated the five interest rate swap arrangements with an aggregate notional value of $ 150.0 million.

Our remaining interest rate swap arrangement with a notional amount of $ 100.0 million is recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs.

We record the effective portion of changes in fair value of the cash flow hedge in Other comprehensive income (loss).

We assess the effectiveness of a cash flow hedge both at inception and on an ongoing basis.

If a cash flow hedge is no longer expected to be effective, hedge accounting is discontinued.

Hedge ineffectiveness of our cash flow hedges is recorded in earnings.

The fair values of the interest rate swaps as of December 31, 2021 and 2020, are as follows (in thousands):

Amount Effective Date Fair Value

Derivative Assets (Liabilities)

Derivative Liabilities

Derivative Instrument Maturity Date 2021 2020

Interest rate swaps $ 150,000 October 15, 2015 March 15, 2021 $ — $ ( 62 )

Interest rate swaps $ 100,000 March 31, 2017 July 21, 2023 $ ( 821 ) $ ( 2,671 )

Interest rate swaps 50,000 March 31, 2017 July 21, 2023 — ( 1,338 )

Interest rate swaps 100,000 June 29, 2018 July 21, 2023 — ( 6,246 )

Interest rate swaps 200,000 April 1, 2020 April 1, 2030 — 3,724

$ ( 821 ) $ ( 10,255 )

We record interest rate swaps on our consolidated balance sheets with prepaid expenses and other assets when in a net asset position, and with accounts payable and other liabilities when in a net liability position.

The interest rate swaps have been effective since inception.

The current interest rate swaps have been effective since inception.

The gains or losses on the effective swaps are recognized in other comprehensive income, as follows (in thousands):

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2021 2020 2019

Unrealized (loss) gain on interest rate hedges $ ( 33,025 ) $ ( 8,016 ) $ 420

Unrealized gain (loss) on interest rate hedges $ 3,673 $ ( 33,025 ) $ ( 8,016 )

Amounts reported in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt.

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The only assets or liabilities we had at December 31, 2021 and 2020 that are recorded at fair value on a recurring basis are the assets held in the Supplemental Executive Retirement Plan ("SERP"), which primarily consists of investments in mutual funds, and the interest rate swaps (see note 7).

We base the valuations related to the SERP on assumptions derived from significant other observable inputs and accordingly these valuations fall into Level 2 in the fair value hierarchy.

We base the valuations related to the SERP on assumptions derived from significant other observable inputs and accordingly

these valuations fall into Level 2 in the fair value hierarchy.

The valuation of the interest rate swaps is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each interest rate swap.

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We estimate the fair value of the notes payable by discounting the contractual cash flows at a rate equal to the relevant treasury rates (with respect to the timing of each cash flow) plus credit spreads derived using the relevant securities’ market prices.

We classify these fair value measurements as Level 3 as we use significant unobservable inputs and management judgment due to the absence of quoted market prices.

We classify these fair value measurements as Level 3 as we use

significant unobservable inputs and management judgment due to the absence of quoted market prices.

As of December 31, 2021 and 2020, the carrying values and estimated fair values of our financial instruments were as follows (in thousands):

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Restricted cash 620 620 593 593

Mortgage notes payable — — 47,074 47,899

Line of credit payable — — 42,000 42,000

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Such performance measures will consist of one or more financial performance measures and, if determined by the Compensation Committee, individual performance measures.

Upon or following completion of a performance period, the degree of achievement of each financial performance measure will be determined by the Compensation Committee.

Upon or following completion of a performance period, the degree of achievement of each performance measure will be determined by the Compensation Committee.

The degree of achievement of any individual financial performance measures will be determined by the Compensation Committee in its discretion with respect to the Chief Executive Officer, and by the Chief Executive Officer or other immediate supervisor in his or her discretion with respect to all other participants (subject to final approval by the Compensation Committee), and the Compensation Committee will evaluate the degree of achievement of the individual performance measures on a scale of below 1 (below threshold), 1 (threshold), 2 (target) or 3 (high) or any fractional number between 1 and 3.

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Senior Vice President 35 % 65 % 115 %

If a Change in Control (as defined in the Officer STIP) occurs during a performance period while the participant is employed, the participant will receive a prorated award under the Officer STIP calculated based on the actual levels of achievement of the prorated performance goals as of the date of the Change in Control.

prorated performance goals as of the date of the Change in Control.

Under the Officer LTIP, as revised, all named executive officers will have the opportunity to receive awards based on (i) the achievement of performance measures, which will be established for each performance period, and (ii) continued employment with the Company.

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For performance periods beginning prior to January 1, 2018, performance was evaluated based 50 % on absolute total shareholder return (“TSR”) and 50 % on relative TSR over a three-year evaluation period with a new three-year period initiating under the existing plan each year.

During the first quarter of 2018, we amended the Prior LTIP for executive officers to eliminate the absolute TSR component and only utilize relative TSR in the measurement of market condition performance.

During the first quarter of 2018, we amended the Prior LTIP for executive officers to eliminate the absolute TSR component and only utilize relative TSR

in the measurement of market condition performance.

Under the amended Prior LTIP, relative TSR was evaluated 50 % relative to a defined population of peer companies and 50 % relative to the FTSE NAREIT Diversified Index.

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The unrestricted shares vest immediately at the end of the three-year performance period, and the restricted shares vest over a one-year period commencing on the January 1 following the end of the three-year performance period.

We recognize compensation expense ratably (over three years for the 75 % unrestricted shares and over four years for the 25 % restricted shares) based on the grant date fair value, as determined using a Monte Carlo simulation, and regardless of whether the market conditions are achieved and the awards ultimately vest.

We recognize compensation expense for the Prior LTIP ratably (over three years for the 75 % unrestricted shares and over four years for the 25 % restricted shares) based on the grant date fair value, as determined using a Monte Carlo simulation, and regardless of whether the market conditions are achieved and the awards ultimately vest.

We use a binomial model which employs the Monte Carlo method as of the grant date to determine the fair value of the Officer LTIP awards.

For three-year performance periods commencing on or after January 1, 2018, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting) and relative to the FTSE NAREIT Diversified Index ( 50 % weighting).

The model evaluates the awards for changing total shareholder return over the term of the vesting, relative to the peer companies and relative to the FTSE NAREIT Diversified Index, and uses random simulations that are based on past stock characteristics as well as dividend growth and other factors for WashREIT and each of the peer companies.

For three-year performance periods commencing on or after January 1, 2021, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting), relative to the FTSE Residential Index ( 42.5 % weighting) and the FTSE Office Index ( 7.5 % weighting).

The model evaluates the awards for changing total shareholder return over the term of the vesting, relative to the peer companies and relative to the FTSE indexes, and uses random simulations that are based on past stock characteristics as well as dividend growth and other factors for WashREIT and each of the peer companies.

For the three-year performance periods commencing between January 1, 2018 and December 31, 2020, the market condition performance measurement is based on total shareholder return relative to a defined population of peer companies ( 50 % weighting) and relative to the FTSE NAREIT Diversified Index ( 50 % weighting).

For three-year performance periods commencing prior to January 1, 2018, the market condition performance measurement was based on total shareholder return on an absolute basis ( 50 % weighting) and relative to a defined population of peer companies ( 50 % weighting).

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3 and 4 years

Share price at grant date $ 23.20 $ 31.50 $ 23.00

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(3) Expected term based on the market condition performance period.

population of peer companies and from 22 % to 46 % for the 50 % of the LTIP based on TSR relative to the FTSE NAREIT Diversified Index.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2021 ranged from approximately 37 % to 78 % for the 50 % of the LTIP based on TSR relative to a defined population of peer companies and from 38 % to 80 % for the 50 % of the LTIP based on TSR relative to the FTSE indexes.

The calculated grant date fair value as a percentage of base salary for the officers for the three-year performance period that commenced in 2020 ranged from approximately 20 % to 42 % for the 50 % of the LTIP based on TSR relative to a defined population of peer companies and from 22 % to 46 % for the 50 % of the LTIP based on TSR relative to the FTSE NAREIT Diversified Index.

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Restricted and Unrestricted Shares with Market Conditions

Stock based awards with market conditions under the LTIP and Prior LTIP were granted in 2020, 2019 and 2018 with fair market values, as determined using a Monte Carlo simulation, as follows (in thousands):

2020 Awards 2019 Awards 2018 Awards

Unrestricted (1)

Restricted Unrestricted Restricted Unrestricted

Stock based awards with market conditions under the LTIP and Prior LTIP were awarded in 2021, 2020 and 2019 with fair market values, as determined using a Monte Carlo simulation, as follows (in thousands):

2021 Awards (1)

2020 Awards (1)

Unrestricted Unrestricted Restricted Unrestricted

Relative Peer TSR $ 951 $ 510 $ 184 $ 552

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The unamortized value of these awards with market conditions as of December 31, 2021 was as follows (in thousands):

2020 Awards 2019 Awards 2018 Awards

Unrestricted Restricted Unrestricted Restricted Unrestricted

2021 Awards (1)

2020 Awards (1)

Unrestricted Unrestricted Restricted Unrestricted

Relative Peer TSR $ 692 $ 177 $ 46 $ —

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(1) The 2020 Awards were granted under the 2020 LTIP, whereby all of the shares vest immediately at the end of the three-year performance period.

The 2019 and 2018 Awards were granted under the Prior LTIP, whereby the unrestricted shares ( 75 %) vest immediately at the end of the three-year performance period and the restricted shares ( 25 %) vest over a one-year period commencing on the January 1 following the end of the three-year performance period.

(1) The 2021 and 2020 Awards were granted under the Officer LTIP, whereby all of the shares vest immediately at the end of the three-year performance period.

The 2019 Awards were granted under the Prior LTIP, whereby the unrestricted shares ( 75 %) vest immediately at the end of the three-year performance period and the restricted shares ( 25 %) vest over a one-year period commencing on the January 1 following the end of the three-year performance period.

(2) The performance conditions for the 2021 awards were evaluated based on 50 % on TSR relative to a defined population of peer companies and 50 % on TSR relative to the FTSE Multifamily and Office indexes.

The performance conditions for the 2020 and 2019 awards were evaluated based on 50 % on TSR relative to a defined population of peer companies and 50 % on TSR relative to the FTSE NAREIT Diversified Index.

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2021 2020 2019

(Loss) income from continuing operations $ ( 15,680 ) $ 29,132 $ 1,153

Allocation of distributed earnings to unvested restricted share awards to continuing operations ( 545 ) ( 125 ) ( 526 )

Adjusted (loss) income from continuing operations ( 16,225 ) 29,007 627

Loss from continuing operations $ ( 53,140 ) $ ( 40,318 ) $ ( 4,253 )

Allocation of earnings to unvested restricted share awards ( 393 ) ( 545 ) ( 125 )

Adjusted loss from continuing operations ( 53,533 ) ( 40,863 ) ( 4,378 )

Income from discontinued operations, including gain on sale of real estate 69,524 24,638 387,803

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Adjusted income from discontinued operations 69,524 24,638 385,966

Adjusted net (loss) income $ ( 16,225 ) $ 381,588 $ 25,104

Weighted average shares outstanding – basic 82,348 80,257 78,960

Effect of dilutive securities:

Operating partnership units — 12 12

Employee restricted share awards — 66 70

Weighted average shares outstanding – diluted 82,348 80,335 79,042

Adjusted net income (loss) $ 15,991 $ ( 16,225 ) $ 381,588

Weighted average shares outstanding – basic and diluted 84,544 82,348 80,257

Earnings per common share, basic:

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Discontinued operations 0.82 0.30 4.81

Basic net (loss) income per common share $ ( 0.20 ) $ 4.75 $ 0.32

Basic net income (loss) per common share (1)

$ 0.19 $ ( 0.20 ) $ 4.75

Earnings per common share, diluted:

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Discontinued operations 0.82 0.30 4.81

Diluted net (loss) income per common share $ ( 0.20 ) $ 4.75 $ 0.32

Diluted net income (loss) per common share (1)

$ 0.19 $ ( 0.20 ) $ 4.75

Dividends declared per common share $ 0.94 $ 1.20 $ 1.20

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(1) Earnings per share may not sum due to rounding

COMMITMENTS AND CONTINGENCIES

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SEGMENT INFORMATION

We evaluate real estate performance and allocate resources by property type through two reportable segments:

office and multifamily.

Office properties provide office space for various types of businesses and professions.

Multifamily properties provide rental housing for individuals and families throughout the Washington metro region.

We have eight retail properties that do not meet the qualitative or quantitative criteria for a reportable segment and are classified as “Corporate and other” in our segment disclosure tables.

We evaluate performance based upon net operating income of the combined properties in each segment.

Our reportable operating segments are consolidations of similar properties.

We operate in a single reportable segment which includes the ownership, development, redevelopment and acquisition of apartment communities.

Each of our operating properties, including our remaining office property, do not meet the criteria to be considered separate operating segments on a stand-alone basis.

We do not distinguish or group our consolidated operations based on size, type or geography.

All but one community is within the Washington, DC metro region and no community comprises more than 10% of consolidated revenues.

Further, our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents.

As a result, our operating properties are aggregated into a single reportable segment:

Prior to the end of the second quarter of 2021, we had two reportable segments:

office and residential.

During the third quarter

of 2021, we closed on the sales of the Office Portfolio and the Retail Portfolio (see note 3), and following such sales, we have one remaining office property, Watergate 600, which does not meet the criteria for a reportable segment, and has been classified within “Other” on our segment disclosure tables.

We evaluate performance based upon net operating income of the combined properties in the segment.

Our reportable operating segment is a consolidation of similar properties.

GAAP requires that segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment’s performance.

4 unchanged sentences

Multifamily 89 % 82 % 71 %

Office 45 % 53 % 61 %

Corporate and other 6 % 6 % 6 %

Other 11 % 18 % 29 %

The percentage of income producing real estate assets classified as held and used, at cost, for each of the reportable operating segments as of December 31, 2021 and 2020 was as follows:

Multifamily 91 % 90 %

Office 41 % 45 %

Corporate and other 5 % 5 %

The accounting policies of each of the segments are the same as those described in note 2.

Other 9 % 10 %

The following tables present revenues, net operating income, capital expenditures and total assets for the three years ended December 31, 2021 from these segments, and reconciles net operating income of reportable segments to net (loss) income as reported (in thousands):

Year Ended December 31, 2020

Office Multifamily Corporate

and Other (1)

Twelve Months Ended December 31, 2021

Residential Other (1), (3)

Real estate rental revenue $ 150,965 $ 18,186 $ 169,151

1 unchanged sentence

Net operating income $ 95,438 $ 12,931 $ 108,369

Property management expenses ( 6,133 )

General and administrative expenses ( 27,538 )

Transformation costs ( 6,635 )

Depreciation and amortization ( 72,656 )

General and administrative ( 23,951 )

Interest expense ( 34,063 )

1 unchanged sentence

Loss on extinguishment of debt ( 12,727 )

Loss on sale of real estate ( 15,009 )

Net loss $ ( 15,680 )

Other income 4,109

Discontinued operations:

Income from properties sold or held for sale 23,083

Gain on sale of real estate, net 46,441

Net income $ 16,384

Capital expenditures $ 27,953 $ 4,506 $ 32,459

Total assets $ 1,455,328 $ 420,666 $ 1,875,994

Year Ended December 31, 2019

Office Multifamily Corporate

and Other (1)

Twelve Months Ended December 31, 2020

Residential Other (2), (3)

Real estate rental revenue $ 145,138 $ 30,866 $ 176,004

1 unchanged sentence

Net operating income $ 92,286 $ 20,736 $ 113,022

Property management expenses ( 6,145 )

General and administrative expenses ( 23,951 )

Depreciation and amortization ( 70,336 )

General and administrative ( 26,068 )

Real estate impairment ( 8,374 )

Loss on sale of real estate ( 15,009 )

Interest expense ( 37,305 )

Gain on sale of real estate 59,961

Loss on interest rate derivatives ( 560 )

Loss on extinguishment of debt ( 34 )

Discontinued operations:

Income from properties sold or held for sale 24,638

Gain on sale of real estate 339,024

Loss on extinguishment of debt ( 764 )

Net income $ 383,550

Net loss $ ( 15,680 )

Capital expenditures $ 24,675 $ 33,642 $ 58,317

Total assets $ 1,333,235 $ 1,076,583 $ 2,409,818

Year Ended December 31, 2018

Office Multifamily Corporate

and Other (1)

Twelve Months Ended December 31, 2019

Residential Other (2), (3)

Real estate rental revenue $ 126,197 $ 50,551 $ 176,748

1 unchanged sentence

Net operating income $ 81,660 $ 31,762 $ 113,422

Property management expenses ( 6,098 )

General and administrative expenses ( 26,068 )

Depreciation and amortization ( 83,362 )

General and administrative ( 22,089 )

Interest expense ( 50,501 )

Real estate impairment ( 8,374 )

Loss on extinguishment of debt ( 1,178 )

Gain on sale of real estate 59,961

Interest expense ( 53,734 )

Discontinued operations:

Income from properties sold or held for sale 49,543

Gain on sale of real estate 339,024

Loss on extinguishment of debt ( 764 )

Net income $ 383,550

2 unchanged sentences

______________________________

(1) Includes the retail properties not classified as discontinued operations:

Takoma Park, Westminster, Concord Centre, Chevy Chase Metro Plaza, 800 S.

Washington Street, Randolph Shopping Center, Montrose Shopping Center and Spring Valley Village, and total assets and capital expenditures include all retail properties, including those classified as discontinued operations.

(1) Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment.

(2) Other represents Watergate 600, an office property that does not meet the qualitative or quantitative criteria for a reportable segment and office properties sold during 2020:

John Marshall II, Monument II and 1227 25th Street.

(3) Total capital expenditures include office and retail properties classified as discontinued operations and total assets include office and retail properties classified as discontinued operations and corporate assets.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

While the Company previously owned a combination of commercial and residential assets, we disposed of all but one of our commercial assets in 2021.

These commercial assets are classified as discontinued operations as of December 31, 2021.

Unaudited financial data by quarter in each of the years ended December 31, 2021 and 2020 were as follows (in thousands, except for per share data):

2 unchanged sentences

Real estate rental revenue $ 40,607 $ 41,297 $ 42,499 $ 44,748

Income (loss) from continuing operations $ 1,719 $ ( 5,406 ) $ ( 956 ) $ ( 11,037 )

Net income (loss) $ 1,719 $ ( 5,406 ) $ ( 956 ) $ ( 11,037 )

Income (loss) from continuing operations per share

Loss from continuing operations $ ( 7,277 ) $ ( 16,737 ) $ ( 22,330 ) $ ( 6,796 )

Income from operations of properties sold or held for sale $ 6,130 $ 9,745 $ 7,208 $ —

Net (loss) income $ ( 1,147 ) $ ( 6,992 ) $ 31,319 $ ( 6,796 )

Loss from continuing operations per share

Basic $ ( 0.09 ) $ ( 0.20 ) $ ( 0.26 ) $ ( 0.08 )

Diluted $ ( 0.09 ) $ ( 0.20 ) $ ( 0.26 ) $ ( 0.08 )

Net income (loss) per share

Net (loss) income per share

Basic $ ( 0.02 ) $ ( 0.08 ) $ 0.37 $ ( 0.08 )

1 unchanged sentence

Real estate rental revenue $ 45,743 $ 43,757 $ 43,716 $ 42,788

(Loss) income from continuing operations $ ( 10,443 ) $ ( 6,191 ) $ ( 8,432 ) $ 54,198

Net (loss) income $ ( 4,405 ) $ 987 $ 332,770 $ 54,198

(Loss) income from continuing operations per share

Loss from continuing operations $ ( 5,676 ) $ ( 11,995 ) $ ( 7,043 ) $ ( 15,604 )

Income from operations of properties sold or held for sale $ 7,395 $ 6,589 $ 6,087 $ 4,567

Net income (loss) $ 1,719 $ ( 5,406 ) $ ( 956 ) $ ( 11,037 )

Loss from continuing operations per share

Basic $ ( 0.07 ) $ ( 0.15 ) $ ( 0.09 ) $ ( 0.19 )

Diluted $ ( 0.07 ) $ ( 0.15 ) $ ( 0.09 ) $ ( 0.19 )

Net (loss) income per share

Net income (loss) per share

Basic $ 0.02 $ ( 0.07 ) $ ( 0.01 ) $ ( 0.13 )

2 unchanged sentences

(1) With regard to per share calculations, the sum of the quarterly results may not equal full year results due to rounding.

(2) The second quarter of 2020 includes loss on sale of real estate of $ 7.5 million.

The fourth quarter of 2020 includes loss on sale of real estate of $ 7.5 million.

The second quarter of 2019 includes a loss on sale of real estate of $ 1.0 million.

The third and fourth quarters of 2019 include gains on sale of real estate of $ 339.0 million and $ 61.0 million, respectively.

(2) The third quarter of 2021 includes net gain on sales of real estate of $ 46.4 million.

The second and fourth quarters of 2020 include loss on sale of real estate of $ 7.5 million and $ 7.5 million respectively.

SHAREHOLDERS' EQUITY

On May 4, 2018, we entered into eight separate equity distribution agreements (collectively, the “2018 Equity Distribution Agreements”) with each of Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.

On February 17, 2021, we entered into separate amendments to each of our existing equity distribution agreements (“Original Equity Distribution Agreements”) with each of Wells Fargo Securities, LLC, BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.

Morgan Securities LLC, KeyBanc Capital Markets Inc.

and Truist Securities Inc., (f/k/a SunTrust Robinson Humphrey, Inc.) relating to the issuance of up to $ 250.0 million of our common shares from time to time under our at-the-market program.

and Truist Securities, Inc.

(f/k/a SunTrust Robinson Humphrey, Inc.), each dated May 4, 2018 (collectively, as amended, the “Equity Distribution Agreements”).

Also on February 17, 2021, we entered into a separate equity distribution agreement with BTIG, LLC on the same terms as the Amended Equity Distribution Agreements (the “BTIG Equity Distribution Agreement”).

On September 22, 2021, BTIG, LLC notified us that it was terminating the BTIG Equity Distribution Agreement, effective as of September 27, 2021.

Pursuant to the Equity Distribution Agreements, we may sell, from time to time, up to an aggregate price of $ 550.0 million of our common shares of beneficial interest, $ 0.01 par value per share.

Issuances of our common shares are made at market prices prevailing at the time of issuance.

We may use net proceeds from the issuance of common shares under this program for general business purposes, including, without limitation, working capital, the acquisition, renovation, expansion, improvement, development or redevelopment of income producing properties or the repayment of debt.

Our issuances and net proceeds on the 2018 Equity Distribution Agreements for the three years ended December 31, 2020 were as follows (in thousands, except per share data):

Our issuances and net proceeds on the Equity Distribution Agreements in 2020 and 2021 and the Original Equity Distribution Agreements in 2020 and 2019, respectively, for the three years ended December 31, 2021 were as follows (in thousands, except per share data):

Year Ended December 31,

3 unchanged sentences

Net proceeds $ 40,462 $ 48,355 $ 54,916

Subsequent to December 31, 2021, we issued an additional 1.0 million shares at a weighted average price per share of $ 26.27 for net proceeds of $ 26.9 million.

We have a dividend reinvestment program, whereby shareholders may use their dividends and optional cash payments to purchase common shares.

The common shares sold under this program may either be common shares issued by us or common

shares purchased in the open market.

The common shares sold under this program may either be common shares issued by us or common shares purchased in the open market.

Net proceeds under this program are used for general corporate purposes.

19 unchanged sentences

Deferred leasing incentives amortization 85 536 932

SUBSEQUENT EVENT

On February 1, 2022, we closed on the acquisition of Carlyle of Sandy Springs, a 389 -unit residential property in Atlanta, Georgia, for a contract purchase price of $ 105.6 million.

VALUATION AND QUALIFYING ACCOUNTS

6 unchanged sentences

2019 $ 1,419 $ — $ ( 17 ) $ 1,402

Initial Cost (a) Net Improvements (Retirement) since Acquisition Gross Amounts at Which Carried at December 31, 2020 Accumulated Depreciation at December 31, 2020

Properties Location Land Buildings and Improvements Land Buildings and Improvements Total (b) Year of Construction Date of Acquisition

Feet Units Depreciation Life (c)

Multifamily Properties

Initial Cost (a) Net Improvements (Retirement) since Acquisition Gross Amounts at Which Carried at December 31, 2021 Accumulated Depreciation at December 31, 2021 (b)

Properties Location Land Buildings and Improvements Land Buildings and Improvements (b) Total (c) Year of Construction Date of Acquisition

Feet Homes Depreciation Life (d)

Residential Properties

3801 Connecticut Avenue Washington, D.C.

2 unchanged sentences

Park Adams Virginia 287,000 1,654,000 14,440,000 287,000 16,094,000 16,381,000 12,380,000 1959 Jan 1969 173,000 200 35 years

The Ashby at McLean (e) Virginia 4,356,000 17,102,000 28,435,000 4,356,000 45,537,000 49,893,000 30,928,000 1982 Aug 1996 274,000 256 30 years

The Ashby at McLean (f) Virginia 4,356,000 17,102,000 30,455,000 4,356,000 47,557,000 51,913,000 32,895,000 1982 Aug 1996 274,000 256 30 years

Bethesda Hill Apartments Maryland 3,900,000 13,412,000 16,907,000 3,900,000 30,319,000 34,219,000 23,045,000 1986 Nov 1997 225,000 195 30 years

1 unchanged sentence

The Clayborne Virginia 269,000 — 31,709,000 699,000 31,279,000 31,978,000 18,900,000 2008 Jun 2003 60,000 74 26 years

The Kenmore Washington, D.C.

Kenmore Apartments Washington, D.C.

28,222,000 33,955,000 20,533,000 28,222,000 54,488,000 82,710,000 22,116,000 1948 Sep 2008 268,000 374 30 years

2 unchanged sentences

14,684,000 62,069,000 1,886,000 14,684,000 63,955,000 78,639,000 17,993,000 2011 Feb 2014 173,000 216 30 years

The Paramount (e) Virginia 8,568,000 38,716,000 3,512,000 8,568,000 42,228,000 50,796,000 12,922,000 1984 Oct 2013 141,000 135 30 years

The Paramount (f) Virginia 8,568,000 38,716,000 3,769,000 8,568,000 42,485,000 51,053,000 14,562,000 1984 Oct 2013 141,000 135 30 years

The Wellington Virginia 30,548,000 116,563,000 20,098,000 30,548,000 136,661,000 167,209,000 33,409,000 1960 Jul 2015 600,000 711 30 years

Trove (d) Virginia 15,000,000 — 117,215,000 15,000,000 117,215,000 132,215,000 3,261,000 2020 Jul 2015 293,000 401 30 years

Trove Virginia 15,000,000 — 118,544,000 15,000,000 118,544,000 133,544,000 9,919,000 2020 Jul 2015 293,000 401 30 years

Riverside Apartments Virginia 38,924,000 184,854,000 43,731,000 38,924,000 228,585,000 267,509,000 51,616,000 1971 May 2016 1,001,000 1,222 30 years

Riverside Apartments land parcel (d) Virginia 15,968,000 — 12,658,000 — 28,626,000 28,626,000 — n/a May 2016 — n/a n/a

Riverside Apartments land parcel (e) Virginia 15,968,000 — 13,803,000 — 29,771,000 29,771,000 — n/a May 2016 — n/a n/a

Assembly Alexandria Virginia 23,942,000 93,672,000 9,665,000 23,942,000 103,337,000 127,279,000 10,725,000 1990 Jun 2019 437,000 532 30 years

6 unchanged sentences

Cascade at Landmark Virginia 12,289,000 56,235,000 3,029,000 12,289,000 59,264,000 71,553,000 6,248,000 1988 Jun 2019 273,000 277 30 years

The Oxford Georgia 4,798,000 42,122,000 402,000 4,798,000 42,524,000 47,322,000 736,000 1999 Aug 2021 228,000 240 30 years

Assembly Eagles Landing Georgia 16,117,000 86,460,000 — 16,117,000 86,460,000 102,577,000 493,000 2000 Nov 2021 534,000 490 30 years

$ 290,436,000 $ 1,026,161,000 $ 504,948,000 $ 276,872,000 $ 1,544,673,000 $ 1,821,545,000 $ 377,011,000 6,859,000 7,789

Office Buildings

1901 Pennsylvania Avenue Washington, D.C.

$ 892,000 $ 3,481,000 $ 21,602,000 $ 892,000 $ 25,083,000 $ 25,975,000 $ 19,521,000 1960 May 1977 101,000 28 years

515 King Street Virginia 4,102,000 3,931,000 9,319,000 4,102,000 13,250,000 17,352,000 7,709,000 1966 Jul 1992 75,000 50 years

1220 19th Street Washington, D.C.

7,803,000 11,366,000 18,609,000 7,803,000 29,975,000 37,778,000 20,087,000 1976 Nov 1995 103,000 30 years

1600 Wilson Boulevard Virginia 6,661,000 16,742,000 31,803,000 6,661,000 48,545,000 55,206,000 31,854,000 1973 Oct 1997 171,000 30 years

Silverline Center (e) Virginia 12,049,000 71,825,000 104,041,000 12,049,000 175,866,000 187,915,000 112,929,000 1972 Nov 1997 552,000 30 years

Courthouse Square Virginia — 17,096,000 10,248,000 — 27,344,000 27,344,000 18,712,000 1979 Oct 2000 121,000 30 years

2000 M Street Washington, D.C.

— 61,101,000 42,983,000 — 104,084,000 104,084,000 44,470,000 1971 Dec 2007 233,000 30 years

1140 Connecticut Avenue Washington, D.C.

25,226,000 50,495,000 19,800,000 25,226,000 70,295,000 95,521,000 27,200,000 1966 Jan 2011 184,000 30 years

Fairgate at Ballston Virginia 17,750,000 29,885,000 8,289,000 17,750,000 38,174,000 55,924,000 14,375,000 1988 Jun 2012 144,000 30 years

Army Navy Building Washington, D.C.

30,796,000 39,315,000 13,116,000 30,796,000 52,431,000 83,227,000 15,831,000 1912 Mar 2014 108,000 30 years

1775 Eye Street, NW Washington, D.C.

48,086,000 51,074,000 20,742,000 48,086,000 71,816,000 119,902,000 20,606,000 1964 May 2014 189,000 30 years

Watergate 600 Washington, D.C.

$ 45,981,000 $ 78,325,000 $ 44,959,000 $ 45,751,000 $ 123,514,000 $ 169,265,000 $ 24,915,000 1972 Apr 2017 295,000 30 years

Arlington Tower Virginia 63,970,000 156,525,000 16,028,000 63,970,000 172,553,000 236,523,000 22,178,000 1980 Jan 2018 390,000 30 years

$ 263,316,000 $ 591,161,000 $ 360,482,000 $ 263,086,000 $ 951,873,000 $ 1,214,959,000 $ 374,540,000 2,665,000

Initial Cost (a) Net Improvements (Retirement) since Acquisition Gross Amounts at Which Carried at December 31, 2020 Accumulated Depreciation at December 31, 2020

Properties Location Land Buildings

Improvements Land Buildings

Improvements Total (b) Year of

Construction Date of

Feet Units Depreciation

Retail Centers

Westminster Maryland $ 519,000 $ 1,775,000 $ 10,022,000 $ 519,000 $ 11,797,000 $ 12,316,000 $ 8,938,000 1969 Sep 1972 150,000 37 years

Concord Centre Virginia 413,000 850,000 7,628,000 413,000 8,478,000 8,891,000 4,353,000 1960 Dec 1973 75,000 33 years

Takoma Park (e) Maryland 415,000 1,084,000 302,000 366,000 1,435,000 1,801,000 1,210,000 1962 Jul 1963 51,000 50 years

Chevy Chase Metro Plaza Washington, D.C.

1,549,000 4,304,000 8,438,000 1,549,000 12,742,000 14,291,000 8,743,000 1975 Sep 1985 49,000 50 years

Washington Street Virginia 2,904,000 5,489,000 6,154,000 2,904,000 11,643,000 14,547,000 6,562,000 1955 Jun 1998 46,000 30 years

Randolph Shopping Center Maryland 4,928,000 13,025,000 1,436,000 4,928,000 14,461,000 19,389,000 7,369,000 1972 May 2006 83,000 30 years

Montrose Shopping Center (e) Maryland 11,612,000 22,410,000 2,604,000 11,020,000 25,606,000 36,626,000 12,723,000 1970 May 2006 151,000 30 years

Spring Valley Village Washington, D.C.

10,836,000 32,238,000 12,760,000 10,836,000 44,998,000 55,834,000 8,851,000 1941 Oct 2014 94,000 30 years

$ 33,176,000 $ 81,175,000 $ 49,344,000 $ 32,535,000 $ 131,160,000 $ 163,695,000 $ 58,749,000 699,000

Total $ 336,417,000 $ 1,104,486,000 $ 549,907,000 $ 322,623,000 $ 1,668,187,000 $ 1,990,810,000 $ 401,926,000 7,154,000 7,789

1 unchanged sentence

a) The purchase cost of real estate investments has been divided between land and buildings and improvements on the basis of management’s determination of the fair values.

b) At December 31, 2020, total land, buildings and improvements are carried at $ 1,920.0 million for federal income tax purposes.

c) The useful life shown is for the main structure.

b) Excludes the right of use asset and associated accumulated depreciation for our corporate office operating lease of $ 4.6 million and $ 0.6 million, respectively.

c) At December 31, 2021, total land, buildings and improvements are carried at $ 1,157.5 million for federal income tax purposes.

d) The useful life shown is for the main structure.

Buildings and improvements are depreciated over various useful lives ranging from 3 to 40 years.

d) As of December 31, 2020, WashREIT had under development multifamily properties, Trove and Riverside Apartments land parcel.

The value not yet placed into service at December 31, 2020 was $ 7.1 million and $ 28.6 million, respectively.

e) As of December 31, 2020, WashREIT had investments in various development, redevelopment and renovation projects, including The Ashby at McLean, Montrose Shopping Center, Silverline Center, Takoma Park and The Paramount.

e) As of December 31, 2021, WashREIT had one residential property under development, the Riverside Apartments land parcel.

The value not yet placed into service at December 31, 2021 was $ 29.8 million.

f) As of December 31, 2021, WashREIT had investments in various development, redevelopment and renovation projects, including The Ashby at McLean and The Paramount.

The total value of these projects, which has not yet been placed in service, is $ 0.8 million at December 31, 2021.

25 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures