ELME

SEC Filing Summary: Washington Real Estate Investment Trust (WRIT)

Business Context and Reporting Period

Company: Washington Real Estate Investment Trust (WRIT), a Maryland REIT focused on the Washington metro region.
Filing Type: Form 10-Q (Unaudited Quarterly Report)
Period Ended: June 30, 2009
Business Overview: WRIT owns and develops a diversified portfolio of 92 properties, including office, medical office, retail, multifamily, and industrial/flex centers. The company maintains a strategy of regional focus and conservative capital management.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Rental revenue increased 11.7% quarter-over-quarter and 12.0% year-to-date, driven primarily by non-core properties (acquisitions and developments placed in service in 2008) adding approximately 1.1 million square feet.
• Core Performance: Core property revenue remained relatively flat, with a slight decline due to lower occupancy and higher bad debt provisions, offset by higher rental rates.
• Occupancy: Overall economic occupancy rose to 92.9% in Q2 2009 from 92.3% in Q2 2008. This was driven by a significant increase in the multifamily segment (90.6% vs. 80.1%), partially offset by declines in office, medical office, and industrial segments.
• Discontinued Operations: Net income included a $6.7 million gain on the sale of the Avondale multifamily property in May 2009. In the prior year period, a $15.3 million gain was recognized on the sale of two industrial properties.
• Debt Management: The company repurchased $89.4 million of its 3.875% convertible notes during the six-month period, resulting in a $7.1 million gain on extinguishment of debt. Total debt decreased slightly due to these repurchases and line of credit paydowns.

Guidance, Outlook, and Risks

• Capital Requirements: Management expects modest capital requirements for 2009, including $30–$40 million for portfolio investment, $15 million for first-generation tenant improvements, and $19.5–$50 million for acquisitions.
• Liquidity: The company maintains $337 million in unsecured credit facilities, with $261.1 million available as of June 30, 2009. Cash flow from operations is expected to fund dividends and routine capital needs.
• Market Risks: The filing highlights risks associated with the national economic recession, including higher vacancy rates, increased bad debt provisions, and potential difficulty in refinancing debt or accessing capital markets on favorable terms.
• Accounting Changes: The adoption of FSP 14-1 regarding convertible debt accounting resulted in higher interest expense and lower reported net income compared to prior periods calculated under old standards.

Investor Verification Checklist

• Debt Maturities: Verify the schedule of debt maturities, specifically the $100 million term loan due November 2011 and the $150 million 5.95% notes due June 2011, to assess refinancing risk.
• Core Occupancy Trends: Monitor the decline in core economic occupancy across commercial segments (Office, Medical, Industrial) to gauge the impact of the economic downturn on the existing portfolio.
• Bad Debt Provisions: Review the increasing trend in provisions for doubtful accounts ($3.1 million YTD 2009 vs. $2.1 million YTD 2008) as an indicator of tenant financial stress.
• Convertible Note Repurchases: Confirm the remaining balance of the 3.875% convertible notes ($154.6 million) and the potential for further repurchases or conversion.
• Subsequent Events: Note the post-period sale of Tech 100 and Brandywine Center and the prepayment of a $50 million mortgage in July 2009.