SEC Filing Summary: Washington Real Estate Investment Trust (WRIT)
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 1998, for Washington Real Estate Investment Trust (WRIT), a self-administered equity REIT incorporated in Maryland. The Trust owns and operates income-producing real estate in the Mid-Atlantic region, including office buildings, industrial distribution centers, apartment buildings, and shopping centers. As of the reporting date, there were 35,692,042 shares of beneficial interest outstanding.
Key Financial Metrics
Revenue and Profitability (Six Months Ended June 30, 1998):
- Total Revenue: $49.9 million (Real estate rental revenue).
- Net Income: $22.9 million, driven by a $5.9 million gain on the sale of real estate.
- Net Income Per Share (Diluted): $0.64.
- Dividends Paid: $0.55 per share.
- Operating Income: $35.0 million.
Cash Flow (Six Months Ended June 30, 1998):
- Operating Cash Flow: $29.4 million provided by operating activities.
- Investing Cash Flow: $34.3 million used, primarily for $35.3 million in real estate acquisitions and $7.8 million in capital improvements.
- Financing Cash Flow: $5.0 million provided, net of $19.6 million in dividends and $102.8 million in debt proceeds.
Balance Sheet Highlights (June 30, 1998):
- Total Assets: $509.9 million (Real estate at cost: $544.1 million).
- Total Liabilities: $252.8 million.
- Debt Structure: $210.0 million in Notes Payable, $17.0 million in Lines of Credit, and $7.4 million in Mortgage Notes.
- Liquidity: Cash and temporary investments totaled $8.1 million.
Material Changes vs. Prior Period
Revenue Growth: Total rental revenue increased 32.7% to $49.9 million for the six months ended June 30, 1998, compared to $37.6 million in the prior year period. This growth was driven by acquisitions in 1997 and 1998, as well as increased rental rates and occupancy in the core portfolio.
Expense Increases: Real estate expenses rose 23.2% to $14.9 million, and interest expense increased significantly to $8.0 million (from $4.6 million) due to the issuance of $110 million in debt securities in February 1998.
Portfolio Activity:
- Acquisitions: Purchased Northern Virginia Industrial Park ($30.4 million) and 800 South Washington Street ($6.1 million) in the first half of 1998.
- Dispositions: Sold the Shirley-395 Business Center for a $5.9 million gain and the 5410 Port Royal Business Center for a $64,000 gain.
Outlook, Risks, and Management Commentary
Capital Resources: Management maintains $75 million in unsecured credit commitments, with $17 million outstanding and $58 million available as of June 30, 1998. A shelf registration for up to 4.5 million shares is in place to facilitate future acquisitions.
Year 2000 Compliance: WRIT has implemented a new reporting system that is Year 2000 compliant. Management is currently reviewing remaining operating systems, including building operations, for potential issues.
Corporate Governance: At the June 24, 1998 annual meeting, shareholders approved amendments to investment policies. The meeting was adjourned to September 17, 1998, to vote on authorizing preferred shares and revising super-majority voting provisions.
Risks: Forward-looking statements are subject to risks including general economic conditions, local real estate market performance, and the ability to maintain REIT status.
Investor Verification Checklist
- Verify the sustainability of the 32.7% revenue growth rate once the impact of recent acquisitions stabilizes.
- Monitor the impact of the $110 million debt issuance on future interest coverage ratios and cash flow available for dividends.
- Confirm the status of the adjourned shareholder votes regarding preferred shares and voting provisions scheduled for September 1998.
- Review the progress of the Year 2000 compliance assessment for building operations systems.
- Assess the occupancy and rental rate trends in the core portfolio excluding new acquisitions to gauge organic growth.