ELME

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

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 1999, for Washington Real Estate Investment Trust (WRIT), a self-administered equity REIT. The Trust owns and operates income-producing real estate properties, including office buildings, industrial distribution centers, apartment buildings, and shopping centers, primarily in the Washington-Baltimore region. As of the reporting date, there were 35,721,494 shares of beneficial interest outstanding.

Key Financial Metrics

Note: Total Debt calculated as Mortgage Notes Payable ($87,208) + Lines of Credit ($29,000) + Notes Payable ($210,000).

Material Changes vs. Prior Period

• Revenue Growth: Rental revenue increased 12.7% in Q3 1999 and 13.0% for the nine-month period compared to 1998. This growth was driven by acquisitions (including 600 Jefferson Plaza, 1700 Research Boulevard, and Avondale Apartments) and increased rental rates/occupancy in the core portfolio.
• Segment Performance: Office buildings saw the largest revenue increase (21.6% in Q3), followed by Industrial (9.7%) and Apartments (8.8%). Shopping centers experienced a 5.3% revenue decline in Q3 due to decreased tenant pass-through recoveries and prior dispositions.
• Acquisitions and Dispositions: During the nine months ended September 30, 1999, WRIT acquired properties totaling approximately $57.2 million. It also sold several properties, generating a gain on sale of real estate of $7.9 million for the period.
• Debt Structure: On September 27, 1999, WRIT closed a $50.0 million mortgage note to pay down lines of credit. Additionally, an $8.7 million mortgage was assumed for the Avondale Apartments acquisition. Total interest expense rose to $16.1 million for the nine-month period (up from $12.5 million in 1998) due to new debt issuances and higher average balances on lines of credit.

Guidance, Outlook, and Risks

• Liquidity and Capital Resources: Management believes it has sufficient liquidity to meet obligations and fund future acquisitions. The Trust has $46 million available under its $75 million unsecured credit commitments. Capital needs are funded through operating cash flow, debt, and equity.
• Year 2000 (Y2K) Compliance: WRIT has completed the inventory and assessment phases of its Y2K project. Testing is ongoing, with completion expected in the fourth quarter of 1999. Management does not expect material costs or significant interruptions to operations, though risks remain regarding third-party suppliers and tenants.
• Market Risk: The primary market risk is interest rate risk, specifically regarding refinancing fixed-rate obligations and variable-rate lines of credit. WRIT has not entered into new derivative instruments but monitors the market for hedging opportunities.
• Forward-Looking Statements: Actual results may differ due to general economic conditions, local real estate market performance, and the success of new acquisitions.

Investor Verification Checklist

• Debt Covenants: Verify compliance with financial covenants related to debt, net worth, and cash flow on the $75 million credit lines and unsecured notes.
• Occupancy Trends: Monitor occupancy rates in the Office segment, which decreased slightly from 97.4% to 96.0% in Q3 1999, despite revenue growth.
• Y2K Contingency: Confirm the status of third-party vendor and tenant Y2K readiness as the fourth quarter of 1999 approaches.
• Dividend Coverage: Review the ratio of Funds From Operations (FFO) to dividends paid to ensure sustainability of the $0.29 quarterly dividend.
• Acquisition Integration: Assess the performance of the six properties acquired in 1999, particularly the Avondale Apartments, to ensure they meet projected returns.