Real Estate | 9 Months Ended |
Sep. 30, 2013 |
Real Estate [Abstract] | ' |
Real Estate | ' |
NOTE 3: REAL ESTATE |
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Variable Interest Entities |
In June 2011, we executed a joint venture operating agreement with a real estate development company to develop a mid-rise multifamily property at 650 North Glebe Road in Arlington, Virginia. We estimate the total cost of the project to be $49.9 million. During the first quarter of 2013, we secured third-party debt financing for approximately 70% of the project's cost. WRIT is the 90% owner of the joint venture, and will have management and leasing responsibilities when the project is completed and stabilized (defined as 90% of the residential units leased). The real estate development company owns 10% of the joint venture and is responsible for the development and construction of the property. The joint venture currently expects to complete this development project during the fourth quarter of 2014. |
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In November 2011, we executed a joint venture operating agreement with a real estate development company to develop a high-rise multifamily property at 1225 First Street (formerly 1219 First Street) in Alexandria, Virginia. We estimate the total cost of the project to be $95.3 million, with approximately 70% of the project to be financed with debt. WRIT is the 95% owner of the joint venture and will have management and leasing responsibilities when the project is completed and stabilized. The real estate development company owns 5% of the joint venture and is responsible for the development and construction of the property. During the first quarter of 2013, we decided to delay commencement of construction, due to market conditions and concerns of oversupply, and stopped capitalizing interest costs on this project. We will reassess this project on a periodic basis going forward. |
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We have determined that the 650 North Glebe Road and 1225 First Street joint ventures are variable interest entities (“VIE's”) primarily based on the fact that the equity investment at risk is not sufficient to permit either entity to finance its activities without additional financial support. We expect that 70% of the total development costs will be financed through debt. We have also determined that WRIT is the primary beneficiary of each VIE due to the fact that WRIT is providing 90% to 95% of the equity contributions and will manage each property after stabilization. |
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We include the joint venture land acquisitions on our consolidated balance sheets in properties under development or held for future development. As of September 30, 2013 and December 31, 2012, the land and capitalized development costs are as follows (in thousands): |
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| September 30, 2013 | | December 31, 2012 | | | | | | | | | | | |
650 North Glebe | $ | 24,185 | | | $ | 15,646 | | | | | | | | | | | | |
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1225 First Street | 21,409 | | | 19,807 | | | | | | | | | | | | |
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As of September 30, 2013 and December 31, 2012, the accounts payable and accrued liabilities related to the joint ventures are as follows (in thousands): |
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| September 30, 2013 | | December 31, 2012 | | | | | | | | | | | |
650 North Glebe | $ | 2,584 | | | $ | 115 | | | | | | | | | | | | |
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1225 First Street | 249 | | | 1,676 | | | | | | | | | | | | |
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On February 21, 2013, WRIT, through its consolidated joint venture to develop a mid-rise multifamily property at 650 North Glebe Road, entered into a construction loan agreement with Citizens Bank for $33.0 million. The loan bears interest at LIBOR plus 2.15%, which decreases to LIBOR plus 2.0% upon completion of construction and the joint venture not being in default. The loan matures on February 21, 2016, with two one year extension options exercisable by the joint venture, subject to fees and compliance with certain provisions in the loan agreement. As of September 30, 2013, the consolidated joint venture had $3.0 million outstanding on this construction loan agreement. |
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Discontinued Operations |
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We dispose of assets that no longer meet our long-term strategy or return objectives and where market conditions for sale are favorable. The proceeds from the sales may be reinvested into other properties, used to fund development operations or to support other corporate needs, or distributed to our shareholders. Properties are considered held for sale when they meet the criteria specified (see "Discontinued Operations" in note 2 of the consolidated financial statements included in WRIT's Annual Report on Form 10-K for the year ended December 31, 2012). Depreciation on these properties is discontinued at that time, but operating revenues, other operating expenses and interest continue to be recognized until the date of sale. |
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In September 2013, we entered into four separate purchase and sale agreements to effectuate the sale of our entire medical office segment (including land held for development at 4661 Kenmore Avenue) and two office buildings (Woodholme Center and 6565 Arlington Boulevard) for an aggregate purchase price of $500.8 million. The sale will be structured as four transactions with projected closing dates in the fourth quarter 2013 and first quarter 2014. |
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The results of our medical office segment are summarized as follows (amounts in thousands, except per share data): |
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| Three Months Ended | | Nine Months Ended | | | |
September 30, | September 30, | | | |
| 2013 | | 2012 | | 2013 | | 2012 | | | |
Real estate revenues | $ | 10,889 | | | $ | 11,282 | | | $ | 32,928 | | | $ | 33,580 | | | | |
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Net income | $ | 3,820 | | | $ | 2,463 | | | $ | 10,080 | | | $ | 7,456 | | | | |
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Basic net income per share | $ | 0.06 | | | $ | 0.04 | | | $ | 0.15 | | | $ | 0.11 | | | | |
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Diluted net income per share | $ | 0.06 | | | $ | 0.04 | | | $ | 0.15 | | | $ | 0.11 | | | | |
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We classified as held for sale or sold the following properties in 2013 and 2012: |
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Disposition Date | | Property Name | | Segment | | Rentable Square Feet | | Contract | | | | | | | |
Purchase Price | | | | | | | |
(In thousands) | | | | | | | |
March 19, 2013 | | Atrium Building | | Office | | 79,000 | | | $ | 15,750 | | | | | | | | |
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N/A | | Medical Office Portfolio (1) | | Medical Office / Office | | 1,520,000 | | | 500,750 | | | | | | | | |
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| | | | Total 2013 | | 1,599,000 | | | $ | 516,500 | | | | | | | | |
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August 31, 2012 | | 1700 Research Boulevard | | Office | | 101,000 | | | $ | 14,250 | | | | | | | | |
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December 20, 2012 | | Plumtree Medical Center | | Medical Office | | 33,000 | | | 8,750 | | | | | | | | |
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| | | | Total 2012 | | 134,000 | | | $ | 23,000 | | | | | | | | |
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(1) The Medical Office Portfolio consists of every property in our medical office segment (including land held for development at 4661 Kenmore Avenue) and two office buildings (6565 Arlington Boulevard and Woodholme Center). |
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As of September 30, 2013 and December 31, 2012, investment in real estate for properties sold or held for sale were as follows (in thousands): |
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| 30-Sep-13 | | 31-Dec-12 | | | | | | | | | | | |
Office | $ | 55,049 | | | $ | 71,605 | | | | | | | | | | | | |
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Medical office | 409,486 | | | 406,873 | | | | | | | | | | | | |
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Total | 464,535 | | | 478,478 | | | | | | | | | | | | |
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Less accumulated depreciation | (118,378 | ) | | (113,479 | ) | | | | | | | | | | | |
Investment in real estate sold or held for sale, net | $ | 346,157 | | | $ | 364,999 | | | | | | | | | | | | |
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As of September 30, 2013 and December 31, 2012, liabilities related to properties sold or held for sale were as follows (in thousands): |
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| 30-Sep-13 | | 31-Dec-12 | | | | | | | | | | | |
Mortgage notes | $ | 23,467 | | | $ | 23,945 | | | | | | | | | | | | |
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Other liabilities | 7,808 | | | 8,412 | | | | | | | | | | | | |
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Liabilities related to properties sold or held for sale | $ | 31,275 | | | $ | 32,357 | | | | | | | | | | | | |
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Income from operations of properties sold or held for sale for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands): |
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| Three Months Ended | | Nine Months Ended | | | |
September 30, | September 30, | | | |
| 2013 | | 2012 | | 2013 | | 2012 | | | |
Revenues | $ | 12,073 | | | $ | 13,725 | | | 37,141 | | | 41,338 | | | | |
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Property expenses | (4,398 | ) | | (4,793 | ) | | (12,856 | ) | | (13,992 | ) | | | |
Depreciation and amortization | (3,215 | ) | | (4,536 | ) | | (12,161 | ) | | (14,210 | ) | | | |
Interest expense | (329 | ) | | (1,163 | ) | | (985 | ) | | (3,494 | ) | | | |
| $ | 4,131 | | | $ | 3,233 | | | $ | 11,139 | | | $ | 9,642 | | | | |
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Income from operations of properties sold or held for sale by property for the three and nine months ended September 30, 2013 and 2012 were as follows (in thousands): |
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| | | | Three Months Ended | | Nine Months Ended |
September 30, | September 30, |
Property | | Segment | | 2013 | | 2012 | | 2013 | | 2012 |
1700 Research Boulevard | | Office | | $ | — | | | $ | 106 | | | — | | | 225 | |
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Atrium Building | | Office | | — | | | 320 | | | 185 | | | 833 | |
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Plumtree Medical Center | | Medical Office | | — | | | 88 | | | — | | | 117 | |
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Medical Office Portfolio | | Medical Office / Office | | 4,131 | | | 2,719 | | | 10,954 | | | 8,467 | |
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| | | | $ | 4,131 | | | $ | 3,233 | | | $ | 11,139 | | | $ | 9,642 | |
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