Washington Real Estate Investment Trust (WRE) filed Quarterly Report for the period ended 2009-09-30.
WASHINGTON R.E. INV. TRUST is a self-administered qualified equity real estate investment trust. The Trust's business consists of the ownership of income-producing real estate properties principally in the Greater Washington-Baltimore Region. The Trust has a fundamental strategy of regional focus diversified property type ownership and conservative financial management. Washington Real Estate Investment Trust has a market cap of $1.58 billion; its shares were traded at around $27.13 with a P/E ratio of 11.9 and P/S ratio of 5.6. The dividend yield of Washington Real Estate Investment Trust stocks is 6.4%. Washington Real Estate Investment Trust had an annual average earning growth of 7.2% over the past 10 years. GuruFocus rated Washington Real Estate Investment Trust the business predictability rank of 3.5-star.
Highlight of Business Operations:
We depreciate buildings on a straight-line basis over estimated useful lives ranging from 28 to 50 years. We capitalize all capital improvement expenditures 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 30 years. We also capitalize costs incurred in connection with our development projects, including capitalizing interest and other internal costs during periods in which qualifying expenditures have been made and activities necessary to get the development projects ready for their intended use are in progress. 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 $19.1 million and $56.7 million for the 2009 Quarter and Period, respectively, and $17.2 million and $50.5 million for the 2008 Quarter and Period, respectively. Maintenance and repair costs that do not extend an asset’s life are charged to expense as incurred.
We capitalize interest costs incurred on borrowing obligations while qualifying assets are being readied for their intended use. Total interest expense capitalized to real estate assets related to development and major renovation activities was $0.3 million and $1.0 million for the 2009 Quarter and Period, respectively, and $0.5 million and $2.0 million for the 2008 Quarter and Period, respectively. Interest capitalized is amortized over the useful life of the related underlying assets upon those assets being placed into service.
We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code and intend to continue to qualify as such. To maintain our status as a REIT, we are required to distribute 90% of our ordinary taxable income to our shareholders. When selling properties, we have the option of (a) reinvesting the sale price of properties sold, allowing for a deferral of income taxes on the sale, (b) paying out capital gains to the shareholders with no tax to WRIT or (c) treating the capital gains as having been distributed to the shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to the shareholders. In June 2008, two industrial properties, Sullyfield Center and The Earhart Building, were sold for a gain of $15.3 million. The proceeds from the sale were treated as a distribution to shareholders. In May 2009, a multifamily property, Avondale, was sold for a gain of $6.7 million. In July 2009, an industrial property, Tech 100, and an office property, Brandywine Center, were sold for gains of $4.1 million and $1.0 million, respectively. We currently anticipate that the proceeds from these gains will be treated as a distribution to shareholders. Generally, no provisions for income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS”). A TRS is subject to corporate federal and state income tax on its taxable income at regular statutory rates. There were no income tax provisions or material deferred income tax items for our TRS for the nine month periods ended September 30, 2009 and 2008.
Recoveries from Tenants: Recoveries from tenants increased by $0.1 million in the 2009 Quarter as compared to the 2008 Quarter due primarily to non-core properties ($1.4 million), combined with a $1.3 million decrease in recoveries from tenants from core properties primarily due to lower common area maintenance ($0.6 million) and real estate tax ($0.7 million) reimbursements.
Recoveries from tenants increased by $4.0 million in the 2009 Period as compared to the 2008 Period due primarily to non-core properties ($4.7 million), combined with a $0.7 million decrease in recoveries from tenants from core properties primarily due to lower common area maintenance reimbursements ($1.4 million) offset by higher electricity ($0.5 million) and overtime utilities ($0.2 million) reimbursements.
Provisions for doubtful accounts increased by $1.2 million in the 2009 Period as compared to the 2008 Period, primarily in the office ($1.0 million) and retail ($0.5 million) segments, partially offset by lower provisions in the medical office segment ($0.3 million). The increase in provisions for doubtful accounts for both the 2009 Quarter and Period reflects the impact of the national economic recession.
WRE is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Tom Gayner of Markel Gayner Asset Management Corp.
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