Quarterly report pursuant to Section 13 or 15(d)

Real Estate

v2.4.0.6
Real Estate
6 Months Ended
Jun. 30, 2012
Real Estate Investments [Abstract]  
Real Estate
REAL ESTATE

Acquisition

We acquired the following property during the 2012 Period:
Acquisition Date
 
Property Name
 
Property Type
 
Rentable Square Feet
 
Contract Purchase Price (in thousands)
June 21, 2012
 
Fairgate at Ballston
 
Office
 
147,000

 
$
52,250



The results of operations from the acquired property are included in the consolidated statements of income as of its acquisition date and are immaterial for the nine days that we owned the property during the 2012 Period. The difference in the contract purchase price and the cash paid for the acquisition per the consolidated statements of cash flows is due to credits received at settlement totaling $0.1 million.

Variable Interest Entities
On June 15, 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 $45.0 million, with approximately 70% of the project financed with debt. 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 third quarter of 2014.

On November 23, 2011, we executed a joint venture operating agreement with a real estate development company to develop a high-rise multifamily property at 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 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. The joint venture currently expects to complete this development project during the fourth quarter of 2014.

We have determined that the 650 North Glebe Road and 1219 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.
      
We include the joint venture land acquisitions on our consolidated balance sheets in held for development. As of June 30, 2012 and December 31, 2011, the land and capitalized development costs are as follows (in millions):
 
June 30, 2012
 
December 31, 2011
650 North Glebe
$
14.5

 
$
13.4

1219 First Street
$
16.0

 
$
14.4



As of June 30, 2012 and December 31, 2011, the accounts payable and accrued liabilities related to the joint ventures are as follows (in millions):
 
June 30, 2012
 
December 31, 2011
650 North Glebe
$
0.3

 
$
0.1

1219 First Street
$
0.4

 
$
0.2


Discontinued Operations
We dispose of assets (sometimes using tax-deferred exchanges) 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 by GAAP. 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. We had no properties classified as sold or held for sale as of June 30, 2012.
We sold or classified as held for sale the following properties during 2011:
Disposition Date
 
Property Name
 
Property Type
 
Rentable Square Feet
 
Contract
Purchase  Price
(In millions)
Various (1)
 
Industrial Portfolio(1)
 
Industrial/Office
 
3,092,000

 
$
350.9

April 5, 2011
 
Dulles Station, Phase I
 
Office
 
180,000

 
58.8

 
 
 
 
Total 2011
 
3,272,000

 
$
409.7

 
(1) 
The Industrial Portfolio consists of every property in our industrial segment and two office properties (the Crescent and Albemarle Point). On September 2, 2011 we closed on the sale of industrial properties (8880 Gorman Road, Dulles South IV, Fullerton Business Center, Hampton Overlook, Alban Business Center, Pickett Industrial Park, Northern Virginia Industrial Park I, 270 Technology Park, Fullerton Industrial Center, Sully Square, 9950 Business Parkway, Hampton South and 8900 Telegraph Road) and two office properties (Crescent and Albemarle Point). On October 3, 2011, we closed on the sale of Northern Virginia Industrial Park II. On November 2, 2011, we closed on the sale of 6100 Columbia Park Road and Dulles Business Park I and II.
Operating results of the properties classified as discontinued operations are summarized as follows (in thousands):
 
Quarter Ended June 30,
 
Period Ended June 30,
 
2012
 
2011
 
2012
 
2011
Revenues
$

 
$
8,931

 
$

 
$
19,014

Property expenses

 
(2,468
)
 

 
(5,796
)
Real estate impairment

 

 

 
(599
)
Depreciation and amortization

 
(2,933
)
 

 
(6,287
)
Interest expense

 
(232
)
 

 
(465
)
Income from operations of properties sold or held for sale
$

 
$
3,298

 
$

 
$
5,867

Less: Net income attributable to noncontrolling interests in subsidiaries

 
(34
)
 

 
(57
)
Income from operations of properties sold or held for sale attributable to the controlling interests
$

 
$
3,264

 
$

 
$
5,810



Operating income (loss) by each property classified as discontinued operations is summarized below (in thousands):
 
 
 
 
Quarter Ended June 30,
 
Period Ended June 30,
Property
 
Segment
 
2012
 
2011
 
2012
 
2011
Industrial Portfolio
 
Industrial/Office
 
$

 
$
3,308

 
$

 
$
6,335

Dulles Station, Phase I
 
Office
 

 
(10
)
 

 
(468
)
 
 
 
 
$

 
$
3,298

 
$

 
$
5,867



The operating loss for Dulles Station I for the 2011 Period includes a $0.6 million impairment charge to reflect the property’s fair value less any selling costs based on its contract sales price.