Quarterly report pursuant to Section 13 or 15(d)

Real Estate Acquisitions And Discontinued Operations

v2.3.0.15
Real Estate Acquisitions And Discontinued Operations
9 Months Ended
Sep. 30, 2011
Real Estate Acquisitions And Discontinued Operations [Abstract]  
Real Estate Acquisitions And Discontinued Operations

NOTE 3: REAL ESTATE ACQUISITIONS AND DISCONTINUED OPERATIONS

Acquisitions

WRIT acquired the following properties and land for development during the 2011 Period:

 

Acquisition Date

  

Property Name

  

Property Type

   Rentable
Square
Feet
     Contract
Purchase  Price
(in thousands)
 

January 11, 2011

   1140 Connecticut Avenue    Office      184,000       $ 80,250   

March 30, 2011

   1227 25th Street    Office      130,000         47,000   

June 15, 2011

   650 North Glebe Road(1)    Multifamily      N/A         11,800   

August 30, 2011

   Olney Village Center    Retail      199,000         58,000   

September 13, 2011

   Braddock Metro Center    Office      345,000         101,000   

September 15, 2011

   John Marshall II    Office      223,000         73,500   
        

 

 

    

 

 

 
      Total      1,081,000       $ 371,550   
        

 

 

    

 

 

 

 

The results of operations from the acquired operating properties are included in the consolidated statements of income as of their acquisition dates.

The revenue and earnings of our 2011 acquisitions are as follows (amounts in thousands):

 

     Quarter Ended
September 30,
2011
     Period Ended
September 30,
2011
 

Real estate revenues

   $ 4,376       $ 9,458   

Net income

   $ 292       $ 730   

We have recorded the total purchase price of the above acquisitions as follows (in millions):

 

     Recordation
of Purchase
Price
 
     2011  

Land

   $ 90.9   

Buildings

     219.6   

Tenant origination costs

     15.7   

Leasing commissions/absorption costs

     29.7   

Net lease intangible assets

     6.8   

Net lease intangible liabilities

     (2.5

Fair value of assumed mortgages

     (78.5
  

 

 

 

Total

   $ 281.7   
  

 

 

 

The weighted remaining average life in months for the components above, other than land and building, are 65 months for tenant origination costs, 54 months for leasing commissions/absorption costs, 68 months for net lease intangible assets and 65 months for net lease intangible liabilities.

The difference in total contract purchase price of $371.6 million and the acquisition cost per the consolidated statements of cash flows of $281.7 million is primarily related to the two mortgage notes assumed for $76.7 million relating to John Marshall II and Olney Village Center, cash paid for the acquisition of land at 650 North Glebe Road for $11.8 million included in development, and credits received at settlement totaling $1.3 million.

The following unaudited pro forma combined condensed statements of operations present the consolidated results of operations for the 2011 Quarter and Period and the 2010 Quarter and Period, as if the above described acquisitions had occurred at the beginning of the year prior to the acquisition. The unaudited pro forma information does not purport to be indicative of the results that actually would have occurred if the acquisitions had been in effect for the Quarters and Periods presented. The unaudited data presented is in thousands, except per share data.

 

     Quarter Ended
September 30,
     Period Ended
September 30,
 
     2011      2010      2011      2010  

Real estate revenues

   $ 76,823       $ 74,471       $ 231,370       $ 221,135   

Income from continuing operations

   $ 3,283       $ 4,046       $ 11,330       $ 10,784   

Net income

   $ 63,585       $ 7,578       $ 76,268       $ 29,665   

Diluted earnings per share

   $ 0.96       $ 0.12       $ 1.15       $ 0.48   

Noncontrolling Interests in Subsidiaries

We entered into an operating partnership agreement with a member of the entity that previously owned Northern Virginia Industrial Park II in conjunction with the acquisition of this property in May 1998. We account for this activity by applying the noncontrolling owner's percentage ownership interest to the net income of the property and reporting such amount in our net income attributable to noncontrolling interests. Subsequent to the end of the 2011 Quarter, we closed on the sale of Northern Virginia Industrial Park II (see next section), thereby terminating this noncontrolling interest in our earnings. Accordingly, the total amounts reported on the consolidated statements of income for noncontrolling interests are related to discontinued operations.

 

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.

On August 5, 2011 we entered into five separate purchase and sale agreements to effectuate the sale of our entire industrial segment and two office assets (the Crescent and Albemarle Point) for an aggregate purchase price of $350.0 million. On September 2, 2011, we closed the first three of the purchase and sale agreements, for an aggregate $235.8 million. We closed on the remaining two purchase and sale agreements subsequent to the end of the quarter. We recognized a $56.6 million gain on sale of real estate during the 2011 Quarter in connection with the first three purchase and sale agreements.

The impact of the disposal of our industrial segment on revenues and net income is summarized as follows (amounts in thousands, except per share data):

 

Quarter Ended
September 30,
     Period Ended
September 30,
 
     2011      2010      2011      2010  

Real estate revenues

   $ 6,053       $ 7,854       $ 22,503       $ 24,252   

Net income

   $ 3,297       $ 2,778       $ 9,340       $ 8,215   

Basic net income per share

   $ 0.05       $ 0.04       $ 0.14       $ 0.13   

Diluted net income per share

   $ 0.05       $ 0.04       $ 0.14       $ 0.13   

We sold or classified as held for sale the following properties during the 2011 Period and 2010:

 

 

Operating results of the properties classified as discontinued operations are summarized as follows (in thousands):

 

     Quarter Ended
September 30,
    Period Ended
September 30,
 
     2011     2010     2011     2010  

Revenues

   $ 6,597      $ 11,241      $ 25,612      $ 36,410   

Property expenses

     (1,768     (3,239     (7,564     (11,866

Real estate impairment

     —          —          (599     —     

Depreciation and amortization

     (943     (4,054     (7,231     (11,981

Interest expense

     (231     (383     (696     (1,516
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 3,655      $ 3,565      $ 9,522      $ 11,047   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss) by each property classified as discontinued operations is summarized below (in thousands):

 

          Quarter Ended
September 30,
     Period Ended
September 30,
 

Property

  

Segment

   2011      2010      2011     2010  

Parklawn Plaza

   Office    $ —         $ —         $ —        $ 132   

Lexington Building

   Office      —           —           —          65   

Saratoga Building

   Office      —           —           —          225   

Charleston Business Center

   Industrial      —           —           —          370   

The Ridges

   Office      —           156         —          347   

Ammendale I&II

   Industrial      —           217         —          733   

Amvax

   Industrial      —           82         —          260   

Dulles Station, Phase I

   Office      —           160         (468     367   

Industrial Portfolio

   Industrial/Office    $ 3,655         2,950       $ 9,990        8,548   
     

 

 

    

 

 

    

 

 

   

 

 

 
      $ 3,655         3,565       $ 9,522      $ 11,047   
     

 

 

    

 

 

    

 

 

   

 

 

 

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.