Quarterly report pursuant to Section 13 or 15(d)

Real Estate

v2.4.0.6
Real Estate
3 Months Ended
Mar. 31, 2013
Real Estate Investments, Net [Abstract]  
Real Estate
REAL ESTATE

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, and, during the 2013 Quarter, 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.

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 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 2013 Quarter, 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.

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.
      
We include the joint venture land acquisitions on our consolidated balance sheets in properties under development or held for future development. As of March 31, 2013 and December 31, 2012, the land and capitalized development costs are as follows (in thousands):
 
March 31, 2013
 
December 31, 2012
650 North Glebe
$
17,616

 
$
15,646

1225 First Street
21,561

 
19,807



As of March 31, 2013 and December 31, 2012, the accounts payable and accrued liabilities related to the joint ventures are as follows (in thousands):
 
March 31, 2013
 
December 31, 2012
650 North Glebe
$
875

 
$
115

1225 First Street
952

 
1,676


Discontinued Operations
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.
We sold the following properties in 2013 and 2012:
Disposition Date
 
Property Name
 
Segment
 
Rentable Square Feet
 
Contract
Purchase  Price
(In thousands)
March 19, 2013
 
Atrium Building
 
Office
 
79,000

 
$
15,750

 
 
 
 
 
 
 
 
 
August 31, 2012
 
1700 Research Boulevard
 
Office
 
101,000

 
$
14,250

December 20, 2012
 
Plumtree Medical Center
 
Medical Office
 
33,000

 
8,750

 
 
 
 
Total 2012
 
134,000

 
$
23,000


Income from operations of properties sold or held for sale for the three months ended March 31, 2013 and 2012 were as follows (in thousands):
 
Three Months Ended March 31,
 
2013
 
2012
Revenues
$
347

 
$
1,285

Property expenses
(162
)
 
(462
)
Depreciation and amortization

 
(412
)
Interest expense

 
(64
)
 
$
185

 
$
347



Income from operations of properties sold or held for sale by property were as follows (in thousands):
 
 
 
Three Months Ended March 31,
Property
Segment
 
2013
 
2012
1700 Research Boulevard
Office
 
$

 
$
44

Atrium Building
Office
 
185

 
289

Plumtree Medical Center
Medical Office
 

 
14

 
 
 
$
185

 
$
347