Annual report pursuant to Section 13 and 15(d)

Nature Of Business

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Nature Of Business
12 Months Ended
Dec. 31, 2014
Nature Of Business [Abstract]  
Nature Of Business
NOTE 1: NATURE OF BUSINESS
Washington Real Estate Investment Trust (“Washington REIT”), a Maryland real estate investment trust, is a self-administered, self-managed equity real estate investment trust, successor to a trust organized in 1960. Our business consists of the ownership and operation of income-producing real estate properties in the greater Washington Metro region. We own a diversified portfolio of office buildings, multifamily buildings and retail centers.
Federal Income Taxes
We believe that we qualify as a 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 among other things required to distribute 90% of our REIT taxable income (which is, generally, our ordinary taxable income, with certain modifications), excluding any net capital gains and any deductions for dividends paid to our shareholders on an annual basis. When selling a property, we generally have the option of (a) reinvesting the sales proceeds of property sold, in a way that allows us to defer recognition of some or all taxable gain realized on the sale, (b) distributing gains to the shareholders with no tax to us or (c) treating net long-term capital gains as having been distributed to our shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to our shareholders. During the three years ended December 31, 2014, we sold the following properties (in thousands):
Disposition Date
Property
Type
Gain on Sale
January 21, 2014
Medical Office Portfolio Transactions III & IV (1)
Medical Office
$
105,985

May 2, 2014
5740 Columbia Road
Retail
570

 
 
Total 2014
$
106,555

 
 
 
 
March 19, 2013
Atrium Building
Office
$
3,195

November 2013
Medical Office Portfolio Transactions I & II (2)
Medical Office / Office
18,949

 
 
Total 2013
$
22,144

 
 
 
 
August 31, 2012
1700 Research Boulevard
Office
$
3,724

December 20, 2012
Plumtree Medical Center
Medical Office
1,400

 
 
Total 2012
$
5,124

(1) Woodburn Medical Park I and II and Prosperity Medical Center I, II and III.

(2) 2440 M Street, 15001 Shady Grove Road, 15505 Shady Grove Road, 19500 at Riverside Park (formerly Lansdowne Medical Office Building), 9707 Medical Center Drive, CentreMed I and II, 8301 Arlington Boulevard, Sterling Medical Office Building, Shady Grove Medical Village II, Alexandria Professional Center, Ashburn Farm Office Park I, Ashburn Farm Office Park II, Ashburn Farm Office Park III, Woodholme Medical Office Building, two office properties (6565 Arlington Boulevard and Woodholme Center) and undeveloped land at 4661 Kenmore Avenue.
We reinvested a portion of the Medical Office Portfolio sales proceeds in replacement properties through deferred tax exchanges.
Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on undistributed taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRS's”). Our TRS's are subject to corporate federal and state income tax on their taxable income at regular statutory rates, or as calculated under the alternative minimum tax, as appropriate. As of December 31, 2014 and December 31, 2013, our TRS's had no net deferred tax assets and a net deferred tax liability of $0.6 million. These deferred tax liabilities are primarily related to temporary differences in the timing of the recognition of revenue, amortization and depreciation. During 2011, we recognized a $14.5 million impairment charge at Dulles Station, Phase II, a development property held by one of our TRS's. The impairment charge created a deferred tax asset of $5.7 million at this TRS, but we have determined that it is more likely than not that this deferred tax asset will not be realized. We have therefore recorded a valuation allowance for the full amount of the deferred tax asset related to the impairment charge at Dulles Station, Phase II.

The following is a breakdown of the taxable percentage of our dividends for these years ended December 31, 2014, 2013 and 2012, (unaudited):
 
2014
 
2013
 
2012
Ordinary income
40
%
 
62
%
 
72
%
Return of capital
52
%
 
38
%
 
26
%
Qualified dividends
%
 
%
 
%
Unrecaptured Section 1250 gain
8
%
 
%
 
2
%
Capital gain
%
 
%
 
%