No. of Recommendations: 3
WRE announced a 5.4% increase of $0.02 per share in the quarterly dividend rate to an annual rate of $1.57 per share. The quarterly dividend of $.3925 per share will be paid on 6/30/04 to shareholders on 6/16/04.
This is WRE's 170th consecutive quarterly dividend at equal or increasing rates. WRE dividends have increased every year for 34 consecutive years. During these 34 years, WRE dividends have increased 39 times, a record unmatched by any other REIT.
Print the post Back To Top
No. of Recommendations: 3
Ga1Dawg wrote:
WRE announced a 5.4% increase of $0.02 per share in the quarterly dividend rate to an annual rate of $1.57 per share. The quarterly dividend of $.3925 per share will be paid on 6/30/04 to shareholders on 6/16/04.
This is WRE's 170th consecutive quarterly dividend at equal or increasing rates. WRE dividends have increased every year for 34 consecutive years. During these 34 years, WRE dividends have increased 39 times, a record unmatched by any other REIT.


I like WRE (and I own a small amount). The concensus FFO (Funds From Operations) estimate for 2004 is $2.10 which nicely covers the $1.57 dividend. IMHO, there is very little risk of a dividend cut.

Russ
Print the post Back To Top
No. of Recommendations: 0
I, too, own a fair amount of WRE, a good BofB REIT.

David
Print the post Back To Top
No. of Recommendations: 2
Have been in WRE DRIP since 1992. Ihe investment has really built up over time. Guess that's what they mean by long term buy and hold.

Little Giant
Print the post Back To Top
No. of Recommendations: 0
Dawg,

What are your concerns with regard to owning a REIT focused in one city?

Do you feel it is not a problem as it is a small percentage of total REIT ownership or total portfolio? Or do you feel that it creates the opportunity for Washington REIT to have managers who truly understand their market over a larger national REIT like Equity Office that perhaps don't have local managers with as much experience collectively?

Petey



WRE announced a 5.4% increase of $0.02 per share in the quarterly dividend rate to an annual rate of $1.57 per share. The quarterly dividend of $.3925 per share will be paid on 6/30/04 to shareholders on 6/16/04.
This is WRE's 170th consecutive quarterly dividend at equal or increasing rates. WRE dividends have increased every year for 34 consecutive years. During these 34 years, WRE dividends have increased 39 times, a record unmatched by any other REIT.
Print the post Back To Top
No. of Recommendations: 1
What are your concerns with regard to owning a REIT focused in one city?

Do you feel it is not a problem as it is a small percentage of total REIT ownership or total portfolio? Or do you feel that it creates the opportunity for Washington REIT to have managers who truly understand their market over a larger national REIT like Equity Office that perhaps don't have local managers with as much experience collectively?
***************************
I think it depends on the city & the REIT management team. The basic industry in D.C. is the Federal Government.
Print the post Back To Top
No. of Recommendations: 1
Petey asked Dawg:
What are your concerns with regard to owning a REIT [WRE] focused in one city [Washington DC]?

I'm no Dawg, but I'll throw in my two €s worth.

One of the reasons we're heavily invested in WRE is the fact that they ARE concentrated in just one area: Washington, DC. I feel as long as we have a federal government in Washington WRE will never want for customers.

On the other hand, if the terrorists manage to nuke DC WRE won't be worth a plug ¥ in a Las Vegas slot machine. I guess your estimate of the odds against that happening will color your investment strategy.

As to EOP's supposed spread out strength, I'm not adding to our EOP holdings right now because EOP isn't doing all that well right now. This is due, in large part, to EOP's extensive holdings in California which (as you may have heard) is in more financial trouble than (I believe) even the Terminator can get them out of. Having paid too much for a large chunk of properties in the bay area doesn't help either.

Bottom Line:
I'm holding on EOP but throwing every spare ¢ into our WRE DRIP!

Print the post Back To Top
No. of Recommendations: 0
Thanks for your comments inc. the nuke possibility.

Do you happen to know what percentage of the tenant base is govt. related?

Petey


I'm no Dawg, but I'll throw in my two €s worth.

One of the reasons we're heavily invested in WRE is the fact that they ARE concentrated in just one area: Washington, DC. I feel as long as we have a federal government in Washington WRE will never want for customers.

On the other hand, if the terrorists manage to nuke DC WRE won't be worth a plug ¥ in a Las Vegas slot machine. I guess your estimate of the odds against that happening will color your investment strategy.

As to EOP's supposed spread out strength, I'm not adding to our EOP holdings right now because EOP isn't doing all that well right now. This is due, in large part, to EOP's extensive holdings in California which (as you may have heard) is in more financial trouble than (I believe) even the Terminator can get them out of. Having paid too much for a large chunk of properties in the bay area doesn't help either.

Bottom Line:
I'm holding on EOP but throwing every spare ¢ into our WRE DRIP!
Print the post Back To Top
No. of Recommendations: 1
Do you happen to know what percentage of the tenant base is govt. related?

Petey

Off the top of my head, I think they may have a few federal tenants, but I was referring to WRE's providing for the needs for federal employees, lobbyists and all the others attracted to the seat of power.

In other words, the PEOPLE living there will have money as long as the federal government has money. As long as the feds are in D.C. there will always be a need for WRE's space regardless of who's renting it.
Print the post Back To Top
No. of Recommendations: 0
Do you happen to know what percentage of the tenant base is govt. related?

Petey
*******************************************
If you want a tenant base that is govt. related maybe you should look at OFC.

Print the post Back To Top
No. of Recommendations: 4
Hi Dave,

Yes, I suppose you have to balance this with the increased locality risk that a terrorist nuke in DC would wipe out the WRE real estate.

Petey


Off the top of my head, I think they may have a few federal tenants, but I was referring to WRE's providing for the needs for federal employees, lobbyists and all the others attracted to the seat of power.

In other words, the PEOPLE living there will have money as long as the federal government has money. As long as the feds are in D.C. there will always be a need for WRE's space regardless of who's renting it.
Print the post Back To Top
No. of Recommendations: 2
This is WRE's 170th consecutive quarterly dividend at equal or increasing rates. WRE dividends have increased every year for 34 consecutive years. During these 34 years, WRE dividends have increased 39 times, a record unmatched by any other REIT.

I see a lot of the posts here that cite these kinds of historical performance. It's interesting but not particular relevant to the future.
For example, UST has a great history but does anyone seriously believe that they have a great future. I don't want to debate whether UST is or isn't a good investment; I only use it as an example of the danger of using historical information. I think that div payers are particularly prone to this kind of thing. We tend to be lulled my history. There are lots of examples of this - TE, GT, SGP. It's not so much that the divs were cut but rather how the stock price deterioration was sticky over time. Not everyone believed or even saw that cuts were coming. And you can't if you look at the past too much.

I think that citing historical performance is useful only to demonstrate the power of dividend based investing or perhaps as bragging rights. It falls into the dangerous territory of YOC - yield on cost.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 3
Re: I see a lot of the posts here that cite these kinds of historical performance. It's interesting but not particular relevant to the future.
For example, UST has a great history but does anyone seriously believe that they have a great future. I don't want to debate whether UST is or isn't a good investment; I only use it as an example of the danger of using historical information. I think that div payers are particularly prone to this kind of thing. We tend to be lulled my history. There are lots of examples of this - TE, GT, SGP. It's not so much that the divs were cut but rather how the stock price deterioration was sticky over time. Not everyone believed or even saw that cuts were coming. And you can't if you look at the past too much.

I think that citing historical performance is useful only to demonstrate the power of dividend based investing or perhaps as bragging rights. It falls into the dangerous territory of YOC - yield on cost.


I think we would all agree that past performance does not guarantee future results. What you have failed to indentify is a solid replacement that will, without fail, guarantee future results. We tend to use past performance largely because it is available and I would argue is of some value. But you are certainly correct that it does not guarantee future results and should not be the only consideration when investing.

Jim Sullivan aka 8128
Print the post Back To Top
No. of Recommendations: 4
Historical performance is valuable only in the context of the present and future. Certainly, one has to continually evaluate management's activities and the company's policies to watch for poor decisions and acquisitions that might somehow affect the dividend.


Still, the historical performance of the dividend stream can be the basis for expectations for the future, if not future performance. WRE's historical record through the very high interest rate and high inflation environment in the 1970s speaks volumes on its ability to weather and even excell during bad economic times.

David
Print the post Back To Top
No. of Recommendations: 1
What you have failed to indentify is a solid replacement that will, without fail, guarantee future results. We tend to use past performance largely because it is available and I would argue is of some value. But you are certainly correct that it does not guarantee future results and should not be the only consideration when investing.

Without fail???? guarantee???? Can you say that the sun will rise tomorrow without fail? Can it be guaranteed? No? Even after millions of years? Then it may be asking a bit too much without fail, guarantee future results.

Past performance is of little value other than to identify stocks worth looking at. Recent history might help with the immediate future but that is all. What you want to look at is the reasons for the past performance. Macro reasons must generally be excluded. Micro reasons are worth looking at, ie, what are the characteristics of stocks that increase their dividends over long periods of time? What are the characteristics of stocks that freeze or cut their dividends after a long history of dividend increases?

To focus on past performance without identifying/understanding the reasons why is too easy. If it were that easy, we'd all buy the Mergent achievers with the highest div growth rate and the longest history. And that would be the end of that technique very quickly.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 1
WRE's historical record through the very high interest rate and high inflation environment in the 1970s speaks volumes on its ability to weather and even excell during bad economic times.

Why was it able to perform as it did during the 70s? I'm not looking for you to answer the question. But it is the answer to that question that provides a useful comparison to today not the performance.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 0
yielderA posted:

>>Why was it able to perform as it did during the 70s? I'm not looking for you to answer the question. But it is the answer to that question that provides a useful comparison to today not the performance.<<

I do not disagree with the points in your last two posts on this thread.
Still, WRE was able to do well because of good management and execution. It also shows, I think, that high interest rates and high inflation will not negatively impact the FFO and dividends of a well-run REIT, such as WRE. But past performance, by itself and out of context, is not a reliable indicator of future performance.

David
Print the post Back To Top
No. of Recommendations: 0
WRE was able to do well because of good management and execution

Surely, it's not the same management today, is it??

It also shows, I think, that high interest rates and high inflation will not negatively impact the FFO and dividends of a well-run REIT, such as WRE.

I had a quick peek at their balance sheet. At year end 2003, the D/E ratio was 1.21. Five years before that, it was .94. In 1995, it was .18. In 1994, they had no LT debt. Depending on the type of long term debt they are carrying today (fixed vs floating rate) and its maturity(short vs long), rising rates could hurt them.

Who knows what their balance sheet looked like in the 70s? If it carried little debt, that might explain why they did well. This is an example of drawing conclusions based on results rather that what caused the results.

Notwithstanding my comments about historical numbers, I think that they do have some value in identifying stocks for further investigation. I look for stocks with certain ratio and growth characteristics. Then I start digging into the company to assess whether it can continue the growth characteristics. It's my assessment of the present and my guess at the future that determines my buy/sell decision.

Mike
Print the post Back To Top
No. of Recommendations: 6
I had a quick peek at their balance sheet. At year end 2003, the D/E ratio was 1.21. Five years before that, it was .94. In 1995, it was .18. In 1994, they had no LT debt.
*******************************************
Would you really want to own a REIT that has failed to take advantage of the interest rate environment of the past few years?
Print the post Back To Top
No. of Recommendations: 2
Would you really want to own a REIT that has failed to take advantage of the interest rate environment of the past few years?

Nope but would you really want to own a highly leveraged company with a high payout ratio in a rising rate environment?

WRE may do fine but the dividend is far riskier in a rising rate environment. As an income oriented investor, I focus on risk, ie, is the dividend sustainable & can it be increased?

In 2003, WRE's interest expense was $30 mil on $460 in LT debt (no short term debt). Impute an interest rate. Then increase the rate by .5%. Calculate the new interest expense. Divide it by the shares outstanding. A very rough and dirty estimate (I haven't looked at the detail of their debt) says that for every .5% increase in rates earnings may decrease by around $0.045/share. Does that mean a dividend cut? Probably not immediately. But eventually it must unless they can make up the difference by cutting operating costs which they will obviously try to do. Salaries and benefits are always the single biggest item so that is what they will target. Can they find enough savings in the operating expenses on a sustained basis? Who knows but that's one of the places you look to see if increased debt servicing can be offset. The other place you look is on the revenue side. Are price increases sticky? Do they have diversified sources of income?

The other problem with rising rates is that the cost of new borrowing will increase meaning that asset purchases will have a higher return threshhold meaning that there will be fewer viable opportunities. The other new capital alternative - equity - will be problematic in a falling market.

I'm not picking on WRE; I'm just using it as an example. When rates are low or falling, the balance sheet is less of an issue but when rates are climbing or high, watch out.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 0
yielderA posted, in pertinent part:

>>Notwithstanding my comments about historical numbers, I think that they do have some value in identifying stocks for further investigation. I look for stocks with certain ratio and growth characteristics. Then I start digging into the company to assess whether it can continue the growth characteristics. It's my assessment of the present and my guess at the future that determines my buy/sell decision.<<

I agree. The most (and maybe only) valuable thing about historical performance numbers is to identify stocks for further research.

David
Print the post Back To Top
No. of Recommendations: 0
The most (and maybe only) valuable thing about historical performance numbers is to identify stocks for further research.

It was my sense from reading some of the posts here that historical performance seemed to be the reason being advanced for buying a stock. I didn't see much discussion about current or future performance.

The problem with these stocks is that historical performance is so good that you can be lulled into focusing on it as a buying rationale: the past will continue into the future.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 0
>>It was my sense from reading some of the posts here that historical performance seemed to be the reason being advanced for buying a stock. I didn't see much discussion about current or future performance.

The problem with these stocks is that historical performance is so good that you can be lulled into focusing on it as a buying rationale: the past will continue into the future<<


Certainly, one could view even some of my posts in this thread in such a fashion, and that is why I clarified in response to your posts. I was only trying to highlight the historical performance of a REIT (WRE) that I believe is fundamentally a Best of the Blue REITs, in the first place.

David
Print the post Back To Top
No. of Recommendations: 3
In 2003, WRE's interest expense was $30 mil on $460 in LT debt (no short term debt). Impute an interest rate. Then increase the rate by .5%. Calculate the new interest expense.

Do you KNOW that the intrest rate on WRE's Long Term debt is going to increase?

Print the post Back To Top
No. of Recommendations: 3
In 2003, WRE's interest expense was $30 mil on $460 in LT debt (no short term debt). Impute an interest rate. Then increase the rate by .5%. Calculate the new interest expense.

Do you KNOW that the intrest rate on WRE's Long Term debt is going to increase?


page 69 of the 2003 Annual report has a table that shows the expected maturity dates of the $375 million in "Notes Payable."

$55 million will mature in 2004, 0 in 2005, and $50 million will mature in 2006 and 0 in 2007... So my rough guess is that most of the "long-term debt" will not be re-financed until 2008 or after...

JTT


Print the post Back To Top
No. of Recommendations: 0
Do you KNOW that the intrest rate on WRE's Long Term debt is going to increase?

No, I don't. I said that "I haven't looked at the detail of their debt".

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 7
2 kits to pick.

The first is that your analysis on rising rates only hits the mark if a firm had 100% floating debt or a heavily front;oaded maturity schedule for their debt. The best REIT managements have spent the last 3 years casting out their maturitues as far as possible. They may not face the crunch you envision.

And Mike said:


The other problem with rising rates is that the cost of new borrowing will increase meaning that asset purchases will have a higher return threshhold meaning that there will be fewer viable opportunities. The other new capital alternative - equity - will be problematic in a falling market.


For a REIT with a comparative advantage in developing new properties and selling them once completed, this may be true. The higher return threshhold effectively limits competition from creeping up on established properties in high barrier-to-entry markets. This can actually help such a REIT.

As someone who is surprised just how far and fast REITs could correct from NAV premiums of 20% to -2%, I think much of the 'risk' you mentioned has been priced out of the market for REITs. The strong negative cash flows out of the yield-chasing funds may keep prices under pressure for a while, but it is hard to argue that REITs like GGP, REG, WRI, VNO and AVB are overpriced.

Respectfully, ET
Print the post Back To Top
No. of Recommendations: 1
WRE paid a dividend of $ .23 in the 1st qtr of 1994.  Ten years later, it
paid $ .373 for the 1st qtr of 2004. This is a 4.83 annual rate of dividend
growth for 10 years.  Over the same period here is how some other REIT's 
did in the same sector (diversified):

WRE   4.8%   $.23  -> $.373 

CLP   4.4     .43  ->  .67
CUZ   9.6     .147 ->  .37
LXP   3.7     .27  ->  .35
OLP  10.8     .1   ->  .33 (5 qtrs after start div was .3 so really poor)
PEI   1.1     .47  ->  .54
VNO  10.4     .25  ->  .71

I wouldn't consider WRE's dividend growth over the last 10 years extra-
ordinary.  I would certainly prefer CUZ or VNO.  Especially when you
consider total return.

Norm
Print the post Back To Top
No. of Recommendations: 2
selling them once completed

It's the same situation for holding them. The net return from a new investment gets squeezed if the cost of new borrowing increases.

I'm not making a case for cheap or expensive; neither am I making a case for any particular REIT being a good or bad investment. All I'm saying is that (1) you can't make a buy/sell decision based on the past and (2) in a rising rate environment, look closely at the balance sheet viz a viz leverage and type and maturity of debt. Look at the amount of goodwill as well. Look at the return on assets as well. Increasing debt and decreasing ROA is not a good sign at any time but it's worse during a rising rate environment.

This applies for any dividend-growth stock not just REITs.

Regards,
Mike

Print the post Back To Top
No. of Recommendations: 2
Below are two posts today from the Real Estate & REIT Discussion Board here at MF on this subject (with their links):

>>Page 7 of WRE's Q1 supplemental shows $530M of long-term FIXED debt, with an avg. weighted maturity of 7.6 yrs and an avg. interest rate of 6.4%. Only $70M is maturing in 2004.

I don't see how a 0.5% increase in LT rates would have any serious effect on WRE's interest expense.<<

http://aolboards.fool.com/Message.asp?mid=20773223


>>May I point out that WRE has INCREASED its dividend for 34 consecutive years now? This means right through the Nixon 1973-1974 recession, the Ford-Carter super high interest rate debacle (short-term interest rates hit 22%!) when Carter ordered Volker to squash inflation, the Reagan recession of 1982 (the worst since the Great Depression), the Bush 41 recession, the 1994 bond market collapse which was at least the worst bond market since 1929 as Big Al rushed through interest rate increases (though he had given a lot of warning), and the Bush43 recession of 2001-2002(at least).<<

http://aolboards.fool.com/Message.asp?mid=20773340

David
Print the post Back To Top
No. of Recommendations: 1
I don't see how a 0.5% increase in LT rates would have any serious effect on WRE's interest expense.

Excellent. This is the kind of digging one needs to do. This is part of the "why" behind the performance numbers. This provides far more comfort about how the company will perform if rates rise than looking at historical performance.


the 1994 bond market collapse which was at least the worst bond market since 1929

This is exactly the danger of extrapolating from historical information without having enough detail. In 1994, WRE had no LT debt and only 18 mil in ST debt for a D/E ratio of .12

FWIW, I've contacted the company and asked for the LT debt and shareholders' equity figures for each year of the 1970 decade. I'll post what I get.

Regards,
Mike
Print the post Back To Top
No. of Recommendations: 5

It's the same situation for holding them. The net return from a new investment gets squeezed if the cost of new borrowing increases.


Not if the rising rates squeeze out competition. This can translate into quick gains in rental rates in short lease REITs like hotels/apartments, and can lead to gradual (but meaningful) increases in rents for office/industrial.

Sure, all else equal, rising rates are a headwind for virtually all equity investments...but you need to consider the positive wind of less development from your local competition. All else is never equal. I believe that if one followed your logic that one would have a tough time accounting for the tough situation in apartment REITs that we've witnessed as rates fell...driving folks out of apartments into single-family homes via low mortgage rates. The affordability index increased as rates dropped. So what would you expect as mortgage rates pop up 150-250 bps? The market price of a REIT equity might pull back temporarily, but sooner or later, the increases in AFFO should overwhelm any squeeze in a REIT's financing/rental spread. Apartments are positively leveraged to growth in jobs and unaffordability of homes.

At least, I'm hoping they are.

I don't disagree with much of your analysis. I just think there are more variables to consider.

ET

Print the post Back To Top
No. of Recommendations: 0
In a rising rate environment, watch the balance sheet.

All of attention on earnings comparisons, GDP growth, ISM numbers and employment emphasizes income statements. But to a large extent, the sustainability of any income stream is dependent on the balance sheet – debt burdens, interest service, savings, and the availability of financing. The underlying assumption of investors is that the economy has been sufficiently “kick started” by tax cuts and monetary policy, so it will continue to grow along typical trajectories.


http://www.hussmanfunds.com/wmc/wmc040517.htm
Print the post Back To Top
Advertisement