Will Somebody Buy WRIT?

George F. McKenzie

Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) has been making a lot of headlines for departures and dispositions.

In February 2011, the firm announced it was exiting the industrial real estate business. Six months later, the Rockville, MD-based REIT had a buyer for the portfolio, a joint venture between affiliates of AREA Property Partners (AREA) and the Adler Group.

Those properties (combined with two office buildings) sold for $350 million.

Two months later, the firm announced it was looking to minimize its exposure in Suburban Maryland, about 13 percent of its entire portfolio.

And then yesterday (1/29/13) came the news that WRIT was looking to shed its Medical Office Division, which totals about 1.3 million square feet and 17 properties. As of third quarter 2012, the Medical Office Division contributed 15 percent of WRIT’s total net operating income.

But perhaps most significant was the news that WRIT’s President and CEO, George F. “Skip” McKenzie, said he had communicated to WRIT’s Board of Trustees that he was looking to retire from WRIT by the end of 2013. McKenzie was appointed WRIT’s President and Chief Executive Officer effective June 1, 2007.

McKenzie addressed his decision in a call with analysts on Wednesday.

“As this year began I contemplated a number of variables,” said McKenzie. “Professionally, I have been running full speed non-stop for the past four years. I have been continuously employed for last 36 and the last 20 have been in real estate. My youngest child Petra graduated from college this June and is off the family payroll and I’ll be building house on the bay that also will be finished this summer from which I would like some time to enjoy the view. And lastly, this year I will be 58 years old – not getting any younger. It’s time to think about slowing down and spending more time with my family.”

John Guinee, an analyst with Stifel Nicolaus, followed up with a question on whether it was time to sell the firm.

“You sell the MOB, the CEO transition issue … the DC office market is clearly going to be slow for a number of years, 20,000 or 30,000 apartment deliveries in the next few years, plenty of cheap debt out there to lever off a portfolio, what’s the thought of just putting the entire company up for sale?”, Guinee asked.

“We are always going to do what’s in the best interest of our shareholders,” McKenzie responded. “Our initiatives are to continue the growth path that we set forth over almost six years ago. If something happens in the meantime, we will always consider it if it’s in the best interest of the shareholders.”

When asked by Michael Knott from Green St Advisors what the Board will be looking for in a new CEO, McKenzie took some time to poke fun at the search process.

“I think they want someone with real estate depth and very obviously it’s going to be downgrade off of me, but maybe not as good looking,” he responded.

“A strong leader, someone who knows the market, someone who is financially astute and, has all of the characteristics that it will all attribute to good leader,” McKenzie added. “The [search] committee hasn’t been formed yet. I don’t want to put words in their mouth. They got a lot of work to do.”

McKenzie joined WRIT in September 1996. Prior to joining WRIT, McKenzie was Vice President, Investment & Sales at Prudential Realty Group, a subsidiary of Prudential Insurance Company of America.