WRIT Closing in on New CEO, Buyer for MOB Portfolio

George F. McKenzie

During their quarterly conference call with analysts, executives with Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) expressed optimism that the buyer of its medical office building (MOB) portfolio and its new Chief Executive Officer would be identified soon.

George F. McKenzie, the company’s current President and Chief Executive Officer, said the “Committee and Board have identified the shortlist of finalists” to succeed him.

“Deliberations and final interviews are ongoing and I expect the process for the selection will be complete by the end of this summer,” McKenzie added.

In a previous conference call, McKenzie – who was appointed WRIT’s President and Chief Executive Officer effective June 1, 2007 – said the firm would be looking for a “strong leader, someone who knows the market, someone who is financially astute and has all of the characteristics of a good leader.”

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The search for the Rockville, MD-based real estate investment trust’s new CEO coincides with the sale of its entire medical office building portfolio, a 17-property portfolio which totals about 1.3 million square feet. As of third quarter 2012, the Medical Office Division contributed 15 percent of WRIT’s total net operating income.

The company initially said it planned to have a buyer identified by early-July and under contract in the same month.

“We weren’t radically rushing to push the button,” said McKenzie when asked why the process has been elongated. “We felt it was in our best interest just to sort of stretch it out a little bit, but we are at the point now where we are very, very close to moving forward with a particular group.”

Brendan Maiorana, an analyst with Wells Fargo Securities, asked if there had been any change in pricing expectations from where the bids are now relative to what the firm thought it might receive at the beginning of the process.

William T. Camp

“We are well within where we expected this thing to be,” replied William T. Camp, WRIT’s executive vice president and chief financial officer. “Interest rates in particular affect different people in different ways. But clearly some people were affected more than others and some people weren’t affected at all. And the people that weren’t affected at all rose to the top and that’s probably the group that we are going to be with at the end of the day.”

Camp said WRIT would announce a material transaction with the buyer “after they go firm” instead of when the buyer puts deposit money down. “It will probably be at the end of August” after the due diligence period, he said.

Michael Knott with Green Street Advisors asked the executive where they were in terms of redeploying the proceeds from the sale of these assets.

“It’s still a very competitive acquisition market,” replied Camp. “The straight up answer is we don’t have anything firm right now, we have several things in due diligence, none of which are firm, so I think we have a little bit of a head start and we have work to do.”

Camp went on to say that the firm has some multifamily properties under due diligence, some office buildings that are “not necessarily in due diligence but we feel confident that we will be successful on,” and some retail properties that are smaller in size.