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. During the first quarter of 2013, we 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 to be 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 first quarter of 2013, 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 June 30, 2013 and December 31, 2012, the land and capitalized development costs are as follows (in thousands):



	June 30, 2013		December 31, 2012
650 North Glebe	$	19,904	$	15,646
1225 First Street	21,576		19,807

As of June 30, 2013 and December 31, 2012, the accounts payable and accrued liabilities related to the joint ventures are as follows (in thousands):



	June 30, 2013		December 31, 2012
650 North Glebe	$	1,089	$	115
1225 First Street	394		1,676

On February 21, 2013, WRIT, through its consolidated joint venture to develop a mid-rise multifamily property at 650 North Glebe Road, entered into a construction loan agreement with Citizens Bank for $33.0 million. The loan bears interest at LIBOR plus 2.15%, which decreases to LIBOR plus 2.0% upon completion of construction and the joint venture not being in default. The loan matures on February 21, 2016, with two one year extension options exercisable by the joint venture, subject to fees and compliance with certain provisions in the loan agreement. As of June 30, 2013, the consolidated joint venture had $0.4 million outstanding on this construction loan agreement.

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 classified as held for sale or 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 and six months ended June 30, 2013 and 2012 were as follows (in thousands):



	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013			2012
Revenues	$	—	$	1,187		347			2,472
Property expenses	—		(446		)	(162		)	(908		)
Depreciation and amortization	—		(364		)	—			(776		)
Interest expense	—		(63		)	—			(127		)
	$	—	$	314		$	185		$	661

Income from operations of properties sold or held for sale by property for the three and six months ended June 30, 2013 and 2012 were as follows (in thousands):



		Three Months Ended June 30,				Six Months Ended June 30,
Property	Segment	2013		2012		2013		2012
1700 Research Boulevard	Office	$	—	$	74	—		118
Atrium Building	Office	—		225		185		514
Plumtree Medical Center	Medical Office	—		15		—		29
		$	—	$	314	$	185	$	661