Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2011 are not necessarily indicative of the operating results for the full year.

The accompanying unaudited consolidated financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT TRS Management Corp., and the Operating Partnership. All majority-owned subsidiaries and affiliates over which the Trust has financial and operating control and variable interest entities (“VIE’s”) in which the Trust has determined it is the primary beneficiary are included in the consolidated financial statements. All significant intercompany balances and transactions have been eliminated in consolidation. The Trust accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trust’s share of the earnings of these joint ventures and companies is included in consolidated net income.

Reclassifications

Certain prior year balances have been reclassified in order to conform to the current year presentation. Discontinued operations for the three and six month periods ended June 30, 2011 include the Trust’s properties in Lafayette, Louisiana, Knoxville, Tennessee, and St. Louis, Missouri. Discontinued operations for the three and six month periods ended June 30, 2010 also include the Trust’s properties in Athens, Georgia and Sherman, Texas which were disposed of in 2010.

Out of Period Adjustments

During the quarter ended June 30, 2010, the Trust identified an error in its year ended December 31, 2009 allocation of fair value attributable to the building component of its Athens, Georgia property which was assessed for impairment in connection with its reclassification as held for sale and its presentation in discontinued operations. As a result, net loss was understated by approximately $700,000 for the year ended December 31, 2009. The Trust determined that this amount was not material to the year ended December 31, 2009 or to the three and six months ended June 30, 2010. As such, a charge of approximately $700,000 was recorded in the consolidated statement of operations within discontinued operations as an out of period adjustment in the second quarter of 2010. There was no impact on cash flow from operations.

Investments in Real Estate

Real estate assets are stated at historical cost. Expenditures for repairs and maintenance are expensed as incurred. Significant renovations that extend the useful life of the properties are capitalized. Depreciation for financial reporting purposes is computed using the straight-line method.

Upon the acquisition of real estate, the Trust assesses the fair value of acquired assets (including land, buildings and improvements, and identified intangibles) and acquired liabilities. The Trust allocates purchase price based on these assessments.

Real estate investments and purchased intangibles subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. When evaluating the carrying amount, the Trust considers the future undiscounted cash flows expected to result from the use and the eventual disposition of the property. Undiscounted cash flows are used to assess recoverability and when warranted, discounted cash flows are used to assess fair value. Cash flow assumptions include market rental rates, lease terms, lease up costs and operating expenses during the hold period as well as proceeds expected to result from the disposition of the property.

Earnings Per Share

The Trust determines basic earnings per share on the weighted average number of Common Shares of Beneficial Interest (“Common Shares”) outstanding during the period and reflects the impact of participating securities. The holders of the Trust’s Series B-1 Cumulative Convertible Redeemable Preferred Shares (“Series B-1 Preferred Shares”) and the Series C Cumulative Convertible Redeemable Preferred Shares (“Series C Preferred Shares”) are entitled to receive cumulative preferential dividends on a quarterly basis equal to the greater of (i) $0.40625 per share quarterly (6.5% of the liquidation preference on an annualized basis) or (ii) cash dividends payable on the number of Common Shares into which the Series B-1 Preferred Shares and Series C Preferred Shares (assuming for this purpose that the conversion price of the Series C Preferred Shares equals the conversion price of the Series B-1 Preferred Shares) are convertible. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

The Trust has calculated earnings per share in accordance with relevant accounting guidance for participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Basic
Income from continuing operations	$	3,967		$	5,515		$	11,322		$	9,718
Income attributable to non-controlling interest		(329	)		(175	)		(533	)		(420	)
Preferred dividend of Series C Preferred Shares		(58	)		(58	)		(117	)		(171	)
Income from continuing operations applicable to Common Shares		3,580			5,282			10,672			9,127
Income (loss) from discontinued operations		90			(764	)		137			(517	)
Net income applicable to Common Shares for earnings per share purposes	$	3,670		$	4,518		$	10,809		$	8,610
Basic weighted-average Common Shares		32,573			21,175			29,841			20,888
Income from continuing operations	$	0.11		$	0.25		$	0.36		$	0.44
Income (loss) from discontinued operations		—			(0.04	)		—			(0.03	)
Net income per Common Share	$	0.11		$	0.21		$	0.36		$	0.41
Diluted
Income from continuing operations	$	3,967		$	5,515		$	11,322		$	9,718
Income attributable to non-controlling interest		(329	)		(175	)		(533	)		(420	)
Preferred dividend of Series C Preferred Shares		(58	)		(58	)		(117	)		—
Income from continuing operations applicable to Common Shares		3,580			5,282			10,672			9,298
Income from discontinued operations		90			(764	)		137			(517	)
Net income applicable to Common Shares for earnings per share purposes	$	3,670		$	4,518		$	10,809		$	8,781
Basic weighted-average Common Shares		32,573			21,175			29,841			20,888
Series B-1 Preferred Shares (1)		—			—			—			—
Series C Preferred Shares (2)		—			—			—			522
Stock options (3)		1			2			1			2
Diluted weighted-average Common Shares		32,574			21,177			29,842			21,412
Income from continuing operations	$	0.11		$	0.25		$	0.36		$	0.44
Income from discontinued operations		—			(0.04	)		—			(0.03	)
Net income per Common Share	$	0.11		$	0.21		$	0.36		$	0.41

(1)	The Series B-1 Preferred Shares were anti-dilutive for the three and six months ended June 30, 2011 and 2010 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share.
(2)	The Series C Preferred Shares were anti-dilutive for the three and six months ended June 30, 2011 and the three months ended June 30, 2010 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. The Series C Preferred Shares were dilutive for the six months ended June 30, 2010.
(3)	The Trust’s outstanding stock options were dilutive for the three and six months ended June 30, 2011 and 2010.

Recently Issued Accounting Standards

In April 2011 the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (an “Update”) that provides clarification on which loan modifications meet the criteria to be treated as Troubled Debt Restructurings (“TDR’s”) under Topic 310. The guidance is intended to improve financial reporting by creating greater consistency in the way GAAP is applied for various TDRs by reaffirming the requirements and clarifying the criteria that creditors should use in evaluating whether a restructuring constitutes a TDR. The guidance is effective for interim and/or annual periods beginning on or after June 15, 2011, and early application is permitted. The Trust has adopted this standard which did not have a material impact on its consolidated financial statements.

In May 2011 the FASB issued an Update to Topic 820, Fair Value Measurements which results in changes to common fair value measurement and disclosure requirements. Consequently, the amendments change the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements. Certain amendments in this update clarify the FASB’s intent about the application of existing fair value measurement requirements. Other amendments change requirements for measuring fair value or for disclosing information about fair value measurements. This amendment will be effective for the Trust beginning with the first reporting period of 2012. The Trust has evaluated this amendment and does not anticipate its adoption will have a material impact on its consolidated financial statements.

In June 2011 the FASB issued an Update that amends Topic 220, Comprehensive Income. In this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, it requires consecutive presentation of the statement of net income and other comprehensive income and requires an entity to present reclassification adjustments on the face of the financial statements from other comprehensive income to net income. These changes apply to both annual and interim financial statements and shall be applied retrospectively. This amendment will be effective for the Trust beginning with the first reporting period of 2012. The Trust has evaluated this amendment and does not anticipate its adoption will have a material impact on its consolidated financial statements.