wre-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________

FORM 10-Q

___________________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NO. 1-6622


WASHINGTON REAL ESTATE INVESTMENT TRUST
(Exact name of registrant as specified in its charter)


Maryland						53-0261100
(State of incorporation)						(IRS Employer Identification Number)

1775 EYE STREET, NW, SUITE 1000, WASHINGTON, DC 20006

(Address of principal executive office) (Zip code)

Registrant’s telephone number, including area code: (202) 774-3200

___________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Shares of Beneficial Interest	WRE	NYSE

___________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of July 27, 2020, 82,346,724 common shares were outstanding.

WASHINGTON REAL ESTATE INVESTMENT TRUST

INDEX


		Page
Part I: Financial Information

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Operations	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Consolidated Statements of Equity	8
	Consolidated Statements of Cash Flows	10
	Notes to Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4.	Controls and Procedures	43

Part II: Other Information

Item 1.	Legal Proceedings	44

Item 1A.	Risk Factors	44

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

	Signatures	48

PART I

FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

The information furnished in the accompanying unaudited Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss, Consolidated Statements of Equity and Consolidated Statements of Cash Flows reflects all adjustments, consisting of normal recurring items, which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes for the three years ended December 31, 2019 included in Washington Real Estate Investment Trust’s 2019 Annual Report on Form 10-K, as amended by Amendment No. 1 to the Annual Report on Form 10-K, filed on March 6, 2020.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE DATA)


	June 30, 2020		December 31, 2019
	(Unaudited)
Assets
Land	$	574,025	$	566,807
Income producing property	2,467,629		2,392,415
	3,041,654		2,959,222
Accumulated depreciation and amortization	(745,692)		(693,610)
Net income producing property	2,295,962		2,265,612
Properties under development or held for future development	89,166		124,193
Total real estate held for investment, net	2,385,128		2,389,805
Investment in real estate held for sale, net	—		57,028
Cash and cash equivalents	7,971		12,939
Restricted cash	630		1,812
Rents and other receivables	67,026		65,259
Prepaid expenses and other assets	81,967		95,149
Other assets related to properties held for sale	—		6,336
Total assets	$	2,542,722	$	2,628,328
Liabilities
Notes payable, net	$	897,060	$	996,722
Mortgage notes payable, net	—		47,074
Line of credit	181,000		56,000
Accounts payable and other liabilities	93,192		71,136
Dividend payable	24,760		24,668
Advance rents	7,375		9,353
Tenant security deposits	10,769		10,595
Other liabilities related to properties held for sale	—		718
Total liabilities	1,214,156		1,216,266
Equity
Shareholders’ equity
Preferred shares; $0.01 par value; 10,000 shares authorized; no shares issued or outstanding	—		—
Shares of beneficial interest, $0.01 par value; 100,000 shares authorized; 82,327 and 82,099 shares issued and outstanding, as of June 30, 2020 and December 31, 2019, respectively	823		821
Additional paid in capital	1,598,620		1,592,487
Distributions in excess of net income	(236,673)		(183,405)
Accumulated other comprehensive (loss) income	(34,533)		1,823
Total shareholders’ equity	1,328,237		1,411,726
Noncontrolling interests in subsidiaries	329		336
Total equity	1,328,566		1,412,062
Total liabilities and equity	$	2,542,722	$	2,628,328

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue
Real estate rental revenue	$	72,870	$	76,820	$	149,662	$	148,254
Expenses
Real estate expenses	26,885		28,134		55,524		54,277
Depreciation and amortization	29,599		33,044		59,319		60,101

General and administrative expenses	5,296		5,535		11,633		13,342

Real estate impairment	—		—		—		8,374

	61,780		66,713		126,476		136,094
Loss on sale of real estate	(7,539)		(1,046)		(7,539)		(1,046)
Real estate operating income	3,551		9,061		15,647		11,114
Other expense
Interest expense	(8,751)		(15,252)		(19,596)		(27,748)
(Loss) gain on extinguishment of debt	(206)		—		262		—


	(8,957)		(15,252)		(19,334)		(27,748)
Loss from continuing operations	(5,406)		(6,191)		(3,687)		(16,634)
Discontinued operations:
Income from operations of properties sold or held for sale	—		7,178		—		13,216



Income from discontinued operations	—		7,178		—		13,216
Net (loss) income	(5,406)		987		(3,687)		(3,418)
Less: Net income attributable to noncontrolling interests in subsidiaries	—		—		—		—
Net (loss) income attributable to the controlling interests	$	(5,406)	$	987	$	(3,687)	$	(3,418)

Basic net (loss) income attributable to the controlling interests per share:
Continuing operations	$	(0.07)	$	(0.08)	$	(0.05)	$	(0.21)
Discontinued operations	—		0.09		—		0.17
Net (loss) income attributable to the controlling interests per share ⁽¹⁾	$	(0.07)	$	0.01	$	(0.05)	$	(0.05)

Diluted net (loss) income attributable to the controlling interests per share:
Continuing operations	$	(0.07)	$	(0.08)	$	(0.05)	$	(0.21)
Discontinued operations	—		0.09		—		0.17
Net (loss) income attributable to the controlling interests per share ⁽¹⁾	$	(0.07)	$	0.01	$	(0.05)	$	(0.05)
Weighted average shares outstanding – basic	82,153		79,934		82,120		79,908
Weighted average shares outstanding – diluted	82,153		79,934		82,120		79,908
Dividends declared per share	$	0.30	$	0.30	$	0.60	$	0.60

______________________________

⁽¹⁾Earnings per share may not sum due to rounding

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(UNAUDITED)


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net (loss) income	$	(5,406)	$	987	$	(3,687)	$	(3,418)
Other comprehensive loss:
Unrealized loss on interest rate hedges	(1,789)		(6,942)		(36,356)		(11,111)
Comprehensive loss	(7,195)		(5,955)		(40,043)		(14,529)
Less: Comprehensive income attributable to noncontrolling interests	—		—		—		—
Comprehensive loss attributable to the controlling interests	$	(7,195)	$	(5,955)	$	(40,043)	$	(14,529)

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS)

(UNAUDITED)


	Shares Issued and Out-standing	Shares of Beneficial Interest at Par Value		Additional Paid in Capital		Distributions in Excess of Net Income		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, December 31, 2019	82,099	$	821	$	1,592,487	$	(183,405)	$	1,823	$	1,411,726	$	336	$	1,412,062

Net loss attributable to the controlling interests	—	—		—		(3,687)		—		(3,687)		—		(3,687)

Unrealized loss on interest rate hedges	—	—		—		—		(36,356)		(36,356)		—		(36,356)
Distributions to noncontrolling interests	—	—		—		—		—		—		(7)		(7)

Dividends	—	—		—		(49,581)		—		(49,581)		—		(49,581)
Equity issuances, net of issuance costs	46	1		1,241		—		—		1,242		—		1,242
Shares issued under Dividend Reinvestment Program	41	—		1,065		—		—		1,065		—		1,065
Share grants, net of forfeitures and tax withholdings	141	1		3,827		—		—		3,828		—		3,828
Balance, June 30, 2020	82,327	$	823	$	1,598,620	$	(236,673)	$	(34,533)	$	1,328,237	$	329	$	1,328,566


	Shares Issued and Out-standing	Shares of Beneficial Interest at Par Value		Additional Paid in Capital		Distributions in Excess of Net Income		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, December 31, 2018	79,910	$	799	$	1,526,574	$	(469,085)	$	9,839	$	1,068,127	$	351	$	1,068,478
Cumulative effect of change in accounting principle	—	—		—		(906)		—		(906)		—		(906)
Net loss attributable to the controlling interests	—	—		—		(3,418)		—		(3,418)		—		(3,418)
Unrealized loss on interest rate hedges	—	—		—		—		(11,111)		(11,111)		—		(11,111)
Distributions to noncontrolling interests	—	—		—		—		—		—		(8)		(8)
Dividends	—	—		—		(48,252)		—		(48,252)		—		(48,252)
Shares issued under Dividend Reinvestment Program	64	1		1,672		—		—		1,673		—		1,673
Share grants, net of forfeitures and tax withholdings	108	1		4,251		—		—		4,252		—		4,252
Balance, June 30, 2019	80,082	$	801	$	1,532,497	$	(521,661)	$	(1,272)	$	1,010,365	$	343	$	1,010,708

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(IN THOUSANDS)

(UNAUDITED)


	Shares Issued and Out-standing	Shares of Beneficial Interest at Par Value		Additional Paid in Capital		Distributions in Excess of Net Income		Accumulated Other Comprehensive Loss		Total Shareholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, March 31, 2020	82,315	$	823	$	1,596,242	$	(206,506)	$	(32,744)	$	1,357,815	$	333	$	1,358,148

Net loss attributable to the controlling interests	—	—		—		(5,406)		—		(5,406)		—		(5,406)

Unrealized loss on interest rate hedges	—	—		—		—		(1,789)		(1,789)		—		(1,789)
Distributions to noncontrolling interests	—	—		—		—		—		—		(4)		(4)

Dividends	—	—		—		(24,761)		—		(24,761)		—		(24,761)

Shares issued under Dividend Reinvestment Program	6	—		144		—		—		144		—		144
Share grants, net of forfeitures and tax withholdings	6	—		2,234		—		—		2,234		—		2,234
Balance, June 30, 2020	82,327	$	823	$	1,598,620	$	(236,673)	$	(34,533)	$	1,328,237	$	329	$	1,328,566


	Shares Issued and Out-standing	Shares of Beneficial Interest at Par Value		Additional Paid in Capital		Distributions in Excess of Net Income		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity		Noncontrolling Interests in Subsidiaries		Total Equity
Balance, March 31, 2019	80,029	$	800	$	1,529,916	$	(498,537)	$	5,670	$	1,037,849	$	347	$	1,038,196
Net income attributable to the controlling interests	—	—		—		987		—		987		—		987
Unrealized loss on interest rate hedges	—	—		—		—		(6,942)		(6,942)		—		(6,942)
Distributions to noncontrolling interests	—	—		—		—		—		—		(4)		(4)
Dividends	—	—		—		(24,111)		—		(24,111)		—		(24,111)
Shares issued under Dividend Reinvestment Program	21	1		575		—		—		576		—		576
Share grants, net of forfeitures and tax withholdings	32	—		2,006		—		—		2,006		—		2,006
Balance, June 30, 2019	80,082	$	801	$	1,532,497	$	(521,661)	$	(1,272)	$	1,010,365	$	343	$	1,010,708

See accompanying notes to the consolidated financial statements.


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(3,687)	$	(3,418)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	59,319		64,968
Credit losses (gains) on lease related receivables	2,271		(133)

Real estate impairment	—		8,374
Loss on sale of real estate	7,539		1,046
Share-based compensation expense	3,783		4,527

Amortization of debt premiums, discounts and related financing costs	1,314		1,404
Gain on extinguishment of debt	(262)		—
Changes in operating other assets	(4,482)		(5,781)
Changes in operating other liabilities	(14,613)		(10,444)
Net cash provided by operating activities	51,182		60,543
Cash flows from investing activities
Real estate acquisitions, net	—		(458,604)
Net cash received for sale of real estate	56,353		31,334

Capital improvements to real estate	(25,452)		(18,634)
Development in progress	(18,646)		(19,445)
Real estate deposits, net	—		(1,744)

Non-real estate capital improvements	(124)		(121)
Net cash provided by (used in) investing activities	12,131		(467,214)
Cash flows from financing activities
Line of credit borrowings, net	125,000		30,000
Dividends paid	(49,485)		(72,274)
Principal payments – mortgage notes payable	(46,567)		(1,231)

Repayments of unsecured notes payable	(250,000)		—
Proceeds from term loan	150,000		450,000
Payment of financing costs	(560)		(1,219)
Distributions to noncontrolling interests	(7)		(8)
Proceeds from dividend reinvestment program	1,065		1,673

Payment of tax withholdings for restricted share awards	(150)		(504)
Net proceeds from exercise of share options	1,241		—
Net cash (used in) provided by financing activities	(69,463)		406,437
Net decrease in cash, cash equivalents and restricted cash	(6,150)		(234)
Cash, cash equivalents and restricted cash at beginning of period	14,751		7,640
Cash, cash equivalents and restricted cash at end of period	$	8,601	$	7,406


WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

	Six Months Ended June 30,
	2020		2019
Supplemental disclosure of cash flow information:
Cash paid for interest, net of amounts capitalized	$	21,380	$	26,418
Change in accrued capital improvements and development costs	3,687		(5,277)



Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	7,971	$	5,756
Restricted cash	630		1,650
Cash, cash equivalents and restricted cash	$	8,601	$	7,406

See accompanying notes to the consolidated financial statements.

WASHINGTON REAL ESTATE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(UNAUDITED)

NOTE 1: NATURE OF BUSINESS

Washington Real Estate Investment Trust (“WashREIT”), a Maryland real estate investment trust, is a self-administered equity real estate investment trust, successor to a trust organized in 1960. Our business consists of the ownership and operation of income producing real estate properties in the greater Washington metro region. We own a portfolio of multifamily and commercial (office and retail) properties.

Federal Income Taxes

We believe that we qualify as a real estate investment trust (“REIT”) under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"), and intend to continue to qualify as such. To maintain our status as a REIT, we are, among other things, required to distribute 90% of our REIT taxable income (which is, generally, our ordinary taxable income, with certain modifications), excluding any net capital gains and any deductions for dividends paid to our shareholders on an annual basis. When selling a property, we generally have the option of (a) reinvesting the sales proceeds of property sold, in a way that allows us to defer recognition of some or all taxable gain realized on the sale, (b) distributing gains to the shareholders with no tax to us or (c) treating net long-term capital gains as having been distributed to our shareholders, paying the tax on the gain deemed distributed and allocating the tax paid as a credit to our shareholders.

Generally, and subject to our ongoing qualification as a REIT, no provisions for income taxes are necessary except for taxes on undistributed taxable income and taxes on the income generated by our taxable REIT subsidiaries (“TRSs”). Our TRSs are subject to corporate federal and state income tax on their taxable income at regular statutory rates, or as calculated under the alternative minimum tax, as appropriate. As of both June 30, 2020 and December 31, 2019, our TRSs had a deferred tax asset of $1.4 million that was fully reserved. As of both June 30, 2020 and December 31, 2019, we had deferred state and local tax liabilities of $0.6 million. These deferred tax liabilities are recorded in Accounts payable and other liabilities on our consolidated balance sheets and are primarily related to temporary differences in the timing of the recognition of revenue, depreciation and amortization.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATIONS

Significant Accounting Policies

We have prepared our consolidated financial statements using the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended by Amendment No. 1 to the Annual Report on Form 10-K, filed on March 6, 2020.

Pronouncements Adopted


Standard/Description	Effective Date and Adoption Considerations	Effect on Financial Statements or Other significant Matters
ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires financial assets measured on an amortized cost basis, including trade receivables, to be presented at the net amount expected to be collected.	We adopted the new standard as of January 1, 2020.	The adoption of the new standard did not have a material effect on our consolidated financial statements.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software. This standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance to determine which implementation costs to capitalize as assets.	We adopted the new standard as of January 1, 2020.	The adoption of the new standard did not have a material effect on our consolidated financial statements.


Standard/Description	Effective Date and Adoption Considerations	Effect on Financial Statements or Other significant Matters
ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard contains optional practical expedients and exceptions for applying Generally Accepted Accounting Principles (“GAAP”) to contracts, hedging relations, and other transactions affected by reference rate reform if certain criteria are met.	We elected certain optional practical expedients as of January 1, 2020.	The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. As of January 1, 2020, we have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

COVID-19 Lease Modification Accounting Relief

In April 2020, the Financial Accounting Standards Board (“FASB”) staff issued a question-and-answer document (“Q&A”) that addresses their belief that the guidance on lease modifications in GAAP does not contemplate concessions being executed as rapidly as they were executed as a result of the major financial crisis arising from the COVID-19 pandemic. Under ASC 842, Leases, we evaluate, on a lease by lease basis, if a lease concession is the result of a new arrangement reached with the tenant, which could result in lease modification accounting, or if a lease concession is contemplated in the existing lease agreement, which is precluded from lease modification accounting. In the Q&A, the staff stated that entities may elect to not evaluate whether a concession provided by a lessor to a lessee in response to the COVID-19 pandemic is a lease modification. This election must be applied consistently to leases with similar characteristics and circumstances. The election permits entities, if certain criteria are met, to account for concessions as if they were contemplated in the existing contract (and accounted for as a negative variable rental revenue) or evaluate the lease concessions for lease modification accounting. We have elected to utilize the relief provided by the FASB staff. This election did not have a material impact on our consolidated financial statements as of June 30, 2020, and we do not expect material impacts in future periods.

Principles of Consolidation and Basis of Presentation

The accompanying unaudited consolidated financial statements include the consolidated accounts of WashREIT, our majority-owned subsidiaries and entities in which WashREIT has a controlling interest. All intercompany balances and transactions have been eliminated in consolidation.

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information presented not misleading. In addition, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included. These unaudited financial statements should be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, as amended by Amendment No. 1 to the Annual Report on Form 10-K, filed on March 6, 2020.

Within these notes to the financial statements, we refer to the three months ended June 30, 2020 and June 30, 2019 as the “2020 Quarter” and the “2019 Quarter,” respectively, and the six months ended June 30, 2020 and June 30, 2019 as the “2020 Period” and the “2019 Period,” respectively.

Discontinued Operations

We classify properties as held for sale when they meet the necessary criteria, which include: (a) senior management commits to a plan to sell the assets, (b) the assets are available for immediate sale in their present condition subject only to terms that are usual and customary for sales of such assets, (c) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated, (d) the sale of the assets is probable, and transfer of the assets is expected to qualify for recognition as a completed sale, within one year, (e) the assets are being actively marketed for sale at a price that is reasonable in relation to its current fair value and (f) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Depreciation on these properties is discontinued at the time they are classified as held for sale, but operating revenues, operating expenses and interest expense continue to be recognized until the date of sale.

Revenues and expenses of properties that are either sold or classified as held for sale are presented as discontinued operations for all periods presented in the consolidated statements of operations if the dispositions represent a strategic shift that has (or will have) a major effect on our operations and financial results. Interest on debt that can be identified as specifica