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A Tale of Two REITs: PREIT and WRIT

11/22/2010 | By Michele Lerner

The following is an excerpt from a profile of Washington Real Estate Investment Trust and Pennsylvania Real Estate Investment Trust in the November/December 2010 issue of REIT magazine celebrating 50 years of REITs.

While Washington Real Estate Investment Trust (WRIT) (NYSE: WRE) and Pennsylvania Real Estate Investment Trust (PREIT) (NYSE: PEI) share the spotlight as the two longest-operating REITs, they also share a core philosophy that company leaders believe has contributed to their success: knowing their markets.

WRIT invests entirely in the Washington, D.C. area, where it can remain a hands-on company and maintain a close relationship with every individual involved with each property. PREIT invests in properties along the east coast so that each can be reached within a two-hour flight or drive from company headquarters in Philadelphia. Both WRIT and PREIT have been consistently conservative, yet opportunistic, in their outlooks while pursuing success in different directions.

WRIT's Early Years

While the Washington, D.C. area has grown and changed since WRIT was organized in 1960, the REIT has never shifted its exclusive focus from the greater Washington area.

"Our philosophy, beginning when we were the first REIT out of the chute in 1960, was to be a local company with a diversified property platform," says George "Skip" McKenzie, WRIT's current president and CEO. "Our strategy goes completely against the conventional wisdom of REIT success: Instead of being geographically diversified and focused on a single sector; we are geographically focused and diversified across five property sectors. Clearly, the strategy works, since for 48 consecutive years we have provided equal or increasing dividends to our investors."

WRIT's portfolio includes office, industrial, medical office, retail and multifamily properties.

McKenzie points to WRIT's steady strategy as one reason for its success. "While there have been no major mergers, large acquisitions or transformational events over the past 50 years, our success is primarily a result of our balanced portfolio in Washington, D.C., one of the most stable markets in the country, with the government providing that stability throughout every economic cycle," McKenzie says.

PREIT's Early Years

PREIT, founded in 1960 by Philadelphia lawyer Sylvan M. Cohen, was created to help provide funding for developers and to provide joint venture equity.

"It was essentially a small asset management company when it started. Back then, REITs were more constrained in their activities," says Edward Glickman, current president and COO of PREIT. "As the company expanded, we went into multifamily housing as developers and owner/managers, eventually owning around 7,000 apartments primarily on the east coast."

Until the 1990s, PREIT's focus was the ownership and management of these multifamily housing developments along with the legacy buildings of its early projects.

In 1997, PREIT merged with The Rubin Organization, a commercial property development and management firm. The newly expanded REIT concentrated on developing and managing retail centers and apartments.

"At the time, we thought that retail and multifamily were the most secure sectors of the real estate business, and these were also the areas in which each of the companies had the most success," Glickman says.

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