Exploiting Washington, D.C. real estate for profit?

After all this time (a two-week history of publication) you may be getting a notion that Ghost Money is keen on stocks that pay you to own them. Capital gains are unpredictable -- they're a "story." Ghost Money is skeptical of "story" stocks that pay no dividends.

But what about another kind of "capital" gains -- investing in America's version of Lhasa, Paris, Beijing, and the Emerald City all rolled into one? We refer, of course, to Washington, D.C., the seat of the Empire that can now, courtesy of decades of power aggregation and five Supreme Dictators, "tax" you into bending the knee? 

Namely, Washington real estate. As the prosperous center of a wasting (in more than one sense) nation, D.C. is where it's at. Lobbyists, lawyers, and other free-spending life forms congregate there to warm their hands at the federal hearth. They aren't making any more Washingtons (thank goodness). Siting an office in the region comes with a pricey Pigs at the Trough supplement.

Now that limited and representative government is but a poignant memory, we might as well pass an Affordable Financial Self-Care Act and rake off a bit of the Washington Property Boom profits, what?

I know of only one REIT specifically geared to the Washington area market: Washington Real Estate Investment Trust (WRIT). I've followed this company for years, formerly had a few shares, went to their annual meeting, and even lived in one of the buildings they own (on Connecticut Avenue in D.C.).

Sounds like a way you can print money like the Fed, doesn't it? But hold your horses.

This isn't an awful REIT. It seems to be managed conservatively. The dividend (about 6 percent) is steady-Eddie; it didn't even get shaved in the crash of 2008. Property turnover is low -- they've owned most of their buildings for years. Long-term debt to equity is high, but about average for REITS. Beta is in line with the market, so it's not a roller-coaster ride.

Something is wrong with WRIT, though. I sensed it when I held their shares and nothing since has caused me to change my mind. (I mean "wrong" in business sense; there is no reason to question their integrity.)

WRIT's stock price has its ups and downs, like any company, but over time just seems stuck. Their earnings have underperformed estimates in the past few quarters; earnings were negative in last year's fourth quarter. 

Ghost Money doesn't profess to have any special insight about what the trouble is with WRIT. We suspect it may have something to do with the disparate assortment of properties it carries: office buildings, shopping centers, medical offices, and residential units. Such diversification provides a cushion against downward shocks in any segment, but it may be a handful to manage.

You can buy WRIT with reasonable confidence that you'll continue to get the yield you're paying for. But for a capital gain on top of that, I'd wait till the stock is near the lower end of its trading range.

Keywords: [WRIT] [real estate] [Washington]

Ghost Money's author does not claim to know what he's talking about. He is not an investment advisor. This site is for entertainment, if it can even manage that.