In a year that has thrown a pandemic, natural disasters and economic calamity at us while we lurch closer to a presidential election, stability can feel elusive. No matter how well laid your plans, some new crisis might be lurking around the corner, waiting to upend your life.

While it’s never been more clear how much is out of our control, you can still take steps to improve your financial stability. And it’s not just about cash flow.

FIND YOUR IDEA OF STABILITY

Financial stability is both a state of money and a state of mind, says Ed Coambs, a certified financial planner and certified financial therapist near Charlotte, North Carolina.

On the money side, stability is straightforward. “You have a budget, you know where your money is going, and you know how much you should be saving to meet your bigger goals,” Coambs says.

“What’s a little harder is more the state of mind,” Coambs says. This financial peace of mind is subjective and looks different from one person to the next.

Do some self-reflection to pin down what stability means for you. Maybe you don’t want to feel anxious when you check your bank balance, or you hope to save enough for retirement so you won’t have to worry about the future. Whatever your focus, feeling stable means you won’t have to constantly worry about money.

If you find yourself overwhelmed because the pandemic has destabilized your finances, follow the advice of Tara Tussing Unverzagt, a Torrance, California, certified financial planner and financial therapist. She advises people to think through the worst that could happen rather than avoiding the topic out of fear.

“This often helps people open up a way to reframe the situation from, ‘There’s no way out of this,’ to ‘I have some choices —

Thesis

Washington Real Estate Investment Trust (WRE) (“WashREIT”) has exposure to an extremely stable market in the Washington DC metro area. Its properties cover ground in downtown DC, northern Virginia, and Maryland suburbs. The diversified REIT boasts multifamily, office, and retail holdings.

Management has de-risked its portfolio by transitioning to lower-cap rate, lower-risk, and higher-growth suburban multifamily properties. Capital recycling from high-cap rate to lower-cap rate properties has resulted in a short-term decrease in core funds from operations per share and an underperforming stock price. However, the company is well-positioned for the long term with a suburban multifamily focus.

The sector and market focus position the company to benefit from population and employment migration to the region, as well as a continued housing shortage. WashREIT is undervalued due to its diversified nature and recent core FFO per share declines. Suburban office is stable, and retail makes a small portion of the total NOI for the company. WashREIT is a value at current prices given its relatively low valuation and growth prospects.

Recent Company Actions

Since CEO Paul McDermott joined in 2013, the company has made significant strides to simplify its focus. By reducing its exposure to retail and office, WashREIT has increased its multifamily exposure from 19% to 48% of its total portfolio.

Sector Q4 2013 Q2 2020
Office 56% 46%
Multifamily 19% 48%
Retail 25% 6%

(Source: Company Filings)

Given that multifamily properties sell for much lower cap rates than office and retail, this strategy has been dilutive for WashREIT on an FFO per share basis. While the company generated $1.70 in FFO per share in 2013, this number dropped to $.77 per share through Q2 2020 ($1.54 per share annualized).

However, FFO per share is a poor cash flow metric for REITs with retail and office properties. Leasing