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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
May 1, 2024
EQUITY COMMONWEALTH
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
1-9317 04-6558834
(Commission File Number) (IRS Employer Identification No.)
Two North Riverside Plaza, Suite 2000 60606
,
Chicago
,
IL
(Address of principal executive offices) (Zip Code)
(312)
646-2800
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title Of Each Class Trading Symbol Name of Each Exchange On Which Registered
Common Shares of Beneficial Interest EQC New York Stock Exchange
6.50% Series D Cumulative Convertible EQCpD New York Stock Exchange
Preferred Shares of Beneficial Interest
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)240.12b-2 of this
chapter).
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.
o
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Item 2.02. Results of Operations and Financial Condition.
On May 1, 2024, Equity Commonwealth, or the Company, issued a press release
setting forth the Company's results of operations and financial condition for
the quarter ended March 31, 2024, and also provided certain supplemental
operating and financial information for the quarter ended March 31, 2024.
Copies of the Company's press release and supplemental operating and financial
information are furnished as Exhibits 99.1 and 99.2 hereto, respectively.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press Release Dated
May
1
, 2024
.
99.2 First
Quarter 202
4
Supplemental Operating and Financial Information.
104 The cover page from this Current Report on form 8-K, formatted in Inline XBRL.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EQUITY COMMONWEALTH
By: /s/ William H. Griffiths
Name: William H. Griffiths
Title: Executive Vice President, Chief
Financial Officer and Treasurer
Date: May 1, 2024
Exhibit 99.1
Two North Riverside Plaza, Suite 2000, Chicago, Illinois 60606
Equity Commonwealth Reports First Quarter 2024 Results
Chicago
-
May 1, 2024 - Equity Commonwealth (NYSE: EQC) today reported financial results
for the quarter ended March 31, 2024.
Financial results for the quarter ended March 31, 2024
Net income attributable to common shareholders was $23.4 million, or $0.22 per
diluted share, for the quarter ended March 31, 2024. This compares to net
income attributable to common shareholders of $20.7 million, or $0.19 per
diluted share, for the quarter ended March 31, 2023. The increase in net
income was primarily due to an increase in interest income from higher average
interest rates and a decrease in income tax expense.
Funds from Operations, or FFO, as defined by the National Association of Real
Estate Investment Trusts, for the quarter ended March 31, 2024, were $27.8
million, or $0.26 per diluted share. This compares to FFO for the quarter
ended March 31, 2023 of $25.1 million, or $0.22 per diluted share. The
following items impacted FFO for the quarter ended March 31, 2024, compared to
the corresponding 2023 period:
.
$0.01 per diluted share increase in interest and other income, net; and
.
$0.01 per diluted share decrease in income tax expense.
Normalized FFO was $27.6 million, or $0.25 per diluted share, for the quarter
ended March 31, 2024. This compares to Normalized FFO for the quarter ended
March 31, 2023 of $25.3 million, or $0.23 per diluted share. The following
items impacted Normalized FFO for the quarter ended March 31, 2024, compared
to the corresponding 2023 period:
.
$0.01 per diluted share increase in interest and other income, net; and
.
$0.01 per diluted share decrease in income tax expense.
Normalized FFO begins with FFO and eliminates certain items that, by their
nature, are not comparable from period to period, non-cash items, and items
that obscure the company
'
s operating performance. Definitions of FFO, Normalized FFO and reconciliations
to net income, determined in accordance with U.S. generally accepted
accounting principles, or GAAP, are included at the end of this press release.
As of March 31, 2024, the company's cash and cash equivalents balance was $2.2
billion.
Same property results for the quarter ended March 31, 2024
The company
'
s same property portfolio at the end of the quarter consisted of 4 properties
totaling 1.5 million square feet. Operating results were as follows:
.
The same property portfolio was 75.4% leased as of March 31, 2024, compared to
81.2% as of December 31, 2023, and 81.6% as of March 31, 2023.
.
The same property portfolio commenced occupancy was 74.6% as of March 31,
2024, compared to 80.0% as of December 31, 2023, and 77.0% as of March 31,
2023.
.
Same property NOI increased 4.3% when compared to the same period in 2023,
primarily due to a decrease in pre-leasing demolition costs and an increase in
lease termination fees, partially offset by a decrease in average commenced
occupancy.
.
Same property cash NOI decreased 6.9% when compared to the same period in
2023, primarily due to a decrease in average commenced occupancy, partially
offset by a decrease in pre-leasing demolition costs.
1
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.
The company entered into leases for approximately 18,000 square feet,
including renewal leases for approximately 15,000 square feet and new leases
for approximately 3,000 square feet.
.
The GAAP rental rate on new and renewal leases was 0.5% lower compared to the
prior GAAP rental rate for the same space.
.
The cash rental rate on new and renewal leases was 2.8% lower compared to the
prior cash rental rate for the same space.
The definitions and reconciliations of same property NOI and same property
cash NOI to net income, determined in accordance with GAAP, are included at
the end of this press release. The same property portfolio at the end of the
quarter included properties continuously owned from January 1, 2023 through
March 31, 2024.
Business update
Since taking responsibility for the company in 2014, the EQC team has remained
focused in its efforts and executed a disciplined strategy. We have:
.
Completed $7.6 billion of dispositions, including the sale of 164 properties
totaling 44 million square feet and three land parcels,
.
Distributed $1.8 billion, or $14.75 per Common Share, to our common
shareholders,
.
Repurchased $652 million of our Common Shares at a weighted average, dividend
adjusted price of $17.63 per share,
.
Repaid debt and preferred equity of $3.3 billion, and
.
Generated a cash balance of $2.2 billion, or $19.95 per share.
Throughout this time, one of our guiding principles has been to be responsive
to evolving market conditions. For the first six years, following this
principle was relatively straightforward - valuations were at or near all-time
highs, and we concluded that it was in shareholders' best interests to sell
assets. We sold $7.6 billion of assets between 2015 and early 2020. When the
Covid-19 pandemic hit, office values plummeted. We have also evaluated
numerous investment opportunities, seeking to acquire a business with strong
fundamentals and a compelling risk-reward profile that would create long-term
value for our shareholders. To date, we have not found such an opportunity.
Today, we are continuing our efforts to maximize shareholder value. We remain
focused on opportunities in our pipeline where we can create long-term value
for our shareholders, while concurrently taking steps to facilitate the
potential wind down of our business. Before the end of this year, we expect to
either announce a transaction or move forward with a plan to wind down our
business.
Earnings conference call & supplemental operating and financial information
Equity Commonwealth will host a conference call to discuss first quarter
results on Thursday, May 2, 2024, at 9:00 A.M. CT. The conference call will be
available via live audio webcast on the Investor Relations section of the
company
'
s website (www.eqcre.com). A replay of the audio webcast will also be
available following the call.
A copy of EQC
'
s First Quarter 2024 Supplemental Operating and Financial Information is
available in the Investor Relations section of EQC
'
s website at www.eqcre.com.
About Equity Commonwealth
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and
self-advised real estate investment trust (REIT) with commercial office
properties in the United States. EQC's portfolio is comprised of four
properties totaling 1.5 million square feet.
Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under
Regulation FD: press releases, SEC filings, public conference calls, or our
website. We routinely post important information on our website at
www.eqcre.com, including information that may be deemed to be material.
We encourage investors and others interested in the company to monitor these
distribution channels for material disclosures.
2
-------------------------------------------------------------------------------
Forward-Looking Statements
Some of the statements contained in this press release constitute
forward-looking statements within the meaning of the federal securities laws.
Any forward-looking statements contained in this press release are intended to
be made pursuant to the safe harbor provisions of Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements relate
to expectations, beliefs, projections, future plans and strategies,
anticipated events or trends and similar expressions concerning matters that
are not historical facts. You can identify forward-looking statements by the
use of forward-looking terminology, including but not limited to, "may,"
"will," "should," "could," "would," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," or "potential" or the
negative of these words and phrases or similar words or phrases which are
predictions of or indicate future events or trends and which do not relate
solely to historical matters. You can also identify forward-looking statements
by discussions of strategy, plans or intentions.
The forward-looking statements contained in this press release reflect our
current views about future events and are subject to numerous known and
unknown risks, uncertainties, assumptions and changes in circumstances that
may cause our actual results to differ significantly from those expressed in
any forward-looking statement. We do not guarantee that the transactions and
events described will happen as described (or that they will happen at all).
We disclaim any obligation to publicly update or revise any forward-looking
statement to reflect changes in underlying assumptions or factors, of new
information, data or methods, future events or other changes. For a further
discussion of these and other factors that could cause our future results to
differ materially from any forward-looking statements, see the section
entitled "Risk Factors" in our most recent Annual Report on Form 10-K and
subsequent quarterly reports on Form 10-Q.
Contact:
Bill Griffiths
(312) 646-2801
ir@eqcre.com
3
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except share data)
March 31, 2024 December 31, 2023
ASSETS
Real estate properties:
Land $ 44,060 $ 44,060
Buildings and 371,550 367,827
improvements
415,610 411,887
Accumulated (180,266) (180,535)
depreciation
235,344 231,352
Cash and cash 2,170,834 2,160,535
equivalents
Rents receivable 16,593 15,737
Other assets, net 16,915 17,417
Total assets $ 2,439,686 $ 2,425,041
LIABILITIES AND EQUITY
Accounts payable, accrued $ 20,833 $ 27,298
expenses and other
Rent collected 2,166 1,990
in advance
Distributions payable 3,359 5,640
Total $ 26,358 $ 34,928
liabilities
Shareholders' equity:
Preferred shares of beneficial interest, $0.01
par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares $ 119,263 $ 119,263
issued and outstanding, aggregate liquidation preference of $122,880
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares 1,072 1,068
authorized; 107,223,284 and 106,847,438 shares issued and outstanding, respectively
Additional paid 3,935,501 3,935,873
in capital
Cumulative net income 3,952,384 3,926,979
Cumulative common (4,864,195) (4,864,440)
distributions
Cumulative preferred (735,673) (733,676)
distributions
Total shareholders' 2,408,352 2,385,067
equity
Noncontrolling 4,976 5,046
interest
Total equity $ 2,413,328 $ 2,390,113
Total liabilities $ 2,439,686 $ 2,425,041
and equity
4
-------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
Three Months Ended
March 31,
2024 2023
Revenues:
Rental revenue $ 13,893 $ 14,226
Other revenue 1,297 1,350
(1)
Total revenues $ 15,190 $ 15,576
Expenses:
Operating expenses $ 6,534 $ 7,256
Depreciation and amortization 4,357 4,310
General and administrative 8,323 8,555
Total expenses $ 19,214 $ 20,121
Interest and other income, net 29,512 28,376
Income before income taxes 25,488 23,831
Income tax expense (30) (1,080)
Net income $ 25,458 $ 22,751
Net income attributable to noncontrolling interest (53) (66)
Net income attributable to Equity Commonwealth $ 25,405 $ 22,685
Preferred distributions (1,997) (1,997)
Net income attributable to Equity Commonwealth common shareholders $ 23,408 $ 20,688
Weighted average common shares outstanding - basic 107,216 109,720
(2)
Weighted average common shares outstanding - diluted 108,224 111,300
(2)(3)
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic $ 0.22 $ 0.19
Diluted $ 0.22 $ 0.19
(1) Other revenue is primarily comprised of parking revenue
that does not represent a component of a lease.
(2) Weighted average common shares outstanding
for the three months ended March
31, 2024 and 2023 includes 129 and 113
unvested, earned RSUs, respectively.
(3) As of March 31, 2024, we had 4,915 series D preferred shares
outstanding. The series D preferred shares were convertible into 4,032
common shares as of March 31, 2024 and 2023. The series D preferred
shares are anti-dilutive for GAAP EPS for all periods presented.
5
-------------------------------------------------------------------------------
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(Unaudited, amounts in thousands, except per share data)
Three Months Ended
March 31,
2024 2023
Calculation
of FFO
Net income $ 25,458 $ 22,751
Real estate depreciation 4,346 4,299
and amortization
FFO attributable to 29,804 27,050
Equity Commonwealth
Preferred (1,997) (1,997)
distributions
FFO attributable to EQC common $ 27,807 $ 25,053
shareholders and unitholders
Calculation of
Normalized FFO
FFO attributable to EQC common $ 27,807 $ 25,053
shareholders and unitholders
Straight-line (223) 279
rent adjustments
Normalized FFO attributable to EQC $ 27,584 $ 25,332
common shareholders and unitholders
Weighted average common shares 107,439 110,044
and units outstanding - basic
(1)
Weighted average common shares 108,447 111,624
and units outstanding - diluted
(1)
FFO attributable to EQC common shareholders $ 0.26 $ 0.23
and unitholders per share and unit - basic
FFO attributable to EQC common shareholders $ 0.26 $ 0.22
and unitholders per share and unit - diluted
Normalized FFO attributable to EQC common shareholders $ 0.26 $ 0.23
and unitholders per share and unit - basic
Normalized FFO attributable to EQC common shareholders $ 0.25 $ 0.23
and unitholders per share and unit - diluted
(1) Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders
per share and unit - basic for the three months ended March 31, 2024 and 2023 include
223 and 324 LTIP/Operating Partnership Units, respectively, that are excluded from the
calculation of basic earnings per common share attributable to EQC common shareholders (only).
6
-------------------------------------------------------------------------------
We compute FFO in accordance with standards established by Nareit. Nareit
defines FFO as net income (loss), calculated in accordance with GAAP,
excluding real estate depreciation and amortization, gains (or losses) from
sales of depreciable property, impairment of depreciable real estate and our
portion of these items related to equity investees and noncontrolling
interests. Our calculation of Normalized FFO differs from Nareit's definition
of FFO because we exclude certain items that we view as nonrecurring or
impacting comparability from period to period. FFO and Normalized FFO are
supplemental non-GAAP financial measures. We consider FFO and Normalized FFO
to be appropriate measures of operating performance for a REIT, along with net
income (loss), net income (loss) attributable to EQC common shareholders and
cash flow from operating activities.
We believe that FFO and Normalized FFO provide useful information to investors
because by excluding the effects of certain historical amounts, such as
depreciation expense, FFO and Normalized FFO may facilitate a comparison of
our operating performance between periods and with other REITs. FFO and
Normalized FFO do not represent cash generated by operating activities in
accordance with GAAP and should not be considered as alternatives to net
income (loss), net income (loss) attributable to EQC common shareholders or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs.
These measures should be considered in conjunction with net income (loss), net
income (loss) attributable to EQC common shareholders and cash flow from
operating activities as presented in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows. Other REITs
and real estate companies may calculate FFO and Normalized FFO differently
than we do.
7
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CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH
BASIS NOI
(Unaudited, amounts in thousands)
For the Three Months Ended
3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
Calculation of Same Property NOI
and Same Property Cash Basis NOI:
Rental $ 13,893 $ 13,824 $ 13,928 $ 13,358 $ 14,226
revenue
Other 1,297 1,322 1,284 1,232 1,350
revenue
(1)
Operating (6,534) (6,542) (6,722) (6,942) (7,256)
expenses
NOI $ 8,656 $ 8,604 $ 8,490 $ 7,648 $ 8,320
Straight-line (223) (538) (107) 273 279
rent adjustments
Lease termination (616) (630) (173) (33) (177)
fees
Cash Basis $ 7,817 $ 7,436 $ 8,210 $ 7,888 $ 8,422
NOI
Cash Basis NOI from 16 7 (5) (4) (4)
non-same properties
(2)
Same Property $ 7,833 $ 7,443 $ 8,205 $ 7,884 $ 8,418
Cash Basis NOI
Non-cash rental income and lease 839 1,168 280 (240) (102)
termination fees from same properties
Same $ 8,672 $ 8,611 $ 8,485 $ 7,644 $ 8,316
Property NOI
Reconciliation of Same Property
NOI to GAAP Net Income:
Same $ 8,672 $ 8,611 $ 8,485 $ 7,644 $ 8,316
Property NOI
Non-cash rental income and lease (839) (1,168) (280) 240 102
termination fees from same properties
Same Property $ 7,833 $ 7,443 $ 8,205 $ 7,884 $ 8,418
Cash Basis NOI
Cash Basis NOI from (16) (7) 5 4 4
non-same properties
(2)
Cash Basis $ 7,817 $ 7,436 $ 8,210 $ 7,888 $ 8,422
NOI
Straight-line 223 538 107 (273) (279)
rent adjustments
Lease termination 616 630 173 33 177
fees
NOI $ 8,656 $ 8,604 $ 8,490 $ 7,648 $ 8,320
Depreciation and (4,357) (4,184) (4,436) (4,514) (4,310)
amortization
General and (8,323) (7,504) (7,061) (13,854) (8,555)
administrative
Interest and other 29,512 29,670 29,269 27,352 28,376
income, net
Income before $ 25,488 $ 26,586 $ 26,262 $ 16,632 $ 23,831
income taxes
Income tax (30) 40 (30) (796) (1,080)
(expense) benefit
Net $ 25,458 $ 26,626 $ 26,232 $ 15,836 $ 22,751
income
(1) Other revenue is primarily comprised of parking revenue that does not represent a component of a lease.
(2) Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
8
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NOI is income from our real estate including lease termination fees received
from tenants less our property operating expenses. NOI excludes amortization
of capitalized tenant improvement costs and leasing commissions and corporate
level expenses. Cash Basis NOI is NOI excluding the effects of straight-line
rent adjustments, lease value amortization and lease termination fees. The
year-to-date same property versions of these measures include the results of
properties continuously owned from January 1, 2023 through March 31,
2024.Properties classified as held for sale within our condensed consolidated
balance sheets are excluded from the same property versions of these measures.
We consider these supplemental non-GAAP financial measures to be appropriate
supplemental measures to net income (loss) because they may help to understand
the operations of our properties. We use these measures internally to evaluate
property level performance, and we believe that they provide useful
information to investors regarding our results of operations because they
reflect only those income and expense items that are incurred at the property
level and may facilitate comparisons of our operating performance between
periods and with other REITs. Cash Basis NOI is among the factors considered
with respect to acquisition, disposition and financing decisions. These
measures do not represent cash generated by operating activities in accordance
with GAAP and should not be considered as an alternative to net income (loss),
net income (loss) attributable to Equity Commonwealth common shareholders or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs. These
measures should be considered in conjunction with net income (loss), net
income (loss) attributable to EQC common shareholders and cash flow from
operating activities as presented in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows. Other REITs
and real estate companies may calculate these measures differently than we do.
9
Exhibit 99.2
Equity Commonwealth
Supplemental Operating
and Financial Information
First Quarter 2024
Corporate Headquarters Investor Relations
Two North Riverside Plaza (312) 646-2801
Suite 2000 ir@eqcre.com
Chicago, IL 60606 www.eqcre.com
(312) 646-2800
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Corporate Information
Company Profile and Investor Information 3
Financial Information
Key Financial Data 4
Condensed Consolidated Balance Sheets 5
Additional Balance Sheet Information 6
Condensed Consolidated Statements of Operations 7
Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI 8
Same Property Results of Operations 9
Calculation of EBITDA, EBITDAre, and Adjusted EBITDAre 10
Calculation of Funds from Operations (FFO) and Normalized FFO 11
Portfolio Information
Property Detail 12
Leasing Summary 13
Capital Summary - Expenditures & Same Property Leasing Commitments 14
Tenants Representing 2.5% or More of Annualized Rental Revenue 15
Same Property Lease Expiration Schedule 16
Additional Support
Common & Potential Common Shares 17
Definitions 18
Forward-Looking Statements
Some of the statements contained in this presentation constitute forward-looking statements
within the meaning of the federal securities laws including, but not limited to, statements
pertaining to our capital resources, portfolio performance, lease expirations schedules,
results of operations or anticipated market conditions, including statements regarding the
overall impact of COVID-19 and other external factors on the foregoing. Any forward-looking
statements contained in this presentation are intended to be made pursuant to the safe harbor
provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements relate to
expectations, beliefs, projections, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts. You can identify
forward-looking statements by the use of forward-looking terminology, including but not
limited to, "may," "will," "should," "could," "would," "expects," "intends," "plans,"
"anticipates," "believes," "estimates," "predicts," or "potential" or the negative of these
words and phrases or similar words or phrases which are predictions of or indicate future
events or trends and which do not relate solely to historical matters. You can also identify
forward-looking statements by discussions of strategy, plans or intentions.
Any forward-looking statements contained in this presentation reflect our current views about
future events and are subject to numerous known and unknown risks, uncertainties, assumptions
and changes in circumstances that may cause our actual results to differ significantly from
those expressed in any forward-looking statement. We do not guarantee that the transactions
and events described will happen as described (or that they will happen at all). We disclaim
any obligation to publicly update or revise any forward-looking statement to reflect changes
in underlying assumptions or factors, of new information, data or methods, future events or
other changes. For a further discussion of these and other factors that could cause our future
results to differ materially from any forward-looking statements, see the section entitled
"Risk Factors" in our most recent Annual Report on Form 10-K and subsequent quarterly reports
on Form 10-Q.
Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under Regulation FD:
press releases, SEC filings, public conference calls, or our website. We routinely post
important information on our website at www.eqcre.com, including information that may be
deemed to be material. We encourage investors and others interested in the company to monitor
these distribution channels for material disclosures.
2
-------------------------------------------------------------------------------
COMPANY PROFILE AND INVESTOR INFORMATION
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and
self-advised real estate investment trust (REIT) with commercial office
properties in the United States.
Same Property Statistics
No. of
Properties Sq. Feet % Leased % Commenced
4 1,520,944 75.4% 74.6%
NYSE Trading Symbols
Common Stock: EQC
Preferred Stock Series D: EQCpD
Board of Trustees
David Helfand (Chair) Peter Linneman (Lead Independent Trustee) James A. Star
Ellen-Blair Chube Mary Jane Robertson
Martin L. Edelman Gerald A. Spector
Senior Management
David A. Helfand David S. Weinberg
President and Chief Executive Officer Executive Vice President and
Chief Operating Officer
William H. Griffiths Orrin S. Shifrin
Executive Vice President, Executive Vice President,
Chief Financial Officer and Treasurer General Counsel and Secretary
Equity Research Coverage
(1)
Citigroup Nicholas Joseph (212) 816-1909 nicholas.joseph@citi.com
Green Street Advisors Daniel Ismail (949) 640-8780 dismail@greenstreetadvisors.com
Certain terms are defined in the definitions section of this document. All financial data included herein is unaudited.
(1) Any opinions, estimates or forecasts regarding EQC's performance made by these analysts
do not represent opinions, forecasts or predictions of EQC or its management. EQC does
not by its reference to the analysts above imply its endorsement of or concurrence with
any information, conclusions or recommendations provided by any of these analysts.
3
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KEY FINANCIAL DATA
(Unaudited, amounts in thousands, except per share data)
As of and for the Three Months Ended
3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
OPERATING INFORMATION
Ending 4 4 4 4 4
property count
Ending square 1,521 1,521 1,521 1,521 1,507
footage
(1)
Percent 75.4 % 81.2 % 80.8 % 82.0 % 81.6 %
leased
Percent 74.6 % 80.0 % 79.9 % 78.2 % 77.0 %
commenced
Net income attributable to $ 23,408 $ 24,552 $ 24,149 $ 13,787 $ 20,688
EQC common shareholders
Adjusted 29,845 30,770 30,698 27,103 28,141
EBITDAre
(2)
SAME PROPERTY OPERATING INFORMATION
Ending square 1,521 1,521 1,521 1,521 1,507
footage
(1)
Percent 75.4 % 81.2 % 80.8 % 82.0 % 81.6 %
leased
Percent 74.6 % 80.0 % 79.9 % 78.2 % 77.0 %
commenced
Same $ 8,672 $ 8,611 $ 8,485 $ 7,644 $ 8,316
Property NOI
(2)
Same Property 7,833 7,443 8,205 7,884 8,418
Cash Basis NOI
(2)
Same Property 57.1 % 56.9 % 55.8 % 52.4 % 53.4 %
NOI margin
Same Property Cash 54.6 % 53.3 % 55.0 % 53.2 % 53.7 %
Basis NOI margin
SHARES OUTSTANDING AND PER SHARE DATA
Shares Outstanding
at End of Period
Common shares 107,223 106,847 106,712 109,730 109,702
outstanding
Dilutive restricted share units (RSUs), 1,358 1,467 1,779 1,891 2,068
Operating Partnership Units, and LTIP Units
(3)
Preferred shares 4,915 4,915 4,915 4,915 4,915
outstanding
(4)
Weighted Average Shares
Outstanding - GAAP
Basic 107,216 106,905 108,931 109,839 109,720
(5)
Diluted 108,224 108,015 110,217 111,237 111,300
(5)
Distributions Declared $ - $ - $ - $ - $ 4.25
Per Common Share
BALANCE SHEET
Total $ 2,439,686 $ 2,425,041 $ 2,393,786 $ 2,421,843 $ 2,399,324
assets
Total 26,358 34,928 31,550 30,016 30,252
liabilities
MARKET CAPITALIZATION
Market value of $ 122,880 $ 123,519 $ 122,929 $ 124,846 $ 122,831
preferred shares
Market value of 2,050,009 2,079,629 1,992,980 2,261,441 2,314,757
diluted common shares
Total market $ 2,172,889 $ 2,203,148 $ 2,115,909 $ 2,386,287 $ 2,437,588
capitalization
(1) Changes in total square footage result from remeasurement.
(2) Non-GAAP financial measures are defined and reconciled
to the most directly comparable GAAP measure herein.
(3) Restricted share units (RSUs) and LTIP Units are equity awards that contain
both service and market-based vesting components. Refer to the schedule
of Common & Potential Common Shares for information regarding RSUs and
LTIP Units and their impact on weighted average shares outstanding.
(4) As of March 31, 2024, we had 4,915 series D preferred shares outstanding that were convertible into 4,032 common
shares. The series D preferred shares are anti-dilutive for GAAP EPS for all periods presented. Refer to the
schedule of Common & Potential Common Shares for information regarding the series D preferred shares and their
impact on diluted weighted average shares outstanding for EPS, FFO per share and Normalized FFO per share.
(5) Refer to the schedule of Common &
Potential Common Shares for information
regarding the components of our weighted
average common shares outstanding.
4
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, amounts in thousands, except share data)
March 31, 2024 December 31, 2023
ASSETS
Real estate properties:
Land $ 44,060 $ 44,060
Buildings and 371,550 367,827
improvements
415,610 411,887
Accumulated (180,266) (180,535)
depreciation
235,344 231,352
Cash and cash 2,170,834 2,160,535
equivalents
Rents receivable 16,593 15,737
Other assets, net 16,915 17,417
Total assets $ 2,439,686 $ 2,425,041
LIABILITIES AND EQUITY
Accounts payable, accrued $ 20,833 $ 27,298
expenses and other
Rent collected 2,166 1,990
in advance
Distributions payable 3,359 5,640
Total $ 26,358 $ 34,928
liabilities
Shareholders' equity:
Preferred shares of beneficial interest, $0.01
par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares $ 119,263 $ 119,263
issued and outstanding, aggregate liquidation preference of $122,880
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares 1,072 1,068
authorized; 107,223,284 and 106,847,438 shares issued and outstanding, respectively
Additional paid 3,935,501 3,935,873
in capital
Cumulative net income 3,952,384 3,926,979
Cumulative common (4,864,195) (4,864,440)
distributions
Cumulative preferred (735,673) (733,676)
distributions
Total shareholders' 2,408,352 2,385,067
equity
Noncontrolling 4,976 5,046
interest
Total equity $ 2,413,328 $ 2,390,113
Total liabilities $ 2,439,686 $ 2,425,041
and equity
5
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ADDITIONAL BALANCE SHEET INFORMATION
(Unaudited, amounts in thousands)
March 31, 2024 December 31, 2023
Additional Balance Sheet Information
Straight-line rents receivable $ 15,218 $ 14,995
Accounts receivable 1,375 742
Rents receivable $ 16,593 $ 15,737
Capitalized lease incentives, net $ 1,340 $ 1,193
Deferred leasing costs, net 10,258 10,816
Other 5,317 5,408
Other assets, net $ 16,915 $ 17,417
Accounts payable $ 2,690 $ 2,824
Accrued taxes 5,560 9,527
Accrued capital expenditures 5,433 2,881
Accrued leasing costs 286 206
Security deposits 2,341 2,356
Other accrued liabilities 4,523 9,504
Accounts payable, accrued expenses and other $ 20,833 $ 27,298
6
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
Three Months Ended
March 31,
2024 2023
Revenues:
Rental revenue $ 13,893 $ 14,226
Other revenue 1,297 1,350
(1)
Total revenues $ 15,190 $ 15,576
Expenses:
Operating expenses $ 6,534 $ 7,256
Depreciation and amortization 4,357 4,310
General and administrative 8,323 8,555
Total expenses $ 19,214 $ 20,121
Interest and other income, net 29,512 28,376
Income before income taxes 25,488 23,831
Income tax expense (30) (1,080)
Net income $ 25,458 $ 22,751
Net income attributable to noncontrolling interest (53) (66)
Net income attributable to Equity Commonwealth $ 25,405 $ 22,685
Preferred distributions (1,997) (1,997)
Net income attributable to Equity Commonwealth common shareholders $ 23,408 $ 20,688
Weighted average common shares outstanding - basic 107,216 109,720
(2)
Weighted average common shares outstanding - diluted 108,224 111,300
(2)
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic $ 0.22 $ 0.19
Diluted $ 0.22 $ 0.19
(1) Other revenue is primarily comprised of parking revenue
that does not represent a component of a lease.
(2) Refer to the schedule of Common & Potential Common Shares for information
regarding the components of our weighted average common shares outstanding.
7
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CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH
BASIS NOI
(Unaudited, amounts in thousands)
For the Three Months Ended
3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
Calculation of Same Property NOI
and Same Property Cash Basis NOI:
Rental $ 13,893 $ 13,824 $ 13,928 $ 13,358 $ 14,226
revenue
Other 1,297 1,322 1,284 1,232 1,350
revenue
(1)
Operating (6,534) (6,542) (6,722) (6,942) (7,256)
expenses
NOI $ 8,656 $ 8,604 $ 8,490 $ 7,648 $ 8,320
Straight-line (223) (538) (107) 273 279
rent adjustments
Lease termination (616) (630) (173) (33) (177)
fees
Cash Basis $ 7,817 $ 7,436 $ 8,210 $ 7,888 $ 8,422
NOI
Cash Basis NOI from 16 7 (5) (4) (4)
non-same properties
(2)
Same Property $ 7,833 $ 7,443 $ 8,205 $ 7,884 $ 8,418
Cash Basis NOI
Non-cash rental income and lease 839 1,168 280 (240) (102)
termination fees from same properties
Same $ 8,672 $ 8,611 $ 8,485 $ 7,644 $ 8,316
Property NOI
Reconciliation of Same Property
NOI to GAAP Net Income:
Same $ 8,672 $ 8,611 $ 8,485 $ 7,644 $ 8,316
Property NOI
Non-cash rental income and lease (839) (1,168) (280) 240 102
termination fees from same properties
Same Property $ 7,833 $ 7,443 $ 8,205 $ 7,884 $ 8,418
Cash Basis NOI
Cash Basis NOI from (16) (7) 5 4 4
non-same properties
(2)
Cash Basis $ 7,817 $ 7,436 $ 8,210 $ 7,888 $ 8,422
NOI
Straight-line 223 538 107 (273) (279)
rent adjustments
Lease termination 616 630 173 33 177
fees
NOI $ 8,656 $ 8,604 $ 8,490 $ 7,648 $ 8,320
Depreciation and (4,357) (4,184) (4,436) (4,514) (4,310)
amortization
General and (8,323) (7,504) (7,061) (13,854) (8,555)
administrative
Interest and other 29,512 29,670 29,269 27,352 28,376
income, net
Income before $ 25,488 $ 26,586 $ 26,262 $ 16,632 $ 23,831
income taxes
Income tax (30) 40 (30) (796) (1,080)
(expense) benefit
Net $ 25,458 $ 26,626 $ 26,232 $ 15,836 $ 22,751
income
(1) Other revenue is primarily comprised of parking revenue that does not represent a component of a lease.
(2) Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
8
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SAME PROPERTY RESULTS OF OPERATIONS
(Unaudited, dollars and square feet in thousands)
As of and for the Three Months Ended March 31,
2024 2023 % Change
Properties 4 4
Square Feet 1,521 1,507
% Leased 75.4 % 81.6 % (6.2) %
% Commenced 74.6 % 77.0 % (2.4) %
Rental revenue $ 13,054 $ 14,328 (8.9) %
Other revenue 1,297 1,343 (3.4) %
(1)
Straight-line rent adjustment 223 (279)
Lease termination fees 616 177
Total revenue 15,190 15,569 (2.4) %
Operating expenses (6,518) (7,253) (10.1) %
NOI $ 8,672 $ 8,316 4.3 %
NOI Margin 57.1 % 53.4 %
Straight-line rent adjustment $ (223) $ 279
Lease termination fees (616) (177)
Cash Basis NOI $ 7,833 $ 8,418 (6.9) %
Cash Basis NOI Margin 54.6 % 53.7 %
(1) Other revenue is primarily comprised of parking revenue that does not represent a component of a lease.
9
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CALCULATION OF EBITDA, EBITDAre, AND ADJUSTED EBITDAre
(Unaudited, amounts in thousands)
Three Months Ended
March 31,
2024 2023
Net income $ 25,458 $ 22,751
Income tax expense 30 1,080
Depreciation and amortization 4,357 4,310
EBITDA, EBITDAre and Adjusted EBITDAre $ 29,845 $ 28,141
10
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CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(Unaudited, amounts in thousands, except per share data)
Three Months Ended
March 31,
2024 2023
Calculation
of FFO
Net income $ 25,458 $ 22,751
Real estate depreciation 4,346 4,299
and amortization
FFO attributable to 29,804 27,050
Equity Commonwealth
Preferred (1,997) (1,997)
distributions
FFO attributable to EQC common $ 27,807 $ 25,053
shareholders and unitholders
Calculation of
Normalized FFO
FFO attributable to EQC common $ 27,807 $ 25,053
shareholders and unitholders
Straight-line (223) 279
rent adjustments
Normalized FFO attributable to EQC $ 27,584 $ 25,332
common shareholders and unitholders
Weighted average common shares 107,439 110,044
and units outstanding -- basic
(1)
Weighted average common shares 108,447 111,624
and units outstanding -- diluted
(1)
FFO attributable to EQC common shareholders $ 0.26 $ 0.23
and unitholders per share and unit -- basic
FFO attributable to EQC common shareholders $ 0.26 $ 0.22
and unitholders per share and unit -- diluted
Normalized FFO attributable to EQC common shareholders $ 0.26 $ 0.23
and unitholders per share and unit -- basic
Normalized FFO attributable to EQC common shareholders $ 0.25 $ 0.23
and unitholders per share and unit -- diluted
(1) Our calculations of FFO and Normalized FFO attributable to EQC common
shareholders and unitholders per share and unit - basic for the
three months ended March 31, 2024 and 2023 include 223 and 324
LTIP/Operating Partnership Units, respectively, that are excluded
from the calculation of basic earnings per common share attributable
to EQC common shareholders (only). Refer to the schedule of
Common & Potential Common Shares for information regarding the
components of our weighted average common shares and units outstanding.
11
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PROPERTY DETAIL
As of March 31, 2024
(Unaudited, sorted by annualized rental revenue, dollars in thousands)
Same Property Portfolio
(1)
Property City, State Type No. of Square Feet % Leased % Commenced Annualized Undepreciated Net Book
Buildings Rental Book Value Value
Revenue
1 1225 Denver, Office 1 708,937 91.6 % 90.8 % $ 29,594 $ 177,668 $ 111,586
Seventeenth CO
Street
(17th
Street
Plaza)
2 Bridgepoint Austin, Office 5 440,007 57.0 % 55.9 % 9,862 104,785 47,430
Square TX
3 206 Austin, Office 1 175,510 69.4 % 69.4 % 8,201 56,578 42,163
East TX
9th
Street
(Capitol
Tower)
4 1250 H Washington, Office 1 196,490 63.4 % 62.5 % 7,141 76,579 34,165
Street, D.C.
NW
Total 8 1,520,944 75.4 % 74.6 % $ 54,798 $ 415,610 $ 235,344
Same
Properties
Year
Acquired
2009
1997
2012
1998
(1) Refer to the definitions section of this document for a description of our same property portfolio.
12
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LEASING SUMMARY
(Unaudited, dollars and square feet in thousands, except per square foot data)
As of and for the Three Months Ended
3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
Properties 4 4 4 4 4
Total square feet 1,521 1,521 1,521 1,521 1,507
(1)
Percentage leased 75.4 % 81.2 % 80.8 % 82.0 % 81.6 %
Percentage commenced 74.6 % 80.0 % 79.9 % 78.2 % 77.0 %
Total Leases
Square feet 18 32 54 68 60
Lease term (years) 4.1 3.0 6.4 4.9 5.8
Starting cash rent $ 49.71 $ 50.88 $ 48.17 $ 48.34 $ 61.15
Percent change in cash rent (2.8) % 7.9 % (1.8) % (0.7) % 3.6 %
(2)
Percent change in GAAP rent (0.5) % 26.4 % 6.0 % 15.3 % 13.8 %
(2)
Total TI & LC per square foot $ 58.93 $ 16.97 $ 40.57 $ 43.44 $ 64.87
(3)
Total TI & LC per sq. ft. per year of lease term $ 14.39 $ 5.75 $ 6.38 $ 8.92 $ 11.22
(3)
Renewal Leases
Square feet 15 27 39 54 37
Lease term (years) 4.0 2.6 7.0 4.7 5.3
Starting cash rent $ 49.54 $ 52.04 $ 49.47 $ 49.63 $ 63.26
Percent change in cash rent 0.6 % 7.9 % (1.7) % (0.7) % 4.8 %
(2)
Percent change in GAAP rent 3.2 % 26.4 % 8.8 % 15.3 % 16.8 %
(2)
Total TI & LC per square foot $ 64.35 $ 9.46 $ 41.02 $ 25.17 $ 58.65
(3)
Total TI & LC per sq. ft. per year of lease term $ 15.95 $ 3.70 $ 5.84 $ 5.40 $ 11.00
(3)
New Leases
Square feet 3 5 15 14 23
Lease term (years) 4.4 5.2 4.6 5.7 6.5
Starting cash rent $ 50.50 $ 44.44 $ 44.73 $ 43.34 $ 57.87
Percent change in cash rent (17.6) % - (2.2) % - 1.5 %
(2)
Percent change in GAAP rent (17.0) % - (1.3) % - 8.9 %
(2)
Total TI & LC per square foot $ 34.43 $ 58.68 $ 39.38 $ 114.17 $ 74.56
(3)
Total TI & LC per sq. ft. per year of lease term $ 7.88 $ 11.36 $ 8.50 $ 20.15 $ 11.50
(3)
The above leasing summary is based on leases executed during the periods indicated and excludes leasing activity for assets
during the quarter in which the asset was sold or classified as held for sale. Our same property leasing activity is identical
to the information above for all periods presented. Refer to the definitions section of this document for a description of our
same property portfolio.
(1) Changes in total square footage result from remeasurement.
(2) Percent change in GAAP and cash rents is a comparison of current rent, including estimated tenant expense reimbursements,
if any, to the rent, including actual/projected tenant expense reimbursements, if any, last received for the
same space on a GAAP and cash basis, respectively. Cash rent during the reporting period is calculated before deducting
any initial period free rent. Leasing in suites vacant longer than two years was excluded from the calculation.
(3) Includes tenant improvements (TI) and leasing commissions (LC).
13
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CAPITAL SUMMARY
EXPENDITURES & SAME PROPERTY LEASING COMMITMENTS
(Unaudited, dollars and square feet in thousands)
CAPITAL SUMMARY Three Months Ended
EXPENDITURES 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023
Tenant $ 5,752 $ 645 $ 224 $ 1,351 $ 1,757
improvements
Leasing 174 150 646 673 1,162
costs
Building 1,855 1,495 1,438 533 195
improvements
(1)
Total capital $ 7,781 $ 2,290 $ 2,308 $ 2,557 $ 3,114
expenditures
Average square 1,521 1,521 1,521 1,514 1,507
feet during period
Building improvements per average $ 1.22 $ 0.98 $ 0.95 $ 0.35 $ 0.13
total sq. ft. during period
CAPITAL SUMMARY Three Months Ended
SAME PROPERTY LEASING COMMITMENTS March 31, 2024
New Leases Renewal Leases Total
Square feet leased during the period 3 15 18
Total TI & LC $ 103 $ 965 $ 1,068
(2)
Total TI & LC per square foot $ 34.43 $ 64.35 $ 58.93
(2)
Weighted average lease term by square foot (years) 4.4 4.0 4.1
Total TI & LC per square foot per year of lease term $ 7.88 $ 15.95 $ 14.39
(2)
(1) Tenant-funded capital expenditures are excluded.
(2) Includes tenant improvements (TI) and leasing commissions (LC).
14
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TENANTS REPRESENTING 2.5% OR MORE OF ANNUALIZED RENTAL REVENUE
As of March 31, 2024
(Unaudited, square feet in thousands)
Tenant Square Feet % of Total % of Annualized Weighted Average
(1) Sq. Ft. Rental Revenue Remaining Lease Term
(1)
1 Salesforce.com, 66 5.8 % 5.7 % 1.7
Inc.
2 KPMG, 66 5.8 % 5.2 % 5.2
LLP
3 Crowdstrike, 48 4.2 % 5.2 % 5.9
Inc.
4 CBRE, 41 3.6 % 3.9 % 4.0
Inc.
5 Jones Lang LaSalle 42 3.7 % 3.6 % 6.3
Americas, Inc.
6 RSM US 32 2.8 % 3.5 % 8.2
LLP
7 SonarSource 28 2.4 % 3.0 % 3.4
US, Inc.
8 Alden Torch 35 3.1 % 2.9 % 2.9
Financial, LLC
9 Ballard 30 2.6 % 2.6 % 1.4
Spahr LLP
10 Simply Good 29 2.5 % 2.6 % 3.7
Foods USA, Inc
11 Wunderman 24 2.1 % 2.5 % 3.3
Thompson, LLC
12 Shiseido Americas 21 1.8 % 2.5 % 5.6
Corporation
Total 462 40.4 % 43.2 % 4.3
(1) Square footage as of March 31, 2024 includes space subject to leases that have
commenced for revenue recognition purposes in accordance with GAAP, space
being fitted out for occupancy pursuant to existing leases, and space which
is leased but is not occupied or is being offered for sublease by tenants.
15
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SAME PROPERTY LEASE EXPIRATION SCHEDULE
As of March 31, 2024
(Unaudited, dollars and sq. ft. in thousands)
Year Number of Leased % of Cumulative % Annualized % of Annualized Cumulative %
Tenants Sq. Leased Sq. of Leased Rental Rental of Annualized
Expiring Ft. Ft. Sq. Ft. Revenue Revenue Rental Revenue
Expiring Expiring Expiring Expiring Expiring Expiring
(1) (2)
2024 17 119 10.4 % 10.4 % $ 5,849 10.7 % 10.7 %
2025 7 130 11.3 % 21.7 % 6,018 11.0 % 21.7 %
2026 11 69 6.0 % 27.7 % 3,241 5.9 % 27.6 %
2027 18 231 20.1 % 47.8 % 11,027 20.1 % 47.7 %
2028 11 123 10.7 % 58.5 % 5,400 9.9 % 57.6 %
2029 10 149 13.0 % 71.5 % 6,729 12.3 % 69.9 %
2030 10 159 13.9 % 85.4 % 7,664 14.0 % 83.9 %
2031 4 58 5.1 % 90.5 % 2,661 4.9 % 88.8 %
2032 1 32 2.8 % 93.3 % 1,942 3.5 % 92.3 %
2033 3 23 2.0 % 95.3 % 1,392 2.5 % 94.8 %
Thereafter 4 54 4.7 % 100.0 % 2,875 5.2 % 100.0 %
Total 96 1,147 100.0 % $ 54,798 100.0 %
Weighted
average
remaining
lease 4.2 4.3
term
(in
years)
(1) Leased square footage as of March 31, 2024 includes space subject to leases that have commenced for revenue recognition
purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which
is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the
latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
(2) Excludes the Annualized Rental Revenue of
space that is leased but not commenced.
16
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COMMON & POTENTIAL COMMON SHARES
(Unaudited, share amounts in thousands)
Three Months Ended
March 31,
Weighted Average Share 2024 2023
Calculation - GAAP EPS
Weighted average common 107,216 109,720
shares outstanding - basic
(1)
Weighted average dilutive RSUs 1,008 1,580
and maket-based LTIP Units
(2)
Weighted average common 108,224 111,300
shares outstanding - diluted
(1)
Three Months Ended
March 31,
Weighted Average Share and Unit Calculation 2024 2023
- FFO and Normalized FFO per share and unit
Weighted average EQC 107,216 109,720
common shares outstanding
(1)
Weighted average Operating 119 227
Partnership Units outstanding
(3)
Weighted average 104 97
time-based LTIP Units
(2)(3)
Weighted average common shares 107,439 110,044
and units outstanding - basic
(1)
Weighted average dilutive RSUs 1,008 1,580
and market-based LTIP Units
(2)
Weighted average common shares 108,447 111,624
and units outstanding - diluted
(1)
Rollforward of Share Series D EQC Common Shares
Count to March 31, 2024 Preferred Shares (5)
(4)
Outstanding on 4,915 106,847
December 31, 2023
Operating Partnership - 4
Unit redemption
Share-based compensation - 372
grants and vesting, net
(6)
Outstanding on 4,915 107,223
March 31, 2024
Common shares issuable from RSUs, Operating Partnership 1,358
Units, and LTIP Units as measured on March 31, 2024
(2)
Potential common shares as 108,581
measured on March 31, 2024
(7)
(1) Weighted average common shares outstanding
for the three months ended March
31, 2024 and 2023 includes 129 and 113
unvested, earned RSUs, respectively.
(2) We have granted RSUs and LTIP Units to certain trustees, employees and eligible consultants. RSUs and market-based
LTIP Units contain service and market-based vesting components. Time-based LTIP Units contain service-based
vesting components. Each LTIP Unit will convert automatically into an OP Unit on a one-for-one basis when the
LTIP Unit becomes vested and its capital account is equalized with the per-unit capital account of the OP Units.
(3) Our calculations of FFO and Normalized FFO attributable to EQC common
shareholders and unitholders per share and unit - basic include time-based
LTIP Units and OP Units that are excluded from the calculation of basic
earnings per common share attributable to EQC common shareholders (only).
(4) As of March 31, 2024, we had 4,915 series D preferred shares that were convertible
into 4,032 common shares. The series D preferred shares are anti-dilutive for GAAP EPS
for all periods presented. The series D preferred shares are anti-dilutive for all
periods presented with respect to FFO and Normalized FFO per common share and unit.
(5) EQC common shares include
unvested restricted shares.
(6) This amount is net of forfeitures
and shares surrendered
to satisfy statutory tax
withholding obligations.
(7) Potential common shares as measured on March 31, 2024
include unvested earned RSUs. The 4,915 series D
preferred shares outstanding that were convertible into
4,032 common shares as of March 31, 2024 are excluded.
17
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DEFINITIONS
Annualized Rental Revenue
Annualized Rental Revenue is annualized contractual rents from our tenants
pursuant to leases which have commenced as of March 31, 2024, plus estimated
recurring expense reimbursements; excludes lease value amortization,
straight-line rent adjustments, abated (free) rent periods and parking
revenue. We calculate annualized rental revenue by aggregating the recurring
billings outlined above for the most recent month during the quarter reported,
adding abated rent, and multiplying the sum by 12 to provide an estimation of
near-term potentially-recurring revenues. The annualized rental revenue of
disposed properties, if any, is presented for the quarter-ended preceding each
disposition.
Annualized rental revenue is a forward-looking non-GAAP measure. Annualized
rental revenue cannot be reconciled to a comparable GAAP measure without
unreasonable efforts, primarily due to the fact that it is calculated from the
billings of tenants in the most recent month at the most recent rental rates
during the quarter reported, whereas historical GAAP measures include billings
from a potentially different group of tenants over multiple months at
potentially different rental rates.
Building Improvements
Building improvements are expenditures to replace obsolete building components
or extend the useful life of existing assets. Tenant-funded capital
expenditures are excluded.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA),
EBITDAre and Adjusted EBITDAre
We calculate EBITDA as net income (loss) excluding interest expense, income
tax expense and depreciation and amortization.
We calculate EBITDAre in accordance with standards established by the National
Association of Real Estate Investment Trusts (Nareit). Nareit defines EBITDAre
as net income (loss), calculated in accordance with GAAP, plus interest
expense, plus income tax expense, plus depreciation and amortization, plus
(minus) losses and gains on the disposition of depreciated property, plus
impairment write-downs of depreciated property and investments in
unconsolidated joint ventures, plus adjustments to reflect the entity's share
of EBITDAre of unconsolidated joint ventures. Our calculation of Adjusted
EBITDAre differs from our calculations of EBITDA and EBITDAre because we
exclude certain items that we view as nonrecurring or impacting comparability
from period to period. EBITDA, EBITDAre and Adjusted EBITDAre are supplemental
non-GAAP financial measures.
We consider EBITDA, EBITDAre and Adjusted EBITDAre to be appropriate measures
of our operating performance, along with net income (loss), net income (loss)
attributable to EQC common shareholders, and cash flow from operating
activities. We believe that EBITDA, EBITDAre and Adjusted EBITDAre provide
useful information to investors because by excluding the effects of certain
historical amounts, such as interest, depreciation and amortization expense,
EBITDA, EBITDAre and Adjusted EBITDAre may facilitate a comparison of current
operating performance with our past operating performance. EBITDA, EBITDAre
and Adjusted EBITDAre do not represent cash generated by operating activities
in accordance with GAAP and should not be considered alternatives to net
income (loss), net income (loss) attributable to EQC common shareholders or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs. These
measures should be considered in conjunction with net income (loss), net
income (loss) attributable to EQC common shareholders and cash flow from
operating activities as presented in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows. Other REITs
and real estate companies may calculate EBITDA, EBITDAre and Adjusted EBITDAre
differently than we do.
Funds from Operations (FFO) and Normalized FFO
We compute FFO in accordance with standards established by Nareit. Nareit
defines FFO as net income (loss), calculated in accordance with GAAP,
excluding real estate depreciation and amortization, gains (or losses) from
sales of depreciable property, impairment of depreciable real estate and our
portion of these items related to equity investees and noncontrolling
interests. Our calculation of Normalized FFO differs from Nareit's definition
of FFO because we exclude certain items that we view as nonrecurring or
impacting comparability from period to period. FFO and Normalized FFO are
supplemental non-GAAP financial measures. We consider FFO and Normalized FFO
to be appropriate measures of operating performance for a REIT, along with net
income (loss), net income (loss) attributable to EQC common shareholders and
cash flow from operating activities.
We believe that FFO and Normalized FFO provide useful information to investors
because by excluding the effects of certain historical amounts, such as
depreciation expense, FFO and Normalized FFO may facilitate a comparison of
our operating performance between periods and with other REITs. FFO and
Normalized FFO do not represent cash generated by operating activities in
accordance with GAAP and should not be considered as alternatives to net
income (loss), net income (loss) attributable to EQC common shareholders or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs.
These measures should be considered in conjunction with net income (loss), net
income (loss) attributable to EQC common shareholders and cash flow from
operating activities as presented in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows. Other REITs
and real estate companies may calculate FFO and Normalized FFO differently
than we do.
Leasing Costs
Leasing costs include leasing commissions (LCs) and related legal expenses.
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DEFINITIONS
LTIP Units
LTIP Units are a class of beneficial interests in EQC Operating Trust (the
Operating Trust) that may be issued to employees, officers or trustees of the
Operating Trust, EQC, or their subsidiaries.
Net Operating Income (NOI), Same Property NOI, Cash Basis NOI and Same
Property Cash Basis NOI
NOI is income from our real estate including lease termination fees received
from tenants less our property operating expenses. NOI excludes amortization
of capitalized tenant improvement costs and leasing commissions and corporate
level expenses. Cash Basis NOI is NOI excluding the effects of straight-line
rent adjustments, lease value amortization and lease termination fees. The
year-to-date same property versions of these measures include the results of
properties continuously owned from January 1, 2023 through March 31, 2024.
Properties classified as held for sale within our condensed consolidated
balance sheets are excluded from the same property versions of these measures.
We consider these supplemental non-GAAP financial measures to be appropriate
supplemental measures to net income (loss) because they may help to understand
the operations of our properties. We use these measures internally to evaluate
property level performance, and we believe that they provide useful
information to investors regarding our results of operations because they
reflect only those income and expense items that are incurred at the property
level and may facilitate comparisons of our operating performance between
periods and with other REITs. Cash Basis NOI is among the factors considered
with respect to acquisition, disposition and financing decisions. These
measures do not represent cash generated by operating activities in accordance
with GAAP and should not be considered as an alternative to net income (loss),
net income (loss) attributable to Equity Commonwealth common shareholders or
cash flow from operating activities, determined in accordance with GAAP, or as
indicators of our financial performance or liquidity, nor are these measures
necessarily indicative of sufficient cash flow to fund all of our needs. These
measures should be considered in conjunction with net income (loss), net
income (loss) attributable to EQC common shareholders and cash flow from
operating activities as presented in our condensed consolidated statements of
operations and condensed consolidated statements of cash flows. Other REITs
and real estate companies may calculate these measures differently than we do.
Net Book Value
Net book value represents the carrying value of real estate properties after
depreciation and amortization, purchase price allocations and impairment
write-downs, if any.
NOI Margin
NOI Margin is NOI (or the same property or cash basis derivations of NOI
defined above) divided by the total revenues used to calculate NOI (or its
derivation).
Operating Partnership Units
Operating Partnership Units are beneficial interests in the Operating Trust.
Other Revenue
Other revenue is primarily comprised of parking revenue that does not
represent a component of a lease.
Percentage Commenced
Percentage commenced is the percentage of space subject to leases that have
commenced for revenue recognition purposes in accordance with GAAP, which
includes the space of tenants in a free rent period.
Percentage Leased
Percentage leased is the percentage of space subject to signed leases.
Rental Revenue
Rental revenue is primarily comprised of minimum lease payments from tenants,
including tenant reimbursements. In addition, rental revenue includes lease
termination fees and straight-line rent adjustments.
Same Properties
Our year-to-date same property portfolio is comprised of those properties
continuously owned from January 1, 2023 through March 31, 2024. Properties
classified as held for sale within our condensed consolidated balance sheets
are excluded.
Tenant Improvements
Tenant improvements are capital expenditures to improve tenant spaces.
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DEFINITIONS
Total Market Capitalization
Total market capitalization is the market value of preferred shares plus the
market value of diluted common shares. The market value of preferred shares is
the product of the number of Series D preferred shares outstanding at the end
of the period and the closing share price of the Series D preferred shares
(EQCpD) at the end of the period. The market value of diluted common shares is
the product of the number of diluted common shares outstanding at the end of
the period and the closing share price of the common shares (EQC) at the end
of the period.
Undepreciated Book Value
Undepreciated book value represents the carrying value of real estate
properties after purchase price allocations, and impairment write-downs, if
any.
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