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Section 1: 8-K (8-K)

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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): March 12, 2020

EQUITY COMMONWEALTH
(Exact Name of Registrant as Specified in Its Charter)

Maryland
(State or Other Jurisdiction of Incorporation)
1-931704-6558834
(Commission File Number)(IRS Employer Identification No.)
Two North Riverside Plaza, Suite 2100ChicagoIL

60606
(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 ClassTrading SymbolName of Each Exchange On Which Registered
Common Shares of Beneficial InterestEQCThe New York Stock Exchange
6.50% Series D Cumulative Convertible Preferred Shares of Beneficial InterestEQCpDThe New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§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





Item 2.01. Completion of Acquisition or Disposition of Assets.
On March 12, 2020, Equity Commonwealth, a Maryland real estate investment trust (the “Company”), by and through its operating subsidiary, EQC Operating Trust (the “Seller”), closed on the previously announced sale of the building and land at 333 108th Avenue NE ("Tower 333") in Bellevue, Washington, to Bellevue 108 Avenue Owner LLC for a gross sale price of $401.5 million. Proceeds after credits, primarily for contractual lease costs, and transfer taxes were $316.7 million.

Tower 333 is a 435,000 square foot, Class A office property in Bellevue, WA.

Item 9.01. Financial Statements and Exhibits.

(b) Pro forma financial information

The pro forma financial information of the Company as adjusted to give effect to the sale of Tower 333 is presented in the unaudited pro forma condensed consolidated financial statements filed as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.

(d) Exhibits

Exhibit NumberDescription
99.1
104Cover Page Interactive Data File (embedded within the Inline XBRL document)






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/ Orrin S. Shifrin
Name:Orrin S. Shifrin
Title:Executive Vice President, General
Counsel and Secretary
Date: March 16, 2020



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Section 2: EX-99.1 (EX-99.1)

Document

Exhibit 99.1

Unaudited Pro Forma Condensed Consolidated Financial Statements

On February 12, 2020, Equity Commonwealth, a Maryland real estate investment trust (the “Company”), by and through its operating subsidiary, EQC Operating Trust (the “Seller”), entered into a real estate sale agreement (the “Sale Agreement”) with Bellevue 108 Avenue Owner LLC (“Purchaser”), pursuant to which the Company agreed to sell to the Purchaser the building and land at 333 108th Avenue NE in Bellevue, Washington, for a gross sale price of $401.5 million (the "Transaction"). The Transaction closed on March 12, 2020. Proceeds after credits, primarily for contractual lease costs, and transfer taxes were $316.7 million.

The accompanying Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2019 presents Equity Commonwealth's historical amounts, adjusted for the effects of the Transaction, as if 333 108th Avenue NE had been disposed of on December 31, 2019. The accompanying Pro Forma Condensed Consolidated Balance Sheet is unaudited and is not necessarily indicative of what Equity Commonwealth's actual financial position would have been had the Transaction actually occurred on December 31, 2019, nor does it purport to represent Equity Commonwealth's future financial position.

The accompanying Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2019 presents Equity Commonwealth's historical amounts, adjusted for the effects of the Transaction, as if 333 108th Avenue NE had been disposed of on January 1, 2019. The accompanying Pro Forma Condensed Consolidated Statement of Operations is unaudited and is not necessarily indicative of what Equity Commonwealth's actual results of operations would have been had the Transaction actually occurred on January 1, 2019, nor does it purport to represent Equity Commonwealth's future results of operations.

These Unaudited Condensed Pro Forma Consolidated Financial Statements should be read in conjunction with the Company's historical consolidated financial statements and notes thereto as of and for the year ended December 31, 2019, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (the "SEC") on February 13, 2020.



Equity Commonwealth
Pro Forma Condensed Consolidated Balance Sheet
December 31, 2019
(Unaudited and in thousands)

Historical (1)Transaction (2)Pro Forma
ASSETS
Real estate properties:
Land$85,627  $(14,400) $71,227  
Buildings and improvements576,494  (139,187) 437,307  
662,121  (153,587) 508,534  
Accumulated depreciation(202,700) 36,660  (166,040) 
459,421  (116,927) 342,494  
Cash and cash equivalents2,795,642  316,721  (2a) 3,111,065  
(1,298) (2b) 
Restricted cash5,003  —  5,003  
Rents receivable19,554  (389) 19,165  
Other assets, net39,757  (8,904) 30,853  
Total assets$3,319,377  $189,203  $3,508,580  
LIABILITIES AND EQUITY
Mortgage notes payable, net$25,691  —  $25,691  
Accounts payable, accrued expenses and other37,153  (5,271) 31,882  
Rent collected in advance3,127  —  3,127  
Distributions payable7,534  —  7,534  
Total liabilities73,505  (5,271) 68,234  
Shareholders’ equity:
Series D preferred shares
119,263  —  119,263  
Common shares
1,219  —  1,219  
Additional paid in capital4,313,831  (78) (2c) 4,313,753  
Cumulative net income3,363,654  194,474  (2d) 3,558,128  
Cumulative common distributions(3,851,666) —  (3,851,666) 
Cumulative preferred distributions(701,724) —  (701,724) 
Total shareholders’ equity3,244,577  194,396  3,438,973  
Noncontrolling interest1,295  78  (2c) 1,373  
Total equity3,245,872  194,474  3,440,346  
Total liabilities and equity$3,319,377  $189,203  $3,508,580  
See accompanying notes.




Equity Commonwealth
Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2019
(Unaudited and in thousands, except per share amounts)
Historical (3)Transaction (4)Pro Forma
Revenues:
Rental revenue$116,869  $(21,184) $95,685  
Other revenue10,981  (3,888) 7,093  
Total revenues127,850  (25,072) 102,778  
Expenses:
Operating expenses46,418  (7,286) 39,132  
Depreciation and amortization28,122  (3,551) 24,571  
General and administrative38,442  —  38,442  
Total expenses112,982  (10,837) 102,145  
Interest and other income, net72,392  —  72,392  
Interest expense
(8,908) —  (8,908) 
Loss on early extinguishment of debt(6,374) —  (6,374) 
Gain on sale of properties, net
422,172  —  422,172  
Income before income taxes
494,150  (14,235) 479,915  
Income tax expense(1,284) —  (1,284) 
Net income492,866  (14,235) 478,631  
Net income attributable to noncontrolling interest(186)  (4a) (181) 
Net income attributable to Equity Commonwealth492,680  (14,230) 478,450  
Preferred distributions(7,988) —  (7,988) 
Net income attributable to Equity Commonwealth common shareholders
$484,692  $(14,230) $470,462  
Weighted average common shares outstanding — basic122,091  122,091  
Weighted average common shares outstanding — diluted126,260  126,260  
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic$3.97  $3.85  
Diluted
$3.90  $3.79  
See accompanying notes.





Equity Commonwealth
Notes to Pro Forma Condensed Consolidated Balance Sheet
December 31, 2019
(Unaudited)

(1) Historical Balances - Reflects the audited consolidated balance sheet of the Company as contained in its historical audited consolidated financial statements included in its Annual Report on Form 10-K as of and for the year ended December 31, 2019 previously filed with the SEC on February 13, 2020.

(2) Transaction - Represents the de-recognition of carrying amounts at December 31, 2019 for the assets and the related accumulated depreciation and working capital assets and liabilities related to 333 108th Avenue NE.

a.Represents the net cash proceeds from the sale after credits, primarily for contractual lease costs, and transfer taxes.

b.Reflects the estimated transaction costs the Company has or will incur in connection with closing the disposition. These costs are not included in the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2019 because they represent non-recurring charges that result directly from the transaction and will be included in the consolidated financial results of the Company within twelve months of the transaction.

c.Reflects the reallocation of total equity and Noncontrolling interest based on the Noncontrolling interest ownership of EQC Operating Trust.

d.Reflects the estimated gain on sale of 333 108th Avenue NE, which is reduced by the estimated transaction costs discussed above. The estimated gain is not included in the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2019 as it represents a non-recurring item that results directly from the transaction and will be included in the consolidated financial results of the Company within twelve months of the transaction.





Equity Commonwealth
Notes to Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2019
(Unaudited)

(3) Historical Balances - Reflects the audited consolidated statement of operations of the Company as contained in its historical audited consolidated financial statements included in its Annual Report on Form 10-K as of and for the year ended December 31, 2019 previously filed with the SEC on February 13, 2020.

(4) Transaction - Represents the historical combined revenues and expenses of 333 108th Avenue NE for the year ended December 31, 2019 as if the disposition had occurred on January 1, 2019.

a.Reflects the allocation of results between the controlling interests and the noncontrolling interests based on the noncontrolling interests weighted average ownership of 0.04% of EQC Operating Trust for the year ended December 31, 2019.


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