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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): May 7, 2018


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 2100, Chicago, IL
 

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:

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 o
 
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 2.02. Results of Operations and Financial Condition.
On May 7, 2018, 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, 2018, and also provided certain supplemental operating and financial data for the quarter ended March 31, 2018.  Copies of the Company’s press release and supplemental operating and financial data 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 7, 2018.
99.2         First Quarter 2018 Supplemental Operating and Financial Data.



2




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/ Adam S. Markman
 
Name:
Adam S. Markman
 
Title:
Executive Vice President, Chief
 
 
Financial Officer and Treasurer
Date: May 7, 2018




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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
Exhibit 99.1

393384761_earningslogoa12.jpg
Two North Riverside Plaza, Suite 2100, Chicago, Illinois 60606

            
Equity Commonwealth Reports First Quarter 2018 Results

Chicago - May 7, 2018 - Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended March 31, 2018. All per share results are reported on a diluted basis.

Financial results for the quarter ended March 31, 2018
Net income attributable to common shareholders was $185.6 million, or $1.48 per share, for the quarter ended March 31, 2018. This compares to net income attributable to common shareholders of $21.8 million, or $0.17 per share, for the quarter ended March 31, 2017. The increase in net income was primarily due to gains from property sales.

Funds from Operations (FFO), as defined by the National Association of Real Estate Investment Trusts, for the quarter ended March 31, 2018, were $6.1 million, or $0.05 per share. This compares to FFO for the quarter ended March 31, 2017 of $33.3 million, or $0.27 per share. The following items impacted FFO for the quarter ended March 31, 2018, compared to the corresponding 2017 period:
($0.19) per share of income from properties sold;
($0.04) per share of loss on debt extinguishment;
($0.02) per share of increase in income tax expense;
$0.04 per share of interest expense savings; and
$0.01 per of share of increase in interest and other income (net of a $0.04 per share loss on the sale of securities).

Normalized FFO was $17.5 million, or $0.14 per share. This compares to Normalized FFO for the quarter ended March 31, 2017 of $29.5 million, or $0.24 per share. The following items impacted Normalized FFO for the quarter ended March 31, 2018, compared to the corresponding 2017 period:
($0.19) per share of income from properties sold;
$0.05 per share of increase in interest income; and
$0.04 per share of interest expense savings.

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 tend to obscure the companys 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.

For the quarter ended March 31, 2018, the company’s balance of cash and marketable securities was $3.1 billion. Total debt outstanding was $679 million and availability under the company’s revolving credit facility was $750 million.

The weighted average number of diluted common shares outstanding when calculating net income per share for the quarter ended March 31, 2018 was 127,097,324 shares, compared to 125,150,337 for the quarter ended March 31, 2017. The weighted average number of diluted common shares outstanding when calculating FFO or Normalized FFO per share for the quarter ended March 31, 2018 was 124,734,221 shares, compared to 125,150,337 for the quarter ended March 31, 2017.

Same property results for the quarter ended March 31, 2018
The companys same property portfolio at the end of the quarter consisted of 13 properties totaling 6.3 million square feet, which excludes one held for sale property. Operating results were as follows:

1


The same property portfolio was 88.6% leased as of March 31, 2018, compared to 89.2% as of December 31, 2017, and 87.2% as of March 31, 2017.
The same property portfolio commenced occupancy was 83.5% as of March 31, 2018, compared to 85.4% as of December 31, 2017, and 83.5% as of March 31, 2017.
Same property NOI decreased 2.1% when compared to the same period in 2017.
Same property cash NOI increased 4.3% when compared to the same period in 2017.
The company entered into leases for approximately 117,000 square feet, including renewal leases for approximately 71,000 square feet and new leases for approximately 46,000 square feet.
GAAP rental rates on new and renewal leases were 10.8% higher compared to prior GAAP rental rates for the same space.
Cash rental rates on new and renewal leases were 2.8% higher compared to prior cash rental rates for the same space.

The definitions and reconciliations of same property NOI and same property cash NOI to operating income, determined in accordance with GAAP, are included at the end of this press release. The same property portfolio includes properties continuously owned from January 1, 2017 through March 31, 2018 and excludes properties held for sale.

Significant events during the quarter ended March 31, 2018
The company redeemed at par, on March 7, 2018, all $175 million of its 5.75% Senior Unsecured Notes due August 1, 2042.
The company authorized the repurchase of $150 million of its outstanding common shares, replacing the expiring authorization.
The company repurchased approximately 2.97 million of its common shares at an average price of $29.67 per share for a total investment of $88.1 million. The company has $130.9 million authorized for future share repurchases, under its new authorization.
The company completed dispositions totaling $785.2 million. The assets sold during the quarter included:
600 West Chicago, a 1,561,000 square foot, 99.2% leased, office building in Chicago, IL, for a gross sale price of $510 million. Proceeds after credits for capital, contractual lease costs, and rent abatement were approximately $488 million.
1600 Market Street, a 826,000 square foot, 84.7% leased, office building in Philadelphia, Pennsylvania, for a gross sale price of $160 million.
5073, 5075, & 5085 S. Syracuse, a 248,000 square foot, 100% leased, office property in Denver, Colorado, for a gross sale price of $115.2 million.
The company entered into a contract to sell its 100% leased, 553,000 square foot office property at 1601 Dry Creek in Longmont, Colorado. The property was held for sale as of March 31, 2018.

Subsequent Events
On May 4, 2018, the company repaid at par its $400 million unsecured floating rate term loans due in 2020 and 2022.
The company currently has 3 properties totaling 1.5 million square feet in various stages of the sale process, including one property held for sale.


Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss first quarter results on Tuesday, May 8, 2018, at 9:00 A.M. CDT. The conference call will be available via live audio webcast on the Investor Relations section of the companys website (www.eqcre.com). A replay of the audio webcast will also be available following the call.

A copy of EQCs First Quarter 2018 Supplemental Operating and Financial Data is available on the Investor Relations section of EQCs website at www.eqcre.com.





2



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 throughout the United States. As of March 31, 2018, EQCs same property portfolio comprised 13 properties and 6.3 million square feet.

Regulation FD Disclosures
We intend to 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.

Forward-Looking Statements
Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding share repurchases, marketing the company’s properties for sale and consummating asset sales. 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. 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. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “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 the company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the company’s 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).

While forward-looking statements reflect the company’s good faith beliefs, they are not guarantees of future performance. 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 the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company’s most recent Annual Report on Form 10-K and in the company’s Quarterly Reports on Form 10-Q for subsequent quarters.


Contact:
Sarah Byrnes, Investor Relations
(312) 646-2801
ir@eqcre.com









    




3

CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)


 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate properties:
 
 
 
Land
$
146,700

 
$
191,775

Buildings and improvements
1,100,524

 
1,555,836

 
1,247,224

 
1,747,611

Accumulated depreciation
(379,862
)
 
(450,718
)
 
867,362

 
1,296,893

Assets held for sale
38,882

 
97,688

Acquired real estate leases, net
3,621

 
23,847

Cash and cash equivalents
2,837,671

 
2,351,693

Marketable securities
247,879

 
276,928

Restricted cash
6,995

 
8,897

Rents receivable, net of allowance for doubtful accounts of $5,137 and $4,771, respectively
55,910

 
93,436

Other assets, net
78,986

 
87,563

Total assets
$
4,137,306

 
$
4,236,945

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Revolving credit facility
$

 
$

Senior unsecured debt, net
646,246

 
815,984

Mortgage notes payable, net
32,281

 
32,594

Liabilities related to properties held for sale
1,153

 
1,840

Accounts payable and accrued expenses
42,007

 
69,220

Assumed real estate lease obligations, net
503

 
1,001

Rent collected in advance
9,225

 
11,076

Security deposits
4,412

 
4,735

Total liabilities
$
735,827

 
$
936,450

 
 
 
 
Shareholders' equity:
 
 
 
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
 
 
 
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880
$
119,263

 
$
119,263

Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 121,457,073 and 124,217,616 shares issued and outstanding, respectively
1,214

 
1,242

Additional paid in capital
4,295,772

 
4,380,313

Cumulative net income
2,785,760

 
2,596,259

Cumulative other comprehensive loss
(2,106
)
 
(95
)
Cumulative common distributions
(3,111,868
)
 
(3,111,868
)
Cumulative preferred distributions
(687,745
)
 
(685,748
)
Total shareholders’ equity
3,400,290

 
3,299,366

Noncontrolling interest
1,189

 
1,129

Total equity
$
3,401,479

 
$
3,300,495

Total liabilities and equity
$
4,137,306

 
$
4,236,945



4

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)



 
Three Months Ended
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental income
$
43,549

 
$
80,205

Tenant reimbursements and other income
15,039

 
19,346

Total revenues
$
58,588

 
$
99,551

 
 
 
 
Expenses:
 
 
 
Operating expenses
$
24,599

 
$
41,087

Depreciation and amortization
13,903

 
26,915

General and administrative
13,339

 
12,078

Loss on asset impairment
12,087

 
1,286

Total expenses
$
63,928

 
$
81,366

 
 
 
 
Operating (loss) income
$
(5,340
)
 
$
18,185

 
 
 
 
Interest and other income, net
5,780

 
4,372

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $801 and $713, respectively)
(10,115
)
 
(15,014
)
Loss on early extinguishment of debt
(4,867
)
 

Gain on sale of properties, net
205,211

 
16,454

Income before income taxes
190,669

 
23,997

Income tax expense
(3,007
)
 
(175
)
Net income
$
187,662

 
$
23,822

Net income attributable to noncontrolling interest
(63
)
 
(8
)
Net income attributable to Equity Commonwealth
$
187,599

 
$
23,814

Preferred distributions
(1,997
)
 
(1,997
)
Net income attributable to Equity Commonwealth common shareholders
$
185,602

 
$
21,817

Weighted average common shares outstanding — basic
123,867

 
124,047

 
Weighted average common shares outstanding — diluted (1)
127,097

 
125,150

 
 
 
 
 
 
Earnings per common share attributable to Equity Commonwealth common shareholders:
 
 
 
 
Basic
$
1.50

 
$
0.18

 
Diluted
$
1.48

 
$
0.17

 
(1)
Weighted average common shares outstanding - diluted contains the dilutive effect of RSUs, LTIP Units, and Operating Partnership Units outstanding for the periods presented. Additionally, as of March 31, 2018, we had 4,915 series D preferred shares outstanding that were convertible into 2,363 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended March 31, 2018. They are anti-dilutive for GAAP EPS for the three months ended March 31, 2017, and are excluded from Weighted average common shares outstanding - diluted for that period.
 
 

5

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(amounts in thousands, except per share data)


 
Three Months Ended
 
March 31,
 
2018
 
2017
Calculation of FFO
 
 
 
Net income
$
187,662

 
$
23,822

Real estate depreciation and amortization
13,603

 
26,616

Loss on asset impairment
12,087

 
1,286

Gain on sale of properties, net
(205,211
)
 
(16,454
)
FFO attributable to Equity Commonwealth
8,141

 
35,270

Preferred distributions
(1,997
)
 
(1,997
)
FFO attributable to EQC common shareholders and unitholders
$
6,144

 
$
33,273

 
 
 
 
Calculation of Normalized FFO
 
 
 
FFO attributable to EQC common shareholders and unitholders
$
6,144

 
$
33,273

Lease value amortization
98

 
573

Straight line rent adjustments
(1,528
)
 
(4,387
)
Loss on early extinguishment of debt
4,867

 

Income taxes related to gains on property sales
2,969

 

Loss on sale of securities
4,987

 

Normalized FFO attributable to EQC common shareholders and unitholders
$
17,537

 
$
29,459

 
 
 
 
Weighted average common shares and units outstanding -- basic (1)
123,910

 
124,076

Weighted average common shares and units outstanding -- diluted (2)
124,734

 
125,150

FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$
0.05

 
$
0.27

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$
0.14

 
$
0.24

(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, 2018 include 43 and 29 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only).
(2
)
Weighted average common shares and units outstanding - diluted contains the dilutive effect of RSUs, LTIP Units, and Operating Partnership Units outstanding for the periods presented.
 
 





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, operating income (loss) 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, operating income (loss) 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, operating income (loss) and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.  Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do.




7

CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI
(amounts in thousands)


 
Three Months Ended
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Calculation of Same Property NOI and Same Property Cash Basis NOI:
 
 
 
 
 
 
 
 
 
Rental income
$
43,549

 
$
54,672

 
$
61,091

 
$
74,352

 
$
80,205

Tenant reimbursements and other income
15,039

 
16,951

 
16,707

 
17,247

 
19,346

Operating expenses
(24,599
)
 
(30,674
)
 
(32,380
)
 
(37,284
)
 
(41,087
)
NOI
$
33,989

 
$
40,949

 
$
45,418

 
$
54,315

 
$
58,464

Straight line rent adjustments
(1,528
)
 
(1,938
)
 
(3,557
)
 
(4,543
)
 
(4,387
)
Lease value amortization
98

 
295

 
388

 
518

 
573

Lease termination fees
(965
)
 
(942
)
 
(1,477
)
 
(814
)
 
(1,711
)
Cash Basis NOI
$
31,594

 
$
38,364

 
$
40,772

 
$
49,476

 
$
52,939

Cash Basis NOI from non-same properties (1)
(7,451
)
 
(13,411
)
 
(16,531
)
 
(26,558
)
 
(29,798
)
Same Property Cash Basis NOI
$
24,143

 
$
24,953

 
$
24,241

 
$
22,918

 
$
23,141

Non-cash rental income and lease termination fees from same properties
1,913

 
1,845

 
3,284

 
4,100

 
3,468

Same Property NOI
$
26,056

 
$
26,798

 
$
27,525

 
$
27,018

 
$
26,609

 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to GAAP Operating Income:
 
 
 
 
 
 
 
 
 
Same Property NOI
$
26,056

 
$
26,798

 
$
27,525

 
$
27,018

 
$
26,609

Non-cash rental income and lease termination fees from same properties
(1,913
)
 
(1,845
)
 
(3,284
)
 
(4,100
)
 
(3,468
)
Same Property Cash Basis NOI
$
24,143

 
$
24,953

 
$
24,241

 
$
22,918

 
$
23,141

Cash Basis NOI from non-same properties (1)
7,451

 
13,411

 
16,531

 
26,558

 
29,798

Cash Basis NOI
$
31,594

 
$
38,364

 
$
40,772

 
$
49,476

 
$
52,939

Straight line rent adjustments
1,528

 
1,938

 
3,557

 
4,543

 
4,387

Lease value amortization
(98
)
 
(295
)
 
(388
)
 
(518
)
 
(573
)
Lease termination fees
965

 
942

 
1,477

 
814

 
1,711

NOI
$
33,989

 
$
40,949

 
$
45,418

 
$
54,315

 
$
58,464

Depreciation and amortization
(13,903
)
 
(18,738
)
 
(21,133
)
 
(23,922
)
 
(26,915
)
General and administrative
(13,339
)
 
(12,033
)
 
(11,689
)
 
(11,960
)
 
(12,078
)
Loss on asset impairment
(12,087
)
 

 

 
(18,428
)
 
(1,286
)
Operating (Loss) Income
$
(5,340
)
 
$
10,178

 
$
12,596

 
$
5

 
$
18,185

(1
)
Cash Basis NOI from non-same properties for all periods presented includes the operations of properties disposed or classified as held for sale and land parcels.
 
 
NOI is income from our real estate operations 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 quarter-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2017 through March 31, 2018. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2017 through March 31, 2018. Land parcels and 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 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 EQC common shareholders, operating income (loss) 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, operating income (loss) and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do.

8
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Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit
Exhibit 99.2





393384761_multibldga02.jpg

Equity Commonwealth
Supplemental Operating
and Financial Data

First Quarter 2018

393384761_eqcblueboxonlya02.jpg



Corporate Headquarters                                Investor Relations
Two North Riverside Plaza                                Sarah Byrnes
Suite 2100                                        (312) 646-2801
Chicago, IL 60606                                    ir@eqcre.com
(312) 646-2800                                        www.eqcre.com








TABLE OF CONTENTS

Corporate Information
 
Company Profile and Investor Information
 
 
 
Financial Information
 
Key Financial Data
 
Condensed Consolidated Balance Sheets
 
Additional Balance Sheet Information
 
Condensed Consolidated Statements of Operations
 
Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI
 
Same Property Results of Operations
 
Calculation of EBITDA, EBITDAre, and Adjusted EBITDAre
 
Calculation of Funds from Operations (FFO) and Normalized FFO
 
Debt Summary
 
Debt Maturity Schedule
 
Leverage Ratios, Coverage Ratios and Public Debt Covenants
 
Acquisitions and Dispositions
 
 
 
Portfolio Information
 
Property Detail
 
Leasing Summary
 
Same Property Leasing Summary
 
Capital Summary - Expenditures & Same Property Leasing Commitments
 
Tenants Representing 1.5% or More of Annualized Rental Revenue
 
Same Property Lease Expiration Schedule
 
Disposed Property Detail
 
 
 
Additional Support
 
Common & Potential Common Shares
 
Definitions
 
 
 
Forward-Looking Statements
 
 
 
Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws. 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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. 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. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “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 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 sections 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 intend to 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 an internally managed and self-advised real estate investment trust (REIT) with commercial office properties throughout the United States.
Same Property Statistics
No. of
 
 
 
 Properties
Sq. Feet
% Leased
% Commenced
13
6,344
88.6%
83.5%
 Senior Unsecured Debt Ratings
 
 
 NYSE Trading Symbols
 Moody's: Baa2
 
 
 Common Stock: EQC
 Standard & Poor's: BBB-
 
 
 Preferred Stock Series D: EQCPD
 
 
 
 
Board of Trustees
Sam Zell (Chairman)
 
David A. Helfand
 
Kenneth Shea
James S. Corl
 
Peter Linneman (Lead Independent Trustee)
 
Gerald A. Spector
Martin L. Edelman
 
James L. Lozier, Jr.
 
James A. Star
Edward A. Glickman
 
Mary Jane Robertson
 
 
 
 
 
 
 
Senior Management
David A. Helfand
 
David S. Weinberg
 
 
President and Chief Executive Officer
 
Executive Vice President and
 
 
 
 
Chief Operating Officer
 
 
 
 
 
 
 
Adam S. Markman
 
Orrin S. Shifrin
 
 
Executive Vice President,
 
Executive Vice President,
 
 
Chief Financial Officer and Treasurer
 
General Counsel and Secretary
 
 
Equity Research Coverage (1)
Bank of America / Merrill Lynch
James Feldman
(646) 855-5808
james.feldman@baml.com
Citigroup
Michael Bilerman
(212) 816-1383
michael.bilerman@citi.com
Green Street Advisors
Jed Reagan
(949) 640-8780
jreagan@greenstreetadvisors.com
JMP Securities
Mitch Germain
(212) 906-3546
mgermain@jmpsecurities.com
Stifel Nicolaus
John Guinee
(443) 224-1307
jwguinee@stifel.com
 
 
 
 
Debt Research Coverage (1)
J.P.Morgan
Mark Streeter
(212) 834-5086
mark.streeter@jpmorgan.com
Wells Fargo Securities
Thierry Perrein
(704) 410-3262
thierry.perrein@wellsfargo.com
 
 
 
 
Rating Agencies (1)
Moody's Investors Service
Lori Marks
(212) 553-1098
lori.marks@moodys.com
Standard & Poor's
Anita Ogbara
(212) 438-5077
anita.ogbara@standardandpoors.com

Certain terms are defined in the definitions section of this document.
 
 
(1)
Any opinions, estimates or forecasts regarding EQC's performance made by these analysts or agencies do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts and agencies above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies.

3


KEY FINANCIAL DATA
(amounts in thousands, except per share data)

 
 
As of and for the Three Months Ended
 
 
3/31/2018

 
12/31/2017

 
9/30/2017

 
6/30/2017

 
3/31/2017

OPERATING INFORMATION
 
Ending property count (1)
13

 
16

 
20

 
21

 
28

 
Ending square footage (1)(2)
6,344

 
8,706

 
11,031

 
11,651

 
14,593

 
Percent leased (1)
88.6
 %
 
91.9
 %
 
88.3
 %
 
88.4
 %
 
89.0
 %
 
Percent commenced (1)
83.5
 %
 
89.2
 %
 
85.5
 %
 
86.3
 %
 
86.3
 %
 
Net income (loss) attributable to EQC common shareholders
185,602

 
(23,558
)
 
31,215

 
(7,806
)
 
21,817

 
Adjusted EBITDAre (3)
31,417

 
37,309

 
41,325

 
48,374

 
50,758

SAME PROPERTY OPERATING INFORMATION
 
Ending square footage (1)
6,344

 
6,343

 
6,343

 
6,324

 
6,324

 
Percent leased
88.6
 %
 
89.2
 %
 
88.7
 %
 
87.5
 %
 
87.2
 %
 
Percent commenced
83.5
 %
 
85.4
 %
 
85.2
 %
 
84.8
 %
 
83.5
 %
 
Same Property NOI (3)
26,056

 
26,798

 
27,525

 
27,018

 
26,609

 
Same Property Cash Basis NOI (3)
24,143

 
24,953

 
24,241

 
22,918

 
23,141

 
Same Property NOI margin
59.0
 %
 
61.0
 %
 
61.3
 %
 
61.6
 %
 
60.2
 %
 
Same Property Cash Basis NOI margin
57.2
 %
 
59.3
 %
 
58.3
 %
 
57.6
 %
 
56.8
 %
SHARES OUTSTANDING AND PER SHARE DATA (4)
 
Shares Outstanding at End of Period
 
 
 
 
 
 
 
 
 
 
Common stock outstanding - basic (5)
121,457

 
124,218

 
124,089

 
124,089

 
124,064

 
Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units (4)
1,377

 
673

 
1,085

 
1,191

 
1,165

 
Dilutive Series D Convertible Preferred Shares outstanding (5)
2,363

 

 

 

 

 
Preferred Stock Outstanding (6)
4,915

 
4,915

 
4,915

 
4,915

 
4,915

 
Weighted Average Shares Outstanding - GAAP
 
 
 
 
 
 
 
 
 
 
Basic (5)
123,867

 
124,293

 
124,089

 
124,067

 
124,047

 
Diluted (5)
127,097

 
124,293

 
125,175

 
124,067

 
125,150

BALANCE SHEET
 
Total assets
$
4,137,306

 
$
4,236,945

 
$
4,260,289

 
$
4,491,116

 
$
4,518,756

 
Total liabilities
735,827

 
936,450

 
935,590

 
1,204,655

 
1,232,231

ENTERPRISE VALUE
 
Total debt (book value) (7)
$
678,527

 
$
848,578

 
$
850,576

 
$
1,100,355

 
$
1,141,628

 
Less: Cash and cash equivalents
(2,837,671
)
 
(2,351,693
)
 
(2,233,077
)
 
(1,967,549
)
 
(1,888,537
)
 
Plus: Market value of preferred shares (at end of period)
127,746

 
129,462

 
130,892

 
127,992

 
125,632

 
Plus: Market value of diluted common shares (at end of period)
3,767,312

 
3,810,414

 
3,805,309

 
3,958,870

 
3,909,662

 
Total enterprise value
$
1,735,914

 
$
2,436,761

 
$
2,553,700

 
$
3,219,668

 
$
3,288,385

RATIOS
 
Net debt / enterprise value
(124.4
)%
 
(61.7
)%
 
(54.1
)%
 
(26.9
)%
 
(22.7
)%
 
Net debt / annualized adjusted EBITDAre (3)
(17.2)x

 
(10.1)x

 
(8.4)x

 
(4.5)x

 
(3.7)x

 
Adjusted EBITDAre (3) / interest expense
3.1x

 
3.5x

 
3.6x

 
3.3x

 
3.4x

(1)
Excludes properties classified as held for sale and land parcels.
(2)
Changes in total square footage result from property dispositions, reclassifications, and remeasurement.
(3)
Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measure, herein.
(4)
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.
(5)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.
(6)
As of March 31, 2018, we had 4,915 series D preferred shares outstanding that were convertible into 2,363 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended March 31, 2018, and are anti-dilutive for GAAP EPS for all other 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.
(7)
On May 4, 2018, the company repaid at par its $400 million unsecured floating rate term loans due in 2020 and 2022.

4


CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

 
March 31, 2018
 
December 31, 2017
ASSETS
 
 
 
Real estate properties:
 
 
 
Land
$
146,700

 
$
191,775

Buildings and improvements
1,100,524

 
1,555,836

 
1,247,224

 
1,747,611

Accumulated depreciation
(379,862
)
 
(450,718
)
 
867,362

 
1,296,893

Assets held for sale
38,882

 
97,688

Acquired real estate leases, net
3,621

 
23,847

Cash and cash equivalents
2,837,671

 
2,351,693

Marketable securities
247,879

 
276,928

Restricted cash
6,995

 
8,897

Rents receivable, net of allowance for doubtful accounts of $5,137 and $4,771, respectively
55,910

 
93,436

Other assets, net
78,986

 
87,563

Total assets
$
4,137,306

 
$
4,236,945

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Revolving credit facility
$

 
$

Senior unsecured debt, net
646,246

 
815,984

Mortgage notes payable, net
32,281

 
32,594

Liabilities related to properties held for sale
1,153

 
1,840

Accounts payable and accrued expenses
42,007

 
69,220

Assumed real estate lease obligations, net
503

 
1,001

Rent collected in advance
9,225

 
11,076

Security deposits
4,412

 
4,735

Total liabilities
$
735,827

 
$
936,450

 
 
 
 
Shareholders' equity:
 
 
 
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
 
 
 
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880
$
119,263

 
$
119,263

Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 121,457,073 and 124,217,616 shares issued and outstanding, respectively
1,214

 
1,242

Additional paid in capital
4,295,772

 
4,380,313

Cumulative net income
2,785,760

 
2,596,259

Cumulative other comprehensive loss
(2,106
)
 
(95
)
Cumulative common distributions
(3,111,868
)
 
(3,111,868
)
Cumulative preferred distributions
(687,745
)
 
(685,748
)
Total shareholders’ equity
3,400,290

 
3,299,366

Noncontrolling interest
1,189

 
1,129

Total equity
$
3,401,479

 
$
3,300,495

Total liabilities and equity
$
4,137,306

 
$
4,236,945



5


ADDITIONAL BALANCE SHEET INFORMATION
(amounts in thousands)

 
March 31, 2018
December 31, 2017
Additional Balance Sheet Information
 
 
 
 
 
Straight-line rents receivable, net of allowance for doubtful accounts
$
50,096

$
87,190

Accounts receivable, net of allowance for doubtful accounts
5,814

6,246

Rents receivable, net of allowance for doubtful accounts
$
55,910

$
93,436

 
 
 
Capitalized lease incentives, net
$
5,788

$
6,508

Deferred financing fees, net
1,346

1,749

Deferred leasing costs, net
45,945

63,539

Other
25,907

15,767

Other assets, net
$
78,986

$
87,563

 
 
 
Accounts payable
$
4,475

$
5,175

Accrued interest
2,200

7,517

Accrued taxes
12,586

28,015

Accrued capital expenditures
7,271

7,168

Accrued leasing costs
2,754

3,630

Other accrued liabilities
12,721

17,715

Accounts payable and accrued expenses
$
42,007

$
69,220



6


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)

 
Three Months Ended
 
March 31,
 
2018
 
2017
Revenues:
 
 
 
Rental income
$
43,549

 
$
80,205

Tenant reimbursements and other income
15,039

 
19,346

Total revenues
$
58,588

 
$
99,551

 
 
 
 
Expenses:
 
 
 
Operating expenses
$
24,599

 
$
41,087

Depreciation and amortization
13,903

 
26,915

General and administrative
13,339

 
12,078

Loss on asset impairment
12,087

 
1,286

Total expenses
$
63,928

 
$
81,366

 
 
 
 
Operating (loss) income
$
(5,340
)
 
$
18,185

 
 
 
 
Interest and other income, net
5,780

 
4,372

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $801 and $713, respectively)
(10,115
)
 
(15,014
)
Loss on early extinguishment of debt
(4,867
)
 

Gain on sale of properties, net
205,211

 
16,454

Income before income taxes
190,669

 
23,997

Income tax expense
(3,007
)
 
(175
)
Net income
$
187,662

 
$
23,822

Net income attributable to noncontrolling interest
(63
)
 
(8
)
Net income attributable to Equity Commonwealth
$
187,599

 
$
23,814

Preferred distributions
(1,997
)
 
(1,997
)
Net income attributable to Equity Commonwealth common shareholders
$
185,602

 
$
21,817

Weighted average common shares outstanding — basic (1)
123,867

 
124,047

 
Weighted average common shares outstanding — diluted (1)
127,097

 
125,150

 
 
 
 
 
 
Earnings per common share attributable to Equity Commonwealth common shareholders:
 
 
 
 
Basic
$
1.50

 
$
0.18

 
Diluted
$
1.48

 
$
0.17

 
(1
)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

7


CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI
(amounts in thousands)

 
Three Months Ended
 
3/31/2018
 
12/31/2017
 
9/30/2017
 
6/30/2017
 
3/31/2017
Calculation of Same Property NOI and Same Property Cash Basis NOI:
 
 
 
 
 
 
 
 
 
Rental income
$
43,549

 
$
54,672

 
$
61,091

 
$
74,352

 
$
80,205

Tenant reimbursements and other income
15,039

 
16,951

 
16,707

 
17,247

 
19,346

Operating expenses
(24,599
)
 
(30,674
)
 
(32,380
)
 
(37,284
)
 
(41,087
)
NOI
$
33,989

 
$
40,949

 
$
45,418

 
$
54,315

 
$
58,464

Straight line rent adjustments
(1,528
)
 
(1,938
)
 
(3,557
)
 
(4,543
)
 
(4,387
)
Lease value amortization
98

 
295

 
388

 
518

 
573

Lease termination fees
(965
)
 
(942
)
 
(1,477
)
 
(814
)
 
(1,711
)
Cash Basis NOI
$
31,594

 
$
38,364

 
$
40,772

 
$
49,476

 
$
52,939

Cash Basis NOI from non-same properties (1)
(7,451
)
 
(13,411
)
 
(16,531
)
 
(26,558
)
 
(29,798
)
Same Property Cash Basis NOI
$
24,143

 
$
24,953

 
$
24,241

 
$
22,918

 
$
23,141

Non-cash rental income and lease termination fees from same properties
1,913

 
1,845

 
3,284

 
4,100

 
3,468

Same Property NOI
$
26,056

 
$
26,798

 
$
27,525

 
$
27,018

 
$
26,609

 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to GAAP Operating Income:
 
 
 
 
 
 
 
 
 
Same Property NOI
$
26,056

 
$
26,798

 
$
27,525

 
$
27,018

 
$
26,609

Non-cash rental income and lease termination fees from same properties
(1,913
)
 
(1,845
)
 
(3,284
)
 
(4,100
)
 
(3,468
)
Same Property Cash Basis NOI
$
24,143

 
$
24,953

 
$
24,241

 
$
22,918

 
$
23,141

Cash Basis NOI from non-same properties (1)
7,451

 
13,411

 
16,531

 
26,558

 
29,798

Cash Basis NOI
$
31,594

 
$
38,364

 
$
40,772

 
$
49,476

 
$
52,939

Straight line rent adjustments
1,528

 
1,938

 
3,557

 
4,543

 
4,387

Lease value amortization
(98
)
 
(295
)
 
(388
)
 
(518
)
 
(573
)
Lease termination fees
965

 
942

 
1,477

 
814

 
1,711

NOI
$
33,989

 
$
40,949

 
$
45,418

 
$
54,315

 
$
58,464

Depreciation and amortization
(13,903
)
 
(18,738
)
 
(21,133
)
 
(23,922
)
 
(26,915
)
General and administrative
(13,339
)
 
(12,033
)
 
(11,689
)
 
(11,960
)
 
(12,078
)
Loss on asset impairment
(12,087
)
 

 

 
(18,428
)
 
(1,286
)
Operating (Loss) Income
$
(5,340
)
 
$
10,178

 
$
12,596

 
$
5

 
$
18,185

(1)
Cash Basis NOI from non-same properties for all periods presented includes the operations of properties disposed or classified as held for sale and land parcels.
 
 

8


SAME PROPERTY RESULTS OF OPERATIONS
(dollars and square feet in thousands)


 
As of and for the Three Months Ended March 31,
 
 
 
2018
 
2017
 
% Change
Properties
13

 
13

 
 
Square Feet (1)
6,344

 
6,324

 
 
% Leased
88.6
%
 
87.2
%
 
1.4
 %
% Commenced
83.5
%
 
83.5
%
 
0.0
 %
 
 
 
 
 
 
Rental income
$
30,488

 
$
28,506

 
7.0
 %
Tenant reimbursements and other income
11,749

 
12,259

 
(4.2
)%
Straight line rent adjustment
1,333

 
3,435

 
 
Lease value amortization
20

 
(69
)
 
 
Lease termination fees
560

 
102

 
 
Total revenue
44,150

 
44,233

 
(0.2
)%
Operating expenses
(18,094
)
 
(17,624
)
 
2.7
 %
NOI
$
26,056

 
$
26,609

 
(2.1
)%
NOI Margin
59.0
%
 
60.2
%
 
 
 
 
 
 
 
 
Straight line rent adjustment
$
(1,333
)
 
$
(3,435
)
 
 
Lease value amortization
(20
)
 
69

 
 
Lease termination fees
(560
)
 
(102
)
 
 
Cash Basis NOI
$
24,143

 
$
23,141

 
4.3
 %
Cash Basis NOI Margin
57.2
%
 
56.8
%
 
 
 
 
 
 
 
 

(1
)
The change in total square footage results from remeasurement.


9


CALCULATION OF EBITDA, EBITDAre, AND ADJUSTED EBITDAre
(amounts in thousands)


 
For the Three Months Ended
 
March 31,
 
2018
 
2017
Net income
$
187,662

 
$
23,822

Interest expense
10,115

 
15,014

Income tax expense
3,007

 
175

Depreciation and amortization
13,903

 
26,915

EBITDA
$
214,687

 
$
65,926

Loss on asset impairment
12,087

 
1,286

Gain on sale of properties, net
(205,211
)
 
(16,454
)
EBITDAre
$
21,563

 
$
50,758

Loss on early extinguishment of debt
4,867

 

Loss on sale of securities
4,987

 

Adjusted EBITDAre
$
31,417

 
$
50,758


 
 


10


CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(amounts in thousands, except per share data)

 
Three Months Ended
 
 
March 31,
 
 
2018
 
2017
 
Calculation of FFO
 
 
 
 
Net income
$
187,662

 
$
23,822

 
Real estate depreciation and amortization
13,603

 
26,616

 
Loss on asset impairment
12,087

 
1,286

 
Gain on sale of properties, net
(205,211
)
 
(16,454
)
 
FFO attributable to Equity Commonwealth
8,141

 
35,270

 
Preferred distributions
(1,997
)
 
(1,997
)
 
FFO attributable to EQC common shareholders and unitholders
$
6,144

 
$
33,273

 
 
 
 
 
 
Calculation of Normalized FFO
 
 
 
 
FFO attributable to EQC common shareholders and unitholders
$
6,144

 
$
33,273

 
Lease value amortization
98

 
573

 
Straight line rent adjustments
(1,528
)
 
(4,387
)
 
Loss on early extinguishment of debt
4,867

 

 
Income taxes related to gains on property sales
2,969

 

 
Loss on sale of securities
4,987

 

 
Normalized FFO attributable to EQC common shareholders and unitholders
$
17,537

 
$
29,459

 
 
 
 
 
 
Weighted average common shares and units outstanding -- basic (1)
123,910

 
124,076

 
Weighted average common shares and units outstanding -- diluted (1)
124,734

 
125,150

 
FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$
0.05

 
$
0.27

 
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$
0.14

 
$
0.24

 
(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, 2018 include 43 and 29 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

DEBT SUMMARY
As of March 31, 2018
(dollars in thousands)

 
Interest Rate
 
Principal Balance
 
Maturity Date
Open at Par Date
 
Due at Maturity
 
Years to Maturity
Unsecured Debt:
 
 
 
 
 
 
 
 
 
 
Unsecured Floating Rate Debt:
 
 
 
 
 
 
 
 
 
 
Revolving credit facility (LIBOR + 105 bps) (1)
2.93
%
 
$

 
1/28/2019
Open
 
$

 
0.8

Term loan (LIBOR + 115 bps) (2)
3.03
%
 
200,000

 
1/28/2020
Open
 
200,000

 
1.8

Term loan (LIBOR + 155 bps) (2)
3.43
%
 
200,000

 
1/28/2022
Open
 
200,000

 
3.8

Total / weighted average unsecured floating rate debt
3.23
%
 
$
400,000

 
 
 
 
$
400,000

 
2.8

 
 
 
 
 
 
 
 
 
 
 
Unsecured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
5.875% Senior Unsecured Notes Due 2020
5.88
%
 
$
250,000

 
9/15/2020
3/15/2020
 
$
250,000

 
2.5

Total / weighted average unsecured fixed rate debt
5.88
%
 
$
250,000

 
 
 
 
$
250,000

 
2.5

 
 
 
 
 
 
 
 
 
 
 
Secured Debt:
 
 
 
 
 
 
 
 
 
 
Secured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
206 East 9th Street
5.69
%
 
$
26,400

 
1/5/2021
7/5/2020
 
$
24,836

 
2.8

97 Newberry Road
5.71
%
 
5,275

 
3/1/2026
None
 

 
7.9

Total / weighted average secured fixed rate debt
5.69
%
 
$
31,675

 
 
 
 
$
24,836

 
3.6

 
 
 
 
 
 
 
 
 
 
 
Total / weighted average (3)
4.32
%
 
$
681,675

 
 
 
 
$
674,836

 
2.7

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Represents amounts outstanding on EQC's $750,000 revolving credit facility as of March 31, 2018. The interest rate presented is as of March 31, 2018, and equals LIBOR plus 1.05%. We also pay a 20 basis point facility fee annually. The spread over LIBOR and the facility fee vary depending upon EQC's credit rating.
(2)
On May 4, 2018, the company repaid at par its $400,000 unsecured floating rate term loans due in 2020 and 2022. The interest rate presented is as of March 31, 2018, and equals LIBOR plus 1.15% for the term loan maturing on January 28, 2020, and LIBOR plus 1.55% for the term loan maturing January 28, 2022. The spreads over LIBOR vary depending upon EQC's credit rating. We entered into a $400,000 interest rate cap with coverage effective April 1, 2016 that caps LIBOR at 2.5% until March 1, 2019.
(3)
Total debt outstanding as of March 31, 2018, including net unamortized premiums, discounts, and deferred financing fees was $678,527. Net unamortized deferred financing fees related to our revolving credit facility of $1,346 are included in other assets, net on our condensed consolidated balance sheet as of March 31, 2018.
 
 

12


DEBT MATURITY SCHEDULE
(dollars in thousands)

Scheduled Principal Payments During Period
Year
Unsecured Floating Rate Debt
 
Unsecured Fixed Rate Debt
 
Secured Fixed Rate Debt
 
Total
 
Weighted Average Interest Rate
 
 
 
 
 
 
 
 
 
 
2018
$

 
$

 
$
798

 
$
798

 
5.7
%
2019

 

 
1,126

 
1,126

 
5.7
%
2020
200,000

(1) 
250,000

 
1,189

 
451,189

 
4.6
%
2021

 

 
25,463

 
25,463

 
5.7
%
2022
200,000

(1) 

 
663

 
200,663

 
3.4
%
2023

 

 
702

 
702

 
5.7
%
2024

 

 
743

 
743

 
5.7
%
2025

 

 
787

 
787

 
5.7
%
2026

 

 
204

 
204

 
5.7
%
2027

 

 

 

 
%
Thereafter

 

 

 

 
%
Total
$
400,000

 
$
250,000

 
$
31,675


$
681,675

(2) 
4.3
%
 
 
 
 
 
 
 
 
 
 
Percent
58.7
%
 
36.7
%
 
4.6
%
 
100.0
%
 
 
(1)
On May 4, 2018, the company repaid at par its $400,000 unsecured floating rate term loans due in 2020 and 2022. The interest rate presented is as of March 31, 2018, and equals LIBOR plus 1.15% for the term loan maturing on January 28, 2020, and LIBOR plus 1.55% for the term loan maturing January 28, 2022. The spreads over LIBOR vary depending upon EQC's credit rating. We entered into a $400,000 interest rate cap with coverage effective April 1, 2016 that caps LIBOR at 2.5% until March 1, 2019.
(2)
Total debt outstanding as of March 31, 2018, including net unamortized premiums, discounts, and deferred financing fees was $678,527. Net unamortized deferred financing fees related to our revolving credit facility of $1,346 are included in other assets, net on our condensed consolidated balance sheet as of March 31, 2018.

13


LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS
(dollars in thousands)

 
As of and for the Three Months Ended
 
3/31/2018

 
12/31/2017

 
9/30/2017

 
6/30/2017

 
3/31/2017

Leverage Ratios
 
 
 
 
 
 
 
 
 
Total debt / total assets
16.4
 %
 
20.0
 %
 
20.0
 %
 
24.5
 %
 
25.3
 %
Total debt / total market capitalization
14.8
 %
 
17.7
 %
 
17.8
 %
 
21.2
 %
 
22.1
 %
Total debt + preferred stock / total market capitalization
17.6
 %
 
20.4