Toggle SGML Header (+)


Section 1: 10-Q (10-Q)

Document
false--12-31Q22019000080364964500014460001540003190001228800001228800000.010.0135000000035000000012157215512192212012157215512192212064000000.0650.0650.0650.0650.0650.406250.406250.406250.406250.010.0150000000500000004915196491519649151964915196P4YP3Y 0000803649 2019-01-01 2019-06-30 0000803649 2019-07-26 0000803649 us-gaap:CommonClassAMember 2019-01-01 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2019-01-01 2019-06-30 0000803649 2018-12-31 0000803649 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-12-31 0000803649 us-gaap:SeriesDPreferredStockMember 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-01-01 2018-12-31 0000803649 2018-01-01 2018-06-30 0000803649 2019-04-01 2019-06-30 0000803649 2018-04-01 2018-06-30 0000803649 us-gaap:ParkingMember 2018-04-01 2018-06-30 0000803649 us-gaap:ParkingMember 2018-01-01 2018-06-30 0000803649 us-gaap:ParkingMember 2019-04-01 2019-06-30 0000803649 us-gaap:ParkingMember 2019-01-01 2019-06-30 0000803649 us-gaap:NoncontrollingInterestMember 2019-01-01 2019-06-30 0000803649 us-gaap:NoncontrollingInterestMember 2019-04-01 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2019-03-31 0000803649 eqc:CumulativePreferredDistributionsMember 2018-12-31 0000803649 us-gaap:NoncontrollingInterestMember 2018-12-31 0000803649 us-gaap:RetainedEarningsMember 2019-06-30 0000803649 us-gaap:CommonStockMember 2019-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2019-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0000803649 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2019-04-01 2019-06-30 0000803649 eqc:CumulativeCommonDistributionsMember 2018-12-31 0000803649 us-gaap:CommonStockMember 2018-12-31 0000803649 eqc:CumulativeCommonDistributionsMember 2019-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2019-06-30 0000803649 eqc:CumulativeCommonDistributionsMember 2019-03-31 0000803649 us-gaap:NoncontrollingInterestMember 2019-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000803649 2019-03-31 0000803649 eqc:CumulativePreferredDistributionsMember 2019-01-01 2019-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2019-03-31 0000803649 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0000803649 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2018-12-31 0000803649 us-gaap:CommonStockMember 2019-03-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0000803649 eqc:CumulativeCommonDistributionsMember 2019-01-01 2019-06-30 0000803649 us-gaap:RetainedEarningsMember 2018-12-31 0000803649 us-gaap:NoncontrollingInterestMember 2019-03-31 0000803649 eqc:CumulativeCommonDistributionsMember 2019-04-01 2019-06-30 0000803649 us-gaap:RetainedEarningsMember 2019-03-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0000803649 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0000803649 us-gaap:CommonStockMember 2018-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0000803649 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0000803649 us-gaap:RetainedEarningsMember 2017-12-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-06-30 0000803649 us-gaap:CommonStockMember 2017-12-31 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2018-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2018-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2017-12-31 0000803649 us-gaap:RetainedEarningsMember 2018-06-30 0000803649 eqc:CumulativeCommonDistributionsMember 2018-03-31 0000803649 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0000803649 2018-03-31 0000803649 2018-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2017-12-31 0000803649 us-gaap:NoncontrollingInterestMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:PreferredStockMember 2018-03-31 0000803649 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0000803649 us-gaap:CommonStockMember 2018-03-31 0000803649 us-gaap:NoncontrollingInterestMember 2018-03-31 0000803649 us-gaap:RetainedEarningsMember 2018-01-01 2018-06-30 0000803649 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000803649 us-gaap:NoncontrollingInterestMember 2018-06-30 0000803649 eqc:CumulativeCommonDistributionsMember 2018-06-30 0000803649 2017-12-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 0000803649 us-gaap:NoncontrollingInterestMember 2017-12-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0000803649 us-gaap:NoncontrollingInterestMember 2018-04-01 2018-06-30 0000803649 us-gaap:RetainedEarningsMember 2018-03-31 0000803649 eqc:CumulativePreferredDistributionsMember 2018-03-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0000803649 eqc:CumulativePreferredDistributionsMember 2018-01-01 2018-06-30 0000803649 us-gaap:RetainedEarningsMember 2018-01-01 0000803649 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0000803649 eqc:CumulativePreferredDistributionsMember 2018-04-01 2018-06-30 0000803649 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0000803649 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0000803649 eqc:CumulativeCommonDistributionsMember 2017-12-31 0000803649 us-gaap:ConsolidatedPropertiesMember 2019-06-30 0000803649 eqc:EQCOperatingTrustMember 2019-06-30 0000803649 eqc:MarketStreetPhiladelphiaPA1735Member us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-01-01 2019-06-30 0000803649 eqc:ResearchParkMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-01-01 2019-06-30 0000803649 eqc:A600108thAvenueNEMember us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-01-01 2019-06-30 0000803649 us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-01-01 2019-06-30 0000803649 eqc:MarketStreetPhiladelphiaPA1735Member us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-06-30 0000803649 eqc:MarketStreetPhiladelphiaPA1735Member us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2019-04-01 2019-06-30 0000803649 eqc:MarketStreetPhiladelphiaPA1735Member us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2018-04-01 2018-06-30 0000803649 eqc:MarketStreetPhiladelphiaPA1735Member us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember 2018-01-01 2018-06-30 0000803649 us-gaap:MortgagesMember 2019-06-30 0000803649 2019-06-28 0000803649 2018-09-26 2018-09-26 0000803649 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0000803649 2019-02-01 2019-02-28 0000803649 eqc:ShareRepurchaseProgramMarch132019Member us-gaap:CommonStockMember 2019-06-30 0000803649 2018-10-23 2018-10-23 0000803649 eqc:ShareRepurchaseProgramMarch132019Member us-gaap:CommonStockMember 2019-03-13 0000803649 eqc:ShareRepurchaseProgramMarch132019Member 2019-03-13 2019-03-13 0000803649 eqc:ShareRepurchaseProgramMarch132019Member us-gaap:CommonStockMember 2019-01-01 2019-06-30 0000803649 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember us-gaap:SubsequentEventMember 2019-07-12 2019-07-12 0000803649 us-gaap:SeriesDPreferredStockMember 2019-01-11 2019-01-11 0000803649 us-gaap:SeriesDPreferredStockMember 2019-04-11 2019-04-11 0000803649 us-gaap:SeriesDPreferredStockMember 2019-02-15 2019-02-15 0000803649 srt:ScenarioForecastMember us-gaap:SeriesDPreferredStockMember 2019-08-15 2019-08-15 0000803649 us-gaap:SeriesDPreferredStockMember 2019-05-15 2019-05-15 0000803649 eqc:EQCOperatingTrustMember 2019-01-01 2019-06-30 0000803649 eqc:EQCOperatingTrustMember 2019-04-01 2019-06-30 0000803649 us-gaap:CommonClassAMember 2018-12-31 0000803649 eqc:CommonStockLongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember 2018-12-31 0000803649 eqc:LongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember us-gaap:NoncontrollingInterestMember 2019-06-30 0000803649 eqc:CommonStockLongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember 2019-01-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember us-gaap:NoncontrollingInterestMember 2019-01-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember us-gaap:NoncontrollingInterestMember 2018-12-31 0000803649 eqc:CommonStockLongTermIncentivePlanUnitsAndOperatingPartnershipUnitsMember 2019-06-30 0000803649 us-gaap:CommonClassAMember 2019-06-30 0000803649 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-01-01 2019-06-30 0000803649 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2019-06-30 0000803649 us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember 2018-12-31 0000803649 eqc:IndependentTrusteeMember eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2019-06-20 2019-06-20 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2019-06-20 0000803649 eqc:RestrictedStockUnitsRSUsTargetMember 2018-01-29 2018-01-29 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2018-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember 2019-01-01 2019-06-30 0000803649 eqc:RestrictedStockUnitsRSUsMaximumMember 2018-01-29 2018-01-29 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2019-06-20 2019-06-20 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2018-06-19 0000803649 eqc:RestrictedStockUnitsRSUsTargetMember 2019-01-29 2019-01-29 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2019-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2018-06-20 2018-06-20 0000803649 us-gaap:GeneralAndAdministrativeExpenseMember 2018-04-01 2018-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2019-01-01 2019-06-30 0000803649 eqc:IndependentTrusteeMember eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2018-06-20 2018-06-20 0000803649 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-06-30 0000803649 us-gaap:RestrictedStockMember 2019-01-29 2019-01-29 0000803649 us-gaap:RestrictedStockMember 2018-01-29 0000803649 eqc:RestrictedStockUnitsRSUsAndMarketBasedLongTermIncentivePlanUnitsMember 2019-06-30 0000803649 eqc:RestrictedStockUnitsRSUsAndMarketBasedLongTermIncentivePlanUnitsMember 2019-01-01 2019-06-30 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2018-06-20 2018-06-20 0000803649 eqc:EquityCommonwealth2015OmnibusIncentivePlanMember 2019-06-20 0000803649 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-06-20 2019-06-20 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-06-30 0000803649 us-gaap:RestrictedStockMember 2018-06-20 2018-06-20 0000803649 us-gaap:RestrictedStockMember 2018-01-29 2018-01-29 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2018-01-29 0000803649 eqc:RestrictedStockUnitsRSUsMaximumMember 2019-01-29 2019-01-29 0000803649 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2019-06-30 0000803649 eqc:RestrictedStockAndTimeBasedLongTermIncentivePlanUnitsMember 2019-01-01 2019-06-30 0000803649 us-gaap:RestrictedStockMember 2019-06-20 2019-06-20 0000803649 us-gaap:RestrictedStockMember 2019-04-01 2019-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2019-04-01 2019-06-30 0000803649 eqc:TenantMember us-gaap:SalesRevenueNetMember us-gaap:CustomerConcentrationRiskMember 2019-01-01 2019-06-30 0000803649 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2019-06-30 0000803649 us-gaap:CarryingReportedAmountFairValueDisclosureMember 2018-12-31 0000803649 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2018-12-31 0000803649 us-gaap:EstimateOfFairValueFairValueDisclosureMember 2019-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-01-01 2018-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-04-01 2019-06-30 0000803649 eqc:OperatingPartnershipUnitsMember 2019-01-01 2019-06-30 0000803649 eqc:OperatingPartnershipUnitsMember 2018-04-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-04-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2019-04-01 2019-06-30 0000803649 eqc:OperatingPartnershipUnitsMember 2019-04-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-01-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2018-04-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2019-01-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2019-04-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-01-01 2019-06-30 0000803649 us-gaap:RestrictedStockUnitsRSUMember 2018-04-01 2018-06-30 0000803649 eqc:OperatingPartnershipUnitsMember 2018-01-01 2018-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2019-04-01 2019-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2018-04-01 2018-06-30 0000803649 eqc:LongTermIncentivePlanUnitsMember 2018-01-01 2018-06-30 0000803649 us-gaap:SeriesDPreferredStockMember 2018-04-01 2018-06-30 0000803649 eqc:TwoNorthRiversidePlazaJointVentureLimitedPartnershipMember 2019-01-01 2019-06-30 0000803649 eqc:TwoNorthRiversidePlazaJointVentureLimitedPartnershipMember 2019-06-30 0000803649 eqc:TwoNorthRiversidePlazaJointVentureLimitedPartnershipMember 2019-04-01 2019-06-30 0000803649 eqc:TwoNorthRiversidePlazaJointVentureLimitedPartnershipMember 2018-04-01 2018-06-30 0000803649 eqc:TwoNorthRiversidePlazaJointVentureLimitedPartnershipMember 2018-01-01 2018-06-30 xbrli:shares eqc:segment eqc:option eqc:tranche eqc:building xbrli:pure eqc:property utreg:sqft iso4217:USD xbrli:shares iso4217:USD
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended June 30, 2019
OR
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9317
EQUITY COMMONWEALTH
(Exact Name of Registrant as Specified in Its Charter)
Maryland
 
04-6558834
(State or Other Jurisdiction of Incorporation or Organization)
 
(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)
 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
 
The New York Stock Exchange
6 1/2% Series D Cumulative Convertible Preferred Shares of Beneficial Interest
 
EQCpD
 
The New York Stock Exchange

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
Accelerated filer
 
 
 
 
 
Non-accelerated filer
 
Smaller reporting company
 
 
 
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
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ý
Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of July 26, 2019121,921,801.
 


Table of Contents

EQUITY COMMONWEALTH
 
FORM 10-Q
 
June 30, 2019
 
INDEX
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents


 
EXPLANATORY NOTE
 
References in this Quarterly Report on Form 10-Q to the Company, EQC, we, us or our, refer to Equity Commonwealth and its consolidated subsidiaries as of June 30, 2019, unless the context indicates otherwise.


i

Table of Contents

PART I.      Financial Information

Item 1.         Financial Statements.

EQUITY COMMONWEALTH
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
 
June 30,
2019
 
December 31,
2018
 
 
 
(audited)
ASSETS
 
 
 
Real estate properties:
 
 
 
Land
$
85,627

 
$
135,142

Buildings and improvements
571,342

 
1,004,500

 
656,969

 
1,139,642

Accumulated depreciation
(193,166
)
 
(375,968
)
 
463,803

 
763,674

Acquired real estate leases, net
92

 
275

Cash and cash equivalents
3,180,548

 
2,400,803

Marketable securities

 
249,602

Restricted cash
2,310

 
3,298

Rents receivable
19,735

 
51,089

Other assets, net
35,683

 
62,031

Total assets
$
3,702,171

 
$
3,530,772

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Senior unsecured debt, net
$

 
$
248,473

Mortgage notes payable, net
26,091

 
26,482

Accounts payable, accrued expenses and other
36,903

 
62,368

Rent collected in advance
3,554

 
9,451

Total liabilities
66,548

 
346,774

 
 
 
 
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; 121,922,120 and 121,572,155 shares issued and outstanding, respectively
1,219

 
1,216

Additional paid in capital
4,308,049

 
4,305,974

Cumulative net income
3,323,778

 
2,870,974

Cumulative other comprehensive loss

 
(342
)
Cumulative common distributions
(3,420,406
)
 
(3,420,548
)
Cumulative preferred distributions
(697,730
)
 
(693,736
)
Total shareholders’ equity
3,634,173

 
3,182,801

Noncontrolling interest
1,450

 
1,197

Total equity
3,635,623

 
3,183,998

Total liabilities and equity
$
3,702,171

 
$
3,530,772

See accompanying notes.

1

Table of Contents

EQUITY COMMONWEALTH
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
Rental revenue
$
30,574

 
$
45,569

 
$
69,464

 
$
100,842

Other revenue
2,794

 
3,067

 
5,656

 
6,382

Total revenues
33,368

 
48,636

 
75,120

 
107,224

Expenses:
 
 
 
 
 
 
 
Operating expenses
10,974

 
19,521

 
26,754

 
44,120

Depreciation and amortization
7,561

 
13,021

 
16,146

 
26,924

General and administrative
9,533

 
11,222

 
21,629

 
24,561

Loss on asset impairment

 

 

 
12,087

Total expenses
28,068

 
43,764

 
64,529

 
107,692

Interest and other income, net
20,695

 
12,668

 
38,470

 
18,448

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $154, $645, $319 and $1,446, respectively)
(4,070
)
 
(6,350
)
 
(8,276
)
 
(16,465
)
Loss on early extinguishment of debt
(6,374
)
 
(1,536
)
 
(6,374
)
 
(6,403
)
Gain on sale of properties, net
227,166

 
26,937

 
420,203

 
232,148

Income before income taxes
242,717

 
36,591

 
454,614

 
227,260

Income tax (expense) benefit
(340
)
 
456

 
(1,640
)
 
(2,551
)
Net income
242,377

 
37,047

 
452,974

 
224,709

Net income attributable to noncontrolling interest
(91
)
 
(14
)
 
(170
)
 
(77
)
Net income attributable to Equity Commonwealth
$
242,286

 
$
37,033

 
$
452,804

 
$
224,632

Preferred distributions
(1,997
)
 
(1,997
)
 
(3,994
)
 
(3,994
)
Net income attributable to Equity Commonwealth common shareholders
$
240,289

 
$
35,036

 
$
448,810

 
$
220,638

 
 
 
 
 
 
 
 
Weighted average common shares outstanding — basic
122,122

 
121,822

 
122,041

 
122,839

Weighted average common shares outstanding — diluted
125,862

 
122,649

 
125,841

 
126,027

Earnings per common share attributable to Equity Commonwealth common shareholders:
 
 
 
 
 
 
 
Basic
$
1.97

 
$
0.29

 
$
3.68

 
$
1.80

Diluted
$
1.93

 
$
0.29

 
$
3.60

 
$
1.78


See accompanying notes.

2

Table of Contents

EQUITY COMMONWEALTH
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
242,377

 
$
37,047

 
$
452,974

 
$
224,709

 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Unrealized gain on derivative instruments

 
339

 

 
456

Unrealized gain on marketable securities

 
298

 
342

 
72

Total comprehensive income
242,377

 
37,684

 
453,316

 
225,237

Comprehensive income attributable to the noncontrolling interest
(91
)
 
(14
)
 
(170
)
 
(77
)
Total comprehensive income attributable to Equity Commonwealth
$
242,286

 
$
37,670

 
$
453,146

 
$
225,160


See accompanying notes.


3

Table of Contents

EQUITY COMMONWEALTH
 
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(amounts in thousands, except share data)
(unaudited)
 
Equity Commonwealth Shareholders
 
 
 
 
 
Preferred Shares
 
Common Shares
 
 
 
 
 
Series D
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of
Shares
 
Preferred
Shares
 
Cumulative
Preferred
Distributions
 
Number
of
Shares
 
Common
Shares
 
Cumulative
Common
Distributions
 
Additional
Paid
in
Capital
 
Cumulative
Net
Income
 
Cumulative Other Comprehensive Loss
 
Noncontrolling Interest
 
Total
Balance at April 1, 2019
4,915,196

 
$
119,263

 
$
(695,733
)
 
121,899,625

 
$
1,219

 
$
(3,420,512
)
 
$
4,304,560

 
$
3,081,492

 
$

 
$
1,272

 
$
3,391,561

Net income

 

 

 

 

 

 

 
242,286

 

 
91

 
242,377

Repurchase of shares

 

 

 
(4,414
)
 

 

 
(145
)
 

 

 

 
(145
)
Share-based compensation

 

 

 
26,909

 

 

 
3,393

 

 

 
328

 
3,721

Distributions

 

 
(1,997
)
 

 

 
106

 

 

 

 

 
(1,891
)
Adjustment for noncontrolling interest

 

 

 

 

 

 
241

 

 

 
(241
)
 

Balance at June 30, 2019
4,915,196

 
$
119,263

 
$
(697,730
)
 
121,922,120

 
$
1,219

 
$
(3,420,406
)
 
$
4,308,049

 
$
3,323,778

 
$

 
$
1,450

 
$
3,635,623

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
4,915,196

 
$
119,263

 
$
(693,736
)
 
121,572,155

 
$
1,216

 
$
(3,420,548
)
 
$
4,305,974

 
$
2,870,974

 
$
(342
)
 
$
1,197

 
$
3,183,998

Net income

 

 

 

 

 

 

 
452,804

 

 
170

 
452,974

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 
342

 

 
342

Repurchase of shares

 

 

 
(168,327
)
 
(2
)
 

 
(5,485
)
 

 

 

 
(5,487
)
Share-based compensation

 

 

 
518,292

 
5

 

 
6,978

 

 

 
665

 
7,648

Distributions

 

 
(3,994
)
 

 

 
142

 

 

 

 

 
(3,852
)
Adjustment for noncontrolling interest

 

 

 

 

 

 
582

 

 

 
(582
)
 

Balance at June 30, 2019
4,915,196

 
$
119,263

 
$
(697,730
)
 
121,922,120

 
$
1,219

 
$
(3,420,406
)
 
$
4,308,049

 
$
3,323,778

 
$

 
$
1,450

 
$
3,635,623


See accompanying notes.












4

Table of Contents

EQUITY COMMONWEALTH
 
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(amounts in thousands, except share data)
(unaudited)
 
Equity Commonwealth Shareholders
 
 
 
 
 
Preferred Shares
 
Common Shares
 
 
 
 
 
Series D
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of
Shares
 
Preferred
Shares
 
Cumulative
Preferred
Distributions
 
Number
of
Shares
 
Common
Shares
 
Cumulative
Common
Distributions
 
Additional
Paid
in
Capital
 
Cumulative
Net
Income
 
Cumulative Other Comprehensive Loss
 
Noncontrolling Interest
 
Total
Balance at April 1, 2018
4,915,196

 
$
119,263

 
$
(687,745
)
 
121,457,073

 
$
1,214

 
$
(3,111,868
)
 
$
4,295,772

 
$
2,785,760

 
$
(2,106
)
 
$
1,189

 
$
3,401,479

Net income

 

 

 

 

 

 

 
37,033

 

 
14

 
37,047

Unrealized gain on derivative instruments

 

 

 

 

 

 

 

 
339

 

 
339

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 
298

 

 
298

Share-based compensation

 

 

 
25,600

 
1

 

 
4,812

 

 

 
329

 
5,142

Contributions

 

 

 

 

 

 

 

 

 
1

 
1

Distributions

 

 
(1,997
)
 

 

 

 

 

 

 

 
(1,997
)
Adjustment for noncontrolling interest

 

 

 

 

 

 
238

 

 

 
(238
)
 

Balance at June 30, 2018
4,915,196

 
$
119,263

 
$
(689,742
)
 
121,482,673

 
$
1,215

 
$
(3,111,868
)
 
$
4,300,822

 
$
2,822,793

 
$
(1,469
)
 
$
1,295

 
$
3,442,309

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Balance at January 1, 2018
4,915,196

 
$
119,263

 
$
(685,748
)
 
124,217,616

 
$
1,242

 
$
(3,111,868
)
 
$
4,380,313

 
$
2,596,259

 
$
(95
)
 
$
1,129

 
$
3,300,495

Reclassification pursuant to change in accounting principle

 

 

 

 

 

 

 
1,902

 
(1,902
)
 

 

Net income

 

 

 

 

 

 

 
224,632

 

 
77

 
224,709

Unrealized gain on derivative instruments

 

 

 

 

 

 

 

 
456

 

 
456

Unrealized gain on marketable securities

 

 

 

 

 

 

 

 
72

 

 
72

Repurchase of shares

 

 

 
(3,027,557
)
 
(30
)
 

 
(89,880
)
 

 

 

 
(89,910
)
Share-based compensation

 

 

 
292,614

 
3

 

 
9,822

 

 

 
655

 
10,480

Contributions

 

 

 

 

 

 

 

 

 
1

 
1

Distributions

 

 
(3,994
)
 

 

 

 

 

 

 

 
(3,994
)
Adjustment for noncontrolling interest

 

 

 

 

 

 
567

 

 

 
(567
)
 

Balance at June 30, 2018
4,915,196

 
$
119,263

 
$
(689,742
)
 
121,482,673

 
$
1,215

 
$
(3,111,868
)
 
$
4,300,822

 
$
2,822,793

 
$
(1,469
)
 
$
1,295

 
$
3,442,309


See accompanying notes.

5

Table of Contents

EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 
Six Months Ended June 30,
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
452,974

 
$
224,709

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation
13,531

 
21,740

Net amortization of debt discounts, premiums and deferred financing fees
319

 
1,446

Straight line rental income
(848
)
 
(2,550
)
Amortization of acquired real estate leases
105

 
1,562

Other amortization
2,375

 
3,505

Amortization of right-of-use asset
364

 

Share-based compensation
7,648

 
10,480

Loss on asset impairment

 
12,087

Loss on marketable securities

 
4,987

Loss on early extinguishment of debt
6,374

 
6,403

Net gain on sale of properties
(420,203
)
 
(232,148
)
Change in assets and liabilities:
 
 
 
Rents receivable and other assets
(8,036
)
 
(16,856
)
Accounts payable, accrued expenses and other
(11,179
)
 
(8,514
)
Rent collected in advance
(2,183
)
 
(2,971
)
Cash provided by operating activities
41,241

 
23,880

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Real estate improvements
(18,073
)
 
(32,203
)
Insurance proceeds received

 
1,443

Proceeds from sale of properties, net
771,787

 
807,322

Proceeds from maturity of marketable securities
250,000

 

Proceeds from sale of marketable securities

 
23,933

Cash provided by investing activities
1,003,714

 
800,495

 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Repurchase and retirement of common shares
(5,487
)
 
(89,910
)
Payments on borrowings
(255,557
)
 
(575,526
)
Contributions from holders of noncontrolling interest

 
1

Distributions to common shareholders
(1,160
)
 

Distributions to preferred shareholders
(3,994
)
 
(3,994
)
Cash used in financing activities
(266,198
)
 
(669,429
)
 
 
 
 
Increase in cash, cash equivalents, and restricted cash
778,757

 
154,946

Cash, cash equivalents, and restricted cash at beginning of period
2,404,101

 
2,360,590

Cash, cash equivalents, and restricted cash at end of period
$
3,182,858

 
$
2,515,536

See accompanying notes.




6

Table of Contents





EQUITY COMMONWEALTH 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(amounts in thousands)
(unaudited)

 
Six Months Ended June 30,
 
2019
 
2018
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
Interest paid
$
12,291

 
$
17,704

Taxes paid, net
2,873

 
2,417

 
 
 
 
NON-CASH INVESTING ACTIVITIES:
 
 
 
Recognition of right-of-use asset and lease liability
$
1,503

 
$

Accrued capital expenditures
$
3,992

 
$
4,539


The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):
 
June 30,
 
2019
 
2018
Cash and cash equivalents
$
3,180,548

 
$
2,507,117

Restricted cash
2,310

 
8,419

Total cash, cash equivalents, and restricted cash shown in the statements of cash flows
$
3,182,858

 
$
2,515,536


See accompanying notes.


7

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Business

Equity Commonwealth, or the Company, is a real estate investment trust, or REIT, formed in 1986 under the laws of the State of Maryland. Our business is primarily the ownership and operation of office properties in the United States.

On November 10, 2016, the Company converted to what is commonly referred to as an umbrella partnership real estate investment trust, or UPREIT. In connection with this conversion, the Company contributed substantially all of its assets to EQC Operating Trust, a Maryland real estate investment trust, or the Operating Trust, and the Operating Trust assumed substantially all of the Company’s liabilities pursuant to a contribution and assignment agreement between the Company and the Operating Trust.
 
The Company now conducts and intends to continue to conduct substantially all of its activities through the Operating Trust. The Company beneficially owned 99.96% of the outstanding shares of beneficial interest, designated as units, in the Operating Trust, or OP Units, as of June 30, 2019, and the Company is the sole trustee of the Operating Trust.  As the sole trustee, the Company generally has the power under the declaration of trust of the Operating Trust to manage and conduct the business of the Operating Trust, subject to certain limited approval and voting rights of other holders of OP Units.

At June 30, 2019, our portfolio consisted of 7 properties (12 buildings), with a combined 2.5 million square feet. As of June 30, 2019, we had $3.2 billion of cash and cash equivalents.

Note 2.  Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements of EQC have been prepared without audit.  Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted.  We believe the disclosures made are appropriate.  The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K, or our Annual Report, for the year ended December 31, 2018.  Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.

In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.  All intercompany transactions and balances with or among our subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  Certain reclassifications have been made to the prior year's financial statements to conform to the current year’s presentation.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts.  Actual results could differ from those estimates.  Significant estimates in the condensed consolidated financial statements include the assessment of the collectability of rental revenue, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets.

Share amounts are presented in whole numbers, except where noted.

Recent Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of FASB Accounting Standards Codification, or ASC, 820. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This update is effective for

8

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. We adopted ASU 2018-07 on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently evaluating the impact, if any, that the adoption of ASU 2016-13 will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes previous leasing standards. For leases where we are the lessor, we account for these leases using an approach that is substantially equivalent to previous guidance prior to the adoption of ASU 2016-02. Additionally, under ASU 2016-02, lessors may only capitalize incremental direct leasing costs. For leases in which we are the lessee, we recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments, with rent expense being recognized on a straight-line basis and the right of use asset being reduced when lease payments are made.

In July 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of ASU 2016-02. The amendment to the new leases standard includes a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single component under the new leases standard.  The amendment also provides a transition option that permits the application of the new guidance as of the adoption date rather than to all periods presented.  We elected the practical expedient to account for both our lease (primarily base rent) and non-lease (primarily tenant reimbursements) components as a single component under the leases standard and elected the new transition option. We adopted these pronouncements on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements, both as a lessor and as a lessee.

Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations as a result of adopting ASU 2016-02. Amounts that were previously disclosed as "Tenant reimbursements and other income" are now included in "Rental revenue" and are no longer presented as a separate line item. Parking revenues that do not represent components of leases and were previously disclosed as "Rental income" are now included in "Other revenue." Subsequent to January 1, 2019, provisions for credit losses are included in "Rental revenue." Provisions for credit losses prior to January 1, 2019 were disclosed as "Operating expenses" and were not reclassified to conform prior periods to the current presentation.

Note 3.  Real Estate Properties

During the six months ended June 30, 2019 and 2018, we made improvements, excluding tenant-funded improvements, to our properties totaling $8.5 million and $29.6 million, respectively.
 
 



9

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Property Dispositions:

During the six months ended June 30, 2019, we sold the following properties (dollars in thousands):
Property
 
Date Sold
 
Number of
Properties
 
Number of
Buildings
 
Square
Footage
 
Gross Sales Price
 
Gain on Sale
1735 Market Street(1)
 
March 2019
 
1

 
1

 
1,286,936

 
$
451,600

 
$
192,985

600 108th Avenue NE(2)
 
April 2019
 
1

 
1

 
254,510

 
195,000

 
149,009

Research Park(3)
 
June 2019
 
1

 
4

 
1,110,007

 
165,500

 
78,158

 
 
 
 
3

 
6

 
2,651,453

 
$
812,100

 
$
420,152



(1)
Certain of our subsidiaries sold 100% of the equity interests in the fee simple owner of this property.     The sale of this property did not represent a strategic shift under ASC Topic 205. However, the sale does represent an individually significant disposition. The operating results of this property are included in continuing operations for all periods presented through the date of sale. Net income related to this property was $0.1 million and $2.0 million for the three months ended June 30, 2019 and 2018, respectively, and $197.2 million (of which $193.0 million related to the gain on sale) and $3.8 million for the six months ended June 30, 2019 and 2018, respectively.
(2)
The property includes an office building and additional development rights.
(3)
There is consideration of $2.0 million being held in escrow related to the sale of this property. To the extent any of these proceeds are ultimately released to the Company, the gain on sale will increase.

Lease Payments

The future minimum lease payments, excluding tenant reimbursement revenue, scheduled to be received by us during the current terms of our leases as of June 30, 2019 are as follows (in thousands):
2019
$
33,114

2020
53,642

2021
58,692

2022
52,368

2023
46,859

Thereafter
340,138

 
$
584,813


Rental revenue consists of the following (in thousands):
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2019
 
2018
 
2019
 
2018
Lease payments
 
$
20,429

 
$
30,628

 
$
48,334

 
$
70,164

Variable lease payments
 
10,145

 
14,941

 
21,130

 
30,678

Rental revenue
 
$
30,574

 
$
45,569

 
$
69,464

 
$
100,842



Note 4.  Marketable Securities

As of December 31, 2018, our marketable securities consisted of United States Treasury notes and were classified as available-for-sale. The United States Treasury notes matured in January and February 2019, and as of June 30, 2019, we do not have any marketable securities.


10

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Below is a summary of our marketable securities as of December 31, 2018 (in thousands):
 
 
December 31, 2018
 
 
Amortized Cost
 
Unrealized Loss
 
Estimated Fair Value
Marketable securities
 
$
249,944

 
$
(342
)
 
$
249,602



Note 5.  Indebtedness
 
Senior Unsecured Notes:

On June 28, 2019, we redeemed all $250.0 million of our 5.875% senior unsecured notes due 2020 and recognized a loss on early extinguishment of debt of $6.4 million for the three and six months ended June 30, 2019 from prepayment fees, the write off of unamortized deferred financing fees and the write off of an unamortized discount.

Debt Covenants:
 
After the redemption of our 5.875% senior unsecured notes due 2020 on June 28, 2019, we no longer have any notes outstanding under our public debt indenture and related supplements, collectively the Indenture, and we are no longer required to maintain the financial ratio covenants prescribed in the Indenture. As a result, we are no longer rated by the rating agencies.

Mortgage Note Payable:
 
At June 30, 2019, one of our properties with an aggregate net book value of $43.9 million had a secured mortgage note totaling $26.1 million (including a net premium and unamortized deferred financing fees) maturing in 2021.

Note 6.  Shareholders’ Equity
 
Common Share Issuances:

See Note 10 for information regarding equity issuances related to share-based compensation.

Common Share Repurchases:

On March 13, 2019, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares over the twelve months following the date of authorization. During the six months ended June 30, 2019, we did not repurchase any of our common shares under our share repurchase program. The $150.0 million of remaining authorization available under our share repurchase program as of June 30, 2019 is scheduled to expire on March 13, 2020.

During the six months ended June 30, 2019 and 2018, certain of our employees surrendered 168,327 and 57,348 common shares owned by them, respectively, to satisfy their statutory tax withholding obligations in connection with the vesting of such common shares.

Common Share and Unit Distribution:

On September 26, 2018, our Board of Trustees declared a special, one-time cash distribution of $2.50 per common share/unit to shareholders/unitholders of record on October 9, 2018. On October 23, 2018, we paid this distribution to such shareholders/unitholders in the aggregate amount of $304.7 million. In February 2019, the number of earned awards for certain recipients of the Company's restricted stock units was determined. Pursuant to the terms of such awards, we paid a one-time catch-up cash distribution of $2.50 per common share/unit to these recipients in the aggregate amount of $1.2 million upon such determination.


11

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Preferred Share Distributions:

In 2019, our Board of Trustees declared distributions on our series D preferred shares to date as follows:
Declaration Date
 
Record Date
 
Payment Date
 
Series D Dividend Per Share
January 11, 2019
 
January 30, 2019
 
February 15, 2019
 
$
0.40625

April 11, 2019
 
April 29, 2019
 
May 15, 2019
 
$
0.40625

July 12, 2019
 
July 30, 2019
 
August 15, 2019
 
$
0.40625



Note 7.  Noncontrolling Interest

Noncontrolling interest represents the portion of the OP Units not beneficially owned by the Company. The ownership of an OP Unit and a common share of beneficial interest have essentially the same economic characteristics. Distributions with respect to OP Units will generally mirror distributions with respect to the Company’s common shares. Unitholders (other than the Company) generally have the right, commencing six months from the date of issuance of such OP Units, to cause the Operating Trust to redeem their OP Units in exchange for cash or, at the option of the Company, common shares of the Company on a one-for-one basis. As sole trustee, the Company will have the sole discretion to elect whether the redemption right will be satisfied by the Company in cash or the Company’s common shares. As a result, the Noncontrolling interest is classified as permanent equity. As of June 30, 2019, the portion of the Operating Trust not beneficially owned by the Company is in the form of OP Units and LTIP Units (see Note 10 for a description of LTIP Units). LTIP Units may be subject to additional vesting requirements.

The following table presents the changes in Equity Commonwealth’s issued and outstanding common shares and units for the six months ended June 30, 2019:
 
 
Common Shares
 
OP Units and LTIP Units
 
Total
Outstanding at January 1, 2019
 
121,572,155

 
45,720

 
121,617,875

Repurchase of shares
 
(168,327
)
 

 
(168,327
)
Restricted share grants, time-based LTIP Unit grants and vested restricted stock units
 
518,292

 
2,940

 
521,232

Outstanding at June 30, 2019
 
121,922,120

 
48,660

 
121,970,780

Noncontrolling ownership interest in the Operating Trust
 


 


 
0.04
%

The carrying value of the Noncontrolling interest is allocated based on the number of OP Units and LTIP Units in proportion to the number of OP Units and LTIP Units plus the number of common shares. We adjust the Noncontrolling interest balance at the end of each period to reflect the noncontrolling partners’ interest in the net assets of the Operating Trust. Net income is allocated to the Noncontrolling interest in the Operating Trust based on the weighted average ownership percentage during the period. Equity Commonwealth’s weighted average ownership interest in the Operating Trust was 99.96% and 99.96% for the three and six months ended June 30, 2019, respectively.

Note 8.  Cumulative Other Comprehensive Loss
 
The following table presents the amounts recognized in cumulative other comprehensive loss for the six months ended June 30, 2019 (in thousands):
 
 
Unrealized Loss on Marketable Securities
Balance as of January 1, 2019
 
$
(342
)
 
 
 
Other comprehensive income
 
342

 
 
 
Balance as of June 30, 2019
 
$



12

Table of Contents

EQUITY COMMONWEALTH
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


 
Note 9.  Income Taxes
 
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and are generally not subject to federal and state income taxes provided we distribute a sufficient amount of our taxable income to our shareholders and meet other requirements for qualifying as a REIT.  We are also subject to certain state and local taxes without regard to our REIT status.

Our provision for income taxes consists of the following (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Current:
 
 
 
 
 
 
 
State and local
$
(340
)
 
$
456