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Section 1: 8-K (8-K)

Document
0000803649false00008036492019-10-292019-10-290000803649us-gaap:CommonClassAMember2019-10-292019-10-290000803649us-gaap:SeriesDPreferredStockMember2019-10-292019-10-29

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): October 29, 2019

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

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


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

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title Of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Shares of Beneficial InterestEQCNew York Stock Exchange
6 1/2% Series D Cumulative Convertible Preferred Shares of Beneficial InterestEQCpDNew York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.02. Results of Operations and Financial Condition.
On October 29, 2019, Equity Commonwealth, or the Company, issued a press release setting forth the Company’s results of operations and financial condition for the quarter ended September 30, 2019, and also provided certain supplemental operating and financial data for the quarter ended September 30, 2019.  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
99.2
104The cover page from this Current Report on form 8-K, formatted in Inline XBRL.


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EQUITY COMMONWEALTH
By:/s/ Adam S. Markman
Name:Adam S. Markman
Title:Executive Vice President, Chief
Financial Officer and Treasurer
Date: October 29, 2019


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Section 2: EX-99.1 (EX-99.1)

Document
Exhibit 99.1
400715884_image12.jpg
Two North Riverside Plaza, Suite 2100, Chicago, Illinois 60606


Equity Commonwealth Reports Third Quarter 2019 Results

Chicago - October 29, 2019 - Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended September 30, 2019. All per share results are reported on a diluted basis.

Financial results for the quarter ended September 30, 2019
Net income attributable to common shareholders was $21.9 million, or $0.18 per share, for the quarter ended September 30, 2019. This compares to net income attributable to common shareholders of $30.8 million, or $0.25 per share, for the quarter ended September 30, 2018. The decrease in net income was primarily a result of property dispositions and a decrease in gains from property sales, partially offset by higher interest income and lower interest expense.

Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended September 30, 2019, were $25.6 million, or $0.21 per share. This compares to FFO for the quarter ended September 30, 2018 of $20.9 million, or $0.17 per share. The following items impacted FFO for the quarter ended September 30, 2019, compared to the corresponding 2018 period:

($0.09) per share of decrease in income and straight-line rent from properties sold;
$0.05 per share of increase in interest and other income, net;
$0.04 per share of interest expense savings;
$0.02 per share of general & administrative expense savings; and
$0.01 per share of increase in same property NOI.

Normalized FFO was $25.7 million, or $0.21 per share. This compares to Normalized FFO for the quarter ended September 30, 2018 of $21.6 million, or $0.18 per share. The following items impacted Normalized FFO for the quarter ended September 30, 2019, compared to the corresponding 2018 period:

($0.07) per share of decrease in income from properties sold;
$0.04 per share of increase in interest and other income;
$0.04 per share of interest expense savings;
$0.02 per share of general & administrative expense savings; and
$0.01 per share of increase in same property cash NOI and termination income.

Normalized FFO begins with FFO and eliminates certain items that we view as nonrecurring or impacting comparability from period to period. 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 September 30, 2019, the company’s cash balance net of distributions payable was $2.8 billion. Total debt outstanding was $25.9 million.

Same property results for the quarter ended September 30, 2019
The company’s same property portfolio at the end of the quarter consisted of 7 properties totaling 2.5 million square feet. Operating results were as follows:

The same property portfolio was 93.5% leased as of September 30, 2019, compared to 90.5% as of June 30, 2019, and 93.1% as of September 30, 2018.
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The same property portfolio commenced occupancy was 88.2% as of September 30, 2019, compared to 89.7% as of June 30, 2019, and 91.1% as of September 30, 2018.
Same property NOI increased 5.2% when compared to the same period in 2018.
Same property cash NOI increased 6.9% when compared to the same period in 2018.
The company entered into leases for approximately 298,000 square feet, including new leases for approximately 116,000 square feet and renewal leases for approximately 182,000 square feet.
GAAP rental rates on new and renewal leases were 9.1% higher compared to prior GAAP rental rates for the same space.
Cash rental rates on new and renewal leases were 0.7% lower compared to prior cash rental rates for the same space.

The definitions and reconciliations of same property NOI and same property cash NOI to net income, determined in accordance with GAAP, are included at the end of this press release. The same property portfolio includes properties continuously owned from July 1, 2018 through September 30, 2019 and excludes properties sold or classified as held for sale at the end of the period.

Significant events during the quarter ended September 30, 2019
The company announced a special, one-time cash distribution of $3.50 per common share, which was paid on October 23, 2019 to shareholders of record on October 7, 2019.

Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss third quarter results on Wednesday, October 30, 2019, at 9:00 A.M. CDT. The conference call will be available via live audio webcast on the Investor Relations section of the company’s website (www.eqcre.com). A replay of the audio webcast will also be available following the call.

A copy of EQC’s Third Quarter 2019 Supplemental Operating and Financial Data is available on the Investor Relations section of EQC’s website at www.eqcre.com.

About Equity Commonwealth
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties in the United States. As of October 29, 2019, EQC’s portfolio comprised 7 properties and 2.5 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 pertaining to the marketing of certain properties for sale, consummating any sales, and future share repurchases. Any forward-looking statements contained in this press release are intended to be made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. 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 press release reflect the companys current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the companys 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
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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 companys future results to differ materially from any forward-looking statements, see the section entitled Risk Factors in the companys Annual Report on Form 10-K for the year ended December 31, 2018.



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














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

September 30, 2019December 31, 2018
ASSETS
Real estate properties:
Land$85,627  $135,142  
Buildings and improvements572,714  1,004,500  
658,341  1,139,642  
Accumulated depreciation(197,847) (375,968) 
460,494  763,674  
Cash and cash equivalents3,205,775  2,400,803  
Marketable securities—  249,602  
Restricted cash4,456  3,298  
Rents receivable19,347  51,089  
Other assets, net41,271  62,306  
Total assets$3,731,343  $3,530,772  
LIABILITIES AND EQUITY
Senior unsecured debt, net$—  $248,473  
Mortgage notes payable, net25,896  26,482  
Accounts payable, accrued expenses and other38,218  58,300  
Rent collected in advance3,533  9,451  
Distributions payable435,583  4,068  
Total liabilities$503,230  $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; 121,924,199 and 121,572,155 shares issued and outstanding, respectively1,219  1,216  
Additional paid in capital4,310,353  4,305,974  
Cumulative net income3,347,664  2,870,974  
Cumulative other comprehensive loss—  (342) 
Cumulative common distributions(3,851,947) (3,420,548) 
Cumulative preferred distributions(699,727) (693,736) 
Total shareholders’ equity3,226,825  3,182,801  
Noncontrolling interest1,288  1,197  
Total equity$3,228,113  $3,183,998  
Total liabilities and equity$3,731,343  $3,530,772  


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


Three Months EndedNine Months Ended
September 30,September 30,  
2019201820192018
Revenues:
Rental revenue$23,995  $43,770  $93,459  $144,612  
Other revenue2,740  3,103  8,396  9,485  
Total revenues$26,735  $46,873  $101,855  $154,097  
Expenses:
Operating expenses$9,923  $20,257  $36,677  $64,377  
Depreciation and amortization5,939  11,287  22,085  38,211  
General and administrative8,523  10,905  30,152  35,466  
Loss on asset impairment—  —  —  12,087  
Total expenses$24,385  $42,449  $88,914  $150,141  
Interest and other income, net19,401  12,626  57,871  31,074  
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(55), $559, $264 and $2,005, respectively)(321) (5,085) (8,597) (21,550) 
Loss on early extinguishment of debt—  —  (6,374) (6,403) 
Gain on sale of properties, net1,945  20,877  422,148  253,025  
Income before income taxes23,375  32,842  477,989  260,102  
Income tax benefit (expense)521  (65) (1,119) (2,616) 
Net income$23,896  $32,777  $476,870  $257,486  
Net income attributable to noncontrolling interest(10) (13) (180) (90) 
Net income attributable to Equity Commonwealth$23,886  $32,764  $476,690  $257,396  
Preferred distributions(1,997) (1,997) (5,991) (5,991) 
Net income attributable to Equity Commonwealth common shareholders$21,889  $30,767  $470,699  $251,405  
Weighted average common shares outstanding — basic (1)
122,140  121,845  122,075  122,504  
Weighted average common shares outstanding — diluted (1)
123,564  122,851  125,938  123,389  
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic$0.18  $0.25  $3.86  $2.05  
Diluted$0.18  $0.25  $3.79  $2.04  
Distributions declared per common share$3.50  $2.50  $3.50  $2.50  

Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations due to the impact 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.  
(1) Weighted average common shares outstanding for the three months ended September 30, 2019 and 2018 includes 217 and 362 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2019 and 2018 includes 208 and 344 unvested, earned RSUs, respectively.


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

Three Months Ended  Nine Months Ended  
September 30,September 30,  
2019201820192018
Calculation of FFO
Net income$23,896  $32,777  $476,870  $257,486  
Real estate depreciation and amortization5,683  10,978  21,243  37,298  
Loss on asset impairment—  —  —  12,087  
Gain on sale of properties, net(1,945) (20,877) (422,148) (253,025) 
FFO attributable to Equity Commonwealth27,634  22,878  75,965  53,846  
Preferred distributions(1,997) (1,997) (5,991) (5,991) 
FFO attributable to EQC common shareholders and unitholders$25,637  $20,881  $69,974  $47,855  
Calculation of Normalized FFO
FFO attributable to EQC common shareholders and unitholders$25,637  $20,881  $69,974  $47,855  
Lease value amortization(39) (4) (117) 76  
Straight line rent adjustments499  (1,435) (349) (3,985) 
Loss on early extinguishment of debt—  —  6,374  6,403  
Loss on sale of securities—  —  —  4,987  
Loss on sale of real estate mortgage receivable—  2,117  —  2,117  
Income taxes related to gains on property sales, net(423) 25  142  2,498  
Normalized FFO attributable to EQC common shareholders and unitholders
$25,674  $21,584  $76,024  $59,951  
Weighted average common shares and units outstanding -- basic (1)
122,189  121,891  122,121  122,548  
Weighted average common shares and units outstanding -- diluted (1)
123,613  122,897  123,421  123,433  
FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$0.21  $0.17  $0.57  $0.39  
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted
$0.21  $0.18  $0.62  $0.49  
(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 September 30, 2019 and 2018 include 49 and 46 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only). Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share and unit - basic for the nine months ended September 30, 2019 and 2018 include 46 and 44 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only).





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We compute FFO in accordance with standards established by NAREIT. NAREIT defines FFO as net income (loss), calculated in accordance with GAAP, excluding real estate depreciation and amortization, gains (or losses) from sales of depreciable property, impairment of depreciable real estate, and our portion of these items related to equity investees and noncontrolling interests.  Our calculation of Normalized FFO differs from NAREIT’s definition of FFO because we exclude certain items that we view as nonrecurring or impacting comparability from period to period.  FFO and Normalized FFO are supplemental non-GAAP financial measures. We consider FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities.
 
We believe that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs.  FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income (loss), net income (loss) attributable to EQC common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.  These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, 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.




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

For the Three Months Ended
9/30/20196/30/20193/31/201912/31/20189/30/2018
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue$23,995  $30,574  $38,890  $39,756  $43,770  
Other revenue2,740  2,794  2,862  3,169  3,103  
Operating expenses(9,923) (10,974) (15,780) (15,539) (20,257) 
NOI$16,812  $22,394  $25,972  $27,386  $26,616  
Straight line rent adjustments499  (11) (837) (986) (1,435) 
Lease value amortization(39) (39) (39) (22) (4) 
Lease termination fees(11) (2,188) —  (19) (395) 
Cash Basis NOI$17,261  $20,156  $25,096  $26,359  $24,782  
Cash Basis NOI from non-same properties (1)
(135) (2,666) (7,853) (10,273) (8,756) 
Same Property Cash Basis NOI$17,126  $17,490  $17,243  $16,086  $16,026  
Non-cash rental income and lease termination fees from same properties(449) 1,950  (165) (137) (180) 
Same Property NOI$16,677  $19,440  $17,078  $15,949  $15,846  
Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI$16,677  $19,440  $17,078  $15,949  $15,846  
Non-cash rental income and lease termination fees from same properties449  (1,950) 165  137  180  
Same Property Cash Basis NOI$17,126  $17,490  $17,243  $16,086  $16,026  
Cash Basis NOI from non-same properties (1)
135  2,666  7,853  10,273  8,756  
Cash Basis NOI$17,261  $20,156  $25,096  $26,359  $24,782  
Straight line rent adjustments(499) 11  837  986  1,435  
Lease value amortization39  39  39  22   
Lease termination fees11  2,188  —  19  395  
NOI$16,812  $22,394  $25,972  $27,386  $26,616  
Depreciation and amortization(5,939) (7,561) (8,585) (10,830) (11,287) 
General and administrative(8,523) (9,533) (12,096) (8,973) (10,905) 
Interest and other income, net19,401  20,695  17,775  15,741  12,626  
Interest expense(321) (4,070) (4,206) (5,035) (5,085) 
Loss on early extinguishment of debt—  (6,374) —  (719) —  
Gain (loss) on sale of properties, net1,945  227,166  193,037  (1,608) 20,877  
Income before income taxes$23,375  $242,717  $211,897  $15,962  $32,842  
Income tax benefit (expense)521  (340) (1,300) (540) (65) 
Net income$23,896  $242,377  $210,597  $15,422  $32,777  
Same Property capitalized external legal costs(2)
N/A  N/A  N/A  $—  $14  

(1) Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
(2) Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods.



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

For the Nine Months Ended September 30,
20192018
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue$93,459  $144,612  
Other revenue8,396  9,485  
Operating expenses(36,677) (64,377) 
NOI$65,178  $89,720  
Straight line rent adjustments(349) (3,985) 
Lease value amortization(117) 76  
Lease termination fees(2,199) (2,917) 
Cash Basis NOI$62,513  $82,894  
Cash Basis NOI from non-same properties (1)
(10,654) (35,777) 
Same Property Cash Basis NOI$51,859  $47,117  
Non-cash rental income and lease termination fees from same properties1,336  256  
Same Property NOI$53,195  $47,373  
Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI$53,195  $47,373  
Non-cash rental income and lease termination fees from same properties(1,336) (256) 
Same Property Cash Basis NOI$51,859  $47,117  
Cash Basis NOI from non-same properties (1)
10,654  35,777  
Cash Basis NOI$62,513  $82,894  
Straight line rent adjustments349  3,985  
Lease value amortization117  (76) 
Lease termination fees2,199  2,917  
NOI$65,178  $89,720  
Depreciation and amortization(22,085) (38,211) 
General and administrative(30,152) (35,466) 
Loss on asset impairment—  (12,087) 
Interest and other income, net57,871  31,074  
Interest expense(8,597) (21,550) 
Loss on early extinguishment of debt(6,374) (6,403) 
Gain on sale of properties, net422,148  253,025  
Income before income taxes$477,989  $260,102  
Income tax expense(1,119) (2,616) 
Net income$476,870  $257,486  
Same Property capitalized external legal costs(2)
N/A  $190  

(1) Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
(2) Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods.




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NOI is income from our real estate including lease termination fees received from tenants less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses. Cash Basis NOI is NOI excluding the effects of straight line rent adjustments, lease value amortization, and lease termination fees. The quarter-to-date same property versions of these measures include the results of properties continuously owned from July 1, 2018 through September 30, 2019. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2018 through September 30, 2019. Properties classified as held for sale within our condensed consolidated balance sheets are excluded from the same property versions of these measures.
 
We consider these supplemental non-GAAP financial measures to be appropriate supplemental measures to net income (loss) because they may help to understand the operations of our properties. We use these measures internally to evaluate property level performance, and we believe that they provide useful information to investors regarding our results of operations because they reflect only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. Cash Basis NOI is among the factors considered with respect to acquisition, disposition and financing decisions. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income (loss), net income (loss) attributable to Equity Commonwealth common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, 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.

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Section 3: EX-99.2 (EX-99.2)

Document
Exhibit 99.2



400715884_image11.jpg

Equity Commonwealth
Supplemental Operating
and Financial Data

Third Quarter 2019

400715884_image21.jpg




Corporate HeadquartersInvestor Relations
Two North Riverside PlazaSarah Byrnes
Suite 2100(312) 646-2801
Chicago, IL 60606ir@eqcre.com
(312) 646-2800www.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
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 2% or More of Annualized Rental Revenue
Same Property Lease Expiration Schedule
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 including, but not limited to, statements pertaining to our capital resources, portfolio performance, results of operations or anticipated market conditions. Any forward-looking statements contained in this presentation are intended to be made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. 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 section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.
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 a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties in the United States.
Same Property Statistics
No. of
 PropertiesSq. Feet% Leased% Commenced
 2,469  93.5%  88.2%  

 NYSE Trading Symbols
 Common Stock: EQC
 Preferred Stock Series D: EQCpD

Board of Trustees
Sam Zell (Chairman)David A. HelfandKenneth Shea
James S. CorlPeter Linneman (Lead Independent Trustee)Gerald A. Spector
Martin L. EdelmanJames L. Lozier, Jr.James A. Star
Edward A. GlickmanMary Jane Robertson
Senior Management
David A. HelfandDavid S. Weinberg
President and Chief Executive OfficerExecutive Vice President and
Chief Operating Officer
Adam S. MarkmanOrrin S. Shifrin
Executive Vice President,Executive Vice President,
Chief Financial Officer and TreasurerGeneral Counsel and Secretary
Equity Research Coverage (1)
Bank of America / Merrill LynchJames Feldman(646) 855-5808james.feldman@baml.com
CitigroupMichael Bilerman(212) 816-1383michael.bilerman@citi.com
Green Street AdvisorsDaniel Ismail(949) 640-8780dismail@greenstreetadvisors.com
JMP SecuritiesMitch Germain(212) 906-3546mgermain@jmpsecurities.com
Stifel NicolausJohn Guinee(443) 224-1307jwguinee@stifel.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 do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts.


3


KEY FINANCIAL DATA
(amounts in thousands, except per share data)
As of and for the Three Months Ended
9/30/20196/30/20193/31/201912/31/20189/30/2018
OPERATING INFORMATION
Ending property count
   10  11  
Ending square footage (1)
2,469  2,469  3,833  5,120  5,410  
Percent leased
93.5 %90.5 %94.4 %94.8 %94.0 %
Percent commenced
88.2 %89.7 %93.7 %91.2 %91.3 %
Net income attributable to EQC common shareholders
$21,889  $240,289  $208,521  $13,420  $30,767  
Adjusted EBITDAre (2)
27,690  33,556  31,651  34,154  30,454  
SAME PROPERTY OPERATING INFORMATION
Ending square footage2,469  2,469  2,469  2,469  2,469  
Percent leased93.5 %90.5 %92.0 %93.2 %93.1 %
Percent commenced88.2 %89.7 %91.1 %91.6 %91.1 %
Same Property NOI (2)
$16,677  $19,440  $17,078  $15,949  $15,846  
Same Property Cash Basis NOI (2)
17,126  17,490  17,243  16,086  16,026  
Same Property NOI margin62.8 %66.7 %64.3 %61.9 %61.6 %
Same Property Cash Basis NOI margin63.4 %64.3 %64.5 %62.2 %61.8 %
SHARES OUTSTANDING AND PER SHARE DATA (3)
Shares Outstanding at End of Period
Common stock outstanding
121,924  121,922  121,900  121,572  121,483  
Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units (3)
1,688  1,443  1,566  1,809  1,414  
Dilutive Series D Convertible Preferred Shares outstanding (4)
—  2,563  2,563  —  —  
Preferred Stock Outstanding (4)
4,915  4,915  4,915  4,915  4,915  
Weighted Average Shares Outstanding - GAAP
Basic (5)
122,140  122,122  121,960  121,749  121,845  
Diluted (5)
123,564  125,862  125,822  123,376  122,851  
Distributions Declared Per Common Share$3.50  $—  $—  $—  $2.50  
BALANCE SHEET
Total assets$3,731,343  $3,702,171  $3,713,937  $3,530,772  $3,813,728  
Total liabilities503,230  66,548  322,376  346,774  644,217  
ENTERPRISE VALUE
Total debt (book value)$25,896  $26,091  $274,977  $274,955  $279,901  
Less: Cash and cash equivalents(3,205,775) (3,180,548) (3,069,501) (2,400,803) (2,673,328) 
Plus: Market value of preferred shares
137,871  135,561  134,480  124,109  128,451  
Plus: Market value of diluted common shares
4,233,722  4,011,848  4,036,090  3,698,580  3,943,753  
Total enterprise value$1,191,714  $992,952  $1,376,046  $1,696,841  $1,678,777  
RATIOS
Net debt / enterprise value(266.8)%(317.7)%(203.1)%(125.3)%(142.6)%
Net debt / annualized adjusted EBITDAre (2)
(28.7)x(23.5)x(22.1)x(15.6)x(19.6)x
Adjusted EBITDAre (2) / interest expense
86.3x8.2x7.5x6.8x6.0x

(1) Changes in total square footage result from property dispositions, reclassifications, and remeasurement.
(2) Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measure herein.
(3) Restricted share units (RSUs) and LTIP Units are equity awards that contain both service and market-based vesting components. Refer to the schedule of Common & Potential Common Shares for information regarding RSUs and LTIP Units and their impact on weighted average shares outstanding.
(4) As of September 30, 2019, we had 4,915 series D preferred shares outstanding that were convertible into 2,563 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended June 30, 2019 and March 31, 2019, 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.
(5) Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.


4


CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
September 30, 2019December 31, 2018
ASSETS
Real estate properties:
Land$85,627  $135,142  
Buildings and improvements572,714  1,004,500  
658,341  1,139,642  
Accumulated depreciation(197,847) (375,968) 
460,494  763,674  
Cash and cash equivalents3,205,775  2,400,803  
Marketable securities—  249,602  
Restricted cash4,456  3,298  
Rents receivable19,347  51,089  
Other assets, net41,271  62,306  
Total assets$3,731,343  $3,530,772  
LIABILITIES AND EQUITY
Senior unsecured debt, net$—  $248,473  
Mortgage notes payable, net25,896  26,482  
Accounts payable, accrued expenses and other38,218  58,300  
Rent collected in advance3,533  9,451  
Distributions payable435,583  4,068  
Total liabilities$503,230  $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; 121,924,199 and 121,572,155 shares issued and outstanding, respectively1,219  1,216  
Additional paid in capital4,310,353  4,305,974  
Cumulative net income3,347,664  2,870,974  
Cumulative other comprehensive loss—  (342) 
Cumulative common distributions(3,851,947) (3,420,548) 
Cumulative preferred distributions(699,727) (693,736) 
Total shareholders’ equity3,226,825  3,182,801  
Noncontrolling interest1,288  1,197  
Total equity$3,228,113  $3,183,998  
Total liabilities and equity$3,731,343  $3,530,772  


5


ADDITIONAL BALANCE SHEET INFORMATION
(amounts in thousands)
September 30, 2019December 31, 2018
Additional Balance Sheet Information
Straight-line rents receivable$16,347  $47,393  
Accounts receivable3,000  3,696  
Rents receivable$19,347  $51,089  
Capitalized lease incentives, net$2,124  $4,308  
Deferred leasing costs, net26,344  51,123  
Other12,803  6,875  
Other assets, net$41,271  $62,306  
Accounts payable$2,404  $2,932  
Accrued interest101  4,432  
Accrued taxes9,978  13,228  
Accrued capital expenditures2,161  13,540  
Accrued leasing costs7,376  6,181  
Assumed real estate lease obligations, net—  117  
Security deposits3,278  4,137  
Other accrued liabilities12,920  13,733  
Accounts payable and accrued expenses$38,218  $58,300  


6


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
Three Months EndedNine Months Ended
September 30,September 30,  
2019201820192018
Revenues:
Rental revenue$23,995  $43,770  $93,459  $144,612  
Other revenue2,740  3,103  8,396  9,485  
Total revenues$26,735  $46,873  $101,855  $154,097  
Expenses:
Operating expenses$9,923  $20,257  $36,677  $64,377  
Depreciation and amortization5,939  11,287  22,085  38,211  
General and administrative8,523  10,905  30,152  35,466  
Loss on asset impairment—  —  —  12,087  
Total expenses$24,385  $42,449  $88,914  $150,141  
Interest and other income, net19,401  12,626  57,871  31,074  
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(55), $559, $264 and $2,005, respectively)(321) (5,085) (8,597) (21,550) 
Loss on early extinguishment of debt—  —  (6,374) (6,403) 
Gain on sale of properties, net1,945  20,877  422,148  253,025  
Income before income taxes23,375  32,842  477,989  260,102  
Income tax benefit (expense)521  (65) (1,119) (2,616) 
Net income$23,896  $32,777  $476,870  $257,486  
Net income attributable to noncontrolling interest(10) (13) (180) (90) 
Net income attributable to Equity Commonwealth$23,886  $32,764  $476,690  $257,396  
Preferred distributions
(1,997) (1,997) (5,991) (5,991) 
Net income attributable to Equity Commonwealth common shareholders$21,889  $30,767  $470,699  $251,405  
Weighted average common shares outstanding — basic (1)
122,140  121,845  122,075  122,504  
Weighted average common shares outstanding — diluted (1)
123,564  122,851  125,938  123,389  
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic$0.18  $0.25  $3.86  $2.05  
Diluted$0.18  $0.25  $3.79  $2.04  
Distributions declared per common share$3.50  $2.50  $3.50  $2.50  

Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations due to the impact 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.
(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)
For the Three Months Ended
9/30/2019