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Section 1: 8-K (8-K)

eqc-20200212
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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): February 12, 2020

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

Maryland
(State or Other Jurisdiction of Incorporation)
1-931704-6558834
(Commission File Number)(IRS Employer Identification No.)
Two North Riverside Plaza, Suite 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
6.50% 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 February 12, 2020, Equity Commonwealth, or the Company, issued a press release setting forth the Company’s results of operations and financial condition for the quarter and year ended December 31, 2019, and also provided certain supplemental operating and financial data for the quarter and year ended December 31, 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         Press Release Dated February 12, 2020.
99.2         Fourth Quarter 2019 Supplemental Operating and Financial Data.
104  The 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: February 12, 2020



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Section 2: EX-99.1 (EX-99.1)

Document
Exhibit 99.1
402770378_earningslogoa151.jpg
Two North Riverside Plaza, Suite 2100, Chicago, Illinois 60606


Equity Commonwealth Reports Full Year 2019 Results
Announces Sale of 109 Brookline in Boston and Contract to Sell Tower 333 in Bellevue

Chicago - February 12, 2020 - Equity Commonwealth (NYSE: EQC) today reported its financial results for the quarter and year ended December 31, 2019. All per share results are reported on a diluted basis.

Financial results for the quarter ended December 31, 2019
Net income attributable to common shareholders for the quarter ended December 31, 2019 was $14.0 million, or $0.11 per share. This compares to net income attributable to common shareholders for the quarter ended December 31, 2018 of $13.4 million, or $0.11 per share. The increase in net income was primarily due to a decrease in interest expense offset by a decrease in income due to property sales.

Funds from Operations (FFO), as defined by the National Association of Real Estate Investment Trusts, for the quarter ended December 31, 2019, were $19.8 million, or $0.16 per share. This compares to FFO for the quarter ended December 31, 2018 of $25.6 million, or $0.21 per share. The following items impacted FFO for the quarter ended December 31, 2019, compared to the corresponding 2018 period:
($0.09) per share decrease in income from properties sold;
($0.01) per share decrease in interest and other income;
$0.04 per share of interest expense savings; and
$0.01 per share of lower loss on debt extinguishment.

Normalized FFO for the quarter ended December 31, 2019 was $19.7 million, or $0.16 per share. This compares to Normalized FFO for the quarter ended December 31, 2018 of $25.5 million, or $0.21 per share. The following items impacted Normalized FFO for the quarter ended December 31, 2019, compared to the corresponding 2018 period:
($0.08) per share decrease in income from properties sold;
($0.01) per share decrease in interest and other 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 company’s operating performance. Definitions of FFO, Normalized FFO and reconciliations to net income, determined in accordance with U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release.

As of December 31, 2019, the company’s balance of cash and cash equivalents was $2.8 billion. Total debt outstanding as of December 31, 2019 was $25.7 million.

Same property results for the quarter ended December 31, 2019
The company’s same property portfolio at the end of the quarter consisted of 7 properties totaling 2.5 million square feet. Same property operating results were as follows:
The same property portfolio was 94.7% leased as of December 31, 2019, compared to 93.5% as of September 30, 2019, and 93.2% as of December 31, 2018;
The same property portfolio commenced occupancy was 89.0% as of December 31, 2019, compared to 88.2% as of September 30, 2019, and 91.6% as of December 31, 2018;
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Same property net operating income (NOI) decreased 1.6% when compared to the same period in 2018;
Same property cash NOI decreased 2.9% when compared to the same period in 2018;
The company entered into leases for approximately 153,000 square feet, including renewal leases for approximately 63,000 square feet and new leases for approximately 90,000 square feet;
GAAP rental rates on new and renewal leases were 10.1% higher compared to prior GAAP rental rates for the same space; and
Cash rental rates on new and renewal leases were 1.5% 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 net income, determined in accordance with GAAP, are included at the end of this press release. The same property portfolio at the end of the quarter included properties continuously owned from October 1, 2018 through December 31, 2019.

Financial results for the year ended December 31, 2019
Net income attributable to common shareholders for the year ended December 31, 2019 was $484.7 million, or $3.90 per share. This compares to net income attributable to common shareholders for the year ended December 31, 2018 of $264.8 million, or $2.15 per share. The increase in net income was primarily due to an increase in gains from property sales, an increase in interest and other income, and a decrease in interest expense.

FFO for the year ended December 31, 2019 was $89.7 million, or $0.73 per share. This compares to FFO for the year ended December 31, 2018 of $73.4 million, or $0.59 per share. The following items impacted FFO for the year ended December 31, 2019, compared to the corresponding 2018 period:
($0.33) per share decrease in income from properties sold;
$0.21 per share increase in interest and other income, net;
$0.14 per share of interest expense savings;
$0.05 per increase in same property NOI;
$0.05 per share of general & administrative expense savings;
$0.02 per share decrease in income tax expense; and
$0.01 per share of lower loss on debt extinguishment.

Normalized FFO for the year ended December 31, 2019 was $95.7 million, or $0.78 per share. This compares to Normalized FFO for the year ended December 31, 2018 of $85.4 million, or $0.69 per share. The following items impacted Normalized FFO for the year ended December 31, 2019, compared to the corresponding 2018 period:
($0.30) per share decrease in income from properties sold;
$0.15 per share increase in interest income;
$0.14 per share of interest expense savings;
$0.05 per share increase in same property cash NOI and termination income; and
$0.05 per share of general & administrative expense savings.

Same property results for the year ended December 31, 2019
The company’s same property portfolio at the end of the year consisted of 7 properties totaling 2.5 million square feet. Same property operating results were as follows:
Same property NOI increased 8.8% when compared to the same period in 2018;
Same property cash NOI increased 6.8% when compared to the same period in 2018;
The company entered into leases for approximately 608,000 square feet, including new leases for approximately 232,000 square feet and renewal leases for approximately 376,000 square feet;
GAAP rental rates on new and renewal leases were 11.6% higher compared to prior GAAP rental rates for the same space; and
Cash rental rates on new and renewal leases were 2.3% 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 net income, determined in accordance with GAAP, are included at the end of this press release. The
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same property portfolio at the end of the year included properties continuously owned from January 1, 2018 through December 31, 2019.

Significant events during the quarter ended December 31, 2019
The company sold three properties totaling 2.7 million square feet for a gross sale price of $812.1 million. Proceeds after credits for capital costs, contractual lease costs, and rent abatements were $795.9 million.
On June 28, 2019, the company redeemed all $250 million of its 5.875% Senior Unsecured Notes due September 15, 2020.
The company paid a special, one-time cash distribution of $3.50 per share on October 23, 2019 to common shareholders of record on October 7, 2019.

Subsequent Events
On February 12, 2020, the company sold 109 Brookline, a 286,000 square foot property in Boston, MA for a gross sale price of $270 million. Proceeds after credits, primarily for contractual lease costs, and transfer taxes were $259.2 million.
On February 12, 2020, the company entered into a contract to sell Tower 333, a 435,000 square foot office property in Bellevue, WA, for a gross sale price of $401.5 million. Proceeds after credits, primarily for contractual lease costs, and transfer taxes are expected to be approximately $317 million. The closing is expected to occur on or before March 12, 2020. This transaction is subject to customary closing conditions and extension options. There is no certainty that the transaction will close.

Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss fourth quarter and full year results on Thursday, February 13, 2020, at 9:00 A.M. CST. 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 Fourth 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 February 12, 2020, EQC’s portfolio comprised 6 properties and 2.2 million square feet.

Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the company to monitor these distribution channels for material disclosures.

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 and consummating any 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, 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,” “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.

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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). 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







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

December 31,
ASSETS20192018
Real estate properties:
Land$85,627  $135,142  
Buildings and improvements576,494  1,004,500  
662,121  1,139,642  
Accumulated depreciation(202,700) (375,968) 
459,421  763,674  
Cash and cash equivalents2,795,642  2,400,803  
Marketable securities—  249,602  
Restricted cash5,003  3,298  
Rents receivable19,554  51,089  
Other assets, net39,757  62,306  
Total assets$3,319,377  $3,530,772  
LIABILITIES AND EQUITY
Senior unsecured debt, net$—  $248,473  
Mortgage notes payable, net25,691  26,482  
Accounts payable, accrued expenses and other37,153  58,300  
Rent collected in advance3,127  9,451  
Distributions payable7,534  4,068  
Total liabilities$73,505  $346,774  
Shareholders’ equity:
 Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
 Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares 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 capital4,313,831  4,305,974  
Cumulative net income3,363,654  2,870,974  
Cumulative other comprehensive loss—  (342) 
Cumulative common distributions(3,851,666) (3,420,548) 
Cumulative preferred distributions(701,724) (693,736) 
Total shareholders' equity3,244,577  3,182,801  
Noncontrolling interest1,295  1,197  
Total equity$3,245,872  $3,183,998  
Total liabilities and equity$3,319,377  $3,530,772  





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


Three Months EndedYear Ended
December 31,December 31,  
2019201820192018
Revenues:
Rental income$23,410  $39,756  $116,869  $184,368  
Other revenue2,585  3,169  10,981  12,654  
Total revenues$25,995  $42,925  $127,850  $197,022  
Expenses:
Operating expenses$9,741  $15,539  $46,418  $79,916  
Depreciation and amortization6,037  10,830  28,122  49,041  
General and administrative8,290  8,973  38,442  44,439  
Loss on asset impairment—  —  —  12,087  
Total expenses$24,068  $35,342  $112,982  $185,483  
Interest and other income, net14,521  15,741  72,392  46,815  
 Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(60), $548, $204 and $2,553, respectively)(311) (5,035) (8,908) (26,585) 
Loss on early extinguishment of debt—  (719) (6,374) (7,122) 
Gain (loss) on sale of properties, net24  (1,608) 422,172  251,417  
Income before income taxes16,161  15,962  494,150  276,064  
Income tax expense(165) (540) (1,284) (3,156) 
Net income$15,996  $15,422  $492,866  $272,908  
Net income attributable to noncontrolling interest(6) (5) (186) (95) 
Net income attributable to Equity Commonwealth$15,990  $15,417  $492,680  $272,813  
Preferred distributions(1,997) (1,997) (7,988) (7,988) 
 Net income attributable to Equity Commonwealth common shareholders$13,993  $13,420  $484,692  $264,825  

 Weighted average common shares outstanding — basic (1)
122,140  121,749  122,091  122,314  
 Weighted average common shares outstanding — diluted (1)(2)
123,490  123,376  126,260  123,385  
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic$0.11  $0.11  $3.97  $2.17  
Diluted
$0.11  $0.11  $3.90  $2.15  

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 December 31, 2019 and 2018 includes 216 and 203 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the year ended December 31, 2019 and 2018 includes 210 and 308 unvested, earned RSUs, respectively.
(2) As of December 31, 2019, we had 4,915 series D preferred shares that were convertible into 2,857 common shares. The series D preferred shares are dilutive for the year ended December 31, 2019 and are antidilutive for all other periods presented.


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


Three Months Ended  Year Ended  
December 31,December 31,  
2019201820192018
Calculation of FFO
Net income$15,996  $15,422  $492,866  $272,908  
Real estate depreciation and amortization5,794  10,518  27,037  47,816  
Loss on asset impairment—  —  —  12,087  
(Gain) loss on sale of properties, net(24) 1,608  (422,172) (251,417) 
FFO attributable to Equity Commonwealth21,766  27,548  97,731  81,394  
Preferred distributions(1,997) (1,997) (7,988) (7,988) 
FFO attributable to EQC common shareholders and unitholders$19,769  $25,551  $89,743  $73,406  
Calculation of Normalized FFO
FFO attributable to EQC common shareholders and unitholders$19,769  $25,551  $89,743  $73,406  
Lease value amortization—  (22) (117) 54  
Straight line rent adjustments(69) (986) (418) (4,971) 
Loss on early extinguishment of debt—  719  6,374  7,122  
Loss on sale of securities—  —  —  4,987  
Loss on sale of real estate mortgage receivable—  —  —  2,117  
Income taxes related to gains on property sales—  228  142  2,726  
 Normalized FFO attributable to EQC common shareholders and unitholders$19,700  $25,490  $95,724  $85,441  
Weighted average common shares and units outstanding -- basic (1)
122,189  121,794  122,138  122,358  
Weighted average common shares and units outstanding -- diluted (1)
123,539  123,421  123,450  123,429  
 FFO attributable to EQC common shareholders and unitholders per share and unit -- basic$0.16  $0.21  $0.73  $0.60  
 FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted$0.16  $0.21  $0.73  $0.59  
 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic$0.16  $0.21  $0.78  $0.70  
 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted$0.16  $0.21  $0.78  $0.69  

(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 December 31, 2019 and 2018 include 49 and 45 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 year ended December 31, 2019 and 2018 include 47 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
(Unaudited, amounts in thousands)

Three Months Ended
12/31/20199/30/20196/30/20193/31/201912/31/2018
 Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue$23,410  $23,995  $30,574  $38,890  $39,756  
Other revenue2,585  2,740  2,794  2,862  3,169  
Operating expenses(9,741) (9,923) (10,974) (15,780) (15,539) 
NOI$16,254  $16,812  $22,394  $25,972  $27,386  
Straight line rent adjustments(69) 499  (11) (837) (986) 
Lease value amortization—  (39) (39) (39) (22) 
Lease termination fees(16) (11) (2,188) —  (19) 
Cash Basis NOI$16,169  $17,261  $20,156  $25,096  $26,359  
Cash Basis NOI from non-same properties (1)
(557) (135) (2,666) (7,853) (10,273) 
Same Property Cash Basis NOI$15,612  $17,126  $17,490  $17,243  $16,086  
 Non-cash rental income and lease termination fees from same properties85  (449) 1,950  (165) (137) 
Same Property NOI$15,697  $16,677  $19,440  $17,078  $15,949  
 Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI$15,697  $16,677  $19,440  $17,078  $15,949  
 Non-cash rental income and termination fees from same properties (85) 449  (1,950) 165  137  
Same Property Cash Basis NOI$15,612  $17,126  $17,490  $17,243  $16,086  
Cash Basis NOI from non-same properties (1)
557  135  2,666  7,853  10,273  
Cash Basis NOI$16,169  $17,261  $20,156  $25,096  $26,359  
Straight line rent adjustments69  (499) 11  837  986  
Lease value amortization—  39  39  39  22  
Lease termination fees16  11  2,188  —  19  
NOI$16,254  $16,812  $22,394  $25,972  $27,386  
Depreciation and amortization(6,037) (5,939) (7,561) (8,585) (10,830) 
General and administrative (8,290) (8,523) (9,533) (12,096) (8,973) 
Interest and other income, net14,521  19,401  20,695  17,775  15,741  
Interest expense(311) (321) (4,070) (4,206) (5,035) 
Loss on early extinguishment of debt—  —  (6,374) —  (719) 
Gain (loss) on sale of properties, net24  1,945  227,166  193,037  (1,608) 
Income before income taxes$16,161  $23,375  $242,717  $211,897  $15,962  
Income tax (expense) benefit(165) 521  (340) (1,300) (540) 
Net income$15,996  $23,896  $242,377  $210,597  $15,422  
Same Property capitalized external legal costs (2)
N/A  N/A  N/A  N/A  $—  

(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
(Unaudited, amounts in thousands)

For the Year Ended December 31,
20192018
   Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue$116,869  $184,368  
Other revenue10,981  12,654  
Operating expenses(46,418) (79,916) 
NOI$81,432  $117,106  
Straight line rent adjustments(418) (4,971) 
Lease value amortization(117) 54  
Lease termination fees(2,215) (2,936) 
Cash Basis NOI$78,682  $109,253  
Cash Basis NOI from non-same properties (1)
(11,211) (46,050) 
Same Property Cash Basis NOI$67,471  $63,203  
 Non-cash rental income and lease termination fees from same properties1,421  119  
Same Property NOI$68,892  $63,322  
 Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI$68,892  $63,322  
 Non-cash rental income and termination fees from same properties (1,421) (119) 
Same Property Cash Basis NOI$67,471  $63,203  
Cash Basis NOI from non-same properties (1)
11,211  46,050  
Cash Basis NOI$78,682  $109,253  
Straight line rent adjustments418  4,971  
Lease value amortization117  (54) 
Lease termination fees2,215  2,936  
NOI$81,432  $117,106  
Depreciation and amortization(28,122) (49,041) 
General and administrative (38,442) (44,439) 
Loss on asset impairment—  (12,087) 
Interest and other income, net72,392  46,815  
Interest expense(8,908) (26,585) 
Loss on early extinguishment of debt(6,374) (7,122) 
Gain on sale of properties, net422,172  251,417  
Income before income taxes$494,150  $276,064  
Income tax expense(1,284) (3,156) 
Net income$492,866  $272,908  
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.

10

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

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 October 1, 2018 through December 31, 2019. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2018 through December 31, 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.

11
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Section 3: EX-99.2 (EX-99.2)

Document
Exhibit 99.2


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Equity Commonwealth
Supplemental Operating
and Financial Data

Fourth Quarter 2019

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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 most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q.
Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the company to monitor these distribution channels for material disclosures.

2


COMPANY PROFILE AND INVESTOR INFORMATION
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties in the United States.

Same Property Statistics
No. of
 PropertiesSq. Feet% Leased% Commenced
 2,468,816  94.7%  89.0%  

 NYSE Trading Symbols
 Common Stock: EQC
 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. 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
Stifel NicolausJohn Guinee(443) 224-1307jwguinee@stifel.com









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


3


KEY FINANCIAL DATA
(Unaudited, amounts in thousands, except per share data)
As of and for the Three Months Ended
12/31/20199/30/20196/30/20193/31/201912/31/2018
OPERATING INFORMATION
Ending property count    10  
Ending square footage (1)
2,469  2,469  2,469  3,833  5,120  
Percent leased94.7 %93.5 %90.5 %94.4 %94.8 %
Percent commenced89.0 %88.2 %89.7 %93.7 %91.2 %
Net income attributable to EQC common shareholders$13,993  $21,889  $240,289  $208,521  $13,420  
Adjusted EBITDAre (2)
22,485  27,690  33,556  31,651  34,154  
SAME PROPERTY OPERATING INFORMATION
Ending square footage2,469  2,469  2,469  2,469  2,469  
Percent leased94.7 %93.5 %90.5 %92.0 %93.2 %
Percent commenced89.0 %88.2 %89.7 %91.1 %91.6 %
Same Property NOI (2)
15,697  16,677  19,440  17,078  15,949  
Same Property Cash Basis NOI (2)
15,612  17,126  17,490  17,243  16,086  
Same Property NOI margin60.4 %62.8 %66.7 %64.3 %61.9 %
Same Property Cash Basis NOI margin60.3 %63.4 %64.3 %64.5 %62.2 %
SHARES OUTSTANDING AND PER SHARE DATA (3)
Shares Outstanding at End of Period
Common stock outstanding121,924  121,924  121,922  121,900  121,572  
Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units (3)
1,615  1,688  1,443  1,566  1,809  
Dilutive Series D Convertible Preferred Shares outstanding (4)
—  —  2,563  2,563  —  
Preferred Stock Outstanding (4)
4,915  4,915  4,915  4,915  4,915  
Weighted Average Shares Outstanding - GAAP
Basic (5)
122,140  122,140  122,122  121,960  121,749  
Diluted (5)
123,490  123,564  125,862  125,822  123,376  
Distributions Declared Per Common Share$—  $3.50  $—  $—  $—  
BALANCE SHEET
Total assets$3,319,377  $3,731,343  $3,702,171  $3,713,937  $3,530,772  
Total liabilities73,505  503,230  66,548  322,376  346,774  
ENTERPRISE VALUE
Total debt (book value)$25,691  $25,896  $26,091  $274,977  $274,955  
Less: Cash and cash equivalents(2,795,642) (3,205,775) (3,180,548) (3,069,501) (2,400,803) 
Plus: Market value of preferred shares138,805  137,871  135,561  134,480  124,109  
Plus: Market value of diluted common shares
4,055,786  4,233,722  4,011,848  4,036,090  3,698,580  
Total enterprise value$1,424,640  $1,191,714  $992,952  $1,376,046  $1,696,841  
RATIOS
Net debt / enterprise value(194.4)%(266.8)%(317.7)%(203.1)%(125.3)%
Net debt / annualized adjusted EBITDAre (2)
(30.8)x(28.7)x(23.5)x(22.1)x(15.6)x
Adjusted EBITDAre (2) / interest expense
72.3 x86.3 x8.2 x7.5 x6.8 x

(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 December 31, 2019, we had 4,915 series D preferred shares outstanding that were convertible into 2,857 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
(Unaudited, amounts in thousands, except share data)
December 31,
ASSETS20192018
Real estate properties:
Land$85,627  $135,142  
Buildings and improvements576,494  1,004,500  
662,121  1,139,642  
Accumulated depreciation(202,700) (375,968) 
459,421  763,674  
Cash and cash equivalents2,795,642  2,400,803  
Marketable securities—  249,602  
Restricted cash5,003  3,298  
Rents receivable
19,554  51,089  
Other assets, net39,757  62,306  
Total assets$3,319,377  $3,530,772  
LIABILITIES AND EQUITY
Senior unsecured debt, net$—  $248,473  
Mortgage notes payable, net25,691  26,482  
Accounts payable, accrued expenses and other37,153  58,300  
Rent collected in advance3,127  9,451  
Distributions payable7,534  4,068  
Total liabilities$73,505  $346,774  
Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares 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 capital4,313,831  4,305,974  
Cumulative net income3,363,654  2,870,974  
Cumulative other comprehensive loss—  (342) 
Cumulative common distributions(3,851,666) (3,420,548) 
Cumulative preferred distributions(701,724) (693,736) 
Total shareholders' equity3,244,577  3,182,801  
Noncontrolling interest1,295  1,197  
Total equity$3,245,872  $3,183,998  
Total liabilities and equity$3,319,377  $3,530,772  


5

ADDITIONAL BALANCE SHEET INFORMATION
(Unaudited, amounts in thousands)
December 31,
Additional Balance Sheet Information20192018
Straight-line rents receivable$16,416  $47,393  
Accounts receivable3,138  3,696  
Rents receivable$19,554  $51,089  
Capitalized lease incentives, net$2,030  $4,308  
Deferred leasing costs, net26,618  51,123  
Other11,109  6,875  
Other assets, net$39,757  $62,306  
Accounts payable$2,944  $2,932  
Accrued interest104  4,432  
Accrued taxes10,398  13,228  
Accrued capital expenditures1,383  13,540  
Accrued leasing costs5,266  6,181  
Assumed real estate lease obligations, net—  117  
Security deposits3,082  4,137  
Other accrued liabilities13,976  13,733  
Accounts payable, accrued expenses and other$37,153  $58,300  


6


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
Three Months EndedYear Ended
December 31,December 31,  
2019201820192018
Revenues:
Rental revenue$23,410  $39,756  $116,869  $184,368  
Other revenue2,585  3,169  10,981  12,654  
Total revenues$25,995  $42,925  $127,850  $197,022  
Expenses:
Operating expenses$9,741  $15,539  $46,418  $79,916  
Depreciation and amortization6,037  10,830  28,122  49,041  
General and administrative8,290  8,973  38,442  44,439  
Loss on asset impairment—  —  —  12,087  
Total expenses$24,068  $35,342  $112,982  $185,483  
Interest and other income, net14,521  15,741  72,392  46,815  
 Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(60), $548, $204 and $2,553, respectively)(311) (5,035) (8,908) (26,585) 
Loss on early extinguishment of debt—  (719) (6,374) (7,122) 
Gain (loss) on sale of properties, net24  (1,608) 422,172  251,417  
Income before income taxes16,161  15,962  494,150  276,064  
Income tax expense(165) (540) (1,284) (3,156) 
Net income$15,996  $15,422