the Securities Exchange Act of 1934
EQUITY COMMONWEALTH |
N/A |
September 30, 2024 | December 31, 2023 | ||||||||||
ASSETS | |||||||||||
Real estate properties: | |||||||||||
Land | $ | 22,400 | $ | 44,060 | |||||||
Buildings and improvements | 158,152 | 367,827 | |||||||||
180,552 | 411,887 | ||||||||||
Accumulated depreciation | (69,254) | (180,535) | |||||||||
111,298 | 231,352 | ||||||||||
Assets held for sale | 86,803 | — | |||||||||
Cash and cash equivalents | 2,225,150 | 2,160,535 | |||||||||
Rents receivable | 8,046 | 15,737 | |||||||||
Other assets, net | 9,833 | 17,417 | |||||||||
Total assets | $ | 2,441,130 | $ | 2,425,041 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Liabilities related to properties held for sale | $ | 6,200 | $ | — | |||||||
Accounts payable, accrued expenses and other | 17,621 | 27,298 | |||||||||
Rent collected in advance | 1,324 | 1,990 | |||||||||
Distributions payable | 2,803 | 5,640 | |||||||||
Total liabilities | $ | 27,948 | $ | 34,928 | |||||||
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; 107,327,691 and 106,847,438 shares issued and outstanding, respectively | 1,073 | 1,068 | |||||||||
Additional paid in capital | 3,942,389 | 3,935,873 | |||||||||
Cumulative net income | 3,950,345 | 3,926,979 | |||||||||
Cumulative common distributions | (4,863,688) | (4,864,440) | |||||||||
Cumulative preferred distributions | (739,667) | (733,676) | |||||||||
Total shareholders’ equity | 2,409,715 | 2,385,067 | |||||||||
Noncontrolling interest | 3,467 | 5,046 | |||||||||
Total equity | $ | 2,413,182 | $ | 2,390,113 | |||||||
Total liabilities and equity | $ | 2,441,130 | $ | 2,425,041 |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Rental revenue | $ | 12,782 | $ | 13,928 | $ | 39,491 | $ | 41,512 | |||||||||||||||
Other revenue (1) | 1,206 | 1,284 | 3,796 | 3,866 | |||||||||||||||||||
Total revenues | $ | 13,988 | $ | 15,212 | $ | 43,287 | $ | 45,378 | |||||||||||||||
Expenses: | |||||||||||||||||||||||
Operating expenses | $ | 6,863 | $ | 6,722 | $ | 20,118 | $ | 20,920 | |||||||||||||||
Depreciation and amortization | 4,214 | 4,436 | 12,753 | 13,260 | |||||||||||||||||||
General and administrative | 8,886 | 7,061 | 25,565 | 29,470 | |||||||||||||||||||
Loss on asset impairment | 50,226 | — | 50,226 | — | |||||||||||||||||||
Total expenses | $ | 70,189 | $ | 18,219 | $ | 108,662 | $ | 63,650 | |||||||||||||||
Interest and other income, net | 29,996 | 29,269 | 89,278 | 84,997 | |||||||||||||||||||
(Loss) income before income taxes | (26,205) | 26,262 | 23,903 | 66,725 | |||||||||||||||||||
Income tax expense | (22) | (30) | (486) | (1,906) | |||||||||||||||||||
Net (loss) income | $ | (26,227) | $ | 26,232 | $ | 23,417 | $ | 64,819 | |||||||||||||||
Net loss (income) attributable to noncontrolling interest | 38 | (86) | (51) | (204) | |||||||||||||||||||
Net (loss) income attributable to Equity Commonwealth | $ | (26,189) | $ | 26,146 | $ | 23,366 | $ | 64,615 | |||||||||||||||
Preferred distributions | (1,997) | (1,997) | (5,991) | (5,991) | |||||||||||||||||||
Net (loss) income attributable to Equity Commonwealth common shareholders | $ | (28,186) | $ | 24,149 | $ | 17,375 | $ | 58,624 |
Weighted average common shares outstanding — basic (2) | 107,456 | 108,931 | 107,363 | 109,494 | |||||||||||||||||||
Weighted average common shares outstanding — diluted (2)(3) | 107,456 | 110,217 | 108,391 | 110,916 | |||||||||||||||||||
Earnings per common share attributable to Equity Commonwealth common shareholders: | |||||||||||||||||||||||
Basic | $ | (0.26) | $ | 0.22 | $ | 0.16 | $ | 0.54 | |||||||||||||||
Diluted | $ | (0.26) | $ | 0.22 | $ | 0.16 | $ | 0.53 | |||||||||||||||
(1) | Other revenue is primarily comprised of parking revenue that does not represent a component of a lease. | ||||
(2) | Weighted average common shares outstanding for the three months ended September 30, 2024 and 2023 includes 128 and 131 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2024 and 2023 includes 129 and 125 unvested, earned RSUs, respectively. | ||||
(3) | As of September 30, 2024, we had 4,915 series D preferred shares outstanding. The series D preferred shares were convertible into 4,032 common shares as of September 30, 2024 and 2023. The series D preferred shares are anti-dilutive for GAAP EPS for all periods presented. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Calculation of FFO | |||||||||||||||||||||||
Net (loss) income | $ | (26,227) | $ | 26,232 | $ | 23,417 | $ | 64,819 | |||||||||||||||
Real estate depreciation and amortization | 4,202 | 4,429 | 12,717 | 13,231 | |||||||||||||||||||
Loss on asset impairment (1) | 50,226 | — | 50,226 | — | |||||||||||||||||||
FFO attributable to Equity Commonwealth | 28,201 | 30,661 | 86,360 | 78,050 | |||||||||||||||||||
Preferred distributions | (1,997) | (1,997) | (5,991) | (5,991) | |||||||||||||||||||
FFO attributable to EQC common shareholders and unitholders | $ | 26,204 | $ | 28,664 | $ | 80,369 | $ | 72,059 | |||||||||||||||
Calculation of Normalized FFO | |||||||||||||||||||||||
FFO attributable to EQC common shareholders and unitholders | $ | 26,204 | $ | 28,664 | $ | 80,369 | $ | 72,059 | |||||||||||||||
Straight-line rent adjustments | (77) | (107) | (559) | 445 | |||||||||||||||||||
Wind down costs | 1,246 | — | 1,246 | — | |||||||||||||||||||
Former chairman accelerated compensation expense | — | — | — | 5,957 | |||||||||||||||||||
Normalized FFO attributable to EQC common shareholders and unitholders | $ | 27,373 | $ | 28,557 | $ | 81,056 | $ | 78,461 | |||||||||||||||
Weighted average common shares and units outstanding — basic (2) | 107,610 | 109,292 | 107,543 | 109,842 | |||||||||||||||||||
Weighted average common shares and units outstanding — diluted (2) | 108,351 | 110,578 | 108,571 | 111,264 | |||||||||||||||||||
FFO attributable to EQC common shareholders and unitholders per share and unit — basic | $ | 0.24 | $ | 0.26 | $ | 0.75 | $ | 0.66 | |||||||||||||||
FFO attributable to EQC common shareholders and unitholders per share and unit — diluted | $ | 0.24 | $ | 0.26 | $ | 0.74 | $ | 0.65 | |||||||||||||||
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic | $ | 0.25 | $ | 0.26 | $ | 0.75 | $ | 0.71 | |||||||||||||||
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted | $ | 0.25 | $ | 0.26 | $ | 0.75 | $ | 0.71 |
(1) | Includes $16.3 million of loss on asset impairment related to non-real estate assets which will be written off or transferred to a buyer upon sale. | ||||
(2) | 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, 2024 and 2023 include 154 and 361 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, 2024 and 2023 include 180 and 348 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only). | ||||
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 and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do. |
For the Three Months Ended | |||||||||||||||||||||||||||||
9/30/2024 | 6/30/2024 | 3/31/2024 | 12/31/2023 | 9/30/2023 | |||||||||||||||||||||||||
Calculation of Same Property NOI and Same Property Cash Basis NOI: | |||||||||||||||||||||||||||||
Rental revenue | $ | 12,782 | $ | 12,816 | $ | 13,893 | $ | 13,824 | $ | 13,928 | |||||||||||||||||||
Other revenue (1) | 1,206 | 1,293 | 1,297 | 1,322 | 1,284 | ||||||||||||||||||||||||
Operating expenses | (6,863) | (6,721) | (6,534) | (6,542) | (6,722) | ||||||||||||||||||||||||
NOI | $ | 7,125 | $ | 7,388 | $ | 8,656 | $ | 8,604 | $ | 8,490 | |||||||||||||||||||
Straight-line rent adjustments | (77) | (259) | (223) | (538) | (107) | ||||||||||||||||||||||||
Lease termination fees | (106) | (69) | (616) | (630) | (173) | ||||||||||||||||||||||||
Cash Basis NOI | $ | 6,942 | $ | 7,060 | $ | 7,817 | $ | 7,436 | $ | 8,210 | |||||||||||||||||||
Cash Basis NOI from non-same properties (2) | — | 3 | 16 | 7 | (5) | ||||||||||||||||||||||||
Same Property Cash Basis NOI | $ | 6,942 | $ | 7,063 | $ | 7,833 | $ | 7,443 | $ | 8,205 | |||||||||||||||||||
Non-cash rental income and lease termination fees from same properties | 183 | 328 | 839 | 1,168 | 280 | ||||||||||||||||||||||||
Same Property NOI | $ | 7,125 | $ | 7,391 | $ | 8,672 | $ | 8,611 | $ | 8,485 | |||||||||||||||||||
Reconciliation of Same Property NOI to GAAP Net (Loss) Income: | |||||||||||||||||||||||||||||
Same Property NOI | $ | 7,125 | $ | 7,391 | $ | 8,672 | $ | 8,611 | $ | 8,485 | |||||||||||||||||||
Non-cash rental income and lease termination fees from same properties | (183) | (328) | (839) | (1,168) | (280) | ||||||||||||||||||||||||
Same Property Cash Basis NOI | $ | 6,942 | $ | 7,063 | $ | 7,833 | $ | 7,443 | $ | 8,205 | |||||||||||||||||||
Cash Basis NOI from non-same properties (2) | — | (3) | (16) | (7) | 5 | ||||||||||||||||||||||||
Cash Basis NOI | $ | 6,942 | $ | 7,060 | $ | 7,817 | $ | 7,436 | $ | 8,210 | |||||||||||||||||||
Straight-line rent adjustments | 77 | 259 | 223 | 538 | 107 | ||||||||||||||||||||||||
Lease termination fees | 106 | 69 | 616 | 630 | 173 | ||||||||||||||||||||||||
NOI | $ | 7,125 | $ | 7,388 | $ | 8,656 | $ | 8,604 | $ | 8,490 | |||||||||||||||||||
Depreciation and amortization | (4,214) | (4,182) | (4,357) | (4,184) | (4,436) | ||||||||||||||||||||||||
General and administrative | (8,886) | (8,356) | (8,323) | (7,504) | (7,061) | ||||||||||||||||||||||||
Loss on asset impairment | (50,226) | — | — | — | — | ||||||||||||||||||||||||
Interest and other income, net | 29,996 | 29,770 | 29,512 | 29,670 | 29,269 | ||||||||||||||||||||||||
(Loss) income before income taxes | $ | (26,205) | $ | 24,620 | $ | 25,488 | $ | 26,586 | $ | 26,262 | |||||||||||||||||||
Income tax (expense) benefit | (22) | (434) | (30) | 40 | (30) | ||||||||||||||||||||||||
Net (loss) income | $ | (26,227) | $ | 24,186 | $ | 25,458 | $ | 26,626 | $ | 26,232 | |||||||||||||||||||
(1) | Other revenue is primarily comprised of parking revenue that does not represent a component of a lease. | ||||
(2) | Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties. |
For the Nine Months Ended September 30, | |||||||||||
2024 | 2023 | ||||||||||
Calculation of Same Property NOI and Same Property Cash Basis NOI: | |||||||||||
Rental revenue | $ | 39,491 | $ | 41,512 | |||||||
Other revenue (1) | 3,796 | 3,866 | |||||||||
Operating expenses | (20,118) | (20,920) | |||||||||
NOI | $ | 23,169 | $ | 24,458 | |||||||
Straight-line rent adjustments | (559) | 445 | |||||||||
Lease termination fees | (791) | (383) | |||||||||
Cash Basis NOI | $ | 21,819 | $ | 24,520 | |||||||
Cash Basis NOI from non-same properties (2) | 19 | (13) | |||||||||
Same Property Cash Basis NOI | $ | 21,838 | $ | 24,507 | |||||||
Non-cash rental income and lease termination fees from same properties | 1,350 | (62) | |||||||||
Same Property NOI | $ | 23,188 | $ | 24,445 | |||||||
Reconciliation of Same Property NOI to GAAP Net Income: | |||||||||||
Same Property NOI | $ | 23,188 | $ | 24,445 | |||||||
Non-cash rental income and lease termination fees from same properties | (1,350) | 62 | |||||||||
Same Property Cash Basis NOI | $ | 21,838 | $ | 24,507 | |||||||
Cash Basis NOI from non-same properties (2) | (19) | 13 | |||||||||
Cash Basis NOI | $ | 21,819 | $ | 24,520 | |||||||
Straight-line rent adjustments | 559 | (445) | |||||||||
Lease termination fees | 791 | 383 | |||||||||
NOI | $ | 23,169 | $ | 24,458 | |||||||
Depreciation and amortization | (12,753) | (13,260) | |||||||||
General and administrative | (25,565) | (29,470) | |||||||||
Loss on asset impairment | (50,226) | — | |||||||||
Interest and other income, net | 89,278 | 84,997 | |||||||||
Income before income taxes | $ | 23,903 | $ | 66,725 | |||||||
Income tax expense | (486) | (1,906) | |||||||||
Net income | $ | 23,417 | $ | 64,819 | |||||||
(1) | Other revenue is primarily comprised of parking revenue that does not represent a component of a lease. | ||||
(2) | Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties. |
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, 2023 through September 30, 2024. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2023 through September 30, 2024. | ||
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 and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do. |