Equity Commonwealth Reports First Quarter 2024 Results
Financial results for the quarter ended
Net income attributable to common shareholders was
Funds from Operations, or FFO, as defined by the
-
$0.01 per diluted share increase in interest and other income, net; and -
$0.01 per diluted share decrease in income tax expense.
Normalized FFO was
-
$0.01 per diluted share increase in interest and other income, net; and -
$0.01 per diluted share decrease in income tax expense.
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 obscure the company’s operating performance. Definitions of FFO, Normalized FFO and reconciliations to net income, determined in accordance with
As of
Same property results for the quarter ended
The company’s same property portfolio at the end of the quarter consisted of 4 properties totaling 1.5 million square feet. Operating results were as follows:
-
The same property portfolio was 75.4% leased as of
March 31, 2024 , compared to 81.2% as ofDecember 31, 2023 , and 81.6% as ofMarch 31, 2023 . -
The same property portfolio commenced occupancy was 74.6% as of
March 31, 2024 , compared to 80.0% as ofDecember 31, 2023 , and 77.0% as ofMarch 31, 2023 . - Same property NOI increased 4.3% when compared to the same period in 2023, primarily due to a decrease in pre-leasing demolition costs and an increase in lease termination fees, partially offset by a decrease in average commenced occupancy.
- Same property cash NOI decreased 6.9% when compared to the same period in 2023, primarily due to a decrease in average commenced occupancy, partially offset by a decrease in pre-leasing demolition costs.
- The company entered into leases for approximately 18,000 square feet, including renewal leases for approximately 15,000 square feet and new leases for approximately 3,000 square feet.
- The GAAP rental rate on new and renewal leases was 0.5% lower compared to the prior GAAP rental rate for the same space.
- The cash rental rate on new and renewal leases was 2.8% lower compared to the prior cash rental rate 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
Business update
Since taking responsibility for the company in 2014, the EQC team has remained focused in its efforts and executed a disciplined strategy. We have:
-
Completed
$7.6 billion of dispositions, including the sale of 164 properties totaling 44 million square feet and three land parcels, -
Distributed
$1.8 billion , or$14.75 per Common Share, to our common shareholders, -
Repurchased
$652 million of our Common Shares at a weighted average, dividend adjusted price of$17.63 per share, -
Repaid debt and preferred equity of
$3.3 billion , and -
Generated a cash balance of
$2.2 billion , or$19.95 per share.
Throughout this time, one of our guiding principles has been to be responsive to evolving market conditions. For the first six years, following this principle was relatively straightforward – valuations were at or near all-time highs, and we concluded that it was in shareholders’ best interests to sell assets. We sold
Today, we are continuing our efforts to maximize shareholder value. We remain focused on opportunities in our pipeline where we can create long-term value for our shareholders, while concurrently taking steps to facilitate the potential wind down of our business. Before the end of this year, we expect to either announce a transaction or move forward with a plan to wind down our business.
Earnings conference call & supplemental operating and financial information
A copy of EQC’s First Quarter 2024 Supplemental Operating and Financial Information is available in the Investor Relations section of EQC’s website at www.eqcre.com.
About
Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under Regulation FD: press releases,
Forward-Looking Statements
Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws. 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. You can identify forward-looking statements by the use of forward-looking terminology, including but not limited to, “may,” “will,” “should,” “could,” “would,” “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 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.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, amounts in thousands, except share data)
|
|||||||
|
|
|
|
||||
ASSETS |
|
|
|
||||
Real estate properties: |
|
|
|
||||
Land |
$ |
44,060 |
|
|
$ |
44,060 |
|
Buildings and improvements |
|
371,550 |
|
|
|
367,827 |
|
|
|
415,610 |
|
|
|
411,887 |
|
Accumulated depreciation |
|
(180,266 |
) |
|
|
(180,535 |
) |
|
|
235,344 |
|
|
|
231,352 |
|
Cash and cash equivalents |
|
2,170,834 |
|
|
|
2,160,535 |
|
Rents receivable |
|
16,593 |
|
|
|
15,737 |
|
Other assets, net |
|
16,915 |
|
|
|
17,417 |
|
Total assets |
$ |
2,439,686 |
|
|
$ |
2,425,041 |
|
|
|
|
|
||||
LIABILITIES AND EQUITY |
|
|
|
||||
Accounts payable, accrued expenses and other |
$ |
20,833 |
|
|
$ |
27,298 |
|
Rent collected in advance |
|
2,166 |
|
|
|
1,990 |
|
Distributions payable |
|
3,359 |
|
|
|
5,640 |
|
Total liabilities |
$ |
26,358 |
|
|
$ |
34,928 |
|
|
|
|
|
||||
Shareholders’ equity: |
|
|
|
||||
Preferred shares of beneficial interest, |
|
|
|
||||
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of |
$ |
119,263 |
|
|
$ |
119,263 |
|
Common shares of beneficial interest, |
|
1,072 |
|
|
|
1,068 |
|
Additional paid in capital |
|
3,935,501 |
|
|
|
3,935,873 |
|
Cumulative net income |
|
3,952,384 |
|
|
|
3,926,979 |
|
Cumulative common distributions |
|
(4,864,195 |
) |
|
|
(4,864,440 |
) |
Cumulative preferred distributions |
|
(735,673 |
) |
|
|
(733,676 |
) |
Total shareholders’ equity |
|
2,408,352 |
|
|
|
2,385,067 |
|
Noncontrolling interest |
|
4,976 |
|
|
|
5,046 |
|
Total equity |
$ |
2,413,328 |
|
|
$ |
2,390,113 |
|
Total liabilities and equity |
$ |
2,439,686 |
|
|
$ |
2,425,041 |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data)
|
|||||||
|
Three Months Ended |
||||||
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
||||
Rental revenue |
$ |
13,893 |
|
|
$ |
14,226 |
|
Other revenue (1) |
|
1,297 |
|
|
|
1,350 |
|
Total revenues |
$ |
15,190 |
|
|
$ |
15,576 |
|
|
|
|
|
||||
Expenses: |
|
|
|
||||
Operating expenses |
$ |
6,534 |
|
|
$ |
7,256 |
|
Depreciation and amortization |
|
4,357 |
|
|
|
4,310 |
|
General and administrative |
|
8,323 |
|
|
|
8,555 |
|
Total expenses |
$ |
19,214 |
|
|
$ |
20,121 |
|
|
|
|
|
||||
Interest and other income, net |
|
29,512 |
|
|
|
28,376 |
|
Income before income taxes |
|
25,488 |
|
|
|
23,831 |
|
Income tax expense |
|
(30 |
) |
|
|
(1,080 |
) |
Net income |
$ |
25,458 |
|
|
$ |
22,751 |
|
Net income attributable to noncontrolling interest |
|
(53 |
) |
|
|
(66 |
) |
Net income attributable to |
$ |
25,405 |
|
|
$ |
22,685 |
|
Preferred distributions |
|
(1,997 |
) |
|
|
(1,997 |
) |
Net income attributable to |
$ |
23,408 |
|
|
$ |
20,688 |
|
Weighted average common shares outstanding — basic (2) |
|
107,216 |
|
|
109,720 |
||
Weighted average common shares outstanding — diluted (2)(3) |
|
108,224 |
|
|
|
111,300 |
|
|
|
|
|
||||
Earnings per common share attributable to |
|
|
|
||||
Basic |
$ |
0.22 |
|
|
$ |
0.19 |
|
Diluted |
$ |
0.22 |
|
|
$ |
0.19 |
|
|
|
|
|
(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 |
(3) |
As of |
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (Unaudited, amounts in thousands, except per share data)
|
|||||||
|
Three Months Ended |
||||||
|
|
||||||
|
|
2024 |
|
|
|
2023 |
|
Calculation of FFO |
|
|
|
||||
Net income |
$ |
25,458 |
|
|
$ |
22,751 |
|
Real estate depreciation and amortization |
|
4,346 |
|
|
|
4,299 |
|
FFO attributable to |
|
29,804 |
|
|
|
27,050 |
|
Preferred distributions |
|
(1,997 |
) |
|
|
(1,997 |
) |
FFO attributable to EQC common shareholders and unitholders |
$ |
27,807 |
|
|
$ |
25,053 |
|
|
|
|
|
||||
Calculation of Normalized FFO |
|
|
|
||||
FFO attributable to EQC common shareholders and unitholders |
$ |
27,807 |
|
|
$ |
25,053 |
|
Straight-line rent adjustments |
|
(223 |
) |
|
|
279 |
|
Normalized FFO attributable to EQC common shareholders and unitholders |
$ |
27,584 |
|
|
$ |
25,332 |
|
|
|
|
|
||||
Weighted average common shares and units outstanding — basic (1) |
|
107,439 |
|
|
|
110,044 |
|
Weighted average common shares and units outstanding — diluted (1) |
|
108,447 |
|
|
|
111,624 |
|
|
|
|
|
||||
FFO attributable to EQC common shareholders and unitholders per share and unit — basic |
$ |
0.26 |
|
|
$ |
0.23 |
|
FFO attributable to EQC common shareholders and unitholders per share and unit — diluted |
$ |
0.26 |
|
|
$ |
0.22 |
|
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic |
$ |
0.26 |
|
|
$ |
0.23 |
|
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted |
$ |
0.25 |
|
|
$ |
0.23 |
|
(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 |
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. |
CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands)
|
|||||||||||||||||||
|
For the Three Months Ended |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Calculation of Same Property NOI and Same Property Cash Basis NOI: |
|
|
|
|
|
|
|
|
|
||||||||||
Rental revenue |
$ |
13,893 |
|
|
$ |
13,824 |
|
|
$ |
13,928 |
|
|
$ |
13,358 |
|
|
$ |
14,226 |
|
Other revenue (1) |
|
1,297 |
|
|
|
1,322 |
|
|
|
1,284 |
|
|
|
1,232 |
|
|
|
1,350 |
|
Operating expenses |
|
(6,534 |
) |
|
|
(6,542 |
) |
|
|
(6,722 |
) |
|
|
(6,942 |
) |
|
|
(7,256 |
) |
NOI |
$ |
8,656 |
|
|
$ |
8,604 |
|
|
$ |
8,490 |
|
|
$ |
7,648 |
|
|
$ |
8,320 |
|
Straight-line rent adjustments |
|
(223 |
) |
|
|
(538 |
) |
|
|
(107 |
) |
|
|
273 |
|
|
|
279 |
|
Lease termination fees |
|
(616 |
) |
|
|
(630 |
) |
|
|
(173 |
) |
|
|
(33 |
) |
|
|
(177 |
) |
Cash Basis NOI |
$ |
7,817 |
|
|
$ |
7,436 |
|
|
$ |
8,210 |
|
|
$ |
7,888 |
|
|
$ |
8,422 |
|
Cash Basis NOI from non-same properties (2) |
|
16 |
|
|
|
7 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
Same Property Cash Basis NOI |
$ |
7,833 |
|
|
$ |
7,443 |
|
|
$ |
8,205 |
|
|
$ |
7,884 |
|
|
$ |
8,418 |
|
Non-cash rental income and lease termination fees from same properties |
|
839 |
|
|
|
1,168 |
|
|
|
280 |
|
|
|
(240 |
) |
|
|
(102 |
) |
Same Property NOI |
$ |
8,672 |
|
|
$ |
8,611 |
|
|
$ |
8,485 |
|
|
$ |
7,644 |
|
|
$ |
8,316 |
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reconciliation of Same Property NOI to GAAP Net Income: |
|
|
|
|
|
|
|
|
|
||||||||||
Same Property NOI |
$ |
8,672 |
|
|
$ |
8,611 |
|
|
$ |
8,485 |
|
|
$ |
7,644 |
|
|
$ |
8,316 |
|
Non-cash rental income and lease termination fees from same properties |
|
(839 |
) |
|
|
(1,168 |
) |
|
|
(280 |
) |
|
|
240 |
|
|
|
102 |
|
Same Property Cash Basis NOI |
$ |
7,833 |
|
|
$ |
7,443 |
|
|
$ |
8,205 |
|
|
$ |
7,884 |
|
|
$ |
8,418 |
|
Cash Basis NOI from non-same properties (2) |
|
(16 |
) |
|
|
(7 |
) |
|
|
5 |
|
|
|
4 |
|
|
|
4 |
|
Cash Basis NOI |
$ |
7,817 |
|
|
$ |
7,436 |
|
|
$ |
8,210 |
|
|
$ |
7,888 |
|
|
$ |
8,422 |
|
Straight-line rent adjustments |
|
223 |
|
|
|
538 |
|
|
|
107 |
|
|
|
(273 |
) |
|
|
(279 |
) |
Lease termination fees |
|
616 |
|
|
|
630 |
|
|
|
173 |
|
|
|
33 |
|
|
|
177 |
|
NOI |
$ |
8,656 |
|
|
$ |
8,604 |
|
|
$ |
8,490 |
|
|
$ |
7,648 |
|
|
$ |
8,320 |
|
Depreciation and amortization |
|
(4,357 |
) |
|
|
(4,184 |
) |
|
|
(4,436 |
) |
|
|
(4,514 |
) |
|
|
(4,310 |
) |
General and administrative |
|
(8,323 |
) |
|
|
(7,504 |
) |
|
|
(7,061 |
) |
|
|
(13,854 |
) |
|
|
(8,555 |
) |
Interest and other income, net |
|
29,512 |
|
|
|
29,670 |
|
|
|
29,269 |
|
|
|
27,352 |
|
|
|
28,376 |
|
Income before income taxes |
$ |
25,488 |
|
|
$ |
26,586 |
|
|
$ |
26,262 |
|
|
$ |
16,632 |
|
|
$ |
23,831 |
|
Income tax (expense) benefit |
|
(30 |
) |
|
|
40 |
|
|
|
(30 |
) |
|
|
(796 |
) |
|
|
(1,080 |
) |
Net income |
$ |
25,458 |
|
|
$ |
26,626 |
|
|
$ |
26,232 |
|
|
$ |
15,836 |
|
|
$ |
22,751 |
|
|
|
|
|
|
|
|
|
|
|
(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 year-to-date same property versions of these measures include the results of properties continuously owned from |
|
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 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240501127589/en/
(312) 646-2801
ir@eqcre.com
Source: