Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil Hydroworld Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Equity Commonwealth Reports Third Quarter 2023 Results By: Equity Commonwealth via Business Wire October 30, 2023 at 16:15 PM EDT Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended September 30, 2023. Financial results for the quarter ended September 30, 2023 Net income attributable to common shareholders was $24.1 million, or $0.22 per diluted share, for the quarter ended September 30, 2023. This compares to net income attributable to common shareholders of $10.2 million, or $0.09 per diluted share, for the quarter ended September 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended September 30, 2023, were $28.7 million, or $0.26 per diluted share. This compares to FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. Normalized FFO was $28.6 million, or $0.26 per diluted share, for the quarter ended September 30, 2023. This compares to Normalized FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted Normalized FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of September 30, 2023, the company’s cash and cash equivalents balance was $2.1 billion. Same property results for the quarter ended September 30, 2023 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 80.8% leased as of September 30, 2023, compared to 82.0% as of June 30, 2023, and 83.4% as of September 30, 2022. The same property portfolio commenced occupancy was 79.9% as of September 30, 2023, compared to 78.2% as of June 30, 2023, and 80.8% as of September 30, 2022. Same property NOI decreased 6.8% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. Same property cash NOI decreased 6.6% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. The company entered into leases for approximately 54,000 square feet, including renewal leases for approximately 39,000 square feet and new leases for approximately 15,000 square feet. The GAAP rental rate on new and renewal leases was 6.0% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 1.8% 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 July 1, 2022 through September 30, 2023. Significant events during the quarter ended September 30, 2023 During the quarter ended September 30, 2023, the company repurchased 3,018,411 of its common shares at a weighted average price of $18.78 for a total investment of $56.7 million. The company has $93.3 million of remaining authorization available under its share repurchase program, as of October 24, 2023. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss third quarter results on Tuesday, October 31, 2023, at 9:00 A.M. CT. 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 2023 Supplemental Operating and Financial Information is available in 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. EQC’s portfolio is comprised of four properties totaling 1.5 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. 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) September 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 366,908 364,063 410,968 408,123 Accumulated depreciation (178,201 ) (169,530 ) 232,767 238,593 Cash and cash equivalents 2,127,788 2,582,222 Rents receivable 15,174 16,009 Other assets, net 18,057 18,061 Total assets $ 2,393,786 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 23,027 $ 25,935 Rent collected in advance 2,133 2,355 Distributions payable 6,390 2,863 Total liabilities $ 31,550 $ 31,153 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; 106,712,046 and 109,428,252 shares issued and outstanding, respectively 1,067 1,094 Additional paid in capital 3,930,372 3,979,566 Cumulative net income 3,900,430 3,835,815 Cumulative common distributions (4,865,190 ) (4,393,522 ) Cumulative preferred distributions (731,679 ) (725,688 ) Total shareholders’ equity 2,354,263 2,816,528 Noncontrolling interest 7,973 7,204 Total equity $ 2,362,236 $ 2,823,732 Total liabilities and equity $ 2,393,786 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,928 $ 13,869 $ 41,512 $ 44,135 Other revenue (1) 1,284 1,257 3,866 3,218 Total revenues $ 15,212 $ 15,126 $ 45,378 $ 47,353 Expenses: Operating expenses $ 6,722 $ 6,073 $ 20,920 $ 17,198 Depreciation and amortization 4,436 4,451 13,260 13,176 General and administrative 7,061 7,593 29,470 23,241 Total expenses $ 18,219 $ 18,117 $ 63,650 $ 53,615 Interest and other income, net 29,269 15,145 84,997 22,682 Gain on sale of properties, net — 90 — 90 Income before income taxes 26,262 12,244 66,725 16,510 Income tax expense (30 ) (23 ) (1,906 ) (81 ) Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Net income attributable to noncontrolling interest (86 ) (31 ) (204 ) (41 ) Net income attributable to Equity Commonwealth $ 26,146 $ 12,190 $ 64,615 $ 16,388 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) Net income attributable to Equity Commonwealth common shareholders $ 24,149 $ 10,193 $ 58,624 $ 10,397 Weighted average common shares outstanding — basic (2) 108,931 111,305 109,494 112,341 Weighted average common shares outstanding — diluted (2)(3) 110,217 112,596 110,916 113,383 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.22 $ 0.09 $ 0.54 $ 0.09 Diluted $ 0.22 $ 0.09 $ 0.53 $ 0.09 (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, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2023 and 2022 includes 125 and 111 unvested, earned RSUs, respectively. (3) As of September 30, 2023, 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, 2023 and 3,365 common shares as of September 30, 2022. The series D preferred shares are anti-dilutive for GAAP EPS for all periods presented. CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Real estate depreciation and amortization 4,429 4,412 13,231 13,058 Gain on sale of properties, net — (90 ) — (90 ) FFO attributable to Equity Commonwealth 30,661 16,543 78,050 29,397 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Straight-line rent adjustments (107 ) (61 ) 445 (151 ) Former chairman accelerated compensation expense — — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 28,557 $ 14,485 $ 78,461 $ 23,255 Weighted average common shares and units outstanding — basic (1) 109,292 111,585 109,842 112,616 Weighted average common shares and units outstanding — diluted (1) 110,578 112,876 111,264 113,658 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.66 $ 0.21 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.65 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.71 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.71 $ 0.20 (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, 2023 and 2022 include 361 and 280 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, 2023 and 2022 include 348 and 275 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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Three Months Ended 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,928 $ 13,358 $ 14,226 $ 14,628 $ 13,869 Other revenue (1) 1,284 1,232 1,350 1,159 1,257 Operating expenses (6,722 ) (6,942 ) (7,256 ) (6,986 ) (6,073 ) NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Straight-line rent adjustments (107 ) 273 279 389 (61 ) Lease termination fees (173 ) (33 ) (177 ) (743 ) (259 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Cash Basis NOI from non-same properties (2) (5 ) (4 ) (4 ) 14 48 Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Non-cash rental income and lease termination fees from same properties 280 (240 ) (102 ) 354 320 Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Non-cash rental income and lease termination fees from same properties (280 ) 240 102 (354 ) (320 ) Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Cash Basis NOI from non-same properties (2) 5 4 4 (14 ) (48 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Straight-line rent adjustments 107 (273 ) (279 ) (389 ) 61 Lease termination fees 173 33 177 743 259 NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Depreciation and amortization (4,436 ) (4,514 ) (4,310 ) (4,634 ) (4,451 ) General and administrative (7,061 ) (13,854 ) (8,555 ) (7,137 ) (7,593 ) Interest and other income, net 29,269 27,352 28,376 24,263 15,145 Gain on sale of properties, net — — — 7 90 Income before income taxes $ 26,262 $ 16,632 $ 23,831 $ 21,300 $ 12,244 Income tax expense (30 ) (796 ) (1,080 ) (372 ) (23 ) Net income $ 26,232 $ 15,836 $ 22,751 $ 20,928 $ 12,221 (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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Nine Months Ended September 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 41,512 $ 44,135 Other revenue (1) 3,866 3,218 Operating expenses (20,920 ) (17,198 ) NOI $ 24,458 $ 30,155 Straight-line rent adjustments 445 (151 ) Lease termination fees (383 ) (761 ) Cash Basis NOI $ 24,520 $ 29,243 Cash Basis NOI from non-same properties (2) (13 ) (1,624 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Non-cash rental income and lease termination fees from same properties (62 ) 912 Same Property NOI $ 24,445 $ 28,531 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 24,445 $ 28,531 Non-cash rental income and lease termination fees from same properties 62 (912 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Cash Basis NOI from non-same properties (2) 13 1,624 Cash Basis NOI $ 24,520 $ 29,243 Straight-line rent adjustments (445 ) 151 Lease termination fees 383 761 NOI $ 24,458 $ 30,155 Depreciation and amortization (13,260 ) (13,176 ) General and administrative (29,470 ) (23,241 ) Interest and other income, net 84,997 22,682 Gain on sale of properties, net — 90 Income before income taxes $ 66,725 $ 16,510 Income tax expense (1,906 ) (81 ) Net income $ 64,819 $ 16,429 (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, 2022 through September 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through September 30, 2023. 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 and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do. View source version on businesswire.com: https://www.businesswire.com/news/home/20231030479231/en/Contacts Bill Griffiths (312) 646-2801 ir@eqcre.com Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
Equity Commonwealth Reports Third Quarter 2023 Results By: Equity Commonwealth via Business Wire October 30, 2023 at 16:15 PM EDT Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended September 30, 2023. Financial results for the quarter ended September 30, 2023 Net income attributable to common shareholders was $24.1 million, or $0.22 per diluted share, for the quarter ended September 30, 2023. This compares to net income attributable to common shareholders of $10.2 million, or $0.09 per diluted share, for the quarter ended September 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended September 30, 2023, were $28.7 million, or $0.26 per diluted share. This compares to FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. Normalized FFO was $28.6 million, or $0.26 per diluted share, for the quarter ended September 30, 2023. This compares to Normalized FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted Normalized FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of September 30, 2023, the company’s cash and cash equivalents balance was $2.1 billion. Same property results for the quarter ended September 30, 2023 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 80.8% leased as of September 30, 2023, compared to 82.0% as of June 30, 2023, and 83.4% as of September 30, 2022. The same property portfolio commenced occupancy was 79.9% as of September 30, 2023, compared to 78.2% as of June 30, 2023, and 80.8% as of September 30, 2022. Same property NOI decreased 6.8% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. Same property cash NOI decreased 6.6% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. The company entered into leases for approximately 54,000 square feet, including renewal leases for approximately 39,000 square feet and new leases for approximately 15,000 square feet. The GAAP rental rate on new and renewal leases was 6.0% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 1.8% 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 July 1, 2022 through September 30, 2023. Significant events during the quarter ended September 30, 2023 During the quarter ended September 30, 2023, the company repurchased 3,018,411 of its common shares at a weighted average price of $18.78 for a total investment of $56.7 million. The company has $93.3 million of remaining authorization available under its share repurchase program, as of October 24, 2023. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss third quarter results on Tuesday, October 31, 2023, at 9:00 A.M. CT. 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 2023 Supplemental Operating and Financial Information is available in 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. EQC’s portfolio is comprised of four properties totaling 1.5 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. 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) September 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 366,908 364,063 410,968 408,123 Accumulated depreciation (178,201 ) (169,530 ) 232,767 238,593 Cash and cash equivalents 2,127,788 2,582,222 Rents receivable 15,174 16,009 Other assets, net 18,057 18,061 Total assets $ 2,393,786 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 23,027 $ 25,935 Rent collected in advance 2,133 2,355 Distributions payable 6,390 2,863 Total liabilities $ 31,550 $ 31,153 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; 106,712,046 and 109,428,252 shares issued and outstanding, respectively 1,067 1,094 Additional paid in capital 3,930,372 3,979,566 Cumulative net income 3,900,430 3,835,815 Cumulative common distributions (4,865,190 ) (4,393,522 ) Cumulative preferred distributions (731,679 ) (725,688 ) Total shareholders’ equity 2,354,263 2,816,528 Noncontrolling interest 7,973 7,204 Total equity $ 2,362,236 $ 2,823,732 Total liabilities and equity $ 2,393,786 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,928 $ 13,869 $ 41,512 $ 44,135 Other revenue (1) 1,284 1,257 3,866 3,218 Total revenues $ 15,212 $ 15,126 $ 45,378 $ 47,353 Expenses: Operating expenses $ 6,722 $ 6,073 $ 20,920 $ 17,198 Depreciation and amortization 4,436 4,451 13,260 13,176 General and administrative 7,061 7,593 29,470 23,241 Total expenses $ 18,219 $ 18,117 $ 63,650 $ 53,615 Interest and other income, net 29,269 15,145 84,997 22,682 Gain on sale of properties, net — 90 — 90 Income before income taxes 26,262 12,244 66,725 16,510 Income tax expense (30 ) (23 ) (1,906 ) (81 ) Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Net income attributable to noncontrolling interest (86 ) (31 ) (204 ) (41 ) Net income attributable to Equity Commonwealth $ 26,146 $ 12,190 $ 64,615 $ 16,388 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) Net income attributable to Equity Commonwealth common shareholders $ 24,149 $ 10,193 $ 58,624 $ 10,397 Weighted average common shares outstanding — basic (2) 108,931 111,305 109,494 112,341 Weighted average common shares outstanding — diluted (2)(3) 110,217 112,596 110,916 113,383 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.22 $ 0.09 $ 0.54 $ 0.09 Diluted $ 0.22 $ 0.09 $ 0.53 $ 0.09 (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, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2023 and 2022 includes 125 and 111 unvested, earned RSUs, respectively. (3) As of September 30, 2023, 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, 2023 and 3,365 common shares as of September 30, 2022. The series D preferred shares are anti-dilutive for GAAP EPS for all periods presented. CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Real estate depreciation and amortization 4,429 4,412 13,231 13,058 Gain on sale of properties, net — (90 ) — (90 ) FFO attributable to Equity Commonwealth 30,661 16,543 78,050 29,397 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Straight-line rent adjustments (107 ) (61 ) 445 (151 ) Former chairman accelerated compensation expense — — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 28,557 $ 14,485 $ 78,461 $ 23,255 Weighted average common shares and units outstanding — basic (1) 109,292 111,585 109,842 112,616 Weighted average common shares and units outstanding — diluted (1) 110,578 112,876 111,264 113,658 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.66 $ 0.21 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.65 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.71 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.71 $ 0.20 (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, 2023 and 2022 include 361 and 280 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, 2023 and 2022 include 348 and 275 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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Three Months Ended 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,928 $ 13,358 $ 14,226 $ 14,628 $ 13,869 Other revenue (1) 1,284 1,232 1,350 1,159 1,257 Operating expenses (6,722 ) (6,942 ) (7,256 ) (6,986 ) (6,073 ) NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Straight-line rent adjustments (107 ) 273 279 389 (61 ) Lease termination fees (173 ) (33 ) (177 ) (743 ) (259 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Cash Basis NOI from non-same properties (2) (5 ) (4 ) (4 ) 14 48 Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Non-cash rental income and lease termination fees from same properties 280 (240 ) (102 ) 354 320 Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Non-cash rental income and lease termination fees from same properties (280 ) 240 102 (354 ) (320 ) Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Cash Basis NOI from non-same properties (2) 5 4 4 (14 ) (48 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Straight-line rent adjustments 107 (273 ) (279 ) (389 ) 61 Lease termination fees 173 33 177 743 259 NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Depreciation and amortization (4,436 ) (4,514 ) (4,310 ) (4,634 ) (4,451 ) General and administrative (7,061 ) (13,854 ) (8,555 ) (7,137 ) (7,593 ) Interest and other income, net 29,269 27,352 28,376 24,263 15,145 Gain on sale of properties, net — — — 7 90 Income before income taxes $ 26,262 $ 16,632 $ 23,831 $ 21,300 $ 12,244 Income tax expense (30 ) (796 ) (1,080 ) (372 ) (23 ) Net income $ 26,232 $ 15,836 $ 22,751 $ 20,928 $ 12,221 (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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Nine Months Ended September 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 41,512 $ 44,135 Other revenue (1) 3,866 3,218 Operating expenses (20,920 ) (17,198 ) NOI $ 24,458 $ 30,155 Straight-line rent adjustments 445 (151 ) Lease termination fees (383 ) (761 ) Cash Basis NOI $ 24,520 $ 29,243 Cash Basis NOI from non-same properties (2) (13 ) (1,624 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Non-cash rental income and lease termination fees from same properties (62 ) 912 Same Property NOI $ 24,445 $ 28,531 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 24,445 $ 28,531 Non-cash rental income and lease termination fees from same properties 62 (912 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Cash Basis NOI from non-same properties (2) 13 1,624 Cash Basis NOI $ 24,520 $ 29,243 Straight-line rent adjustments (445 ) 151 Lease termination fees 383 761 NOI $ 24,458 $ 30,155 Depreciation and amortization (13,260 ) (13,176 ) General and administrative (29,470 ) (23,241 ) Interest and other income, net 84,997 22,682 Gain on sale of properties, net — 90 Income before income taxes $ 66,725 $ 16,510 Income tax expense (1,906 ) (81 ) Net income $ 64,819 $ 16,429 (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, 2022 through September 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through September 30, 2023. 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 and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do. View source version on businesswire.com: https://www.businesswire.com/news/home/20231030479231/en/Contacts Bill Griffiths (312) 646-2801 ir@eqcre.com
Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended September 30, 2023. Financial results for the quarter ended September 30, 2023 Net income attributable to common shareholders was $24.1 million, or $0.22 per diluted share, for the quarter ended September 30, 2023. This compares to net income attributable to common shareholders of $10.2 million, or $0.09 per diluted share, for the quarter ended September 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended September 30, 2023, were $28.7 million, or $0.26 per diluted share. This compares to FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. Normalized FFO was $28.6 million, or $0.26 per diluted share, for the quarter ended September 30, 2023. This compares to Normalized FFO for the quarter ended September 30, 2022 of $14.5 million, or $0.13 per diluted share. The following items impacted Normalized FFO for the quarter ended September 30, 2023, compared to the corresponding 2022 period: $0.13 per diluted share increase in interest and other income, net; and $(0.01) per diluted share decrease in same property NOI. 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of September 30, 2023, the company’s cash and cash equivalents balance was $2.1 billion. Same property results for the quarter ended September 30, 2023 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 80.8% leased as of September 30, 2023, compared to 82.0% as of June 30, 2023, and 83.4% as of September 30, 2022. The same property portfolio commenced occupancy was 79.9% as of September 30, 2023, compared to 78.2% as of June 30, 2023, and 80.8% as of September 30, 2022. Same property NOI decreased 6.8% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. Same property cash NOI decreased 6.6% when compared to the same period in 2022, primarily due to a decrease in commenced occupancy and an increase in pre-leasing demolition costs. The company entered into leases for approximately 54,000 square feet, including renewal leases for approximately 39,000 square feet and new leases for approximately 15,000 square feet. The GAAP rental rate on new and renewal leases was 6.0% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 1.8% 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 July 1, 2022 through September 30, 2023. Significant events during the quarter ended September 30, 2023 During the quarter ended September 30, 2023, the company repurchased 3,018,411 of its common shares at a weighted average price of $18.78 for a total investment of $56.7 million. The company has $93.3 million of remaining authorization available under its share repurchase program, as of October 24, 2023. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss third quarter results on Tuesday, October 31, 2023, at 9:00 A.M. CT. 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 2023 Supplemental Operating and Financial Information is available in 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. EQC’s portfolio is comprised of four properties totaling 1.5 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. 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) September 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 366,908 364,063 410,968 408,123 Accumulated depreciation (178,201 ) (169,530 ) 232,767 238,593 Cash and cash equivalents 2,127,788 2,582,222 Rents receivable 15,174 16,009 Other assets, net 18,057 18,061 Total assets $ 2,393,786 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 23,027 $ 25,935 Rent collected in advance 2,133 2,355 Distributions payable 6,390 2,863 Total liabilities $ 31,550 $ 31,153 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; 106,712,046 and 109,428,252 shares issued and outstanding, respectively 1,067 1,094 Additional paid in capital 3,930,372 3,979,566 Cumulative net income 3,900,430 3,835,815 Cumulative common distributions (4,865,190 ) (4,393,522 ) Cumulative preferred distributions (731,679 ) (725,688 ) Total shareholders’ equity 2,354,263 2,816,528 Noncontrolling interest 7,973 7,204 Total equity $ 2,362,236 $ 2,823,732 Total liabilities and equity $ 2,393,786 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,928 $ 13,869 $ 41,512 $ 44,135 Other revenue (1) 1,284 1,257 3,866 3,218 Total revenues $ 15,212 $ 15,126 $ 45,378 $ 47,353 Expenses: Operating expenses $ 6,722 $ 6,073 $ 20,920 $ 17,198 Depreciation and amortization 4,436 4,451 13,260 13,176 General and administrative 7,061 7,593 29,470 23,241 Total expenses $ 18,219 $ 18,117 $ 63,650 $ 53,615 Interest and other income, net 29,269 15,145 84,997 22,682 Gain on sale of properties, net — 90 — 90 Income before income taxes 26,262 12,244 66,725 16,510 Income tax expense (30 ) (23 ) (1,906 ) (81 ) Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Net income attributable to noncontrolling interest (86 ) (31 ) (204 ) (41 ) Net income attributable to Equity Commonwealth $ 26,146 $ 12,190 $ 64,615 $ 16,388 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) Net income attributable to Equity Commonwealth common shareholders $ 24,149 $ 10,193 $ 58,624 $ 10,397 Weighted average common shares outstanding — basic (2) 108,931 111,305 109,494 112,341 Weighted average common shares outstanding — diluted (2)(3) 110,217 112,596 110,916 113,383 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.22 $ 0.09 $ 0.54 $ 0.09 Diluted $ 0.22 $ 0.09 $ 0.53 $ 0.09 (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, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2023 and 2022 includes 125 and 111 unvested, earned RSUs, respectively. (3) As of September 30, 2023, 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, 2023 and 3,365 common shares as of September 30, 2022. The series D preferred shares are anti-dilutive for GAAP EPS for all periods presented. CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (Unaudited, amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 26,232 $ 12,221 $ 64,819 $ 16,429 Real estate depreciation and amortization 4,429 4,412 13,231 13,058 Gain on sale of properties, net — (90 ) — (90 ) FFO attributable to Equity Commonwealth 30,661 16,543 78,050 29,397 Preferred distributions (1,997 ) (1,997 ) (5,991 ) (5,991 ) FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 28,664 $ 14,546 $ 72,059 $ 23,406 Straight-line rent adjustments (107 ) (61 ) 445 (151 ) Former chairman accelerated compensation expense — — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 28,557 $ 14,485 $ 78,461 $ 23,255 Weighted average common shares and units outstanding — basic (1) 109,292 111,585 109,842 112,616 Weighted average common shares and units outstanding — diluted (1) 110,578 112,876 111,264 113,658 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.66 $ 0.21 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.65 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.26 $ 0.13 $ 0.71 $ 0.21 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.26 $ 0.13 $ 0.71 $ 0.20 (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, 2023 and 2022 include 361 and 280 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, 2023 and 2022 include 348 and 275 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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Three Months Ended 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,928 $ 13,358 $ 14,226 $ 14,628 $ 13,869 Other revenue (1) 1,284 1,232 1,350 1,159 1,257 Operating expenses (6,722 ) (6,942 ) (7,256 ) (6,986 ) (6,073 ) NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Straight-line rent adjustments (107 ) 273 279 389 (61 ) Lease termination fees (173 ) (33 ) (177 ) (743 ) (259 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Cash Basis NOI from non-same properties (2) (5 ) (4 ) (4 ) 14 48 Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Non-cash rental income and lease termination fees from same properties 280 (240 ) (102 ) 354 320 Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 8,485 $ 7,644 $ 8,316 $ 8,815 $ 9,101 Non-cash rental income and lease termination fees from same properties (280 ) 240 102 (354 ) (320 ) Same Property Cash Basis NOI $ 8,205 $ 7,884 $ 8,418 $ 8,461 $ 8,781 Cash Basis NOI from non-same properties (2) 5 4 4 (14 ) (48 ) Cash Basis NOI $ 8,210 $ 7,888 $ 8,422 $ 8,447 $ 8,733 Straight-line rent adjustments 107 (273 ) (279 ) (389 ) 61 Lease termination fees 173 33 177 743 259 NOI $ 8,490 $ 7,648 $ 8,320 $ 8,801 $ 9,053 Depreciation and amortization (4,436 ) (4,514 ) (4,310 ) (4,634 ) (4,451 ) General and administrative (7,061 ) (13,854 ) (8,555 ) (7,137 ) (7,593 ) Interest and other income, net 29,269 27,352 28,376 24,263 15,145 Gain on sale of properties, net — — — 7 90 Income before income taxes $ 26,262 $ 16,632 $ 23,831 $ 21,300 $ 12,244 Income tax expense (30 ) (796 ) (1,080 ) (372 ) (23 ) Net income $ 26,232 $ 15,836 $ 22,751 $ 20,928 $ 12,221 (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. CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (Unaudited, amounts in thousands) For the Nine Months Ended September 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 41,512 $ 44,135 Other revenue (1) 3,866 3,218 Operating expenses (20,920 ) (17,198 ) NOI $ 24,458 $ 30,155 Straight-line rent adjustments 445 (151 ) Lease termination fees (383 ) (761 ) Cash Basis NOI $ 24,520 $ 29,243 Cash Basis NOI from non-same properties (2) (13 ) (1,624 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Non-cash rental income and lease termination fees from same properties (62 ) 912 Same Property NOI $ 24,445 $ 28,531 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 24,445 $ 28,531 Non-cash rental income and lease termination fees from same properties 62 (912 ) Same Property Cash Basis NOI $ 24,507 $ 27,619 Cash Basis NOI from non-same properties (2) 13 1,624 Cash Basis NOI $ 24,520 $ 29,243 Straight-line rent adjustments (445 ) 151 Lease termination fees 383 761 NOI $ 24,458 $ 30,155 Depreciation and amortization (13,260 ) (13,176 ) General and administrative (29,470 ) (23,241 ) Interest and other income, net 84,997 22,682 Gain on sale of properties, net — 90 Income before income taxes $ 66,725 $ 16,510 Income tax expense (1,906 ) (81 ) Net income $ 64,819 $ 16,429 (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, 2022 through September 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through September 30, 2023. 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 and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do. View source version on businesswire.com: https://www.businesswire.com/news/home/20231030479231/en/