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 Second Quarter 2023 Results By: Equity Commonwealth via Business Wire July 26, 2023 at 16:15 PM EDT Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended June 30, 2023. Financial results for the quarter ended June 30, 2023 Net income attributable to common shareholders was $13.8 million, or $0.12 per diluted share, for the quarter ended June 30, 2023. This compares to net income attributable to common shareholders of $0.9 million, or $0.01 per diluted share, for the quarter ended June 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates, partially offset by an increase in general and administrative expenses due to accelerated compensation expense related to the passing of our former Board of Trustees Chairman, Sam Zell. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended June 30, 2023, were $18.3 million, or $0.16 per diluted share. This compares to FFO for the quarter ended June 30, 2022 of $5.2 million, or $0.05 per diluted share. The following items impacted FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.06) per diluted share increase in general and administrative expenses primarily due to accelerated compensation expense related to the passing of our former chairman; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase in income tax expense. Normalized FFO was $24.6 million, or $0.22 per diluted share, for the quarter ended June 30, 2023. This compares to Normalized FFO for the quarter ended June 30, 2022 of $5.1 million, or $0.04 per diluted share. The following items impacted Normalized FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of June 30, 2023, the company’s cash and cash equivalents balance was $2.2 billion. Same property results for the quarter ended June 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 82.0% leased as of June 30, 2023, compared to 81.6% as of March 31, 2023, and 84.8% as of June 30, 2022. The same property portfolio commenced occupancy was 78.2% as of June 30, 2023, compared to 77.0% as of March 31, 2023, and 82.9% as of June 30, 2022. Same property NOI decreased 14.8% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. Same property cash NOI decreased 9.4% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. The company entered into leases for approximately 68,000 square feet, including renewal leases for approximately 54,000 square feet and a new lease for approximately 14,000 square feet. The GAAP rental rate on new and renewal leases was 15.3% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 0.7% 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 April 1, 2022 through June 30, 2023. Significant events during the quarter ended June 30, 2023 On May 19, 2023, Equity Commonwealth announced that David Helfand will serve as the Chair of the Board of Trustees following the passing of our former Chairman, Sam Zell, on May 18, 2023. The Board of Trustees also reduced its size from 8 to 7 trustees. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss second quarter results on Thursday, July 27, 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 Second 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) June 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 365,247 364,063 409,307 408,123 Accumulated depreciation (174,399 ) (169,530 ) 234,908 238,593 Cash and cash equivalents 2,153,047 2,582,222 Rents receivable 16,151 16,009 Other assets, net 17,737 18,061 Total assets $ 2,421,843 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 20,016 $ 25,935 Rent collected in advance 3,132 2,355 Distributions payable 6,868 2,863 Total liabilities $ 30,016 $ 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; 109,730,457 and 109,428,252 shares issued and outstanding, respectively 1,097 1,094 Additional paid in capital 3,984,681 3,979,566 Cumulative net income 3,874,284 3,835,815 Cumulative common distributions (4,865,668 ) (4,393,522 ) Cumulative preferred distributions (729,682 ) (725,688 ) Total shareholders’ equity 2,383,975 2,816,528 Noncontrolling interest 7,852 7,204 Total equity $ 2,391,827 $ 2,823,732 Total liabilities and equity $ 2,421,843 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,358 $ 14,426 $ 27,584 $ 30,266 Other revenue (1) 1,232 1,115 2,582 1,961 Total revenues $ 14,590 $ 15,541 $ 30,166 $ 32,227 Expenses: Operating expenses $ 6,942 $ 6,592 $ 14,198 $ 11,125 Depreciation and amortization 4,514 4,313 8,824 8,725 General and administrative 13,854 7,646 22,409 15,648 Total expenses $ 25,310 $ 18,551 $ 45,431 $ 35,498 Interest and other income, net 27,352 5,963 55,728 7,537 Income before income taxes 16,632 2,953 40,463 4,266 Income tax expense (796 ) (50 ) (1,876 ) (58 ) Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Net income attributable to noncontrolling interest (52 ) (7 ) (118 ) (10 ) Net income attributable to Equity Commonwealth $ 15,784 $ 2,896 $ 38,469 $ 4,198 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) Net income attributable to Equity Commonwealth common shareholders $ 13,787 $ 899 $ 34,475 $ 204 Weighted average common shares outstanding — basic (2) 109,839 112,005 109,779 112,868 Weighted average common shares outstanding — diluted (2)(3) 111,237 113,380 111,269 113,785 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.13 $ 0.01 $ 0.31 $ 0.00 Diluted $ 0.12 $ 0.01 $ 0.31 $ 0.00 (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 June 30, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the six months ended June 30, 2023 and 2022 includes 122 and 124 unvested, earned RSUs, respectively. (3) As of June 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 June 30, 2023 and 3,237 common shares as of June 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 Six Months Ended June 30, June 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Real estate depreciation and amortization 4,503 4,273 8,802 8,646 FFO attributable to Equity Commonwealth 20,339 7,176 47,389 12,854 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Straight-line rent adjustments 273 (100 ) 552 (90 ) Former chairman accelerated compensation expense 5,957 — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 24,572 $ 5,079 $ 49,904 $ 8,770 Weighted average common shares and units outstanding — basic (1) 110,196 112,282 110,120 113,140 Weighted average common shares and units outstanding — diluted (1) 111,594 113,657 111,610 114,057 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.17 $ 0.05 $ 0.39 $ 0.08 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.16 $ 0.05 $ 0.39 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.22 $ 0.05 $ 0.45 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.22 $ 0.04 $ 0.45 $ 0.08 (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 June 30, 2023 and 2022 include 357 and 277 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 six months ended June 30, 2023 and 2022 include 341 and 272 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 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,358 $ 14,226 $ 14,628 $ 13,869 $ 14,426 Other revenue (1) 1,232 1,350 1,159 1,257 1,115 Operating expenses (6,942 ) (7,256 ) (6,986 ) (6,073 ) (6,592 ) NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Straight-line rent adjustments 273 279 389 (61 ) (100 ) Lease termination fees (33 ) (177 ) (743 ) (259 ) (177 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Cash Basis NOI from non-same properties (2) (4 ) (4 ) 14 48 27 Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Non-cash rental income and lease termination fees from same properties (240 ) (102 ) 354 320 277 Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Non-cash rental income and lease termination fees from same properties 240 102 (354 ) (320 ) (277 ) Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Cash Basis NOI from non-same properties (2) 4 4 (14 ) (48 ) (27 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Straight-line rent adjustments (273 ) (279 ) (389 ) 61 100 Lease termination fees 33 177 743 259 177 NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Depreciation and amortization (4,514 ) (4,310 ) (4,634 ) (4,451 ) (4,313 ) General and administrative (13,854 ) (8,555 ) (7,137 ) (7,593 ) (7,646 ) Interest and other income, net 27,352 28,376 24,263 15,145 5,963 Gain on sale of properties, net — — 7 90 — Income before income taxes $ 16,632 $ 23,831 $ 21,300 $ 12,244 $ 2,953 Income tax expense (796 ) (1,080 ) (372 ) (23 ) (50 ) Net income $ 15,836 $ 22,751 $ 20,928 $ 12,221 $ 2,903 (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 Six Months Ended June 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 27,584 $ 30,266 Other revenue (1) 2,582 1,961 Operating expenses (14,198 ) (11,125 ) NOI $ 15,968 $ 21,102 Straight-line rent adjustments 552 (90 ) Lease termination fees (210 ) (502 ) Cash Basis NOI $ 16,310 $ 20,510 Cash Basis NOI from non-same properties (2) (8 ) (1,672 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Non-cash rental income and lease termination fees from same properties (342 ) 592 Same Property NOI $ 15,960 $ 19,430 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 15,960 $ 19,430 Non-cash rental income and lease termination fees from same properties 342 (592 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Cash Basis NOI from non-same properties (2) 8 1,672 Cash Basis NOI $ 16,310 $ 20,510 Straight-line rent adjustments (552 ) 90 Lease termination fees 210 502 NOI $ 15,968 $ 21,102 Depreciation and amortization (8,824 ) (8,725 ) General and administrative (22,409 ) (15,648 ) Interest and other income, net 55,728 7,537 Income before income taxes $ 40,463 $ 4,266 Income tax expense (1,876 ) (58 ) Net income $ 38,587 $ 4,208 (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 April 1, 2022 through June 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through June 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/20230726031608/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 Second Quarter 2023 Results By: Equity Commonwealth via Business Wire July 26, 2023 at 16:15 PM EDT Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended June 30, 2023. Financial results for the quarter ended June 30, 2023 Net income attributable to common shareholders was $13.8 million, or $0.12 per diluted share, for the quarter ended June 30, 2023. This compares to net income attributable to common shareholders of $0.9 million, or $0.01 per diluted share, for the quarter ended June 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates, partially offset by an increase in general and administrative expenses due to accelerated compensation expense related to the passing of our former Board of Trustees Chairman, Sam Zell. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended June 30, 2023, were $18.3 million, or $0.16 per diluted share. This compares to FFO for the quarter ended June 30, 2022 of $5.2 million, or $0.05 per diluted share. The following items impacted FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.06) per diluted share increase in general and administrative expenses primarily due to accelerated compensation expense related to the passing of our former chairman; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase in income tax expense. Normalized FFO was $24.6 million, or $0.22 per diluted share, for the quarter ended June 30, 2023. This compares to Normalized FFO for the quarter ended June 30, 2022 of $5.1 million, or $0.04 per diluted share. The following items impacted Normalized FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of June 30, 2023, the company’s cash and cash equivalents balance was $2.2 billion. Same property results for the quarter ended June 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 82.0% leased as of June 30, 2023, compared to 81.6% as of March 31, 2023, and 84.8% as of June 30, 2022. The same property portfolio commenced occupancy was 78.2% as of June 30, 2023, compared to 77.0% as of March 31, 2023, and 82.9% as of June 30, 2022. Same property NOI decreased 14.8% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. Same property cash NOI decreased 9.4% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. The company entered into leases for approximately 68,000 square feet, including renewal leases for approximately 54,000 square feet and a new lease for approximately 14,000 square feet. The GAAP rental rate on new and renewal leases was 15.3% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 0.7% 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 April 1, 2022 through June 30, 2023. Significant events during the quarter ended June 30, 2023 On May 19, 2023, Equity Commonwealth announced that David Helfand will serve as the Chair of the Board of Trustees following the passing of our former Chairman, Sam Zell, on May 18, 2023. The Board of Trustees also reduced its size from 8 to 7 trustees. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss second quarter results on Thursday, July 27, 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 Second 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) June 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 365,247 364,063 409,307 408,123 Accumulated depreciation (174,399 ) (169,530 ) 234,908 238,593 Cash and cash equivalents 2,153,047 2,582,222 Rents receivable 16,151 16,009 Other assets, net 17,737 18,061 Total assets $ 2,421,843 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 20,016 $ 25,935 Rent collected in advance 3,132 2,355 Distributions payable 6,868 2,863 Total liabilities $ 30,016 $ 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; 109,730,457 and 109,428,252 shares issued and outstanding, respectively 1,097 1,094 Additional paid in capital 3,984,681 3,979,566 Cumulative net income 3,874,284 3,835,815 Cumulative common distributions (4,865,668 ) (4,393,522 ) Cumulative preferred distributions (729,682 ) (725,688 ) Total shareholders’ equity 2,383,975 2,816,528 Noncontrolling interest 7,852 7,204 Total equity $ 2,391,827 $ 2,823,732 Total liabilities and equity $ 2,421,843 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,358 $ 14,426 $ 27,584 $ 30,266 Other revenue (1) 1,232 1,115 2,582 1,961 Total revenues $ 14,590 $ 15,541 $ 30,166 $ 32,227 Expenses: Operating expenses $ 6,942 $ 6,592 $ 14,198 $ 11,125 Depreciation and amortization 4,514 4,313 8,824 8,725 General and administrative 13,854 7,646 22,409 15,648 Total expenses $ 25,310 $ 18,551 $ 45,431 $ 35,498 Interest and other income, net 27,352 5,963 55,728 7,537 Income before income taxes 16,632 2,953 40,463 4,266 Income tax expense (796 ) (50 ) (1,876 ) (58 ) Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Net income attributable to noncontrolling interest (52 ) (7 ) (118 ) (10 ) Net income attributable to Equity Commonwealth $ 15,784 $ 2,896 $ 38,469 $ 4,198 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) Net income attributable to Equity Commonwealth common shareholders $ 13,787 $ 899 $ 34,475 $ 204 Weighted average common shares outstanding — basic (2) 109,839 112,005 109,779 112,868 Weighted average common shares outstanding — diluted (2)(3) 111,237 113,380 111,269 113,785 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.13 $ 0.01 $ 0.31 $ 0.00 Diluted $ 0.12 $ 0.01 $ 0.31 $ 0.00 (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 June 30, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the six months ended June 30, 2023 and 2022 includes 122 and 124 unvested, earned RSUs, respectively. (3) As of June 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 June 30, 2023 and 3,237 common shares as of June 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 Six Months Ended June 30, June 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Real estate depreciation and amortization 4,503 4,273 8,802 8,646 FFO attributable to Equity Commonwealth 20,339 7,176 47,389 12,854 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Straight-line rent adjustments 273 (100 ) 552 (90 ) Former chairman accelerated compensation expense 5,957 — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 24,572 $ 5,079 $ 49,904 $ 8,770 Weighted average common shares and units outstanding — basic (1) 110,196 112,282 110,120 113,140 Weighted average common shares and units outstanding — diluted (1) 111,594 113,657 111,610 114,057 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.17 $ 0.05 $ 0.39 $ 0.08 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.16 $ 0.05 $ 0.39 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.22 $ 0.05 $ 0.45 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.22 $ 0.04 $ 0.45 $ 0.08 (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 June 30, 2023 and 2022 include 357 and 277 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 six months ended June 30, 2023 and 2022 include 341 and 272 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 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,358 $ 14,226 $ 14,628 $ 13,869 $ 14,426 Other revenue (1) 1,232 1,350 1,159 1,257 1,115 Operating expenses (6,942 ) (7,256 ) (6,986 ) (6,073 ) (6,592 ) NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Straight-line rent adjustments 273 279 389 (61 ) (100 ) Lease termination fees (33 ) (177 ) (743 ) (259 ) (177 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Cash Basis NOI from non-same properties (2) (4 ) (4 ) 14 48 27 Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Non-cash rental income and lease termination fees from same properties (240 ) (102 ) 354 320 277 Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Non-cash rental income and lease termination fees from same properties 240 102 (354 ) (320 ) (277 ) Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Cash Basis NOI from non-same properties (2) 4 4 (14 ) (48 ) (27 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Straight-line rent adjustments (273 ) (279 ) (389 ) 61 100 Lease termination fees 33 177 743 259 177 NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Depreciation and amortization (4,514 ) (4,310 ) (4,634 ) (4,451 ) (4,313 ) General and administrative (13,854 ) (8,555 ) (7,137 ) (7,593 ) (7,646 ) Interest and other income, net 27,352 28,376 24,263 15,145 5,963 Gain on sale of properties, net — — 7 90 — Income before income taxes $ 16,632 $ 23,831 $ 21,300 $ 12,244 $ 2,953 Income tax expense (796 ) (1,080 ) (372 ) (23 ) (50 ) Net income $ 15,836 $ 22,751 $ 20,928 $ 12,221 $ 2,903 (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 Six Months Ended June 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 27,584 $ 30,266 Other revenue (1) 2,582 1,961 Operating expenses (14,198 ) (11,125 ) NOI $ 15,968 $ 21,102 Straight-line rent adjustments 552 (90 ) Lease termination fees (210 ) (502 ) Cash Basis NOI $ 16,310 $ 20,510 Cash Basis NOI from non-same properties (2) (8 ) (1,672 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Non-cash rental income and lease termination fees from same properties (342 ) 592 Same Property NOI $ 15,960 $ 19,430 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 15,960 $ 19,430 Non-cash rental income and lease termination fees from same properties 342 (592 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Cash Basis NOI from non-same properties (2) 8 1,672 Cash Basis NOI $ 16,310 $ 20,510 Straight-line rent adjustments (552 ) 90 Lease termination fees 210 502 NOI $ 15,968 $ 21,102 Depreciation and amortization (8,824 ) (8,725 ) General and administrative (22,409 ) (15,648 ) Interest and other income, net 55,728 7,537 Income before income taxes $ 40,463 $ 4,266 Income tax expense (1,876 ) (58 ) Net income $ 38,587 $ 4,208 (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 April 1, 2022 through June 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through June 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/20230726031608/en/Contacts Bill Griffiths (312) 646-2801 ir@eqcre.com
Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended June 30, 2023. Financial results for the quarter ended June 30, 2023 Net income attributable to common shareholders was $13.8 million, or $0.12 per diluted share, for the quarter ended June 30, 2023. This compares to net income attributable to common shareholders of $0.9 million, or $0.01 per diluted share, for the quarter ended June 30, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates, partially offset by an increase in general and administrative expenses due to accelerated compensation expense related to the passing of our former Board of Trustees Chairman, Sam Zell. Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended June 30, 2023, were $18.3 million, or $0.16 per diluted share. This compares to FFO for the quarter ended June 30, 2022 of $5.2 million, or $0.05 per diluted share. The following items impacted FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.06) per diluted share increase in general and administrative expenses primarily due to accelerated compensation expense related to the passing of our former chairman; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase in income tax expense. Normalized FFO was $24.6 million, or $0.22 per diluted share, for the quarter ended June 30, 2023. This compares to Normalized FFO for the quarter ended June 30, 2022 of $5.1 million, or $0.04 per diluted share. The following items impacted Normalized FFO for the quarter ended June 30, 2023, compared to the corresponding 2022 period: $0.19 per diluted share increase in interest and other income, net; $(0.01) per diluted share decrease in same property NOI; and $(0.01) per diluted share increase 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 U.S. generally accepted accounting principles, or GAAP, are included at the end of this press release. As of June 30, 2023, the company’s cash and cash equivalents balance was $2.2 billion. Same property results for the quarter ended June 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 82.0% leased as of June 30, 2023, compared to 81.6% as of March 31, 2023, and 84.8% as of June 30, 2022. The same property portfolio commenced occupancy was 78.2% as of June 30, 2023, compared to 77.0% as of March 31, 2023, and 82.9% as of June 30, 2022. Same property NOI decreased 14.8% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. Same property cash NOI decreased 9.4% when compared to the same period in 2022, primarily due to an increase in pre-leasing demolition costs and a decrease in commenced occupancy. The company entered into leases for approximately 68,000 square feet, including renewal leases for approximately 54,000 square feet and a new lease for approximately 14,000 square feet. The GAAP rental rate on new and renewal leases was 15.3% higher compared to the prior GAAP rental rate for the same space. The cash rental rate on new and renewal leases was 0.7% 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 April 1, 2022 through June 30, 2023. Significant events during the quarter ended June 30, 2023 On May 19, 2023, Equity Commonwealth announced that David Helfand will serve as the Chair of the Board of Trustees following the passing of our former Chairman, Sam Zell, on May 18, 2023. The Board of Trustees also reduced its size from 8 to 7 trustees. Earnings Conference Call & Supplemental Operating and Financial Information Equity Commonwealth will host a conference call to discuss second quarter results on Thursday, July 27, 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 Second 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) June 30, 2023 December 31, 2022 ASSETS Real estate properties: Land $ 44,060 $ 44,060 Buildings and improvements 365,247 364,063 409,307 408,123 Accumulated depreciation (174,399 ) (169,530 ) 234,908 238,593 Cash and cash equivalents 2,153,047 2,582,222 Rents receivable 16,151 16,009 Other assets, net 17,737 18,061 Total assets $ 2,421,843 $ 2,854,885 LIABILITIES AND EQUITY Accounts payable, accrued expenses and other $ 20,016 $ 25,935 Rent collected in advance 3,132 2,355 Distributions payable 6,868 2,863 Total liabilities $ 30,016 $ 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; 109,730,457 and 109,428,252 shares issued and outstanding, respectively 1,097 1,094 Additional paid in capital 3,984,681 3,979,566 Cumulative net income 3,874,284 3,835,815 Cumulative common distributions (4,865,668 ) (4,393,522 ) Cumulative preferred distributions (729,682 ) (725,688 ) Total shareholders’ equity 2,383,975 2,816,528 Noncontrolling interest 7,852 7,204 Total equity $ 2,391,827 $ 2,823,732 Total liabilities and equity $ 2,421,843 $ 2,854,885 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Revenues: Rental revenue $ 13,358 $ 14,426 $ 27,584 $ 30,266 Other revenue (1) 1,232 1,115 2,582 1,961 Total revenues $ 14,590 $ 15,541 $ 30,166 $ 32,227 Expenses: Operating expenses $ 6,942 $ 6,592 $ 14,198 $ 11,125 Depreciation and amortization 4,514 4,313 8,824 8,725 General and administrative 13,854 7,646 22,409 15,648 Total expenses $ 25,310 $ 18,551 $ 45,431 $ 35,498 Interest and other income, net 27,352 5,963 55,728 7,537 Income before income taxes 16,632 2,953 40,463 4,266 Income tax expense (796 ) (50 ) (1,876 ) (58 ) Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Net income attributable to noncontrolling interest (52 ) (7 ) (118 ) (10 ) Net income attributable to Equity Commonwealth $ 15,784 $ 2,896 $ 38,469 $ 4,198 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) Net income attributable to Equity Commonwealth common shareholders $ 13,787 $ 899 $ 34,475 $ 204 Weighted average common shares outstanding — basic (2) 109,839 112,005 109,779 112,868 Weighted average common shares outstanding — diluted (2)(3) 111,237 113,380 111,269 113,785 Earnings per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.13 $ 0.01 $ 0.31 $ 0.00 Diluted $ 0.12 $ 0.01 $ 0.31 $ 0.00 (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 June 30, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the six months ended June 30, 2023 and 2022 includes 122 and 124 unvested, earned RSUs, respectively. (3) As of June 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 June 30, 2023 and 3,237 common shares as of June 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 Six Months Ended June 30, June 30, 2023 2022 2023 2022 Calculation of FFO Net income $ 15,836 $ 2,903 $ 38,587 $ 4,208 Real estate depreciation and amortization 4,503 4,273 8,802 8,646 FFO attributable to Equity Commonwealth 20,339 7,176 47,389 12,854 Preferred distributions (1,997 ) (1,997 ) (3,994 ) (3,994 ) FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Calculation of Normalized FFO FFO attributable to EQC common shareholders and unitholders $ 18,342 $ 5,179 $ 43,395 $ 8,860 Straight-line rent adjustments 273 (100 ) 552 (90 ) Former chairman accelerated compensation expense 5,957 — 5,957 — Normalized FFO attributable to EQC common shareholders and unitholders $ 24,572 $ 5,079 $ 49,904 $ 8,770 Weighted average common shares and units outstanding — basic (1) 110,196 112,282 110,120 113,140 Weighted average common shares and units outstanding — diluted (1) 111,594 113,657 111,610 114,057 FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.17 $ 0.05 $ 0.39 $ 0.08 FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.16 $ 0.05 $ 0.39 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — basic $ 0.22 $ 0.05 $ 0.45 $ 0.08 Normalized FFO attributable to EQC common shareholders and unitholders per share and unit — diluted $ 0.22 $ 0.04 $ 0.45 $ 0.08 (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 June 30, 2023 and 2022 include 357 and 277 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 six months ended June 30, 2023 and 2022 include 341 and 272 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 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 13,358 $ 14,226 $ 14,628 $ 13,869 $ 14,426 Other revenue (1) 1,232 1,350 1,159 1,257 1,115 Operating expenses (6,942 ) (7,256 ) (6,986 ) (6,073 ) (6,592 ) NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Straight-line rent adjustments 273 279 389 (61 ) (100 ) Lease termination fees (33 ) (177 ) (743 ) (259 ) (177 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Cash Basis NOI from non-same properties (2) (4 ) (4 ) 14 48 27 Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Non-cash rental income and lease termination fees from same properties (240 ) (102 ) 354 320 277 Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 7,644 $ 8,316 $ 8,815 $ 9,101 $ 8,976 Non-cash rental income and lease termination fees from same properties 240 102 (354 ) (320 ) (277 ) Same Property Cash Basis NOI $ 7,884 $ 8,418 $ 8,461 $ 8,781 $ 8,699 Cash Basis NOI from non-same properties (2) 4 4 (14 ) (48 ) (27 ) Cash Basis NOI $ 7,888 $ 8,422 $ 8,447 $ 8,733 $ 8,672 Straight-line rent adjustments (273 ) (279 ) (389 ) 61 100 Lease termination fees 33 177 743 259 177 NOI $ 7,648 $ 8,320 $ 8,801 $ 9,053 $ 8,949 Depreciation and amortization (4,514 ) (4,310 ) (4,634 ) (4,451 ) (4,313 ) General and administrative (13,854 ) (8,555 ) (7,137 ) (7,593 ) (7,646 ) Interest and other income, net 27,352 28,376 24,263 15,145 5,963 Gain on sale of properties, net — — 7 90 — Income before income taxes $ 16,632 $ 23,831 $ 21,300 $ 12,244 $ 2,953 Income tax expense (796 ) (1,080 ) (372 ) (23 ) (50 ) Net income $ 15,836 $ 22,751 $ 20,928 $ 12,221 $ 2,903 (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 Six Months Ended June 30, 2023 2022 Calculation of Same Property NOI and Same Property Cash Basis NOI: Rental revenue $ 27,584 $ 30,266 Other revenue (1) 2,582 1,961 Operating expenses (14,198 ) (11,125 ) NOI $ 15,968 $ 21,102 Straight-line rent adjustments 552 (90 ) Lease termination fees (210 ) (502 ) Cash Basis NOI $ 16,310 $ 20,510 Cash Basis NOI from non-same properties (2) (8 ) (1,672 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Non-cash rental income and lease termination fees from same properties (342 ) 592 Same Property NOI $ 15,960 $ 19,430 Reconciliation of Same Property NOI to GAAP Net Income: Same Property NOI $ 15,960 $ 19,430 Non-cash rental income and lease termination fees from same properties 342 (592 ) Same Property Cash Basis NOI $ 16,302 $ 18,838 Cash Basis NOI from non-same properties (2) 8 1,672 Cash Basis NOI $ 16,310 $ 20,510 Straight-line rent adjustments (552 ) 90 Lease termination fees 210 502 NOI $ 15,968 $ 21,102 Depreciation and amortization (8,824 ) (8,725 ) General and administrative (22,409 ) (15,648 ) Interest and other income, net 55,728 7,537 Income before income taxes $ 40,463 $ 4,266 Income tax expense (1,876 ) (58 ) Net income $ 38,587 $ 4,208 (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 April 1, 2022 through June 30, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through June 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/20230726031608/en/