Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter ended June 30, 2019. All per share results are reported on a diluted basis.
Financial results for the quarter ended June 30, 2019
Net income attributable to common shareholders was $240.3 million, or $1.93 per share, for the quarter ended June 30, 2019. This compares to net income attributable to common shareholders of $35.0 million, or $0.29 per share, for the quarter ended June 30, 2018. The increase in net income was primarily due to gains from property sales.
Funds from Operations (FFO), as defined by the National Association of Real Estate Investment Trusts, for the quarter ended June 30, 2019, were $20.5 million, or $0.17 per share. This compares to FFO for the quarter ended June 30, 2018 of $20.8 million, or $0.17 per share. The following items impacted FFO for the quarter ended June 30, 2019, compared to the corresponding 2018 period:
- ($0.08) per share of decrease in income from properties sold;
- ($0.04) per share of loss on early extinguishment of debt;
- $0.07 per share of increase in interest and other income;
- $0.03 per share of increase in same property NOI; and
- $0.02 per of share of interest expense savings.
Normalized FFO was $27.2 million, or $0.22 per share. This compares to Normalized FFO for the quarter ended June 30, 2018 of $20.8 million, or $0.17 per share. The following items impacted Normalized FFO for the quarter ended June 30, 2019, compared to the corresponding 2018 period:
- ($0.08) per share of decrease in income from properties sold;
- $0.07 per share of increase in interest and other income;
- $0.03 per share of increase in same property cash NOI and termination income; and
- $0.02 per share of interest expense savings.
Normalized FFO begins with FFO and eliminates certain items that we view as nonrecurring or impacting comparability from period to period. 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.
For the quarter ended June 30, 2019, the company’s cash balance was $3.2 billion. Total debt outstanding was $26.1 million.
The weighted average number of diluted common shares outstanding when calculating net income per share for the quarter ended June 30, 2019 was 125,862,172 shares, compared to 122,649,382 for the quarter ended June 30, 2018. The weighted average number of diluted common shares outstanding when calculating FFO or Normalized FFO per share for the quarter ended June 30, 2019 was 123,344,972 shares, compared to 122,692,289 for the quarter ended June 30, 2018.
Same property results for the quarter ended June 30, 2019
The company’s same property portfolio at the end of the quarter consisted of 7 properties totaling 2.5 million square feet. Operating results were as follows:
- The same property portfolio was 90.5% leased as of June 30, 2019, compared to 92.0% as of March 31, 2019, and 92.0% as of June 30, 2018.
- The same property portfolio commenced occupancy was 89.7% as of June 30, 2019, compared to 91.1% as of March 31, 2019, and 88.5% as of June 30, 2018.
- Same property NOI increased 22.5% when compared to the same period in 2018.
- Same property cash NOI increased 11.0% when compared to the same period in 2018.
- The company entered into leases for approximately 58,000 square feet, including new leases for approximately 15,000 square feet and renewal leases for approximately 43,000 square feet.
- GAAP rental rates on new and renewal leases were 14.5% higher compared to prior GAAP rental rates for the same space.
- Cash rental rates on new and renewal leases were 9.1% higher compared to prior cash rental rates for the same space.
The definitions and reconciliations of same property NOI and same property cash NOI to net income, determined in accordance with GAAP, are included at the end of this press release. The same property portfolio includes properties continuously owned from April 1, 2018 through June 30, 2019 and excludes properties sold or classified as held for sale at the end of the period.
Significant events during the quarter ended June 30, 2019
- The company redeemed, on June 28, 2019, all $250 million of its 5.875% Senior Unsecured Notes due September 15, 2020.
- The company sold 600 108th Avenue NE in Bellevue, WA, for a gross price of $195 million. The property includes a 254,510 square foot office building and additional development rights.
- The company sold Research Park in Austin, TX, for a gross price of $165.5 million. The asset includes a 1,100,000 square foot flex property on 188 acres.
Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss second quarter results on Thursday, August 1, 2019, at 9:00 A.M. CDT. 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 2019 Supplemental Operating and Financial Data is available on the Investor Relations section of EQC’s website at www.eqcre.com.
About Equity Commonwealth
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties in the United States. As of July 31, 2019, EQC’s portfolio comprised 7 properties and 2.5 million square feet.
Regulation FD Disclosures
We intend to use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the company to monitor these distribution channels for material disclosures.
Forward-Looking Statements
Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws including, but not limited to, statements pertaining to the marketing of certain properties for sale, consummating any sales, and future share repurchases. Any forward-looking statements contained in this press release are intended to be made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” 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 the company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the company’s actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2018.
CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, except share data) | |||||||
June 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Real estate properties: | |||||||
Land | $ | 85,627 | $ | 135,142 | |||
Buildings and improvements | 571,342 | 1,004,500 | |||||
656,969 | 1,139,642 | ||||||
Accumulated depreciation | (193,166 | ) | (375,968 | ) | |||
463,803 | 763,674 | ||||||
Acquired real estate leases, net | 92 | 275 | |||||
Cash and cash equivalents | 3,180,548 | 2,400,803 | |||||
Marketable securities | — | 249,602 | |||||
Restricted cash | 2,310 | 3,298 | |||||
Rents receivable | 19,735 | 51,089 | |||||
Other assets, net | 35,683 | 62,031 | |||||
Total assets | $ | 3,702,171 | $ | 3,530,772 | |||
LIABILITIES AND EQUITY | |||||||
Senior unsecured debt, net | $ | — | $ | 248,473 | |||
Mortgage notes payable, net | 26,091 | 26,482 | |||||
Accounts payable, accrued expenses and other | 36,903 | 62,368 | |||||
Rent collected in advance | 3,554 | 9,451 | |||||
Total liabilities | $ | 66,548 | $ | 346,774 | |||
Shareholders' equity: | |||||||
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized; | |||||||
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880 | $ | 119,263 | $ | 119,263 | |||
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 121,922,120 and 121,572,155 shares issued and outstanding, respectively | 1,219 | 1,216 | |||||
Additional paid in capital | 4,308,049 | 4,305,974 | |||||
Cumulative net income | 3,323,778 | 2,870,974 | |||||
Cumulative other comprehensive loss | — | (342 | ) | ||||
Cumulative common distributions | (3,420,406 | ) | (3,420,548 | ) | |||
Cumulative preferred distributions | (697,730 | ) | (693,736 | ) | |||
Total shareholders’ equity | 3,634,173 | 3,182,801 | |||||
Noncontrolling interest | 1,450 | 1,197 | |||||
Total equity | $ | 3,635,623 | $ | 3,183,998 | |||
Total liabilities and equity | $ | 3,702,171 | $ | 3,530,772 | |||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||
Revenues: | ||||||||||||||||||
Rental revenue | $ | 30,574 | $ | 45,569 | $ | 69,464 | $ | 100,842 | ||||||||||
Other revenue | 2,794 | 3,067 | 5,656 | 6,382 | ||||||||||||||
Total revenues | $ | 33,368 | $ | 48,636 | $ | 75,120 | $ | 107,224 | ||||||||||
Expenses: | ||||||||||||||||||
Operating expenses | $ | 10,974 | $ | 19,521 | $ | 26,754 | $ | 44,120 | ||||||||||
Depreciation and amortization | 7,561 | 13,021 | 16,146 | 26,924 | ||||||||||||||
General and administrative | 9,533 | 11,222 | 21,629 | 24,561 | ||||||||||||||
Loss on asset impairment | — | — | — | 12,087 | ||||||||||||||
Total expenses | $ | 28,068 | $ | 43,764 | $ | 64,529 | $ | 107,692 | ||||||||||
Interest and other income, net | 20,695 | 12,668 | 38,470 | 18,448 | ||||||||||||||
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $154, $645, $319 and $1,446, respectively) | (4,070 | ) | (6,350 | ) | (8,276 | ) | (16,465 | ) | ||||||||||
Loss on early extinguishment of debt | (6,374 | ) | (1,536 | ) | (6,374 | ) | (6,403 | ) | ||||||||||
Gain on sale of properties, net | 227,166 | 26,937 | 420,203 | 232,148 | ||||||||||||||
Income before income taxes | 242,717 | 36,591 | 454,614 | 227,260 | ||||||||||||||
Income tax (expense) benefit | (340 | ) | 456 | (1,640 | ) | (2,551 | ) | |||||||||||
Net income | $ | 242,377 | $ | 37,047 | $ | 452,974 | $ | 224,709 | ||||||||||
Net income attributable to noncontrolling interest | (91 | ) | (14 | ) | (170 | ) | (77 | ) | ||||||||||
Net income attributable to Equity Commonwealth | $ | 242,286 | $ | 37,033 | $ | 452,804 | $ | 224,632 | ||||||||||
Preferred distributions | (1,997 | ) | (1,997 | ) | (3,994 | ) | (3,994 | ) | ||||||||||
Net income attributable to Equity Commonwealth common shareholders | $ | 240,289 | $ | 35,036 | $ | 448,810 | $ | 220,638 | ||||||||||
Weighted average common shares outstanding — basic (1) | 122,122 | 121,822 | 122,041 | 122,839 | ||||||||||||||
Weighted average common shares outstanding — diluted (1) | 125,862 | 122,649 | 125,841 | 126,027 | ||||||||||||||
Earnings per common share attributable to Equity Commonwealth common shareholders: | ||||||||||||||||||
Basic | $ | 1.97 | $ | 0.29 | $ | 3.68 | $ | 1.80 | ||||||||||
Diluted | $ | 1.93 | $ | 0.29 | $ | 3.60 | $ | 1.78 | ||||||||||
| Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations due to the impact of adopting ASU 2016-02. Amounts that were previously disclosed as "Tenant reimbursements and other income" are now included in "Rental revenue" and are no longer presented as a separate line item. Parking revenues that do not represent components of leases and were previously disclosed as "Rental income" are now included in "Other revenue." Subsequent to January 1, 2019, provisions for credit losses are included in "Rental revenue." Provisions for credit losses prior to January 1, 2019 were disclosed as "Operating expenses" and were not reclassified to conform prior periods to the current presentation. | |
(1) | Weighted average common shares outstanding for the three months ended June 30, 2019 and 2018 includes 220 and 362 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the six months ended June 30, 2019 and 2018 includes 203 and 335 unvested, earned RSUs, respectively. |
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (amounts in thousands, except per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Calculation of FFO | |||||||||||||||
Net income | $ | 242,377 | $ | 37,047 | $ | 452,974 | $ | 224,709 | |||||||
Real estate depreciation and amortization | 7,283 | 12,717 | 15,560 | 26,320 | |||||||||||
Loss on asset impairment | — | — | — | 12,087 | |||||||||||
Gain on sale of properties, net | (227,166 | ) | (26,937 | ) | (420,203 | ) | (232,148 | ) | |||||||
FFO attributable to Equity Commonwealth | 22,494 | 22,827 | 48,331 | 30,968 | |||||||||||
Preferred distributions | (1,997 | ) | (1,997 | ) | (3,994 | ) | (3,994 | ) | |||||||
FFO attributable to EQC common shareholders and unitholders | $ | 20,497 | $ | 20,830 | $ | 44,337 | $ | 26,974 | |||||||
Calculation of Normalized FFO | |||||||||||||||
FFO attributable to EQC common shareholders and unitholders | $ | 20,497 | $ | 20,830 | $ | 44,337 | $ | 26,974 | |||||||
Lease value amortization | (39 | ) | (18 | ) | (78 | ) | 80 | ||||||||
Straight line rent adjustments | (11 | ) | (1,022 | ) | (848 | ) | (2,550 | ) | |||||||
Loss on early extinguishment of debt | 6,374 | 1,536 | 6,374 | 6,403 | |||||||||||
Loss on sale of securities | — | — | — | 4,987 | |||||||||||
Income taxes related to gains on property sales, net | 415 | (496 | ) | 565 | 2,473 | ||||||||||
Normalized FFO attributable to EQC common shareholders and unitholders | $ | 27,236 | $ | 20,830 | $ | 50,350 | $ | 38,367 | |||||||
Weighted average common shares and units outstanding -- basic (1) | 122,168 | 121,865 | 122,087 | 122,882 | |||||||||||
Weighted average common shares and units outstanding -- diluted (1) | 123,345 | 122,692 | 123,324 | 123,707 | |||||||||||
FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted | $ | 0.17 | $ | 0.17 | $ | 0.36 | $ | 0.22 | |||||||
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted | $ | 0.22 | $ | 0.17 | $ | 0.41 | $ | 0.31 | |||||||
(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, 2019 and 2018 include 46 and 43 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, 2019 and 2018 include 46 and 43 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, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do. |
CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (amounts in thousands) | |||||||||||||||||||
For the Three Months Ended | |||||||||||||||||||
6/30/2019 | 3/31/2019 | 12/31/2018 | 9/30/2018 | 6/30/2018 | |||||||||||||||
Calculation of Same Property NOI and Same Property Cash Basis NOI: | |||||||||||||||||||
Rental revenue | $ | 30,574 | $ | 38,890 | $ | 39,756 | $ | 43,770 | $ | 45,569 | |||||||||
Other revenue | 2,794 | 2,862 | 3,169 | 3,103 | 3,067 | ||||||||||||||
Operating expenses | (10,974 | ) | (15,780 | ) | (15,539 | ) | (20,257 | ) | (19,521 | ) | |||||||||
NOI | $ | 22,394 | $ | 25,972 | $ | 27,386 | $ | 26,616 | $ | 29,115 | |||||||||
Straight line rent adjustments | (11 | ) | (837 | ) | (986 | ) | (1,435 | ) | (1,022 | ) | |||||||||
Lease value amortization | (39 | ) | (39 | ) | (22 | ) | (4 | ) | (18 | ) | |||||||||
Lease termination fees | (2,188 | ) | — | (19 | ) | (395 | ) | (1,557 | ) | ||||||||||
Cash Basis NOI | $ | 20,156 | $ | 25,096 | $ | 26,359 | $ | 24,782 | $ | 26,518 | |||||||||
Cash Basis NOI from non-same properties (1) | (2,666 | ) | (7,853 | ) | (10,273 | ) | (8,756 | ) | (10,767 | ) | |||||||||
Same Property Cash Basis NOI | $ | 17,490 | $ | 17,243 | $ | 16,086 | $ | 16,026 | $ | 15,751 | |||||||||
Non-cash rental income and lease termination fees from same properties | 1,950 | (165 | ) | (137 | ) | (180 | ) | 113 | |||||||||||
Same Property NOI | $ | 19,440 | $ | 17,078 | $ | 15,949 | $ | 15,846 | $ | 15,864 | |||||||||
Reconciliation of Same Property NOI to GAAP Net Income: | |||||||||||||||||||
Same Property NOI | $ | 19,440 | $ | 17,078 | $ | 15,949 | $ | 15,846 | $ | 15,864 | |||||||||
Non-cash rental income and lease termination fees from same properties | (1,950 | ) | 165 | 137 | 180 | (113 | ) | ||||||||||||
Same Property Cash Basis NOI | $ | 17,490 | $ | 17,243 | $ | 16,086 | $ | 16,026 | $ | 15,751 | |||||||||
Cash Basis NOI from non-same properties (1) | 2,666 | 7,853 | 10,273 | 8,756 | 10,767 | ||||||||||||||
Cash Basis NOI | $ | 20,156 | $ | 25,096 | $ | 26,359 | $ | 24,782 | $ | 26,518 | |||||||||
Straight line rent adjustments | 11 | 837 | 986 | 1,435 | 1,022 | ||||||||||||||
Lease value amortization | 39 | 39 | 22 | 4 | 18 | ||||||||||||||
Lease termination fees | 2,188 | — | 19 | 395 | 1,557 | ||||||||||||||
NOI | $ | 22,394 | $ | 25,972 | $ | 27,386 | $ | 26,616 | $ | 29,115 | |||||||||
Depreciation and amortization | (7,561 | ) | (8,585 | ) | (10,830 | ) | (11,287 | ) | (13,021 | ) | |||||||||
General and administrative | (9,533 | ) | (12,096 | ) | (8,973 | ) | (10,905 | ) | (11,222 | ) | |||||||||
Interest and other income, net | 20,695 | 17,775 | 15,741 | 12,626 | 12,668 | ||||||||||||||
Interest expense | (4,070 | ) | (4,206 | ) | (5,035 | ) | (5,085 | ) | (6,350 | ) | |||||||||
Loss on early extinguishment of debt | (6,374 | ) | — | (719 | ) | — | (1,536 | ) | |||||||||||
Gain (loss) on sale of properties, net | 227,166 | 193,037 | (1,608 | ) | 20,877 | 26,937 | |||||||||||||
Income before income taxes | $ | 242,717 | $ | 211,897 | $ | 15,962 | $ | 32,842 | $ | 36,591 | |||||||||
Income tax (expense) benefit | (340 | ) | (1,300 | ) | (540 | ) | (65 | ) | 456 | ||||||||||
Net income | $ | 242,377 | $ | 210,597 | $ | 15,422 | $ | 32,777 | $ | 37,047 | |||||||||
Same Property capitalized external legal costs(2) | N/A | N/A | $ | — | $ | 14 | $ | 75 | |||||||||||
(1) | Cash Basis NOI from non-same properties for all periods presented includes the operations of properties disposed or classified as held for sale at the end of the period. | |
(2) | Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods. | |
CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI (amounts in thousands) | |||||||
For the Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
Calculation of Same Property NOI and Same Property Cash Basis NOI: | |||||||
Rental revenue | $ | 69,464 | $ | 100,842 | |||
Other revenue | 5,656 | 6,382 | |||||
Operating expenses | (26,754 | ) | (44,120 | ) | |||
NOI | $ | 48,366 | $ | 63,104 | |||
Straight line rent adjustments | (848 | ) | (2,550 | ) | |||
Lease value amortization | (78 | ) | 80 | ||||
Lease termination fees | (2,188 | ) | (2,522 | ) | |||
Cash Basis NOI | $ | 45,252 | $ | 58,112 | |||
Cash Basis NOI from non-same properties (1) | (10,519 | ) | (27,021 | ) | |||
Same Property Cash Basis NOI | $ | 34,733 | $ | 31,091 | |||
Non-cash rental income and lease termination fees from same properties | 1,785 | 435 | |||||
Same Property NOI | $ | 36,518 | $ | 31,526 | |||
Reconciliation of Same Property NOI to GAAP Net Income: | |||||||
Same Property NOI | $ | 36,518 | $ | 31,526 | |||
Non-cash rental income and lease termination fees from same properties | (1,785 | ) | (435 | ) | |||
Same Property Cash Basis NOI | $ | 34,733 | $ | 31,091 | |||
Cash Basis NOI from non-same properties (1) | 10,519 | 27,021 | |||||
Cash Basis NOI | $ | 45,252 | $ | 58,112 | |||
Straight line rent adjustments | 848 | 2,550 | |||||
Lease value amortization | 78 | (80 | ) | ||||
Lease termination fees | 2,188 | 2,522 | |||||
NOI | $ | 48,366 | $ | 63,104 | |||
Depreciation and amortization | (16,146 | ) | (26,924 | ) | |||
General and administrative | (21,629 | ) | (24,561 | ) | |||
Loss on asset impairment | — | (12,087 | ) | ||||
Interest and other income, net | 38,470 | 18,448 | |||||
Interest expense | (8,276 | ) | (16,465 | ) | |||
Loss on early extinguishment of debt | (6,374 | ) | (6,403 | ) | |||
Gain on sale of properties, net | 420,203 | 232,148 | |||||
Income before income taxes | $ | 454,614 | $ | 227,260 | |||
Income tax expense | (1,640 | ) | (2,551 | ) | |||
Net income | $ | 452,974 | $ | 224,709 | |||
Same Property capitalized external legal costs(2) | N/A | $ | 176 | ||||
(1) | Cash Basis NOI from non-same properties for all periods presented includes the operations of properties disposed or classified as held for sale at the end of the period. | |
(2) | Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods. | |
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, 2018 through June 30, 2019. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2018 through June 30, 2019. Properties classified as held for sale within our condensed consolidated balance sheets are excluded from the same property versions of these measures. |
We consider these supplemental non-GAAP financial measures to be appropriate supplemental measures to net income (loss) because they may help to understand the operations of our properties. We use these measures internally to evaluate property level performance, and we believe that they provide useful information to investors regarding our results of operations because they reflect only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. Cash Basis NOI is among the factors considered with respect to acquisition, disposition and financing decisions. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income (loss), net income (loss) attributable to Equity Commonwealth common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do. |
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Contacts:
(312) 646-2801
ir@eqcre.com
