Equity Commonwealth (NYSE: EQC) today reported financial results
for the quarter ended March 31, 2022.
Financial results for the quarter ended March 31,
2022
Net loss attributable to common shareholders was $0.7 million,
or $0.01 per diluted share, for the quarter ended March 31, 2022.
This compares to net loss attributable to common shareholders of
$12.0 million, or $0.10 per diluted share, for the quarter ended
March 31, 2021. The decline in net loss was primarily due to a
decrease in general and administrative expense due to lower
severance, the collection of a previously reserved receivable and a
real estate tax refund at a sold property.
Funds from Operations, or FFO, as defined by the National
Association of Real Estate Investment Trusts, for the quarter ended
March 31, 2022, were $3.7 million, or $0.03 per diluted share. This
compares to FFO for the quarter ended March 31, 2021 of $(7.7)
million, or $(0.06) per diluted share. The following items impacted
FFO for the quarter ended March 31, 2022, compared to the
corresponding 2021 period:
- $0.07 per diluted share decrease in general and administrative
expense;
- $0.02 per diluted share increase in same property NOI; and
- $0.01 per diluted share increase in NOI from properties
sold.
Normalized FFO was $3.7 million, or $0.03 per diluted share, for
the quarter ended March 31, 2022. This compares to Normalized FFO
for the quarter ended March 31, 2021 of $(0.9) million, or $(0.01)
per diluted share. The following items impacted Normalized FFO for
the quarter ended March 31, 2022, compared to the corresponding
2021 period:
- $0.02 per diluted share increase in same property cash NOI and
lease termination fees;
- $0.01 per diluted share increase in NOI from properties sold;
and
- $0.01 per diluted share decrease in general and administrative
expense, excluding 2021 executive severance 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 (loss), determined in accordance with U.S. generally
accepted accounting principles, or GAAP, are included at the end of
this press release.
As of March 31, 2022, the company’s cash and cash equivalents
balance was $2.7 billion.
Same property results for the quarter ended March 31,
2022
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 83.3% leased as of March 31,
2022, compared to 82.3% as of December 31, 2021, and 85.6% as of
March 31, 2021.
- The same property portfolio commenced occupancy was 79.5% as of
March 31, 2022, compared to 79.2% as of December 31, 2021, and
82.2% as of March 31, 2021.
- Same property NOI increased 29.0% when compared to the same
period in 2021, primarily due to the collection of $1.9 million of
a previously reserved receivable in the quarter ended March 31,
2022.
- Same property cash NOI increased 30.0% when compared to the
same period in 2021 primarily due to the collection of the
previously reserved receivable described above.
- Excluding the collection of the previously reserved receivable,
same property NOI and same property cash NOI increased 5.4% and
5.5%, respectively, when compared to the same period in 2021.
- The company entered into leases for approximately 40,000 square
feet, including renewal leases for approximately 30,000 square feet
and new leases for approximately 10,000 square feet in the quarter
ended March 31, 2022.
- The GAAP rental rate on new and renewal leases was 5.0% higher
compared to the prior GAAP rental rate for the same space when
compared to the same period in 2021.
- The cash rental rate on new and renewal leases was 2.8% higher
compared to the prior cash rental rate for the same space when
compared to the same period in 2021.
The definitions and reconciliations of same property NOI and
same property cash NOI to net income (loss), 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 January 1, 2021 through
March 31, 2022.
Significant events during the quarter ended March 31,
2022
- On March 15, 2022, the Board of Trustees authorized the
repurchase, through June 30, 2023, of an additional $150 million of
its outstanding common shares under the company’s existing share
repurchase program.
- During the quarter ended March 31, 2022, the company
repurchased 2,851,030 of its common shares at a weighted average
price of $25.83 per share, for a total investment of $73.6
million.
Subsequent Events
- Subsequent to quarter-end, as of May 3, 2022, the company
repurchased 156,400 of its common shares at a weighted average
price of $25.98 per share for a total investment of $4.1 million.
The company has $198.2 million of remaining authorization available
under its share repurchase program, as of May 3, 2022.
- The company currently has two properties totaling 0.6 million
square feet in the sale process.
Earnings Conference Call & Supplemental Operating and
Financial Information
Equity Commonwealth will host a conference call to discuss first
quarter results on Thursday, May 5, 2022, 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 First Quarter 2022 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)
March 31, 2022
December 31, 2021
ASSETS
Real estate properties:
Land
$
44,060
$
44,060
Buildings and improvements
362,464
362,042
406,524
406,102
Accumulated depreciation
(159,755
)
(156,439
)
246,769
249,663
Cash and cash equivalents
2,721,929
2,800,998
Rents receivable
15,644
15,549
Other assets, net
15,676
15,173
Total assets
$
3,000,018
$
3,081,383
LIABILITIES AND EQUITY
Accounts payable, accrued expenses and
other
$
15,505
$
19,762
Rent collected in advance
3,732
3,986
Distributions payable
514
2,365
Total liabilities
$
19,751
$
26,113
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; 112,670,401 and
115,205,818 shares issued and outstanding, respectively
1,127
1,152
Additional paid in capital
4,053,256
4,128,656
Cumulative net income
3,799,854
3,798,552
Cumulative common distributions
(4,280,826
)
(4,281,195
)
Cumulative preferred distributions
(719,697
)
(717,700
)
Total shareholders’ equity
2,972,977
3,048,728
Noncontrolling interest
7,290
6,542
Total equity
$
2,980,267
$
3,055,270
Total liabilities and equity
$
3,000,018
$
3,081,383
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited, amounts in thousands,
except per share data)
Three Months Ended
March 31,
2022
2021
Revenues:
Rental revenue
$
15,840
$
14,169
Other revenue (1)
846
682
Total revenues
$
16,686
$
14,851
Expenses:
Operating expenses
$
4,533
$
6,621
Depreciation and amortization
4,412
4,351
General and administrative
8,002
15,729
Total expenses
$
16,947
$
26,701
Interest and other income, net
1,574
1,843
Income (loss) before income taxes
1,313
(10,007
)
Income tax expense
(8
)
(31
)
Net income (loss)
$
1,305
$
(10,038
)
Net (income) loss attributable to
noncontrolling interest
(3
)
20
Net income (loss) attributable to
Equity Commonwealth
$
1,302
$
(10,018
)
Preferred distributions
(1,997
)
(1,997
)
Net loss attributable to Equity
Commonwealth common shareholders
$
(695
)
$
(12,015
)
Weighted average common shares
outstanding — basic (2)
113,740
122,002
Weighted average common shares
outstanding — diluted(2)(3)
113,740
122,002
Earnings per common share attributable to
Equity Commonwealth common shareholders:
Basic
$
(0.01
)
$
(0.10
)
Diluted
$
(0.01
)
$
(0.10
)
(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 March 31, 2022 and 2021 includes 162 and
236 unvested, earned RSUs, respectively.
(3)
As of March 31, 2022, we had 4,915 series
D preferred shares outstanding. The series D preferred shares were
convertible into 3,237 common shares as of March 31, 2022 and 2021.
The series D preferred shares are antidilutive for GAAP EPS for the
three months ended March 31, 2022 and 2021.
CALCULATION OF FUNDS FROM
OPERATIONS (FFO) AND NORMALIZED FFO
(Unaudited, amounts in thousands,
except per share data)
Three Months Ended
March 31,
2022
2021
Calculation of FFO
Net income (loss)
$
1,305
$
(10,038
)
Real estate depreciation and
amortization
4,373
4,301
FFO attributable to Equity
Commonwealth
5,678
(5,737
)
Preferred distributions
(1,997
)
(1,997
)
FFO attributable to EQC common
shareholders and unitholders
$
3,681
$
(7,734
)
Calculation of Normalized FFO
FFO attributable to EQC common
shareholders and unitholders
$
3,681
$
(7,734
)
Straight-line rent adjustments
10
(307
)
Executive severance expense
—
7,107
Normalized FFO attributable to EQC
common shareholders and unitholders
$
3,691
$
(934
)
Weighted average common shares and units
outstanding — basic (1)
114,008
122,245
Weighted average common shares and units
outstanding — diluted (1)
114,468
122,245
FFO attributable to EQC common
shareholders and unitholders per share and unit — basic and
diluted
$
0.03
$
(0.06
)
Normalized FFO attributable to EQC common
shareholders and unitholders per share and unit — basic and
diluted
$
0.03
$
(0.01
)
(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 March 31, 2022 and 2021 include 268 and 243
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
3/31/2022
12/31/2021
9/30/2021
6/30/2021
3/31/2021
Calculation of Same Property NOI and
Same Property Cash Basis NOI:
Rental revenue
$
15,840
$
13,503
$
13,141
$
14,114
$
14,169
Other revenue (1)
846
892
740
761
682
Operating expenses
(4,533
)
(6,582
)
(6,102
)
(6,588
)
(6,621
)
NOI
$
12,153
$
7,813
$
7,779
$
8,287
$
8,230
Straight-line rent adjustments
10
(130
)
(409
)
(561
)
(307
)
Lease termination fees
(325
)
(209
)
(7
)
—
—
Cash Basis NOI
$
11,838
$
7,474
$
7,363
$
7,726
$
7,923
Cash Basis NOI from non-same properties
(2)
(1,699
)
(111
)
12
22
(124
)
Same Property Cash Basis NOI
$
10,139
$
7,363
$
7,375
$
7,748
$
7,799
Non-cash rental income and lease
termination fees from same properties
315
338
416
561
307
Same Property NOI
$
10,454
$
7,701
$
7,791
$
8,309
$
8,106
Reconciliation of Same Property NOI to
GAAP Net Income (Loss):
Same Property NOI
$
10,454
$
7,701
$
7,791
$
8,309
$
8,106
Non-cash rental income and lease
termination fees from same properties
(315
)
(338
)
(416
)
(561
)
(307
)
Same Property Cash Basis NOI
$
10,139
$
7,363
$
7,375
$
7,748
$
7,799
Cash Basis NOI from non-same properties
(2)
1,699
111
(12
)
(22
)
124
Cash Basis NOI
$
11,838
$
7,474
$
7,363
$
7,726
$
7,923
Straight-line rent adjustments
(10
)
130
409
561
307
Lease termination fees
325
209
7
—
—
NOI
$
12,153
$
7,813
$
7,779
$
8,287
$
8,230
Depreciation and amortization
(4,412
)
(4,403
)
(4,588
)
(4,432
)
(4,351
)
General and administrative
(8,002
)
(6,753
)
(7,572
)
(7,390
)
(15,729
)
Interest and other income, net
1,574
1,732
1,599
1,626
1,843
Income (loss) before income
taxes
$
1,313
$
(1,611
)
$
(2,782
)
$
(1,909
)
$
(10,007
)
Income tax expense
(8
)
(26
)
(32
)
(31
)
(31
)
Net income (loss)
$
1,305
$
(1,637
)
$
(2,814
)
$
(1,940
)
$
(10,038
)
(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 same property versions of these
measures include the results of properties continuously owned from
January 1, 2021 through March 31, 2022. 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/20220504005895/en/
Bill Griffiths, (312) 646-2801 ir@eqcre.com
Equity Commonwealth (NYSE:EQC)
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