Equity Commonwealth Reports Second Quarter 2023 Results

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.