Equity Commonwealth Reports Fourth Quarter and Full Year 2018 Results
Business Wire 13-Feb-2019 4:15 PM
Equity Commonwealth (NYSE:EQC) today reported its financial results for
the quarter and year ended December 31, 2018. All per share results are
reported on a diluted basis.
Financial results for the quarter ended December 31, 2018
Net income attributable to common shareholders for the quarter ended
December 31, 2018 was $13.4 million, or $0.11 per share. This compares
to net loss attributable to common shareholders for the quarter ended
December 31, 2017 of $23.6 million, or $0.19 per share. The increase in
net income was primarily due to lower losses from property sales, an
increase in interest and other income, and a decrease in interest
expense.
Funds from Operations (FFO), as defined by the National Association of
Real Estate Investment Trusts, for the quarter ended December 31, 2018,
were $25.6 million, or $0.21 per share. This compares to FFO for the
quarter ended December 31, 2017 of $24.0 million, or $0.19 per share.
The following items impacted FFO for the quarter ended December 31,
2018, compared to the corresponding 2017 period:
-
($0.12) per share from properties sold;
-
$0.06 per share of increase in interest and other income;
-
$0.05 per share of interest expense savings;
-
$0.02 per share of general & administrative expense savings; and
-
$0.01 per share of income from same properties.
Normalized FFO for the quarter ended December 31, 2018 was $25.5
million, or $0.21 per share. This compares to Normalized FFO for the
quarter ended December 31, 2017 of $22.6 million, or $0.18 per share.
The following items impacted Normalized FFO for the quarter ended
December 31, 2018, compared to the corresponding 2017 period:
-
($0.12) per share from properties sold;
-
$0.06 per share of increase in interest income;
-
$0.05 per share of interest expense savings;
-
$0.02 per share of general & administrative expense savings; and
-
$0.02 per share from same properties.
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 tend to 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.
For the quarter ended December 31, 2018, the company's balance of cash
and marketable securities was $2.7 billion, or $21 per share. Total debt
outstanding as of December 31, 2018 was $275 million.
The weighted average number of diluted common shares outstanding used
for calculating net income or loss per share for the quarter ended
December 31, 2018 was 123,375,686 shares, compared to 124,293,289 for
the quarter ended December 31, 2017.
Same property results for the quarter ended December 31, 2018
The company's same property portfolio at the end of the quarter
consisted of 10 properties totaling 5.1 million square feet. Operating
results were as follows:
-
The same property portfolio was 94.8% leased as of December 31, 2018,
compared to 93.7% as of September 30, 2018, and 90.6% as of December
31, 2017;
-
The same property portfolio commenced occupancy was 91.2% as of
December 31, 2018, compared to 90.8% as of September 30, 2018, and
86.4% as of December 31, 2017;
-
Same property net operating income (NOI) increased 7.3% when compared
to the same period in 2017;
-
Same property cash NOI increased 8.4% when compared to the same period
in 2017;
-
The company entered into leases for approximately 173,000 square feet,
including renewal leases for approximately 93,000 square feet and new
leases for approximately 80,000 square feet;
-
GAAP rental rates on new and renewal leases were 22.5% higher compared
to prior GAAP rental rates for the same space; and
-
Cash rental rates on new and renewal leases were 10.0% 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 operating income, determined in accordance with
GAAP, are included at the end of this press release. The same property
portfolio includes properties continuously owned from October 1, 2017
through December 31, 2018.
Financial results for the year ended December 31, 2018
Net income attributable to common shareholders for the year ended
December 31, 2018 was $264.8 million, or $2.15 per share. This compares
to net income attributable to common shareholders for the year ended
December 31, 2017 of $21.7 million, or $0.17 per share. The increase in
net income was primarily due to gains from property sales, a decrease in
interest expense, and an increase in interest and other income.
FFO for the year ended December 31, 2018 was $73.4 million, or $0.59 per
share. This compares to FFO for the year ended December 31, 2017 of
$115.4 million, or $0.92 per share. The decrease in FFO was primarily
the result of property sales. The following items impacted FFO for the
year ended December 31, 2018, compared to the corresponding 2017 period:
-
($0.69) per share from properties sold;
-
($0.05) per share of loss on debt extinguishment;
-
($0.02) per share of income tax expense;
-
$0.21 per share of interest expense savings;
-
$0.17 per share of increase in interest and other income (net of $0.05
per share of losses from the sale of securities and the sale of a
mortgage note receivable);
-
$0.03 per share of general & administrative expense savings; and
-
$0.03 per share from same properties.
Normalized FFO for the year ended December 31, 2018 was $85.4 million,
or $0.69 per share. This compares to Normalized FFO for the year ended
December 31, 2017 of $103.3 million, or $0.83 per share. The following
items impacted Normalized FFO for the year ended December 31, 2018,
compared to the corresponding 2017 period:
-
($0.67) per share from properties sold;
-
$0.22 per share of increase in interest income;
-
$0.21 per share of interest expense savings;
-
$0.06 per share from same properties; and
-
$0.03 per share of general & administrative expense savings.
The weighted average number of diluted common shares outstanding when
calculating net income or loss per share for the year ended December 31,
2018 was 123,384,813 shares, compared to 125,128,772 for the year ended
December 31, 2017.
Same property results for the year ended December 31, 2018
The company's same property portfolio at the end of the year consisted
of 10 properties totaling 5.1 million square feet. Operating results
were as follows:
-
Same property NOI increased 3.4% when compared to the same period in
2017;
-
Same property cash NOI increased 11.8% when compared to the same
period in 2017;
-
The company entered into leases for approximately 976,000 square feet,
including new leases for approximately 757,000 square feet and renewal
leases for approximately 219,000 square feet;
-
GAAP rental rates on new and renewal leases were 14.8% higher compared
to prior GAAP rental rates for the same space; and
-
Cash rental rates on new and renewal leases were 3.4% 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 operating income, determined in accordance with
GAAP, are included at the end of this press release. The same property
portfolio includes properties continuously owned from January 1, 2017
through December 31, 2018.
Significant events during the quarter ended December 31, 2018
-
The company sold 97 Newberry Road, a 289,000 square foot industrial
property, in East Windsor, Connecticut, for a gross sale price of $7.1
million. In connection with the sale, the company repaid the
outstanding $4.9 million, 5.7% mortgage loan on the property and
incurred $0.5 million of prepayment costs.
-
The company paid a special, one-time cash distribution of $2.50 per
share on October 23, 2018 to shareholders of record on October 9, 2018.
-
The company determined not to extend its $750 million unsecured
revolving credit facility, which was terminated on December 26, 2018.
Significant events during the year ended December 31, 2018
-
The company sold seven properties totaling 4,405,000 square feet, for
a gross sales price of $1.0 billion, at a weighted average cap rate in
the high-5% range. Proceeds after credits for capital, contractual
lease costs, and rent abatement were $988.3 million.
-
The company repaid $579.9 million of debt with a weighted average
coupon of 4.0%.
-
The company repurchased approximately 2.97 million of its common
shares at an average price of $29.67 per share for a total investment
of $88.1 million. The company has $130.9 million authorized for future
share repurchases.
Subsequent Events
-
On January 29, 2019, the company entered into a contract to sell its
1,287,000 square foot office property at 1735 Market Street in
Philadelphia, PA, for a gross sale price of $451.6 million. Proceeds
after credits for capital costs, contractual lease costs, and rent
abatements are expected to be approximately $435.6 million. The
closing is expected to occur on or before March 27, 2019. This
transaction is subject to customary closing conditions and extensions,
and there is no certainty that it will close.
-
The company currently has three properties totaling 2.7 million square
feet for sale, including 1735 Market Street.
Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss fourth
quarter and full year results on Thursday, February 14, 2019, at 9:00
A.M. CST. 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 Fourth Quarter 2018 Supplemental Operating and Financial
Data is available for 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 December 31, 2018, EQC's
same property portfolio comprised 10 properties and 5.1 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, any statements regarding marketing
the company's 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," "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.
Any 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
most recent Annual Report on Form 10-K and in the company's Quarterly
Reports on Form 10-Q for subsequent quarters.
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
December 31, 2017
|
|
ASSETS
|
|
|
|
|
|
|
Real estate properties:
|
|
|
|
|
|
|
Land
|
|
$
|
135,142
|
|
|
|
$
|
191,775
|
|
|
Buildings and improvements
|
|
1,004,500
|
|
|
|
1,555,836
|
|
|
|
|
1,139,642
|
|
|
|
1,747,611
|
|
|
Accumulated depreciation
|
|
(375,968
|
)
|
|
|
(450,718
|
)
|
|
|
|
763,674
|
|
|
|
1,296,893
|
|
|
Assets held for sale
|
|
—
|
|
|
|
97,688
|
|
|
Acquired real estate leases, net
|
|
275
|
|
|
|
23,847
|
|
|
Cash and cash equivalents
|
|
2,400,803
|
|
|
|
2,351,693
|
|
|
Marketable securities
|
|
249,602
|
|
|
|
276,928
|
|
|
Restricted cash
|
|
3,298
|
|
|
|
8,897
|
|
|
Rents receivable, net of allowance for doubtful accounts of $4,974
and $4,771, respectively
|
|
51,089
|
|
|
|
93,436
|
|
|
Other assets, net
|
|
62,031
|
|
|
|
87,563
|
|
|
Total assets
|
|
$
|
3,530,772
|
|
|
|
$
|
4,236,945
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
Senior unsecured debt, net
|
|
$
|
248,473
|
|
|
|
$
|
815,984
|
|
|
Mortgage notes payable, net
|
|
26,482
|
|
|
|
32,594
|
|
|
Liabilities related to properties held for sale
|
|
—
|
|
|
|
1,840
|
|
|
Accounts payable, accrued expenses and other
|
|
62,368
|
|
|
|
74,956
|
|
|
Rent collected in advance
|
|
9,451
|
|
|
|
11,076
|
|
|
Total liabilities
|
|
$
|
346,774
|
|
|
|
$
|
936,450
|
|
|
|
|
|
|
|
|
|
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; 121,572,155 and 124,217,616 shares issued and
outstanding, respectively
|
|
1,216
|
|
|
|
1,242
|
|
|
Additional paid in capital
|
|
4,305,974
|
|
|
|
4,380,313
|
|
|
Cumulative net income
|
|
2,870,974
|
|
|
|
2,596,259
|
|
|
Cumulative other comprehensive loss
|
|
(342
|
)
|
|
|
(95
|
)
|
|
Cumulative common distributions
|
|
(3,420,548
|
)
|
|
|
(3,111,868
|
)
|
|
Cumulative preferred distributions
|
|
(693,736
|
)
|
|
|
(685,748
|
)
|
|
Total shareholders' equity
|
|
3,182,801
|
|
|
|
3,299,366
|
|
|
Noncontrolling interest
|
|
1,197
|
|
|
|
1,129
|
|
|
Total equity
|
|
$
|
3,183,998
|
|
|
|
$
|
3,300,495
|
|
|
Total liabilities and equity
|
|
$
|
3,530,772
|
|
|
|
$
|
4,236,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
31,527
|
|
|
$
|
54,672
|
|
|
|
$
|
144,425
|
|
|
$
|
270,320
|
|
|
Tenant reimbursements and other income
|
|
11,398
|
|
|
16,951
|
|
|
|
52,597
|
|
|
70,251
|
|
|
Total revenues
|
|
$
|
42,925
|
|
|
$
|
71,623
|
|
|
|
$
|
197,022
|
|
|
$
|
340,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
15,539
|
|
|
$
|
30,674
|
|
|
|
$
|
79,916
|
|
|
$
|
141,425
|
|
|
Depreciation and amortization
|
|
10,830
|
|
|
18,738
|
|
|
|
49,041
|
|
|
90,708
|
|
|
General and administrative
|
|
8,973
|
|
|
12,033
|
|
|
|
44,439
|
|
|
47,760
|
|
|
Loss on asset impairment
|
|
—
|
|
|
—
|
|
|
|
12,087
|
|
|
19,714
|
|
|
Total expenses
|
|
$
|
35,342
|
|
|
$
|
61,445
|
|
|
|
$
|
185,483
|
|
|
$
|
299,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
7,583
|
|
|
$
|
10,178
|
|
|
|
$
|
11,539
|
|
|
$
|
40,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income, net
|
|
15,741
|
|
|
8,393
|
|
|
|
46,815
|
|
|
26,380
|
|
|
Interest expense (including net amortization of debt discounts,
premiums and deferred financing fees of $548, $789, $2,553 and
$3,135, respectively)
|
|
(5,035
|
)
|
|
(10,796
|
)
|
|
|
(26,585
|
)
|
|
(52,183
|
)
|
|
Loss on early extinguishment of debt
|
|
(719
|
)
|
|
(227
|
)
|
|
|
(7,122
|
)
|
|
(493
|
)
|
|
(Loss) gain on sale of properties, net
|
|
(1,608
|
)
|
|
(29,172
|
)
|
|
|
251,417
|
|
|
15,498
|
|
|
Income (loss) before income taxes
|
|
15,962
|
|
|
(21,624
|
)
|
|
|
276,064
|
|
|
30,166
|
|
|
Income tax (expense) benefit
|
|
(540
|
)
|
|
55
|
|
|
|
(3,156
|
)
|
|
(500
|
)
|
|
Net income (loss)
|
|
$
|
15,422
|
|
|
$
|
(21,569
|
)
|
|
|
$
|
272,908
|
|
|
$
|
29,666
|
|
|
Net (income) loss attributable to noncontrolling interest
|
|
(5
|
)
|
|
8
|
|
|
|
(95
|
)
|
|
(10
|
)
|
|
Net income (loss) attributable to Equity Commonwealth
|
|
$
|
15,417
|
|
|
$
|
(21,561
|
)
|
|
|
$
|
272,813
|
|
|
$
|
29,656
|
|
|
Preferred distributions
|
|
(1,997
|
)
|
|
(1,997
|
)
|
|
|
(7,988
|
)
|
|
(7,988
|
)
|
|
Net income (loss) attributable to Equity Commonwealth common
shareholders
|
|
$
|
13,420
|
|
|
$
|
(23,558
|
)
|
|
|
$
|
264,825
|
|
|
$
|
21,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — basic (1)
|
|
|
121,749
|
|
|
|
124,293
|
|
|
|
|
122,314
|
|
|
|
124,125
|
|
|
Weighted average common shares outstanding — diluted (1)
|
|
|
123,376
|
|
|
|
124,293
|
|
|
|
|
123,385
|
|
|
|
125,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to Equity Commonwealth
common shareholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
(0.19
|
)
|
|
|
$
|
2.17
|
|
|
$
|
0.17
|
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
(0.19
|
)
|
|
|
$
|
2.15
|
|
|
$
|
0.17
|
|
|
|
|
|
|
(1)
|
|
Weighted average common shares outstanding for the three months and
year ended December 31, 2018 includes 203 and 308 unvested, earned
RSUs, respectively. Weighted average common shares outstanding for
the three months and year ended December 31, 2017 includes 133 and
33 unvested, earned RSUs, respectively.
|
|
|
|
|
|
|
|
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
Calculation of FFO
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
15,422
|
|
|
$
|
(21,569
|
)
|
|
|
$
|
272,908
|
|
|
$
|
29,666
|
|
|
Real estate depreciation and amortization
|
|
10,518
|
|
|
18,442
|
|
|
|
47,816
|
|
|
89,519
|
|
|
Loss on asset impairment
|
|
—
|
|
|
—
|
|
|
|
12,087
|
|
|
19,714
|
|
|
Loss (gain) on sale of properties, net
|
|
1,608
|
|
|
29,172
|
|
|
|
(251,417
|
)
|
|
(15,498
|
)
|
|
FFO attributable to Equity Commonwealth
|
|
27,548
|
|
|
26,045
|
|
|
|
81,394
|
|
|
123,401
|
|
|
Preferred distributions
|
|
(1,997
|
)
|
|
(1,997
|
)
|
|
|
(7,988
|
)
|
|
(7,988
|
)
|
|
FFO attributable to EQC common shareholders and unitholders
|
|
$
|
25,551
|
|
|
$
|
24,048
|
|
|
|
$
|
73,406
|
|
|
$
|
115,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of Normalized FFO
|
|
|
|
|
|
|
|
|
|
|
FFO attributable to EQC common shareholders and unitholders
|
|
$
|
25,551
|
|
|
$
|
24,048
|
|
|
|
$
|
73,406
|
|
|
$
|
115,413
|
|
|
Lease value amortization
|
|
(22
|
)
|
|
295
|
|
|
|
54
|
|
|
1,774
|
|
|
Straight line rent adjustments
|
|
(986
|
)
|
|
(1,938
|
)
|
|
|
(4,971
|
)
|
|
(14,425
|
)
|
|
Loss on early extinguishment of debt
|
|
719
|
|
|
227
|
|
|
|
7,122
|
|
|
493
|
|
|
Loss on sale of securities
|
|
—
|
|
|
—
|
|
|
|
4,987
|
|
|
—
|
|
|
Loss on sale of real estate mortgage receivable
|
|
—
|
|
|
—
|
|
|
|
2,117
|
|
|
—
|
|
|
Income taxes related to gains on property sales
|
|
228
|
|
|
—
|
|
|
|
2,726
|
|
|
—
|
|
|
Normalized FFO attributable to EQC common shareholders and
unitholders
|
|
$
|
25,490
|
|
|
$
|
22,632
|
|
|
|
$
|
85,441
|
|
|
$
|
103,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and units outstanding -- basic (1)
|
|
121,794
|
|
|
124,336
|
|
|
|
122,358
|
|
|
124,163
|
|
|
Weighted average common shares and units outstanding -- diluted (1)
|
|
123,421
|
|
|
124,932
|
|
|
|
123,429
|
|
|
125,129
|
|
|
FFO attributable to EQC common shareholders and unitholders per
share and unit -- basic
|
|
$
|
0.21
|
|
|
$
|
0.19
|
|
|
|
$
|
0.60
|
|
|
$
|
0.93
|
|
|
FFO attributable to EQC common shareholders and unitholders per
share and unit -- diluted
|
|
$
|
0.21
|
|
|
$
|
0.19
|
|
|
|
$
|
0.59
|
|
|
$
|
0.92
|
|
|
Normalized FFO attributable to EQC common shareholders and
unitholders per share and unit -- basic
|
|
$
|
0.21
|
|
|
$
|
0.18
|
|
|
|
$
|
0.70
|
|
|
$
|
0.83
|
|
|
Normalized FFO attributable to EQC common shareholders and
unitholders per share and unit -- diluted
|
|
$
|
0.21
|
|
|
$
|
0.18
|
|
|
|
$
|
0.69
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Our calculations of FFO and Normalized FFO attributable to EQC
common shareholders and unitholders
per share and unit - basic for the three months and year ended
December 31, 2018, include 45 and 44 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 three
months and year ended December 31, 2017, include 43 and 38
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, operating income (loss) 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, operating income
(loss) 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, operating income
(loss) 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)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
12/31/2018
|
|
9/30/2018
|
|
6/30/2018
|
|
3/31/2018
|
|
12/31/2017
|
|
Calculation of Same Property NOI and Same Property Cash Basis NOI:
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
31,527
|
|
|
$
|
34,138
|
|
|
$
|
35,211
|
|
|
$
|
43,549
|
|
|
$
|
54,672
|
|
|
Tenant reimbursements and other income
|
|
11,398
|
|
|
12,735
|
|
|
13,425
|
|
|
15,039
|
|
|
16,951
|
|
|
Operating expenses
|
|
(15,539
|
)
|
|
(20,257
|
)
|
|
(19,521
|
)
|
|
(24,599
|
)
|
|
(30,674
|
)
|
|
NOI
|
|
$
|
27,386
|
|
|
$
|
26,616
|
|
|
$
|
29,115
|
|
|
$
|
33,989
|
|
|
$
|
40,949
|
|
|
Straight line rent adjustments
|
|
(986
|
)
|
|
(1,435
|
)
|
|
(1,022
|
)
|
|
(1,528
|
)
|
|
(1,938
|
)
|
|
Lease value amortization
|
|
(22
|
)
|
|
(4
|
)
|
|
(18
|
)
|
|
98
|
|
|
295
|
|
|
Lease termination fees
|
|
(19
|
)
|
|
(395
|
)
|
|
(1,557
|
)
|
|
(965
|
)
|
|
(942
|
)
|
|
Cash Basis NOI
|
|
$
|
26,359
|
|
|
$
|
24,782
|
|
|
$
|
26,518
|
|
|
$
|
31,594
|
|
|
$
|
38,364
|
|
|
Cash Basis NOI from non-same properties (1)
|
|
(1,325
|
)
|
|
(405
|
)
|
|
(2,259
|
)
|
|
(7,966
|
)
|
|
(15,274
|
)
|
|
Same Property Cash Basis NOI
|
|
$
|
25,034
|
|
|
$
|
24,377
|
|
|
$
|
24,259
|
|
|
$
|
23,628
|
|
|
$
|
23,090
|
|
|
Non-cash rental income and lease termination fees from same
properties
|
|
1,059
|
|
|
1,159
|
|
|
1,147
|
|
|
1,130
|
|
|
1,235
|
|
|
Same Property NOI
|
|
$
|
26,093
|
|
|
$
|
25,536
|
|
|
$
|
25,406
|
|
|
$
|
24,758
|
|
|
$
|
24,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Same Property NOI to GAAP Operating Income:
|
|
|
|
|
|
|
|
|
|
|
|
Same Property NOI
|
|
$
|
26,093
|
|
|
$
|
25,536
|
|
|
$
|
25,406
|
|
|
$
|
24,758
|
|
|
$
|
24,325
|
|
|
Non-cash rental income and termination fees from same properties
|
|
(1,059
|
)
|
|
(1,159
|
)
|
|
(1,147
|
)
|
|
(1,130
|
)
|
|
(1,235
|
)
|
|
Same Property Cash Basis NOI
|
|
$
|
25,034
|
|
|
$
|
24,377
|
|
|
$
|
24,259
|
|
|
$
|
23,628
|
|
|
$
|
23,090
|
|
|
Cash Basis NOI from non-same properties (1)
|
|
1,325
|
|
|
405
|
|
|
2,259
|
|
|
7,966
|
|
|
15,274
|
|
|
Cash Basis NOI
|
|
$
|
26,359
|
|
|
$
|
24,782
|
|
|
$
|
26,518
|
|
|
$
|
31,594
|
|
|
$
|
38,364
|
|
|
Straight line rent adjustments
|
|
986
|
|
|
1,435
|
|
|
1,022
|
|
|
1,528
|
|
|
1,938
|
|
|
Lease value amortization
|
|
22
|
|
|
4
|
|
|
18
|
|
|
(98
|
)
|
|
(295
|
)
|
|
Lease termination fees
|
|
19
|
|
|
395
|
|
|
1,557
|
|
|
965
|
|
|
942
|
|
|
NOI
|
|
$
|
27,386
|
|
|
$
|
26,616
|
|
|
$
|
29,115
|
|
|
$
|
33,989
|
|
|
$
|
40,949
|
|
|
Depreciation and amortization
|
|
(10,830
|
)
|
|
(11,287
|
)
|
|
(13,021
|
)
|
|
(13,903
|
)
|
|
(18,738
|
)
|
|
General and administrative
|
|
(8,973
|
)
|
|
(10,905
|
)
|
|
(11,222
|
)
|
|
(13,339
|
)
|
|
(12,033
|
)
|
|
Loss on asset impairment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,087
|
)
|
|
—
|
|
|
Operating Income (Loss)
|
|
$
|
7,583
|
|
|
$
|
4,424
|
|
|
$
|
4,872
|
|
|
$
|
(5,340
|
)
|
|
$
|
10,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Cash Basis NOI from non-same properties for all periods presented
includes the operations of properties disposed or classified as held
for sale and land parcels.
|
|
|
|
|
|
|
|
CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND
SAME PROPERTY CASH BASIS NOI
(amounts in thousands)
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Calculation of Same Property NOI and Same Property Cash Basis NOI:
|
|
|
|
|
|
|
Rental income
|
|
$
|
144,425
|
|
|
|
$
|
270,320
|
|
|
Tenant reimbursements and other income
|
|
52,597
|
|
|
|
70,251
|
|
|
Operating expenses
|
|
(79,916
|
)
|
|
|
(141,425
|
)
|
|
NOI
|
|
$
|
117,106
|
|
|
|
$
|
199,146
|
|
|
Straight line rent adjustments
|
|
(4,971
|
)
|
|
|
(14,425
|
)
|
|
Lease value amortization
|
|
54
|
|
|
|
1,774
|
|
|
Lease termination fees
|
|
(2,936
|
)
|
|
|
(4,944
|
)
|
|
Cash Basis NOI
|
|
$
|
109,253
|
|
|
|
$
|
181,551
|
|
|
Cash Basis NOI from non-same properties (1)
|
|
(11,955
|
)
|
|
|
(94,487
|
)
|
|
Same Property Cash Basis NOI
|
|
$
|
97,298
|
|
|
|
$
|
87,064
|
|
|
Non-cash rental income and lease termination fees from same
properties
|
|
4,495
|
|
|
|
11,350
|
|
|
Same Property NOI
|
|
$
|
101,793
|
|
|
|
$
|
98,414
|
|
|
|
|
|
|
|
|
|
Reconciliation of Same Property NOI to GAAP Operating Income:
|
|
|
|
|
|
|
Same Property NOI
|
|
$
|
101,793
|
|
|
|
$
|
98,414
|
|
|
Non-cash rental income and termination fees from same properties
|
|
(4,495
|
)
|
|
|
(11,350
|
)
|
|
Same Property Cash Basis NOI
|
|
$
|
97,298
|
|
|
|
$
|
87,064
|
|
|
Cash Basis NOI from non-same properties (1)
|
|
11,955
|
|
|
|
94,487
|
|
|
Cash Basis NOI
|
|
$
|
109,253
|
|
|
|
$
|
181,551
|
|
|
Straight line rent adjustments
|
|
4,971
|
|
|
|
14,425
|
|
|
Lease value amortization
|
|
(54
|
)
|
|
|
(1,774
|
)
|
|
Lease termination fees
|
|
2,936
|
|
|
|
4,944
|
|
|
NOI
|
|
$
|
117,106
|
|
|
|
$
|
199,146
|
|
|
Depreciation and amortization
|
|
(49,041
|
)
|
|
|
(90,708
|
)
|
|
General and administrative
|
|
(44,439
|
)
|
|
|
(47,760
|
)
|
|
Loss on asset impairment
|
|
(12,087
|
)
|
|
|
(19,714
|
)
|
|
Operating Income
|
|
$
|
11,539
|
|
|
|
$
|
40,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Cash Basis NOI from non-same properties for all periods presented
includes the operations of properties disposed or classified as held
for sale and land parcels.
|
|
|
|
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 October 1, 2017 through December
31, 2018. The year-to-date same property versions of these measures
include the results of properties continuously owned from January 1,
2017 through December 31, 2018. Land parcels and 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
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, operating income (loss)
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, operating income
(loss) 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.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190213005718/en/
