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Equity Commonwealth Reports Fourth Quarter and Full Year 2023 Results

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Equity Commonwealth (EQC) reported strong financial results for the quarter and year ended December 31, 2023, with net income attributable to common shareholders increasing to $24.6 million and $83.2 million, respectively. Funds from Operations (FFO) and Normalized FFO also showed significant growth. The company's same property portfolio experienced fluctuations in occupancy rates and NOI, impacting overall performance. Key events during the year included a special cash distribution, changes in board leadership, and share repurchases.
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An increase in net income and Funds from Operations (FFO) for Equity Commonwealth reflects a positive trend in the company's earnings, primarily driven by higher interest income due to increased average interest rates. This is a significant indicator for investors, as it demonstrates the company's ability to generate more income from its investments, which could lead to enhanced shareholder value. However, it's important to note the decrease in same property Net Operating Income (NOI) and cash NOI, which suggests that the company's core real estate operations may be facing challenges, such as tenant turnover and increased operating expenses. The substantial cash and cash equivalents balance of $2.2 billion provides the company with significant liquidity and opportunities for strategic investments or shareholder returns, evidenced by the special distribution and share repurchase program.

Equity Commonwealth's reported increase in GAAP and cash rental rates on new and renewal leases indicates a robust leasing environment, allowing the company to negotiate higher rents. A 26.4% increase in GAAP rental rates and 7.9% in cash rental rates are exceptional, potentially reflecting a strategic positioning of their properties or a favorable market trend. However, a decline in same property NOI and cash NOI highlights operational challenges. The increase in lease termination fees and repairs costs, combined with the dip in occupancy rates, could be a concern for sustaining revenue growth. The company's leasing activity, with new leases and renewals totaling 214,000 square feet, shows an active management approach to tenant engagement and property utilization.

The strategic decisions made by Equity Commonwealth, including the special cash distribution and the authorization of a $150 million share repurchase program, indicate a shareholder-friendly capital allocation policy. The special distribution of $4.25 per common share represents a significant return of capital to shareholders, which could be a result of the company's strong liquidity position. The share repurchase program, with $93.3 million remaining authorization, suggests confidence in the intrinsic value of the company's shares by the management. Such buybacks can potentially increase earnings per share and provide support to the stock price. The reduction of the Board of Trustees from 8 to 7 members following the passing of former Chairman Sam Zell could streamline decision-making processes, although it also represents a transition period for corporate governance.

CHICAGO--(BUSINESS WIRE)-- Equity Commonwealth (NYSE: EQC) today reported financial results for the quarter and year ended December 31, 2023.

Financial results for the quarter ended December 31, 2023

Net income attributable to common shareholders was $24.6 million, or $0.23 per diluted share, for the quarter ended December 31, 2023. This compares to net income attributable to common shareholders of $18.9 million, or $0.17 per diluted share, for the quarter ended December 31, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates.

Funds from Operations, or FFO, as defined by the National Association of Real Estate Investment Trusts, for the quarter ended December 31, 2023, were $28.8 million, or $0.27 per diluted share. This compares to FFO for the quarter ended December 31, 2022 of $23.5 million, or $0.21 per diluted share. The following item impacted FFO for the quarter ended December 31, 2023, compared to the corresponding 2022 period:

  • $0.05 per diluted share increase in interest and other income, net.

Normalized FFO was $28.3 million, or $0.26 per diluted share, for the quarter ended December 31, 2023. This compares to Normalized FFO for the quarter ended December 31, 2022 of $23.9 million, or $0.21 per diluted share. The following item impacted Normalized FFO for the quarter ended December 31, 2023, compared to the corresponding 2022 period:

  • $0.05 per diluted share increase in interest and other income, net.

Same property results for the quarter ended December 31, 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 81.2% leased as of December 31, 2023, compared to 80.8% as of September 30, 2023, and 82.8% as of December 31, 2022.
  • The same property portfolio commenced occupancy was 80.0% as of December 31, 2023, compared to 79.9% as of September 30, 2023, and 78.7% as of December 31, 2022.
  • Same property NOI decreased 2.3% when compared to the same period in 2022, primarily due to lower lease termination fees and an increase in repairs.
  • Same property cash NOI decreased 12.0% when compared to the same period in 2022, primarily due to tenant turnover and an increase in free rent.
  • The company entered into leases for approximately 32,000 square feet, including renewal leases for approximately 27,000 square feet and new leases for approximately 5,000 square feet.
  • The GAAP rental rate on new and renewal leases was 26.4% higher compared to the prior GAAP rental rate for the same space.
  • The cash rental rate on new and renewal leases was 7.9% higher 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 (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 October 1, 2022 through December 31, 2023.

Financial results for the year ended December 31, 2023

Net income attributable to common shareholders was $83.2 million, or $0.75 per diluted share, for the year ended December 31, 2023. This compares to net income attributable to common shareholders of $29.3 million, or $0.26 per diluted share, for the year ended December 31, 2022. The increase in net income was primarily due to an increase in interest income from higher average interest rates.

FFO for the year ended December 31, 2023, was $100.9 million, or $0.91 per diluted share. This compares to FFO for the year ended December 31, 2022 of $46.9 million, or $0.41 per diluted share. The following items impacted FFO for the year ended December 31, 2023, compared to the corresponding 2022 period:

  • $0.61 per diluted share increase in interest income and other, 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;
  • $(0.04) per share decrease in same property NOI;
  • $(0.01) per diluted share decrease in NOI from properties sold; and
  • $(0.01) per diluted share increase in income tax expense.

Normalized FFO was $106.7 million, or $0.97 per diluted share, for the year ended December 31, 2023. This compares to Normalized FFO for the year ended December 31, 2022 of $47.2 million, or $0.42 per diluted share. The following items impacted Normalized FFO for the year ended December 31, 2023, compared to the corresponding 2022 period:

  • $0.61 per diluted share increase in interest income and other, net;
  • $(0.04) per diluted share decrease in same property cash NOI and lease termination fees;
  • $(0.01) per diluted share decrease in NOI from properties sold;
  • $(0.01) per diluted share increase in income tax expense; and
  • $(0.01) per diluted share increase in general and administrative expenses.

As of December 31, 2023, the company’s cash and cash equivalents balance was $2.2 billion.

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.

Same property results for the year ended December 31, 2023

The company’s same property portfolio at the end of the year consisted of 4 properties totaling 1.5 million square feet. Operating results were as follows:

  • Same property NOI decreased 11.5% when compared to the same period in 2022, primarily due to the collection of $1.9 million of a previously reserved receivable in the year ended December 31, 2022, a decrease in average commenced occupancy and an increase in pre-leasing demolition costs, partially offset by higher parking revenue.
  • Same property cash NOI decreased 11.4% when compared to the same period in 2022, primarily due to the collection of the previously reserved receivable described above, a decrease in average commenced occupancy and an increase in pre-leasing demolition costs, partially offset by higher parking revenue.
  • Excluding the collection of the previously reserved receivable, same property NOI and same property cash NOI decreased 6.7% and 6.5%, respectively, when compared to the same period in 2022.
  • The company entered into leases for approximately 214,000 square feet, including renewal leases for approximately 157,000 square feet and new leases for approximately 57,000 square feet.
  • The GAAP rental rate on new and renewal leases was 13.7% higher compared to the prior GAAP rental rate for the same space.
  • The cash rental rate on new and renewal leases was 1.6% higher 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 (loss), determined in accordance with GAAP, are included at the end of this press release. The same property portfolio at the end of the year included properties continuously owned from January 1, 2022 through December 31, 2023.

Significant events during the year ended December 31, 2023

  • On February 13, 2023, the company declared a special, one-time cash distribution of $4.25 per common share, which was paid on March 9, 2023 to shareholders of record on February 23, 2023.
  • On May 19, 2023, the Board of Trustees appointed David Helfand to 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.
  • On June 13, 2023, the Board of Trustees authorized the repurchase of up to $150 million of our outstanding common shares from July 1, 2023 through June 30, 2024, under the company’s existing share repurchase program.
  • During the year ended December 31, 2023, the company repurchased 3,018,411 of its common shares at a weighted average price of $18.78 per share, for a total investment of $56.7 million. The company has $93.3 million of remaining authorization available under its share repurchase program, as of February 12, 2024.

Earnings Conference Call & Supplemental Operating and Financial Information

Equity Commonwealth will host a conference call to discuss fourth quarter and full year results on Tuesday, February 13, 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 Full Year 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)

 

 

December 31,

ASSETS

 

2023

 

 

 

2022

 

Real estate properties:

 

 

 

Land

$

44,060

 

 

$

44,060

 

Buildings and improvements

 

367,827

 

 

 

364,063

 

 

 

411,887

 

 

 

408,123

 

Accumulated depreciation

 

(180,535

)

 

 

(169,530

)

 

 

231,352

 

 

 

238,593

 

Cash and cash equivalents

 

2,160,535

 

 

 

2,582,222

 

Rents receivable

 

15,737

 

 

 

16,009

 

Other assets, net

 

17,417

 

 

 

18,061

 

Total assets

$

2,425,041

 

 

$

2,854,885

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

Accounts payable, accrued expenses and other

$

27,298

 

 

$

25,935

 

Rent collected in advance

 

1,990

 

 

 

2,355

 

Distributions payable

 

5,640

 

 

 

2,863

 

Total liabilities

$

34,928

 

 

$

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; 106,847,438 and 109,428,252 shares issued and outstanding, respectively

 

1,068

 

 

 

1,094

 

Additional paid in capital

 

3,935,873

 

 

 

3,979,566

 

Cumulative net income

 

3,926,979

 

 

 

3,835,815

 

Cumulative common distributions

 

(4,864,440

)

 

 

(4,393,522

)

Cumulative preferred distributions

 

(733,676

)

 

 

(725,688

)

Total shareholders’ equity

 

2,385,067

 

 

 

2,816,528

 

Noncontrolling interest

 

5,046

 

 

 

7,204

 

Total equity

$

2,390,113

 

 

$

2,823,732

 

Total liabilities and equity

$

2,425,041

 

 

$

2,854,885

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except per share data)

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

Rental revenue

$

13,824

 

 

$

14,628

 

 

$

55,336

 

 

$

58,763

 

Other revenue (1)

 

1,322

 

 

 

1,159

 

 

 

5,188

 

 

 

4,377

 

Total revenues

$

15,146

 

 

$

15,787

 

 

$

60,524

 

 

$

63,140

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Operating expenses

$

6,542

 

 

$

6,986

 

 

$

27,462

 

 

$

24,184

 

Depreciation and amortization

 

4,184

 

 

 

4,634

 

 

 

17,444

 

 

 

17,810

 

General and administrative

 

7,504

 

 

 

7,137

 

 

 

36,974

 

 

 

30,378

 

Total expenses

$

18,230

 

 

$

18,757

 

 

$

81,880

 

 

$

72,372

 

 

 

 

 

 

 

 

 

Interest and other income, net

 

29,670

 

 

 

24,263

 

 

 

114,667

 

 

 

46,945

 

Gain on sale of properties, net

 

 

 

 

7

 

 

 

 

 

 

97

 

Income before income taxes

 

26,586

 

 

 

21,300

 

 

 

93,311

 

 

 

37,810

 

Income tax benefit (expense)

 

40

 

 

 

(372

)

 

 

(1,866

)

 

 

(453

)

Net income

$

26,626

 

 

$

20,928

 

 

$

91,445

 

 

$

37,357

 

Net income attributable to noncontrolling interest

 

(77

)

 

 

(53

)

 

 

(281

)

 

 

(94

)

Net income attributable to Equity Commonwealth

$

26,549

 

 

$

20,875

 

 

$

91,164

 

 

$

37,263

 

Preferred distributions

 

(1,997

)

 

 

(1,997

)

 

 

(7,988

)

 

 

(7,988

)

Net income attributable to Equity Commonwealth common shareholders

$

24,552

 

 

$

18,878

 

 

$

83,176

 

 

$

29,275

 

Weighted average common shares outstanding — basic (2)

 

106,905

 

 

109,695

 

 

108,841

 

 

111,674

Weighted average common shares outstanding — diluted (2)(3)

 

108,015

 

 

 

111,171

 

 

 

110,185

 

 

 

112,825

 

 

 

 

 

 

 

 

 

Earnings per common share attributable to Equity Commonwealth common shareholders:

 

 

 

 

 

 

 

Basic

$

0.23

 

 

$

0.17

 

 

$

0.76

 

 

$

0.26

 

Diluted

$

0.23

 

 

$

0.17

 

 

$

0.75

 

 

$

0.26

 

(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 December 31, 2023 and 2022 includes 131 and 86 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the year ended December 31, 2023 and 2022 includes 127 and 105 unvested, earned RSUs, respectively.

(3)

As of December 31, 2023, we had 4,915 series D preferred shares outstanding. The series D preferred shares were convertible into 4,032 common shares as of December 31, 2023 and 3,365 common shares as of December 31, 2022. The series D preferred shares are antidilutive for GAAP EPS for the three months and years ended December 31, 2023 and 2022.

 

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO

(Unaudited, amounts in thousands, except per share data)

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Calculation of FFO

 

 

 

 

 

 

 

Net income

$

26,626

 

 

$

20,928

 

 

$

91,445

 

 

$

37,357

 

Real estate depreciation and amortization

 

4,178

 

 

 

4,594

 

 

 

17,409

 

 

 

17,652

 

Gain on sale of properties, net

 

 

 

 

(7

)

 

 

 

 

 

(97

)

FFO attributable to Equity Commonwealth

 

30,804

 

 

 

25,515

 

 

 

108,854

 

 

 

54,912

 

Preferred distributions

 

(1,997

)

 

 

(1,997

)

 

 

(7,988

)

 

 

(7,988

)

FFO attributable to EQC common shareholders and unitholders

$

28,807

 

 

$

23,518

 

 

$

100,866

 

 

$

46,924

 

 

 

 

 

 

 

 

 

Calculation of Normalized FFO

 

 

 

 

 

 

 

FFO attributable to EQC common shareholders and unitholders

$

28,807

 

 

$

23,518

 

 

$

100,866

 

 

$

46,924

 

Straight-line rent adjustments

 

(538

)

 

 

389

 

 

 

(93

)

 

 

238

 

Former chairman accelerated compensation expense

 

 

 

 

 

 

 

5,957

 

 

 

 

Normalized FFO attributable to EQC common shareholders and unitholders

$

28,269

 

 

$

23,907

 

 

$

106,730

 

 

$

47,162

 

 

 

 

 

 

 

 

 

Weighted average common shares and units outstanding -- basic (1)

 

107,205

 

 

 

109,975

 

 

 

109,176

 

 

 

111,950

 

Weighted average common shares and units outstanding -- diluted (1)

 

108,315

 

 

 

111,451

 

 

 

110,520

 

 

 

113,101

 

FFO attributable to EQC common shareholders and unitholders per share and unit -- basic

$

0.27

 

 

$

0.21

 

 

$

0.92

 

 

$

0.42

 

FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted

$

0.27

 

 

$

0.21

 

 

$

0.91

 

 

$

0.41

 

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic

$

0.26

 

 

$

0.22

 

 

$

0.98

 

 

$

0.42

 

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted

$

0.26

 

 

$

0.21

 

 

$

0.97

 

 

$

0.42

 

(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 December 31, 2023 and 2022 include 300 and 280 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 year ended December 31, 2023 and 2022 include 335 and 276 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)

 

 

Three Months Ended

 

12/31/2023

 

9/30/2023

 

6/30/2023

 

3/31/2023

 

12/31/2022

Calculation of Same Property NOI and Same Property Cash Basis NOI:

 

 

 

 

 

 

 

 

 

Rental revenue

$

13,824

 

 

$

13,928

 

 

$

13,358

 

 

$

14,226

 

 

$

14,628

 

Other revenue (1)

 

1,322

 

 

 

1,284

 

 

 

1,232

 

 

 

1,350

 

 

 

1,159

 

Operating expenses

 

(6,542

)

 

 

(6,722

)

 

 

(6,942

)

 

 

(7,256

)

 

 

(6,986

)

NOI

$

8,604

 

 

$

8,490

 

 

$

7,648

 

 

$

8,320

 

 

$

8,801

 

Straight-line rent adjustments

 

(538

)

 

 

(107

)

 

 

273

 

 

 

279

 

 

 

389

 

Lease termination fees

 

(630

)

 

 

(173

)

 

 

(33

)

 

 

(177

)

 

 

(743

)

Cash Basis NOI

$

7,436

 

 

$

8,210

 

 

$

7,888

 

 

$

8,422

 

 

$

8,447

 

Cash Basis NOI from non-same properties (2)

 

7

 

 

 

(5

)

 

 

(4

)

 

 

(4

)

 

 

14

 

Same Property Cash Basis NOI

$

7,443

 

 

$

8,205

 

 

$

7,884

 

 

$

8,418

 

 

$

8,461

 

Non-cash rental income and lease termination fees from same properties

 

1,168

 

 

 

280

 

 

 

(240

)

 

 

(102

)

 

 

354

 

Same Property NOI

$

8,611

 

 

$

8,485

 

 

$

7,644

 

 

$

8,316

 

 

$

8,815

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Same Property NOI to GAAP Net Income:

 

 

 

 

 

 

 

 

 

Same Property NOI

$

8,611

 

 

$

8,485

 

 

$

7,644

 

 

$

8,316

 

 

$

8,815

 

Non-cash rental income and lease termination fees from same properties

 

(1,168

)

 

 

(280

)

 

 

240

 

 

 

102

 

 

 

(354

)

Same Property Cash Basis NOI

$

7,443

 

 

$

8,205

 

 

$

7,884

 

 

$

8,418

 

 

$

8,461

 

Cash Basis NOI from non-same properties (2)

 

(7

)

 

 

5

 

 

 

4

 

 

 

4

 

 

 

(14

)

Cash Basis NOI

$

7,436

 

 

$

8,210

 

 

$

7,888

 

 

$

8,422

 

 

$

8,447

 

Straight-line rent adjustments

 

538

 

 

 

107

 

 

 

(273

)

 

 

(279

)

 

 

(389

)

Lease termination fees

 

630

 

 

 

173

 

 

 

33

 

 

 

177

 

 

 

743

 

NOI

$

8,604

 

 

$

8,490

 

 

$

7,648

 

 

$

8,320

 

 

$

8,801

 

Depreciation and amortization

 

(4,184

)

 

 

(4,436

)

 

 

(4,514

)

 

 

(4,310

)

 

 

(4,634

)

General and administrative

 

(7,504

)

 

 

(7,061

)

 

 

(13,854

)

 

 

(8,555

)

 

 

(7,137

)

Interest and other income, net

 

29,670

 

 

 

29,269

 

 

 

27,352

 

 

 

28,376

 

 

 

24,263

 

Gain on sale of properties, net

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Income before income taxes

$

26,586

 

 

$

26,262

 

 

$

16,632

 

 

$

23,831

 

 

$

21,300

 

Income tax benefit (expense)

 

40

 

 

 

(30

)

 

 

(796

)

 

 

(1,080

)

 

 

(372

)

Net income

$

26,626

 

 

$

26,232

 

 

$

15,836

 

 

$

22,751

 

 

$

20,928

 

 

 

 

 

 

 

 

 

 

 

(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 Year Ended December 31,

 

 

2023

 

 

 

2022

 

Calculation of Same Property NOI and Same Property Cash Basis NOI:

 

 

 

Rental revenue

$

55,336

 

 

$

58,763

 

Other revenue (1)

 

5,188

 

 

 

4,377

 

Operating expenses

 

(27,462

)

 

 

(24,184

)

NOI

$

33,062

 

 

$

38,956

 

Straight-line rent adjustments

 

(93

)

 

 

238

 

Lease termination fees

 

(1,013

)

 

 

(1,504

)

Cash Basis NOI

$

31,956

 

 

$

37,690

 

Cash Basis NOI from non-same properties (2)

 

(6

)

 

 

(1,610

)

Same Property Cash Basis NOI

$

31,950

 

 

$

36,080

 

Non-cash rental income and lease termination fees from same properties

 

1,106

 

 

 

1,266

 

Same Property NOI

$

33,056

 

 

$

37,346

 

 

 

 

 

Reconciliation of Same Property NOI to GAAP Net Income:

 

 

 

Same Property NOI

$

33,056

 

 

$

37,346

 

Non-cash rental income and lease termination fees from same properties

 

(1,106

)

 

 

(1,266

)

Same Property Cash Basis NOI

$

31,950

 

 

$

36,080

 

Cash Basis NOI from non-same properties (2)

 

6

 

 

 

1,610

 

Cash Basis NOI

$

31,956

 

 

$

37,690

 

Straight-line rent adjustments

 

93

 

 

 

(238

)

Lease termination fees

 

1,013

 

 

 

1,504

 

NOI

$

33,062

 

 

$

38,956

 

Depreciation and amortization

 

(17,444

)

 

 

(17,810

)

General and administrative

 

(36,974

)

 

 

(30,378

)

Interest and other income, net

 

114,667

 

 

 

46,945

 

Gain on sale of properties, net

 

 

 

 

97

 

Income before income taxes

$

93,311

 

 

$

37,810

 

Income tax expense

 

(1,866

)

 

 

(453

)

Net income

$

91,445

 

 

$

37,357

 

 

 

 

 

(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 October 1, 2022 through December 31, 2023. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2022 through December 31, 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.

 

Bill Griffiths

(312) 646-2801

ir@eqcre.com

Source: Equity Commonwealth

Equity Commonwealth reported a net income of $24.6 million, or $0.23 per diluted share, for the quarter ended December 31, 2023.

Equity Commonwealth's FFO for the quarter ended December 31, 2023, was $28.8 million, or $0.27 per diluted share, compared to $23.5 million, or $0.21 per diluted share, for the same period in 2022.

The same property NOI for Equity Commonwealth decreased by 2.3% in the quarter ended December 31, 2023, primarily due to lower lease termination fees and an increase in repairs.

Equity Commonwealth reported a net income of $83.2 million, or $0.75 per diluted share, for the year ended December 31, 2023.

Equity Commonwealth declared a special, one-time cash distribution of $4.25 per common share on February 13, 2023, which was paid on March 9, 2023.
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About EQC

equity commonwealth (nyse: eqc) is a chicago based, internally managed and self-advised real estate investment trust (reit) with commercial office properties throughout the united states. eqc’s portfolio is comprised of 15 properties and 7.1 million square feet. eqc’s corporate culture is instilled with equity company values of accountability and alignment with stakeholders, and an emphasis on creating value. our core values center around building a culture that encourages transparency and open communication based on the following guiding principles:  use your best judgment  keep your word  be a team player  no surprises  speak up  reward outstanding performance  serve our customers  exchange ideas  celebrate diversity for career opportunities please visit: https://workforcenow.adp.com/jobs/apply/posting.html?client=eqcmgmt