EX-99.2 3 eqc33119ex992.htm EXHIBIT 99.2 Exhibit
Exhibit 99.2




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Equity Commonwealth
Supplemental Operating
and Financial Data

First Quarter 2019

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Corporate Headquarters                                Investor Relations
Two North Riverside Plaza                                Sarah Byrnes
Suite 2100                                        (312) 646-2801
Chicago, IL 60606                                    ir@eqcre.com
(312) 646-2800                                        www.eqcre.com




TABLE OF CONTENTS

Corporate Information
 
Company Profile and Investor Information
 
 
 
Financial Information
 
Key Financial Data
 
Condensed Consolidated Balance Sheets
 
Additional Balance Sheet Information
 
Condensed Consolidated Statements of Operations
 
Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI
 
Same Property Results of Operations
 
Calculation of EBITDA, EBITDAre, and Adjusted EBITDAre
 
Calculation of Funds from Operations (FFO) and Normalized FFO
 
Debt Summary
 
Debt Maturity Schedule
 
Leverage Ratios, Coverage Ratios and Public Debt Covenants
 
Acquisitions and Dispositions
 
 
 
Portfolio Information
 
Property Detail
 
Leasing Summary
 
Same Property Leasing Summary
 
Capital Summary - Expenditures & Same Property Leasing Commitments
 
Tenants Representing 1.5% or More of Annualized Rental Revenue
 
Same Property Lease Expiration Schedule
 
 
 
Additional Support
 
Common & Potential Common Shares
 
Definitions
 
 
 
Forward-Looking Statements
 
 
 
Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws including, but not limited to, statements pertaining to our capital resources, portfolio performance, results of operations or anticipated market conditions. Any forward-looking statements contained in this presentation are intended to be made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
 
 
 
The forward-looking statements contained in this presentation 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 Annual Report on Form 10-K for the year ended December 31, 2018.
 
 
 
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.

2

COMPANY PROFILE AND INVESTOR INFORMATION

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.
Same Property Statistics
No. of
 
 
 
 Properties
Sq. Feet
% Leased
% Commenced
9
3,833
94.4%
93.7%
 Senior Unsecured Debt Ratings
 
 
 NYSE Trading Symbols
 Moody's: Baa2
 
 
 Common Stock: EQC
 Standard & Poor's: BBB-
 
 
 Preferred Stock Series D: EQCPD
 
 
 
 
Board of Trustees
Sam Zell (Chairman)
 
David A. Helfand
 
Kenneth Shea
James S. Corl
 
Peter Linneman (Lead Independent Trustee)
 
Gerald A. Spector
Martin L. Edelman
 
James L. Lozier, Jr.
 
James A. Star
Edward A. Glickman
 
Mary Jane Robertson
 
 
 
 
 
 
 
Senior Management
David A. Helfand
 
David S. Weinberg
 
 
President and Chief Executive Officer
 
Executive Vice President and
 
 
 
 
Chief Operating Officer
 
 
 
 
 
 
 
Adam S. Markman
 
Orrin S. Shifrin
 
 
Executive Vice President,
 
Executive Vice President,
 
 
Chief Financial Officer and Treasurer
 
General Counsel and Secretary
 
 
Equity Research Coverage (1)
Bank of America / Merrill Lynch
James Feldman
(646) 855-5808
james.feldman@baml.com
Citigroup
Michael Bilerman
(212) 816-1383
michael.bilerman@citi.com
Green Street Advisors
Daniel Ismail
(949) 640-8780
dismail@greenstreetadvisors.com
JMP Securities
Mitch Germain
(212) 906-3546
mgermain@jmpsecurities.com
Stifel Nicolaus
John Guinee
(443) 224-1307
jwguinee@stifel.com
 
 
 
 
Debt Research Coverage (1)
J.P.Morgan
Mark Streeter
(212) 834-5086
mark.streeter@jpmorgan.com
Wells Fargo Securities
Thierry Perrein
(704) 410-3262
thierry.perrein@wellsfargo.com
 
 
 
 
Rating Agencies (1)
Moody's Investors Service
Lori Marks
(212) 553-1098
lori.marks@moodys.com
Standard & Poor's
Fernanda Hernandez
(212) 438-1347
fernanda.hernandez@spglobal.com

Certain terms are defined in the definitions section of this document.
 
 
(1)
Any opinions, estimates or forecasts regarding EQC's performance made by these analysts or agencies do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts and agencies above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies.

3

KEY FINANCIAL DATA
(amounts in thousands, except per share data)

 
 
As of and for the Three Months Ended
 
 
3/31/2019

 
12/31/2018

 
9/30/2018

 
6/30/2018

 
3/31/2018

OPERATING INFORMATION
 
Ending property count (1)
9

 
10

 
11

 
13

 
13

 
Ending square footage (1)(2)
3,833

 
5,120

 
5,410

 
6,341

 
6,344

 
Percent leased (1)
94.4
 %
 
94.8
 %
 
94.0
 %
 
89.8
 %
 
88.6
 %
 
Percent commenced (1)
93.7
 %
 
91.2
 %
 
91.3
 %
 
87.7
 %
 
83.5
 %
 
Net income attributable to EQC common shareholders
$
208,521

 
$
13,420

 
$
30,767

 
$
35,036

 
$
185,602

 
Adjusted EBITDAre (3)
31,651

 
34,154

 
30,454

 
30,561

 
31,417

SAME PROPERTY OPERATING INFORMATION
 
Ending square footage
3,833

 
3,833

 
3,833

 
3,838

 
3,841

 
Percent leased
94.4
 %
 
95.5
 %
 
94.6
 %
 
94.0
 %
 
92.3
 %
 
Percent commenced
93.7
 %
 
93.9
 %
 
93.3
 %
 
91.7
 %
 
91.2
 %
 
Same Property NOI (3)
$
21,371

 
$
20,164

 
$
20,064

 
$
20,291

 
$
19,976

 
Same Property Cash Basis NOI (3)
21,378

 
20,119

 
20,086

 
20,007

 
19,493

 
Same Property NOI margin
65.3
 %
 
63.4
 %
 
63.3
 %
 
65.1
 %
 
65.0
 %
 
Same Property Cash Basis NOI margin
65.3
 %
 
63.4
 %
 
63.3
 %
 
64.8
 %
 
64.4
 %
SHARES OUTSTANDING AND PER SHARE DATA (4)
 
Shares Outstanding at End of Period
 
 
 
 
 
 
 
 
 
 
Common stock outstanding - basic (5)
121,900

 
121,572

 
121,483

 
121,483

 
121,457

 
Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units (4)
1,566

 
1,809

 
1,414

 
1,235

 
1,377

 
Dilutive Series D Convertible Preferred Shares outstanding (6)
2,563

 
—

 
—

 
—

 
2,363

 
Preferred Stock Outstanding (6)
4,915

 
4,915

 
4,915

 
4,915

 
4,915

 
Weighted Average Shares Outstanding - GAAP
 
 
 
 
 
 
 
 
 
 
Basic (5)
121,960

 
121,749

 
121,845

 
121,822

 
123,867

 
Diluted (5)
125,822

 
123,376

 
122,851

 
122,649

 
127,097

 
Distributions Declared Per Common Share
$
—

 
$
—

 
$
2.50

 
$
—

 
$
—

BALANCE SHEET
 
Total assets
$
3,713,937

 
$
3,530,772

 
$
3,813,728

 
$
3,776,874

 
$
4,137,306

 
Total liabilities
322,376

 
346,774

 
644,217

 
334,565

 
735,827

ENTERPRISE VALUE
 
Total debt (book value)
$
274,977

 
$
274,955

 
$
279,901

 
$
280,012

 
$
678,527

 
Less: Cash and cash equivalents
(3,069,501
)
 
(2,400,803
)
 
(2,673,328
)
 
(2,507,117
)
 
(2,837,671
)
 
Plus: Market value of preferred shares
134,480

 
124,109

 
128,451

 
127,943

 
127,746

 
Plus: Market value of diluted common shares
4,036,090

 
3,698,580

 
3,943,753

 
3,865,605

 
3,767,312

 
Total enterprise value
$
1,376,046

 
$
1,696,841

 
$
1,678,777

 
$
1,766,443

 
$
1,735,914

RATIOS
 
Net debt / enterprise value
(203.1
)%
 
(125.3
)%
 
(142.6
)%
 
(126.1
)%
 
(124.4
)%
 
Net debt / annualized adjusted EBITDAre (3)
(22.1)x

 
(15.6)x

 
(19.6)x

 
(18.2)x

 
(17.2)x

 
Adjusted EBITDAre (3) / interest expense
7.5x

 
6.8x

 
6.0x

 
4.8x

 
3.1x

(1)
Excludes properties classified as held for sale and land parcels.
(2)
Changes in total square footage result from property dispositions, reclassifications, and remeasurement.
(3)
Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measure, herein.
(4)
Restricted share units (RSUs) and LTIP Units are equity awards that contain both service and market-based vesting components. Refer to the schedule of Common & Potential Common Shares for information regarding RSUs and LTIP Units and their impact on weighted average shares outstanding.
(5)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.
(6)
As of March 31, 2019, we had 4,915 series D preferred shares outstanding that were convertible into 2,563 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended March 31, 2019 and 2018, and are anti-dilutive for GAAP EPS for all other periods presented. Refer to the schedule of Common & Potential Common Shares for information regarding the series D preferred shares and their impact on diluted weighted average shares outstanding for EPS, FFO per share and Normalized FFO per share.

4

CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

 
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
Real estate properties:
 
 
 
Land
$
110,395

 
$
135,142

Buildings and improvements
704,142

 
1,004,500

 
814,537

 
1,139,642

Accumulated depreciation
(245,528
)
 
(375,968
)
 
569,009

 
763,674

Acquired real estate leases, net
183

 
275

Cash and cash equivalents
3,069,501

 
2,400,803

Marketable securities
—

 
249,602

Restricted cash
1,767

 
3,298

Rents receivable
31,151

 
51,089

Other assets, net
42,326

 
62,031

Total assets
$
3,713,937

 
$
3,530,772

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Senior unsecured debt, net
$
248,689

 
$
248,473

Mortgage notes payable, net
26,288

 
26,482

Accounts payable, accrued expenses and other
42,280

 
62,368

Rent collected in advance
5,119

 
9,451

Total liabilities
$
322,376

 
$
346,774

 
 
 
 
Shareholders' equity:
 
 
 
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
 
 
 
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880
$
119,263

 
$
119,263

Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 121,899,625 and 121,572,155 shares issued and outstanding, respectively
1,219

 
1,216

Additional paid in capital
4,304,560

 
4,305,974

Cumulative net income
3,081,492

 
2,870,974

Cumulative other comprehensive loss
—

 
(342
)
Cumulative common distributions
(3,420,512
)
 
(3,420,548
)
Cumulative preferred distributions
(695,733
)
 
(693,736
)
Total shareholders’ equity
3,390,289

 
3,182,801

Noncontrolling interest
1,272

 
1,197

Total equity
$
3,391,561

 
$
3,183,998

Total liabilities and equity
$
3,713,937

 
$
3,530,772



5

ADDITIONAL BALANCE SHEET INFORMATION
(amounts in thousands)

 
March 31, 2019
December 31, 2018
Additional Balance Sheet Information
 
 
 
 
 
Straight-line rents receivable
$
27,966

$
47,393

Accounts receivable
3,185

3,696

Rents receivable
$
31,151

$
51,089

 
 
 
Capitalized lease incentives, net
$
1,721

$
4,308

Deferred leasing costs, net
31,058

51,123

Other
9,547

6,600

Other assets, net
$
42,326

$
62,031

 
 
 
Accounts payable
$
3,014

$
2,932

Accrued interest
759

4,432

Accrued taxes
7,914

13,228

Accrued capital expenditures
2,907

13,540

Accrued leasing costs
5,661

6,181

Assumed real estate lease obligations, net
78

117

Security deposits
4,141

4,137

Other accrued liabilities
17,806

17,801

Accounts payable and accrued expenses
$
42,280

$
62,368



6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)

 
Three Months Ended
 
March 31,
 
2019
 
2018
Revenues:
 
 
 
Rental revenue
$
38,890

 
$
55,273

Other revenue
2,862

 
3,315

Total revenues
$
41,752

 
$
58,588

 
 
 
 
Expenses:
 
 
 
Operating expenses
$
15,780

 
$
24,599

Depreciation and amortization
8,585

 
13,903

General and administrative
12,096

 
13,339

Loss on asset impairment
—

 
12,087

Total expenses
$
36,461

 
$
63,928

 
 
 
 
Interest and other income, net
17,775

 
5,780

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $165 and $801, respectively)
(4,206
)
 
(10,115
)
Loss on early extinguishment of debt
—

 
(4,867
)
Gain on sale of properties, net
193,037

 
205,211

Income before income taxes
211,897

 
190,669

Income tax expense
(1,300
)
 
(3,007
)
Net income
$
210,597

 
$
187,662

Net income attributable to noncontrolling interest
(79
)
 
(63
)
Net income attributable to Equity Commonwealth
$
210,518

 
$
187,599

Preferred distributions
(1,997
)
 
(1,997
)
Net income attributable to Equity Commonwealth common shareholders
$
208,521

 
$
185,602

 
 
 
 
Weighted average common shares outstanding — basic (1)
121,960

 
123,867

Weighted average common shares outstanding — diluted (1)
125,822

 
127,097

 
 
 
 
Earnings per common share attributable to Equity Commonwealth common shareholders:
 
 
 
Basic
$
1.71

 
$
1.50

Diluted
$
1.67

 
$
1.48

Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations due to the impact of adopting ASU 2016-02.  Amounts that were previously disclosed as "Tenant reimbursements and other income" are now included in "Rental revenue" and are no longer presented as a separate line item.  Parking revenues that do not represent components of leases and were previously disclosed as "Rental income" are now included in "Other revenue."  Subsequent to January 1, 2019, provisions for credit losses are included in "Rental revenue."  Provisions for credit losses prior to January 1, 2019 were disclosed as "Operating expenses" and were not reclassified to conform prior periods to the current presentation.
 
 
(1
)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

7

CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI
(amounts in thousands)

 
For the Three Months Ended
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Calculation of Same Property NOI and Same Property Cash Basis NOI:
 
 
 
 
 
 
 
 
 
Rental revenue
$
38,890

 
$
39,756

 
$
43,770

 
$
45,569

 
$
55,273

Other revenue
2,862

 
3,169

 
3,103

 
3,067

 
3,315

Operating expenses
(15,780
)
 
(15,539
)
 
(20,257
)
 
(19,521
)
 
(24,599
)
NOI
$
25,972

 
$
27,386

 
$
26,616

 
$
29,115

 
$
33,989

Straight line rent adjustments
(837
)
 
(986
)
 
(1,435
)
 
(1,022
)
 
(1,528
)
Lease value amortization
(39
)
 
(22
)
 
(4
)
 
(18
)
 
98

Lease termination fees
—

 
(19
)
 
(395
)
 
(1,557
)
 
(965
)
Cash Basis NOI
$
25,096

 
$
26,359

 
$
24,782

 
$
26,518

 
$
31,594

Cash Basis NOI from non-same properties (1)
(3,718
)
 
(6,240
)
 
(4,696
)
 
(6,511
)
 
(12,101
)
Same Property Cash Basis NOI
$
21,378

 
$
20,119

 
$
20,086

 
$
20,007

 
$
19,493

Non-cash rental income and lease termination fees from same properties
(7
)
 
45

 
(22
)
 
284

 
483

Same Property NOI
$
21,371

 
$
20,164

 
$
20,064

 
$
20,291

 
$
19,976

 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to GAAP Net Income:
 
 
 
 
 
 
 
 
 
Same Property NOI
$
21,371

 
$
20,164

 
$
20,064

 
$
20,291

 
$
19,976

Non-cash rental income and lease termination fees from same properties
7

 
(45
)
 
22

 
(284
)
 
(483
)
Same Property Cash Basis NOI
$
21,378

 
$
20,119

 
$
20,086

 
$
20,007

 
$
19,493

Cash Basis NOI from non-same properties (1)
3,718

 
6,240

 
4,696

 
6,511

 
12,101

Cash Basis NOI
$
25,096

 
$
26,359

 
$
24,782

 
$
26,518

 
$
31,594

Straight line rent adjustments
837

 
986

 
1,435

 
1,022

 
1,528

Lease value amortization
39

 
22

 
4

 
18

 
(98
)
Lease termination fees
—

 
19

 
395

 
1,557

 
965

NOI
$
25,972

 
$
27,386

 
$
26,616

 
$
29,115

 
$
33,989

Depreciation and amortization
(8,585
)
 
(10,830
)
 
(11,287
)
 
(13,021
)
 
(13,903
)
General and administrative
(12,096
)
 
(8,973
)
 
(10,905
)
 
(11,222
)
 
(13,339
)
Loss on asset impairment
—

 
—

 
—

 
—

 
(12,087
)
Interest and other income, net
17,775

 
15,741

 
12,626

 
12,668

 
5,780

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $165 and $801, respectively)
(4,206
)
 
(5,035
)
 
(5,085
)
 
(6,350
)
 
(10,115
)
Loss on early extinguishment of debt
—

 
(719
)
 
—

 
(1,536
)
 
(4,867
)
Gain (loss) on sale of properties, net
193,037

 
(1,608
)
 
20,877

 
26,937

 
205,211

Income before income taxes
$
211,897

 
$
15,962

 
$
32,842

 
$
36,591

 
$
190,669

Income tax (expense) benefit
(1,300
)
 
(540
)
 
(65
)
 
456

 
(3,007
)
Net income
$
210,597

 
$
15,422

 
$
32,777

 
$
37,047

 
$
187,662

 
 
 
 
 
 
 
 
 
 
Same Property capitalized external legal costs(2)
N/A

 
$
—

 
$
9

 
$
63

 
$
76

(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.
(2)
Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods.
 
 

8

SAME PROPERTY RESULTS OF OPERATIONS
(dollars and square feet in thousands)


 
For the Three Months Ended March 31,
 
2019
 
2018
 
% Change
Properties
9

 
9

 
 
Square Feet (1)
3,833

 
3,841

 
 
% Leased
94.4
%
 
92.3
%
 
2.1
%
% Commenced
93.7
%
 
91.2
%
 
2.5
%
 
 
 
 
 
 
Rental revenue
$
29,867

 
$
27,467

 
8.7
%
Other revenue
2,847

 
2,801

 
1.6
%
Straight line rent adjustment
(46
)
 
333

 
 
Lease value amortization
39

 
8

 
 
Lease termination fees
—

 
142

 
 
Total revenue
32,707

 
30,751

 
6.4
%
Operating expenses
(11,336
)
 
(10,775
)
 
5.2
%
NOI
$
21,371

 
$
19,976

 
7.0
%
NOI Margin
65.3
%
 
65.0
%
 
 
 
 
 
 
 
 
Straight line rent adjustment
$
46

 
$
(333
)
 
 
Lease value amortization
(39
)
 
(8
)
 
 
Lease termination fees
—

 
(142
)
 
 
Cash Basis NOI
$
21,378

 
$
19,493

 
9.7
%
Cash Basis NOI Margin
65.3
%
 
64.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Property capitalized external legal costs(2)

N/A

 
$
76

 
 

(1
)
The change in total square footage results from remeasurement.
(2
)
Effective January 1, 2019, with the adoption of ASU 2016-02, we no longer capitalize external legal costs incurred when we enter into leases. We did not recast the comparative prior periods presented for the external legal leasing costs capitalized in those periods.


9

CALCULATION OF EBITDA, EBITDAre, AND ADJUSTED EBITDAre
(amounts in thousands)


 
For the Three Months Ended
 
March 31,
 
2019
 
2018
Net income
$
210,597

 
$
187,662

Interest expense
4,206

 
10,115

Income tax expense
1,300

 
3,007

Depreciation and amortization
8,585

 
13,903

EBITDA
$
224,688

 
$
214,687

Loss on asset impairment
—

 
12,087

Gain on sale of properties, net
(193,037
)
 
(205,211
)
EBITDAre
$
31,651

 
$
21,563

Loss on early extinguishment of debt
—

 
4,867

Loss on sale of securities
—

 
4,987

Adjusted EBITDAre
$
31,651

 
$
31,417


 
 


10

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(amounts in thousands, except per share data)

 
Three Months Ended
 
March 31,
 
2019
 
2018
Calculation of FFO
 
 
 
Net income
$
210,597

 
$
187,662

Real estate depreciation and amortization
8,277

 
13,603

Loss on asset impairment
—

 
12,087

Gain on sale of properties, net
(193,037
)
 
(205,211
)
FFO attributable to Equity Commonwealth
25,837

 
8,141

Preferred distributions
(1,997
)
 
(1,997
)
FFO attributable to EQC common shareholders and unitholders
$
23,840

 
$
6,144

 
 
 
 
Calculation of Normalized FFO
 
 
 
FFO attributable to EQC common shareholders and unitholders
$
23,840

 
$
6,144

Lease value amortization
(39
)
 
98

Straight line rent adjustments
(837
)
 
(1,528
)
Loss on early extinguishment of debt
—

 
4,867

Loss on sale of securities
—

 
4,987

Income taxes related to gains on property sales, net
150

 
2,969

Normalized FFO attributable to EQC common shareholders and unitholders
$
23,114

 
$
17,537

 
 
 
 
Weighted average common shares and units outstanding -- basic (1)
122,006

 
123,910

Weighted average common shares and units outstanding -- diluted (1)
123,305

 
124,734

FFO attributable to EQC common shareholders and unitholders per share and unit -- basic
$
0.20

 
$
0.05

FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted
$
0.19

 
$
0.05

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic
$
0.19

 
$
0.14

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted
$
0.19

 
$
0.14

(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, 2019 and 2018 include 46 and 43 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only). Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares and units outstanding.

11
DEBT SUMMARY
As of March 31, 2019
(dollars in thousands)

 
Interest Rate
 
Principal Balance
 
Maturity Date
Open at Par Date
 
Due at Maturity
 
Years to Maturity
Unsecured Debt:
 
 
 
 
 
 
 
 
 
 
Unsecured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
5.875% Senior Unsecured Notes Due 2020
5.88
%
 
$
250,000

 
9/15/2020
3/15/2020
 
$
250,000

 
1.5

 
 
 
 
 
 
 
 
 
 
 
Secured Debt:
 
 
 
 
 
 
 
 
 
 
Secured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
206 East 9th Street
5.69
%
 
$
25,856

 
1/5/2021
7/5/2020
 
$
24,836

 
1.8

 
 
 
 
 
 
 
 
 
 
 
Total / weighted average (1)
5.86
%
 
$
275,856

 
 
 
 
$
274,836

 
1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Total debt outstanding as of March 31, 2019, including net unamortized premiums, discounts, and deferred financing fees was $274,977.
 
 

12

DEBT MATURITY SCHEDULE
(dollars in thousands)

Scheduled Principal Payments During Period
Year
 
Unsecured Fixed Rate Debt
 
Secured Fixed Rate Debt
 
Total
 
Weighted Average Interest Rate
 
 
 
 
 
 
 
 
 
2019
 
$
—

 
$
423

 
$
423

 
5.7
%
2020
 
250,000

 
597

 
250,597

 
5.9
%
2021
 
—

 
24,836

 
24,836

 
5.7
%
Thereafter
 
—

 
—

 
—

 
—
%
 
 
$
250,000

 
$
25,856

 
$
275,856

(1) 
5.9
%
 
 
 
 
 
 
 
 
 
Percent
 
90.6
%
 
9.4
%
 
100.0
%
 
 
(1)
Total debt outstanding as of March 31, 2019, including net unamortized premiums, discounts, and deferred financing fees was $274,977.

13

LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS
(dollars in thousands)

 
As of and for the Three Months Ended
 
3/31/2019

 
12/31/2018

 
9/30/2018

 
6/30/2018

 
3/31/2018

Leverage Ratios
 
 
 
 
 
 
 
 
 
Total debt / total assets
7.4
 %
 
7.8
 %
 
7.3
 %
 
7.4
 %
 
16.4
 %
Total debt / total market capitalization
6.2
 %
 
6.7
 %
 
6.4
 %
 
6.6
 %
 
14.8
 %
Total debt + preferred stock / total market capitalization
9.2
 %
 
9.7
 %
 
9.4
 %
 
9.5
 %
 
17.6
 %
Total debt / annualized adjusted EBITDAre (1)
2.2x

 
2.0x

 
2.3x

 
2.3x

 
5.4x

Total debt + preferred stock / annualized adjusted EBITDAre (1)
3.2x

 
2.9x

 
3.4x

 
3.3x

 
6.4x

Net debt / enterprise value
(203.1
)%
 
(125.3
)%
 
(142.6
)%
 
(126.1
)%
 
(124.4
)%
Net debt + preferred stock / enterprise value
(193.3
)%
 
(118.0
)%
 
(134.9
)%
 
(118.8
)%
 
(117.0
)%
Net debt / annualized adjusted EBITDAre (1)
(22.1)x

 
(15.6)x

 
(19.6)x

 
(18.2)x

 
(17.2)x

Net debt + preferred stock / annualized adjusted EBITDAre (1)
(21.0)x

 
(14.7)x

 
(18.6)x

 
(17.2)x

 
(16.2)x

Secured debt / total assets
0.7
 %
 
0.8
 %
 
0.8
 %
 
0.8
 %
 
0.8
 %
Variable rate debt / total debt
—
 %
 
—
 %
 
—
 %
 
—
 %
 
59.0
 %
Variable rate debt / total assets
—
 %
 
—
 %
 
—
 %
 
—
 %
 
9.7
 %
 
 
 
 
 
 
 
 
 
 
Coverage Ratios
 
 
 
 
 
 
 
 
 
Adjusted EBITDAre / interest expense (1)
7.5x

 
6.8x

 
6.0x

 
4.8x

 
3.1x

Adjusted EBITDAre / interest expense + preferred distributions (1)
5.1x

 
4.9x

 
4.3x

 
3.7x

 
2.6x

 
 
 
 
 
 
 
 
 
 
Public Debt Covenants
 
 
 
 
 
 
 
 
 
Debt / adjusted total assets (2) (maximum 60%)
7.0
 %
 
7.2
 %
 
6.8
 %
 
6.8
 %
 
15.2
 %
Secured debt / adjusted total assets (2) (maximum 40%)
0.7
 %
 
0.7
 %
 
0.8
 %
 
0.8
 %
 
0.7
 %
Consolidated income available for debt service / debt service (minimum 1.5x)
5.8x

 
6.2x

 
4.6x

 
4.6x

 
2.8x

Total unencumbered assets (2) / unsecured debt (minimum 150% / 200%)
1,550
 %
 
1,520
 %
 
1,629
 %
 
1,624
 %
 
681
 %
(1)
Refer to the calculation of EBITDA, EBITDAre, and Adjusted EBITDAre for a reconciliation of these measures to Net income.
(2)
Adjusted total assets and total unencumbered assets includes original cost of real estate assets plus capital improvements, both calculated in accordance with GAAP, and excludes depreciation and amortization, accounts receivable, other intangible assets, and impairment write downs, if any.

14

ACQUISITIONS AND DISPOSITIONS
(dollars in thousands)

Acquisitions
None
Dispositions
Property/Portfolio
City
State
No. of Properties
Sq. Feet (1)
 
% Leased(1)
 
Gross Sales Price
 
Net Book Value (1)
 
Annualized Rental Revenue (1)
1735 Market Street (2)
Philadelphia
PA
1
1,286,936

 
92.8
%
 
$
451,600

 
$
192,094

 
$
37,313

Total Q1 Dispositions
 
1

1,286,936

 
92.8
%
 
$
451,600

 
$
192,094

 
$
37,313

 
 
 
 
 
 
 
 
 
 
 
 
 
The disposition above resulted in a gain on sale of properties of $193.0 million for the three months ended March 31, 2019.
      
(1
)
As of the quarter-ended preceding each sale.
(2
)
Proceeds from the sale of 1735 Market Street were approximately $435.4 million after credits for capital costs, contractual lease costs, and rent abatements.


15
PROPERTY DETAIL
As of March 31, 2019
(sorted by annualized rental revenue, dollars in thousands)

Same Property Portfolio(1)
Property
City, State
Type
No. of Buildings
Square Feet
% Leased
% Comm-enced
Annualized Rental Revenue
Undepreciated Book Value
Net Book Value
Year Acquired
Weighted Average Year Built or Substantially Renovated (2)
1
1225 Seventeenth Street
Denver, CO
Office
1

695,372
88.3
%
86.0
%
$
24,469

$
163,900

$
127,534

2009
1982
 
(17th Street Plaza)
 
 
 
 
 
 
 
 
 
 
 
2
333 108th Avenue NE
Bellevue, WA
Office
1

435,406
99.3
%
99.3
%
22,247

153,525

119,529

2009
2008
 
(Tower 333)
 
 
 
 
 
 
 
 
 
 
 
3
Bridgepoint Square
Austin, TX
Office
5

440,007
87.3
%
85.7
%
14,318

98,354

52,547

1997
1995
4
Research Park
Austin, TX
Flex
4

1,110,007
99.1
%
99.1
%
13,126

109,719

70,576

1998
1976
5
109 Brookline Avenue
Boston, MA
Office
1

285,556
94.6
%
94.6
%
11,259

47,807

25,611

1995
1915
6
600 108th Avenue NE (3)
Bellevue, WA
Office
1

254,510
97.0
%
94.5
%
9,561

52,344

34,481

2004
2012
 
(Bellevue Corporate Plaza)
 
 
 
 
 
 
 
 
 
 
 
7
1250 H Street, NW
Washington, D.C.
Office
1

196,490
86.7
%
86.7
%
9,068

75,310

41,265

1998
1992
 
 
 
 
 
 
 
 
 
 
 
 
 
8
206 East 9th Street
Austin, TX
Office
1

175,510
92.0
%
92.0
%
8,348

51,774

44,315

2012
1984
 
(Capitol Tower)
 
 
 
 
 
 
 
 
 
 
 
9
Georgetown-Green and Harris Buildings
Washington, D.C.
Office
2

240,475
100.0
%
100.0
%
6,911

61,804

53,151

2009
2006
 
Total Same Properties
 
 
17

3,833,333

94.4
%
93.7
%
$
119,307

$
814,537

$
569,009

2003
1984
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Property NOI & Cash Basis NOI Composition
Q1 2019 NOI
% of NOI
Q1 2019 Cash Basis NOI
% of Cash Basis NOI
 
 
 
 
 
 
Top 5 Properties
 
 
$
14,990

70.1
%
$
14,902

69.7
%
 
 
 
 
 
 
All other properties (4 properties)
 
6,381

29.9
%
6,476

30.3
%
 
 
 
 
 
 
Total (9 properties)
 
 
$
21,371

100.0
%
$
21,378

100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Excludes properties disposed prior to April 1, 2019.
(2)
Weighted based on square feet.
(3)
On April 23, 2019, The company sold 600 108th Avenue NE in Bellevue, WA, for a gross price of $195 million. The property includes a 254,510 square foot office building and additional development rights.

16

LEASING SUMMARY
(dollars and square feet in thousands, except per square foot data)

 
 
As of and for the Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Properties (1)
 
9

 
10

 
11

 
13

 
13

Total square feet (1)(2)
 
3,833

 
5,120

 
5,410

 
6,341

 
6,344

Percentage leased
 
94.4
%
 
94.8
%
 
94.0
 %
 
89.8
%
 
88.6
%
Percentage commenced
 
93.7
%
 
91.2
%
 
91.3
 %
 
87.7
%
 
83.5
%
 
 
 
 
 
 
 
 
 
 
 
Total Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
108

 
173

 
563

 
292

 
117

Lease term (years)
 
4.5

 
7.0

 
14.4

 
9.4

 
7.8

Starting cash rent
 
$
54.98

 
$
45.01

 
$
47.36

 
$
39.44

 
$
36.29

Percent change in cash rent (3)
 
8.0
%
 
10.0
%
 
(1.2
)%
 
10.4
%
 
2.8
%
Percent change in GAAP rent (3)
 
17.9
%
 
22.5
%
 
11.0
 %
 
23.6
%
 
10.8
%
Total TI & LC per square foot (4)
 
$
24.78

 
$
46.00

 
$
118.03

 
$
59.54

 
$
59.23

Total TI & LC per sq. ft. per year of lease term (4)
 
$
5.56

 
$
6.60

 
$
8.22

 
$
6.36

 
$
7.56

 
 
 
 
 
 
 
 
 
 
 
Renewal Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
95

 
93

 
1

 
103

 
71

Lease term (years)
 
4.5

 
6.7

 
5.0

 
5.2

 
7.2

Starting cash rent
 
$
56.78

 
$
43.12

 
$
67.85

 
$
39.01

 
$
36.93

Percent change in cash rent (3)
 
8.2
%
 
6.5
%
 
0.0
 %
 
12.0
%
 
1.7
%
Percent change in GAAP rent (3)
 
18.4
%
 
19.4
%
 
17.0
 %
 
20.2
%
 
9.5
%
Total TI & LC per square foot (4)
 
$
22.18

 
$
32.95

 
$
2.50

 
$
40.07

 
$
55.07

Total TI & LC per sq. ft. per year of lease term (4)
 
$
4.96

 
$
4.95

 
$
0.50

 
$
7.75

 
$
7.61

 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
13

 
80

 
562

 
189

 
46

Lease term (years)
 
4.3

 
7.3

 
14.4

 
11.6

 
8.7

Starting cash rent
 
$
42.25

 
$
47.23

 
$
47.32

 
$
39.67

 
$
35.34

Percent change in cash rent (3)
 
4.7
%
 
18.8
%
 
(1.2
)%
 
9.6
%
 
6.7
%
Percent change in GAAP rent (3)
 
7.4
%
 
30.3
%
 
11.0
 %
 
25.5
%
 
15.3
%
Total TI & LC per square foot (4)
 
$
43.16

 
$
61.27

 
$
118.28

 
$
70.12

 
$
65.55

Total TI & LC per sq. ft. per year of lease term (4)
 
$
10.02

 
$
8.35

 
$
8.23

 
$
6.03

 
$
7.49

The above leasing summary is based on leases executed during the periods indicated, and excludes leasing activity for assets during the quarter in which the asset was sold or classified as held for sale.
 
 
(1)
Excludes properties classified as held for sale and land parcels.
(2)
Changes in total square footage result from property dispositions, reclassifications, and remeasurement.
(3)
Percent change in GAAP and cash rent is a comparison of current rent, including tenant expense reimbursements, if any, to the rent, including tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. Cash rent is calculated before deducting any initial period free rent. New leasing in suites vacant longer than 2 years was excluded from the calculation.
(4)
Includes tenant improvements (TI) and leasing commissions (LC).


17

SAME PROPERTY LEASING SUMMARY
(dollars and square feet in thousands, except per square foot data)

 
 
As of and for the Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Properties
 
9

 
9

 
9

 
9

 
9

Total square feet (1)
 
3,833

 
3,833

 
3,833

 
3,838

 
3,841

Percentage leased
 
94.4
%
 
95.5
%
 
94.6
 %
 
94.0
%
 
92.3
%
Percentage commenced
 
93.7
%
 
93.9
%
 
93.3
 %
 
91.7
%
 
91.2
%
 
 
 
 
 
 
 
 
 
 
 
Total Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
108

 
141

 
466

 
171

 
50

Lease term (years)
 
4.5

 
6.7

 
15.1

 
5.1

 
7.9

Starting cash rent
 
$
54.98

 
$
45.29

 
$
49.88

 
$
42.99

 
$
39.89

Percent change in cash rent (2)
 
8.0
%
 
10.4
%
 
(1.2
)%
 
15.5
%
 
2.9
%
Percent change in GAAP rent (2)
 
17.9
%
 
23.9
%
 
11.0
 %
 
25.0
%
 
9.3
%
Total TI & LC per square foot (3)
 
$
24.78

 
$
41.88

 
$
123.02

 
$
45.22

 
$
59.04

Total TI & LC per sq. ft. per year of lease term (3)
 
$
5.56

 
$
6.23

 
$
8.15

 
$
8.82

 
$
7.46

 
 
 
 
 
 
 
 
 
 
 
Renewal Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
95

 
90

 
1

 
87

 
34

Lease term (years)
 
4.5

 
6.5

 
5.0

 
5.2

 
9.4

Starting cash rent
 
$
56.78

 
$
42.45

 
$
67.85

 
$
40.71

 
$
40.13

Percent change in cash rent (2)
 
8.2
%
 
7.5
%
 
0.0
 %
 
16.3
%
 
1.3
%
Percent change in GAAP rent (2)
 
18.4
%
 
20.3
%
 
17.0
 %
 
23.9
%
 
6.9
%
Total TI & LC per square foot (3)
 
$
22.18

 
$
33.32

 
$
2.50

 
$
44.92

 
$
70.64

Total TI & LC per sq. ft. per year of lease term (3)
 
$
4.96

 
$
5.10

 
$
0.50

 
$
8.64

 
$
7.53

 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
13

 
51

 
465

 
84

 
16

Lease term (years)
 
4.3

 
7.1

 
15.1

 
5.0

 
4.7

Starting cash rent
 
$
42.25

 
$
50.25

 
$
49.84

 
$
45.37

 
$
39.37

Percent change in cash rent (2)
 
4.7
%
 
21.4
%
 
(1.2
)%
 
14.9
%
 
6.7
%
Percent change in GAAP rent (2)
 
7.4
%
 
37.4
%
 
11.0
 %
 
26.0
%
 
15.1
%
Total TI & LC per square foot (3)
 
$
43.16

 
$
56.87

 
$
123.33

 
$
45.53

 
$
34.03

Total TI & LC per sq. ft. per year of lease term (3)
 
$
10.02

 
$
8.05

 
$
8.16

 
$
9.02

 
$
7.17

The above leasing summary is based on leases executed during the periods indicated.
 
 
(1)
Changes in total square footage result from remeasurement.
(2)
Percent change in GAAP and cash rent is a comparison of current rent, including tenant expense reimbursements, if any, to the rent, including tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. Cash rent is calculated before deducting any initial period free rent. New leasing in suites vacant longer than 2 years was excluded from the calculation.
(3)
Includes tenant improvements (TI) and leasing commissions (LC).


18
CAPITAL SUMMARY
EXPENDITURES & SAME PROPERTY LEASING COMMITMENTS
(dollars and square feet in thousands)

CAPITAL SUMMARY
Three Months Ended
EXPENDITURES
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Tenant improvements
$
2,450

 
$
11,078

 
$
11,490

 
$
13,773

 
$
10,907

Leasing costs
843

 
2,224

 
11,699

 
4,909

 
2,842

Building improvements (1)
1,256

 
1,936

 
2,223

 
2,936

 
1,951

Total capital expenditures
$
4,549

 
$
15,238

 
$
25,412

 
$
21,618

 
$
15,700

 
 
 
 
 
 
 
 
 
 
Average square feet during period (2)
4,477

 
5,265

 
5,876

 
6,619

 
8,214

 
 
 
 
 
 
 
 
 
 
Building improvements per average total sq. ft. during period
$
0.28

 
$
0.37

 
$
0.38

 
$
0.44

 
$
0.24


CAPITAL SUMMARY
 
Three Months Ended
SAME PROPERTY LEASING COMMITMENTS
 
March 31, 2019
 
 
New Leases
 
Renewal Leases
 
Total
Square feet leased during the period
 
13

 
95

 
108

Total TI & LC (3)
 
$
561

 
$
2,107

 
$
2,668

Total TI & LC per square foot (3)
 
$
43.16

 
$
22.18

 
$
24.78

Weighted average lease term by square foot (years)
 
4.3

 
4.5

 
4.5

Total TI & LC per square foot per year of lease term (3)
 
$
10.02

 
$
4.96

 
$
5.56

(1)
Tenant-funded capital expenditures are excluded.
(2)
Average square feet during each period includes properties held for sale at the end of each period.
(3)
Includes tenant improvements (TI) and leasing commissions (LC).


19
TENANTS REPRESENTING 1.5% OR MORE OF ANNUALIZED RENTAL REVENUE
As of March 31, 2019
(square feet in thousands)


 
 
Tenant
 
Square Feet (1)
 
% of Total Sq. Ft. (1)
 
% of Annualized Rental Revenue
 
Weighted Average Remaining Lease Term
1

 
Expedia, Inc. (2)
 
427

 
11.8
%
 
18.2
%
 
0.8
2

 
Flex Ltd.
 
1,051

 
29.1
%
 
9.8
%
 
10.8
3

 
Georgetown University (3)
 
240

 
6.6
%
 
5.8
%
 
0.5
4

 
Beth Israel Deaconess Medical Center, Inc.
 
117

 
3.2
%
 
3.2
%
 
4.6
5

 
Dana-Farber Cancer Institute, Inc.
 
77

 
2.1
%
 
3.0
%
 
10.4
6

 
Equinor Energy Services, Inc.
 
77

 
2.1
%
 
2.7
%
 
4.8
7

 
BT Americas, Inc.
 
59

 
1.6
%
 
2.6
%
 
0.3
8

 
KPMG, LLP
 
66

 
1.8
%
 
2.2
%
 
3.9
9

 
CBRE, Inc.
 
40

 
1.1
%
 
1.6
%
 
10.0
10

 
HNTB Corporation
 
52

 
1.4
%
 
1.5
%
 
8.2
11

 
Boon Insurance Management Services, LP
 
53

 
1.5
%
 
1.5
%
 
2.3
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
2,259

 
62.3
%
 
52.1
%
 
6.5
(1)
Square footage as of March 31, 2019 includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants.
(2)
During the third quarter of 2018, an affiliate of Amazon.com, Inc. entered into a new 16-year lease for 429,012 square feet, including all of the Expedia, Inc. space. The lease commences in 2020.
(3)
Georgetown University's leased space includes 111,600 square feet that are sublet to another tenant. During the fourth quarter of 2017, the other tenant committed to lease this space through September 30, 2037. The lease commences on October 1, 2019.
 
 
 
 


20
SAME PROPERTY LEASE EXPIRATION SCHEDULE
As of March 31, 2019
(dollars and sq. ft. in thousands)

Year
 
Number of Tenants Expiring
 
Leased Sq. Ft. Expiring (1)
 
% of Leased Sq. Ft. Expiring
 
Cumulative % of Leased Sq. Ft. Expiring
 
Annualized Rental Revenue Expiring (2)
 
% of Annualized Rental Revenue Expiring
 
Cumulative % of Annualized Rental Revenue Expiring
2019
 
25
 
281
 
7.8
%
 
7.8
%
 
$
10,215

 
8.6
%
 
8.6
%
2020
 
26
 
134
 
3.7
%
 
11.5
%
 
5,663

 
4.7
%
 
13.3
%
2021
 
31
 
246
 
6.8
%
 
18.3
%
 
10,078

 
8.5
%
 
21.8
%
2022
 
21
 
291
 
8.0
%
 
26.3
%
 
13,131

 
11.0
%
 
32.8
%
2023
 
22
 
286
 
7.9
%
 
34.2
%
 
11,895

 
10.0
%
 
42.8
%
2024
 
20
 
299
 
8.3
%
 
42.5
%
 
11,031

 
9.2
%
 
52.0
%
2025
 
9
 
99
 
2.7
%
 
45.2
%
 
3,785

 
3.2
%
 
55.2
%
2026
 
8
 
80
 
2.2
%
 
47.4
%
 
3,398

 
2.8
%
 
58.0
%
2027
 
3
 
87
 
2.5
%
 
49.9
%
 
3,348

 
2.8
%
 
60.8
%
2028
 
3
 
59
 
1.6
%
 
51.5
%
 
2,868

 
2.4
%
 
63.2
%
Thereafter
 
11
 
1,755
 
48.5
%
 
100.0
%
 
43,895

 
36.8
%
 
100.0
%
    Total
 
179
 
3,617
 
100.0
%
 
 
 
$
119,307

 
100.0
%
 
 
Weighted average remaining
 
 
 
 
 
 
 
 
 
 
    lease term (in years)
 
8.2

 
 
 
 
 
7.8

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Square footage as of March 31, 2019 includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
(2)
Excludes the Annualized Rental Revenue of space that is leased but not commenced.

21

COMMON & POTENTIAL COMMON SHARES
(share amounts in thousands)

 
Three Months Ended
 
March 31,
Weighted Average Share Calculation - GAAP EPS
2019
 
2018
 
 
 
 
Weighted average common shares outstanding - basic (1)
121,960

 
123,867

Weighted average Series D preferred shares convertible to common shares
2,563

 
2,363

Weighted average Operating Partnership Units outstanding
—

 
1

Weighted average dilutive RSUs and LTIP Units (2)
1,299

 
866

Weighted average common shares outstanding - diluted (1)
125,822

 
127,097

 
 
 
 
 
Three Months Ended
 
March 31,
Weighted Average Share and Unit Calculation - FFO and Normalized FFO per share and unit
2019
 
2018
Weighted average EQC common shares outstanding (1)
121,960

 
123,867

Weighted average Operating Partnership Units outstanding (3)
4

 
1

Weighted average time-based LTIP Units (2)(3)
42

 
42

Weighted average common shares and units outstanding - basic (1)
122,006

 
123,910

Weighted average dilutive RSUs and market-based LTIP Units (2)
1,299

 
824

Weighted average common shares and units outstanding - diluted (1)
123,305

 
124,734

Rollforward of Share Count to March 31, 2019
 
 
Series D Preferred Shares (4)
 
EQC Common Shares (5)
Outstanding on December 31, 2018
 
 
4,915

 
121,572

Issuance of restricted shares and shares earned from RSUs, net (6)
 
 
—

 
328

Outstanding on March 31, 2019
 
 
4,915

 
121,900

Common shares issuable from RSUs, Operating Partnership Units, and LTIP Units as measured on March 31, 2019 (2)
 
 
 
 
1,566

Potential common shares as measured on March 31, 2019 (7)
 
 
 
 
123,466

(1
)
Weighted average common shares outstanding for the three months ended March 31, 2019 and 2018 includes 187 and 307 unvested, earned RSUs, respectively.
(2
)
We have granted RSUs and LTIP Units to certain employees, officers, and trustees. RSUs and LTIP Units contain service and market-based vesting components.
(3
)
Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share and unit - basic include time-based LTIP Units and Operating Partnership Units that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only).
(4
)
As of March 31, 2019, we had 4,915 series D preferred shares that were convertible into 2,563 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended March 31, 2019 and 2018. They are antidilutive for FFO per common share and Normalized FFO per common share for all periods presented.
(5
)
EQC common shares include unvested restricted shares and unvested earned RSUs.
(6
)
This amount is net of forfeitures and shares surrendered to satisfy statutory tax witholding obligations.
(7
)
Potential common shares as measured on March 31, 2019, exclude 4,915 series D preferred shares outstanding that were convertible into 2,563 common shares.

22

DEFINITIONS

Annualized Rental Revenue
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2019, plus estimated recurring expense reimbursements; excludes lease value amortization, straight line rent adjustments, abated (“free”) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues. The annualized rental revenue of disposed properties is presented for the quarter-ended preceding each disposition.
Annualized rental revenue is a forward-looking non-GAAP measure. Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
Building Improvements
Building improvements are expenditures to replace obsolete building components or extend the useful life of existing assets.
Consolidated Income Available for Debt Service
Consolidated income available for debt service is earnings from operations excluding interest expense, depreciation and amortization, taxes, and certain items that we view as nonrecurring or impacting comparability from period to period, determined together with debt service on a pro forma basis for the four consecutive fiscal quarters most recently ended.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), EBITDAre, and Adjusted EBITDAre
We calculate EBITDA as net income (loss) excluding interest expense, income tax expense, and depreciation and amortization.
We calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT). NAREIT defines EBITDAre as net income (loss), calculated in accordance with GAAP, plus interest expense, plus income tax expense, plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated joint ventures, plus adjustments to reflect the entity's share of EBITDAre of unconsolidated joint ventures. Our calculation of Adjusted EBITDAre differs from our calculations of EBITDA and EBITDAre because we exclude certain items that we view as nonrecurring or impacting comparability from period to period. EBITDA, EBITDAre, and Adjusted EBITDAre are supplemental non-GAAP financial measures.
We consider EBITDA, EBITDAre and Adjusted EBITDAre to be appropriate measures of our operating performance, along with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities. We believe that EBITDA, EBITDAre, and Adjusted EBITDAre provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA, EBITDAre, and Adjusted EBITDAre may facilitate a comparison of current operating performance with our past operating performance. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss), net income (loss) attributable to EQC common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income (loss) and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate EBITDA, EBITDAre and Adjusted EBITDAre differently than we do.
Annualized Adjusted EBITDAre
Annualized Adjusted EBITDAre is Adjusted EBITDAre for the three months ended March 31, 2019 multiplied by four.
Enterprise Value
Enterprise value is net debt plus the market value of our preferred shares plus the market value of our common shares.
Funds from Operations (FFO) and Normalized FFO
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.

23

DEFINITIONS

 
We believe that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs.  FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income (loss), net income (loss) attributable to EQC common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.  These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.  Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do.
Leasing Costs
Leasing costs include leasing commissions (LCs) and related legal expenses.
LTIP Units
LTIP Units are a class of beneficial interests in EQC Operating Trust (the Operating Trust) that may be issued to employees, officers, or trustees of the Operating Trust, EQC, or their subsidiaries.
Net Debt
Net debt is total debt minus cash and cash equivalents.
Net Operating Income (NOI), Same Property NOI, Cash Basis NOI, and Same Property Cash Basis NOI
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 January 1, 2018 through March 31, 2019. 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 may help to understand the operations of our properties. We use these measures internally to evaluate property level performance, and we believe that they provide useful information to investors regarding our results of operations because they reflect only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. Cash Basis NOI is among the factors considered with respect to acquisition, disposition and financing decisions. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income (loss), net income (loss) attributable to Equity Commonwealth common shareholders, or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do.
Net Book Value
Net book value represents the carrying value of real estate properties after depreciation and amortization, purchase price allocations, and impairment write-downs, if any.
NOI Margin
NOI Margin is NOI (or the same property or cash basis derivations of NOI defined above) divided by the total revenues used to calculate NOI (or its derivation).
Operating Partnership Units
Operating Partnership Units are beneficial interests in the Operating Trust.
Other Revenue
Other revenue is primarily comprised of parking revenue that does not represent a component of a lease.
Percentage Commenced
Percentage commenced includes space subject to leases that have commenced, whether or not the tenant is in a free rent period.

24

DEFINITIONS

Percentage Leased
Percentage leased includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but not occupied or is being offered for sublease by tenants.
Rental Revenue
Rental revenue is primarily comprised of minimum lease payments from tenants, including tenant reimbursements. In addition, rental revenue includes lease termination fees and straight line rent adjustments.
Same Properties
Our same property portfolio is comprised of those properties continuously owned from January 1, 2018 through March 31, 2019. Land parcels and properties classified as held for sale within our condensed consolidated balance sheets are excluded.
Tenant Improvements
Tenant improvements are capital expenditures to improve tenant spaces.
Total Debt
Total debt is the aggregate balance of the following line items on our condensed consolidated balance sheets: senior unsecured debt, net, and mortgage notes payable, net.
Undepreciated Book Value
Undepreciated book value represents the carrying value of real estate properties after purchase price allocations, and impairment write-downs, if any.



25