Document

EX-99.2 3 eqc93019ex992.htm EX-99.2 Document

Exhibit 99.2

Equity Commonwealth

Supplemental Operating

and Financial Data

Third Quarter 2019


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	3

Financial Information
	Key Financial Data	4
	Condensed Consolidated Balance Sheets	5
	Additional Balance Sheet Information	6
	Condensed Consolidated Statements of Operations	7
	Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI	8
	Same Property Results of Operations	10
	Calculation of EBITDA, EBITDAre, and Adjusted EBITDAre	11
	Calculation of Funds from Operations (FFO) and Normalized FFO	12
	Debt Summary	13
	Leverage Ratios, Coverage Ratios and Public Debt Covenants	14
	Acquisitions and Dispositions	15

Portfolio Information
	Property Detail	16
	Leasing Summary	17
	Same Property Leasing Summary	18
	Capital Summary - Expenditures & Same Property Leasing Commitments	19
	Tenants Representing 2% or More of Annualized Rental Revenue	20
	Same Property Lease Expiration Schedule	21

Additional Support
	Common & Potential Common Shares	22
	Definitions	23

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.

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
7	2,469	93.5%	88.2%


NYSE Trading Symbols
Common Stock: EQC
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,

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


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 do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts.

KEY FINANCIAL DATA

(amounts in thousands, except per share data)


		As of and for the Three Months Ended
		9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
OPERATING INFORMATION
	Ending property count	7			7			9			10			11
	Ending square footage ⁽¹⁾	2,469			2,469			3,833			5,120			5,410
	Percent leased	93.5		%	90.5		%	94.4		%	94.8		%	94.0		%
	Percent commenced	88.2		%	89.7		%	93.7		%	91.2		%	91.3		%
	Net income attributable to EQC common shareholders	$	21,889		$	240,289		$	208,521		$	13,420		$	30,767
	Adjusted EBITDAre ⁽²⁾	27,690			33,556			31,651			34,154			30,454
SAME PROPERTY OPERATING INFORMATION
	Ending square footage	2,469			2,469			2,469			2,469			2,469
	Percent leased	93.5		%	90.5		%	92.0		%	93.2		%	93.1		%
	Percent commenced	88.2		%	89.7		%	91.1		%	91.6		%	91.1		%
	Same Property NOI ⁽²⁾	$	16,677		$	19,440		$	17,078		$	15,949		$	15,846
	Same Property Cash Basis NOI ⁽²⁾	17,126			17,490			17,243			16,086			16,026
	Same Property NOI margin	62.8		%	66.7		%	64.3		%	61.9		%	61.6		%
	Same Property Cash Basis NOI margin	63.4		%	64.3		%	64.5		%	62.2		%	61.8		%
SHARES OUTSTANDING AND PER SHARE DATA ⁽³⁾
	Shares Outstanding at End of Period
	Common stock outstanding	121,924			121,922			121,900			121,572			121,483
	Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units ⁽³⁾	1,688			1,443			1,566			1,809			1,414
	Dilutive Series D Convertible Preferred Shares outstanding ⁽⁴⁾	—			2,563			2,563			—			—
	Preferred Stock Outstanding ⁽⁴⁾	4,915			4,915			4,915			4,915			4,915
	Weighted Average Shares Outstanding - GAAP
	Basic ⁽⁵⁾	122,140			122,122			121,960			121,749			121,845
	Diluted ⁽⁵⁾	123,564			125,862			125,822			123,376			122,851
	Distributions Declared Per Common Share	$	3.50		$	—		$	—		$	—		$	2.50
BALANCE SHEET
	Total assets	$	3,731,343		$	3,702,171		$	3,713,937		$	3,530,772		$	3,813,728
	Total liabilities	503,230			66,548			322,376			346,774			644,217
ENTERPRISE VALUE
	Total debt (book value)	$	25,896		$	26,091		$	274,977		$	274,955		$	279,901
	Less: Cash and cash equivalents	(3,205,775)			(3,180,548)			(3,069,501)			(2,400,803)			(2,673,328)
	Plus: Market value of preferred shares	137,871			135,561			134,480			124,109			128,451
	Plus: Market value of diluted common shares	4,233,722			4,011,848			4,036,090			3,698,580			3,943,753
	Total enterprise value	$	1,191,714		$	992,952		$	1,376,046		$	1,696,841		$	1,678,777
RATIOS
	Net debt / enterprise value	(266.8)		%	(317.7)		%	(203.1)		%	(125.3)		%	(142.6)		%
	Net debt / annualized adjusted EBITDAre ⁽²⁾	(28.7)x			(23.5)x			(22.1)x			(15.6)x			(19.6)x
	Adjusted EBITDAre ⁽²⁾ / interest expense	86.3x			8.2x			7.5x			6.8x			6.0x


(1)			Changes in total square footage result from property dispositions, reclassifications, and remeasurement.
(2)			Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measure herein.
(3)			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.
(4)			As of September 30, 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 June 30, 2019 and March 31, 2019, 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.
(5)			Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)


	September 30, 2019		December 31, 2018
ASSETS
Real estate properties:
Land	$	85,627	$	135,142
Buildings and improvements	572,714		1,004,500
	658,341		1,139,642
Accumulated depreciation	(197,847)		(375,968)
	460,494		763,674



Cash and cash equivalents	3,205,775		2,400,803
Marketable securities	—		249,602
Restricted cash	4,456		3,298
Rents receivable	19,347		51,089
Other assets, net	41,271		62,306
Total assets	$	3,731,343	$	3,530,772

LIABILITIES AND EQUITY
Senior unsecured debt, net	$	—	$	248,473
Mortgage notes payable, net	25,896		26,482

Accounts payable, accrued expenses and other	38,218		58,300

Rent collected in advance	3,533		9,451

Distributions payable	435,583		4,068

Total liabilities	$	503,230	$	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; 121,924,199 and 121,572,155 shares issued and outstanding, respectively	1,219		1,216
Additional paid in capital	4,310,353		4,305,974
Cumulative net income	3,347,664		2,870,974
Cumulative other comprehensive loss	—		(342)
Cumulative common distributions	(3,851,947)		(3,420,548)
Cumulative preferred distributions	(699,727)		(693,736)
Total shareholders’ equity	3,226,825		3,182,801
Noncontrolling interest	1,288		1,197
Total equity	$	3,228,113	$	3,183,998
Total liabilities and equity	$	3,731,343	$	3,530,772

ADDITIONAL BALANCE SHEET INFORMATION

(amounts in thousands)


	September 30, 2019		December 31, 2018
Additional Balance Sheet Information

Straight-line rents receivable	$	16,347	$	47,393
Accounts receivable	3,000		3,696
Rents receivable	$	19,347	$	51,089

Capitalized lease incentives, net	$	2,124	$	4,308
Deferred leasing costs, net	26,344		51,123
Other	12,803		6,875
Other assets, net	$	41,271	$	62,306

Accounts payable	$	2,404	$	2,932
Accrued interest	101		4,432
Accrued taxes	9,978		13,228
Accrued capital expenditures	2,161		13,540
Accrued leasing costs	7,376		6,181
Assumed real estate lease obligations, net	—		117
Security deposits	3,278		4,137
Other accrued liabilities	12,920		13,733
Accounts payable and accrued expenses	$	38,218	$	58,300

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019		2018		2019		2018
Revenues:
Rental revenue	$	23,995	$	43,770	$	93,459	$	144,612
Other revenue	2,740		3,103		8,396		9,485
Total revenues	$	26,735	$	46,873	$	101,855	$	154,097

Expenses:
Operating expenses	$	9,923	$	20,257	$	36,677	$	64,377
Depreciation and amortization	5,939		11,287		22,085		38,211
General and administrative	8,523		10,905		30,152		35,466
Loss on asset impairment	—		—		—		12,087
Total expenses	$	24,385	$	42,449	$	88,914	$	150,141

Interest and other income, net	19,401		12,626		57,871		31,074
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(55), $559, $264 and $2,005, respectively)	(321)		(5,085)		(8,597)		(21,550)
Loss on early extinguishment of debt	—		—		(6,374)		(6,403)

Gain on sale of properties, net	1,945		20,877		422,148		253,025
Income before income taxes	23,375		32,842		477,989		260,102
Income tax benefit (expense)	521		(65)		(1,119)		(2,616)
Net income	$	23,896	$	32,777	$	476,870	$	257,486
Net income attributable to noncontrolling interest	(10)		(13)		(180)		(90)
Net income attributable to Equity Commonwealth	$	23,886	$	32,764	$	476,690	$	257,396
Preferred distributions	(1,997)		(1,997)		(5,991)		(5,991)


Net income attributable to Equity Commonwealth common shareholders	$	21,889	$	30,767	$	470,699	$	251,405



Weighted average common shares outstanding — basic ⁽¹⁾	122,140		121,845		122,075		122,504
Weighted average common shares outstanding — diluted ⁽¹⁾	123,564		122,851		125,938		123,389

Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic	$	0.18	$	0.25	$	3.86	$	2.05
Diluted	$	0.18	$	0.25	$	3.79	$	2.04

Distributions declared per common share	$	3.50	$	2.50	$	3.50	$	2.50


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.

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

(amounts in thousands)


	For the Three Months Ended
	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue	$	23,995	$	30,574	$	38,890	$	39,756	$	43,770
Other revenue	2,740		2,794		2,862		3,169		3,103
Operating expenses	(9,923)		(10,974)		(15,780)		(15,539)		(20,257)
NOI	$	16,812	$	22,394	$	25,972	$	27,386	$	26,616
Straight line rent adjustments	499		(11)		(837)		(986)		(1,435)
Lease value amortization	(39)		(39)		(39)		(22)		(4)
Lease termination fees	(11)		(2,188)		—		(19)		(395)
Cash Basis NOI	$	17,261	$	20,156	$	25,096	$	26,359	$	24,782
Cash Basis NOI from non-same properties ⁽¹⁾	(135)		(2,666)		(7,853)		(10,273)		(8,756)
Same Property Cash Basis NOI	$	17,126	$	17,490	$	17,243	$	16,086	$	16,026
Non-cash rental income and lease termination fees from same properties	(449)		1,950		(165)		(137)		(180)
Same Property NOI	$	16,677	$	19,440	$	17,078	$	15,949	$	15,846

Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI	$	16,677	$	19,440	$	17,078	$	15,949	$	15,846
Non-cash rental income and lease termination fees from same properties	449		(1,950)		165		137		180
Same Property Cash Basis NOI	$	17,126	$	17,490	$	17,243	$	16,086	$	16,026
Cash Basis NOI from non-same properties ⁽¹⁾	135		2,666		7,853		10,273		8,756
Cash Basis NOI	$	17,261	$	20,156	$	25,096	$	26,359	$	24,782
Straight line rent adjustments	(499)		11		837		986		1,435
Lease value amortization	39		39		39		22		4
Lease termination fees	11		2,188		—		19		395
NOI	$	16,812	$	22,394	$	25,972	$	27,386	$	26,616
Depreciation and amortization	(5,939)		(7,561)		(8,585)		(10,830)		(11,287)
General and administrative	(8,523)		(9,533)		(12,096)		(8,973)		(10,905)

Interest and other income, net	19,401		20,695		17,775		15,741		12,626
Interest expense	(321)		(4,070)		(4,206)		(5,035)		(5,085)
Loss on early extinguishment of debt	—		(6,374)		—		(719)		—
Gain (loss) on sale of properties, net	1,945		227,166		193,037		(1,608)		20,877
Income before income taxes	$	23,375	$	242,717	$	211,897	$	15,962	$	32,842
Income tax benefit (expense)	521		(340)		(1,300)		(540)		(65)
Net income	$	23,896	$	242,377	$	210,597	$	15,422	$	32,777

Same Property capitalized external legal costs⁽²⁾	N/A		N/A		N/A		$	—	$	14


(1)			Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
(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.

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

(amounts in thousands)


	For the Nine Months Ended September 30,
	2019		2018
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue	$	93,459	$	144,612
Other revenue	8,396		9,485
Operating expenses	(36,677)		(64,377)
NOI	$	65,178	$	89,720
Straight line rent adjustments	(349)		(3,985)
Lease value amortization	(117)		76
Lease termination fees	(2,199)		(2,917)
Cash Basis NOI	$	62,513	$	82,894
Cash Basis NOI from non-same properties ⁽¹⁾	(10,654)		(35,777)
Same Property Cash Basis NOI	$	51,859	$	47,117
Non-cash rental income and lease termination fees from same properties	1,336		256
Same Property NOI	$	53,195	$	47,373

Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI	$	53,195	$	47,373
Non-cash rental income and lease termination fees from same properties	(1,336)		(256)
Same Property Cash Basis NOI	$	51,859	$	47,117
Cash Basis NOI from non-same properties ⁽¹⁾	10,654		35,777
Cash Basis NOI	$	62,513	$	82,894
Straight line rent adjustments	349		3,985
Lease value amortization	117		(76)
Lease termination fees	2,199		2,917
NOI	$	65,178	$	89,720
Depreciation and amortization	(22,085)		(38,211)
General and administrative	(30,152)		(35,466)
Loss on asset impairment	—		(12,087)
Interest and other income, net	57,871		31,074
Interest expense	(8,597)		(21,550)
Loss on early extinguishment of debt	(6,374)		(6,403)
Gain on sale of properties, net	422,148		253,025
Income before income taxes	$	477,989	$	260,102
Income tax expense	(1,119)		(2,616)
Net income	$	476,870	$	257,486

Same Property capitalized external legal costs⁽²⁾	N/A		$	190


(1)			Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.
(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.

SAME PROPERTY RESULTS OF OPERATIONS

(dollars and square feet in thousands)


	As of and for the Three Months Ended September 30,														As of and for the Nine Months Ended September 30,
	2019			2018			% Change		2019			2018			% Change
Properties	7			7					7			7
Square Feet	2,469			2,469					2,469			2,469
% Leased	93.5		%	93.1		%	0.4	%	93.5		%	93.1		%	0.4	%
% Commenced	88.2		%	91.1		%	(2.9)	%	88.2		%	91.1		%	(2.9)	%

Rental revenue	$	24,288		$	23,357		4.0	%	$	73,212		$	68,047		7.6	%
Other revenue	2,727			2,561			6.5	%	7,731			7,259			6.5	%
Straight line rent adjustment	(499)			(188)					(980)			90
Lease value amortization	39			8					117			24
Lease termination fees	11			—					2,199			142
Total revenue	26,566			25,738			3.2	%	82,279			75,562			8.9	%
Operating expenses	(9,889)			(9,892)			0.0	%	(29,084)			(28,189)			3.2	%
NOI	$	16,677		$	15,846		5.2	%	$	53,195		$	47,373		12.3	%
NOI Margin	62.8		%	61.6		%			64.7		%	62.7		%

Straight line rent adjustment	$	499		$	188				$	980		$	(90)
Lease value amortization	(39)			(8)					(117)			(24)
Lease termination fees	(11)			—					(2,199)			(142)
Cash Basis NOI	$	17,126		$	16,026		6.9	%	51,859			47,117			10.1	%
Cash Basis NOI Margin	63.4		%	61.8		%			64.1		%	62.6		%


Same Property capitalized external legal costs⁽¹⁾	N/A			$	14				N/A			$	190


(1)			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.

CALCULATION OF EBITDA, EBITDAre, AND ADJUSTED EBITDAre

(amounts in thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019		2018		2019		2018
Net income	$	23,896	$	32,777	$	476,870	$	257,486
Interest expense	321		5,085		8,597		21,550
Income tax (benefit) expense	(521)		65		1,119		2,616
Depreciation and amortization	5,939		11,287		22,085		38,211
EBITDA	$	29,635	$	49,214	$	508,671	$	319,863
Loss on asset impairment	—		—		—		12,087
Gain on sale of properties, net	(1,945)		(20,877)		(422,148)		(253,025)
EBITDAre	$	27,690	$	28,337	$	86,523	$	78,925
Loss on early extinguishment of debt	—		—		6,374		6,403
Loss on sale of real estate mortgage receivable	—		2,117		—		2,117
Loss on sale of securities	—		—		—		4,987
Adjusted EBITDAre	$	27,690	$	30,454	$	92,897	$	92,432

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO

(amounts in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019		2018		2019		2018
Calculation of FFO
Net income	$	23,896	$	32,777	$	476,870	$	257,486
Real estate depreciation and amortization	5,683		10,978		21,243		37,298
Loss on asset impairment	—		—		—		12,087
Gain on sale of properties, net	(1,945)		(20,877)		(422,148)		(253,025)
FFO attributable to Equity Commonwealth	27,634		22,878		75,965		53,846
Preferred distributions	(1,997)		(1,997)		(5,991)		(5,991)

FFO attributable to EQC common shareholders and unitholders	$	25,637	$	20,881	$	69,974	$	47,855

Calculation of Normalized FFO
FFO attributable to EQC common shareholders and unitholders	$	25,637	$	20,881	$	69,974	$	47,855
Lease value amortization	(39)		(4)		(117)		76
Straight line rent adjustments	499		(1,435)		(349)		(3,985)
Loss on early extinguishment of debt	—		—		6,374		6,403
Loss on sale of securities	—		—		—		4,987
Loss on sale of real estate mortgage receivable	—		2,117		—		2,117
Income taxes related to gains on property sales, net	(423)		25		142		2,498



Normalized FFO attributable to EQC common shareholders and unitholders	$	25,674	$	21,584	$	76,024	$	59,951

Weighted average common shares and units outstanding -- basic ⁽¹⁾	122,189		121,891		122,121		122,548
Weighted average common shares and units outstanding -- diluted ⁽¹⁾	123,613		122,897		123,421		123,433
FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted	$	0.21	$	0.17	$	0.57	$	0.39

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic & diluted	$	0.21	$	0.18	$	0.62	$	0.49


(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 September 30, 2019 and 2018 include 49 and 46 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 nine months ended September 30, 2019 and 2018 include 46 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). Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares and units outstanding.

DEBT SUMMARY

As of September 30, 2019

(dollars in thousands)

Interest Rate

Principal Balance

Maturity Date

Open at Par Date

Due at Maturity

Years to Maturity

Secured Debt:

Secured Fixed Rate Debt:

206 East 9th Street ⁽¹⁾

5.69

25,579

1/5/2021

7/5/2020

24,836

1.3


Scheduled Principal Payments During Period
Year:	Secured Fixed Rate Debt			Interest Rate

2019	$	146		5.7	%
2020	597			5.7	%
2021	24,836			5.7	%
Thereafter	—			—	%
	$	25,579	⁽¹⁾	5.7	%



(1)			Total debt outstanding as of September 30, 2019, including net unamortized premiums and deferred financing fees was $25,896.

LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS

(dollars in thousands)


	As of and for the Three Months Ended
	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
Leverage Ratios
Total debt / total assets	0.7	%	0.7	%	7.4	%	7.8	%	7.3	%
Total debt / total market capitalization	0.6	%	0.6	%	6.2	%	6.7	%	6.4	%
Total debt + preferred stock / total market capitalization	3.7	%	3.9	%	9.2	%	9.7	%	9.4	%
Total debt / annualized adjusted EBITDAre ⁽¹⁾	0.2x		0.2x		2.2x		2.0x		2.3x
Total debt + preferred stock / annualized adjusted EBITDAre ⁽¹⁾	1.5x		1.2x		3.2x		2.9x		3.4x
Net debt / enterprise value	(266.8)	%	(317.7)	%	(203.1)	%	(125.3)	%	(142.6)	%
Net debt + preferred stock / enterprise value	(255.3)	%	(304.0)	%	(193.3)	%	(118.0)	%	(134.9)	%
Net debt / annualized adjusted EBITDAre ⁽¹⁾	(28.7)x		(23.5)x		(22.1)x		(15.6)x		(19.6)x
Net debt + preferred stock / annualized adjusted EBITDAre ⁽¹⁾	(27.5)x		(22.5)x		(21.0)x		(14.7)x		(18.6)x
Secured debt / total assets	0.7	%	0.7	%	0.7	%	0.8	%	0.8	%



Coverage Ratios
Adjusted EBITDAre / interest expense ⁽¹⁾	86.3x		8.2x		7.5x		6.8x		6.0x
Adjusted EBITDAre / interest expense + preferred distributions ⁽¹⁾	11.9x		5.5x		5.1x		4.9x		4.3x

Public Debt Covenants ⁽²⁾
Debt / adjusted total assets ⁽³⁾ (maximum 60%)	N/A		N/A		7.0	%	7.2	%	6.8	%
Secured debt / adjusted total assets ⁽³⁾ (maximum 40%)	N/A		N/A		0.7	%	0.7	%	0.8	%
Consolidated income available for debt service / debt service (minimum 1.5x)	N/A		N/A		5.8x		6.2x		4.6x
Total unencumbered assets ⁽³⁾ / unsecured debt (minimum 150% / 200%)	N/A		N/A		1,550	%	1,520	%	1,629	%


(1)			Refer to the calculation of EBITDA, EBITDAre, and Adjusted EBITDAre for a reconciliation of these measures to Net income.
(2)			After the redemption of all $250.0 million of our 5.875% senior unsecured notes due 2020 on June 28, 2019, we no longer have any notes outstanding under our public debt indenture and related supplements, collectively the Indenture, and we are no longer required to maintain the financial ratio covenants prescribed in the Indenture. As a result, we are no longer rated by the debt rating agencies.
(3)			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.

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

600 108th Avenue NE ⁽³⁾	Bellevue	WA	1	254,510		97.0	%			$	195,000			$	34,481			$	9,561
Research Park ⁽⁴⁾	Austin	TX	1	1,110,007		99.1	%			165,500				70,576				13,126
Total Q2 Dispositions				2	1,364,517			98.7	%			$	360,500			$	105,057			$	22,687

None			—	—		—				$	—			$	—			$	—




Total Q3 Dispositions				—	—			—				$	—			$	—			$	—

Total Disposed Year-to-Date				3	2,651,453			95.8	%			$	812,100			$	297,151			$	60,000

Dispositions resulted in a net gain on sale of properties of $1.9 million and $422.1 million for the three and nine months ended September 30, 2019, respectively.


(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.
(3)			The property includes an office building and additional development rights.
(4)			There is consideration of $2.0 million being held in escrow related to the sale of this property. To the extent any of these proceeds are ultimately released to the company, the gain on sale will increase.

PROPERTY DETAIL

As of September 30, 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	89.4	%	87.4	%	$	25,645	$	164,581	$	125,450	2009	1982
	(17th Street Plaza)
2	333 108th Avenue NE	Bellevue, WA	Office	1	435,406	100.0	%	99.3	%	22,659		153,525		117,766		2009	2008
	(Tower 333)
3	Bridgepoint Square	Austin, TX	Office	5	440,007	87.2	%	82.6	%	14,490		102,391		54,870		1997	1995
4	1250 H Street, NW	Washington, D.C.	Office	1	196,490	87.1	%	87.1	%	9,497		75,681		40,446		1998	1992
5	109 Brookline Avenue	Boston, MA	Office	1	285,556	99.2	%	73.9	%	8,667		48,102		25,221		1995	1915
6	206 East 9th Street	Austin, TX	Office	1	175,510	98.0	%	86.1	%	8,025		51,759		43,592		2012	1984
	(Capitol Tower)
7	Georgetown-Green and Harris Buildings	Washington, D.C.	Office	2	240,475	100.0	%	100.0	%	7,007		62,302		53,149		2009	2006
	Total Same Properties			12	2,468,816	93.5	%	88.2	%	$	95,990	$	658,341	$	460,494	2005	1984


(1)			Excludes properties disposed prior to October 1, 2019.
(2)			Weighted based on square feet.

LEASING SUMMARY

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


	As of and for the Three Months Ended
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Properties	7			7			9			10			11
Total square feet ⁽¹⁾	2,469			2,469			3,833			5,120			5,410
Percentage leased	93.5		%	90.5		%	94.4		%	94.8		%	94.0		%
Percentage commenced	88.2		%	89.7		%	93.7		%	91.2		%	91.3		%

Total Leases
Square feet	298			58			108			173			563
Lease term (years)	4.6			3.0			4.5			7.0			14.4
Starting cash rent	$	38.89		$	45.83		$	54.98		$	45.01		$	47.36
Percent change in cash rent ⁽²⁾	(0.7)		%	9.1		%	8.0		%	10.0		%	(1.2)		%
Percent change in GAAP rent ⁽²⁾	9.1		%	14.5		%	17.9		%	22.5		%	11.0		%
Total TI & LC per square foot ⁽³⁾	$	44.27		$	11.49		$	24.78		$	46.00		$	118.03
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	9.60		$	3.83		$	5.56		$	6.60		$	8.22

Renewal Leases
Square feet	182			43			95			93			1
Lease term (years)	2.9			2.5			4.5			6.7			5.0
Starting cash rent	$	27.88		$	43.58		$	56.78		$	43.12		$	67.85
Percent change in cash rent ⁽²⁾	(12.7)		%	8.6		%	8.2		%	6.5		%	0.0		%
Percent change in GAAP rent ⁽²⁾	(8.5)		%	13.9		%	18.4		%	19.4		%	17.0		%
Total TI & LC per square foot ⁽³⁾	$	9.05		$	7.93		$	22.18		$	32.95		$	2.50
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	3.15		$	3.12		$	4.96		$	4.95		$	0.50

New Leases
Square feet	116			15			13			80			562
Lease term (years)	7.3			4.3			4.3			7.3			14.4
Starting cash rent	$	56.16		$	52.43		$	42.25		$	47.23		$	47.32
Percent change in cash rent ⁽²⁾	11.6		%	21.2		%	4.7		%	18.8		%	(1.2)		%
Percent change in GAAP rent ⁽²⁾	26.4		%	27.2		%	7.4		%	30.3		%	11.0		%
Total TI & LC per square foot ⁽³⁾	$	99.56		$	21.93		$	43.16		$	61.27		$	118.28
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	13.55		$	5.05		$	10.02		$	8.35		$	8.23


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)			Changes in total square footage result from property dispositions, reclassifications, and 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).

SAME PROPERTY LEASING SUMMARY

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


	As of and for the Three Months Ended
	9/30/2019			6/30/2019			3/31/2019			12/31/2018			9/30/2018
Properties	7			7			7			7			7
Total square feet	2,469			2,469			2,469			2,469			2,469
Percentage leased	93.5		%	90.5		%	92.0		%	93.2		%	93.1		%
Percentage commenced	88.2		%	89.7		%	91.1		%	91.6		%	91.1		%

Total Leases
Square feet	298			58			99			42			464
Lease term (years)	4.6			3.0			4.6			7.3			15.1
Starting cash rent	$	38.89		$	45.83		$	55.73		$	56.83		$	49.91
Percent change in cash rent ⁽¹⁾	(0.7)		%	9.1		%	7.6		%	25.8		%	(1.2)		%
Percent change in GAAP rent ⁽¹⁾	9.1		%	14.5		%	17.7		%	35.9		%	11.0		%
Total TI & LC per square foot ⁽²⁾	$	44.27		$	11.49		$	25.95		$	52.43		$	123.35
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	9.60		$	3.83		$	5.62		$	7.20		$	8.15

Renewal Leases
Square feet	182			43			88			13			1
Lease term (years)	2.9			2.5			4.7			5.2			5.0
Starting cash rent	$	27.88		$	43.58		$	57.58		$	46.03		$	67.85
Percent change in cash rent ⁽¹⁾	(12.7)		%	8.6		%	7.8		%	26.6		%	0.0		%
Percent change in GAAP rent ⁽¹⁾	(8.5)		%	13.9		%	18.2		%	30.4		%	17.0		%
Total TI & LC per square foot ⁽²⁾	$	9.05		$	7.93		$	23.72		$	19.12		$	2.50
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	3.15		$	3.12		$	5.07		$	3.66		$	0.50

New Leases
Square feet	116			15			11			29			463
Lease term (years)	7.3			4.3			4.2			8.2			15.2
Starting cash rent	$	56.16		$	52.43		$	41.59		$	61.89		$	49.86
Percent change in cash rent ⁽¹⁾	11.6		%	21.2		%	0.3		%	25.2		%	(1.2)		%
Percent change in GAAP rent ⁽¹⁾	26.4		%	27.2		%	2.6		%	40.0		%	10.9		%
Total TI & LC per square foot ⁽²⁾	$	99.56		$	21.93		$	43.06		$	68.02		$	123.66
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	13.55		$	5.05		$	10.35		$	8.25		$	8.16


The above leasing summary is based on leases executed during the periods indicated.

(1)			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.
(2)			Includes tenant improvements (TI) and leasing commissions (LC).

CAPITAL SUMMARY

EXPENDITURES & SAME PROPERTY LEASING COMMITMENTS

(dollars and square feet in thousands)


CAPITAL SUMMARY	Three Months Ended
EXPENDITURES	9/30/2019		6/30/2019		3/31/2019		12/31/2018		9/30/2018
Tenant improvements	$	707	$	2,491	$	2,450	$	11,078	$	11,490
Leasing costs ⁽¹⁾	3,056		374		843		2,224		11,699
Building improvements ⁽²⁾	804		2,328		1,256		1,936		2,223
Total capital expenditures	$	4,567	$	5,193	$	4,549	$	15,238	$	25,412


Average square feet during period ⁽³⁾	2,469		3,151		4,477		5,265		5,876

Building improvements per average total sq. ft. during period	$	0.33	$	0.74	$	0.28	$	0.37	$	0.38


CAPITAL SUMMARY	Three Months Ended
SAME PROPERTY LEASING COMMITMENTS	September 30, 2019
	New Leases		Renewal Leases		Total
Square feet leased during the period	116		182		298
Total TI & LC ⁽⁴⁾	$	11,549	$	1,647	$	13,196
Total TI & LC per square foot ⁽⁴⁾	$	99.56	$	9.05	$	44.27
Weighted average lease term by square foot (years)	7.3		2.9		4.6
Total TI & LC per square foot per year of lease term ⁽⁴⁾	$	13.55	$	3.15	$	9.60


(1)			Legal leasing costs are no longer capitalized after December 31, 2018. Periods presented before 2019 include both capitalized leasing commissions and capitalized legal leasing expenses.
(2)			Tenant-funded capital expenditures are excluded.
(3)			Average square feet during each period includes properties held for sale at the end of each period.
(4)			Includes tenant improvements (TI) and leasing commissions (LC).

TENANTS REPRESENTING 2% OR MORE OF ANNUALIZED RENTAL REVENUE

As of September 30, 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	18.5	%	23.0	%	0.3
2	Georgetown University ⁽³⁾	240	10.4	%	7.3	%	2.0
3	Beth Israel Deaconess Medical Center, Inc.	117	5.1	%	4.1	%	4.1
4	Dana-Farber Cancer Institute, Inc.	77	3.3	%	4.1	%	9.9
5	Equinor Energy Services, Inc.	77	3.3	%	3.4	%	4.3
6	KPMG, LLP	66	2.9	%	2.8	%	3.4
7	Crowdstrike, Inc.	36	1.6	%	2.0	%	5.1
8	CBRE, Inc.	40	1.7	%	2.0	%	8.5

	Total	1,080	46.8	%	48.7	%	2.5	⁽⁴⁾


(1)			Square footage as of September 30, 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 the British International School of Washington. During the fourth quarter of 2017, the British International School of Washington committed to lease the 111,600 square feet space through September 30, 2037 directly from EQC. The lease commenced on October 1, 2019. The 2.0 year weighted average remaining lease term for Georgetown University applies to the 128,875 square feet that Georgetown University continues to occupy after September 30, 2019.
(4)			The weighted average remaining lease term including leases that have been backfilled with new tenants is 11.0 years.

SAME PROPERTY LEASE EXPIRATION SCHEDULE

As of September 30, 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	6	18	0.8	%	0.8	%	$	559	0.6	%	0.6	%
2020	29	192	8.3	%	9.1	%	7,262		7.6	%	8.2	%
2021	22	234	10.1	%	19.2	%	8,326		8.7	%	16.9	%
2022	14	212	9.2	%	28.4	%	8,039		8.4	%	25.3	%
2023	18	264	11.4	%	39.8	%	11,411		11.9	%	37.2	%
2024	14	273	11.8	%	51.6	%	11,142		11.5	%	48.7	%
2025	9	100	4.3	%	55.9	%	6,321		6.6	%	55.3	%
2026	8	80	3.5	%	59.4	%	3,507		3.7	%	59.0	%
2027	5	142	6.2	%	65.6	%	3,173		3.3	%	62.3	%
2028	3	59	2.6	%	68.2	%	2,923		3.0	%	65.3	%
Thereafter	12	733	31.8	%	100.0	%	33,327		34.7	%	100.0	%
Total	140	2,307	100.0	%			$	95,990	100.0	%
Weighted average remaining
lease term (in years)			7.5						8.0


(1)			Square footage as of September 30, 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.

COMMON & POTENTIAL COMMON SHARES

(share amounts in thousands)


	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Weighted Average Share Calculation - GAAP EPS	2019	2018	2019	2018



Weighted average common shares outstanding - basic ⁽¹⁾	122,140	121,845	122,075	122,504
Weighted average Series D preferred shares convertible to common shares	—	—	2,563	—
Weighted average dilutive RSUs and LTIP Units ⁽²⁾	1,424	1,006	1,300	885
Weighted average common shares outstanding - diluted ⁽¹⁾	123,564	122,851	125,938	123,389

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
Weighted Average Share and Unit Calculation - FFO and Normalized FFO per share and unit	2019	2018	2019	2018
Weighted average EQC common shares outstanding ⁽¹⁾	122,140	121,845	122,075	122,504
Weighted average Operating Partnership Units outstanding ⁽³⁾	17	1	13	1
Weighted average time-based LTIP Units ⁽²⁾⁽³⁾	32	45	33	43
Weighted average common shares and units outstanding - basic ⁽¹⁾	122,189	121,891	122,121	122,548
Weighted average dilutive RSUs and market-based LTIP Units ⁽²⁾	1,424	1,006	1,300	885
Weighted average common shares and units outstanding - diluted⁽¹⁾	123,613	122,897	123,421	123,433


Rollforward of Share Count to September 30, 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⁾	—	352
Outstanding on September 30, 2019	4,915	121,924
Common shares issuable from RSUs, Operating Partnership Units, and LTIP Units as measured on September 30, 2019 ⁽²⁾		1,688
Potential common shares as measured on September 30, 2019 ⁽⁷⁾		123,612


(1)			Weighted average common shares outstanding for the three months ended September 30, 2019 and 2018 includes 217 and 362 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the nine months ended September 30, 2019 and 2018 includes 208 and 344 unvested, earned RSUs, respectively.
(2)			We have granted RSUs and LTIP Units to certain employees, officers, and trustees. RSUs and market-based LTIP Units contain service and market-based vesting components. Time-based LTIP Units contain service-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 September 30, 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 nine months ended September 30, 2019. 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.
(6)			This amount is net of forfeitures and shares surrendered to satisfy statutory tax witholding obligations.
(7)			Potential common shares as measured on September 30, 2019 include unvested earned RSUs. The 4,915 series D preferred shares outstanding that were convertible into 2,563 common shares as of September 30, 2019 are excluded.

DEFINITIONS

Annualized Rental Revenue

Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of September 30, 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 September 30, 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.

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 July 1, 2018 through September 30, 2019. The year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2018 through September 30, 2019. 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.

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 quarter-to-date same property portfolio is comprised of those properties continuously owned from July 1, 2018 through September 30, 2019. Our year-to-date same property portfolio is comprised of those properties continuously owned from January 1, 2018 through September 30, 2019. 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.