CHICAGO--(BUSINESS WIRE)--
Equity Commonwealth (NYSE: EQC) today reported financial results for the
quarter ended June 30, 2015. All per share results are reported on a
fully diluted basis.
Results for the quarter ended June 30, 2015
Funds from Operations (FFO), as defined by the National Association of
Real Estate Investment Trusts, for the quarter ended June 30, 2015 were
$77.2 million, or $0.59 per share. This compares to FFO for the quarter
ended June 30, 2014 of $87.1 million, or $0.70 per share.
Normalized FFO was $67.8 million, or $0.52 per share. This compares to
Normalized FFO for the quarter ended June 30, 2014 of $81.3 million, or
$0.66 per share. The following items impacted Normalized FFO per share
for the quarter ended June 30, 2015 compared to the corresponding 2014
period:
-
approximately ($0.13) per share from properties sold;
-
approximately ($0.11) per share due to the sale of the company’s
entire interest in Select Income REIT (SIR) in 2014;
-
approximately $0.08 per share from lower interest expense; and
-
approximately $0.06 per share from lower general & administrative
(G&A) expense, excluding shareholder litigation and transition
expenses.
Normalized FFO begins with FFO and eliminates certain items that, by
their nature, are not comparable from period to period, non-cash items,
and items that tend to obscure the company’s operating performance.
Definitions of FFO and Normalized FFO and reconciliations to net income,
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, are included at the end of this press release.
Net income attributable to common shareholders was $5.6 million, or
$0.04 per share, for the quarter ended June 30, 2015. This compares to a
net loss attributable to common shareholders of $17.8 million, or $0.14
per share for the quarter ended June 30, 2014.
The weighted average number of diluted common shares outstanding for the
quarter ended June 30, 2015 was 130,537,044 shares, compared to
123,811,937 for the quarter ended June 30, 2014.
Operating Highlights
As of June 30, 2015, the company’s same property portfolio, which
excludes properties held for sale, consisted of 86 properties comprising
29.4 million square feet. For the quarter ended June 30, 2015, operating
results were as follows:
-
Same property NOI increased 6.3% when compared to the same period in
2014.
-
Same property cash NOI increased 1.3% when compared to the same period
in 2014.
-
The same property portfolio was 90.6% leased, compared to 89.5% as of
March 31, 2015, and 90.5% as of June 30, 2014.
-
The company entered into leases for approximately 1,030,000 square
feet, including renewal leases for approximately 518,000 square feet
and new leases for approximately 512,000 square feet.
-
Cash rental rates on new and renewal leases were 1.9% lower compared
to prior cash rental rates for the same space.
-
GAAP rental rates on new and renewal leases were approximately 5.4%
higher than prior GAAP rental rates for the same space.
The definitions and reconciliations of same property NOI and same
property cash NOI to operating income, determined in accordance with
GAAP, are included at the end of this press release. Same property NOI
and same property cash NOI include properties continuously owned from
April 1, 2014 through June 30, 2015.
Significant Events for the quarter ended June 30, 2015
-
During the quarter, the company sold 65 properties encompassing 10.3
million square feet for a gross sales price of $1.1 billion. Proceeds
were $968.8 million following credits for contractual lease costs and
$56.8 million of mortgage debt repayments, including prepayment costs.
-
On May 1, 2015, the company redeemed, at par, the $138.8 million of
outstanding 5.75% senior unsecured notes due November 1, 2015.
-
On May 22, 2015, the company completed the consensual foreclosure of
the $40.1 million mortgage loan encumbering 225 Water Street.
-
During the quarter, the company classified two properties, Illinois
Center in Chicago, IL and 16th and Race in Philadelphia, PA, totaling
2.7 million square feet, as held for sale.
Subsequent Events
-
On August 4, 2015, the company closed on the sale of Illinois Center
for a gross sale price of $376.0 million. Proceeds from the sale were
$211.2 million net of credits for rent abatements and contractual
lease costs and $147.2 million of mortgage debt repayments, including
prepayment costs.
Disposition Update
The company continues to pursue its previously announced plan to sell $2
to $3 billion of assets through 2017, creating capacity for future
opportunities. As of August 5, 2015, the company has sold $1.5 billion
of assets at a weighted average cap rate in the mid 7% range. In
addition to one remaining property held for sale, the company has 22
properties totaling over 5.5 million square feet in various stages of
marketing for sale.
As of June 30, 2015, the company had $1.3 billion in cash and cash
equivalents and net debt to annualized adjusted EBITDA of 1.6x.
The company continues to focus on strengthening its balance sheet and
improving the performance of its properties.
Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call on Thursday, August 6,
2015, at 9:00 a.m. Central Daylight Time to discuss second quarter 2015
results. The conference call will be available via live audio webcast on
the Investor Relations section of the company’s website (www.eqcre.com).
In addition, a replay of the audio webcast will be available on the
Investor Relations section of the company’s website.
A copy of EQC’s Second Quarter 2015 Supplemental Operating and Financial
Data is available for download on the Investor Relations section of
EQC’s website at www.eqcre.com.
About Equity Commonwealth
Equity Commonwealth (NYSE: EQC) is an internally managed and
self-advised real estate investment trust (REIT) with commercial office
properties throughout the United States. EQC has a portfolio comprising
86 properties and 29.4 million square feet with executive offices in
Chicago, IL.
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this press release constitute
forward-looking statements within the meaning of the federal securities
laws, including, but not limited to, statements regarding marketing the
company’s properties for sale, consummating asset sales, identifying
future investment opportunities, strengthening the balance sheet and
improving property performance. Any forward-looking statements contained
in this press release are intended to be made pursuant to the safe
harbor provisions of Section 21E of the Private Securities Litigation
Reform Act of 1995. 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 press release reflect
the company’s current views about future events and are subject to
numerous known and unknown risks, uncertainties, assumptions and changes
in circumstances that may cause the company’s actual results to differ
significantly from those expressed in any forward-looking statement. We
do not guarantee that the transactions and events described will happen
as described (or that they will happen at all).
While forward-looking statements reflect the company’s good faith
beliefs, they are not guarantees of future performance. We disclaim any
obligation to publicly update or revise any forward-looking statement to
reflect changes in underlying assumptions or factors, of new
information, data or methods, future events or other changes. For a
further discussion of these and other factors that could cause the
company’s future results to differ materially from any forward-looking
statements, see the section entitled “Risk Factors” in the company’s
most recent Annual Report on Form 10-K and in the company’s Quarterly
Reports on Form 10-Q for subsequent quarters.
| CONDENSED CONSOLIDATED BALANCE SHEETS |
|
(amounts in thousands, except share data)
|
|
| |
| |
| | June 30, 2015 | | December 31, 2014 |
| ASSETS | | | | |
|
Real estate properties:
| | | | |
|
Land
| |
$
|
456,614
| | |
$
|
714,238
| |
|
Buildings and improvements
| |
|
3,834,855
|
| |
|
5,014,205
|
|
| | |
4,291,469
| | | |
5,728,443
| |
|
Accumulated depreciation
| |
|
(913,303
|
)
| |
|
(1,030,445
|
)
|
| | |
3,378,166
| | | |
4,697,998
| |
|
Properties held for sale
| | |
360,781
| | | |
—
| |
|
Acquired real estate leases, net
| | |
121,912
| | | |
198,287
| |
|
Cash and cash equivalents
| | |
1,286,902
| | | |
364,516
| |
|
Restricted cash
| | |
31,351
| | | |
32,257
| |
Rents receivable, net of allowance for doubtful accounts of
$10,008 and
$6,565, respectively
| | |
209,089
| | | |
248,101
| |
|
Other assets, net
| |
|
159,845
|
| |
|
220,480
|
|
|
Total assets
| |
$
|
5,548,046
|
| |
$
|
5,761,639
|
|
| | | |
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | |
|
Revolving credit facility
| |
$
|
—
| | |
$
|
—
| |
|
Senior unsecured debt, net
| | |
1,460,131
| | | |
1,598,416
| |
|
Mortgage notes payable, net
| | |
513,561
| | | |
609,249
| |
|
Liabilities related to properties held for sale
| | |
20,336
| | | |
—
| |
|
Accounts payable and accrued expenses
| | |
128,590
| | | |
162,204
| |
|
Assumed real estate lease obligations, net
| | |
5,728
| | | |
26,784
| |
|
Rent collected in advance
| | |
21,860
| | | |
31,359
| |
|
Security deposits
| |
|
10,610
|
| |
|
14,044
|
|
|
Total liabilities
| |
|
2,160,816
|
| |
|
2,442,056
|
|
| | | |
|
|
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
and 4,915,497 shares issued and outstanding, respectively,
aggregate liquidation preference of $122,880 and $122,887,
respectively
| | |
119,263
| | | |
119,266
| |
Series E preferred shares; 7 1/4% cumulative redeemable on or
after May 15, 2016; 11,000,000 shares issued and outstanding,
aggregate liquidation preference $275,000 | | |
265,391
| | | |
265,391
| |
Common shares of beneficial interest, $0.01 par value: 350,000,000
shares authorized; 129,760,214 and 129,607,279 shares issued and
outstanding, respectively
| | |
1,298
| | | |
1,296
| |
|
Additional paid in capital
| | |
4,495,244
| | | |
4,487,133
| |
|
Cumulative net income
| | |
2,260,098
| | | |
2,233,852
| |
|
Cumulative other comprehensive loss
| | |
(5,963
|
)
| | |
(53,216
|
)
|
|
Cumulative common distributions
| | |
(3,111,868
|
)
| | |
(3,111,868
|
)
|
|
Cumulative preferred distributions
| |
|
(636,233
|
)
| |
|
(622,271
|
)
|
|
Total shareholders’ equity
| |
|
3,387,230
|
| |
|
3,319,583
|
|
|
Total liabilities and shareholders’ equity
| |
$
|
5,548,046
|
| |
$
|
5,761,639
|
|
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |
|
(amounts in thousands, except per share data)
| |
|
|
|
| Three Months Ended June 30, |
| Six Months Ended June 30, | |
| | 2015 |
| 2014 | | 2015 |
| 2014 | |
|
Revenues:
| | | | | | | | | |
|
Rental income (1) | |
$
|
163,697
| | |
$
|
172,407
| | |
$
|
331,669
| | |
$
|
344,447
| | |
|
Tenant reimbursements and other income
| |
|
39,997
|
| |
|
42,787
|
| |
|
85,080
|
| |
|
88,007
|
| |
|
Total revenues
| |
|
203,694
|
| |
|
215,194
|
| |
|
416,749
|
| |
|
432,454
|
| |
| | | | | | | | |
|
|
Expenses:
| | | | | | | | | |
|
Operating expenses
| | |
89,686
| | | |
92,701
| | | |
187,557
| | | |
194,432
| | |
|
Depreciation and amortization
| | |
53,637
| | | |
59,831
| | | |
116,336
| | | |
111,480
| | |
|
General and administrative
| | |
10,911
| | | |
24,097
| | | |
27,469
| | | |
48,945
| | |
|
Loss on asset impairment
| | |
15,258
| | | |
22,683
| | | |
17,162
| | | |
17,922
| | |
|
Acquisition related costs
| |
|
—
|
| |
|
—
|
| |
|
—
|
| |
|
5
|
| |
|
Total expenses
| |
|
169,492
|
| |
|
199,312
|
| |
|
348,524
|
| |
|
372,784
|
| |
| | | | | | | | |
|
|
Operating income
| | |
34,202
| | | |
15,882
| | | |
68,225
| | | |
59,670
| | |
| | | | | | | | |
|
|
Interest and other income
| | |
728
| | | |
281
| | | |
4,176
| | | |
665
| | |
Interest expense (including net amortization of debt discounts,
premiums and deferred financing fees of $(177), $(300), $(148),
and $(609), respectively)
| | |
(27,973
|
)
| | |
(37,899
|
)
| | |
(57,815
|
)
| | |
(75,834
|
)
| |
|
Gain on early extinguishment of debt
| | |
10,426
| | | |
—
| | | |
9,998
| | | |
—
| | |
|
Loss on sale of equity investment
| | |
—
| | | |
(33
|
)
| | |
—
| | | |
(33
|
)
| |
|
Gain on issuance of shares by an equity investee
| | |
—
| | | |
16,911
| | | |
—
| | | |
17,020
| | |
|
Foreign currency exchange gain
| | |
856
| | | |
—
| | | |
856
| | | |
—
| | |
|
(Loss) gain on sale of properties
| |
|
(2,708
|
)
| |
|
—
|
| |
|
3,160
|
| |
|
—
|
| |
Income (loss) from continuing operations before income taxes and
equity in earnings of investees
| | |
15,531
| | | |
(4,858
|
)
| | |
28,600
| | | |
1,488
| | |
|
Income tax expense
| | |
(2,915
|
)
| | |
(908
|
)
| | |
(2,354
|
)
| | |
(1,463
|
)
| |
|
Equity in earnings of investees
| |
|
—
|
| |
|
12,454
|
| |
|
—
|
| |
|
23,388
|
| |
|
Income from discontinued operations (1) | | |
12,616
| | | |
6,688
| | | |
26,246
| | | |
23,413
| | |
|
Discontinued operations:
| | | | | | | | | |
|
Income from discontinued operations
| | |
—
| | | |
4,114
| | | |
—
| | | |
8,125
| | |
|
Loss on asset impairment from discontinued operations
| | |
—
| | | |
(2,072
|
)
| | |
—
| | | |
(2,360
|
)
| |
Loss on early extinguishment of debt from discontinued
operations
| |
|
—
|
| |
|
(3,345
|
)
| |
|
—
|
| |
|
(3,345
|
)
| |
|
Net income
| | |
12,616
| | | |
5,385
| | | |
26,246
| | | |
25,833
| | |
|
Preferred distributions
| | |
(6,981
|
)
| | |
(6,982
|
)
| | |
(13,962
|
)
| | |
(18,133
|
)
| |
Excess fair value of consideration over carrying value of preferred
shares
| |
|
—
|
| |
|
(16,205
|
)
| |
|
—
|
| |
|
(16,205
|
)
| |
Net income (loss) attributable to Equity Commonwealth common
shareholders
| |
$
|
5,635
|
| |
$
|
(17,802
|
)
| |
$
|
12,284
|
| |
$
|
(8,505
|
)
| |
| | | | | | | | |
|
Amounts attributable to Equity Commonwealth common
shareholders:
| | | | | |
|
Income (loss) from continuing operations
| |
$
|
5,635
| | |
$
|
(16,499
|
)
| |
$
|
12,284
| | |
$
|
(10,925
|
)
| |
|
Income from discontinued operations (1) | | |
—
| | | |
4,114
| | | |
—
| | | |
8,125
| | |
Loss on asset impairment from discontinued
operations
| | |
—
| | | |
(2,072
|
)
| | |
—
| | | |
(2,360
|
)
| |
|
Loss on early extinguishment of debt from discontinued operations
| |
|
—
|
| |
|
(3,345
|
)
| |
|
—
|
| |
|
(3,345
|
)
| |
|
Net income (loss)
| |
$
|
5,635
|
| |
$
|
(17,802
|
)
| |
$
|
12,284
|
| |
$
|
(8,505
|
)
| |
| | | | | | | | |
|
|
Weighted average common shares outstanding — basic (2) | |
|
129,733
|
| |
|
123,812
|
| |
|
129,714
|
| |
|
121,121
|
| |
|
Weighted average common shares outstanding — diluted (2) | |
|
130,537
|
| |
|
123,812
|
| |
|
130,205
|
| |
|
121,121
|
| |
| | | | | | | | |
|
Basic and diluted earnings per common share attributable to Equity
Commonwealth common shareholders:
| | | | | |
|
Income (loss) from continuing operations
| |
$
|
0.04
|
| |
$
|
(0.13
|
)
| |
$
|
0.09
|
| |
$
|
(0.09
|
)
| |
|
(Loss) income from discontinued operations
| |
$
|
—
|
| |
$
|
(0.01
|
)
| |
$
|
—
|
| |
$
|
0.02
|
| |
|
Net income (loss)
| |
$
|
0.04
|
| |
$
|
(0.14
|
)
| |
$
|
0.09
|
| |
$
|
(0.07
|
)
| |
|
(1)
|
|
Rental income and income from discontinued operations include
non-cash straight line rent adjustments, and non-cash amortization
of intangible lease assets and liabilities.
|
|
|
|
(2)
| |
As of June 30, 2015, we had 4,915 series D preferred shares
outstanding that were convertible into 2,363 of our common shares,
which were anti-dilutive for earnings per common share attributable
to EQC common shareholders for all periods presented. 803 common
shares (804 and 491 common shares on a weighted average basis for
the three and six months ended June 30, 2015, respectively) would be
issued to the RSU holders if the market-based vesting component of
the RSUs was measured as of June 30, 2015. No RSUs had been issued
as of June 30, 2014.
|
| CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO |
|
(amounts in thousands, except per share data)
|
|
|
|
| For the Three Months Ended |
| For the Six Months Ended |
| | June 30, | | June 30, |
| | 2015 |
| 2014 | | 2015 |
| 2014 |
| Calculation of FFO | | | | | | | | |
|
Net income
| |
$
|
12,616
| | |
$
|
5,385
| | |
$
|
26,246
| | |
$
|
25,833
| |
Depreciation and amortization
| | |
53,637
| | | |
59,831
| | | |
116,336
| | | |
111,480
| |
|
Loss on asset impairment from continuing operations
| | |
15,258
| | | |
22,683
| | | |
17,162
| | | |
17,922
| |
|
Loss on asset impairment from discontinued operations
| | |
—
| | | |
2,072
| | | |
—
| | | |
2,360
| |
|
FFO from equity investees
| | |
—
| | | |
16,611
| | | |
—
| | | |
31,551
| |
|
Loss (gain) on sale of properties
| | |
2,708
| | | |
—
| | | |
(3,160
|
)
| | |
—
| |
|
Equity in earnings of investees
| |
|
—
|
| |
|
(12,454
|
)
| |
|
—
|
| |
|
(23,388
|
)
|
| FFO attributable to Equity Commonwealth | | | 84,219 | | | | 94,128 | | | | 156,584 | | | | 165,758 | |
|
Preferred distributions
| |
|
(6,981
|
)
| |
|
(6,982
|
)
| |
|
(13,962
|
)
| |
|
(18,133
|
)
|
| FFO attributable to EQC Common Shareholders | | $ | 77,238 |
| | $ | 87,146 |
| | $ | 142,622 |
| | $ | 147,625 |
|
| | | | | | | |
|
| Calculation of Normalized FFO | | | | | | | | |
|
FFO attributable to EQC common shareholders
| |
$
|
77,238
| | |
$
|
87,146
| | |
$
|
142,622
| | |
$
|
147,625
| |
|
Recurring adjustments:
| | | | | | | | |
|
Lease value amortization
| | |
1,793
| | | |
4,166
| | | |
3,267
| | | |
6,418
| |
|
Straight line rent from continuing operations
| | |
(1,864
|
)
| | |
(1,079
|
)
| | |
(1,683
|
)
| | |
(6,975
|
)
|
|
Straight line rent from discontinued operations
| | |
—
| | | |
(145
|
)
| | |
—
| | | |
(226
|
)
|
|
Gain on early extinguishment of debt from continuing operations
| | |
(10,426
|
)
| | |
—
| | | |
(9,998
|
)
| | |
—
| |
|
Loss on early extinguishment of debt from discontinued operations
| | |
—
| | | |
3,345
| | | |
—
| | | |
3,345
| |
|
Minimum cash rent from direct financing lease (1) | | |
2,032
| | | |
2,032
| | | |
4,064
| | | |
4,064
| |
|
Loss on sale of equity investments
| | |
—
| | | |
33
| | | |
—
| | | |
33
| |
|
Gain on issuance of shares by an equity investee
| | |
—
| | | |
(16,911
|
)
| | |
—
| | | |
(17,020
|
)
|
|
Interest earned from direct financing lease
| | |
(119
|
)
| | |
(208
|
)
| | |
(260
|
)
| | |
(437
|
)
|
|
Normalized FFO from equity investees, net of FFO
| | |
—
| | | |
(1,954
|
)
| | |
—
| | | |
(3,353
|
)
|
|
Other items which affect comparability:
| | | | | | | | |
|
Shareholder litigation and transition related expenses (2) | | |
(215
|
)
| | |
4,892
| | | |
3,257
| | | |
8,805
| |
|
Transition services fee
| | |
180
| | | |
—
| | | |
2,415
| | | |
—
| |
|
Acquisition related costs
| | |
—
| | | |
—
| | | |
—
| | | |
5
| |
|
Gain on sale of securities
| | |
—
| | | |
—
| | | |
(3,080
|
)
| | |
—
| |
|
Foreign currency exchange gain
| |
|
(856
|
)
| |
|
—
|
| |
|
(856
|
)
| |
|
—
|
|
| Normalized FFO attributable to EQC Common Shareholders | | $ | 67,763 |
| | $ | 81,317 |
| | $ | 139,748 |
| | $ | 142,284 |
|
| | | | | | | |
|
|
Weighted average common shares outstanding -- basic
| | |
129,733
| | | |
123,812
| | | |
129,714
| | | |
121,121
| |
|
Weighted average common shares outstanding -- diluted
| | |
130,537
| | | |
123,812
| | | |
130,205
| | | |
121,121
| |
| | | | | | | |
|
|
FFO attributable to EQC common shareholders per share -- basic (3) | |
$
|
0.60
|
| |
$
|
0.70
|
| |
$
|
1.10
|
| |
$
|
1.22
|
|
|
FFO attributable to EQC common shareholders per share -- diluted (3) | |
$
|
0.59
|
| |
$
|
0.70
|
| |
$
|
1.10
|
| |
$
|
1.22
|
|
|
Normalized FFO attributable to EQC common shareholders per share --
basic (3) | |
$
|
0.52
|
| |
$
|
0.66
|
| |
$
|
1.08
|
| |
$
|
1.17
|
|
|
Normalized FFO attributable to EQC common shareholders per share --
diluted (3) | |
$
|
0.52
|
| |
$
|
0.66
|
| |
$
|
1.07
|
| |
$
|
1.17
|
|
|
(1)
|
|
Contractual cash payments (including management fees) from one
tenant at Arizona Center for the three and six months ended June 30,
2015 and 2014 were $2,032 and $4,064, respectively. These payments
will decrease to approximately $515 per year beginning in 2016. Our
calculation of Normalized FFO reflects the cash payments received
from this tenant. The terms of this tenant's lease require us to
classify the lease as a direct financing (or capital) lease. As
such, the revenue recognized on a GAAP basis within our condensed
consolidated statements of operations was $119 and $208 for the
three months ended June 30, 2015 and 2014, and $260 and $437 for the
six months ended June 30, 2015 and 2014, respectively. This direct
financing lease has an expiration date in 2045.
|
| |
|
|
(2)
| |
Shareholder litigation and transition related expenses within
general and administrative for the three and six months ended June
30, 2015 includes $(0.4) million and $2.3 million, respectively, for
the change in the fair value of the shareholder-approved liability
for the reimbursement of expenses incurred by Related/Corvex since
February 2013 in connection with their consent solicitations to
remove our former Trustees, elect the new Board of Trustees and
engage in related litigation. On August 4, 2015, we reimbursed $8.4
million to Related/Corvex under the terms of the
shareholder-approved agreement. An additional $8.4 million will be
reimbursed only if the average closing price of our common shares is
at least $26.00 (as adjusted for any share splits or share
dividends) from August 1, 2015 through July 31, 2016. As of June 30,
2015, the fair value of this aggregate liability is $8.9 million,
which includes the fair value of the portion paid on August 4, 2015.
|
| |
|
|
(3)
| |
As of June 30, 2015, we had 4,915 series D preferred shares
outstanding that were convertible into 2,363 of our common shares,
which were anti-dilutive for earnings per common share attributable
to EQC common shareholders for all periods presented. 803 common
shares (804 and 491 common shares on a weighted average basis for
the three and six months ended June 30, 2015, respectively) would be
issued to the RSU holders if the market-based vesting component of
the RSUs was measured as of June 30, 2015. No RSUs had been issued
as of June 30, 2014.
|
|
We compute FFO in accordance with standards established by the
National Association of Real Estate Investment Trusts (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. We consider FFO and Normalized
FFO to be appropriate measures of operating performance for a REIT,
along with net income, net income attributable to Equity
Commonwealth common shareholders, operating income and cash flow
from operating activities.
|
|
|
|
We believe that FFO and Normalized FFO provide useful information to
investors because by excluding the effects of certain historical
amounts, such as depreciation expense, FFO and Normalized FFO may
facilitate a comparison of our operating performance between periods
and with other REITs. FFO and Normalized FFO are among the factors
considered by our Board of Trustees when determining the amount of
distributions to our shareholders. 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, net
income attributable to Equity Commonwealth common shareholders,
operating income 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, net
income attributable to Equity Commonwealth common shareholders,
operating income and cash flow from operating activities as
presented in our condensed consolidated statements of operations,
condensed consolidated statements of comprehensive income and
condensed consolidated statements of cash flows. Other REITs and
real estate companies may calculate FFO and Normalized FFO
differently than we do.
|
| CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME
PROPERTY CASH BASIS NOI |
|
(amounts in thousands)
|
|
| |
| |
| |
| |
| | For the Three Months Ended | | For the Six Months Ended |
| | June 30, | | June 30, |
| Calculation of Same Property NOI and Same Property Cash Basis NOI: | | 2015 | | 2014 | | 2015 | | 2014 |
|
Rental income
| |
$
|
163,697
| | |
$
|
172,407
| | |
$
|
331,669
| | |
$
|
344,447
| |
|
Tenant reimbursements and other income
| | |
39,997
| | | |
42,787
| | | |
85,080
| | | |
88,007
| |
|
Operating expenses
| |
|
(89,686
|
)
| |
|
(92,701
|
)
| |
|
(187,557
|
)
| |
|
(194,432
|
)
|
| NOI | | | 114,008 | | | | 122,493 | | | | 229,192 | | | | 238,022 | |
|
Straight line rent
| | |
(1,864
|
)
| | |
(1,079
|
)
| | |
(1,683
|
)
| | |
(6,975
|
)
|
|
Lease value amortization
| | |
1,793
| | | |
4,166
| | | |
3,267
| | | |
6,418
| |
|
Lease termination fees
| |
|
(4,167
|
)
| |
|
(1,145
|
)
| |
|
(6,116
|
)
| |
|
(1,738
|
)
|
| Cash Basis NOI | | | 109,770 | | | | 124,435 | | | | 224,660 | | | | 235,727 | |
|
Cash Basis NOI from non-same properties (1) | |
|
(17,410
|
)
| |
|
(33,246
|
)
| |
|
(43,469
|
)
| |
|
(57,057
|
)
|
| Same Property Cash Basis NOI | | | 92,360 | | | | 91,189 | | | | 181,191 | | | | 178,670 | |
|
Non-cash rental and termination income from same properties
| |
|
558
|
| |
|
(3,757
|
)
| |
|
(1,785
|
)
| |
|
(2,622
|
)
|
| Same Property NOI | | $ | 92,918 |
| | $ | 87,432 |
| | $ | 179,406 |
| | $ | 176,048 |
|
| | | | | | | |
|
| Reconciliation of Same Property NOI to GAAP Operating Income | | | | | | |
| Same Property NOI | | $ | 92,918 | | | $ | 87,432 | | | $ | 179,406 | | | $ | 176,048 | |
|
Non-cash rental and termination income from same properties
| |
|
(558
|
)
| |
|
3,757
|
| |
|
1,785
|
| |
|
2,622
|
|
| Same Property Cash Basis NOI | | | 92,360 | | | | 91,189 | | | | 181,191 | | | | 178,670 | |
|
Cash Basis NOI from non-same properties (1) | |
|
17,410
|
| |
|
33,246
|
| |
|
43,469
|
| |
|
57,057
|
|
| Cash Basis NOI | | | 109,770 | | | | 124,435 | | | | 224,660 | | | | 235,727 | |
|
Straight line rent
| | |
1,864
| | | |
1,079
| | | |
1,683
| | | |
6,975
| |
|
Lease value amortization
| | |
(1,793
|
)
| | |
(4,166
|
)
| | |
(3,267
|
)
| | |
(6,418
|
)
|
|
Lease termination fees
| |
|
4,167
|
| |
|
1,145
|
| |
|
6,116
|
| |
|
1,738
|
|
| NOI | | | 114,008 | | | | 122,493 | | | | 229,192 | | | | 238,022 | |
|
Depreciation and amortization
| | |
(53,637
|
)
| | |
(59,831
|
)
| | |
(116,336
|
)
| | |
(111,480
|
)
|
|
General and administrative
| | |
(10,911
|
)
| | |
(24,097
|
)
| | |
(27,469
|
)
| | |
(48,945
|
)
|
|
Loss on asset impairment
| | |
(15,258
|
)
| | |
(22,683
|
)
| | |
(17,162
|
)
| | |
(17,922
|
)
|
|
Acquisition related costs
| |
|
—
|
| |
|
—
|
| |
|
—
|
| |
|
(5
|
)
|
| Operating Income | | $ | 34,202 |
| | $ | 15,882 |
| | $ | 68,225 |
| | $ | 59,670 |
|
|
(1)
|
|
Cash Basis NOI from non-same properties for all periods presented
includes the operations of properties disposed or classified as held
for sale during 2015.
|
|
NOI is total revenues minus operating 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 April 1, 2014 through June 30,
2015. The year-to-date same property versions of these measures
include the results of properties continuously owned from January 1,
2014 through June 30, 2015. Discontinued operations and properties
classified as held for sale are excluded from same property results.
|
|
|
|
We consider these measures to be appropriate supplemental measures
to net income because they may help both investors and management to
understand the operations of our properties. We use these measures
internally to evaluate individual, regional and combined 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. 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, net income attributable to Equity Commonwealth common
shareholders, operating income 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, net income attributable to Equity Commonwealth common
shareholders, operating income and cash flow from operating
activities as presented in our condensed consolidated statements of
operations, condensed consolidated statements of comprehensive
income and condensed consolidated statements of cash flows. Other
REITs and real estate companies may calculate these measures
differently than we do.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20150805006708/en/
Equity Commonwealth
Sarah Byrnes, Investor Relations
312-646-2801
www.eqcre.com
Source: Equity Commonwealth