CHICAGO--(BUSINESS WIRE)--
Equity Commonwealth (NYSE: EQC) today reported its financial results for
the quarter ended June 30, 2016. All per share results are reported on a
diluted basis.
Financial results for the quarter ended June 30, 2016
Operating income was $0.7 million for the quarter ended June 30, 2016.
This compares to $34.2 million for the quarter ended June 30, 2015. Net
income attributable to common shareholders was $71.3 million, or $0.56
per share, for the quarter ended June 30, 2016. This compares to net
income attributable to common shareholders of $5.6 million, or $0.04 per
share, for the quarter ended June 30, 2015. The following items impacted
net income attributable to common shareholders for the quarter ended
June 30, 2016, compared to the corresponding 2015 period:
- $0.86 per share increase in the gain on sale of properties;
-
($0.22) per share of loss on asset impairment; and
-
($0.16) per share of lower net operating income (NOI).
Funds from Operations (FFO), as defined by the National Association of
Real Estate Investment Trusts, for the quarter ended June 30, 2016, were
$45.7 million, or $0.36 per share. This compares to FFO for the quarter
ended June 30, 2015 of $77.2 million, or $0.59 per share.
Normalized FFO was $53.6 million, or $0.42 per share. This compares to
Normalized FFO for the quarter ended June 30, 2015 of $67.8 million, or
$0.52 per share. The following items impacted Normalized FFO for the
quarter ended June 30, 2016, compared to the corresponding 2015 period:
-
($0.28) per share of income from properties sold as part of the
company’s previously announced repositioning plan;
-
($0.03) per share of same property cash NOI;
- $0.12 per share of same property lease termination fee income; and
- $0.05 per share of interest expense savings.
Normalized FFO begins with FFO and eliminates certain items that, by
their nature, are not comparable from period to period, non-cash items,
and items that tend to obscure the company’s operating performance.
Definitions of FFO, Normalized FFO and reconciliations to net income,
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, are included at the end of this press release.
The weighted average number of diluted common shares outstanding for the
quarter ended June 30, 2016 was 126,936,590 shares, compared to
130,537,044 for the quarter ended June 30, 2015.
Same property results for the quarter ended June 30, 2016
The company’s same property portfolio consisted of 45 properties
totaling 20.7 million square feet, which excludes four properties
designated as held for sale at the end of the quarter. Operating results
were as follows:
-
The same property portfolio was 90.3% leased as of June 30, 2016,
compared to 90.6% as of March 31, 2016, and 91.3% as of June 30, 2015.
-
The company entered into leases for approximately 802,000 square feet,
including renewal leases for approximately 307,000 square feet and new
leases for approximately 495,000 square feet.
-
GAAP rental rates on new and renewal leases were 6.9% higher compared
to prior GAAP rental rates for the same space.
-
Cash rental rates on new and renewal leases were 3.7% lower compared
to prior cash rental rates for the same space.
-
Same property NOI increased 19.2% when compared to the same period in
2015, largely due to $17.4 million in lease termination fees received
during the quarter.
-
Same property cash NOI, which adjusts for lease termination fees,
decreased 5.7% when compared to the same period in 2015.
The definitions and reconciliations of same property NOI and same
property cash NOI to operating income, determined in accordance with
GAAP, are included at the end of this press release. The same property
portfolio includes properties continuously owned from April 1, 2015
through June 30, 2016 and excludes properties owned during this period
that are designated as held for sale.
Significant events during the quarter ended June 30, 2016
-
The company sold 13 properties totaling 1,183,166 square feet for a
gross sales price of $291.2 million at a weighted average cap rate in
the low 6% range.
-
The company redeemed all $275 million of its outstanding 7.25% Series
E Cumulative Redeemable Preferred Shares.
Subsequent Events
The company closed on the sale of the following properties:
-
The leasehold interest in 111 River Street, a 566,215 square foot
property in Hoboken, NJ, for a gross sale price of $235 million.
Proceeds after credits for contractual lease costs were $210.8
million. This property was held for sale as of June 30, 2016.
-
A three-property industrial portfolio, totaling 803,687 square feet in
South Carolina, for a gross sale price of $30 million. These
properties were held for sale as of June 30, 2016.
-
Sky Park Center, a 63,485 square foot office property in San Diego,
CA, for a gross sale price of $13.7 million.
- Raintree Industrial Park, a 563,182 square foot 12-building property
in Solon, OH, for a gross sale price of $11.5 million.
Disposition Update
The company continues to pursue its previously announced plan to
reposition its portfolio through active asset management and
dispositions. Year-to-date, through July 28, 2016, the company has sold
$704 million of properties at a weighted average cap rate in the low 6%
range. Since the change in management in 2014, the company has sold $3.6
billion of assets. Proceeds generated from these sales are creating
capacity for future opportunities. The company currently has 12
properties totaling over 6 million square feet in various stages of the
sale process.
Earnings Conference Call & Supplemental Data
Equity Commonwealth will host a conference call to discuss second
quarter results on Friday, July 29, 2016, at 9:00 A.M. CDT. The
conference call will be available via live audio webcast on the Investor
Relations section of the company’s website (www.eqcre.com).
A replay of the audio webcast will also be available following the call.
A copy of EQC’s Second Quarter 2016 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 a Chicago based, internally managed
and self-advised real estate investment trust (REIT) with commercial
office properties throughout the United States. EQC’s portfolio is
comprised of 43 properties and 20 million square feet.
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 and identifying
future investment opportunities. 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,” “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, 2016 |
| December 31, 2015 |
| ASSETS |
|
|
|
|
|
|
Real estate properties:
| | | |
| |
|
Land
| | |
$
|
328,351
| | |
$
|
389,410
| |
|
Buildings and improvements
| | |
3,074,591
|
| |
3,497,942
|
|
| | |
3,402,942
| | |
3,887,352
| |
|
Accumulated depreciation
| | |
(828,786
|
)
| |
(898,939
|
)
|
| | |
2,574,156
| | |
2,988,413
| |
|
Properties held for sale
| | |
150,766
| | |
—
| |
|
Acquired real estate leases, net
| | |
70,724
| | |
88,760
| |
|
Cash and cash equivalents
| | |
1,772,337
| | |
1,802,729
| |
|
Restricted cash
| | |
33,777
| | |
32,245
| |
|
Rents receivable, net of allowance for doubtful accounts of $4,431
and $7,715, respectively
| | |
169,800
| | |
174,676
| |
|
Other assets, net
|
|
|
140,215
|
|
|
144,341
|
|
| Total assets |
|
| $ | 4,911,775 |
|
| $ | 5,231,164 |
|
|
|
|
|
|
|
|
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
Revolving credit facility
| | |
$
|
—
| | |
$
|
—
| |
|
Senior unsecured debt, net
| | |
1,312,707
| | |
1,450,606
| |
|
Mortgage notes payable, net
| | |
244,850
| | |
246,510
| |
|
Liabilities related to properties held for sale
| | |
1,687
| | |
—
| |
|
Accounts payable and accrued expenses
| | |
117,363
| | |
123,587
| |
|
Assumed real estate lease obligations, net
| | |
2,761
| | |
4,296
| |
|
Rent collected in advance
| | |
24,615
| | |
27,340
| |
|
Security deposits
|
|
|
9,154
|
|
|
10,338
|
|
| Total liabilities |
|
| $ | 1,713,137 |
|
| $ | 1,862,677 |
|
| | | | |
|
|
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
| |
|
Series E preferred shares; 7 1/4% cumulative redeemable on or after
May 15, 2016; 0 and 11,000,000 shares issued and outstanding,
respectively, aggregate liquidation preference $0 and $275,000,
respectively (1) | | |
—
| | |
265,391
| |
|
Common shares of beneficial interest, $0.01 par value: 350,000,000
shares authorized; 125,533,376 and 126,349,914 shares issued and
outstanding, respectively
| | |
1,255
| | |
1,263
| |
|
Additional paid in capital
| | |
4,398,033
| | |
4,414,611
| |
|
Cumulative net income
| | |
2,467,955
| | |
2,333,709
| |
|
Cumulative other comprehensive loss
| | |
(2,234
|
)
| |
(3,687
|
)
|
|
Cumulative common distributions
| | |
(3,111,868
|
)
| |
(3,111,868
|
)
|
|
Cumulative preferred distributions
|
|
|
(673,766
|
)
|
|
(650,195
|
)
|
| Total shareholders’ equity |
|
| $ | 3,198,638 |
|
| $ | 3,368,487 |
|
| Total liabilities and shareholders’ equity |
|
| $ | 4,911,775 |
|
| $ | 5,231,164 |
|
|
(1)
|
|
|
On May 15, 2016, we redeemed all of our 11,000,000 outstanding
series E preferred shares at a price of $25.00 per share, plus any
accrued and unpaid dividends. The redemption payment occurred on May
16, 2016 (the first business day following the redemption date).
|
|
| |
| |
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) |
|
|
|
|
|
|
|
|
| | | Three Months Ended |
| Six Months Ended |
| | | June 30, | | June 30, |
| | | 2016 |
| 2015 |
| 2016 |
| 2015 |
|
Revenues
| | | | | | | |
| |
|
Rental income
| | |
$
|
121,735
| | |
$
|
163,697
| | |
$
|
231,623
| | |
$
|
331,669
| |
|
Tenant reimbursements and other income
|
|
|
|
23,632
|
|
|
|
39,997
|
|
|
|
50,879
|
|
|
|
85,080
|
|
| Total revenues |
|
| $ | 145,367 |
|
| $ | 203,694 |
|
| $ | 282,502 |
|
| $ | 416,749 |
|
| | | | | | | | |
|
|
Expenses:
| | | | | | | | | |
|
Operating expenses
| | |
$
|
51,393
| | |
$
|
89,686
| | |
$
|
108,651
| | |
$
|
187,557
| |
|
Depreciation and amortization
| | | |
37,331
| | | |
53,637
| | | |
73,582
| | | |
116,336
| |
|
General and administrative
| | | |
12,177
| | | |
10,911
| | | |
25,489
| | | |
27,469
| |
|
Loss on asset impairment
|
|
|
|
43,736
|
|
|
|
15,258
|
|
|
|
43,736
|
|
|
|
17,162
|
|
| Total expenses |
|
| $ | 144,637 |
|
| $ | 169,492 |
|
| $ | 251,458 |
|
| $ | 348,524 |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income |
|
| $ | 730 |
|
| $ | 34,202 |
|
| $ | 31,044 |
|
| $ | 68,225 |
|
| | | | | | | | |
|
|
Interest and other income
| | | |
2,204
| | | |
728
| | | |
4,171
| | | |
4,176
| |
|
Interest expense (including net amortization of debt discounts,
premiums and deferred financing fees of $949, $(177), $1,932 and
$(148), respectively)
| | | |
(21,300
|
)
| | |
(27,973
|
)
| | |
(43,647
|
)
| | |
(57,815
|
)
|
|
Gain (loss) on early extinguishment of debt
| | | |
—
| | | |
10,426
| | | |
(118
|
)
| | |
9,998
| |
|
Foreign currency exchange gain (loss)
| | | |
—
| | | |
856
| | | |
(5
|
)
| | |
856
| |
|
Gain (loss) on sale of properties
| | |
|
106,375
|
| |
|
(2,708
|
)
| |
|
143,041
|
| |
|
3,160
|
|
|
Income before income taxes
| | | |
88,009
| | | |
15,531
| | | |
134,486
| | | |
28,600
| |
|
Income tax expense
|
|
|
|
(165
|
)
|
|
|
(2,915
|
)
|
|
|
(240
|
)
|
|
|
(2,354
|
)
|
| Net income |
|
| $ | 87,844 |
|
| $ | 12,616 |
|
| $ | 134,246 |
|
| $ | 26,246 |
|
|
Preferred distributions
| | | |
(6,981
|
)
| | |
(6,981
|
)
| | |
(13,962
|
)
| | |
(13,962
|
)
|
|
Excess fair value of consideration paid over carrying value of
preferred shares (1) |
|
|
|
(9,609
|
)
|
|
|
—
|
|
|
|
(9,609
|
)
|
|
|
—
|
|
| Net income attributable to Equity Commonwealth common shareholders |
|
| $ | 71,254 |
|
| $ | 5,635 |
|
| $ | 110,675 |
|
| $ | 12,284 |
|
| | | | | | | | | | | | | | | | |
|
|
Weighted average common shares outstanding — basic
| | |
|
125,508
|
| |
|
129,733
|
| |
|
125,674
|
| |
|
129,714
|
|
|
Weighted average common shares outstanding — diluted (2) | | |
|
126,937
|
| |
|
130,537
|
| |
|
127,229
|
| |
|
130,205
|
|
| | | | | | | | |
|
|
Earnings per common share attributable to Equity Commonwealth common
shareholders:
| | | | | | | | | |
|
Basic
| | |
$
|
0.57
|
| |
$
|
0.04
|
| |
$
|
0.88
|
| |
$
|
0.09
|
|
|
Diluted
| | |
$
|
0.56
|
| |
$
|
0.04
|
| |
$
|
0.87
|
| |
$
|
0.09
|
|
|
(1)
|
|
|
On May 15, 2016, we redeemed all of our 11,000,000 outstanding
series E preferred shares at a price of $25.00 per share,
for a
total of $275.0 million, plus any accrued and unpaid dividends. The
redemption payment occurred on May 16, 2016 (the first business day
following the redemption date). We recorded $9.6 million related to
the excess fair value of consideration paid over the carrying value
of the preferred shares as a reduction to net income attributable to
Equity Commonwealth common shareholders for the three and six months
ended June 30, 2016.
|
|
(2)
| | |
As of June 30, 2016, we had granted RSUs to certain employees,
officers, and the Chairman of the Board of Trustees. The RSUs
contain both service and market-based vesting components. None of
the RSUs have vested. If the market-based vesting component was
measured as of June 30, 2016, and 2015, 1,429 and 803 common shares
would be issued to the RSU holders, respectively. Using a weighted
average basis, 1,429 and 804 common shares are reflected in diluted
earnings per common share, diluted FFO per common share, and diluted
Normalized FFO per common share for the three months ended June 30,
2016 and 2015, respectively, and 1,555 and 491 common shares are
reflected in these measures for the six months ended June 30, 2016
and 2015 respectively.
|
|
|
|
|
CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO (amounts in thousands, except per share data) |
|
|
|
|
| Three Months Ended |
| Six Months Ended |
| June 30, | | June 30, |
|
| 2016 |
| 2015 |
| 2016 |
| 2015 |
| Calculation of FFO |
|
|
|
|
|
|
|
|
Net income
|
$
|
87,844
| |
|
$
|
12,616
| | |
$
|
134,246
| |
|
$
|
26,246
| |
|
Real estate depreciation and amortization
|
37,064
| | |
53,637
| | |
73,108
| | |
116,336
| |
|
Loss on asset impairment
|
43,736
| | |
15,258
| | |
43,736
| | |
17,162
| |
|
(Gain) loss on sale of properties
|
(106,375
|
)
| |
2,708
|
| |
(143,041
|
)
| |
(3,160
|
)
|
|
FFO attributable to Equity Commonwealth |
62,269
| | |
84,219
| | |
108,049
| | |
156,584
| |
|
Preferred distributions
|
(6,981
|
)
| |
(6,981
|
)
| |
(13,962
|
)
| |
(13,962
|
)
|
|
Excess fair value of consideration paid over carrying value of
preferred shares (1) |
(9,609
|
)
|
|
—
|
|
|
(9,609
|
)
|
|
—
|
|
| FFO attributable to EQC Common Shareholders | $ | 45,679 |
|
| $ | 77,238 |
|
| $ | 84,478 |
|
| $ | 142,622 |
|
|
|
|
|
|
|
|
|
|
| Calculation of Normalized FFO |
|
|
|
|
|
|
|
|
FFO attributable to EQC common shareholders
|
$
|
45,679
| | |
$
|
77,238
| | |
$
|
84,478
| | |
$
|
142,622
| |
|
Lease value amortization
|
3,867
| | |
1,793
| | |
4,988
| | |
3,267
| |
|
Straight line rent adjustments
|
(5,599
|
)
| |
(1,864
|
)
| |
(9,430
|
)
| |
(1,683
|
)
|
|
(Gain) loss on early extinguishment of debt
|
—
| | |
(10,426
|
)
| |
118
| | |
(9,998
|
)
|
|
Minimum cash rent from direct financing lease (2) |
—
| | |
2,032
| | |
—
| | |
4,064
| |
|
Interest earned from direct financing lease
|
—
| | |
(119
|
)
| |
—
| | |
(260
|
)
|
|
Shareholder litigation and transition related expenses (3) |
35
| | |
(215
|
)
| |
1,137
| | |
3,257
| |
|
Transition services fee
|
—
| | |
180
| | |
—
| | |
2,415
| |
|
Gain on sale of securities
|
—
| | |
—
| | |
—
| | |
(3,080
|
)
|
|
Foreign currency exchange (gain) loss
|
—
| | |
(856
|
)
| |
5
| | |
(856
|
)
|
|
Excess fair value of consideration paid over carrying value of
preferred shares (1) |
9,609
|
|
|
—
|
|
|
9,609
|
|
|
—
|
|
| Normalized FFO attributable to EQC Common Shareholders | $ | 53,591 |
|
| $ | 67,763 |
|
| $ | 90,905 |
|
| $ | 139,748 |
|
| | | | | | |
|
|
Weighted average common shares outstanding -- basic
|
125,508
|
| |
129,733
|
| |
125,674
|
| |
129,714
|
|
|
Weighted average common shares outstanding -- diluted (4) |
126,937
|
| |
130,537
|
| |
127,229
|
| |
130,205
|
|
|
FFO attributable to EQC common shareholders per share -- basic
|
$
|
0.36
|
| |
$
|
0.60
|
| |
$
|
0.67
|
| |
$
|
1.10
|
|
|
FFO attributable to EQC common shareholders per share -- diluted
|
$
|
0.36
|
| |
$
|
0.59
|
| |
$
|
0.66
|
| |
$
|
1.10
|
|
|
Normalized FFO attributable to EQC common shareholders per share --
basic
|
$
|
0.43
|
| |
$
|
0.52
|
| |
$
|
0.72
|
| |
$
|
1.08
|
|
|
Normalized FFO attributable to EQC common shareholders per share --
diluted
|
$
|
0.42
|
| |
$
|
0.52
|
| |
$
|
0.71
|
| |
$
|
1.07
|
|
|
(1)
|
|
|
On May 15, 2016, we redeemed all of our 11,000,000 outstanding
series E preferred shares at a price of $25.00 per share,
for a
total of $275.0 million, plus any accrued and unpaid dividends. The
redemption payment occurred on May 16, 2016 (the first business day
following the redemption date). We recorded $9.6 million related to
the excess fair value of consideration paid over the carrying value
of the preferred shares as a reduction to FFO attributable to Equity
Commonwealth common shareholders for the three and six months ended
June 30, 2016.
|
|
(2)
| | |
Amounts relate to contractual cash payments (including management
fees) from one tenant at Arizona Center. Arizona Center was sold
during the fourth quarter of 2015. Our calculation of Normalized FFO
reflects the cash payments received from this tenant. The terms of
this tenant's lease required 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 $260 for the three and six months ended June
30, 2015, respectively.
|
|
(3)
| | |
Shareholder litigation and transition related expenses within
general and administrative for the three and six months ended June
30, 2016 is primarily related to the shareholder-approved liability
for the reimbursement of expenses incurred by Related/Corvex since
February 2013 in connection with their consent solicitations to
remove the former Trustees, elect the new Board of Trustees and
engage in related litigation. Approximately $16.7 million was
reimbursed to Related/Corvex during 2014, and 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,
2016, the fair value of this liability is $8.4 million. No
shareholder litigation related expenses were incurred during 2016.
|
|
(4)
| | |
As of June 30, 2016, we had granted RSUs to certain employees,
officers, and the Chairman of the Board of Trustees. The RSUs
contain both service and market-based vesting components. None of
the RSUs have vested. If the market-based vesting component was
measured as of June 30, 2016, and 2015, 1,429 and 803 common shares
would be issued to the RSU holders, respectively. Using a weighted
average basis, 1,429 and 804 common shares are reflected in diluted
earnings per common share, diluted FFO per common share, and diluted
Normalized FFO per common share for the three months ended June 30,
2016 and 2015, respectively, and 1,555 and 491 common shares are
reflected in these measures for the six months ended June 30, 2016
and 2015 respectively.
|
|
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 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, |
| | | 2016 |
| 2015 |
| 2016 |
| 2015 |
| Calculation of Same Property NOI and Same Property Cash Basis NOI: | | | |
| | | |
| |
|
Rental income
| | |
$
|
121,735
| | |
$
|
163,697
| | |
$
|
231,623
| | |
$
|
331,669
| |
|
Tenant reimbursements and other income
| | |
23,632
| | |
39,997
| | |
50,879
| | |
85,080
| |
|
Operating expenses
|
|
|
(51,393
|
)
|
|
(89,686
|
)
|
|
(108,651
|
)
|
|
(187,557
|
)
|
| NOI |
|
| $ | 93,974 |
|
| $ | 114,008 |
|
| $ | 173,851 |
|
| $ | 229,192 |
|
|
Straight line rent adjustments
| | |
(5,599
|
)
| |
(1,864
|
)
| |
(9,430
|
)
| |
(1,683
|
)
|
|
Lease value amortization
| | |
3,867
| | |
1,793
| | |
4,988
| | |
3,267
| |
|
Lease termination fees
|
|
|
(17,433
|
)
|
|
(4,167
|
)
|
|
(17,744
|
)
|
|
(6,116
|
)
|
| Cash Basis NOI |
|
| $ | 74,809 |
|
| $ | 109,770 |
|
| $ | 151,665 |
|
| $ | 224,660 |
|
|
Cash Basis NOI from non-same properties (1) |
|
|
(7,103
|
)
|
|
(37,996
|
)
|
|
(18,225
|
)
|
|
(84,154
|
)
|
| Same Property Cash Basis NOI |
|
| $ | 67,706 |
|
| $ | 71,774 |
|
| $ | 133,440 |
|
| $ | 140,506 |
|
|
Non-cash rental income and lease termination fees from same
properties
|
|
|
18,605
|
|
|
655
|
|
|
21,101
|
|
|
(1,401
|
)
|
| Same Property NOI |
|
| $ | 86,311 |
|
| $ | 72,429 |
|
| $ | 154,541 |
|
| $ | 139,105 |
|
| | | | | | | | |
|
| Reconciliation of Same Property NOI to GAAP Operating Income: |
|
|
|
|
|
|
|
|
|
| Same Property NOI |
|
| $ | 86,311 |
|
| $ | 72,429 |
|
| $ | 154,541 |
|
| $ | 139,105 |
|
|
Non-cash rental income and lease termination fees from same
properties
|
|
|
(18,605
|
)
|
|
(655
|
)
|
|
(21,101
|
)
|
|
1,401
|
|
| Same Property Cash Basis NOI |
|
| $ | 67,706 |
|
| $ | 71,774 |
|
| $ | 133,440 |
|
| $ | 140,506 |
|
|
Cash Basis NOI from non-same properties (1) |
|
|
7,103
|
|
|
37,996
|
|
|
18,225
|
|
|
84,154
|
|
| Cash Basis NOI |
|
| $ | 74,809 |
|
| $ | 109,770 |
|
| $ | 151,665 |
|
| $ | 224,660 |
|
|
Straight line rent adjustments
| | |
5,599
| | |
1,864
| | |
9,430
| | |
1,683
| |
|
Lease value amortization
| | |
(3,867
|
)
| |
(1,793
|
)
| |
(4,988
|
)
| |
(3,267
|
)
|
|
Lease termination fees
|
|
|
17,433
|
|
|
4,167
|
|
|
17,744
|
|
|
6,116
|
|
| NOI |
|
| $ | 93,974 |
|
| $ | 114,008 |
|
| $ | 173,851 |
|
| $ | 229,192 |
|
|
Depreciation and amortization
| | |
(37,331
|
)
| |
(53,637
|
)
| |
(73,582
|
)
| |
(116,336
|
)
|
|
General and administrative
| | |
(12,177
|
)
| |
(10,911
|
)
| |
(25,489
|
)
| |
(27,469
|
)
|
|
Loss on asset impairment
|
|
|
(43,736
|
)
|
|
(15,258
|
)
|
|
(43,736
|
)
|
|
(17,162
|
)
|
| Operating Income |
|
| $ | 730 |
|
| $ | 34,202 |
|
| $ | 31,044 |
|
| $ | 68,225 |
|
|
(1)
|
|
|
Cash Basis NOI from non-same properties for all periods presented
includes the operations of properties disposed or classified as held
for sale.
|
|
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 April 1, 2015 through June 30,
2016. The year-to-date same property versions of these measures
include the results of properties continuously owned from January 1,
2015 through June 30, 2016. 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 measures to be appropriate supplemental measures
to net income because they help to understand the operations of our
properties. We use these measures internally to evaluate property
level performance, and we believe that they provide useful
information to investors regarding our results of operations because
they reflect only those income and expense items that are incurred
at the property level and may facilitate comparisons of our
operating performance between periods and with other REITs. Cash
Basis NOI is among the factors considered with respect to
acquisition, disposition and financing decisions. These measures do
not represent cash generated by operating activities in accordance
with GAAP and should not be considered as an alternative to net
income, 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/20160728006642/en/
Equity Commonwealth
Sarah Byrnes, Investor Relations
(312)
646-2801
[email protected]
Source: Equity Commonwealth