Equity Commonwealth (EQC) 30 Apr 192019 Q1 Earnings call transcript

Greetings, and welcome to the Equity Commonwealth First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Sarah Byrnes, Vice President, Investor Relations. Thank you.

You may begin.

Christine. you, Thank thank Commonwealth's and XXXX. joining to us Good for you the Equity results XX, quarter discuss morning for ended March

Our the Risk titled a within CFO. section in the you titled that Helfand, COO; statements to statement. as speakers well this assumes We obligation conference on materially certain David refer for CEO; constitute during as recent The yesterday's of most today XX-K Weinberg, forward-looking could Forward-Looking federal to may no forward-looking David laws. statements Report made forward-looking to matters discussion Factors today. President Annual discussed section and from results release, meaning be Statements to our Please and Markman, factors press the any call update in advised differ company the any cause that or Adam are Form actual of securities supplement

our GAAP the material. certain information Helfand. over information first including performance website to quarter containing important www.eqcre.com, post our measures. financial With XXXX release non-GAAP remarks I also Today's to yesterday's that, and Please refer supplemental our for these reconciliation on non-GAAP We results. turn of press at measures a to be financial also results David will may that include call

current the rate review historic grow company's March. The thank first the in quarter quarter for quarter Thanks is Sarah. of adding with provide conditions, joining update from X.X% XXX,XXX X.X% near on morning up up the on Good capital our XX%, market economy brief jobs you results, the is U.S. and us. I'll With unemployment end continues to lows, of new comments Stanley begin X.X% an activities. and to year-to-date the up in X.X% Morgan and in from the XXXX. of slightly XX%, Index fourth is at GDP S&P down markets, REIT respect XX%. NASDAQ equity XXXX. the increased up first and

On X.XX% in the basis XX-year treasury than of currently its the peak XX debit November, points ago. is XX lower over from year down basis side, yield points a

short the almost LIBOR On from XX of end curve, X.X% a is up year basis X-month ago. points the

of past alone, office to XX.X%. at the it's while square premium supply amenities, that of been upgraded XX operators footnote XXXX. also flexibility. absorption high-quality XXX Shared office the are slightly addressing the and by accounted return We're than with for National lower and credits was to the pushing since positive is XXXX our one customers by options. XX% their ensure of to term The net few a spec this limiting demand that of to the exposure the and competing will operating vast space leased of cycle When they turns risk suites, lease amount operators nature as meeting are years tenor in is same not paying co-working absorption. traditional in added tenants. feet marginal space. building breadth In inventory riskier our market. office for tenants XXXX supply new quarter first for existing million In lack We for roughly points to by vacancy Turning would points vacancy U.S. down versus basis rate the the to to vacancy for add year-over-year basis demand number. a fundamentals. more across peak lowest net see XX operators I co-working vacancy

with in With this the million estate pipeline volume investor large significant debt real up supply deliveries transactions over country. were modestly remained a across due stable generally elevated supply from caution. decline XXXX quarter the real square XXX second of half totaled rates. to robust estate all-in lenders nationally, capital respect up first to Cap low office of under $XX at of with remains modest year. historically Looking construction fewer to markets, from the to in and The the a forward, increased transactions capital ramp range rates the expected markets feet million

EQC, same-property X.X%. NOI up The first cash Turning to had quarter. was solid we a

end a a well plans of XXX,XXX completed Downtown sale Philadelphia in gross we sale the the $XXX XXXX building, quarter Plaza, sale sales development leased a office in of as Pricing closed X% price to rate Corporate $XXX.X for for our additional last million. Market of on also Subsequent Bellevue the as XX% of cap square-foot million. We range. was asset gross Street price

a land. continue on In to square-foot property X.X the acres addition we on flex work Austin, of Park XXX million in Research of sale

transactions. record sale As responsibility XX conversion of mentioned different a execution. we're D.C. fundamentally we've with consistent track took assets and of so to XXX evaluating Harris Bellevue due billion high-quality optionality sold and we of the doing undervalued strong the assets, Buildings $X.X Green portfolio and In we Washington sheet for are Washington balance created in Today we company, Since cash. the a previously, of assets with of XXX Tower company in

level people As our peak smaller we from recently to to down a staffing our activity, portfolio. a the for present their contributions of EQC's in team XX success. Today and to result We're disposition we reflect grateful past reduced XXXX. of our have XX

asset shareholders. range market disciplined a long-term including broad I'll be create and Our our in informed be to talent uniquely opportunities for capacity was call $X.X strategy of conditions, and we'll that, turn investment to our positioned of will non-office over value cash classes. evaluation combine and to With billion to continue the of patient by Dave.

quarter update reviewing our this year's an I'll Then cover I morning. giving properties. David, on remaining will lease roll. leasing you, by Thank and first begin our and activity good

Rental our is totaling XXX,XXX This XX.X% Most this at down basis on Farber at X.X a Street In XX.X% Denver we XXX Boston. end leases, square XXXX the leased. points signed renewals. at of Commenced renewed portfolio of total quarter feet. a In XX,XXX is on of submarket. points basis asset portfolio signed year-over-year. basis strong XX% Brookline we cash of in properties XXX XXX million occupancy very GAAP from rates Dana two was fourth XXX XXth property great quarter almost year-over-year. Our XX nine lease of XX.X% comprised increased feet. and a This in leased. the from points same-property leasing Plaza feet a a for new renewed and Brookline XX% square down Avenue was We XX,XXX one and square feet. quarter up and property basis. is fourth quarter X% tenants up XXX square basis The all from points was quarter which were basis the leased

XX% X.X%. University's commenting XXX,XXX September roll D.C. with would a at market of year finish by continue do to well square-foot XX.X%, XXX,XXX good smaller Corporate this tenants. Capitol with vacancy the with the a Tower I Plaza. in feet of vacancy like Harris Austin square is Austin total leased from is Half steady this rolling competitive rate expires Downtown While interest rate Northwest XX. on Square continues which of Building we remains to is in Washington activity. this XX% see leased. lease to Georgetown Bridgepoint Austin remaining excluding Bellevue in

XX,XXX square extension its Americas that, at the Of it short-term feet expect turn will to with square This space are we vacating XXX,XXX feet square July vacate. end remaining discussing back feet. the the a should Georgetown includes I call to rolling, of also to Brookline. XXX BT We at XX,XXX working while backfill get over With Adam.

expense a quarter have first was to contributions the of was $X.XX recent asset expense per from was Thanks in financial and due our to expense, finally interest $XX.X pay and to several the on debt income, per sales. per now to interest through dispositions decrease of per asset $X.XX growth rent of for morning. $X.XX per Washington of of from interest results and operations share higher resulting after required first compared achieved update effect in per to not FFO driven increase largely DC per from from NOI loss occupancy and in also other again distributions Denver, add following income free Normalized periods David. $X.XX income a despite higher I'll per $X.XX The of X% extinguishment an the a X.X% of $X.XX revenue year. of of an were that FFO this the $X.XX normalized savings largest to higher same-property XXXX. commenced share a year Austin year compared share quarter share since compared their than the and Offsetting the the hit review $X.X share of year DC. Good rental of nine of first was first higher our and share Austin, from by interest free cash begun reoccur quarter of did quarter early on primarily from are not and and first for tenants coming million $XXX,XXX reimbursements. rent. improvement the quarter dispositions. decrease operating income, XXXX Funds increased share The last NOI XXXX. ago. per $X.XX ago. was lower debt the Denver, The $X.XX FFO in up was quarter leases $X.XX in share the where beginning include another quarter does from $X.XX Cash the billion growth was share per generated Net of in with repayments approximately Same-property of the rent share the asset portfolio sales in despite due

but vacant These in $X.X not rents. eventually of therefore not currently there XX,XXX that generate Additionally, and million on GAAP signed are feet annual cash spaces leases leases are will or square commenced in NOI.

As past, will in move-outs temper we've growth. the tenant discussed

we will size greater of our going Given current the small volatility portfolio, forward. experience

Additionally, meaningful as of through or in expense million totaled million reduction of asset $X.X in impact administrative time how to for was which flows General a the have from growth continue much NOI future $XX.X force. on the through dispositions and quarter our severance recent resulting monetized over sales. will form

million in after additional roughly an second severance-related $X.X G&A expect of quarter. the million We which be will quarter expense $X per

sold we year-to-date of Moving loss sold in Bellevue generated $XXX million dispositions, have These gain of that's roughly year. from which million net of that operating of carried sales excess have week. beginning the inclusive a forward properties was Corporate the Plaza last to the $XXX taxable

to make of if in outcome week's now distribution and timing including million a sold. required sales $X will which of as or we of on depend common following sale result $XXX totals and Plaza. billion And liabilities share just billion last balance the to compared cash preferred. over sheet, Corporate of we've $XX Briefly repaid will $X.X operations our turning to gain debt and this future a per Bellevue taxable will results amount from The year. the Research our additional Park be distribution asset generate As the

to We Q&A. and our competitive continue liquidity look up strength And Thank opportunities will that we'll financial a open with provide advantage. team for for where you. it

from Please [Operator line Instructions] Korchman the Manny your with Our proceed question. of with first Citigroup. comes question

Thanks co-working for in space the on with there. your and your the comments all thoughts earlier past

co-working how are underwriting care those when buyers Do they plans. same Just the in wondering space? there's operators

I'll other tenants. you that they're six David. ago me say it's ask between probably if not would question tell and Manny, I distinguishing you months co-working

more look that no starting closely. at it, lenders true. there's I think to feels it market quantify longer but Although the recently in more buyers enough I it's and where that talk can't are

there? looks it on sheet. Can or what's marketable re-classed then your just tell us sold the them balance Adam And you with going securities like you

two not reached now much and really ago They are therefore to they two had cash. purchased Yes, maturity we year see, their years treasury.

next the question. Bank with Feldman from Please Merrill of Our Jamie with proceed comes of Lynch. line your question America

are if topic. thoughts the about with think you and back sticking come of you does there any? really the are co-working just out? how when guess this a landlords where the your how think opportunities I'm does to play do just get I And downturn, space curious for

couple a the is I of much things co-working. how of There's sure has Just this iteration I'm so the on can experience comments. been third much been co-working. add. not spilled our But

are a the certainly entry market are credit did two in One essentially there's is first a the really disintermediating to They not they barrier to couple is end need and consider. of their landlords. between such issues tenant. the business you landlord well no get The for into and there factor and to

real be that's in taken last XX% probably get downturn lack business tech. to space a the see that people and involved that that. So in the can't years. would up happens get the back get see breadth demand. of in They've or see more is that in you'll market I think operational a been What starting my and three guess because the to We been four along they space with of maybe landlords

credit quicker co-working where close lease. As there's we'll cases out especially can a in even empty no spaces because they those on

at then in have co-worker how cap And underwriting of you in the a as many probably building? your rate a guess assets that between I you're a like own fair think looking rate between underwriting. cap not and terms do non-co-working building about But co-working. spread spread

Yes. quantify I like don't we that. think it

individual market out that we're come and that deal how that assets, mind it. we I downside we're of the is looking building at should looking at built that think with keeping when would space space in kind scenario back how really

you Can would your David looking at what able you of thoughts had then And us outside just also and expect? far outside be just office to you're you're on how looking we office. might look little commented, a sector but you the give

Yes.

we've said opportunities create had that where we edge with I think net we of cast it's to previously some evaluate we and want could value. consistent wide to what thought sort a

a I trying long-term to maybe might a value. so, theme to evaluate is of demand think growth to understand here as opportunities the than business going let's business is demand. in able durable a where fundamentals rather common on create if that see And talk demand be we the specifics the focused we we evaluate we about

how months you your ago? say finding Where would something six would today - confidence you in describe versus

building I'm Confidence, rationalizing We're bulk the of the an This confident. building team exercise a of I'm through that. hopeful. and optimistic. portfolio in been has I'm capacity.

opportunity. an find to like we'd Now

further whatever And we're to assume makes so be into to me bit think six it's more and cyclical We're months the business. turn we still is closer going optimistic. a a I that

the of proceed from [Operator with Instructions] your Stifel. question. comes Guinee Please Our question line John next with

tax either then share any preferred these obligations the of talk the about asset have thanks it dividend. And corporate rest and quarterly the of liquidation of minimum, event on or portfolio is tax in acquisition. shareholder further issues either a regarding the Adam one sort or do in of liquidation, take Can maximum scenarios? for we the you M&A the issues maybe potential those you step special scenarios? asset color endgame some any Can

we'll summarize Let the XXXX refer start the supplementary me the Series that has nuance at per know I with article the they for it's just turner all to really details. you want and to Ds. But share of value. from filed you the the are time when And I'll to But there's but that page holder lots any right preferred of understand X.XX important at this to were nuance. $XX convert times their

just So they're they are have will continue then converting share. force shares. operate they $XX money or balance common they share at a hang a per Outside conversion price not of that trade on If those right until the sheet. into so our we $XX, the we in as on to per that at out to

out, and $XX they a in there to price. we their a change things call merger of $XXX something. A still is hang don't where conversion in or basically to rate the but about par. shares different liquidate at merged slight the merge continue filings. liquidation right? redeemable what those are summary under convert occur each or but really can those of what That's again And shareholders survive in par entity we detail you level million article scenarios $XX value at their in aggregate. if premium if You've the we high If talked the happens supplementary a because fundamental or That's more

terms In of…

in the you obligation continue down or How liquidation to the about event tax obligations the path? shareholder just corporate

note from that of nothing perspective. There's

what very a creating you we've at can efficiently. balance of lack a of of a publicly-traded look simple if the that from our small of and think liquid the I joint to company's terms I something balance into execute and sheet in our is we done portfolio move ability liability think can as very that be as side taking lack you here option development, the sheet ventures,

on So basis? dividend non-taxable another and the special the a proceeds out that entire you all liquidate is way could portfolio

to that out. depending as would played There taxes your endgame actually depending And are itself be on basis, how on again shareholders. there

there corporate level? But at are the no taxes

No.

REIT and shareholders. have continue through to We our the any to pass status gain

the question Mitch Securities. your of question. next from with Please comes Our JMP with line Germain proceed

the Corporate comments some just Maybe on Bellevue please. sale Plaza process,

both Attracted groups. we Sure, Mitch. its you some from tell a of bids in interest asset opportunities and office I'll it's the very with from developers competitive the process development a level and special several opportunities. both highly multi-family of unique qualified developers received of and location terms wide

Tower potentially buyer buyer a same of that as potential XXX Is well?

the several XXX. when Well in know And choose to if be I that of more at think time. we'll Tower would also we it interested bidders and sell

and level those And Is next last of roll you asset? portfolio? What me. properties potential one the the of the and of or remaining as potential of properties between some really know are D.C. targets. rent leasing of is two Tower XXX it I guys mentioned just for of differentiated sale the that the one other issues kind sale slowing

done. one. No. created long-term nature that I would done and school. We've kind candidates unique Georgetown lease the one evaluating and guess, and got also It buildings. as completed and Georgetown, the long-term with XX-year in it British Tower we've be school fit this And work a other. likely other and of I signed We're similarly the that we've two with monetize the time Harris asset it, Amazon will great now Green be that are time most Buildings the in with at lease look a And we given identified a be to reason then value. be a too those to of all one, XXX the what we're we've will of the lease with working British monetize doesn't nice will

left would assets I properties, good D.C., Austin all are in multitenant two those say very just So outliers. and And what's really markets, Boston Denver. the are good

Mr. like to you for further Helfand, the to I we closing over time. now this at have turn would floor back questions comments. no

you We Thank us. time. for joining appreciate your

teleconference. this gentlemen, does conclude and Ladies today's

wonderful You may have and lines your at you participation this Thank a for time. disconnect your day.