Equity Commonwealth (EQC) 5 May 202020 Q1 Earnings call transcript

Greetings and welcome to Equity Commonwealth’s First Quarter 2020 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the conference over to your host, Sarah Byrnes. Thank you, you may begin.

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

the Markman David Weinberg, are call and On David CEO; Helfand, COO CFO. President Adam and today

Please titled laws. Annual may the forward-looking Report of conference during release constitute in you refer well update that recent Risk to company Form XX-K cause Factors results made be discussion most the federal in obligation differ titled statements or as The on for securities yesterday’s a forward-looking Forward-Looking statements forward-looking today. certain Statements factors actual to advised of our discussed this any assumes no statements. matters could meaning that We supplement within from to section the as materially section any press

important We on information at that www.eqcre.com, be website including our material. also may post information

refer supplemental results Today’s measures. our financial remarks press Please measures performance results. reconciliation quarter GAAP XXXX yesterday’s includes first to financial and certain also for these non-GAAP our to release of a non-GAAP containing

to will over the call Helfand. With that I turn David

the cost Sarah. economy, at want We appreciate you for as created deepest directly and joining markets Thanks, to is social sympathies an enormous unprecedented our Good and large. of convey challenges today. The COVID-XX society set those impacted. us morning. pandemic global we to

appreciation on front the our those lines. for to express We also want

safety tenants of Our priority employees at now EQC our right and building health staff. the and is

implementing precautionary in evaluating to control the ingress stay enhance Our begin return and home This and lifted our other to to measures. includes orders they and buildings tenants ensure their are open at options physical safety common as we’re cleaning and building with protocols working to egress, areas, distancing office. are

office. We for will to following protocols all the returning government-mandated be

industry the and since shut specifically unemployment, total as estate of capital the dislocation There near filing markets claims are activity mid-March. down seen ground investment leasing initial with in halt. and million the a real XX created sales Americans office, massive we’ve significant economy The to

and need with with communicate to that working are our those continue assistance. We tenants our

month Less were which April, is retail the of no credit. application is and of than of have For tenants of X% and contractual revenue of X% exposure. paid, security from letters from co-working our we of XX% deposits the rents

Given are to our the the on COVID-XX have tenants at uncertainty and this portfolio. time unable we determine will impact

for to the quarter, turning we the our Briefly, business properties completed in $XXX sale of first million. two

Longwood at As credits February, sale after on in Brookline call the price mentioned of a $XXX Boston of taxes our for gross a million. XXX $XXX in closed transfer we Medical the foot square contractual lease Proceeds of costs million and our foot. District property on XXX,XXX for of $XXX primarily sale

low XXX,XXX Tower transfer a X% the square gross price In sale was contractual closed office addition, we cap million, Washington the Amazon after in was on we of or range. XXX, in lease Bellevue, taxes million in foot primarily for Proceeds per XXXX. credits square that The sale rate $XXX $XXX.X foot. $XXX.X to costs property and pricing leased March, in

will $XXX Taxable from this dividend likely million these dispositions special the year. and totaled another of in gains payment result

of not for closing we of a the have this was signed properties scheduled and sale Buildings do we other addition, the Georgetown at in June. for any market at sale the the held as time. Green with in classified quarter, the Harris In contract first property with sale The for end

NOI the was X%. million Same X.X of of cash square at fourth basis Our end XX the was same totaling four XXXX. property property feet properties of the decrease leased from first quarter, XX.X% portfolio up a quarter points

$XX.X million. per During common shares stock price $XX.XX total an at of share of XXX,XXX repurchased average of we half the first for of March, a

with Our billion roughly cash a sheet $XX $X.X is balance net strong or share. of

Despite equity experienced emerged been years which move risk broader through forward. the focused stronger. cycles The of severe more are continuing we and than multiple to have periods managed the XX by a I has pandemic, part dislocation, organization, on created challenges of for

date, a well As of strength to our sheet, the storm balance and this thrive. weather our result to culture of and we EQC’s execution to our are team positioned and

bulk We we unique in Commonwealth environment. an position, portfolio in original are the opportunistic monetize of of anticipation the

to disciplined we the call broad with consider spectrum that, the and we’ll we your remain forward opportunities continue to questions. as and invest, of to Looking will open patient

question. with Thank you. your proceed [Operator Citi. Instructions] Our with comes from Korchman Please Emmanuel first question

focus Hey, guess comments others in out spoken value intro good dislocation more about markets. next a is the of private public if there your there have seeing that been pause, you in on the define you markets to are real How that same? especially Are David, of thanks a morning viewing in of, of opportunities I acquisition? your the to right the equity sort what direct that for are or telling estate now, or everyone. there you have Thanks. team sort sort

Thanks, Yes. morning. Good Manny.

go. on it’s our it’s team view well things is the is weeks REITs we’re being as activity and market and monitoring predict what revisit begin think discussions it’s to hard in general available. direction said is sort difficult months think early unfolding, have and that before very of is relationships and with both our the investment early That actionable we’re actionable. still general six to real and quarters as going still think midst something what’s down, is not what if what that had about and private, seated we’ll the predict over time and it’s to that I set public probably of those really it I we’re obviously in we are going and is it’s opportunities still But in this, opportunity view calm that his our to

be for we’ll our something if that. way, comes prepared Now that in changes

getting and will more likely we’ve are those guess. of seen some And have its question be the headaches collection is side others assets but proving and of have that that change out temporary, does involved? that sellers rent be thought permanent, bond they were of I Other just like will some approach might on as stresses

you want that? take do to David,

Well, I this are kind challenging and I hopefully Sam And think, in everyone question. reviewing estate it’s environment other advised as owners assumptions. Manny, real a us, of good including of all

cause do because thought longer of asset sell they So, no bond it passive if sooner to what’s it a to never that or happening today. them investment when that’s perhaps they so, had case, like investment, a the may intended then sell and they

Thanks, guys.

of your question. with Jamie, muted, proceed Jamie with Feldman yourself. you’re Bank our America. Please speaker, if [Operator Instructions] live Our next question you’re comes from unmute with please

talk asset Jamie. this Hi, on to what that particular today a you at any Manny on all Elvis last there for at or the little is that not to bit play dislocation dislocation well. today’s about are great financial just cycle? versus Can we’re said, hear you classes potential feel play you’re crises building Glad be and in will

a difficult event unprepared. financial in it that’s lived Well, crisis to comparison, a people dramatic how make great are really was were and given early the everyone this. pretty through Obviously, and we

the for of the a retail. think make into the obviously that entered comments, which to decent in in of exception strong this system a businesses number were part, with most as less can leverage couple I fundamentals I general we is businesses, of was there some

the better have what to two, like. is To don’t that of And understanding to this compare would going we I have have look one frankly, a view.

going how of things set sort greater to and through appears this going that’s and be change. see play or territory. leads on going David been got to be realize moderate to new alluded a to to through reopening. it, is spending of a to Sam back lens I time his us, We going thoughtful of we’ve think that understand that out, fresh and and to trying to with reopening need the to eyes is told is careful, people David got beginning sort to what’s going and of break, going the to there inside to a are as with evaluate is go that be everything We he’s said, this how reopening eyes

we practical is a but health and also and issue. this are optimistic, public science-based essentially We’re

to that the and GFC. outcome hard therefore, compare predict to to So, it’s hard

And then find out, if don’t any then? you Commonwealth Equity year you say would to opportunity, that what happens

Yes.

speculate premature that. it’s think about to I

any Okay. dividend maybe, special for are one Adam, And will look number then have end mind? of of that one in the sort you last Adam. Or able you what are share at the year? like to

Well, I can hope a little a what additional helpful. maybe, detail and provide David bit I of that it’s mentioned reiterate

of $XXX million. previously our carry-forward And year recall, As a disclosed, with believe Brookline the the which is they’re assets that gain we mentioned the and XXX all sold. David we his an approximately if about you generate federal million of will XXX $XXX may in we’ve as $XX additional total David taxable million, Tower net operating prepared remaining mentioned loss remarks. started gains of that from add

to is June, if for scheduled sale Georgetown, close. market close and does in which the it in

course, generated gain, the assets. our of then normal gain income gains the course generated generate we’ll each that will We the other by operating something of one-tenth like but are also And size business. in the be of also of taxable

of operations be those the and timing will earnings will of our that I the size dependent Trustees. decision future but and our Board are of also So, the components, from distribution be ultimately, think on

Thank all me. you. from That’s

question comes question. next Please Guinee proceed Stifel. with from Our your John with

the questions. how go the and the could pay big what’s and long-term the Great. pay And as of earliest latest team Thanks that special? of now sort Two then guys One that into period special you could gals. you suspension? update, what’s for you a is is

could latest next correct not end And of your busy into when pause on any of we’re Well, and of the January believe characterization, be kind but earliest gain, year. the then me. I I’m size Adam pay going of at The work. that we’re hiatus, me blanking take the we let would we is or know you’re the

sort working done of an refocusing to support. and Our job team has outstanding

then the trying it. to communication, understand team activity, when happens coming lines look monitoring reestablished transaction of it tenants for be to work back to busy markets and sale side, on activity Our and our checking relationships, on investment everything information or leasing understand is whether

we the busy, find think that focused we we’re So, going be deploying we’re is we’re in patient something compelling. and until terms of capital to

Great, you. thank

Emmanuel is next with your Please question. proceed Citi. Our from question with Korchman

Bilerman. Michael morning. it’s Good Yes,

little didn’t of, the lens what really was So, that And have extraordinarily like, in sort at of market. looking the terms been of I can you about during patient influences run-up wondering the more is terms in Sam process. pricing how in you investment our and share you if was was decision-making a where that bit your

clearly, environment find event, were concerned real this economic those not You sort didn’t I that now cash. science, in compelling driven the you think is of actual billion of capacity over and excesses provided opportunities has which was someone about your overall $X by

and maybe, property sector a thinking bit So where Sam terms you little and potentially, changed something has perspective now with either happened? guys us world the a you a compelling can you and share find from that this are has about how in may what of so how perspective, geographical about go

David, do want you to take that?

kind you supplement Sure. lens. have not so Sam clear can response. of I’ll or I’m we sure has start, a my then

fresh. fact, is this, is challenge, we anything discuss past, we’ve done revisit, anything us debate, we and into going the In anything, everything to he’s and that in repeatedly unprecedented what if seen need look cautioned thought at this

engaged. what we’ve that’s been been actively So We’ve doing.

We’re looking to is say, opportunities. give pretty at predict us. variety take it certain; what We He the will would as of market time a the find right will opportunities. can’t some Sam

is moment itself. really avails opportunity we when meantime, patient all can the disciplined. the So be And position that ourselves and prepare for do in and

moment not that ready to he's He be any just is can, has much than and sectors one What assume the other looking and keep happens got or absorbing us really to no comes. to everything that this just information spot. be at roadmap, when determined, “red as next lined”, us you told as

now I been I through the like the nothing So have of off before were seen year, list. and of that feels is retail to retail, asked years red and year couple you it no last about I mean retail line. starting initial we've remember stress, ago may is go

a I your I intro are I long was I gave response think, think responsible, David, remember and you think no. I really

no lower than rather is a case? this like a case So upper time it at

with Sam that in the started are anything business. a on from on, think which what I first to very to It's is with late percentage probably what's are result no just question, say philosophy David off about But it's the it, in – right at likely almost malls I there the attractive responded and own significant in not lost in It's going answer no thoughtful Michael, particular malls, when risk Sam, portfolio your to hate aren't to it's XXXXs. those is your in in to there in a the while there's and just unpredictability of exchange we taking challenges previous keeping retail, large to more question, reason back dislocation for tough is return. – given given we write because now, used

sectors. the we've that it so true asked think which answer target depends is the on are we unsatisfying what you your the of to call conversations you've the had an And and with to taking return many with returns and we is, I on earn and same risk the really give

but choice, as it are count right red things are is to it when is not first out our last even reason no uncertain as our or now. to Retail choice, there maybe line they

You back the you can can just bring band And... bring back whole and context together.

My is god, yes – that's Michael. the list, on that

part Do lot view pretty need securities, just wide you are debt more to securities, it's time of period today? your is the to think may you return you six loans do whether with the a companies, about it asset is equity as of what direct what this highest most because focus do XX-month people scope short-term Or much you spending where the the of lending, I and can cash – or you cash? to level? in month a is side? is mean do this net Where on oriented provide in – time that primary a of assets,

want Yes, Adam, take that? to you do

company. toward security, I something Yes. become with the a had and that conversations will But has platform the can something going mentioned being and trader as being in investments. liability that he Sam our sheet. real may focus is that the an we real of initial side platform the in business this from has mean away grow him and the generally creating to grow all our investment focus to That between focus and business a making investor. into debt be with we likelihood the will team do doesn't making And a on made for a through on us for distinction come be balance trades won't that but and

it but Commonwealth estate very are that may different. it's real operating a that operational, is lot estate an Is REIT C-Corp have characteristics, this in something become it – something possible Equity business is it's there struggling, and a and not that invest capital because becomes of possible that real corporates you just

It Well, certainly I real answer ways. me let almost be guess, and maybe estate. that try two will

but the We bought businesses, attractive through challenges public Equity and LifeStyle, long-term public them and are what we knew be look have stout traditional, fundamentals it and trying Sam took No was no focus when I'd have understood give it. of built the the not business, one other it. you when the markets and been businesses find a we XXXX XXXX as that characteristics the business, opportunities Sam fundamentals can the market the is understood looking if that understand to a as in long-term long-term the built given but was. in example To is find now did, and we would it that – he one might had look took

asset asset its almost but we core, real would on the think of right will it intensive this open and we certainly of to almost estate, have, operationally certainly class, started have all never but as be finding an another estate real sort something is intensive asset We'd will say hard estate one edge I which our focus never, has be of been adventure. it real we businesses since that,

then coming from you recapitalize company viewed of sort always management being an able potential an And estate think candidate then securities, do buying a terms public M&A in just generally lastly, of perspective. perspective, and you've real existing also M&A of was as from company, in to been

terms in limit this of So or in all seeds planting are space, at up to of seeing in these equity of fulcrum taking some trying opportunities number private bigger the seen more companies. an of X% on you have public that to have to position ferret least some act positions conversations, in at out a the C-corp hotel you've a taken players

is that that or focus not? an is area So a

not It's and worked do think right. we one pretty good, out. focus trailer The trash investment a to activist. it's is That out highly I turned be what unlikely

Thanks guys, I it. appreciate

Michael. you, Thank

reached the I'd Helfand call time, this At session. the to have turn question-and-answer for over We like closing comments. end the of David to

together. Yes, stakeholders, thank times. the joining team EQC this get stay you a on the for care trying during Be stay today. And we're will these you. just together And as in through team Take for each want recognize we their focus time to I healthy our and we call Teams, hydrated. and I update all us it To all Microsoft well. everybody. Thank tell have

This conference. concludes today’s

You for may time. at you we your disconnect your thank lines And this participation.