Equity Commonwealth (EQC) 2 Aug 202020 Q2 Earnings call transcript

Greetings, and welcome to Equity Commonwealth Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host today, Sarah Byrnes, Vice President of Investor Relations. you. Thank

begin. may You

Good Equity thank quarter Commonwealth's XX, LaTonya. us ending for to XXXX. discuss results morning you, you and joining June Thank for the

Weinberg, section Helfand, call securities advised be laws. of forward-looking matters conference and well are titled titled Forward-looking Factors Statements yesterday's as refer statements the to recent to this as certain the our most most Adam David Form the We during may section On our CEO; CFO. today on recent that David federal you call on quarterly COO; XX-K Risk in discussed press in Please in Report report within and release, Markman, meaning President Annual constitute the XX-Q. Form and

factors differ could to or to any that results supplement COVID-XX. impact including statements, obligation forward-looking of from today. forward-looking regarding Company statements actual materially the statements overall update any The of cause a For no any assumes discussion made

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

results, begin morning. Thanks, quarter joining an comments provide brief with I'll market on appreciate on activities. Sarah. view the today. We second and Good us company's update conditions, our you current

businesses. on business address We and impact having our the tenants' continue our the is virus to

tenants. of team communication We open our ensuring cross-functional lines have a focused on with

push and while ready will understand slow increase implemented measures about dynamics back. the new sublease market to open, for second leasing many of when sales space was continue and tenants is lenders coming the forward. an supply Our tentative that higher we've are and in market over to precautionary Delivery the with vacancy going activity the reflective come quarters. Office try quarter, owners likely frozen, they in return, buildings be market largely as to of volumes are

rents, property prior EQC, leased Turning the the down four points quarter, at basis In from collected of second million XX application from the our second XX% letters square we to and of XX% and contractual was July, quarter. totaling quarter, portfolio the X% XX.X% feet rents, security credit. deposits security end X.X letters including we from the contractual In X% including of of lower of Same to of NOI lease collected and during a credit. lesser received parking Funds share. up significantly decline FFO X.X% year. the impacted $X.X interest to by rates NOI reducing quarter decreased Same last largely $X.XX by compared cash XX% due revenue. million, per on from second our operation property in the balances, cash degree, were property was to to XXXX quarter in the deposits fees termination

rate million we During $XX.X the the The we of prepaid another in cap range. the this Harris from Downtown Capitol loan taxable quarter, of year. of have the Gross the completed on Georgetown was the at will payment million Austin. property this Tower Green in have We quarter. the $XXX and at mortgage dividend properties do any In held July, result sale end gains in time. X.X% approximately likely sale the special low $XX year-to-date the in not million. for Buildings and of million, at-par, market was generated dispositions for for Pricing proceeds in $XXX X% of outstanding sale

Following preferreds. this no we repayment, convertible and debt $XXX have million of

as team times onsite These want and more impressive. response for been the CBRE profound to the and of will focus, have $XX.XX trying be dynamic crisis than bound In your play with have these collaboration, to across share. Our pursuing continued but and to these out, navigate is work efforts I We and diligently acknowledge opportunities it's EQC has strong, the this to will together. consequences. patient balance continue how sectors. or new sheet teams challenges $X.X our commitment know billion per personnel uncertain don't we times, been we and

that, strength Looking to And will the team, forward, competitive questions. of our we be believe call our the culture advantages. your and our balance sheet open with we'll

from Thank Jamie America. we proceed question. a question-and-answer Bank Instructions] of question first session. will you. conduct time, Please Feldman with this At your [Operator Our with comes

anything months, you pause guys. Elvis into forward are had over makes morning, makes This Jamie. differently, even months? three about, investments the than what think recent is has changed last up call harder in for go or you Good you thinking that a quick a you've question, on put just David, about

Thanks, changed Elvis. I opportunity. think No, anything approach to the we're taking don't has that evaluating

on step a the process. that, the the virus, I approach to back that a say opportunity we've call of think we given assumptions it not has and back up take all that previous granted fresh back behavior. effects more learning all the paused and down the up, on then the and and previous cities try I sort people and investigate changed. -- it's made We're as judgments to approach employment economy, our keep going investment to sorts of an everything, have aperture and hasn't there and on mentioned Obviously and have rethink been been effects broad take profound take we the were in has changed of But past, up about effect rebought. opened opened the for a wouldn't

So nowhere investment or near? to would today an you're making you closer say

Then, when?

last quarter? Then, we spoke when than

find view investment of general to patience effects to think the right the time the filtered closer the felt it early further, is being but whether it's through I to terms of opportunity. being believe we our and that say of take consequences opportunities, think hard in it's I sort virus and or continue we're and will the

traditional had shifting over maybe known And with share spaces. Have of office Okay. to the helpful? would and discussions office as you call of, the relative it you that layouts looks be office what and tenants. perhaps there then, can what just future really conversations any to Anything we've like

David, do take you that? to want

Yes.

think going do going I what tenants don't They're thinking their right in people and have very areas who now about it, we employees a retail this in today then point. and about to with happy to going are to future. office some cautious across who are in we can now they're and the and near it's I board, the how of the operate you forward. thinking Very do rethinking couple going those give really tenant of being most And dense had is they're of but So terms a forward. whether build-out. one term, real-time perhaps examples, and to too of little environment coffee with completed bringing tenants we've its back. of haven't recently a how heard work anything rethinking self-serve tenant, But and from kind they at now bar going what that our the the

guys. thanks Great,

proceed Our next with Citi. Please with Instructions] question. Manny your from Korchman question [Operator comes

earlier shifts potential going valuation could morning good markets, on you've maybe everyone. in any and the kind looked way or that your you're the you is that comment past? shift impacts of there you Hey, where versus seeing the that both private how the in your at of markets everything what's that in and revisit sort on implied public point underwriting and being David,

for there been or values the really Sure. market monitoring judgment pretty private trading Manny. got gotten and hit of got -- and With -- them, activity side, to that's some not, whether have centers it's that office the SFR to ask public been Thanks, A data the of and transaction were the you have whether the know in morning. deal the and We understanding make that values it haves, certainly done. haves there number and obviously have cell It's market's we that sectors, has have a are hard, respect reconcile interesting market. so across companies, been as think themselves. number done well particular, pretty then towers, are have-nots a hard, There an the and pre-COVID. deals residential deals Good the right I one gotten hard and you industrial is because question, are others started done. and little right, people there in hit

just -- it's what think to market, private read I to where things see of hard through the So going from the indicator any settle. are as

can transactions. than it me, we're as as a appears And is whether kind as that companies know But pound how at you the both question lease equity much of to or buy per us, -- price The not. pretty prices. well I the if better things office look implied at public some you compelling to sale mean those are you of company need it is relates market, cheap by the certainly, think I price number. waiting to see transactions, the of

of And now to feel have market. Is the on then, and right in time sort your perspective. COVID you a from sell, anything the for in Then right I of program things just price anything was you having just discovery, slowing sort fundamental are not the volatile of guys because sales too it's don't now. you market guess hit, terms that you're waiting pre-COVID. don't

Something else?

assets. to We assets. sort been of factors. the like owning assets they But markets institutional all are are those four We comfortable hit our pause that are Yes, felt traditionally has these good are mostly, liquid, them. in with intention it

to was not, we the were sell going business, assets determine you and mentioned we go forward, the If portfolio, So the are we assets this are to the of To owning. then would to to the in how but intention remain they're stay part continue a all business. all were are we comfortable term. whether with we to really high determination transition hold whether we these would it we we building office in that own to extent office want But until quality office consideration, another long those going reasons make business. our

one Michael think I as well. And has for guys

David. It's Hey Bilerman. Mike

I perspective, public Manny's some perspective amount having you potential guess, the to just and private, interest start bit stocks just from also or either low to have office versus a from positions, back those you a you going capital, an than are given in you earn but conversations? have a to certain M&A perspective? how wide, of of conversations? income -- are, talking little would getting, limit trading for Just about making more guess, a to a some Either taking you're X% perhaps sort question or deploy to I up rates interested disclosure about value

the for question, Michael. thanks Yes,

So let's take it in two parts.

down yield investment the our has just cash Obviously, on First, pure side. the come substantially.

We beginning, taken conservative approach have very a managing that from cash. to the

we we as felt to portion not just internally were We such office that consider are a values but monitor, investing and discussing the if with we the could interim. they whether companies, cash, compelling really and our we want attractive companies, might returns our risk-adjusted in earn board other were small of

As it we much. too relates to idea that I to don't sort investment, really a think strategic of subscribe

doing We have negotiated no intention basis. friendly than of on anything other a

always owning interest we in we without have So company start stock in. potential that might can conversations a

of So bit at team the little probably of less the on investment with Board the former. latter the level maybe a and consideration

am thing where you obviously by financial that getting saying, estate. transaction, not that of -- happening I the office god get if just capital buyer, loaded at I can able you at inquiries the a bring to players team two and but only there. a -- are portfolio are any expertise, stock about say Is help team to can that talk that seeking, are a management guess, a who that been let's I we're public I take markets all? knows fully And about others, guess from real need bit I looking get little for a can have management or over, you approached you me

transactions. people We've inbound things with a we've provide in little Yes, of things to expressing get if partnering really get of had had sloppy, tough, discussions. capital a in terms those if few inquiry EQC interest bit really for of --

want we I to and to responsive our with engaged always want be be we capital. -- think always

we to partnering our achieve of some couple interest built execution interesting relationships fix some But the years think we and capital start past have we've to something get to that want in, past that have to the had our -- way. We we partner in of deploy brought pretty continue relations can I in -- could the lead the discussions. and we've we own, own type and you broken a of we with those have partnership over something to if has and can institutional on do don't want

than office is some though, and made of is as Sam's what's less of definitely the view out house But say call. it making feels I office, comments a sense taking retail? going And to it comments, market the sounds worse it happen some to like perspective you from little something you be, to the an like general more think relative optimistic of bit the on are than to the

think what days, Well, differently, I bullish relatively believe Michael, future there right? to slightly is said for say you're if a you you these office,

mortar even is what your certainly right? the is, go a as a people to view Well, of the office believe There's place I got not an Sam that desk, depressed going lot be whereas valuations, find will a way wants right? money, Equity to out the than office, view, though that and People what the as office deploy of bricks use retail little different is is? a that sounds consensus to view that It bit may at retail. house that's

just there share fair. for ahead that with probably With there business, and a We to That's but finding and But with camp for is risks is office, we want and believing never negative willing right never, that office make the others, we situation future work, don't people of times effective. to we that they certainly be that in respect want finding long-term. bet expressed to the to business, as that teasing, desirable, lot the COVID respect productive collaboration the engage would -- of I that therapeutics, have almost building be be be the for we'll that want view underwriting, is to and what doing. will which really there that was we we'd with Sam and is tolerances today, can would right not to and has people be expressed, that with a live where that say sentiment deal difficult is vaccine a the the retail we

the color time, appreciate the and I

Michael. Thanks,

you. to Helfand Mr. at over to Ladies the for this closing comments. Thank gentlemen, I and like David call would back turn time,

sound, Well, and your to soon. and and interest again hope you're we talking look for we that you appreciate Thank safe time. we your to you forward

Thank teleconference. you you. concludes today's This Thank for participation. your

day. this at time, disconnect a You and may have your lines great