Equity commonwealth reports fourth quarter and full year 2017 results
Chicago--(business wire)--equity commonwealth (nyse: eqc) today reported financial results for the quarter and year ended december 31, 2017. all per share results are reported on a diluted basis. financial results for the quarter ended december 31, 2017 net loss attributable to common shareholders was $23.6 million, or $0.19 per share, for the quarter ended december 31, 2017. this compares to net income attributable to common shareholders of $10.3 million, or $0.08 per share, for the quarter ended december 31, 2016. the decline in net income was primarily due to losses from property sales and a smaller portfolio. funds from operations (ffo), as defined by the national association of real estate investment trusts, for the quarter ended december 31, 2017, were $24.0 million, or $0.19 per share. this compares to ffo for the quarter ended december 31, 2016 of $28.1 million, or $0.22 per share. normalized ffo was $22.6 million, or $0.18 per share. this compares to normalized ffo for the quarter ended december 31, 2016 of $29.6 million, or $0.23 per share. the following items impacted normalized ffo for the quarter ended december 31, 2017, compared to the corresponding 2016 period: ($0.16) per share of income from properties sold; $0.07 per share of interest expense savings; and $0.04 per share of increase in interest income. 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. for the quarter ended december 31, 2017, the company’s balance of cash and marketable securities was $2.6 billion or $21 per share. total debt outstanding was $849 million and availability under the company’s revolving credit facility was $750 million. the weighted average number of diluted common shares outstanding when calculating net income or loss per share for the quarter ended december 31, 2017 was 124,293,289 shares, compared to 126,048,307 for the quarter ended december 31, 2016. the weighted average number of diluted common shares outstanding when calculating ffo or normalized ffo per share for the quarter ended december 31, 2017 was 124,931,908 shares, compared to 126,048,307 for the quarter ended december 31, 2016. same property results for the quarter ended december 31, 2017 the company’s same property portfolio at the end of the quarter consisted of 16 properties totaling 8.7 million square feet, which excluded one held for sale property. operating results were as follows: the same property portfolio was 91.9% leased as of december 31, 2017, compared to 91.5% as of september 30, 2017, and 93.3% as of december 31, 2016. the same property portfolio commenced occupancy was 89.2% as of december 31, 2017, compared to 88.4% as of september 30, 2017, and 90.5% as of december 31, 2016. same property noi decreased 1.0% when compared to the same period in 2016. same property cash noi decreased 0.8% when compared to the same period in 2016. the company entered into leases for approximately 248,000 square feet, including renewal leases for approximately 171,000 square feet and new leases for approximately 77,000 square feet. gaap rental rates on new and renewal leases were 19.0% higher compared to prior gaap rental rates for the same space. cash rental rates on new and renewal leases were 6.8% higher compared to prior cash 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. the same property portfolio includes properties continuously owned from october 1, 2016 through december 31, 2017. significant events during the quarter ended december 31, 2017 the company completed dispositions totaling $106.9 million. the assets sold during the quarter included: a two-property, 15-building, 1,182,000 square foot, 75.6% leased, office portfolio in moon township and pittsburgh, pennsylvania, for a gross sale price of $71 million. 789 east eisenhower parkway, a 100% leased, 131,000 square foot office building in ann arbor, michigan, for a gross sale price of $24.9 million. 33 stiles lane, a 25.1% leased, 175,000 square foot industrial property in north haven, connecticut, for a gross sale price of $10.5 million. in connection with the sale, the company repaid the $2.0 million mortgage loan secured by the property, plus $0.2 million of prepayment costs. a land parcel in aurora, illinois and mineral rights in ft. worth, texas for a combined gross sale price of $0.5 million. a two-property, 15-building, 1,182,000 square foot, 75.6% leased, office portfolio in moon township and pittsburgh, pennsylvania, for a gross sale price of $71 million. 789 east eisenhower parkway, a 100% leased, 131,000 square foot office building in ann arbor, michigan, for a gross sale price of $24.9 million. 33 stiles lane, a 25.1% leased, 175,000 square foot industrial property in north haven, connecticut, for a gross sale price of $10.5 million. in connection with the sale, the company repaid the $2.0 million mortgage loan secured by the property, plus $0.2 million of prepayment costs. a land parcel in aurora, illinois and mineral rights in ft. worth, texas for a combined gross sale price of $0.5 million. the company entered into a contract to sell its 84.7% leased, 826,000 square foot property at 1600 market street in philadelphia, pennsylvania, for a gross sale price of $160 million. proceeds after credits for capital, contractual lease costs, and rent abatement are expected to be approximately $157 million. the property was held for sale as of december 31, 2017. moody’s investors service upgraded the company’s senior unsecured debt rating to baa2 from baa3. a common distribution was not required and the board of trustees determined not to make a distribution for 2017. financial results for the year ended december 31, 2017 net income attributable to common shareholders was $21.7 million, or $0.17 per share, for the year ended december 31, 2017. this compares to net income attributable to common shareholders of $205.3 million, or $1.62 per share, for the year ended december 31, 2016. the decrease in net income was primarily due to a decrease in gains from property sales and a smaller portfolio. ffo for the year ended december 31, 2017, was $115.4 million, or $0.92 per share. this compares to ffo for the year ended december 31, 2016 of $143.7 million, or $1.13 per share. normalized ffo was $103.3 million, or $0.83 per share. this compares to normalized ffo for the year ended december 31, 2016 of $149.4 million, or $1.18 per share. the following items impacted normalized ffo for the year ended december 31, 2017, compared to the corresponding 2016 period: ($0.81) per share of income from properties sold; $0.26 per share of interest expense savings; $0.13 per share of increase in interest income; and $0.08 per share of preferred distribution savings. the weighted average number of diluted common shares outstanding for the year ended december 31, 2017 was 125,128,772 shares, compared to 126,767,628 for the year ended december 31, 2016. same property results for the year ended december 31, 2017 the company’s same property portfolio at the end of the year consisted of 16 properties totaling 8.7 million square feet, which excluded one property held for sale. operating results were as follows: same property noi increased 0.8% when compared to the same period in 2016. same property cash noi decreased 4.1% when compared to the same period in 2016. the company entered into leases for approximately 958,000 square feet, including new leases for approximately 490,000 square feet and renewal leases for approximately 468,000 square feet. gaap rental rates on new and renewal leases were 15.1% higher compared to prior gaap rental rates for the same space. cash rental rates on new and renewal leases were 7.5% higher compared to prior cash 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. the same property portfolio includes properties continuously owned from january 1, 2016 through december 31, 2017. significant events during the year ended december 31, 2017 the company sold 16 properties totaling 6,588,000 square feet, two land parcels, and mineral rights for a gross sales price of $862.6 million at a weighted average cap rate in the mid-8% range. proceeds after credits for capital, contractual lease costs, and rent abatement were $846.6 million. the company repaid $293.3 million of debt with a weighted average coupon of 6.5%. subsequent events in january 2018, the company entered into a contract to sell its 99.2% leased, 1,561,000 square foot property at 600 west chicago avenue in chicago, illinois, for a gross sale price of $510 million. proceeds after credits for capital costs, contractual lease costs, and rent abatements are expected to be approximately $487 million. the closing is scheduled to occur on or before march 23, 2018. this transaction is subject to customary closing conditions and extensions, and there is no certainty that it will close. in january 2018, the company called for redemption at par, on march 7, 2018, all $175 million of its 5.75% senior unsecured notes due august 1, 2042. the company currently has 4 properties totaling 3.2 million square feet in various stages of the sale process, including properties under contract. earnings conference call & supplemental data equity commonwealth will host a conference call to discuss fourth quarter and full year results on thursday, february 15, 2018, at 9:00 a.m. cst. 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 fourth quarter 2017 supplemental operating and financial data is available for 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. as of december 31, 2017, eqc’s same property portfolio comprised 16 properties and 8.7 million square feet. regulation fd disclosures we intend to use any of the following to comply with our disclosure obligations under regulation fd: press releases, sec filings, public conference calls, or our website. we routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. we encourage investors and others interested in the company to monitor these distribution channels for material disclosures. 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 and consummating asset sales. 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 securities exchange act of 1934. 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) condensed consolidated statements of operations (amounts in thousands, except per share data) calculation of funds from operations (ffo) and normalized ffo (amounts in thousands, except per share data) as of december 31, 2017, we had granted rsus and ltip units to certain employees, officers, and trustees. rsus and ltip units contain service and market-based vesting components. if the market-based vesting component of these awards was measured as of december 31, 2017, and 2016, 673 and 1,027 common shares would be issued, respectively. using a weighted average basis, our calculations of ffo and normalized ffo attributable to eqc common shareholders and unitholders per share and unit - basic for the three months and year ended december 31, 2017 include 43 and 38 ltip units, respectively, that are excluded from the calculation of basic earnings per common share attributable to equity commonwealth common shareholders (only). using a weighted average basis, 596 and 1,027 common shares are reflected in diluted ffo and normalized ffo attributable to eqc common shareholders and unitholders per share and unit - diluted for three months ended december 31, 2017 and december 31, 2016, respectively, and 966 and 1,294 common shares are reflected in ffo and normalized ffo attributable to eqc common shareholders and unitholders per share and unit - diluted for the year ended december 31, 2017 and 2016, respectively. calculation of same property net operating income (noi) and same property cash basis noi (amounts in thousands)
