eqc-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9317

EQUITY COMMONWEALTH

(Exact name of registrant as specified in its charter)


Maryland						04-6558834
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)

Two North Riverside Plaza, Suite 2000, Chicago, IL						60606
(Address of principal executive offices)						(Zip Code)
(312) 646-2800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title Of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Shares of Beneficial Interest

EQC

The New York Stock Exchange

6.50% Series D Cumulative Convertible Preferred Shares of Beneficial Interest

EQCpD

The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of April 26, 2024: 107,296,601.


		Page

PART I	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations	2

	Condensed Consolidated Statements of Equity	3

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

PART II	Other Information

Item 1.	Legal Proceedings	22

Item 1A.	Risk Factors	22

Item 1 B .	Unresolved Staff Comments	22

Item 1 C .	Cybersecurity	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3.	Defaults Upon Senior Securities	23

Item 4.	Mine Safety Disclosures	23

Item 5.	Other Information	23

Item 6.	Exhibits	24

	Signatures	25


	March 31, 2024		December 31, 2023
			(audited)
ASSETS
Real estate properties:
Land	$	44,060	$	44,060
Buildings and improvements	371,550		367,827
	415,610		411,887
Accumulated depreciation	(180,266)		(180,535)
	235,344		231,352


Cash and cash equivalents	2,170,834		2,160,535


Rents receivable	16,593		15,737
Other assets, net	16,915		17,417
Total assets	$	2,439,686	$	2,425,041

LIABILITIES AND EQUITY



Accounts payable, accrued expenses and other	$	20,833	$	27,298

Rent collected in advance	2,166		1,990

Distributions payable	3,359		5,640
Total liabilities	26,358		34,928

Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880	119,263		119,263
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 107,223,284 and 106,847,438 shares issued and outstanding, respectively	1,072		1,068
Additional paid in capital	3,935,501		3,935,873
Cumulative net income	3,952,384		3,926,979

Cumulative common distributions	(4,864,195)		(4,864,440)
Cumulative preferred distributions	(735,673)		(733,676)
Total shareholders’ equity	2,408,352		2,385,067
Noncontrolling interest	4,976		5,046
Total equity	2,413,328		2,390,113
Total liabilities and equity	$	2,439,686	$	2,425,041


	Three Months Ended March 31,
		2024		2023
Revenues:
Rental revenue		$	13,893	$	14,226
Other revenue		1,297		1,350
Total revenues		15,190		15,576
Expenses:
Operating expenses		6,534		7,256
Depreciation and amortization		4,357		4,310
General and administrative		8,323		8,555

Total expenses		19,214		20,121
Interest and other income, net		29,512		28,376




Income before income taxes		25,488		23,831
Income tax expense		(30)		(1,080)
Net income		25,458		22,751
Net income attributable to noncontrolling interest		(53)		(66)
Net income attributable to Equity Commonwealth		25,405		22,685
Preferred distributions		(1,997)		(1,997)


Net income attributable to Equity Commonwealth common shareholders		$	23,408	$	20,688



Weighted average common shares outstanding — basic		107,216		109,720
Weighted average common shares outstanding — diluted		108,224		111,300
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic		$	0.22	$	0.19
Diluted		$	0.22	$	0.19

Distributions declared per common share		$	—	$	4.25


	Equity Commonwealth Shareholders
	Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total











Balance at January 1, 2024	4,915,196	$	119,263	106,847,438	$	1,068	$	3,935,873	$	3,926,979	$	(4,864,440)	$	(733,676)	$	5,046	$	2,390,113

Net income	—	—		—	—		—		25,405		—		—		53		25,458



Surrender of shares for tax withholding	—	—		(161,837)	(2)		(3,054)		—		—		—		—		(3,056)
Share-based compensation	—	—		533,207	6		2,509		—		—		—		50		2,565

Distributions	—	—		—	—		—		—		245		(1,997)		—		(1,752)
OP Unit redemption	—	—		4,476	—		86		—		—		—		(86)		—
Adjustment for noncontrolling interest	—	—		—	—		87		—		—		—		(87)		—
Balance at March 31, 2024	4,915,196	$	119,263	107,223,284	$	1,072	$	3,935,501	$	3,952,384	$	(4,864,195)	$	(735,673)	$	4,976	$	2,413,328


	Common Shares	OP Units and LTIP Units	Total
Outstanding at January 1, 2024	106,847,438	226,018	107,073,456
Repurchase and surrender of shares	(161,837)	—	(161,837)
OP Unit redemption	4,476	(4,476)	—
Share-based compensation grants and vesting, net of forfeitures	533,207	—	533,207
Outstanding at March 31, 2024	107,223,284	221,542	107,444,826
Noncontrolling ownership interest in the Operating Trust			0.21	%


	2024
Fair value of market-based awards granted	$	27.08
Expected term (years)	4
Expected volatility	15.46		%

Risk-free rate	4.06		%


	All Properties				Comparable Properties(1)
	As of March 31,				As of March 31,
	2024		2023		2024		2023
Total properties	4		4		4		4
Total square feet	1,521		1,507		1,521		1,507
Percent leased(2)	75.4	%	81.6	%	75.4	%	81.6	%


Year	Number of Tenants Expiring(1)	Leased Square Feet Expiring(2)	% of Leased Square Feet Expiring(2)		Cumulative % of Leased Square Feet Expiring(2)		Annualized Rental Revenue Expiring(3)		% of Annualized Rental Revenue Expiring		Cumulative % of Annualized Rental Revenue Expiring
2024	17	119	10.4	%	10.4	%	$	5,849	10.7	%	10.7	%
2025	7	130	11.3	%	21.7	%	6,018		11.0	%	21.7	%
2026	11	69	6.0	%	27.7	%	3,241		5.9	%	27.6	%
2027	18	231	20.1	%	47.8	%	11,027		20.1	%	47.7	%
2028	11	123	10.7	%	58.5	%	5,400		9.9	%	57.6	%
2029	10	149	13.0	%	71.5	%	6,729		12.3	%	69.9	%
2030	10	159	13.9	%	85.4	%	7,664		14.0	%	83.9	%
2031	4	58	5.1	%	90.5	%	2,661		4.9	%	88.8	%
2032	1	32	2.8	%	93.3	%	1,942		3.5	%	92.3	%
2033	3	23	2.0	%	95.3	%	1,392		2.5	%	94.8	%
Thereafter	4	54	4.7	%	100.0	%	2,875		5.2	%	100.0	%
	96	1,147	100.0	%			$	54,798	100.0	%

Weighted average remaining lease term (in years):		4.2					4.3


Tenant		Square Feet(1)	% of Total Leased Square Feet(1)		% of Annualized Rental Revenue(2)		Weighted Average Remaining Lease Term
1.	Salesforce.com, Inc.	66	5.8	%	5.7	%	1.7
2.	KPMG, LLP	66	5.8	%	5.2	%	5.2
3.	Crowdstrike, Inc.	48	4.2	%	5.2	%	5.9
4.	CBRE, Inc.	41	3.6	%	3.9	%	4.0
5.	Jones Lang LaSalle Americas, Inc.	42	3.7	%	3.6	%	6.3
6.	RSM US LLP	32	2.8	%	3.5	%	8.2
7.	SonarSource US, Inc.	28	2.4	%	3.0	%	3.4
8.	Alden Torch Financial, LLC	35	3.1	%	2.9	%	2.9
9.	Ballard Spahr LLP	30	2.6	%	2.6	%	1.4
10.	Simply Good Foods USA, Inc	29	2.5	%	2.6	%	3.7
11.	Wunderman Thompson, LLC	24	2.1	%	2.5	%	3.3


	Three Months Ended March 31,
	2024		2023
SUPPLEMENTAL CASH FLOW INFORMATION:

Taxes refunded, net	$	—	$	(9)

NON-CASH INVESTING ACTIVITIES:


Accrued capital expenditures	$	5,433	$	1,710


NON-CASH FINANCING ACTIVITIES:
Distributions payable	$	3,359	$	7,795
OP Unit redemption	86		—

SEC Form 10-Q filed by Equity Commonwealth