Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 30, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | Equity Commonwealth | |
Entity Central Index Key | 803,649 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 125,502,209 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Real estate properties: | ||
Land | $ 372,714 | $ 389,410 |
Buildings and improvements | 3,399,909 | 3,497,942 |
Total real estate properties, at cost, gross | 3,772,623 | 3,887,352 |
Accumulated depreciation | (880,678) | (898,939) |
Total real estate properties, at cost, net | 2,891,945 | 2,988,413 |
Properties held for sale | 20,347 | 0 |
Acquired real estate leases, net | 83,121 | 88,760 |
Cash and cash equivalents | 1,742,128 | 1,802,729 |
Restricted cash | 36,190 | 32,245 |
Rents receivable, net of allowance for doubtful accounts of $4,193 and $7,715, respectively | 176,740 | 174,676 |
Other assets, net | 152,678 | 144,341 |
Total assets | 5,103,149 | 5,231,164 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Senior unsecured debt, net | 1,312,148 | 1,450,606 |
Mortgage notes payable, net | 245,691 | 246,510 |
Liabilities related to properties held for sale | 169 | 0 |
Accounts payable and accrued expenses | 120,888 | 123,587 |
Assumed real estate lease obligations, net | 3,624 | 4,296 |
Rent collected in advance | 23,588 | 27,340 |
Security deposits | 9,670 | 10,338 |
Total liabilities | 1,715,778 | 1,862,677 |
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized; | ||
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 125,502,748 and 126,349,914 shares issued and outstanding, respectively | 1,255 | 1,263 |
Additional paid in capital | 4,393,409 | 4,414,611 |
Cumulative net income | 2,380,111 | 2,333,709 |
Cumulative other comprehensive loss | (3,014) | (3,687) |
Cumulative common distributions | (3,111,868) | (3,111,868) |
Cumulative preferred distributions | (657,176) | (650,195) |
Total shareholders’ equity | 3,387,371 | 3,368,487 |
Total liabilities and shareholders’ equity | 5,103,149 | 5,231,164 |
Series D | ||
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized; | ||
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880 | 119,263 | 119,263 |
Series E | ||
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized; | ||
Series E preferred shares; 7 1/4% cumulative redeemable on or after May 15, 2016; 11,000,000 shares issued and outstanding, aggregate liquidation preference $275,000 | $ 265,391 | $ 265,391 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Rents receivable, allowance for doubtful accounts | $ 4,193 | $ 7,715 |
Common shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common shares of beneficial interest, shares authorized (in shares) | 350,000,000 | 350,000,000 |
Common shares of beneficial interest, shares issued (in shares) | 125,502,748 | 126,349,914 |
Common shares of beneficial interest, shares outstanding (in shares) | 125,502,748 | 126,349,914 |
Series D | ||
Preferred shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred shares of beneficial interest, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred shares, dividend yield | 6.50% | 6.50% |
Preferred shares of beneficial interest, shares issued (in shares) | 4,915,196 | 4,915,196 |
Preferred shares, of beneficial interest, shares outstanding (in shares) | 4,915,196 | 4,915,196 |
Preferred shares, aggregate liquidation preference | $ 122,880 | $ 122,880 |
Series E | ||
Preferred shares of beneficial interest, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred shares of beneficial interest, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred shares, dividend yield | 7.25% | 7.25% |
Preferred shares of beneficial interest, shares issued (in shares) | 11,000,000 | 11,000,000 |
Preferred shares, of beneficial interest, shares outstanding (in shares) | 11,000,000 | 11,000,000 |
Preferred shares, aggregate liquidation preference | $ 275,000 | $ 275,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Revenues: | ||
Rental income | $ 109,888 | $ 167,972 |
Tenant reimbursements and other income | 27,247 | 45,083 |
Total revenues | 137,135 | 213,055 |
Expenses: | ||
Operating expenses | 57,258 | 97,871 |
Depreciation and amortization | 36,251 | 62,699 |
General and administrative | 13,312 | 16,558 |
Loss on asset impairment | 0 | 1,904 |
Total expenses | 106,821 | 179,032 |
Operating income | 30,314 | 34,023 |
Interest and other income | 1,967 | 3,448 |
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $983 and $29, respectively) | (22,347) | (29,842) |
Loss on early extinguishment of debt | (118) | (428) |
Foreign currency exchange loss | (5) | 0 |
Gain on sale of properties | 36,666 | 5,868 |
Income before income taxes | 46,477 | 13,069 |
Income tax (expense) benefit | (75) | 561 |
Net income | 46,402 | 13,630 |
Preferred distributions | (6,981) | (6,981) |
Net income attributable to Equity Commonwealth common shareholders | $ 39,421 | $ 6,649 |
Weighted average common shares outstanding — basic (in shares) | 125,840 | 129,696 |
Weighted average common shares outstanding — diluted (in shares) | 127,522 | 129,874 |
Earnings per common share attributable to Equity Commonwealth common shareholders: | ||
Basic (in USD per share) | $ 0.31 | $ 0.05 |
Diluted (in USD per share) | $ 0.31 | $ 0.05 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Amortization of debt discounts, premiums and deferred financing fees | $ 983 | $ 29 |
CONDENSED CONSOLIDATED STATEME6
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 46,402 | $ 13,630 |
Other comprehensive income (loss), net of tax: | ||
Unrealized gain (loss) on derivative instruments and other assets | 673 | (2,622) |
Foreign currency translation adjustments | 0 | (16,390) |
Total comprehensive income (loss) | $ 47,075 | $ (5,382) |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 46,402 | $ 13,630 |
Adjustments to reconcile net income to cash provided by operating activities: | ||
Depreciation | 28,582 | 46,418 |
Net amortization of debt discounts, premiums and deferred financing fees | 983 | 29 |
Straight line rental income | (3,831) | 187 |
Amortization of acquired real estate leases | 4,629 | 10,304 |
Other amortization | 4,161 | 7,346 |
Share-based compensation | 4,353 | 3,958 |
Loss on asset impairment | 0 | 1,904 |
Loss on early extinguishment of debt | 118 | 428 |
Foreign currency exchange loss | 5 | 0 |
Net gain on sale of properties | (36,666) | (5,868) |
Change in assets and liabilities: | ||
Restricted cash | (458) | 2,366 |
Rents receivable and other assets | (15,486) | (28,678) |
Accounts payable and accrued expenses | (6,361) | (11,134) |
Rent collected in advance | (3,255) | (620) |
Security deposits | (192) | 51 |
Cash provided by operating activities | 22,984 | 40,321 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Real estate improvements | (25,963) | (12,163) |
Principal payments received from direct financing lease | 0 | 1,883 |
Proceeds from sale of properties, net | 118,391 | 19,841 |
Proceeds from sale of securities | 0 | 27,068 |
Increase in restricted cash | (3,487) | (3,458) |
Cash provided by investing activities | 88,941 | 33,171 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Purchase and retirement of common shares | (25,563) | 0 |
Payments on borrowings | (139,922) | (1,589) |
Deferred financing fees | (52) | (7,143) |
Distributions to preferred shareholders | (6,981) | (6,981) |
Cash used in financing activities | (172,518) | (15,713) |
Effect of exchange rate changes on cash | (8) | (559) |
(Decrease) increase in cash and cash equivalents | (60,601) | 57,220 |
Cash and cash equivalents at beginning of period | 1,802,729 | 364,516 |
Cash and cash equivalents at end of period | 1,742,128 | 421,736 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Interest paid | 28,542 | 33,479 |
Taxes (refunded) paid | (72) | 2,251 |
NON-CASH INVESTING ACTIVITIES: | ||
(Decrease) increase in capital expenditures recorded as liabilities | $ (6,312) | $ 1,139 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of EQC have been prepared without audit. Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2015. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. Share amounts are presented in whole numbers, except where noted. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, but early adoption is permitted. We are currently in the process of evaluating the impact the adoption of this ASU will have on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. The ASU also requires lessees or lessors to capitalize only initial direct costs of leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, but early adoption is permitted. We are currently in the process of evaluating the impact the adoption of this ASU will have on our condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. This update is effective for interim and annual reporting periods beginning after December 15, 2017. We are currently in the process of evaluating the impact, if any, the adoption of this ASU will have on our condensed consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. We adopted this standard on January 1, 2016 and made the following reclassifications to the prior years' consolidated balance sheet to conform to the current year's presentation (in thousands): Balance Sheet as of December 31, 2015 Originally Reported Effect of Change As Adjusted Other assets, net 157,549 (13,208 ) 144,341 Senior unsecured debt, net 1,460,592 (9,986 ) 1,450,606 Mortgage notes payable, net 249,732 (3,222 ) 246,510 In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, or ASU 2014-08. ASU 2014-08 changes the criteria for reporting a discontinued operation. Under the new pronouncement, a disposal of a part of an organization that has a major effect on its operations and financial results is a discontinued operation. We adopted ASU 2014-08 on January 1, 2015, and determined that our 2016 dispositions, 2015 dispositions and properties held for sale as of March 31, 2016 do not individually represent a strategic shift, as defined by the standard, that has or will have a major effect on our operations and financial results. As a result, the 2016 and 2015 dispositions and properties held for sale have not been presented as discontinued operations in the statements of operations. |
Real Estate Properties
Real Estate Properties | 3 Months Ended |
Mar. 31, 2016 | |
Real Estate [Abstract] | |
Real Estate Properties | Real Estate Properties During the three months ended March 31, 2016 and 2015 , we made improvements, excluding tenant-funded improvements, to our properties totaling $31.9 million and $ 10.9 million , respectively. Properties Held For Sale: We classify all properties that meet the criteria outlined in the Property, Plant and Equipment Topic of the FASB Accounting Standards Codification (Codification) as held for sale on our condensed consolidated balance sheets. As of December 31, 2015, we had no properties classified as held for sale. As of March 31, 2016 , we classified the following properties as held for sale (dollars in thousands): Asset Date Sold Number of Number of Square Footage Gross Sales Price 1525 Locust Street April 2016 1 1 98,009 $ 17,700 633 Ahua Street April 2016 1 1 93,141 29,000 2 2 191,150 $ 46,700 Summarized balance sheet information for all properties classified as held for sale is as follows (in thousands): March 31, 2016 Real estate properties $ 19,568 Rents receivable, net of allowance for doubtful accounts of $159 21 Other assets, net 758 Properties held for sale $ 20,347 Rent collected in advance $ 10 Security deposits 159 Liabilities related to properties held for sale $ 169 Property Dispositions: During the three months ended March 31, 2016 , we sold the following properties (dollars in thousands): Asset Date Disposed Number of Number of Square Footage Gross Sales Price Gain on Sale Executive Park February 2016 1 9 427,443 $ 50,865 $ 16,532 3330 N Washington Boulevard March 2016 1 1 55,719 11,250 5,457 111 East Kilbourn Avenue March 2016 1 1 373,669 60,500 14,677 3 11 856,831 $ 122,615 $ 36,666 During the year ended December 31, 2015, we disposed of 91 properties ( 135 buildings) and one land parcel with a combined 18.9 million square feet for an aggregate gross sales price of $2.0 billion , excluding closing costs. |
Real Estate Mortgages Receivabl
Real Estate Mortgages Receivable | 3 Months Ended |
Mar. 31, 2016 | |
Mortgage Loans on Real Estate [Abstract] | |
Real Estate Mortgages Receivable | Real Estate Mortgages Receivable As of March 31, 2016 and December 31, 2015 , we had total real estate mortgages receivable with an aggregate carrying value of $8.1 million included in other assets in our condensed consolidated balance sheets. We provided mortgage financing totaling $7.7 million at 6.0% per annum in connection with our sale of three suburban office and industrial properties ( 18 buildings) in January 2013 in Dearborn, MI; this real estate mortgage requires monthly interest payments and matures on January 24, 2023 . We also provided mortgage financing totaling $0.4 million at 6.0% per annum in connection with our sale of a suburban office property in Salina, NY in April 2012. This real estate mortgage requires monthly interest payments and matures on April 30, 2019 . We monitor the payment history of the borrowers and have determined that no allowance for losses related to these real estate mortgages receivable were necessary at March 31, 2016 , and December 31, 2015 . |
Indebtedness
Indebtedness | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness Unsecured Revolving Credit Facility and Term Loan: We are party to a credit agreement, pursuant to which the lenders agreed to provide a $750.0 million unsecured revolving credit facility, a $200.0 million 5 -year term loan facility, and a $200.0 million 7 -year term loan facility. The revolving credit facility has a scheduled maturity date of January 28, 2019, which maturity date may be extended for up to two additional periods of six months at our option subject to satisfaction of certain conditions and the payment of an extension fee of 0.075% of the aggregate amount available under the revolving credit facility. The 5-year term loan and the 7-year term loan have scheduled maturity dates of January 28, 2020 and January 28, 2022, respectively. The credit agreement permits us to utilize up to $100.0 million of the revolving credit facility for the issuance of letters of credit. Amounts outstanding under the credit agreement generally may be prepaid at any time without premium or penalty, subject to certain exceptions. We have the right to request increases in the aggregate maximum amount of borrowings available under the revolving credit facility and term loans up to an additional $1.15 billion , subject to certain conditions. Borrowings under the 5-year term loan and 7-year term loan will, subject to certain exceptions, bear interest at a LIBOR rate plus a margin of 90 to 180 basis points for the 5-year term loan and 140 to 235 basis points for the 7-year term loan, in each case depending on our credit rating. Borrowings under the revolving credit facility will, subject to certain exceptions, bear interest at a rate equal to, at our option, either a LIBOR rate or a base rate plus a margin of 87.5 to 155 basis points for LIBOR rate advances and 0 to 55 basis points for base rate advances, in each case depending on our credit rating. In addition, we are required to pay a facility fee of 12.5 to 30 basis points, depending on our credit rating, on the borrowings available under the revolving credit facility, whether or not utilized. Borrowings under our revolving credit facility currently bear interest at LIBOR plus a spread, which was 125 basis points as of March 31, 2016 . As of March 31, 2016 , the interest rate payable on borrowings under our revolving credit facility was 1.69% . As of March 31, 2016 , we had no balance outstanding and $750.0 million available under our revolving credit facility and the facility fee as of March 31, 2016 was 0.25% . Our term loans currently bear interest at a rate of LIBOR plus a spread, which was 140 and 180 basis points for the 5-year and 7-year term loan, respectively, as of March 31, 2016 . As of March 31, 2016 , the interest rates for the amounts outstanding under our 5-year term loan and 7-year term loan were 1.84% and 2.24% , respectively. As of March 31, 2016 , we had $200.0 million outstanding under each of our 5-year and 7-year term loans. Debt Covenants: Our public debt indenture and related supplements, our revolving credit facility agreement and our term loan agreement contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth. At March 31, 2016 , we believe we were in compliance with all of our respective covenants under our public debt indenture and related supplements, our revolving credit facility and our term loan agreements. Senior Unsecured Notes: On February 16, 2016, we redeemed at par $139.1 million of our 6.25% senior unsecured notes due 2016 and recognized a loss on early extinguishment of debt of $0.1 million from the write-off of an unamortized discount and unamortized deferred financing fees for the three months ended March 31, 2016. Mortgage Notes Payable: At March 31, 2016 , five of our properties ( 8 buildings) with an aggregate net book value of $288.7 million had secured mortgage notes totaling $245.7 million (including net premiums and discounts and unamortized deferred financing fees) maturing from 2017 through 2026. |
Shareholders' Equity
Shareholders' Equity | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Shareholders’ Equity Common Share Issuances: See Note 10 for information regarding equity issuances related to share-based compensation. Common Share Repurchases: On August 24, 2015, our Board of Trustees approved a common share repurchase plan, which authorizes the repurchase of up to $100.0 million of our outstanding common shares over the twelve month period following the date of authorization. On September 14, 2015, our Board of Trustees authorized the repurchase of up to an additional $100.0 million of our outstanding common shares over the twelve month period following the date of authorization. On March 17, 2016, our Board of Trustees authorized the repurchase of up to an additional $150.0 million of our outstanding common shares over the next twelve month period following the date of authorization. During the three months ended March 31, 2016 , we purchased and retired 983,789 of our common shares at a weighted average price of $25.94 per share. Preferred Share Distributions: In 2016, our Board of Trustees declared distributions on our series D preferred shares and series E cumulative redeemable preferred shares to date as follows: Declaration Date Record Date Payment Date Series D Dividend Per Share Series E Dividend Per Share January 26, 2016 February 5, 2016 February 16, 2016 $ 0.40625 $ 0.453125 |
Cumulative Other Comprehensive
Cumulative Other Comprehensive Loss | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Cumulative Other Comprehensive Loss | Cumulative Other Comprehensive Loss The following tables present the amounts recognized in cumulative other comprehensive loss for the three months ended March 31, 2016 (in thousands): Unrealized Loss on Derivative Instruments Balances as of January 1, 2016 $ (3,687 ) Other comprehensive loss before reclassifications (445 ) Amounts reclassified from cumulative other comprehensive loss to net income 1,118 Net current period other comprehensive income 673 Balances as of March 31, 2016 $ (3,014 ) The following tables present reclassifications out of cumulative other comprehensive loss for the three months ended March 31, 2016 (in thousands): Amounts Reclassified from Cumulative Other Comprehensive Loss to Net Income Details about Cumulative Other Comprehensive Loss Components Three Months Ended March 31, 2016 Affected Line Items in the Statement of Operations Interest rate swap contracts $ 1,118 Interest expense |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and are generally not subject to federal and state income taxes provided we distribute a sufficient amount of our taxable income to our shareholders and meet other requirements for qualifying as a REIT. We are also subject to certain state and local taxes without regard to our REIT status. In prior periods, we were subject to Australian taxes. Our provision for income taxes consists of the following (in thousands): Three Months Ended March 31, 2016 2015 Current: State $ 75 $ 90 Foreign — (46 ) 75 44 Deferred: Foreign — (605 ) — (605 ) Income tax expense (benefit) $ 75 $ (561 ) |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Derivative Instruments Risk Management Objective of Using Derivatives We are exposed to certain risks relating to our ongoing business operations, including the effect of changes in interest rates. The only risk we currently manage by using derivative instruments is related to our interest rate risk. We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations. Cash Flow Hedges of Interest Rate Risk Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we periodically use interest rate swaps, caps, or other similar instruments as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in cumulative other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During 2016, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. Amounts reported in cumulative other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional $2.9 million will be reclassified from cumulative other comprehensive loss as an increase to interest expense. We have interest rate swap agreements to manage our interest rate risk exposure on $169.2 million of mortgage debt due 2019, which require interest at a spread over LIBOR . The interest rate swap agreements utilized by us qualify as cash flow hedges and effectively modify our exposure to interest rate risk by converting our floating interest rate debt to a fixed interest rate basis for this loan through December 1, 2016, thus reducing the impact of interest rate changes on future interest expense. On March 4, 2016, we purchased an interest rate cap with a LIBOR strike price of 2.50% . The interest rate cap, effective April 1, 2016, has a notional amount of $400.0 million and a maturity date of March 1, 2019. As of March 31, 2016 , we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk: Interest Rate Derivative Number of Instruments Notional Amount (in thousands) Interest rate swap 2 $ 169,119 Interest rate cap 1 $ 400,000 The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 (amounts in thousands): Fair Value as of Interest Rate Derivative Designated as Hedging Instrument Balance Sheet Location March 31, December 31, Pay-fixed swaps Accounts payable and accrued expenses $ (2,850 ) $ (3,687 ) Interest rate cap Other assets $ 358 $ — The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2016 and 2015 (amounts in thousands): Three Months Ended March 31, 2016 2015 Balance at beginning of period $ (3,687 ) $ (7,462 ) Amount of (loss) gain recognized in cumulative other comprehensive loss (445 ) (686 ) Amount of loss reclassified from cumulative other comprehensive loss into interest expense 1,118 1,227 Unrealized gain on derivative instruments 673 541 Balance at end of period $ (3,014 ) $ (6,921 ) Credit-risk-related Contingent Features We have agreements with each of our derivative counterparties that contain a provision where if we either default or are capable of being declared in default on any of our indebtedness, then we could also be declared in default on our derivative obligations. As of March 31, 2016 , the fair value of derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk related to these agreements was $3.2 million . As of March 31, 2016 , we have not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their aggregate termination value of $3.2 million at March 31, 2016 . |
Share-Based Compensation
Share-Based Compensation | 3 Months Ended |
Mar. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | Share-Based Compensation Equity Commonwealth 2015 Omnibus Incentive Plan On January 26, 2016, the Board of Trustees approved an amendment to the 2015 Omnibus Incentive Plan (as amended, the 2015 Incentive Plan) to allow the Compensation Committee (Committee) to authorize in an award agreement a transfer of all or a part of certain equity awards not for value to a “family member” (as defined in the 2015 Incentive Plan). Recipients of the Company’s restricted shares have the same voting rights as any other common shareholder. During the period of restriction, the Company’s unvested restricted shareholders are eligible to receive dividend payments on their shares at the same rate and on the same date as any other common shareholder. Recipients of the Company’s restricted stock units (RSUs) are entitled to receive dividends with respect to the common shares underlying the RSUs if and when the RSUs are earned, at which time the recipient will be entitled to receive an amount in cash equal to the aggregate amount of ordinary cash dividends that would have been paid in respect of the common shares underlying the recipient’s earned RSUs had such common shares been issued to the recipient on the first day of the performance period. To the extent that an award does not vest, the dividends will be forfeited. Administration. The 2015 Incentive Plan will be administered by the Compensation Committee, which will determine all terms and recipients of awards under the 2015 Incentive Plan. 2016 Equity Award Activity On January 26, 2016, the Committee approved a grant of 136,623 restricted common shares and 277,386 RSUs at target to the Company’s officers, certain employees and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2015. The restricted shares are service based awards and vest over a four -year period. The restricted shares were granted on January 26, 2016 and were valued at $26.93 per share, the closing price of our common shares on the NYSE on that day. The RSUs are market based awards with a service condition and grant recipients may earn the RSU grants based on the Company’s total shareholder return (TSR) relative to the TSR's for the constituent REITs that comprise the NAREIT Office Index for the performance period of January 26, 2016 - January 26, 2019. Following the end of the performance period on January 26, 2019, the number of earned awards will be determined. The earned awards vest in two tranches with 50% of the earned award vesting on January 26, 2019 and the remaining 50% of the earned award vesting on January 26, 2020, subject to the grant recipient’s continued employment. Compensation expense for the RSU awards was determined using a Monte Carlo simulation model and is being recognized ratably from the grant date to the vesting date of each tranche. 2015 Equity Award Activity On January 28, 2015, the Committee approved a grant of 126,319 restricted common shares and 256,467 RSUs at target to the Company’s officers, certain employees and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2014. The restricted shares are service based awards and vest over a four -year period. The restricted shares were granted on January 28, 2015 and were valued at $26.58 per share, the closing price of our common shares on the NYSE on that day. The RSUs are market based awards with a service condition and grant recipients may earn the RSU grants based on the Company’s total shareholder return (TSR) relative to the TSR's for the constituent REITs that comprise the NAREIT Office Index for the performance period of January 28, 2015 - January 28, 2018. Following the end of the performance period on January 28, 2018, the number of earned awards will be determined. The earned awards vest in two tranches with 50% of the earned award vesting on January 28, 2018 and the remaining 50% of the earned award vesting on January 28, 2019, subject to the grant recipient’s continued employment. Compensation expense for the RSU awards was determined using a Monte Carlo simulation model and is being recognized ratably from the grant date to the vesting date of each tranche. Outstanding Equity Awards As of March 31, 2016 , the estimated future compensation expense for all unvested restricted share grants was $16.6 million . Compensation expense for the restricted share awards is being recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The weighted average period over which the future compensation expense will be recorded for the restricted shares is approximately 2.8 years. As of March 31, 2016 , the estimated future compensation expense for all unvested RSUs was $28.3 million . The weighted average period over which the future compensation expense will be recorded for the RSUs is approximately 2.6 years. The assumptions and fair values for the RSUs granted for the three months ended March 31, 2016 are included in the following table on a per share basis. 2016 Fair value of RSUs granted $ 38.80 Expected term (years) 4 Expected volatility — Expected dividend yield 1.86 % Risk-free rate 1.07 % During the three months ended March 31, 2016 and 2015, we recorded $4.4 million and $4.0 million , respectively, of compensation expense, net of forfeitures, in general and administrative expense for grants to our Board of Trustees and the Company's employees related to our Plan. At March 31, 2016 , 2,387,405 common shares remain available for issuance under the Plan. |
Fair Value of Assets and Liabil
Fair Value of Assets and Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value of Assets and Liabilities | Fair Value of Assets and Liabilities The table below presents certain of our assets and liabilities measured at fair value during 2016 , categorized by the level of inputs used in the valuation of each asset and liability (dollars in thousands): Fair Value at March 31, 2016 Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description Total (Level 1) (Level 2) (Level 3) Recurring Fair Value Measurements: Effective portion of interest rate swap contracts $ (2,850 ) $ — $ (2,850 ) $ — Effective portion of interest rate cap contract 358 — 358 — Derivative liability (8,333 ) — — (8,333 ) Effective Portion of Interest Rate Swap and Cap Contracts The fair value of our interest rate swap and cap contracts is determined using the net discounted cash flows of each derivative based on the market based interest rate curve (level 2 inputs) and adjusted for our credit spread and the actual and estimated credit spreads of the counterparties (level 3 inputs). Although we have determined that the majority of the inputs used to value our derivatives fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and the counterparties. As of March 31, 2016 , we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified as level 2 inputs in the fair value hierarchy. Derivative Liability On July 31, 2014, our shareholders voted to approve the reimbursement of expenses incurred by Related/Corvex (Note 14). Approximately $16.7 million was paid during the year ended December 31, 2014. Approximately $8.4 million was to be reimbursed only if the average closing price of our common shares was at least $26.00 (as adjusted for any share splits or share dividends) during the one year period after the date on which the reimbursement was approved by shareholders, and the remaining approximately $8.4 million will be reimbursed only if the average closing price of our common shares is at least $26.00 (as adjusted for any share splits or share dividends) during the one year period between the first and second anniversaries of the date on which the reimbursement was approved by shareholders. The average closing price of our common shares was at least $26.00 during the first one year period after the date on which the reimbursement was approved by shareholders, and in August 2015, we paid $8.4 million to Related/Corvex. The potential future reimbursement represents a derivative instrument as codified in ASC 815 Derivatives and Hedging which requires the potential future reimbursement to be recorded at fair value at each reporting date. The fair value of the derivative liability as of March 31, 2016 and December 31, 2015 was $8.3 million and $7.2 million , respectively. We recognized expense of $1.1 million for the three months ended March 31, 2016 , which was recorded in general and administrative expenses in our condensed consolidated statement of operations for such period. The valuation techniques and significant unobservable inputs used for our level 3 fair value measurement at March 31, 2016 were as follows: Description Fair Value at March 31, 2016 Primary Valuation Technique Unobservable Inputs Rate Derivative liability $ 8,333 Monte Carlo simulation Risk-free rate 0.27% Volatility 20.0% Financial Instruments In addition to the assets and liabilities described in the above table, our financial instruments include our cash and cash equivalents, real estate mortgages receivable, restricted cash, senior unsecured debt and mortgage notes payable. At March 31, 2016 and December 31, 2015, the fair value of these additional financial instruments were not materially different from their carrying values, except as follows (in thousands): March 31, 2016 December 31, 2015 Carrying Amount Fair Value Carrying Amount Fair Value Senior unsecured debt and mortgage notes payable, net $ 1,557,839 $ 1,615,440 $ 1,697,116 $ 1,749,211 The fair values of our senior notes and mortgage notes payable are based on estimates using discounted cash flow analyses and currently prevailing interest rates adjusted by credit risk spreads (level 3 inputs). Our cash and cash equivalents consists of cash maintained in time deposits, depository accounts and money market accounts. From time-to-time we may also invest in various U.S. government securities. We continually monitor the credit ratings of the financial institutions holding our deposits to minimize our exposure to credit risk. Throughout the year, we have cash balances in excess of federally insured limits deposited with various financial institutions. We do not believe we are exposed to any significant credit risk on cash and cash equivalents. Other financial instruments that potentially subject us to concentrations of credit risk consist principally of rents receivable; however, as of March 31, 2016 , no single tenant of ours is responsible for more than 4% of our total annualized rents. Our derivative financial instruments, including interest rate swaps and cap, are entered with major financial institutions and we monitor the amount of credit exposure to any one counterparty. |
Earnings Per Common Share
Earnings Per Common Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands except per share amounts): Three Months Ended March 31, 2016 2015 Numerator for earnings per common share - basic and diluted: Net income $ 46,402 $ 13,630 Preferred distributions (6,981 ) (6,981 ) Numerator for net income per share $ 39,421 $ 6,649 Denominator for earnings per common share - basic and diluted: Weighted average number of common shares outstanding - basic 125,840 129,696 Weighted average number of common shares outstanding - diluted (1) 127,522 129,874 Net income per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.31 $ 0.05 Diluted $ 0.31 $ 0.05 Anti-dilutive securities: Effect of Series D preferred shares; 6 1/2% cumulative convertible (2) 2,363 2,363 (1) As of March 31, 2016 , we had granted RSUs to certain employees, officers, and the chairman of the Board of Trustees. The RSUs contain both service and market-based vesting components. None of the RSUs have vested. If the market-based vesting component was measured as of March 31, 2016 , and 2015 , 1,754 and 254 common shares would be issued to the RSU holders, respectively. Using a weighted average basis, 1,682 and 178 common shares are reflected in diluted earnings per share for the three months ended March 31, 2016 and 2015 , respectively. (2) The Series D preferred shares are excluded from the diluted earnings per share calculation because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution during the periods presented. |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2016 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Our primary business is the ownership and operation of office properties, and we currently have one reportable segment. Due to significant dispositions during 2015, during the fourth quarter of 2015 we changed the composition of our operating segments from two reportable segments (central business district properties and suburban properties) to one reportable segment. This change was made based on the financial information reviewed and used by the chief operating decision maker to make operating decisions, assess performance, develop strategy and allocate capital resources. More than 90% of our revenues are from office properties. |
Related Person Transactions
Related Person Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Person Transactions | Related Person Transactions The following discussion includes a description of our related person transactions for the three months ended March 31, 2016 and 2015 . Certain of these related person transactions, and their approvals, occurred prior to the election of our new Board of Trustees at the Special Meeting and the appointment of our current executive officers following the Special Meeting. The disclosure below under “—Transactions with Prior Related Persons” describes our transactions and approvals with our prior related persons. Related Person Transactions Following the Special Meeting: Equity Group Investments and associated entities: Effective February 1, 2016, we entered into a lease with Two North Riverside Plaza Joint Venture Limited Partnership, an entity associated with Mr. Zell, our Chairman, for storage space in the basement of Two North Riverside Plaza, in Chicago, Illinois. The lease expires December 31, 2020, however each party has the right to terminate on 30 days' prior written notice, and the payment is nominal. This lease was approved by the Audit Committee of the Board of Trustees. Effective July 20, 2015, we entered into a lease with Two North Riverside Plaza Joint Venture Limited Partnership, an entity associated with Mr. Zell, our Chairman, to occupy office space on the twentieth and twenty-first floors of Two North Riverside Plaza in Chicago, Illinois. The initial term of the lease is approximately five years, with one 5 -year renewal option. The lease payment is approximately $0.5 million for the initial year beginning in 2016, and $0.8 million to $0.9 million annually thereafter. This lease was approved by the Audit Committee of the Board of Trustees on June 16, 2015. We recently completed improvements to the office space utilizing the $0.7 million tenant improvement allowance provided for by the lease. Effective June 1, 2014, we entered into a one -year license agreement with Equity Group Investments, a private investment firm (Equity Group), to use office space on the sixth floor at Two North Riverside Plaza in Chicago, Illinois. The license fee was $0.2 million for the initial year. The license fee included the non-exclusive use of additional areas on the sixth floor (such as conference rooms and common areas), certain administrative services (such as mail room services and reception desk staffing), office equipment, office furniture, supplies, licensee’s share of building operating expenses and real estate taxes and access to one parking space. Mr. Zell, our Chairman, is the Chairman and Chief Executive Officer of Equity Group, and Mr. Helfand, our President and Chief Executive Officer, is the Co-President of Equity Group. This license agreement was approved by the Audit Committee of the Board of Trustees and was scheduled to expire on May 31, 2015. On May 4, 2015, the Audit Committee of the Board of Trustees approved an agreement to extend the term of the license agreement through November 30, 2015. The license fee payment is approximately $0.1 million for the extended term. On November 2, 2015, the Audit Committee of the Board of Trustees approved an agreement to extend the term of the license agreement through January 31, 2016, for a maximum license fee payment of approximately $0.1 million . The extension of the license agreement was terminated as of December 30, 2015. Effective July 31, 2014, we entered into a sublease with Equity Residential Management, L.L.C. to occupy office space on the tenth floor of Two North Riverside Plaza in Chicago, Illinois. Equity Residential Management, L.L.C. leases the space from Two North Riverside Plaza Joint Venture Limited Partnership, an entity associated with Mr. Zell, our Chairman. The initial term of the sublease was approximately seven months commencing on or about October 22, 2014, expiring on May 31, 2015, with one 3 -month renewal option. The sublease payment was approximately $0.2 million for the initial term. This sublease was approved by the Audit Committee of the Board of Trustees. On May 4, 2015, the Audit Committee of the Board of Trustees approved an agreement to extend the term of the sublease through November 30, 2015. The sublease payment was approximately $0.2 million for the extended term. On November 2, 2015, the Audit Committee of the Board of Trustees approved an agreement to extend the term of the license agreement through January 31, 2016, for a maximum sublease payment of approximately $0.1 million . The extension of the sublease agreement was terminated as of December 30, 2015. Related/Corvex: On July 31, 2014, at the reconvened session of our 2014 annual meeting of shareholders, our shareholders voted to approve the reimbursement of approximately $33.5 million of expenses incurred by Related/Corvex since February 2013 in connection with their consent solicitations to remove our former Trustees and elect the new Board of Trustees and to engage in related litigation. Approximately $16.7 million was paid during the year ended December 31, 2014. Approximately $8.4 million was to be reimbursed only if the average closing price of our common shares is at least $26.00 (as adjusted for any share splits or share dividends) during the one year period after the date on which the reimbursement was approved by shareholders, and the remaining approximately $8.4 million will be reimbursed only if the average closing price of our common shares is at least $26.00 (as adjusted for any share splits or share dividends) during the one year period between the first and second anniversaries of the date on which the reimbursement was approved by shareholders. The average closing price of our common shares was at least $26.00 during the first one year period after the date on which the reimbursement was approved by shareholders, and in August 2015, we paid $8.4 million to Related/Corvex. Transactions with Prior Related Persons: Termination and Cooperation Agreement: On September 30, 2014, we entered into a termination and cooperation agreement (Cooperation Agreement) with RMR and RMR Australia (together, Former Manager). Under the terms of the agreement, the existing business and property management agreements with RMR terminated effective September 30, 2014. Pursuant to the Cooperation Agreement, through February 28, 2015, Former Manager agreed to use best efforts to assist us in the transition of our management and operations. We paid Former Manager $1.2 million per month for transition services from October 1, 2014 to February 28, 2015, which included continued management and other services for the Australian assets pursuant to the Australian Management Agreement. Beginning March 1, 2015, we agreed to pay Former Manager $0.1 million per month until we no longer required such services or until the Australia Management Agreement was terminated, which was terminated in the third quarter of 2015, effective October 31, 2015. There is no future obligation to pay any fees to Former Manager. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In April 2016, we sold two properties ( two buildings), with 191,150 square feet for $46.7 million , excluding closing costs, in a series of transactions. These properties were classified as held for sale as of March 31, 2016 (see Note 3). On April 12, 2016, we sent notice for the redemption of our Series E Preferred Shares. The Series E Preferred Shares will be redeemed at a price of $25.00 per share, plus any accrued and unpaid dividends, on May 15, 2016. The redemption payment will occur on May 16, 2016 (the first business day following the redemption date). |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of EQC have been prepared without audit. Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K (Annual Report) for the year ended December 31, 2015. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years’ financial statements to conform to the current year’s presentation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include the allowance for doubtful accounts, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. Share amounts are presented in whole numbers, except where noted. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This update is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods, but early adoption is permitted. We are currently in the process of evaluating the impact the adoption of this ASU will have on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets. The ASU also requires lessees or lessors to capitalize only initial direct costs of leases. This update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, but early adoption is permitted. We are currently in the process of evaluating the impact the adoption of this ASU will have on our condensed consolidated financial statements. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. This update is effective for interim and annual reporting periods beginning after December 15, 2017. We are currently in the process of evaluating the impact, if any, the adoption of this ASU will have on our condensed consolidated financial statements. In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. This standard amends existing guidance to require the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability instead of as a deferred charge. It is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. We adopted this standard on January 1, 2016 and made the following reclassifications to the prior years' consolidated balance sheet to conform to the current year's presentation (in thousands): Balance Sheet as of December 31, 2015 Originally Reported Effect of Change As Adjusted Other assets, net 157,549 (13,208 ) 144,341 Senior unsecured debt, net 1,460,592 (9,986 ) 1,450,606 Mortgage notes payable, net 249,732 (3,222 ) 246,510 In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, or ASU 2014-08. ASU 2014-08 changes the criteria for reporting a discontinued operation. Under the new pronouncement, a disposal of a part of an organization that has a major effect on its operations and financial results is a discontinued operation. We adopted ASU 2014-08 on January 1, 2015, and determined that our 2016 dispositions, 2015 dispositions and properties held for sale as of March 31, 2016 do not individually represent a strategic shift, as defined by the standard, that has or will have a major effect on our operations and financial results. As a result, the 2016 and 2015 dispositions and properties held for sale have not been presented as discontinued operations in the statements of operations. |
Recent Accounting Pronounceme24
Recent Accounting Pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
New Accounting Pronouncement | We adopted this standard on January 1, 2016 and made the following reclassifications to the prior years' consolidated balance sheet to conform to the current year's presentation (in thousands): Balance Sheet as of December 31, 2015 Originally Reported Effect of Change As Adjusted Other assets, net 157,549 (13,208 ) 144,341 Senior unsecured debt, net 1,460,592 (9,986 ) 1,450,606 Mortgage notes payable, net 249,732 (3,222 ) 246,510 |
Real Estate Properties (Tables)
Real Estate Properties (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Real Estate [Abstract] | |
Summary of Properties Held for Sale and Balance Sheet Information for all Properties Classified as Held for sale | As of March 31, 2016 , we classified the following properties as held for sale (dollars in thousands): Asset Date Sold Number of Number of Square Footage Gross Sales Price 1525 Locust Street April 2016 1 1 98,009 $ 17,700 633 Ahua Street April 2016 1 1 93,141 29,000 2 2 191,150 $ 46,700 Summarized balance sheet information for all properties classified as held for sale is as follows (in thousands): March 31, 2016 Real estate properties $ 19,568 Rents receivable, net of allowance for doubtful accounts of $159 21 Other assets, net 758 Properties held for sale $ 20,347 Rent collected in advance $ 10 Security deposits 159 Liabilities related to properties held for sale $ 169 |
Summary of Properties Sold and Income Statement Information for Properties Disposed of | During the three months ended March 31, 2016 , we sold the following properties (dollars in thousands): Asset Date Disposed Number of Number of Square Footage Gross Sales Price Gain on Sale Executive Park February 2016 1 9 427,443 $ 50,865 $ 16,532 3330 N Washington Boulevard March 2016 1 1 55,719 11,250 5,457 111 East Kilbourn Avenue March 2016 1 1 373,669 60,500 14,677 3 11 856,831 $ 122,615 $ 36,666 |
Shareholders' Equity (Tables)
Shareholders' Equity (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
Schedule of Declared Distributions | In 2016, our Board of Trustees declared distributions on our series D preferred shares and series E cumulative redeemable preferred shares to date as follows: Declaration Date Record Date Payment Date Series D Dividend Per Share Series E Dividend Per Share January 26, 2016 February 5, 2016 February 16, 2016 $ 0.40625 $ 0.453125 |
Cumulative Other Comprehensiv27
Cumulative Other Comprehensive Loss (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Amounts Recognized in Cumulative Other Comprehensive Loss | The following tables present the amounts recognized in cumulative other comprehensive loss for the three months ended March 31, 2016 (in thousands): Unrealized Loss on Derivative Instruments Balances as of January 1, 2016 $ (3,687 ) Other comprehensive loss before reclassifications (445 ) Amounts reclassified from cumulative other comprehensive loss to net income 1,118 Net current period other comprehensive income 673 Balances as of March 31, 2016 $ (3,014 ) |
Schedule of Reclassifications Out of Cumulative Other Comprehensive Loss | The following tables present reclassifications out of cumulative other comprehensive loss for the three months ended March 31, 2016 (in thousands): Amounts Reclassified from Cumulative Other Comprehensive Loss to Net Income Details about Cumulative Other Comprehensive Loss Components Three Months Ended March 31, 2016 Affected Line Items in the Statement of Operations Interest rate swap contracts $ 1,118 Interest expense |
Income Taxes (Tables)
Income Taxes (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Provision for Income Taxes | Our provision for income taxes consists of the following (in thousands): Three Months Ended March 31, 2016 2015 Current: State $ 75 $ 90 Foreign — (46 ) 75 44 Deferred: Foreign — (605 ) — (605 ) Income tax expense (benefit) $ 75 $ (561 ) |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Outstanding Interest Rate Derivatives Designated as Cash Flow Hedges of Interest Rate Risk | As of March 31, 2016 , we had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk: Interest Rate Derivative Number of Instruments Notional Amount (in thousands) Interest rate swap 2 $ 169,119 Interest rate cap 1 $ 400,000 |
Schedule of Fair Value of Derivative Financial Instruments | The table below presents the fair value of our derivative financial instruments as well as their classification on the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 (amounts in thousands): Fair Value as of Interest Rate Derivative Designated as Hedging Instrument Balance Sheet Location March 31, December 31, Pay-fixed swaps Accounts payable and accrued expenses $ (2,850 ) $ (3,687 ) Interest rate cap Other assets $ 358 $ — |
Schedule of Gain or Loss Recognized on Interest Rate Derivatives Designated as Cash Flow Hedges | The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2016 and 2015 (amounts in thousands): Three Months Ended March 31, 2016 2015 Balance at beginning of period $ (3,687 ) $ (7,462 ) Amount of (loss) gain recognized in cumulative other comprehensive loss (445 ) (686 ) Amount of loss reclassified from cumulative other comprehensive loss into interest expense 1,118 1,227 Unrealized gain on derivative instruments 673 541 Balance at end of period $ (3,014 ) $ (6,921 ) |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Restricted stock units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Summary of Assumptions and Fair Values for Restricted Stock Units Granted in the Period | The assumptions and fair values for the RSUs granted for the three months ended March 31, 2016 are included in the following table on a per share basis. 2016 Fair value of RSUs granted $ 38.80 Expected term (years) 4 Expected volatility — Expected dividend yield 1.86 % Risk-free rate 1.07 % |
Fair Value of Assets and Liab31
Fair Value of Assets and Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Schedule of Assets and Liabilities Measured at Fair Value | The table below presents certain of our assets and liabilities measured at fair value during 2016 , categorized by the level of inputs used in the valuation of each asset and liability (dollars in thousands): Fair Value at March 31, 2016 Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Description Total (Level 1) (Level 2) (Level 3) Recurring Fair Value Measurements: Effective portion of interest rate swap contracts $ (2,850 ) $ — $ (2,850 ) $ — Effective portion of interest rate cap contract 358 — 358 — Derivative liability (8,333 ) — — (8,333 ) |
Schedule of Valuation Techniques and Significant Unobservable Inputs used for Level 3 Fair Value Measurements | The valuation techniques and significant unobservable inputs used for our level 3 fair value measurement at March 31, 2016 were as follows: Description Fair Value at March 31, 2016 Primary Valuation Technique Unobservable Inputs Rate Derivative liability $ 8,333 Monte Carlo simulation Risk-free rate 0.27% Volatility 20.0% |
Schedule of Fair Value and Carrying Value of Financial Instruments | At March 31, 2016 and December 31, 2015, the fair value of these additional financial instruments were not materially different from their carrying values, except as follows (in thousands): March 31, 2016 December 31, 2015 Carrying Amount Fair Value Carrying Amount Fair Value Senior unsecured debt and mortgage notes payable, net $ 1,557,839 $ 1,615,440 $ 1,697,116 $ 1,749,211 |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands except per share amounts): Three Months Ended March 31, 2016 2015 Numerator for earnings per common share - basic and diluted: Net income $ 46,402 $ 13,630 Preferred distributions (6,981 ) (6,981 ) Numerator for net income per share $ 39,421 $ 6,649 Denominator for earnings per common share - basic and diluted: Weighted average number of common shares outstanding - basic 125,840 129,696 Weighted average number of common shares outstanding - diluted (1) 127,522 129,874 Net income per common share attributable to Equity Commonwealth common shareholders: Basic $ 0.31 $ 0.05 Diluted $ 0.31 $ 0.05 Anti-dilutive securities: Effect of Series D preferred shares; 6 1/2% cumulative convertible (2) 2,363 2,363 (1) As of March 31, 2016 , we had granted RSUs to certain employees, officers, and the chairman of the Board of Trustees. The RSUs contain both service and market-based vesting components. None of the RSUs have vested. If the market-based vesting component was measured as of March 31, 2016 , and 2015 , 1,754 and 254 common shares would be issued to the RSU holders, respectively. Using a weighted average basis, 1,682 and 178 common shares are reflected in diluted earnings per share for the three months ended March 31, 2016 and 2015 , respectively. (2) The Series D preferred shares are excluded from the diluted earnings per share calculation because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution during the periods presented. |
Recent Accounting Pronounceme33
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets, net | $ 152,678 | $ 144,341 |
Senior unsecured debt, net | 1,312,148 | 1,450,606 |
Mortgage notes payable, net | $ 245,691 | 246,510 |
ASU 2015-03 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets, net | 144,341 | |
Senior unsecured debt, net | 1,450,606 | |
Mortgage notes payable, net | 246,510 | |
ASU 2015-03 | Originally Reported | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets, net | 157,549 | |
Senior unsecured debt, net | 1,460,592 | |
Mortgage notes payable, net | 249,732 | |
ASU 2015-03 | Effect of Change | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets, net | (13,208) | |
Senior unsecured debt, net | (9,986) | |
Mortgage notes payable, net | $ (3,222) |
Real Estate Properties - Narrat
Real Estate Properties - Narrative (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Jan. 31, 2013building | Mar. 31, 2016USD ($)ft²building | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($)ft²land_parcelbuildingproperty | |
Real Estate Properties [Line Items] | ||||
Real estate improvements | $ | $ 31,900 | $ 10,900 | ||
Number of properties held for sale | property | 0 | |||
Number of buildings sold | building | 18 | |||
Disposed of by Sale | ||||
Real Estate Properties [Line Items] | ||||
Number of Properties Sold | property | 91 | |||
Number of buildings sold | building | 11 | 135 | ||
Number of land parcels | land_parcel | 1 | |||
Square Footage (in sqft) | ft² | 856,831 | 18,900,000 | ||
Gross Sales Price | $ | $ 122,615 | $ 2,000,000 |
Real Estate Properties - Summar
Real Estate Properties - Summary of Properties Held for Sale (Details) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016USD ($)ft²buildingproperty | Dec. 31, 2015property | |
Real Estate Properties [Line Items] | ||
Number of Properties | 0 | |
Held-for-sale | ||
Real Estate Properties [Line Items] | ||
Number of Properties | 2 | |
Number of Buildings | building | 2 | |
Square Footage (in sqft) | ft² | 191,150 | |
Gross Sales Price | $ | $ 46,700 | |
Held-for-sale | 1525 Locust Street | ||
Real Estate Properties [Line Items] | ||
Number of Properties | 1 | |
Number of Buildings | building | 1 | |
Square Footage (in sqft) | ft² | 98,009 | |
Gross Sales Price | $ | $ 17,700 | |
Held-for-sale | 633 Ahua Street | ||
Real Estate Properties [Line Items] | ||
Number of Properties | 1 | |
Number of Buildings | building | 1 | |
Square Footage (in sqft) | ft² | 93,141 | |
Gross Sales Price | $ | $ 29,000 |
Real Estate Properties - Summ36
Real Estate Properties - Summary of Balance Sheet Information for all Properties Classified as Held for sale (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Liabilities related to properties held for sale | $ 169 | $ 0 |
Held-for-sale | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Real estate properties | 19,568 | |
Rents receivable, net of allowance for doubtful accounts of $159 | 21 | |
Other assets, net | 758 | |
Properties held for sale | 20,347 | |
Rent collected in advance | 10 | |
Security deposits | 159 | |
Liabilities related to properties held for sale | 169 | |
Allowance for doubtful accounts | $ 159 |
Real Estate Properties - Summ37
Real Estate Properties - Summary of Properties Sold (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2016USD ($)ft²buildingproperty | Feb. 29, 2016USD ($)ft²buildingproperty | Jan. 31, 2013buildingproperty | Mar. 31, 2016USD ($)ft²buildingproperty | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($)ft²building | |
Real Estate Properties [Line Items] | ||||||
Number of Properties | property | 3 | |||||
Number of Buildings | building | 18 | |||||
Gain on Sale | $ 36,666 | $ 5,868 | ||||
Disposed of by Sale | ||||||
Real Estate Properties [Line Items] | ||||||
Number of Properties | property | 3 | |||||
Number of Buildings | building | 11 | 135 | ||||
Square Footage (in sqft) | ft² | 856,831 | 18,900,000 | ||||
Gross Sales Price | $ 122,615 | $ 2,000,000 | ||||
Gain on Sale | $ 36,666 | |||||
Disposed of by Sale | Executive Park | ||||||
Real Estate Properties [Line Items] | ||||||
Number of Properties | property | 1 | |||||
Number of Buildings | building | 9 | |||||
Square Footage (in sqft) | ft² | 427,443 | |||||
Gross Sales Price | $ 50,865 | |||||
Gain on Sale | $ 16,532 | |||||
Disposed of by Sale | 3330 N Washington Boulevard | ||||||
Real Estate Properties [Line Items] | ||||||
Number of Properties | property | 1 | |||||
Number of Buildings | building | 1 | |||||
Square Footage (in sqft) | ft² | 55,719 | |||||
Gross Sales Price | $ 11,250 | |||||
Gain on Sale | $ 5,457 | |||||
Disposed of by Sale | 111 East Kilbourn Avenue | ||||||
Real Estate Properties [Line Items] | ||||||
Number of Properties | property | 1 | |||||
Number of Buildings | building | 1 | |||||
Square Footage (in sqft) | ft² | 373,669 | |||||
Gross Sales Price | $ 60,500 | |||||
Gain on Sale | $ 14,677 |
Real Estate Mortgages Receiva38
Real Estate Mortgages Receivable - Narrative (Details) | 1 Months Ended | |||
Jan. 31, 2013USD ($)buildingproperty | Apr. 30, 2012USD ($) | Mar. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Mortgage Loans on Real Estate [Abstract] | ||||
Total real estate mortgage receivable included in other assets, carrying value | $ 8,100,000 | $ 8,100,000 | ||
Mortgage financing related to sale of suburban property | $ 7,700,000 | $ 400,000 | ||
Interest rate on real estate mortgage receivable | 6.00% | 6.00% | ||
Number of properties sold or agreed to be sold | property | 3 | |||
Number of buildings sold | building | 18 | |||
Allowance for mortgage receivables | $ 0 | $ 0 |
Indebtedness - Narrative (Detai
Indebtedness - Narrative (Details) | Mar. 31, 2016USD ($)buildingproperty | Feb. 16, 2016USD ($) | Jan. 29, 2015option | Mar. 31, 2016USD ($)buildingproperty | Mar. 31, 2015USD ($) | Dec. 31, 2015USD ($) |
Debt Instrument [Line Items] | ||||||
Loss on early extinguishment of debt | $ 118,000 | $ 428,000 | ||||
Real estate properties, net | $ 2,891,945,000 | 2,891,945,000 | $ 2,988,413,000 | |||
Mortgage notes payable, net | 245,691,000 | $ 245,691,000 | $ 246,510,000 | |||
Revolving credit facility | ||||||
Debt Instrument [Line Items] | ||||||
Interest rate payable percentage | 1.69% | |||||
Amount outstanding | 0 | $ 0 | ||||
Revolving credit facility | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Commitment fee percentage | 0.125% | |||||
Revolving credit facility | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Commitment fee percentage | 0.30% | |||||
Revolving credit facility | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.25% | |||||
Revolving credit facility | LIBOR | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 0.875% | |||||
Revolving credit facility | LIBOR | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.55% | |||||
Revolving credit facility | Base rate | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 0.00% | |||||
Revolving credit facility | Base rate | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 0.55% | |||||
Unsecured revolving credit facility | Revolving credit facility | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | 750,000,000 | $ 750,000,000 | ||||
Debt instrument, number of extension options | option | 2 | |||||
Debt instrument, extension option term | 6 months | |||||
Debt instrument, extension option fee, percent | 0.075% | |||||
Amount available for borrowing | $ 750,000,000 | $ 750,000,000 | ||||
Commitment fee percentage | 0.25% | |||||
Unsecured revolving credit facility | Letter of credit | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 100,000,000 | 100,000,000 | ||||
Loan facility, 5-year term | ||||||
Debt Instrument [Line Items] | ||||||
Term loan amount outstanding | 200,000,000 | $ 200,000,000 | ||||
Interest accrual rate | 1.84% | |||||
Loan facility, 5-year term | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.40% | |||||
Loan facility, 5-year term | LIBOR | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 0.90% | |||||
Loan facility, 5-year term | LIBOR | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.80% | |||||
Loan facility, 5-year term | Revolving credit facility | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, term | 5 years | |||||
Loan facility, 7-year term | ||||||
Debt Instrument [Line Items] | ||||||
Term loan amount outstanding | 200,000,000 | $ 200,000,000 | ||||
Interest accrual rate | 2.24% | |||||
Loan facility, 7-year term | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.80% | |||||
Loan facility, 7-year term | LIBOR | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 1.40% | |||||
Loan facility, 7-year term | LIBOR | Maximum | ||||||
Debt Instrument [Line Items] | ||||||
Basis spread on variable rate | 2.35% | |||||
Loan facility, 7-year term | Revolving credit facility | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, term | 7 years | |||||
Senior Notes Five Point Seven Five Percent Due 2015 | ||||||
Debt Instrument [Line Items] | ||||||
Amount of debt, redeemed, defeased, or prepaid | $ 139,100,000 | |||||
Interest rate stated percentage | 6.25% | |||||
Loss on early extinguishment of debt | $ 100,000 | |||||
Revolving credit facility and term loans | ||||||
Debt Instrument [Line Items] | ||||||
Additional increases in maximum amount of borrowings available | $ 1,150,000,000 | $ 1,150,000,000 | ||||
Mortgage notes | ||||||
Debt Instrument [Line Items] | ||||||
Number of real estate properties secured by mortgage | property | 5 | 5 | ||||
Number of buildings secured by mortgage | building | 8 | 8 | ||||
Real estate properties, net | $ 288,700,000 | $ 288,700,000 | ||||
Mortgage notes payable, net | $ 245,700,000 | $ 245,700,000 |
Shareholders' Equity - Narrativ
Shareholders' Equity - Narrative (Details) - Common Shares - USD ($) | 3 Months Ended | |||
Mar. 31, 2016 | Mar. 17, 2016 | Sep. 14, 2015 | Aug. 24, 2015 | |
Class of Stock [Line Items] | ||||
Stock repurchase program, authorized amount | $ 100,000,000 | |||
Stock repurchase program, additional authorized amount | $ 150,000,000 | $ 100,000,000 | ||
Number of shares repurchased (in shares) | 983,789 | |||
Weighted average price per share of shares repurchased (in dollars per share) | $ 25.94 |
Shareholders' Equity - Schedule
Shareholders' Equity - Schedule of Declared Distributions (Details) | Feb. 16, 2016$ / shares |
Series D | |
Class of Stock [Line Items] | |
Dividend declared (in dollars per share) | $ 0.40625 |
Series E | |
Class of Stock [Line Items] | |
Dividend declared (in dollars per share) | $ 0.453125 |
Cumulative Other Comprehensiv42
Cumulative Other Comprehensive Loss - Schedule of Amounts Recognized in Cumulative Other Comprehensive Loss (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Amounts recognized in cumulative other comprehensive income (Loss) by component | |
Balances as of January 1, 2016 | $ (3,687) |
Balances as of March 31, 2016 | (3,014) |
Unrealized Loss on Derivative Instruments | |
Amounts recognized in cumulative other comprehensive income (Loss) by component | |
Balances as of January 1, 2016 | (3,687) |
Other comprehensive loss before reclassifications | (445) |
Amounts reclassified from cumulative other comprehensive loss to net income | 1,118 |
Net current period other comprehensive income | 673 |
Balances as of March 31, 2016 | $ (3,014) |
Cumulative Other Comprehensiv43
Cumulative Other Comprehensive Loss - Schedule of Reclassifications Out of Cumulative Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Reclassifications out of cumulative other comprehensive income (Loss) | ||
Interest expense | $ 22,347 | $ 29,842 |
Amounts Reclassified from Cumulative Other Comprehensive Loss to Net Income | Interest rate swap contracts | ||
Reclassifications out of cumulative other comprehensive income (Loss) | ||
Interest expense | $ 1,118 |
Income Taxes - Schedule of Prov
Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Current: | ||
State | $ 75 | $ 90 |
Foreign | 0 | (46) |
Current income tax expense (benefit) | 75 | 44 |
Deferred: | ||
Foreign | 0 | (605) |
Deferred income tax expense (benefit) | 0 | (605) |
Income tax expense (benefit) | $ 75 | $ (561) |
Derivative Instruments - Narrat
Derivative Instruments - Narrative (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 04, 2016 | |
Derivative [Line Items] | ||
Aggregate termination value | $ 3,200,000 | |
Interest rate swap | ||
Derivative [Line Items] | ||
Fair value of derivatives in a net liability position | 3,200,000 | |
Cash flow hedging | Designated as hedging instrument | ||
Derivative [Line Items] | ||
Estimated gain (loss) reclassification from OCI to income | 2,900,000 | |
Cash flow hedging | Designated as hedging instrument | Interest rate swap | ||
Derivative [Line Items] | ||
Amount of hedged item | $ 169,200,000 | |
Derivative, variable interest rate, percent | LIBOR | |
Notional Amount (in thousands) | $ 169,119,000 | |
Cash flow hedging | Designated as hedging instrument | Interest rate cap | ||
Derivative [Line Items] | ||
Notional Amount (in thousands) | $ 400,000,000 | |
LIBOR | Interest rate cap | ||
Derivative [Line Items] | ||
Derivative, cap interest rate, percent | 2.50% |
Derivative Instruments - Schedu
Derivative Instruments - Schedule of Outstanding Interest Rate Derivatives Designated as Cash Flow Hedges of Interest Rate Risk (Details) - Cash flow hedging - Designated as hedging instrument $ in Thousands | Mar. 31, 2016USD ($)financial_instrument |
Interest rate swap | |
Derivative [Line Items] | |
Number of Instruments | financial_instrument | 2 |
Notional Amount (in thousands) | $ | $ 169,119 |
Interest rate cap | |
Derivative [Line Items] | |
Number of Instruments | financial_instrument | 1 |
Notional Amount (in thousands) | $ | $ 400,000 |
Derivative Instruments - Sche47
Derivative Instruments - Schedule of Fair Value of Derivative Financial Instruments (Details) - Cash flow hedging - Designated as hedging instrument - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Interest rate swap | Accounts payable and accrued expenses | ||
Derivatives, Fair Value [Line Items] | ||
Interest Rate Derivative Designated as Hedging Instrument | $ (2,850) | $ (3,687) |
Interest rate cap | Other Assets | ||
Derivatives, Fair Value [Line Items] | ||
Interest Rate Derivative Designated as Hedging Instrument | $ 358 | $ 0 |
Derivative Instruments - Sche48
Derivative Instruments - Schedule of Gain or Loss Recognized on Interest Rate Derivatives Designated as Cash Flow Hedges (Details) - Cash flow hedging - Designated as hedging instrument - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivative | ||
Balance at beginning of period | $ (3,687) | $ (7,462) |
Amount of (loss) gain recognized in cumulative other comprehensive loss | (445) | (686) |
Amount of loss reclassified from cumulative other comprehensive loss into interest expense | 1,118 | 1,227 |
Unrealized gain on derivative instruments | 673 | 541 |
Balance at end of period | $ (3,014) | $ (6,921) |
Share-Based Compensation - Narr
Share-Based Compensation - Narrative (Details) $ / shares in Units, $ in Millions | Jan. 26, 2016$ / sharesshares | Jan. 28, 2015$ / sharesshares | Mar. 31, 2016USD ($)tranche$ / sharesshares | Mar. 31, 2015USD ($) |
Restricted shares | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of equity awards granted (in shares) | shares | 136,623 | 126,319 | ||
Vesting period | 4 years | |||
Granted shares value (in dollars per share) | $ / shares | $ 26.93 | $ 26.58 | ||
Estimated future compensation expense for unvested shares | $ | $ 16.6 | |||
Weighted average period over which compensation expense will be recorded | 2 years 9 months 18 days | |||
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of equity awards granted (in shares) | shares | 277,386 | 256,467 | ||
Granted shares value (in dollars per share) | $ / shares | $ 38.80 | |||
Number of tranches | tranche | 2 | |||
Estimated future compensation expense for unvested shares | $ | $ 28.3 | |||
Weighted average period over which compensation expense will be recorded | 2 years 7 months 6 days | |||
Restricted stock units | Vesting in three years | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting percent | 50.00% | |||
Restricted stock units | Vesting in four years | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting percent | 50.00% | |||
Share award plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Common shares available for issuance (in shares) | shares | 2,387,405 | |||
Share award plan | General and Administrative Expense | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Compensation expense | $ | $ 4.4 | $ 4 |
Share-Based Compensation - Summ
Share-Based Compensation - Summary of Assumptions and Fair Values for Restricted Stock Units Granted in the Period (Details) - Restricted stock units | 3 Months Ended |
Mar. 31, 2016$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | |
Fair value of RSUs granted (in dollars per share) | $ 38.80 |
Expected term (years) | 4 years |
Expected volatility | 0.00% |
Expected dividend yield | 1.86% |
Risk-free rate | 1.07% |
Fair Value of Assets and Liab51
Fair Value of Assets and Liabilities - Schedule of Assets and Liabilities Measure at Fair Value (Details) - Recurring $ in Thousands | Mar. 31, 2016USD ($) |
Recurring Fair Value Measurements: | |
Derivative liability | $ (8,333) |
Level 1 | |
Recurring Fair Value Measurements: | |
Derivative liability | 0 |
Level 2 | |
Recurring Fair Value Measurements: | |
Derivative liability | 0 |
Level 3 | |
Recurring Fair Value Measurements: | |
Derivative liability | (8,333) |
Interest rate swap | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate swap contracts | (2,850) |
Interest rate swap | Level 1 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate swap contracts | 0 |
Interest rate swap | Level 2 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate swap contracts | (2,850) |
Interest rate swap | Level 3 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate swap contracts | 0 |
Interest rate cap | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate cap contract | 358 |
Interest rate cap | Level 1 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate cap contract | 0 |
Interest rate cap | Level 2 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate cap contract | 358 |
Interest rate cap | Level 3 | |
Recurring Fair Value Measurements: | |
Effective portion of interest rate cap contract | $ 0 |
Fair Value of Assets and Liab52
Fair Value of Assets and Liabilities - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Aug. 31, 2015USD ($) | Mar. 31, 2016USD ($)Tenant | Dec. 31, 2014USD ($) | Dec. 31, 2015USD ($) | Jul. 31, 2014USD ($)$ / shares | |
Fair value of assets and liabilities | |||||
Number of tenants responsible for more than 4% of total annualized rents | Tenant | 0 | ||||
Total rents | Credit concentration | |||||
Fair value of assets and liabilities | |||||
Concentration risk | 4.00% | ||||
General and Administrative Expense | |||||
Fair value of assets and liabilities | |||||
Change in fair value of derivatives | $ 1,100 | ||||
Minimum | |||||
Fair value of assets and liabilities | |||||
Average closing price per common share during one year period after date (in dollars per share) | $ / shares | $ 26 | ||||
Average closing price per common share during first and second year after date (in dollars per share) | $ / shares | $ 26 | ||||
Related/Corvex | |||||
Fair value of assets and liabilities | |||||
Amount of reimbursements payable to related party if specified minimum common share price maintain during the one year period after the date on which the reimbursement is approved by shareholders | $ 8,400 | ||||
Amount of reimbursements payable to related party if specified minimum common share price maintain during the one year period between the first and second anniversaries of the date on which the reimbursement is approved by shareholders | $ 8,400 | ||||
Amount of reimbursements payable to related party upon the approval of shareholders | $ 8,400 | $ 16,700 | |||
Derivative liability | Fair Value, Inputs, Level 3 [Member] | |||||
Fair value of assets and liabilities | |||||
Derivative liability | $ 8,333 | $ 7,200 |
Fair Value of Assets and Liab53
Fair Value of Assets and Liabilities - Schedule of Valuation Techniques and Significant Unobservable Inputs Used for Level 3 Fair Value Measurements (Details) - Derivative liability - Level 3 - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2015 | |
Fair Value of Assets and Liabilities | ||
Derivative liability | $ 8,333 | $ 7,200 |
Risk-free rate | 0.27% | |
Volatility | 20.00% |
Fair Value of Assets and Liab54
Fair Value of Assets and Liabilities - Schedule of Fair Value and Carrying Value of Financial Instruments (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Carrying Amount | ||
Fair value of financial instruments | ||
Senior unsecured debt and mortgage notes payable, net | $ 1,557,839 | $ 1,697,116 |
Fair Value | ||
Fair value of financial instruments | ||
Senior unsecured debt and mortgage notes payable, net | $ 1,615,440 | $ 1,749,211 |
Earnings Per Common Share - Sch
Earnings Per Common Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Numerator for earnings per common share - basic and diluted: | ||
Net income | $ 46,402 | $ 13,630 |
Preferred distributions | (6,981) | (6,981) |
Net income attributable to Equity Commonwealth common shareholders | $ 39,421 | $ 6,649 |
Denominator for earnings per common share - basic and diluted: | ||
Weighted average common shares outstanding — basic (in shares) | 125,840 | 129,696 |
Weighted average common shares outstanding — diluted (in shares) | 127,522 | 129,874 |
Net income per common share attributable to Equity Commonwealth common shareholders: | ||
Basic (in USD per share) | $ 0.31 | $ 0.05 |
Diluted (in USD per share) | $ 0.31 | $ 0.05 |
Effect of Series D preferred shares; 6 1/2% cumulative convertible | ||
Anti-dilutive securities: | ||
Effect of Series D preferred shares; 6 1/2% cumulative convertible (in shares) | 2,363 | 2,363 |
Earnings Per Common Share - S56
Earnings Per Common Share - Schedule of Computation of Basic and Diluted Earnings Per Share (Footnote) (Details) - Restricted stock units - shares | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
RSUs vested (in shares) | 0 | |
Common shares issued (in shares) | 1,754,000 | 254,000 |
Weighted average common shares outstanding — diluted (in shares) | 1,682,000 | 178,000 |
Segment Information - Narrative
Segment Information - Narrative (Details) - segment | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Segment Reporting [Abstract] | ||
Number of reportable segments | 1 | 2 |
Percentage of revenue from office properties (more than) | 90.00% |
Related Person Transactions - N
Related Person Transactions - Narrative (Details) $ / shares in Units, $ in Millions | Nov. 02, 2015USD ($) | Jul. 20, 2015option | May. 04, 2015USD ($) | Mar. 01, 2015USD ($) | Jul. 31, 2014USD ($)option$ / shares | Jun. 01, 2014USD ($)parking_space | Aug. 31, 2015USD ($) | Mar. 31, 2016USD ($) | Feb. 28, 2015USD ($) | Dec. 31, 2014USD ($) |
Related Party Transaction [Line Items] | ||||||||||
Lease termination period duration | 30 days | |||||||||
Minimum | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Average closing price per common share during one year period after date (at least) (in dollars per share) | $ / shares | $ 26 | |||||||||
Average closing price per common share during first and second year after date (in dollars per share) | $ / shares | $ 26 | |||||||||
Equity Group Investments and associated entities | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Lease term | 5 years | 7 months | ||||||||
Number of renewal options of lease arrangement | option | 1 | 1 | ||||||||
Renewal term of lease arrangement | 5 years | 3 months | ||||||||
Related Party Transaction Lease Payment, Annual Lease Payment, Year One | $ 0.5 | |||||||||
Lease payment, initial term | $ 0.2 | |||||||||
Lease payment | $ 0.1 | $ 0.2 | ||||||||
Tenant Improvements | 0.7 | |||||||||
Term of license agreement | 1 year | |||||||||
License fee | $ 0.1 | $ 0.1 | $ 0.2 | |||||||
Number of parking spaces | parking_space | 1 | |||||||||
Equity Group Investments and associated entities | Minimum | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Related Party Transaction Lease Payment, Annual Lease Payment After Year One | 0.8 | |||||||||
Equity Group Investments and associated entities | Maximum | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Related Party Transaction Lease Payment, Annual Lease Payment After Year One | $ 0.9 | |||||||||
Related/Corvex | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Due to related persons | 33.5 | |||||||||
Amount of reimbursements payable to related party if specified minimum common share price maintain during the one year period after the date on which the reimbursement is approved by shareholders | 8.4 | |||||||||
Amount of reimbursements payable to related party if specified minimum common share price maintain during the one year period between the first and second anniversaries of the date on which the reimbursement is approved by shareholders | $ 8.4 | |||||||||
Amount of reimbursements payable to related party upon the approval of shareholders | $ 8.4 | $ 16.7 | ||||||||
RMR and RMR Australia | ||||||||||
Related Party Transaction [Line Items] | ||||||||||
Monthly management transition fee | $ 0.1 | $ 1.2 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||
Apr. 30, 2016USD ($)ft²buildingproperty | Jan. 31, 2013building | Mar. 31, 2016USD ($)ft²building | Dec. 31, 2015USD ($)ft²buildingproperty | May. 15, 2016$ / shares | |
Subsequent Event [Line Items] | |||||
Number of buildings sold | 18 | ||||
Disposed of by Sale | |||||
Subsequent Event [Line Items] | |||||
Number of Properties Sold | property | 91 | ||||
Number of buildings sold | 11 | 135 | |||
Property square feet | ft² | 856,831 | 18,900,000 | |||
Gross Sales Price | $ | $ 122,615 | $ 2,000,000 | |||
Subsequent event | Disposed of by Sale | |||||
Subsequent Event [Line Items] | |||||
Number of Properties Sold | property | 2 | ||||
Number of buildings sold | 2 | ||||
Property square feet | ft² | 191,150 | ||||
Gross Sales Price | $ | $ 46,700 | ||||
Scenario, Forecast | Series E | |||||
Subsequent Event [Line Items] | |||||
Redemption price per share | $ / shares | $ 25 |