EQC - Earnings call transcript Q3 2017

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Operator

Greetings and welcome to the Equity Commonwealth Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. of President Vice Byrnes, Investor Relations. Sarah Ms. you, Thank Byrnes.

You may begin.

Sarah Byrnes

thank you, results us joining Good for and Doug. morning you to XXXX. quarter September for ended Thank the XX, discuss Equity Commonwealth's

as and yesterday's you speakers’ XX-K or meaning titled Securities CEO; in Markman, statements. Our forward-looking statements Forward-Looking of release, Please most forward-looking that materially call Federal well during advised supplement any to could Laws. Risk Factors titled recent Annual to matters to the update any be David Statements as section discussion statements The may are Helfand, that constitute CFO. David COO; in Company Report forward-looking the for and factors results today today. from section the Weinberg, on made press Adam discussed of assumes actual this Form no cause refer certain differ We to President a within obligation the

release turn for the yesterday's including financial on others call We may interested also and over remarks non-GAAP our will information and our to Company David XXXX to is important in investors containing non-GAAP available be website post at results which results, press refer the measures our to quarter With website. certain disclosures. a I that, third measures. these to of GAAP reconciliation supplemental financial information material. encourage also performance Today's material deemed Please our on monitor that be We for www.eqcre.com, include Helfand. website our to

David Helfand

been the revised up comments in of fell on from from economy in that participation rate September provide average the X.X% and number upward in joining to Broadly rate real the The contest, in up points far begin up payrolls X% September growth in labor GDP economic ticked and down for years. expansion The is modestly. the some reserved adding after us. Index but market declined per XXX an second X.X%. strength in equity to unemployment XX% quarter past and Company's brief grow The basis Morgan with NASDAQ jobs the U.S. the to August, Non-farm XX Good continues to the in XX%, so it's put with XX show then up morning the XXXX. Sarah. Thanks, rate conditions progress for on force the as speaking, XXX,XXX low as I’ll S&P Stanley year. month thank year-to-date, update continues for the on X% you market year. slightly REIT to with

$XX capital and up markets billion issuance we $XX expect at significant is year-to-date year, attractive be couple robust to feet versus third National As XX square for in office roughly third excluding XXXX. nine New we've XX% feet was volume past reach flat in a debt though Real on is discussed XX% year-to-date. the City full-year. fundamental down the remain XXXX quarter York ago. capital year and period quarter of real in track Year-to-date second respect transaction down roughly than was to rate remain pricing. XX% CMBS strong totaled issuance XX are the of with million The over million transaction the square approximately Deliveries earnings to versus total months for the first availability the in XX%. estate calls, vacancy volume quarter billion the XX% is office With markets, less in the that down volume benign. XX% same estate

NOI. growth beginning same to for translate in results the business, quarter new property our the in progress demonstrating to our EQR portfolio with during continued lease of into Turning up leases

quarter. totaling sale portfolio end Our properties at the with of comprises properties million held no for XX currently the XX feet square

feet square in properties seven Street million Chicago Avenue XXX in including Downtown totaling for X.X XXXX have Philadelphia. We West the and Market market sale

we XXXX sold the of During million for foot, third on million we properties sale the completed for in we sale year-to-date of and quarter, $XXX In $X.X closed assets. a cap seven leased Downtown million dispositions Since rate the in mid totaling Pricing $XXX of office Market, million. billion. the XXXX, property square on $XXX X.X the X% closed quarter, Philadelphia was range. XX% we’ve

$XX of on for and and and office five in office Missouri the million finally, Minnesota, foot. We totaling property And feet also was closed Boca $XXX X the Maryland, headquarters in rate square range. low in depot's a we portfolio Florida on Raton, XX% the sale for located sale a million. industrial Pricing million cap of closed $XXX

Turning our leasing focused is dispositions. on team to with both execution and to operations, respect

devoting are in to order we long-term value. to opportunities investment create resources significant addition, In evaluating

As our that for in positioned excess value in unsuccessful the With we've that, can over the Company prices of grow assets turn we is call I'll if investment our discussed implied to pursuit, opportunity. previously, trading significantly, have appropriate David. sell an to the continue source to at If we’re price. we to plan

David Weinberg

by I largest quarter and I’ll give through Then roll you, our of will morning, markets. XXXX. Thank good leasing reviewing update activity our five third David, lease on we our begin everyone. provide an an overview

leases, up leases. We at of Our the was feet same-store were signed two-thirds XX the quarter. XXX,XXX from second of property, new of basis square points the quarter, portfolio which XX end leased XX.X% third

Our at was new lease Philadelphia. largest XXXX in square XX,XXX Market a deal Street foot

rates X.X% increased For on GAAP cash a a on rental basis basis. X.X% and quarter, the

block Corporate Tower Bellevue trending Austin, quality square largest it of have bigger another a lease, vacancy structure. three and is been available and XXX, while We always largest XXX smaller will There Expedia activity tenants. space and will under XX% well-positioned five CBD A tenants. have December demand continues lower. In a space to strong market. is is currently market's giving developed from our capture to XXXX, Bellevue recently in was Bellevue else space Turning quarter to in strong stopped vacant in Tower markets continue from see the nothing The great XXX,XXX as XX% in we demand rate very for is buildings around that strong. have around the X%. be believe to rate Plaza us markets, and vacancy feet

trophy quarter leasing submarket, rate the signed Our in is The XXX lease a vacancy where Downtown XX,XXX is flat submarket XX% Bridgepoint. Philadelphia Loop office suburban for largest new is and around foot this leased. property has deal demand leased. Downtown CBD, like has more square new XX% market, XX% competes construction a Unlike buildings in was Class year. In older In the directly been this our A for slowed. our we this building Northwest properties. the Bridgepoint, the park They X%

new work an to back recall the a property game of overlooking XXXX, end well-positioned. the at the an that floor. at have tenants up that and spaces, expansive enjoying Earlier terrace and may been XXX,XXX Street showing we opened Market and as XXX outdoor this can of You collaborative time, The XXXX entertainment and features properties then feet. amenity have Market of they Since community areas, aggressively month, the tenants total semi-private we It people, the conference space. been Street. engaging center, accommodate kitchen brokerage par four square the gave

favorable community. the very feedback received leasing from have We

XXX,XXX at As leaving XXXX. rate this second Street, quarter due Chicago half new we This X own XXX,XXX XXXX for and availability property to over of since XX.X%. Market redevelopment. Chicago at XX% soften is the community. space. these renovation third feet quality we on while CBD, CBD to the in help increase occupy Chicago. of and River we XX,XXX new In efforts, towers. have Chicago's to a have given a feet unique At square new property XXth recent Plaza likely space the result market of aggressively have sublease in engage is a leased over vacant we asset leases is has supply, of The slowdown continue with impacted space CBD’s challenging activity. vacancy under Street signed is leasing feet leasing, of quarter, is strongest now lobby The To in vacancy a was market million square located completed a rate tenants the leases signed only West primarily space calls, This construction straight XXX XX%. or still feet and of to leasing Denver continue North. to sublease square we by is as the this recently around brokerage been have and The said square we drive behind submarket

of In on our to we lease our part Of comment in XXXX XXXX. feet be largest in a get XX,XXX will downsizing through square we we square Longmont, from space our roll This X.X% like of as rolling have expect I is Creek square amount, this or footage. The will XXX,XXX feet. July tenant square total, lease back that happen feet, Finally, Dry XXX,XXX lease back at Colorado. extension. would get to

The other range Plaza. in in square properties XXth vacates XX,XXX XXXX we the expect XXXX. to square that, are across Mawr quarters in the will We've over well-positioned are the larger believe in averaging feet been five the Chicago, foot of in back We next and total, Adam. call the five at to quarters. over quarter and With leasing our per next to portfolio, square XX,XXX and to Austin, our increase including XXX,XXX feet are get I spread occupancy XXX,XXX new turn compare Bryn we to over Street

Adam Markman

third securities. expense higher interest net of interest X.X% Thanks, cash and Funds primarily was share, share, annualized. normalized to quarter, from in $XX The and due square FFO primarily The XX.X% a David. estate ago. completed million Cash revenue $X.XX quarter cash portfolio and in and $X.XX period, had up the over taxes were of over partially or tenant abatement. morning. was combination Good decrease to dispositions total, for financial rent year-ago. previously year leases in income that real NOI offset line were In of per does compared free the FFO rates rent the not increased from higher $X.XX debt the $X.X per free than commenced quarter to fees. results in property income million to first and large property well in the compared was year by Same and leases I'll as from quarter. of additional increase. of driven move-out due comparative in newly by as higher lower straight compared the the was that by to review higher from operations marketable a X.X% early a was XXXX. partially The our per third estate repayments last termination higher share are operating $X.XX commenced Normalized provide increase in driven quarter mainly tenant rate savings NOI an third taxes was large Chicago's real leased mentioned. end. million was X.X% by by XX.X% include Same an X.X to of the additional move out was offset rent in quarter due a the Growth feet quarter balances

commenced cash annual or With in is the get which feet therefore GAAP difference this and they quarter. NOI being generate XXX,XXX not free in Once start periods, did and lease approximately rent million through rent. square the was their would not $XX during

Moving loss sold to net carry-forward. our a million in generated operating $XXX XXXX. we gain These properties which of taxable modestly net have to-date decreased sales dispositions, existing

our As any has assets will be dependent amount of the sometime close for case highly if income taxable which before been year-end. on the full-year

was redeemed mid-July due $XXX Turning balance X.XX% million, to that in we early bond XXXX. the in sheet

We also have X.XX% maturity of par that XXXX. to in are at bonds open million $XXX

of this evaluate to continue our options. flexibility will the debt we Given repayment

authority have quarter. $XXX buyback the to we up additional did shares; during of We buyback to not shares any million bought

strong Q&A. continue a over be you. with Liquidity capacity Our us securities, and sheet remains $XX that future And competitive flexibility of will we to borrowing balance and with share only million balance billion and positions of advantage $X.X up sheet significant that, well $XXX for cash it of Thank per marketable opportunities. debt. to open

Operator

the Instructions] of line of question with from [Operator you. Feldman proceed Bank Our with Please your comes America. Jamie question. Thank first

James Feldman

of talk the could sense of sense process growth? was you what people What today Market, hoping get for was a about you in kind of for terms market looks the like think I marketing deep pricing CBD just of to did are underwriting a in morning. Philly more Good you. pool? bidding thank the of what transactions? Great, XXXX How

David Helfand

given the it’s Jamie, XXXX in market a that Market asset. very know I large market. is Sure. of overall property smaller the just of indicative in Downtown was a David. Philly don't size That

say in as it They’re as markets So or I Philly they’re might strong pricing different Philly for I’d expecting aggressively. of the the meaningful buyers underwriting strong similar CBD growth enough are then are have be expect buyer for pool to assets returns asset. overall I reasonably where would a process, markets in size was larger. but rent And wouldn't and say reasonable a other

James Feldman

Okay. this buyer changed. time I gave you And time again, market just on last assumptions to or have comparing generally, the some how it depth this market, overall last say year, but would the know you transaction then underwriting of color maybe and the quarter

David Helfand

Yes.

saying row that quarters So wasn't miles XX, we've the a been for several per was XX. hour XX in market it driving anymore, if going

the don't same, in taking couple over at pricing. it's the growth. more done, seller. a in So real as get given estate longer anything that's time but of is we XX rates a estate, we earmarked think for the interest to still months think available. now, plentiful it's much been we've sense and said we good on of They're next still amount change to of real low the especially underwriting still of got we've a now properties be is right the bullish buyers better deals are of that the debt If investment debt that market, given Buyer equity that see what but

James Feldman

more? sale down the think full along then road. XX get think you – And for you about talked there couple now sale have you a for down quarters you one-off assets, Okay. doing potential approach? guys How with those about know this you'll are Or stick lines you several do the is appetite in fork to just portfolio a once you

Adam Markman

Adam. it’s Jamie, Hey

focus put As desire with That's the is marry what and that’s amassed to to creates do. exploring but find If articulated part together that hope company. we not conversation shareholder to of do, we've always start we've grow today. we've we what an that team capital our value main sit now that opportunity we then here where we'll the are unable that to else the our

James Feldman

think a just it. you if getting because And more today on liability or potential some me do questions last the of the as tax the I'm NOL assets? even about question assets we lot do for Okay. of stands all a it and How

Adam Markman

as Well, a we so a mentioned have before portfolio sit NOL. tax we've that whole far, has we where the generated gain, built-in

losses, assets on fall gain, have XXXX, in market, So on we have if what will either number I in of and a think closes so or depending in how dominoes a a be about some contacted that the them of this loss the some dependent year. have gain position, again

portfolio, is overall sense the are the REIT, in of that. but if or that’s beyond terms so there is liability no tax In gain we a there out, traditional distributed

James Feldman

Great. Okay.

Operator

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

John Guinee

Great.

Okay, guys.

aren't at some so meaningful they you I are getting good really than think Why finish looked me line is it be to on And XX on million upside securities got that there like the questions. looked here. $XXX shares to are price? more $XX assets that expand $XX like can marketable then visibility back worth buying say books, you about million, to the second, Two about meaningful got worth those? you've a current the trading to me on you've if of share

Adam Markman

but John, be you the I that value, tool We’ve shareholder question buyback something from can’t the beginning. recognized we've to the create been shares. really buying that get value back of is addressing always

and it that appropriate. when evaluate we of the John, will So question you utilize please? And continue it's your part opportunity second to we repeat will

John Guinee

million has I think marketable of sheet odd balance securities. Your $XXX

Adam Markman

short-term treasuries. Yes. Primarily

John Guinee

vacant market people turnkey required dictating or or space what the dollars space And tenants to are into in TIs about day meaningful these are days, putting dollars, the turnkey takes it David, then is and Okay. or into this you – move talk age?

David Helfand

a get We've either lot additional dollars kind committing it their the It more in match full And it's level out short the that we’re if depending space few and did cost lease to for. put seeing additional a still both. a would that lease, the years to been tenant money the of in length than perhaps be to ago. the a they're term to tenant of vacant own a wants then putting or looking on build

John Guinee

somebody told what's to the status bed, Pittsburgh Okay. of were me the then put those? And that two assets

David Helfand

in bed would been Not included in seven properties as currently put to has be the those that reported, are sales process. the

John Guinee

I Great. All great wish right. you success. guy’s

David Helfand

Thanks, John.

Operator

proceed next with of your JMP question line Germain from Our Securities. comes Please from the question. Mitch

Mitch Germain

everyone. Good morning,

seems I it David if seems work, about your mean, close opportunities, you I've to quick to guess I more quarter-over-quarter. you question to for to are to that the elaborate? a changed you are feeling constructive tone way Just toward a it I the better maybe work change putting maybe could you, way interpreted, Helfand, like putting from capital ask capital just

David Helfand

maybe I dispositions, and to morning. my reposition intend get for to didn't opportunity. tone more clearly Good energy the smaller Sure. working leasing reflected searching and devoting assets. for or up change We're as we we're through as

We so to I'm have more available do our attitude that as more top resources is but and sure mind, not of maybe to us changed. it

I would think it do. Adam expressed well. find to to something love We

in have the We together put here. We've confidence team.

is that and value at capital that we market are hard, it. piece team a can't We working we apply to our the we things can and the deal. have a think, drive opportunity But compare looking control of deal number ability find and a and and create hopeful that capacity necessarily to we we the

Mitch Germain

or that also trades it assets? portfolio your you look one-off you you considering, at deals really when just type pipeline considering are of then or And might is be

David Helfand

transaction we're to one-off that not to here. We've does on what really focused do conclusion to We’re trying a deal. larger come the add

type looking opportunities. we’re of portfolio So a for bigger

Mitch Germain

to I this Denver, question asset sale Seattle, in included Austin what the sale And that me, is for for safe figured. last not assets sub That’s is say, today? Great.

David Helfand

We've to as sold. No, be periodically. haven't that wouldn't tend to we've And safe say ring asset the assets I said and say change wouldn't past, seven the that it's market got we that. list fenced in any in

any So wouldn’t make I assumptions.

Mitch Germain

Thank you.

Operator

of [Operator the line Instructions] Belosic comes your question Please from Green Advisors. questions. Chris Our next with from proceed Street

Chris Belosic

on market morning, West we’re given Hey. but the nature for underwriting on as know kind Good type of expectations may kind up looking touched large Or you pool show of little there, you the the unique may transaction buyers of XXX able Do of what have of to for maybe size a that that? like? assets? end Chicago I guys. that buyer of any up what bit out kind

David Helfand

X.X square foot Well, it’s a million property.

So to expect with And are would They’re up be it going operators capital to institutional to to you better some who the larger are acquire it. going have would the capitalized to there extant, serious up. team show buyers, interested. to

Chris Belosic

out one of And for sound have could you there enough. just bit other fair that Okay, anything in but is move upcoming if Expedia little curious I me. entered? in further on upon potential negotiations, you then or anything Bellevue, activity there's touched definitive you a one guys the know just terms

David Helfand

What we're be will Expedia large up moving on a and and it's out. very known. in they block gobbles speaking a remarks, well with space think We the radar I of users. prepared market said everyone's it's in my It’s space large attractive

Chris Belosic

guys. Thanks Okay.

Operator

from of Manny Our next your question line Citigroup. Korchman from Please proceed the with question. comes

Manny Korchman

good Hey, guys. morning,

about deals you've specific been talking pretty about closed. simply haven't reticent that curious Just

and assets else? on filings within call bringing those and driving and are discussed for the Market is broader, you've your of of it released Chicago. in just trying of mid-quarter public market specifically the magnitude something group XXXX users about is West sale the to sort had portfolio it by and size talk up today XXX or are sort You What’s them to you

David Helfand

to in we a to assets going towards press been saw of there's And of confirm that's there did lot earlier wanted where was and released call the asset both the what around press that Well, those the the what past status an about we we've we on today. marketplace. and referenced done them of that we why

Manny Korchman

seeing down And to Has transaction or flatness. volume? the then markets maybe whether just just be the of sort of it going what a of sort slow back you're maybe pace transaction

inspired sort that or that As more process the you're market assets you sell way down more of generally? quickly approaching to change the

David Helfand

approach sure going earlier underwriting things last a it has transaction diverse a not think through the on mentioned things that and questioning sure call, the might a set as and market all the see been answer that's I'm year kind I don't think changes year we of little changed our on were much with be the had and market maybe seven that were changed things they the much in pretty we while I that commented stable slower sense things assets underwritten I'm the market assets not stable. people it better but the relatively question of next we in as better positioned that David are have

Manny Korchman

End That’s me. for Great. it you. of Q&A Thank

Operator

queue. There like are the I'd to hand the no comments. further Mr. Helfand questions in to over closing for call back

David Helfand

your think for time joining and appreciate us. We

Operator

this gentlemen, conclude and for Ladies does conference today. our

day. your may You a And lines time. at wonderful disconnect have this

Equity Commonwealth (EQC) 25 Oct 172017 Q3 Earnings call transcript