EQC - Earnings call transcript Q2 2019

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Operator

Greetings. Welcome to the Equity Commonwealth Second Quarter 2019 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow a formal presentation [Operator Instructions] Please note, this conference is being recorded.

I would now like to turn the conference over to your host, Sarah Byrnes, Vice President, Investor Relations. you. Thank

begin. may You

Sarah Byrnes

thank for joining XX, the and Equity XXXX. to Commonwealth’s results quarter you morning, us for discuss Good ended June

Weinberg, Our and CFO. David are COO; David speakers Markman, and Helfand, Adam today CEO; President

as be titled annual titled may forward-looking report of securities Forward-Looking yesterday’s call laws. Statements Please this update refer recent Risk you company Form XX-K cause Factors results made of discussion most release the in obligation differ constitute that or in The on for discussed statements a forward-looking certain statements forward-looking today. during well factors actual to advised to our section conference any assumes no statements. meaning could We that within supplement as from to federal the matters materially the press any section

post information including We at on that may information also website material. our www.eqcre.com, important be

refer supplemental results Today’s measures. our financial remarks press Please measures performance results. reconciliation quarter GAAP XXXX yesterday’s include second to financial and certain also for these non-GAAP our to release of a non-GAAP containing

to will over the call Helfand. With that, I turn David

David Helfand

second current Sarah. results update and thank you our with brief provide for and Thanks, activities. company’s comments on Good on conditions, review us. the I’ll an market joining morning, begin quarter

continues consecutive growth. likely a June, month in geopolitical growth risk China slowing jobs with slowdown U.S. and XXXth prior and quarter economy as new job X.X%, its dampened tensions, trade of in in were growth. from up the the GDP second the quarter X.X% in XXX,XXX growth U.S. added Europe

the rate XXX,XXX in compared year-to-date per remains of of below has the XXXX, average creation X%. months job New XXX,XXX an month averaged first unemployment six and to

ago. of XX% its been is with XXX NASDAQ the weakening basis from XXX Treasury a peak on XX-year points XX November despite on XX%, up year U.S. year X%, than the and the basis and points has than last down roughly the S&P RMS profits. corporate yield in year-to-date lower Index market The Stock up XX% a up tear more

the X.XX%, year On LIBOR XX end roughly X-month from a basis the of is ago. short almost curve, up points

office to Turning fundamentals.

at approximately run over and flat available in ahead of generally couple start markets indicate credit next lenders robust in from historically a all new XX%. estate and Demand last of market not supply Real versus low in reduction debt future capital holding any decent, years. the active. tighter a particularly to of vacancy historical continues the significant numbers national steady range with Spreads at resulting basically supply quarter New averages rate do rates. is CMBS remain are to remains

Office stable generally roughly decline of volume of inexpensive understandable debt in sales totaled across ago. modest from half a year decide the sell at the to refinance owners as the capital. margin Flat Cap volume rather than a is the XXXX, first rates country. billion $XX given transaction were availability

EQC, price At second quarter two million. same gross of of solid we up the $XXX was with properties sale NOI and as XX%, property cash we sale completed had a

XXX,XXX square a office cap for development million sale Park a was square $XXX.X industrial mentioned, Park XXX gross property for sold range. in in Corporate foot foot rights of acres income Pricing June, X.X the rate Texas, Washington, place million. late $XXX a Plaza on in Austin, Research we land on Research of in X% for million. with Bellevue As building previously In Bellevue, we sold additional price high

optionality. of Through portfolio into we at market and the XX for Since we a sale created For value cash, assets for not and this assets for of in have disparate we do billion XXX any years, conversion in the five assets first EQC, taking the have responsibility transactions. time time. sold have undermanaged $X.X

high of fundamentally strong assets, track are we a portfolio record of quality a small execution. balance company consistent Today, a and different a sheet with

disciplined continue informed create will classes. be market Our strategy and of With we’re be positioned patient of evaluation and we value office including by cash, well $X.X of conditions, our investment billion long-term for a to in asset opportunities shareholders. to non will broad range

With to turn I’ll that, the over call Dave.

David Weinberg

our you, David, cover roll then thank will on begin by and roll of an morning. I this Well, good the remaining and overview update our provide quarter properties, XXXX. lease and giving leasing activity in year reviewing I’ll second an the

seven end quarter totaling was first the year-over-year. portfolio million comprised X.X and Our feet. leased, points of the same XX.X% down property The from square properties portfolio basis at quarter XXX

basis XXXX on in cash largest X.X% signed an quarter points leased. we is we XXth signed basis GAAP GSA of square a Denver XXX XXX through a September in this lease of In basis. rates extension feet down square leases, feet up the basis and XX.X%, Rental property which points was Street Plaza. was renewals. year-over-year. occupancy and on This were XX,XXX XX% from first The increased XX,XXX of quarter quarter, Commenced at XX.X% the most

While of this from remains with market a rate we steady to continued vacancy interest tenants. see competitive XX.X%,

tenants Northwest XX% and of rates leased. each early. Capitol when in leased, impacted Tower in of occupancy downtown Austin both these of this Square The quarter Bridgepoint XX% them had properties were vacate is Austin is full-floor negatively

Austin both square our of vacancy XXXX, remainder respect expirations, to are rate properties, well is We rolling. at lease a feet to continues the do for seeing With of activity there X%. good with and XXX,XXX

square in XX. lease September the Most Washington, of Georgetown which D.C., foot is Harris University’s expires at XXX,XXX Building this roll

a We seeing year, of Americas in short-term This a Medical near Longwood includes are working back. This here. expect BT vacating of unique we location extension and square Park Georgetown. This with get are to XX,XXX activity Boston. the is in all Brookline Fenway square great XXX roll a and leaves which at the feet balance on almost leasing property the District, we feet XX,XXX in good

end Of XXX,XXX vacate this feet that XXX,XXX feet does is rolling, leased Amazon. the square will include there’s scheduled to half not XX,XXX first has XXXX, rolling. year that of XXXX. just the In of feet feet square square expire during the been XXX,XXX Expedia square This the to

to turn Adam. With call that, I will over the

Adam Markman

for I’ll recent our review per second despite the and sales. financial on from period. of sales XXXX results an update morning. in Good billion following over from share, quarter provide $X.XX of asset were David. decrease unchanged a comparative Thanks, operations $X.XX asset the Funds the our $X.X from distributions share quarter per

attributable of Costs related costs was dispositions Offsetting to of decline $X.XX the related $X.XX lower per per bond unsecured per income per termination portfolio and interest lease another share same-property share. to effects higher caused and NOI debt additional of $X.XX the early the of share and payoff our last expense. from share of increased of other interest of $X.XX an the income, $X.XX is which to repayments

a of to compared normalized was FFO increase growth $X.XX the Normalized same share income, year FFO ago. $X.XX result of in $X.XX per was interest in increased per The of share per $X.XX termination of normalized and from share and FFO share NOI a $X.XX approximately from cash occurred savings expense despite property income property of resulting This growth decrease interest dispositions. per $X.XX per in debt repayments. share

of property by the the income in The and that $X.X year full downtown in Net compared vacated operating revenue same free of increase, largely the to Much and tenants early the from remainder lease in Denver two million portfolio commencing up the floor rent Austin. was $X.X in XX.X% Austin. previously the of was quarter generated a is due second million, ago. or termination growth mentioned leases seven asset burn-off to

and NOI leases was XX% and commencing rental free higher quarter NOI escalations than does cash free last of in the from and from income of the in $XX.X Same-property for largely resulting quarter Cash of not Austin rent year, the $XXX,XXX revenue Denver. million, higher include second driven and rent. leases by burn-off

spaces are in not signed cash These currently vacant feet of generate Additionally, $X GAAP leases on million XX,XXX will there or that not and commenced are annual square in eventually NOI. leases but therefore rents.

Expedia’s move-outs tenant end past, at rent the space year. in first temper the the significantly will have will second move-out next Amazon particular, half in with XXXX. discussed commencing this we’ve half the growth. XXXX impact of of of leased In As

$XXX,XXX onetime for $X.X from General and recent totaled of in costs our reduction which are quarter expenses force. administrative million, the

to Moving dispositions.

sold net gain excess that operating million taxable from ordinary properties distribution year. have was course forward the carried We a necessitated have $XXX gain in generated gains as of the that roughly our as of in sales well This taxable common million loss of beginning year-to-date. $XXX operating the the of business These year. is generated this

sheet, the Briefly the $XXX quarter, turning X.XXX% during unsecured a debt, we million remaining to bond. unsecured last balance our redeemed

longer a no rating. carry credit result, a we As

a share cash. in Our billion $XX $XX mortgage, million per or $X.X have is remaining we and loan

provide We strength for a continue to financial our and opportunities competitive team, liquidity where will advantage. look

will Thank open you. And it Q&A. with we to that, up

Operator

is question a Our from Korchman we time this session. At Instructions] you. will conducting Citigroup. with first [Operator question-and-answer be Manny Thank

Manny Korchman

with your this Hi, Was maybe time sort just factor about if any good the don’t and company said is the think assets morning you’re your while. going have guys a of I that up you everyone. in timing for history that a of on in hold and remarks the first be wondering or talked to mix it’s you market. David, in a that's prepared that you lease of sort

David Helfand

More Emmy. the morning, former. of Good

we and identified sale. right, asset lease to maximize value. can in building the a previously and timing the We there we for situation Bellevue want are of we’ve in will just be think the Georgetown where couple leased consider Amazon a I done the that get assets, get

Manny Korchman

then a of have in mix if left, the at you couple Austin. in sort Washington, have And assets of have we couple look D.C., you you a

to bit same sort sets? holdings? to you’d think those little If exit, is of Or were agnostic have, do in the go do would think you which do you a you you other

David Weinberg

would would one be the two got that one tenant, Helfand would lease that determined. the Well, one and net to the The and I the a lease say, Georgetown British long-term to David outliers, properties. We’ve property other are have market that. Amazon being referenced, the with school seven dictate one one I think being long-term two

very working Austin leaves and Denver. portfolio, D.C., And that us would buildings sub-portfolio a that it the We’re five one-off. execution as if time, what markets: sell were a those, to or on we to best is determine office be extension. multi-tenant a in good choosing nice are Georgetown total at have we then Boston, What

Operator

is of Our Bank with Pernokas from Alexander next America. question

Alexander Pernokas

properties kind kind that just prospects lined And tenants space? think morning. are tenants up Hi, in a an trying get guys. give maybe moved out? Good do that then saw have drop that to of wondering these occupancy. What of us most up some any to the you if in And likely what update there? you take of for do I tenants on you you was could are

David Weinberg

expires, kind lease one David there. backfilled quarters. go Expedia’s and can obviously, some some from We’ve are But bigger I’d a firms starting companies Again, Denver, from feels time. seeing well. and been good been and of few in Sure. like occupancy space. we activity starting there. been with momentum even as been drop say, has It’s actually at Tower combination that's occupancy It’s the tenants to last We’ve look service running in tenants of a Weinberg. place, Amazon. see there’s at properties, XXX, but small spoke with holding, it as financial we seven no to that about, more the tech that

much lost because in In thing. the vacant tenant. both our them, tell is Austin, in I’ll having But it space was isn’t I we of occupancy great a at at downtown prepared a in a each market. There Austin we referenced available assets, remarks, on my as you, of drop there two

That's We’re We’ve from tenants a in necessarily tech asset has I’d Austin. tenants, financial and interest variety firms. Northwest say, always other there. types not continued very Bridgepoint in strong attracted of our to tenants. good see And seeing primarily of interest, service

Boston, the good market. et not tight BT windows, there. a asset numbers. downtown time. competitive floor so in we’ve interest say manufacturing then And Americas same got more we’re tend they’re market. said, a Washington, as H be looking of is a very the And That now our vacated multiple to is at plates, get a is prospect, more that quarter Good I’d space in the law It a when activity we’re terms special I to yesterday seeing. associations is was firms, reflected XXXX plant, great we in built working there. Georgetown. D.C. those in And D.C., there, actually, cetera, Boston end cheap smaller available, in XXXXs. tenants early open buildings very That extend big at

Operator

[Operator questions to and no at time, for this Instructions] remarks. more call We’re turn David I’ll receiving back Helfand closing the

David Helfand

see most September. your Thank and we’ll you We thank interest you. of your for in you time in EQC, and

Operator

Please conference. today’s concludes disconnect wonderful This your day. you. lines And Thank time. a at have this

Equity Commonwealth (EQC) 4 Aug 192019 Q2 Earnings call transcript