Equity Commonwealth (EQC) Q3 2024 earnings summary

Executive summary

• Three major properties (two in Austin, one in DC) are under contract and held for sale, with closings expected to begin in early November; buyers have posted nonrefundable deposits.

• Board approved a plan to wind down operations and liquidate assets, with a shareholder vote set for November 12, 2024.

• Portfolio consists of four office properties (eight buildings) totaling 1.5 million sq. ft., 69.7% leased as of September 30, 2024.

• $50.2 million in non-cash impairment charges recognized this quarter related to properties held for sale.

• No new leases signed during the quarter; leasing activity remains slow due to remote/hybrid work trends.

Financial highlights

• Q3 2024 total revenues were $13.99 million, down from $15.21 million in Q3 2023.

• Net loss attributable to common shareholders was $28.2 million for Q3 2024, compared to net income of $24.1 million in Q3 2023, mainly due to a $50.2 million asset impairment loss.

• Adjusted/Normalized FFO for Q3 2024 was $27.4 million ($0.25 per diluted share), down from $28.6 million ($0.26 per diluted share) in Q3 2023.

• Total expected proceeds from the three sales plus Denver remain consistent with the $234 million estimate previously discussed.

• Estimated total distributions from the plan of sale are in the $19.50–$21 per share range, with an initial common distribution of $18–$19 per share planned for early December, subject to board approval and status of dispositions.

Outlook and guidance

• If the plan of sale is approved, the company will adopt liquidation basis accounting and distribute net proceeds to shareholders.

• All remaining assets are expected to be sold by the end of Q1 2025, with substantially all remaining cash distributed thereafter.

• NYSE delisting and SEC deregistration are expected in Q2 2025, with a full wind down targeted by the end of that quarter.

• Company expects to maintain REIT status through 2024 and 2025.

• Cash balances, operations, and asset sale proceeds expected to fund all obligations and distributions.