Equity Commonwealth - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - May 3, 2017

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Exhibit 99.2




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Supplemental Operating and Financial Data

First Quarter 2017








Corporate Headquarters                                Investor Relations
Two North Riverside Plaza                                Sarah Byrnes
Suite 2100                                        (312) 646-2801
Chicago, IL 60606                                    ir@eqcre.com
(312) 646-2800                                        www.eqcre.com







TABLE OF CONTENTS

Corporate Information
 
Company Profile and Investor Information
 
 
 
Financial Information
 
Key Financial Data
 
Condensed Consolidated Balance Sheets
 
Additional Balance Sheet Information
 
Condensed Consolidated Statements of Operations
 
Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI
 
Same Property Results of Operations
 
Calculation of EBITDA and Adjusted EBITDA
 
Calculation of Funds from Operations (FFO) and Normalized FFO
 
Debt Summary
 
Debt Maturity Schedule
 
Leverage Ratios, Coverage Ratios and Public Debt Covenants
 
Acquisitions and Dispositions
 
 
 
Portfolio Information
 
Top Properties by Annualized Rental Revenue
 
Leasing Summary
 
Same Property Leasing Summary
 
Capital Summary - Expenditures & Leasing Commitments
 
Tenants Representing 1.5% or More of Annualized Rental Revenue
 
Same Property Lease Expiration Schedule
 
Property Detail
 
Disposed Property Detail
 
 
 
Additional Support
 
Common & Potential Common Shares
 
Definitions
 
 
 
Forward-Looking Statements
 
 
 
Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws. Any forward-looking statements contained in this presentation are intended to be made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations and anticipated market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
 
 
 
The forward-looking statements contained in this presentation reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the sections entitled “Risk Factors” in our most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q.

2

COMPANY PROFILE AND INVESTOR INFORMATION

Equity Commonwealth (NYSE: EQC) is an internally managed and self-advised real estate investment trust (REIT) with commercial office properties throughout the United States.
Same Property Statistics
No. of
 
 
 
 Properties
Sq. Feet
% Leased
% Commenced
28
14,593
89.0%
86.3%
 Senior Unsecured Debt Ratings
 
 
 NYSE Trading Symbols
 Moody's: Baa3
 
 
 Common Stock: EQC
 Standard & Poor's: BBB-
 
 
 Preferred Stock Series D: EQCPD
 
 
 
 5.75% Senior Notes due 2042: EQCO
Board of Trustees
Sam Zell (Chairman)
 
David A. Helfand
 
Kenneth Shea
James S. Corl
 
Peter Linneman (Lead Independent Trustee)
 
Gerald A. Spector
Martin L. Edelman
 
James L. Lozier, Jr.
 
James A. Star
Edward A. Glickman
 
Mary Jane Robertson
 
 
 
 
 
 
 
Senior Management
David A. Helfand
 
David S. Weinberg
 
 
President and Chief Executive Officer
 
Executive Vice President and
 
 
 
 
Chief Operating Officer
 
 
 
 
 
 
 
Adam S. Markman
 
Orrin S. Shifrin
 
 
Executive Vice President,
 
Executive Vice President,
 
 
Chief Financial Officer and Treasurer
 
General Counsel and Secretary
 
 
Equity Research Coverage (1)
Bank of America / Merrill Lynch
James Feldman
(646) 855-5808
james.feldman@baml.com
Citigroup
Michael Bilerman
(212) 816-1383
michael.bilerman@citi.com
Green Street Advisors
Jed Reagan
(949) 640-8780
jreagan@greenstreetadvisors.com
JMP Securities
Mitch Germain
(212) 906-3546
mgermain@jmpsecurities.com
Stifel Nicolaus
John Guinee
(443) 224-1307
jwguinee@stifel.com
 
 
 
 
Debt Research Coverage (1)
Credit Suisse
John Giordano
(212) 538-4935
john.giordano@credit-suisse.com
J.P.Morgan
Mark Streeter
(212) 834-5086
mark.streeter@jpmorgan.com
Wells Fargo Securities
Thierry Perrein
(704) 410-3262
thierry.perrein@wellsfargo.com
 
 
 
 
Rating Agencies (1)
Moody's Investors Service
Lori Marks
(212) 553-1098
lori.marks@moodys.com
Standard & Poor's
Anita Ogbara
(212) 438-5077
anita.ogbara@standardandpoors.com

Certain terms are defined in the definitions section of this document.
 
 
(1)
Any opinions, estimates or forecasts regarding EQC's performance made by these analysts or agencies do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts and agencies above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts or agencies.

3

KEY FINANCIAL DATA
(amounts in thousands, except per share data)

 
 
As of and for the Three Months Ended
 
 
3/31/2017

 
12/31/2016

 
9/30/2016

 
6/30/2016

 
3/31/2016

OPERATING INFORMATION
 
Ending property count (1)
28

 
33

 
37

 
45

 
60

 
Ending square footage (1)(2)
14,593

 
16,053

 
16,710

 
20,675

 
23,037

 
Percent leased (1)
89.0
 %
 
91.1
 %
 
91.2
 %
 
90.3
 %
 
91.4
 %
 
Total revenues
$
99,551

 
$
103,546

 
$
114,632

 
$
145,367

 
$
137,135

 
Net income
23,822

 
12,260

 
86,388

 
87,844

 
46,402

 
Net income attributable to EQC common shareholders
21,817

 
10,263

 
84,391

 
71,254

 
39,421

 
NOI (3)
58,464

 
60,804

 
65,319

 
93,974

 
79,877

 
Cash Basis NOI (3)
52,939

 
55,963

 
61,422

 
74,809

 
76,856

 
Adjusted EBITDA (3)
50,758

 
52,461

 
54,917

 
84,036

 
69,634

 
NOI margin
58.7
 %
 
58.7
 %
 
57.0
 %
 
64.6
 %
 
58.2
 %
 
Cash Basis NOI margin
56.3
 %
 
56.7
 %
 
55.5
 %
 
59.3
 %
 
57.3
 %
 
FFO attributable to EQC common shareholders and unitholders (3)
33,273

 
28,077

 
31,129

 
45,679

 
38,799

 
Normalized FFO attributable to EQC common shareholders and unitholders (3)
29,459

 
29,601

 
28,919

 
53,591

 
37,314

SHARES OUTSTANDING AND PER SHARE DATA (4)
 
Shares Outstanding at End of Period
 
 
 
 
 
 
 
 
 
 
Common stock outstanding - basic (includes unvested restricted shares)
124,064

 
123,994

 
125,533

 
125,533

 
125,503

 
Dilutive restricted share units ("RSUs") and LTIP Units(4)
1,165

 
1,027

 
1,035

 
1,429

 
1,754

 
Dilutive Series D Convertible Preferred Shares outstanding(5)
—

 
—

 
—

 
—

 
—

 
Preferred Stock outstanding (5) (6)
4,915

 
4,915

 
4,915

 
4,915

 
15,915

 
Weighted Average Shares Outstanding - GAAP
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
124,047

 
125,021

 
125,533

 
125,508

 
125,840

 
Weighted average common shares outstanding - diluted
125,150

 
126,048

 
126,568

 
126,937

 
127,522

 
Net income attributable to EQC common shareholders - basic
$
0.18

 
$
0.08

 
$
0.67

 
$
0.57

 
$
0.31

 
Net income attributable to EQC common shareholders - diluted
0.17

 
0.08

 
0.67

 
0.56

 
0.31

 
Normalized FFO(3) attributable to EQC common shareholders and unitholders - diluted
0.24

 
0.23

 
0.23

 
0.42

 
0.29

BALANCE SHEET
 
Total assets
$
4,518,756

 
$
4,526,075

 
$
4,965,767

 
$
4,911,775

 
$
5,103,149

 
Total liabilities
1,232,231

 
1,265,628

 
1,676,727

 
1,713,137

 
1,715,778

ENTERPRISE VALUE
 
Total debt (book value)
$
1,141,628

 
$1,141,667
 
$1,557,260
 
$1,557,557
 
$
1,557,839

 
Less: Cash and cash equivalents
(1,888,537
)
 
(2,094,674
)
 
(2,405,174
)
 
(1,772,337
)
 
(1,742,128
)
 
Plus: Market value of preferred shares (at end of period)
125,632

 
125,731

 
133,202

 
128,434

 
402,991

 
Plus: Market value of diluted common shares (at end of period)
3,909,662

 
3,780,649

 
3,824,864

 
3,698,408

 
3,591,179

 
Total enterprise value
$
3,288,385

 
$
2,953,373

 
$
3,110,152

 
$
3,612,062

 
$
3,809,881

RATIOS
 
Net debt / enterprise value
(22.7
)%
 
(32.3
)%
 
(27.3
)%
 
(5.9
)%
 
(4.8
)%
 
Net debt / annualized adjusted EBITDA (3)
(3.7)x

 
(4.5)x

 
(3.9)x

 
(0.6)x

 
(0.7)x

 
Adjusted EBITDA (3) / interest expense
3.4x

 
2.7x

 
2.6x

 
3.9x

 
3.1x

(1)
Excludes properties classified as held for sale. As of December 31, 2016, land parcels are excluded from the property count.
(2)
Changes in total square footage result from remeasurement and property dispositions and reclassifications.
(3)
Non-GAAP financial measures are defined and reconciled to the most directly comparable GAAP measure, herein.
(4)
Restricted share units ("RSUs") and LTIP Units are equity awards that contain both service and market-based vesting components. None of the RSUs or LTIP Units have vested. Refer to the schedule of Common & Potential Common Shares for information regarding RSUs and LTIP Units and their impact on weighted average shares outstanding.
(5)
As of March 31, 2017, we had 4,915 series D preferred shares outstanding that were convertible into 2,363 common shares. We exclude these shares from dilutive shares outstanding on March 31, 2017, given this conversion ratio relative to our current common stock price. Refer to the schedule of Common & Potential Common Shares for information regarding the series D preferred shares and their impact on diluted weighted average shares outstanding for EPS, FFO per share and Normalized FFO per share.
(6)
On May 15, 2016, we redeemed all of our 11,000,000 outstanding series E preferred shares at a price of $25.00 per share, plus any accrued and unpaid dividends. The redemption payment occurred on May 16, 2016 (the first business day following the redemption date).

4

CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)

 
March 31, 2017
 
December 31, 2016
ASSETS
 
 
 
Real estate properties:
 
 
 
Land
$
269,062

 
$
286,186

Buildings and improvements
2,395,748

 
2,570,704

 
2,664,810

 
2,856,890

Accumulated depreciation
(705,000
)
 
(755,255
)
 
1,959,810

 
2,101,635

Properties held for sale
64,396

 
—

Acquired real estate leases, net
45,482

 
48,281

Cash and cash equivalents
1,888,537

 
2,094,674

Marketable securities
275,597

 
—

Restricted cash
6,155

 
6,532

Rents receivable, net of allowance for doubtful accounts of $4,593 and $5,105, respectively
152,081

 
152,031

Other assets, net
126,698

 
122,922

Total assets
$
4,518,756

 
$
4,526,075

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Revolving credit facility
$
—

 
$
—

Senior unsecured debt, net
1,064,450

 
1,063,950

Mortgage notes payable, net
77,178

 
77,717

Liabilities related to properties held for sale
1,013

 
—

Accounts payable and accrued expenses
62,518

 
95,395

Assumed real estate lease obligations, net
1,630

 
1,946

Rent collected in advance
18,485

 
18,460

Security deposits
6,957

 
8,160

Total liabilities
$
1,232,231

 
$
1,265,628

 
 
 
 
Shareholders' equity:
 
 
 
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

Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 124,064,195 and 123,994,465 shares issued and outstanding, respectively
1,240

 
1,240

Additional paid in capital
4,367,190

 
4,363,177

Cumulative net income
2,590,417

 
2,566,603

Cumulative other comprehensive loss
(1,002
)
 
(208
)
Cumulative common distributions
(3,111,868
)
 
(3,111,868
)
Cumulative preferred distributions
(679,757
)
 
(677,760
)
Total shareholders’ equity
3,285,483

 
3,260,447

Noncontrolling interest
1,042

 
—

Total equity
$
3,286,525

 
$
3,260,447

Total liabilities and equity
$
4,518,756

 
$
4,526,075



5

ADDITIONAL BALANCE SHEET INFORMATION
(amounts in thousands)

 
March 31, 2017
December 31, 2016
Additional Balance Sheet Information
 
 
 
 
 
Straight-line rents receivable, net of allowance for doubtful accounts
$
141,768

$
141,637

Accounts receivable, net of allowance for doubtful accounts
10,313

10,394

Rents receivable, net of allowance for doubtful accounts
$
152,081

$
152,031

 
 
 
Capitalized lease incentives, net
$
7,585

$
7,664

Deferred financing fees, net
2,961

3,365

Deferred leasing costs, net
88,212

92,623

Other
27,940

19,270

Other assets, net
$
126,698

$
122,922

 
 
 
Accounts payable
$
8,915

$
5,159

Accrued interest
7,281

15,265

Accrued taxes
18,031

26,819

Accrued capital expenditures
6,872

11,138

Accrued leasing costs
3,494

10,828

Other accrued liabilities
17,925

26,186

Accounts payable and accrued expenses
$
62,518

$
95,395



6

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)

 
Three Months Ended
 
March 31,
 
2017
 
2016
Revenues:
 
 
 
Rental income
$
80,205

 
$
109,888

Tenant reimbursements and other income
19,346

 
27,247

Total revenues
$
99,551

 
$
137,135

 
 
 
 
Expenses:
 
 
 
Operating expenses
$
41,087

 
$
57,258

Depreciation and amortization
26,915

 
36,251

General and administrative (1)
12,078

 
13,312

Loss on asset impairment
1,286

 
—

Total expenses
$
81,366

 
$
106,821

 
 
 
 
Operating income
$
18,185

 
$
30,314

 
 
 
 
Interest and other income
4,372

 
1,967

Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $713 and $983, respectively)
(15,014
)
 
(22,347
)
Loss on early extinguishment of debt
—

 
(118
)
Foreign currency exchange loss
—

 
(5
)
Gain on sale of properties, net
16,454

 
36,666

Income before income taxes
23,997

 
46,477

Income tax expense
(175
)
 
(75
)
Net income
$
23,822

 
$
46,402

Net income attributable to noncontrolling interest
(8
)
 
—

Net income attributable to Equity Commonwealth
$
23,814

 
$
46,402

Preferred distributions
(1,997
)
 
(6,981
)
Net income attributable to Equity Commonwealth common shareholders
$
21,817

 
$
39,421

Weighted average common shares outstanding — basic (2)
124,047

 
125,840

Weighted average common shares outstanding — diluted (2)
125,150

 
127,522

 
 
 
 
Earnings per common share attributable to Equity Commonwealth common shareholders:
 
 
 
Basic
$
0.18

 
$
0.31

Diluted
$
0.17

 
$
0.31

(1
)
2016 General and administrative includes transition related expenses of $1.1 million. Transition related expenses are primarily related to the shareholder-approved liability for the reimbursement of expenses incurred by Related Fund Management, LLC and Corvex Management LP (Related/Corvex) beginning in February 2013 in connection with their consent solicitations to remove the former Trustees, elect the new Board of Trustees and engage in related litigation. Approximately $16.7 million was reimbursed to Related/Corvex during 2014, and in August 2016 and 2015, we reimbursed $8.2 million and $8.4 million, respectively, to Related/Corvex under the terms of the shareholder-approved agreement. No transition related expenses were incurred during 2017. There is no future obligation to pay any amounts under the shareholder-approved agreement to Related/Corvex.
(2
)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.



7

CALCULATION OF SAME PROPERTY NET OPERATING INCOME (NOI) AND SAME PROPERTY CASH BASIS NOI
(amounts in thousands)

 
For the Three Months Ended
 
March 31,
 
2017
 
2016
Calculation of Same Property NOI and Same Property Cash Basis NOI:
 
 
 
Rental income
$
80,205

 
$
109,888

Tenant reimbursements and other income
19,346

 
27,247

Operating expenses
(41,087
)
 
(57,258
)
NOI
$
58,464

 
$
79,877

Straight line rent adjustments
(4,387
)
 
(3,831
)
Lease value amortization
573

 
1,121

Lease termination fees
(1,711
)
 
(311
)
Cash Basis NOI
$
52,939

 
$
76,856

Cash Basis NOI from non-same properties (1)
(3,160
)
 
(27,004
)
Same Property Cash Basis NOI
$
49,779

 
$
49,852

Non-cash rental income and lease termination fees from same properties
4,057

 
2,215

Same Property NOI
$
53,836

 
$
52,067

 
 
 
 
Reconciliation of Same Property NOI to GAAP Operating Income:
 
 
 
Same Property NOI
$
53,836

 
$
52,067

Non-cash rental income and lease termination fees from same properties
(4,057
)
 
(2,215
)
Same Property Cash Basis NOI
$
49,779

 
$
49,852

Cash Basis NOI from non-same properties (1)
3,160

 
27,004

Cash Basis NOI
$
52,939

 
$
76,856

Straight line rent adjustments
4,387

 
3,831

Lease value amortization
(573
)
 
(1,121
)
Lease termination fees
1,711

 
311

NOI
$
58,464

 
$
79,877

Depreciation and amortization
(26,915
)
 
(36,251
)
General and administrative (2)
(12,078
)
 
(13,312
)
Loss on asset impairment
(1,286
)
 
—

Operating Income
$
18,185

 
$
30,314

(1)
Cash Basis NOI from non-same properties for all periods presented includes the operations of properties disposed or classified as held for sale and land parcels.
(2)
2016 General and administrative includes transition related expenses of $1.1 million. Transition related expenses are primarily related to the shareholder-approved liability for the reimbursement of expenses incurred by Related/Corvex beginning in February 2013 in connection with their consent solicitations to remove the former Trustees, elect the new Board of Trustees and engage in related litigation. Approximately $16.7 million was reimbursed to Related/Corvex during 2014, and in August 2016 and 2015, we reimbursed $8.2 million and $8.4 million, respectively, to Related/Corvex under the terms of the shareholder-approved agreement. No transition related expenses were incurred during 2017. There is no future obligation to pay any amounts under the shareholder-approved agreement to Related/Corvex.

8

SAME PROPERTY RESULTS OF OPERATIONS
(dollars and square feet in thousands)


 
As of and for the Three Months Ended March 31,
 
2017
 
2016
 
% Change
Properties
28

 
28

 
 
Square Feet(1)
14,593

 
14,578

 
 
% Leased
89.0
%
 
91.6
%
 
(2.6
)%
% Commenced
86.3
%
 
88.0
%
 
(1.7
)%
 
 
 
 
 
 
Rents, tenant reimbursements and other income
$
88,214

 
$
86,730

 
1.7
 %
Straight line rent adjustment
4,529

 
2,729

 
 
Lease value amortization
(574
)
 
(627
)
 
 
Lease termination fees
102

 
113

 
 
Total revenue
92,271

 
88,945

 
3.7
 %
Operating expenses
(38,435
)
 
(36,878
)
 
4.2
 %
NOI
$
53,836

 
$
52,067

 
3.4
 %
NOI Margin
58.3
%
 
58.5
%
 
 
 
 
 
 
 
 
Straight line rent adjustment
$
(4,529
)
 
$
(2,729
)
 
 
Lease value amortization
574

 
627

 
 
Lease termination fees
(102
)
 
(113
)
 
 
Cash Basis NOI
$
49,779

 
$
49,852

 
(0.1
)%
Cash Basis NOI Margin
56.4
%
 
57.5
%
 
 
 
 
 
 
 
 

(1
)
The change in total square footage results from remeasurement.


9

CALCULATION OF EBITDA AND ADJUSTED EBITDA
(amounts in thousands)


 
For the Three Months Ended
 
March 31,
 
2017
 
2016
Net income
$
23,822

 
$
46,402

Interest expense
15,014

 
22,347

Income tax expense
175

 
75

Depreciation and amortization
26,915

 
36,251

EBITDA
$
65,926

 
$
105,075

Loss on asset impairment
1,286

 
—

Loss on early extinguishment of debt
—

 
118

Transition-related expenses
—

 
1,102

Gain on sale of properties
(16,454
)
 
(36,666
)
Foreign currency exchange loss
—

 
5

Adjusted EBITDA
$
50,758

 
$
69,634




10

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO
(amounts in thousands, except per share data)

 
Three Months Ended
 
March 31,
 
2017
 
2016
Calculation of FFO
 
 
 
Net income
$
23,822

 
$
46,402

Real estate depreciation and amortization
26,616

 
36,044

Loss on asset impairment
1,286

 
—

Gain on sale of properties
(16,454
)
 
(36,666
)
FFO attributable to Equity Commonwealth
35,270

 
45,780

Preferred distributions
(1,997
)
 
(6,981
)
FFO attributable to EQC common shareholders and unitholders
$
33,273

 
$
38,799

 
 
 
 
Calculation of Normalized FFO
 
 
 
FFO attributable to EQC common shareholders and unitholders
$
33,273

 
$
38,799

Lease value amortization
573

 
1,121

Straight line rent adjustments
(4,387
)
 
(3,831
)
Loss on early extinguishment of debt
—

 
118

Transition related expenses (1)
—

 
1,102

Foreign currency exchange loss
—

 
5

Normalized FFO attributable to EQC common shareholders and unitholders
$
29,459

 
$
37,314

 
 
 
 
Weighted average common shares and units outstanding -- basic (2)
124,076

 
125,840

Weighted average common shares and units outstanding -- diluted (2)
125,150

 
127,522

FFO attributable to EQC common shareholders and unitholders per share -- basic
$
0.27

 
$
0.31

FFO attributable to EQC common shareholders and unitholders per share -- diluted
$
0.27

 
$
0.30

Normalized FFO attributable to EQC common shareholders and unitholders per share -- basic
$
0.24

 
$
0.30

Normalized FFO attributable to EQC common shareholders and unitholders per share -- diluted
$
0.24

 
$
0.29

(1)
Transition related expenses are primarily related to the shareholder-approved liability for the reimbursement of expenses incurred by Related/Corvex beginning in February 2013 in connection with their consent solicitations to remove the former Trustees, elect the new Board of Trustees and engage in related litigation. Approximately $16.7 million was reimbursed to Related/Corvex during 2014, and in August 2016 and 2015, we reimbursed $8.2 million and $8.4 million, respectively, to Related/Corvex under the terms of the shareholder-approved agreement. No transition related expenses were incurred during 2017. There is no future obligation to pay any amounts under the shareholder-approved agreement to Related/Corvex.
(2)
Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

11
DEBT SUMMARY
As of March 31, 2017
(dollars in thousands)

 
Interest Rate
 
Principal Balance
 
Maturity Date
Open at Par Date
 
Due at Maturity
 
Years to Maturity
Unsecured Debt:
 
 
 
 
 
 
 
 
 
 
Unsecured Floating Rate Debt:
 
 
 
 
 
 
 
 
 
 
Revolving credit facility (LIBOR + 125 bps) (1)
2.23
%
 
$
—

 
1/28/2019
Open
 
$
—

 
1.8

Term loan (LIBOR + 140 bps) (2)
2.38
%
 
200,000

 
1/28/2020
Open
 
200,000

 
2.8

Term loan (LIBOR + 180 bps) (2)
2.78
%
 
200,000

 
1/28/2022
Open
 
200,000

 
4.8

Total / weighted average unsecured floating rate debt
2.58
%
 
$
400,000

 
 
 
 
$
400,000

 
3.8

 
 
 
 
 
 
 
 
 
 
 
Unsecured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
6.65% Senior Unsecured Notes Due 2018
6.65
%
 
$
250,000

 
1/15/2018
7/15/2017
 
$
250,000

 
0.8

5.875% Senior Unsecured Notes Due 2020
5.88
%
 
250,000

 
9/15/2020
3/15/2020
 
250,000

 
3.5

5.75% Senior Unsecured Notes Due 2042 (3)
5.75
%
 
175,000

 
8/1/2042
8/1/2017
 
175,000

 
25.4

Total / weighted average unsecured fixed rate debt
6.13
%
 
$
675,000

 
 
 
 
$
675,000

 
8.1

 
 
 
 
 
 
 
 
 
 
 
Secured Debt:
 
 
 
 
 
 
 
 
 
 
Secured Fixed Rate Debt:
 
 
 
 
 
 
 
 
 
 
Parkshore Plaza (4)
5.67
%
 
$
41,275

 
5/1/2017
12/1/2016
 
$
41,275

 
0.1

206 East 9th Street
5.69
%
 
26,912

 
1/5/2021
7/5/2020
 
24,836

 
3.8

33 Stiles Lane
6.75
%
 
2,318

 
3/1/2022
12/1/2021
 
—

 
4.9

97 Newberry Road
5.71
%
 
5,781

 
3/1/2026
None
 
—

 
8.9

Total / weighted average secured fixed rate debt
5.71
%
 
$
76,286

 
 
 
 
$
66,111

 
2.2

 
 
 
 
 
 
 
 
 
 
 
Total / weighted average (5)
4.87
%
 
$
1,151,286

 
 
 
 
$
1,141,111

 
6.3

 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Represents amounts outstanding on EQC's $750,000 revolving credit facility as of March 31, 2017. The interest rate presented is as of March 31, 2017, and equals LIBOR plus 1.25%. We also pay a 25 basis point facility fee annually. The spread over LIBOR and the facility fee vary depending upon EQC's credit rating.
(2)
Represents amounts outstanding on EQC's term loans as of March 31, 2017. The interest rate presented is as of March 31, 2017, and equals LIBOR plus 1.4% for the loan maturing on January 28, 2020, and LIBOR plus 1.8% for the loan maturing January 28, 2022. The spreads over LIBOR vary depending upon EQC's credit rating. We entered into an interest rate cap with coverage effective April 1, 2016 that caps LIBOR at 2.5% until March 1, 2019.
(3)
The 5.75% senior unsecured notes due 2042 are callable at par on or after August 1, 2017.
(4)
As of March 31, 2017, the Company guaranteed $2.3 million of this non-recourse loan. In April 2017, we repaid at par $41.3 million of mortgage debt at Parkshore Plaza in connection with the sale of the property.
(5)
Total debt outstanding as of March 31, 2017, including net unamortized premiums, discounts, and deferred financing fees was $1,141,628. Net unamortized deferred financing fees related to our revolving credit facility of $2,961 are included in other assets, net on our condensed consolidated balance sheets as of March 31, 2017.

12

DEBT MATURITY SCHEDULE
(dollars in thousands)

Scheduled Principal Payments During Period
Year
Unsecured Floating Rate Debt
 
Unsecured Fixed Rate Debt
 
Secured Fixed Rate Debt
 
Total
 
Weighted Average Interest Rate
 
 
 
 
 
 
 
 
 
 
2017
$
—

 
$
—

 
$
42,328

(1) 
$
42,328

 
5.7
%
2018
—

 
250,000

 
1,487

 
251,487

 
6.6
%
2019
—

 
—

 
1,580

 
1,580

 
6.0
%
2020
200,000

(2) 
250,000

 
1,674

 
451,674

 
4.3
%
2021
—

 
—

 
25,982

 
25,982

 
5.7
%
2022
200,000

(2) 
—

 
799

 
200,799

 
2.8
%
2023
—

 
—

 
702

 
702

 
5.7
%
2024
—

 
—

 
743

 
743

 
5.7
%
2025
—

 
—

 
787

 
787

 
5.7
%
2026
—

 
—

 
204

 
204

 
5.7
%
Thereafter
—

 
175,000

(3) 
—

 
175,000

 
5.8
%
Total
$
400,000

 
$
675,000

 
$
76,286


$
1,151,286

(4) 
4.9
%
 
 
 
 
 
 
 
 
 
 
Percent
34.7
%
 
58.6
%
 
6.6
%
 
100.0
%
 
 
(1)
In April 2017, we repaid at par $41.3 million of mortgage debt at Parkshore Plaza in connection with the sale of the property.
(2)
Represents amounts outstanding on EQC's term loans as of March 31, 2017. The interest rate presented is as of March 31, 2017, and equals LIBOR plus 1.4% for the loan maturing on January 28, 2020, and LIBOR plus 1.8% for the loan maturing January 28, 2022. The spreads over LIBOR vary depending upon EQC's credit rating. We entered into an interest rate cap with coverage effective April 1, 2016 that caps LIBOR at 2.5% until March 1, 2019.
(3)
The 5.75% senior unsecured notes due 2042 are callable at par on or after August 1, 2017.
(4)
Total debt outstanding as of March 31, 2017, including net unamortized premiums, discounts, and deferred financing fees was $1,141,628. Net unamortized deferred financing fees related to our revolving credit facility of $2,961 are included in other assets, net on our condensed consolidated balance sheets as of March 31, 2017.

13

LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS
(dollars in thousands)

 
As of and for the Three Months Ended
 
3/31/2017

 
12/31/2016

 
9/30/2016

 
6/30/2016

 
3/31/2016

Leverage Ratios
 
 
 
 
 
 
 
 
 
Total debt / total assets
25.3
 %
 
25.2
 %
 
31.4
 %
 
31.7
 %
 
30.5
 %
Total debt / total market capitalization
22.1
 %
 
22.6
 %
 
28.2
 %
 
28.9
 %
 
28.1
 %
Total debt + preferred stock / total market capitalization
24.5
 %
 
25.1
 %
 
30.7
 %
 
31.3
 %
 
35.3
 %
Total debt / annualized adjusted EBITDA (1)
5.6x

 
5.4x

 
7.1x

 
4.6x

 
5.6x

Total debt + preferred stock / annualized adjusted EBITDA (1)
6.2x

 
6.0x

 
7.7x

 
5.0x

 
7.0x

Net debt / enterprise value
(22.7
)%
 
(32.3
)%
 
(27.3
)%
 
(5.9
)%
 
(4.8
)%
Net debt + preferred stock / enterprise value
(18.9
)%
 
(28.0
)%
 
(23.0
)%
 
(2.4
)%
 
5.7
 %
Net debt / annualized adjusted EBITDA (1)
(3.7)x

 
(4.5)x

 
(3.9)x

 
(0.6)x

 
(0.7)x

Net debt + preferred stock / annualized adjusted EBITDA (1)
(3.1)x

 
(3.9)x

 
(3.3)x

 
(0.3)x

 
0.8x

Secured debt / total assets
1.7
 %
 
1.7
 %
 
4.9
 %
 
5.0
 %
 
4.8
 %
Variable rate debt (2) / total debt
35.0
 %
 
35.0
 %
 
25.7
 %
 
25.7
 %
 
25.7
 %
Variable rate debt (2) / total assets
8.9
 %
 
8.8
 %
 
8.1
 %
 
8.1
 %
 
7.8
 %
 
 
 
 
 
 
 
 
 
 
Coverage Ratios
 
 
 
 
 
 
 
 
 
Adjusted EBITDA / interest expense (1)
3.4x

 
2.7x

 
2.6x

 
3.9x

 
3.1x

Adjusted EBITDA / interest expense + preferred distributions (1)
3.0x

 
2.5x

 
2.3x

 
3.0x

 
2.4x

 
 
 
 
 
 
 
 
 
 
Public Debt Covenants
 
 
 
 
 
 
 
 
 
Debt / adjusted total assets (3) (maximum 60%)
22.3
 %
 
21.9
 %
 
27.6
 %
 
27.2
 %
 
26.4
 %
Secured debt / adjusted total assets (3) (maximum 40%)
1.5
 %
 
1.5
 %
 
4.3
 %
 
4.3
 %
 
4.1
 %
Consolidated income available for debt service / debt service (minimum 1.5x)
3.2x

 
3.3x

 
2.3x

 
3.0x

 
3.1x

Total unencumbered assets (3) / unsecured debt (minimum 150% / 200%)
468.3
 %
 
475.9
 %
 
392.0
 %
 
399.2
 %
 
412.7
 %
(1)
Refer to the calculation of EBITDA and Adjusted EBITDA for a reconciliation of these measures to Net income.
(2)
We entered into an interest rate cap with coverage effective April 1, 2016 that caps LIBOR at 2.5% until March 1, 2019.
(3)
Adjusted total assets and total unencumbered assets includes original cost of real estate assets plus capital improvements, both calculated in accordance with GAAP, and excludes depreciation and amortization, accounts receivable, other intangible assets and impairment write downs, if any.

14

ACQUISITIONS AND DISPOSITIONS
(dollars in thousands)

Acquisitions
None
Dispositions
Property/Portfolio
City
State
No. of Properties
Sq. Feet (1)
 
% Leased(1)
 
Gross Sales Price
 
Net Book Value (1)
 
Annualized Rental Revenue (1)
111 Market Place
Baltimore
MD
1

589,380

 
95.4
%
 
$
60,100

(2) 
$
44,199

 
$
12,583

Seton Center
Austin
TX
2

237,824

 
95.6
%
 
52,450

 
27,141

 
6,295

Cabot Business Park Land
Mansfield
MA
—

—

 
—
%
 
575

 
575

 
—

Total Q1 Dispositions
 
3

827,204

 
95.4
%
 
$
113,125

 
$
71,915

 
$
18,878

 
 
 
 
 
 
 
 
 
 
 
 
 
The dispositions above resulted in a gain on sale of properties of $16.5 million for the three months ended March 31, 2017.
      
(1
)
As of the quarter-ended preceding each sale.
(2
)
Proceeds from the sale of 111 Market Place were $44.1 million net of credits for contractual lease costs, capital and rent abatements.


15
TOP PROPERTIES BY ANNUALIZED RENTAL REVENUE (1) 
As of March 31, 2017
(sorted by annualized rental revenue, dollars in thousands)

Property
City
State
No. of Buildings
Square Feet
% Leased
% Comm-enced
Annualized Rental Revenue
Undepreciated Book Value
Net Book Value
Year Acquired
Weighted Average Year Built or Substantially Renovated (2)
1
600 West Chicago Avenue
Chicago
IL
2

1,511,887
96.7
%
96.7
%
$
49,480

$
395,899

$
347,029

2011
2001
2
1500 Market Street
Philadelphia
PA
1

1,759,193
91.2
%
82.7
%
39,017

309,800

218,954

2002
1974
3
1735 Market Street
Philadelphia
PA
1

1,286,936
74.7
%
64.9
%
26,985

303,529

183,298

1998
1990
4
1225 Seventeenth Street
Denver
CO
1

672,573
80.9
%
78.3
%
21,282

157,827

130,514

2009
1982
5
333 108th Avenue NE
Bellevue
WA
1

440,565
100.0
%
100.0
%
20,840

153,433

126,730

2009
2008
6
1600 Market Street
Philadelphia
PA
1

825,968
85.3
%
85.3
%
19,758

135,860

76,683

1998
1983
7
6600 North Military Trail
Boca Raton
FL
3

639,825
100.0
%
100.0
%
16,994

145,808

125,525

2011
2008
8
8750 Bryn Mawr Avenue
Chicago
IL
2

638,928
95.0
%
83.9
%
15,373

94,245

79,133

2010
2005
9
Bridgepoint Square
Austin
TX
5

439,970
93.0
%
93.0
%
13,711

91,693

51,273

1997
1995
10
Research Park
Austin
TX
4

1,110,007
98.0
%
98.0
%
11,853

93,453

60,496

1998
1976
11
Foster Plaza
Pittsburgh
PA
8

727,743
84.4
%
82.5
%
11,788

76,341

54,178

2005
1993
12
109 Brookline Avenue
Boston
MA
1

285,556
99.7
%
99.7
%
10,785

47,878

27,283

1995
1915
13
1250 H Street, NW
Washington
DC
1

196,489
94.2
%
90.0
%
9,137

74,043

45,032

1998
1992
14
1601 Dry Creek Drive
Longmont
CO
1

552,865
97.0
%
97.0
%
8,973

34,550

24,319

2004
1982
15
600 108th Avenue NE
Bellevue
WA
1

256,830
96.2
%
96.2
%
8,106

50,797

36,740

2004
2012
 
Subtotal (15 properties)
 
 
33

11,345,335

91.0
%
87.6
%
$
284,082

$
2,165,156

$
1,587,187

 
 
 
All other properties (13 properties)
 
23

3,248,089

81.9
%
81.7
%
53,174

499,654

372,623

 
 
 
Total (28 properties)
 
56

14,593,424

89.0
%
86.3
%
$
337,256

$
2,664,810

$
1,959,810

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Property NOI & Cash Basis NOI Composition
Q1 2017 NOI
% of NOI
Q1 2017 Cash Basis NOI
% of Cash Basis NOI
 
 
 
 
 
 
Top 15 Properties
 
 
$
44,377

82.4
%
$
39,808

80.0
%
 
 
 
 
 
 
All other properties (13 properties)
 
9,459

17.6
%
9,971

20.0
%
 
 
 
 
 
 
Total (28 properties)
 
 
$
53,836

100.0
%
$
49,779

100.0
%
 
 
 
 
 

(1)
Excludes properties classified as held for sale.
(2)
Weighted based on square feet.

16

LEASING SUMMARY
(dollars and square feet in thousands, except per square foot data)

 
 
As of and for the Three Months Ended
 
 
3/31/2017
 
12/31/2016
 
9/30/2016
 
6/30/2016
 
3/31/2016
Properties (1)
 
28

 
33

 
37

 
45

 
60

Total square feet (1)(2)
 
14,593

 
16,053

 
16,710

 
20,675

 
23,037

Percentage leased
 
89.0
 %
 
91.1
%
 
91.2
 %
 
90.3
 %
 
91.4
 %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
331

 
1,411

 
237

 
802

 
1,853

Lease term (years)
 
11.8

 
10.3

 
7.4

 
8.4

 
7.8

Starting cash rent
 
$
32.69

 
$
16.98

 
$
27.28

 
$
25.73

 
$
29.48

Percent change in cash rent (3)
 
(4.9
)%
 
7.3
%
 
(5.8
)%
 
(3.7
)%
 
(1.3
)%
Percent change in GAAP rent (3)
 
21.6
 %
 
20.2
%
 
9.0
 %
 
6.9
 %
 
11.2
 %
Total TI & LC per square foot (4)
 
$
28.88

 
$
32.52

 
$
47.05

 
$
48.85

 
$
25.44

Total TI & LC per sq. ft. per year of lease term (4)
 
$
2.44

 
$
3.16

 
$
6.38

 
$
5.84

 
$
3.27

 
 
 
 
 
 
 
 
 
 
 
Renewal Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
264

 
1,190

 
46

 
307

 
1,569

Lease term (years)
 
13.0

 
9.6

 
4.9

 
5.5

 
7.4

Starting cash rent
 
$
31.68

 
$
13.89

 
$
37.77

 
$
23.56

 
$
28.92

Percent change in cash rent (3)
 
(7.2
)%
 
3.9
%
 
14.6
 %
 
(1.0
)%
 
0.3
 %
Percent change in GAAP rent (3)
 
22.8
 %
 
16.2
%
 
24.1
 %
 
9.3
 %
 
13.2
 %
Total TI & LC per square foot (4)
 
$
25.58

 
$
21.14

 
$
24.13

 
$
18.68

 
$
17.33

Total TI & LC per sq. ft. per year of lease term (4)
 
$
1.97

 
$
2.19

 
$
4.92

 
$
3.42

 
$
2.33

 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
67

 
221

 
191

 
495

 
284

Lease term (years)
 
7.4

 
13.8

 
8.0

 
10.2

 
9.7

Starting cash rent
 
$
36.74

 
$
33.61

 
$
24.76

 
$
27.08

 
$
32.55

Percent change in cash rent (3)
 
8.4
 %
 
15.8
%
 
(12.6
)%
 
(5.4
)%
 
(8.9
)%
Percent change in GAAP rent (3)
 
15.8
 %
 
30.9
%
 
3.4
 %
 
5.5
 %
 
1.9
 %
Total TI & LC per square foot (4)
 
$
42.02

 
$
93.85

 
$
52.57

 
$
67.56

 
$
69.13

Total TI & LC per sq. ft. per year of lease term (4)
 
$
5.70

 
$
6.79

 
$
6.59

 
$
6.64

 
$
7.15

The above leasing summary is based on leases executed during the periods indicated.
 
 
(1)
Excludes properties classified as held for sale. As of December 31, 2016, land parcels are excluded from the property count.
(2)
Changes in total square footage result from remeasurement and property dispositions and reclassifications.
(3)
Percent change in GAAP and cash rent is a comparison of current rent (rent before deducting any initial period free rent), including tenant expense reimbursements, if any, to the rent, including tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. New leasing in suites vacant longer than 2 years was excluded from the calculation.
(4)
Includes tenant improvements (TI) and leasing commissions (LC).


17

SAME PROPERTY LEASING SUMMARY
(dollars and square feet in thousands, except per square foot data)

 
 
As of and for the Three Months Ended
 
 
3/31/2017
 
12/31/2016
 
9/30/2016
 
6/30/2016
 
3/31/2016
Properties
 
28

 
28

 
28

 
28

 
28

Total square feet (1)
 
14,593

 
14,588

 
14,578

 
14,578

 
14,578

Percentage leased
 
89.0
 %
 
91.3
%
 
90.6
 %
 
90.8
 %
 
91.6
 %
Percentage commenced
 
86.3
 %
 
88.6
%
 
87.5
 %
 
87.4
 %
 
88.0
 %
 
 
 
 
 
 
 
 
 
 
 
Total Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
331

 
1,411

 
111

 
300

 
986

Lease term (years)
 
11.8

 
10.3

 
4.3

 
8.2

 
5.0

Starting cash rent
 
$
32.69

 
$
16.98

 
$
33.69

 
$
30.82

 
$
40.21

Percent change in cash rent (2)
 
(4.9
)%
 
7.3
%
 
4.1
 %
 
0.4
 %
 
(3.5
)%
Percent change in GAAP rent (2)
 
21.6
 %
 
20.2
%
 
10.4
 %
 
8.1
 %
 
5.9
 %
Total TI & LC per square foot (3)
 
$
28.88

 
$
32.52

 
$
27.72

 
$
53.67

 
$
27.17

Total TI & LC per sq. ft. per year of lease term (3)
 
$
2.44

 
$
3.16

 
$
6.44

 
$
6.57

 
$
5.44

 
 
 
 
 
 
 
 
 
 
 
Renewal Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
264

 
1,190

 
46

 
105

 
773

Lease term (years)
 
13.0

 
9.6

 
4.9

 
7.1

 
3.4

Starting cash rent
 
$
31.68

 
$
13.89

 
$
37.77

 
$
27.22

 
$
41.53

Percent change in cash rent (2)
 
(7.2
)%
 
3.9
%
 
14.6
 %
 
(1.0
)%
 
(1.3
)%
Percent change in GAAP rent (2)
 
22.8
 %
 
16.2
%
 
24.1
 %
 
8.8
 %
 
7.7
 %
Total TI & LC per square foot (3)
 
$
25.58

 
$
21.14

 
$
24.13

 
$
29.85

 
$
11.95

Total TI & LC per sq. ft. per year of lease term (3)
 
$
1.97

 
$
2.19

 
$
4.92

 
$
4.23

 
$
3.56

 
 
 
 
 
 
 
 
 
 
 
New Leases
 
 
 
 
 
 
 
 
 
 
Square feet
 
67

 
221

 
65

 
195

 
213

Lease term (years)
 
7.4

 
13.8

 
3.9

 
8.8

 
11.0

Starting cash rent
 
$
36.74

 
$
33.61

 
$
30.79

 
$
32.75

 
$
35.44

Percent change in cash rent (2)
 
8.4
 %
 
15.8
%
 
(8.1
)%
 
1.2
 %
 
(12.2
)%
Percent change in GAAP rent (2)
 
15.8
 %
 
30.9
%
 
(5.7
)%
 
7.7
 %
 
(1.7
)%
Total TI & LC per square foot (3)
 
$
42.02

 
$
93.85

 
$
30.27

 
$
66.44

 
$
82.43

Total TI & LC per sq. ft. per year of lease term (3)
 
$
5.70

 
$
6.79

 
$
7.81

 
$
7.58

 
$
7.53

The above leasing summary is based on leases executed during the periods indicated.
 
 
(1)
Changes in total square footage result from remeasurement.
(2)
Percent change in GAAP and cash rent is a comparison of current rent (rent before deducting any initial period free rent), including tenant expense reimbursements, if any, to the rent, including tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. New leasing in suites vacant longer than 2 years was excluded from the calculation.
(3)
Includes tenant improvements (TI) and leasing commissions (LC).


18
CAPITAL SUMMARY
EXPENDITURES & LEASING COMMITMENTS
(dollars and square feet in thousands)

CAPITAL SUMMARY
Three Months Ended
EXPENDITURES
3/31/2017
 
12/31/2016
 
9/30/2016
 
6/30/2016
 
3/31/2016
Tenant improvements
$
9,427

 
$
15,636

 
$
20,411

 
$
19,537

 
$
25,391

Leasing costs
4,617

 
11,663

 
2,292

 
10,609

 
9,765

Building improvements (1)
4,785

 
6,571

 
8,942

 
7,713

 
6,541

Total capital expenditures
$
18,829

 
$
33,870

 
$
31,645

 
$
37,859

 
$
41,697

 
 
 
 
 
 
 
 
 
 
Average square feet during period (2)
15,639

 
16,382

 
19,454

 
22,637

 
23,590

 
 
 
 
 
 
 
 
 
 
Building improvements per average total sq. ft. during period
$
0.31

 
$
0.40

 
$
0.46

 
$
0.34

 
$
0.28


CAPITAL SUMMARY
 
Three Months Ended
LEASING COMMITMENTS
 
March 31, 2017
 
 
New Leases
 
Renewals
 
Total
Rentable square feet leased during the period
 
67

 
264

 
331

Total TI & LC (3)
 
$
2,910

 
$
6,759

 
$
9,669

Total TI & LC per square foot (3)
 
$
42.02

 
$
25.58

 
$
28.88

Weighted average lease term by square foot (years)
 
7.4

 
13.0

 
11.8

Total TI & LC per sq. ft. per year of lease term (3)
 
$
5.70

 
$
1.97

 
$
2.44

(1)
Tenant-funded capital expenditures are excluded.
(2)
Average square feet during each period includes properties held for sale at the end of each period.
(3)
Includes tenant improvements (TI) and leasing commissions (LC).


19
TENANTS REPRESENTING 1.5% OR MORE OF ANNUALIZED RENTAL REVENUE
As of March 31, 2017
(square feet in thousands)


 
 
Tenant (1)
 
Square Feet (2)
 
% of Total Sq. Ft. (2)
 
% of Annualized Rental Revenue
 
Weighted Average Remaining Lease Term
1

 
Expedia, Inc.
 
427

 
2.9
%
 
6.0
%
 
2.7
2

 
Office Depot, Inc.
 
651

 
4.5
%
 
5.1
%
 
6.5
3

 
Groupon, Inc. (3)
 
376

 
2.6
%
 
3.6
%
 
8.8
4

 
PNC Financial Services Group
 
363

 
2.5
%
 
3.3
%
 
9.7
5

 
Flextronics International Ltd.
 
1,051

 
7.2
%
 
3.2
%
 
12.8
6

 
Ballard Spahr LLP
 
217

 
1.5
%
 
2.4
%
 
12.9
7

 
RE/MAX Holdings, Inc.
 
248

 
1.7
%
 
2.2
%
 
11.1
8

 
University of Pennsylvania Health System
 
267

 
1.8
%
 
2.1
%
 
8.6
9

 
Georgetown University
 
240

 
1.6
%
 
1.9
%
 
2.5
10

 
Willis Towers Watson
 
251

 
1.7
%
 
1.9
%
 
3.1
11

 
Echo Global Logistics, Inc.
 
226

 
1.5
%
 
1.8
%
 
10.5
12

 
West Corporation
 
336

 
2.3
%
 
1.7
%
 
11.9
13

 
Wm. Wrigley Jr. Company
 
150

 
1.0
%
 
1.7
%
 
4.8
 
 
Total
 
4,803

 
32.8
%
 
36.9
%
 
8.7
(1)
Tenants located in properties classified as held for sale are excluded.
(2)
Square footage as of March 31, 2017 includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but not occupied or is being offered for sublease by tenants.
(3)
Groupon, Inc. statistics include 207,536 square feet that are sublet from Bankers Life and Casualty Company.


20
SAME PROPERTY LEASE EXPIRATION SCHEDULE
As of March 31, 2017
(dollars and sq. ft. in thousands)

Year
 
Number of Tenants Expiring
 
Leased Sq. Ft. Expiring (1)
 
% of Leased Sq. Ft. Expiring
 
Cumulative % of Leased Sq. Ft. Expiring
 
Annualized Rental Revenue Expiring (2)
 
% of Annualized Rental Revenue Expiring
 
Cumulative % of Annualized Rental Revenue Expiring
2017
 
87
 
464
 
3.6
%
 
3.6
%
 
$
12,253

 
3.6
%
 
3.6
%
2018
 
75
 
557
 
4.3
%
 
7.9
%
 
17,469

 
5.2
%
 
8.8
%
2019
 
85
 
1,230
 
9.5
%
 
17.4
%
 
36,342

 
10.8
%
 
19.6
%
2020
 
77
 
2,144
 
16.5
%
 
33.9
%
 
50,940

 
15.1
%
 
34.7
%
2021
 
63
 
1,053
 
8.1
%
 
42.0
%
 
31,770

 
9.4
%
 
44.1
%
2022
 
42
 
693
 
5.3
%
 
47.3
%
 
25,598

 
7.6
%
 
51.7
%
2023
 
42
 
1,459
 
11.2
%
 
58.5
%
 
44,024

 
13.1
%
 
64.8
%
2024
 
15
 
217
 
1.7
%
 
60.2
%
 
7,264

 
2.2
%
 
67.0
%
2025
 
20
 
758
 
5.8
%
 
66.0
%
 
20,238

 
6.0
%
 
73.0
%
2026
 
13
 
677
 
5.2
%
 
71.2
%
 
22,593

 
6.7
%
 
79.7
%
Thereafter
 
64
 
3,739
 
28.8
%
 
100.0
%
 
68,765

 
20.3
%
 
100.0
%
    Total
 
583
 
12,991
 
100.0
%
 
 
 
$
337,256

 
100.0
%
 
 
Weighted average remaining
 
 
 
 
 
 
 
 
 
 
    lease term (in years)
 
6.8

 
 
 
 
 
6.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Square footage as of March 31, 2017 includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but not occupied or is being offered for sublease by tenants.
(2)
Excludes the Annualized Rental Revenue of space that is leased but not commenced.

21
PROPERTY DETAIL (1) 
As of March 31, 2017
(sorted by geographic location, dollars in thousands)

Office Properties
 
Property
City and State
No. of Bldgs.
Sq. Feet
% Leased
% Comm-enced
Annualized Rental Revenue
Undepreciated Book Value
Net Book Value
Year Acquired (2)
Weighted Average Year Built or Substantially Renovated (2)
1
1225 Seventeenth Street
Denver
CO
1

672,573

80.9
%
78.3
%
21,282

157,827

130,514

2009
1982
2
5073, 5075, & 5085 S. Syracuse Street
Denver
CO
1

248,493

100.0
%
100.0
%
7,379

63,610

53,427

2010
2007
3
1601 Dry Creek Drive
Longmont
CO
1

552,865

97.0
%
97.0
%
8,973

34,550

24,319

2004
1982
4
1250 H Street, NW
Washington
DC
1

196,489

94.2
%
90.0
%
9,137

74,043

45,032

1998
1992
5
Georgetown-Green and Harris Buildings
Washington
DC
2

240,475

100.0
%
100.0
%
6,514

60,023

53,198

2009
2006
6
802 Delaware Avenue
Wilmington
DE
1

240,780

100.0
%
100.0
%
4,291

43,496

18,997

1998
1986
7
6600 North Military Trail
Boca Raton
FL
3

639,825

100.0
%
100.0
%
16,994

145,808

125,525

2011
2008
8
600 West Chicago Avenue
Chicago
IL
2

1,511,887

96.7
%
96.7
%
49,480

395,899

347,029

2011
2001
9
8750 Bryn Mawr Avenue
Chicago
IL
2

638,928

95.0
%
83.9
%
15,373

94,245

79,133

2010
2005
10
109 Brookline Avenue
Boston
MA
1

285,556

99.7
%
99.7
%
10,785

47,878

27,283

1995
1915
11
820 W. Diamond
Gaithersburg
MD
1

134,933

88.7
%
88.7
%
3,087

33,681

20,582

1997
1995
12
Danac Stiles Business Park
Rockville
MD
3

276,637

86.1
%
86.1
%
7,031

65,718

44,313

2004
2002
13
East Eisenhower Parkway
Ann Arbor
MI
2

421,349

50.2
%
48.0
%
6,079

56,472

47,916

2010
2006
14
4700 Belleview Avenue
Kansas City
MO
1

80,615

69.0
%
69.0
%
1,147

7,213

5,860

2008
1986
15
Cherrington Corporate Center
Moon Township
PA
7

454,700

61.4
%
61.4
%
6,061

71,966

48,843

1998; 1999
1997
16
1500 Market Street
Philadelphia
PA
1

1,759,193

91.2
%
82.7
%
39,017

309,800

218,954

2002
1974
17
1600 Market Street
Philadelphia
PA
1

825,968

85.3
%
85.3
%
19,758

135,860

76,683

1998
1983
18
1735 Market Street
Philadelphia
PA
1

1,286,936

74.7
%
64.9
%
26,985

303,529

183,298

1998
1990
19
Foster Plaza
Pittsburgh
PA
8

727,743

84.4
%
82.5
%
11,788

76,341

54,178

2005
1993
20
206 East 9th Street
Austin
TX
1

175,510

78.3
%
78.3
%
6,253

49,435

44,250

2012
1984
21
Bridgepoint Square
Austin
TX
5

439,970

93.0
%
93.0
%
13,711

91,693

51,273

1997
1995
22
Research Park
Austin
TX
4

1,110,007

98.0
%
98.0
%
11,853

93,453

60,496

1998
1976
23
333 108th Avenue NE
Bellevue
WA
1

440,565

100.0
%
100.0
%
20,840

153,433

126,730

2009
2008
24
600 108th Avenue NE
Bellevue
WA
1

256,830

96.2
%
96.2
%
8,106

50,797

36,740

2004
2012
Subtotal Office Properties
52

13,618,827

88.8
%
85.9
%
$
331,924

$
2,616,770

$
1,924,573

2004
1990
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial/Flex Properties
 
Property
City and State
No. of Bldgs.
Sq. Feet
% Leased
% Comm-enced
Annualized Rental Revenue
Undepreciated Book Value
Net Book Value
Year Acquired (2)
Weighted Average Year Built or Substantially Renovated (2)
25
97 Newberry Road
East Windsor
CT
1

289,386

100.0
%
100.0
%
$
1,837

$
15,350

$
12,097

2006
1989
26
33 Stiles Lane
North Haven
CT
1

175,301

52.0
%
52.0
%
657

9,802

7,400

2006
2002
27
2250 Pilot Knob Road
Mendota Heights
MN
1

87,183

100.0
%
100.0
%
931

6,531

3,572

1998
1995
28
411 Farwell Avenue
South St. Paul
MN
1

422,727

100.0
%
100.0
%
1,907

16,357

12,168

2004
1970
Subtotal Industrial/Flex
4

974,597

91.4
%
91.4
%
$
5,332

$
48,040

$
35,237

2004
1984
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Same Properties
 
56

14,593,424

89.0
%
86.3
%
$
337,256

$
2,664,810

$
1,959,810

2004
1990
 
 
 
 
 
 
 
 
 
 
 
 
 
 
625 Crane Street (Land)
Aurora
IL
—

—

—
%
—
%
—

—

—

2007
—


22
PROPERTY DETAIL (1) 
As of March 31, 2017
(sorted by geographic location, dollars in thousands)

Properties Held for Sale as of March, 31 2017
 
Property
 
City and State
 
No. of Bldgs.
 
Sq. Feet
 
% Leased
 
Annualized Rental Revenue
 
Undepreciated Book Value
 
Net Book Value
 
Year Acquired (2)
Weighted Average Year Built or Substantially Renovated (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29
Parkshore Plaza (3)
 
Folsom
CA
 
4

 
271,072

 
73.1
%
 
$
4,280

 
$
45,578

 
$
38,494

 
2011
1999
30
25 S. Charles Street (4)
 
Baltimore
MD
 
1

 
359,254

 
94.2
%
 
$
8,746

 
$
37,218

 
$
23,335

 
2004
1972
Total Held for Sale
 
5

 
630,326

 
85.1
%
 
$
13,026

 
$
82,796

 
$
61,829

 
2007
1984
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Portfolio
 
61

 
15,223,750

 
88.8
%
 
$
350,282

 
$
2,747,606

 
$
2,021,639

 
2004
1990
(1
)
Excludes properties disposed prior to April 1, 2017.
(2
)
Weighted based on square feet.
(3
)
Parkshore Plaza was sold in April of 2017 for $40.0 million, excluding closing costs.
(4
)
25 S. Charles Street was sold in April of 2017 for $24.5 million, excluding closing costs.


23

DISPOSED PROPERTY DETAIL (1) 
(dollars in thousands)

 
Property
 
City and State/Country
 
No. of Bldgs.
 
Sq. Feet
 
% Leased
 
Annualized Rental Revenue
 
Undepreciated Book Value
 
Net Book Value
 
Year Acquired (2)
Weighted Average Year Built or Substantially Renovated (2)
1
111 Market Place
 
Baltimore
MD
 
1
 
589,380
 
95.4
%
 
$
12,583

 
$
71,555

 
$
44,199

 
2003
1990

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
4515 Seton Center Parkway
 
Austin
TX
 
1
 
117,265
 
98.9
%
 
3,650
 
23,130
 
13,381
 
1999
1996

3
4516 Seton Center Parkway
 
Austin
TX
 
1
 
120,559
 
92.3
%
 
2,645
 
24,257
 
13,760
 
1999
1998

 
Subtotal Seton Center
 
 
 
 
2
 
237,824
 
95.6
%
 
6,295
 
47,387
 
27,141
 
1999
1997

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
Cabot Business Park Land
 
Mansfield
MA
 
—

 
—

 
—
%
 
—

 
575
 
575
 
2003
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Q1 2017 Dispositions
 
3
 
827,204
 
95.4
%
 
$
18,878

 
$
119,517

 
$
71,915

 
2002
1992

(1
)
Statistics for disposed properties are presented as of the quarter-ended preceding each sale.
(2
)
Weighted based on square feet.
 
 

24

COMMON & POTENTIAL COMMON SHARES
(share amounts in thousands)

 
Three Months Ended
 
March 31,
Weighted Average Share Calculation
2017
 
2016
Weighted average EQC common shares outstanding
123,140

 
124,964

Weighted average restricted shares outstanding
907

 
876

Weighted average common shares outstanding - basic - GAAP EPS(1)
124,047

 
125,840

Weighted average number of dilutive RSUs and LTIP Units(2)
1,103

 
1,682

Weighted average common shares outstanding - diluted - GAAP EPS, FFO, & Normalized FFO
125,150

 
127,522

Rollforward of Share Count to March 31, 2017
 
 
Series D Preferred Shares(3)
 
EQC Common Shares(4)
Outstanding on December 31, 2016
 
 
4,915

 
123,994

Issuance of restricted shares, net of forfeitures
 
 
—

 
70

Outstanding on March 31, 2017
 
 
4,915

 
124,064

Series D preferred shares convertible into common shares on March 31, 2017(3)
 
 
 
 
2,363

Common shares issuable from RSUs and LTIP Units as measured on March 31, 2017(2)
 
 
 
 
1,165

Potential common shares as measured on March 31, 2017
 
 
 
 
127,592

(1
)
Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share - basic for the three months ended March 31, 2017 includes 29 LTIP Units that are excluded from the calculation of basic GAAP EPS.
(2
)
As of March 31, 2017, we had granted RSUs and LTIP Units to certain employees, officers, and the Chairman of the Board of Trustees. The RSUs and LTIP Units contain service and market-based vesting components.  None of the RSUs or LTIP Units have vested. If the market-based vesting component of these awards was measured as of March 31, 2017, and 2016, 1,165 and 1,754 common shares would be issued, respectively. Using a weighted average basis, 1,103 and 1,682 common shares are reflected in diluted earnings per share, diluted FFO per common share, and diluted Normalized FFO per common share for the three months ended March 31, 2017 and 2016, respectively.
(3
)
As of March 31, 2017, we had 4,915 series D preferred shares outstanding that were convertible into 2,363 common shares. The series D preferred shares are anti-dilutive for GAAP EPS, FFO per common share and Normalized FFO per common share for all periods presented.
(4
)
EQC common shares include unvested restricted shares.

25

DEFINITIONS

Annualized Rental Revenue
Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of March 31, 2017, plus estimated recurring expense reimbursements; includes triple net lease rents and excludes lease value amortization, straight line rent adjustments, abated (“free”) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues. The annualized rental revenue of disposed properties is presented for the quarter-ended preceding each disposition.
Annualized rental revenue is a forward-looking non-GAAP measure. Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
Building Improvements
Building improvements are expenditures to replace obsolete building components or extend the useful life of existing assets.
Consolidated Income Available for Debt Service
Consolidated income available for debt service is earnings from operations excluding interest expense, depreciation and amortization, taxes, and certain items that we view as nonrecurring or impacting comparability from period to period, determined together with debt service on a pro forma basis for the four consecutive fiscal quarters most recently ended.
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA
We calculate EBITDA as net income (loss) excluding 1) interest expense, 2) income tax expense, and 3) depreciation and amortization. Our calculation of Adjusted EBITDA differs from our calculation of EBITDA because we exclude certain items that we view as nonrecurring or impacting comparability from period to period. EBITDA and Adjusted EBITDA are supplemental non-GAAP financial measures.
We consider EBITDA and Adjusted EBITDA to be appropriate measures of our operating performance, along with net income, net income attributable to EQC common shareholders, operating income and cash flow from operating activities. We believe that EBITDA and Adjusted EBITDA provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA and Adjusted EBITDA may facilitate a comparison of current operating performance with our past operating performance. EBITDA and Adjusted EBITDA do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income, net income attributable to EQC common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income, net income attributable to EQC common shareholders, operating income and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income (loss) and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate EBITDA and Adjusted EBITDA differently than we do.
Annualized Adjusted EBITDA
Annualized Adjusted EBITDA is Adjusted EBITDA for the three months ended March 31, 2017 multiplied by four.
Enterprise Value
Enterprise value is net debt plus the market value of our preferred shares plus the market value of our common shares.
Funds from Operations (FFO) and Normalized FFO
We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts (NAREIT). NAREIT defines FFO as net income (loss), calculated in accordance with GAAP, excluding real estate depreciation and amortization, gains (or losses) from sales of depreciable property, impairment of depreciable real estate, and our portion of these items related to equity investees and noncontrolling interests.  Our calculation of Normalized FFO differs from NAREIT’s definition of FFO because we exclude certain items that we view as nonrecurring or impacting comparability from period to period.  FFO and Normalized FFO are supplemental non-GAAP financial measures. We consider FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net income, net income attributable to Equity Commonwealth common shareholders, operating income and cash flow from operating activities.
We believe that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs.  FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, net income attributable to Equity Commonwealth common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash

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DEFINITIONS

flow to fund all of our needs.  These measures should be considered in conjunction with net income, net income attributable to Equity Commonwealth common shareholders, operating income and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.  Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do.
Leasing Costs
Leasing costs are primarily costs such as leasing commissions ("LC"'s) and related legal expenses.
LTIP Units
LTIP Units are a class of beneficial interests in EQC Operating Trust (the "Operating Trust") that may be issued to employees, officers, or trustees of the Operating Trust, EQC, or their subsidiaries.
Net Debt
Net debt is total debt minus cash and cash equivalents.
Net Operating Income (NOI), Same Property NOI, Cash Basis NOI, and Same Property Cash Basis NOI
NOI is income from our real estate including lease termination fees received from tenants less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses. Cash Basis NOI is NOI excluding the effects of straight line rent adjustments, lease value amortization, and lease termination fees. The same property versions of these measures include the results of properties continuously owned from January 1, 2016 through March 31, 2017. Land parcels and properties classified as held for sale within our condensed consolidated balance sheets are excluded from the same property versions of these measures.
We consider these supplemental non-GAAP financial measures to be appropriate supplemental measures to net income because they help to understand the operations of our properties. We use these measures internally to evaluate property level performance, and we believe that they provide useful information to investors regarding our results of operations because they reflect only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs. Cash Basis NOI is among the factors considered with respect to acquisition, disposition and financing decisions. These measures do not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income, net income attributable to Equity Commonwealth common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs. These measures should be considered in conjunction with net income, net income attributable to Equity Commonwealth common shareholders, operating income and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows. Other REITs and real estate companies may calculate these measures differently than we do.
Net Book Value
Net book value represents the carrying value of real estate properties after depreciation and amortization, purchase price allocations, impairment write-downs, and currency adjustments, if any.
NOI Margin
NOI Margin is NOI (or the same property or cash basis derivations of NOI defined above) divided by the total revenues used to calculate NOI (or its derivation).
Percentage Commenced
Percentage commenced includes space subject to leases that have commenced, whether or not the tenant is in a free rent period.
Percentage Leased
Percentage leased includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but not occupied or is being offered for sublease by tenants.
Same Properties
Our same property portfolio is comprised of those properties continuously owned from January 1, 2016 through March 31, 2017. Land parcels and properties classified as held for sale within our condensed consolidated balance sheets are excluded.
Tenant Improvements
Tenant improvements are capital expenditures to improve tenant spaces.

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DEFINITIONS


Total Debt
Total debt is the aggregate balance of the following line items on our condensed consolidated balance sheets: revolving credit facility, senior unsecured debt, net, and mortgage notes payable, net.
Undepreciated Book Value
Undepreciated book value represents the carrying value of real estate properties after purchase price allocations, impairment write-downs, and currency adjustments, if any.


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