eqc-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-9317

EQUITY COMMONWEALTH

(Exact Name of Registrant as Specified in Its Charter)


Maryland						04-6558834
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)

Two North Riverside Plaza, Suite 2100, Chicago, IL						60606
(Address of Principal Executive Offices)						(Zip Code)
(312) 646-2800
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title Of Each Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Shares of Beneficial Interest

EQC

The New York Stock Exchange

6.50% Series D Cumulative Convertible Preferred Shares of Beneficial Interest

EQCpD

The New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of April 30, 2021: 121,921,850.

Table of Contents

EQUITY COMMONWEALTH

FORM 10-Q

March 31, 2021

INDEX


		Page

PART I	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations	2

	Condensed Consolidated Statements of Comprehensive (Loss) Income	3

	Condensed Consolidated Statements of Equity	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II	Other Information

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosures	26

Item 5.	Other Information	26

Item 6.	Exhibits	27

	Signatures	28

Table of Contents

EXPLANATORY NOTE

References in this Quarterly Report on Form 10-Q to the “Company,” “EQC,” “we,” “us” or “our,” refer to Equity Commonwealth and its consolidated subsidiaries as of March 31, 2021, unless the context indicates otherwise.

Table of Contents

PART I. Financial Information

Item 1. Financial Statements.

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)


	March 31, 2021		December 31, 2020
			(audited)
ASSETS
Real estate properties:
Land	$	44,060	$	44,060
Buildings and improvements	361,107		357,650
	405,167		401,710
Accumulated depreciation	(147,034)		(143,319)
	258,133		258,391


Cash and cash equivalents	2,971,052		2,987,225


Rents receivable	14,629		14,702
Other assets, net	16,862		17,353
Total assets	$	3,260,676	$	3,277,671

LIABILITIES AND EQUITY



Accounts payable, accrued expenses and other	$	21,007	$	20,588

Rent collected in advance	2,979		2,928

Distributions payable	5,072		10,991
Total liabilities	29,058		34,507

Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% 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; 121,916,875 and 121,522,555 shares issued and outstanding, respectively	1,219		1,215
Additional paid in capital	4,295,226		4,294,632
Cumulative net income	3,804,930		3,814,948

Cumulative common distributions	(4,283,753)		(4,283,668)
Cumulative preferred distributions	(711,709)		(709,712)
Total shareholders’ equity	3,225,176		3,236,678
Noncontrolling interest	6,442		6,486
Total equity	3,231,618		3,243,164
Total liabilities and equity	$	3,260,676	$	3,277,671

See accompanying notes.

Table of Contents

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
		2021		2020
Revenues:
Rental revenue		$	14,169	$	17,143
Other revenue		682		1,677
Total revenues		14,851		18,820
Expenses:
Operating expenses		6,621		8,761
Depreciation and amortization		4,351		5,114
General and administrative		15,729		10,604

Total expenses		26,701		24,479
Interest and other income, net		1,843		11,895
Interest expense (including net amortization of debt premiums and deferred financing fees of $— and $(56), respectively)		—		(309)


Gain on sale of properties, net		—		419,620
(Loss) income before income taxes		(10,007)		425,547
Income tax expense		(31)		(40)
Net (loss) income		(10,038)		425,507
Net loss (income) attributable to noncontrolling interest		20		(748)
Net (loss) income attributable to Equity Commonwealth		(10,018)		424,759
Preferred distributions		(1,997)		(1,997)


Net (loss) income attributable to Equity Commonwealth common shareholders		$	(12,015)	$	422,762



Weighted average common shares outstanding — basic		122,002		122,148
Weighted average common shares outstanding — diluted		122,002		126,605
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic		$	(0.10)	$	3.46
Diluted		$	(0.10)	$	3.35

See accompanying notes.

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EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(amounts in thousands)

(unaudited)


	Three Months Ended March 31,
		2021		2020
Net (loss) income		$	(10,038)	$	425,507




Total comprehensive (loss) income		$	(10,038)	$	425,507
Comprehensive loss (income) attributable to noncontrolling interest		20		(748)
Total comprehensive (loss) income attributable to Equity Commonwealth		$	(10,018)	$	424,759

See accompanying notes.

Table of Contents

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(amounts in thousands, except share data)

(unaudited)


	Equity Commonwealth Shareholders
	Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total











Balance at January 1, 2021	4,915,196	$	119,263	121,522,555	$	1,215	$	4,294,632	$	3,814,948	$	(4,283,668)	$	(709,712)	$	6,486	$	3,243,164

Net loss	—	—		—	—		—		(10,018)		—		—		(20)		(10,038)



Surrender of shares for tax withholding	—	—		(210,334)	(2)		(6,091)		—		—		—		—		(6,093)
Share-based compensation	—	—		604,654	6		6,405		—		—		—		276		6,687

Distributions	—	—		—	—		—		—		(85)		(1,997)		(20)		(2,102)

Adjustment for noncontrolling interest	—	—		—	—		280		—		—		—		(280)		—
Balance at March 31, 2021	4,915,196	$	119,263	121,916,875	$	1,219	$	4,295,226	$	3,804,930	$	(4,283,753)	$	(711,709)	$	6,442	$	3,231,618


	Equity Commonwealth Shareholders
	Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total












Balance at January 1, 2020	4,915,196	$	119,263	121,924,199	$	1,219	$	4,313,831	$	3,363,654	$	(3,851,666)	$	(701,724)	$	1,295	$	3,245,872

Net income	—	—		—	—		—		424,759		—		—		748		425,507


Repurchase of shares	—	—		(711,000)	(7)		(20,862)		—		—		—		—		(20,869)
Surrender of shares for tax withholding	—	—		(183,466)	(2)		(6,010)		—		—		—		—		(6,012)
Share-based compensation	—	—		472,787	5		2,953		—		—		—		345		3,303

Distributions	—	—