Equity Commonwealth - FORM 8-K - EX-99.2

Attached files

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EX-99.1 - EX-99.1 - Equity Commonwealth	eqc63020ex991.htm
8-K - 8-K - Equity Commonwealth	eqc-20200729.htm

Exhibit 99.2

Equity Commonwealth

Supplemental Operating

and Financial Data

Second Quarter 2020


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	3

Financial Information
	Key Financial Data	4
	Condensed Consolidated Balance Sheets	5
	Additional Balance Sheet Information	6
	Condensed Consolidated Statements of Operations	7
	Calculation of Same Property Net Operating Income (NOI) and Same Property Cash Basis NOI	8
	Same Property Results of Operations	10
	Calculation of EBITDA, EBITDAre, and Adjusted EBITDAre	11
	Calculation of Funds from Operations (FFO) and Normalized FFO	12
	Debt Summary	13
	Leverage Ratios, Coverage Ratios and Public Debt Covenants	14
	Acquisitions and Dispositions	15

Portfolio Information
	Property Detail	16
	Leasing Summary	17
	Same Property Leasing Summary	18
	Capital Summary - Expenditures & Same Property Leasing Commitments	19
	Tenants Representing 2.5% or More of Annualized Rental Revenue	20
	Same Property Lease Expiration Schedule	21

Additional Support
	Common & Potential Common Shares	22
	Definitions	23

Forward-Looking Statements
Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws including, but not limited to, statements pertaining to our capital resources, portfolio performance, results of operations or anticipated market conditions, including our statements regarding the overall impact of COVID-19 on the foregoing to the extent we make any such statements. 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, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 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 section entitled “Risk Factors” in our most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q.

Regulation FD Disclosures
We use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the company to monitor these distribution channels for material disclosures.

COMPANY PROFILE AND INVESTOR INFORMATION

Equity Commonwealth (NYSE: EQC) is a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties in the United States.


Same Property Statistics
No. of
Properties	Sq. Feet	% Leased	% Commenced
4	1,507,379	90.1%	83.9%


NYSE Trading Symbols
Common Stock: EQC
Preferred Stock Series D: EQCpD

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,

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

Daniel Ismail

(949) 640-8780

dismail@greenstreetadvisors.com

Stifel Nicolaus

John Guinee

(443) 224-1307

jwguinee@stifel.com


Certain terms are defined in the definitions section of this document. All financial data included herein is unaudited.

(1)			Any opinions, estimates or forecasts regarding EQC's performance made by these analysts do not represent opinions, forecasts or predictions of EQC or its management. EQC does not by its reference to the analysts above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts.

KEY FINANCIAL DATA

(Unaudited, amounts in thousands, except per share data)


		As of and for the Three Months Ended
		6/30/2020			3/31/2020			12/31/2019			9/30/2019			6/30/2019
OPERATING INFORMATION
	Ending property count ⁽¹⁾	4			4			7			7			7
	Ending square footage ⁽¹⁾⁽²⁾	1,507			1,507			2,469			2,469			2,469
	Percent leased ⁽¹⁾	90.1		%	90.8		%	94.7		%	93.5		%	90.5		%
	Percent commenced ⁽¹⁾	83.9		%	83.7		%	89.0		%	88.2		%	89.7		%
	Net income attributable to EQC common shareholders	$	25,835		$	422,762		$	13,993		$	21,889		$	240,289
	Adjusted EBITDAre ⁽³⁾	5,729			11,350			22,485			27,690			33,556
SAME PROPERTY OPERATING INFORMATION
	Ending square footage	1,507			1,507			1,507			1,507			1,507
	Percent leased	90.1		%	90.8		%	91.5		%	89.5		%	85.7		%
	Percent commenced	83.9		%	83.7		%	87.2		%	85.8		%	84.3		%
	Same Property NOI ⁽³⁾	$	8,474		$	8,751		$	8,801		$	8,786		$	11,142
	Same Property Cash Basis NOI ⁽³⁾	8,882			8,858			8,925			8,776			8,755
	Same Property NOI margin	56.6		%	56.0		%	57.2		%	57.4		%	62.2		%
	Same Property Cash Basis NOI margin	57.7		%	56.3		%	57.6		%	57.4		%	56.4		%
SHARES OUTSTANDING AND PER SHARE DATA ⁽⁴⁾
	Shares Outstanding at End of Period
	Common stock outstanding	121,522			121,503			121,924			121,924			121,922
	Dilutive restricted share units (RSUs), Operating Partnership Units, and LTIP Units ⁽⁴⁾	1,995			1,986			1,615			1,688			1,443
	Dilutive Series D Convertible Preferred Shares outstanding ⁽⁵⁾	—			2,857			—			—			2,563
	Preferred Stock Outstanding ⁽⁵⁾	4,915			4,915			4,915			4,915			4,915
	Weighted Average Shares Outstanding - GAAP
	Basic ⁽⁶⁾	121,655			122,148			122,140			122,140			122,122
	Diluted ⁽⁶⁾	123,255			126,605			123,490			123,564			125,862
	Distributions Declared Per Common Share	$	—		$	—		$	—		$	3.50		$	—
BALANCE SHEET
	Total assets	$	3,733,155		$	3,704,057		$	3,319,377		$	3,731,343		$	3,702,171
	Total liabilities	59,414			59,443			73,505			503,230			66,548
ENTERPRISE VALUE
	Total debt (book value)	$	25,281		$	25,487		$	25,691		$	25,896		$	26,091
	Less: Cash and cash equivalents	(3,437,775)			(3,348,349)			(2,795,642)			(3,205,775)			(3,180,548)
	Plus: Market value of preferred shares	135,168			127,304			138,805			137,871			135,561
	Plus: Market value of diluted common shares	3,977,229			3,915,829			4,055,786			4,233,722			4,011,848
	Total enterprise value	$	699,903		$	720,271		$	1,424,640		$	1,191,714		$	992,952
RATIOS
	Net debt / enterprise value	(487.6)		%	(461.3)		%	(194.4)		%	(266.8)		%	(317.7)		%
	Net debt / annualized adjusted EBITDAre ⁽³⁾	(148.9)x			(73.2)x			(30.8)x			(28.7)x			(23.5)x
	Adjusted EBITDAre ⁽³⁾ / interest expense	19.0x			36.7x			72.3x			86.3x			8.2x


(1)			Excludes properties classified as held for sale.
(2)			Changes in total square footage result from property dispositions, reclassifications and remeasurement.
(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. 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 June 30, 2020, we had 4,915 series D preferred shares outstanding that were convertible into 2,857 common shares. The series D preferred shares are dilutive for GAAP EPS for the three months ended March 31, 2020 and June 30, 2019, and are anti-dilutive for GAAP EPS for all other periods presented. 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)			Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share data)


	June 30, 2020		December 31, 2019
ASSETS
Real estate properties:
Land	$	44,060	$	85,627
Buildings and improvements	353,665		576,494
	397,725		662,121
Accumulated depreciation	(139,061)		(202,700)
	258,664		459,421



Cash and cash equivalents	3,437,775		2,795,642

Restricted cash	4,103		5,003
Rents receivable	13,968		19,554
Other assets, net	18,645		39,757
Total assets	$	3,733,155	$	3,319,377

LIABILITIES AND EQUITY

Mortgage notes payable, net	$	25,281	$	25,691

Accounts payable, accrued expenses and other	25,821		37,153

Rent collected in advance	2,521		3,127

Distributions payable	5,791		7,534

Total liabilities	$	59,414	$	73,505

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; 121,521,624 and 121,924,199 shares issued and outstanding, respectively	1,215		1,219
Additional paid in capital	4,288,245		4,313,831
Cumulative net income	3,816,245		3,363,654

Cumulative common distributions	(3,852,856)		(3,851,666)
Cumulative preferred distributions	(705,718)		(701,724)
Total shareholders’ equity	3,666,394		3,244,577
Noncontrolling interest	7,347		1,295
Total equity	$	3,673,741	$	3,245,872
Total liabilities and equity	$	3,733,155	$	3,319,377

ADDITIONAL BALANCE SHEET INFORMATION

(Unaudited, amounts in thousands)


	June 30, 2020		December 31, 2019
Additional Balance Sheet Information

Straight-line rents receivable	$	13,359	$	16,416
Accounts receivable	609		3,138
Rents receivable	$	13,968	$	19,554

Capitalized lease incentives, net	$	1,517	$	2,030
Deferred leasing costs, net	12,346		26,618
Other	4,782		11,109
Other assets, net	$	18,645	$	39,757

Accounts payable	$	2,168	$	2,944
Accrued interest	99		104
Accrued taxes	9,109		10,398
Accrued capital expenditures	2,733		1,383
Accrued leasing costs	1,080		5,266

Security deposits	2,584		3,082
Other accrued liabilities	8,048		13,976
Accounts payable and accrued expenses	$	25,821	$	37,153

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:
Rental revenue	$	15,248	$	30,574	$	32,391	$	69,464
Other revenue	1,017		2,794		2,694		5,656
Total revenues	$	16,265	$	33,368	$	35,085	$	75,120

Expenses:
Operating expenses	$	6,677	$	10,974	$	15,438	$	26,754
Depreciation and amortization	4,398		7,561		9,512		16,146
General and administrative	8,302		9,533		18,906		21,629

Total expenses	$	19,377	$	28,068	$	43,856	$	64,529

Interest and other income, net	4,443		20,695		16,338		38,470
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $(60), $154, $(116) and $319, respectively)	(302)		(4,070)		(611)		(8,276)
Loss on early extinguishment of debt	—		(6,374)		—		(6,374)

Gain on sale of properties, net	26,916		227,166		446,536		420,203
Income before income taxes	27,945		242,717		453,492		454,614
Income tax expense	(59)		(340)		(99)		(1,640)
Net income	$	27,886	$	242,377	$	453,393	$	452,974
Net income attributable to noncontrolling interest	(54)		(91)		(802)		(170)
Net income attributable to Equity Commonwealth	$	27,832	$	242,286	$	452,591	$	452,804
Preferred distributions	(1,997)		(1,997)		(3,994)		(3,994)


Net income attributable to Equity Commonwealth common shareholders	$	25,835	$	240,289	$	448,597	$	448,810



Weighted average common shares outstanding — basic ⁽¹⁾	121,655		122,122		121,901		122,041
Weighted average common shares outstanding — diluted ⁽¹⁾	123,255		125,862		126,358		125,841

Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic	$	0.21	$	1.97	$	3.68	$	3.68
Diluted	$	0.21	$	1.93	$	3.58	$	3.60



(1)			Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares outstanding.

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

(Unaudited, amounts in thousands)


	For the Three Months Ended
	6/30/2020		3/31/2020		12/31/2019		9/30/2019		6/30/2019
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue	$	15,248	$	17,143	$	23,410	$	23,995	$	30,574
Other revenue	1,017		1,677		2,585		2,740		2,794
Operating expenses	(6,677)		(8,761)		(9,741)		(9,923)		(10,974)
NOI	$	9,588	$	10,059	$	16,254	$	16,812	$	22,394
Straight line rent adjustments	515		198		(69)		499		(11)
Lease value amortization	—		—		—		(39)		(39)
Lease termination fees	—		—		(16)		(11)		(2,188)
Cash Basis NOI	$	10,103	$	10,257	$	16,169	$	17,261	$	20,156
Cash Basis NOI from non-same properties ⁽¹⁾	(1,221)		(1,399)		(7,244)		(8,485)		(11,401)
Same Property Cash Basis NOI	$	8,882	$	8,858	$	8,925	$	8,776	$	8,755
Non-cash rental income and lease termination fees from same properties	(408)		(107)		(124)		10		2,387
Same Property NOI	$	8,474	$	8,751	$	8,801	$	8,786	$	11,142

Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI	$	8,474	$	8,751	$	8,801	$	8,786	$	11,142
Non-cash rental income and lease termination fees from same properties	408		107		124		(10)		(2,387)
Same Property Cash Basis NOI	$	8,882	$	8,858	$	8,925	$	8,776	$	8,755
Cash Basis NOI from non-same properties ⁽¹⁾	1,221		1,399		7,244		8,485		11,401
Cash Basis NOI	$	10,103	$	10,257	$	16,169	$	17,261	$	20,156
Straight line rent adjustments	(515)		(198)		69		(499)		11
Lease value amortization	—		—		—		39		39
Lease termination fees	—		—		16		11		2,188
NOI	$	9,588	$	10,059	$	16,254	$	16,812	$	22,394
Depreciation and amortization	(4,398)		(5,114)		(6,037)		(5,939)		(7,561)
General and administrative	(8,302)		(10,604)		(8,290)		(8,523)		(9,533)

Interest and other income, net	4,443		11,895		14,521		19,401		20,695
Interest expense	(302)		(309)		(311)		(321)		(4,070)
Loss on early extinguishment of debt	—		—		—		—		(6,374)
Gain on sale of properties, net	26,916		419,620		24		1,945		227,166
Income before income taxes	$	27,945	$	425,547	$	16,161	$	23,375	$	242,717
Income tax (expense) benefit	(59)		(40)		(165)		521		(340)
Net income	$	27,886	$	425,507	$	15,996	$	23,896	$	242,377


(1)			Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.

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

(Unaudited, amounts in thousands)


	For the Six Months Ended June 30,
	2020		2019
Calculation of Same Property NOI and Same Property Cash Basis NOI:
Rental revenue	$	32,391	$	69,464
Other revenue	2,694		5,656
Operating expenses	(15,438)		(26,754)
NOI	$	19,647	$	48,366
Straight line rent adjustments	713		(848)
Lease value amortization	—		(78)
Lease termination fees	—		(2,188)
Cash Basis NOI	$	20,360	$	45,252
Cash Basis NOI from non-same properties ⁽¹⁾	(2,620)		(27,726)
Same Property Cash Basis NOI	$	17,740	$	17,526
Non-cash rental income and lease termination fees from same properties	(515)		2,679
Same Property NOI	$	17,225	$	20,205

Reconciliation of Same Property NOI to GAAP Net Income:
Same Property NOI	$	17,225	$	20,205
Non-cash rental income and lease termination fees from same properties	515		(2,679)
Same Property Cash Basis NOI	$	17,740	$	17,526
Cash Basis NOI from non-same properties ⁽¹⁾	2,620		27,726
Cash Basis NOI	$	20,360	$	45,252
Straight line rent adjustments	(713)		848
Lease value amortization	—		78
Lease termination fees	—		2,188
NOI	$	19,647	$	48,366
Depreciation and amortization	(9,512)		(16,146)
General and administrative	(18,906)		(21,629)

Interest and other income, net	16,338		38,470
Interest expense	(611)		(8,276)
Loss on early extinguishment of debt	—		(6,374)
Gain on sale of properties, net	446,536		420,203
Income before income taxes	$	453,492	$	454,614
Income tax expense	(99)		(1,640)
Net income	$	453,393	$	452,974


(1)			Cash Basis NOI from non-same properties for all periods presented includes the operations of disposed properties.

SAME PROPERTY RESULTS OF OPERATIONS

(Unaudited, dollars and square feet in thousands)


	As of and for the Three Months Ended June 30,														As of and for the Six Months Ended June 30,
	2020			2019			% Change		2020			2019			% Change
Properties	4			4					4			4
Square Feet	1,507			1,507					1,507			1,507
% Leased	90.1		%	85.7		%	4.4	%	90.1		%	85.7		%	4.4	%
% Commenced	83.9		%	84.3		%	(0.4)	%	83.9		%	84.3		%	(0.4)	%

Rental revenue	$	14,452		$	13,997		3.3	%	$	28,645		$	27,820		3.0	%
Other revenue	933			1,534			(39.2)	%	2,466			2,963			(16.8)	%
Straight line rent adjustment	(408)			199					(515)			491

Lease termination fees	—			2,188					—			2,188
Total revenue	14,977			17,918			(16.4)	%	30,596			33,462			(8.6)	%
Operating expenses	(6,503)			(6,776)			(4.0)	%	(13,371)			(13,257)			0.9	%
NOI	$	8,474		$	11,142		(23.9)	%	$	17,225		$	20,205		(14.7)	%
NOI Margin	56.6		%	62.2		%			56.3		%	60.4		%

Straight line rent adjustment	$	408		$	(199)				$	515		$	(491)

Lease termination fees	—			(2,188)					—			(2,188)
Cash Basis NOI	$	8,882		$	8,755		1.5	%	17,740			17,526			1.2	%
Cash Basis NOI Margin	57.7		%	56.4		%			57.0		%	56.9		%

CALCULATION OF EBITDA, EBITDAre, AND ADJUSTED EBITDAre

(Unaudited, amounts in thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Net income	$	27,886	$	242,377	$	453,393	$	452,974
Interest expense	302		4,070		611		8,276
Income tax expense	59		340		99		1,640
Depreciation and amortization	4,398		7,561		9,512		16,146
EBITDA	$	32,645	$	254,348	$	463,615	$	479,036

Gain on sale of properties, net	(26,916)		(227,166)		(446,536)		(420,203)
EBITDAre	$	5,729	$	27,182	$	17,079	$	58,833
Adjustments to EBITDAre:
Loss on early extinguishment of debt	—		6,374		—		6,374


Adjusted EBITDAre	$	5,729	$	33,556	$	17,079	$	65,207

CALCULATION OF FUNDS FROM OPERATIONS (FFO) AND NORMALIZED FFO

(Unaudited, amounts in thousands, except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Calculation of FFO
Net income	$	27,886	$	242,377	$	453,393	$	452,974
Real estate depreciation and amortization	4,174		7,283		9,055		15,560

Gain on sale of properties, net	(26,916)		(227,166)		(446,536)		(420,203)
FFO attributable to Equity Commonwealth	5,144		22,494		15,912		48,331
Preferred distributions	(1,997)		(1,997)		(3,994)		(3,994)

FFO attributable to EQC common shareholders and unitholders	$	3,147	$	20,497	$	11,918	$	44,337

Calculation of Normalized FFO
FFO attributable to EQC common shareholders and unitholders	$	3,147	$	20,497	$	11,918	$	44,337
Lease value amortization	—		(39)		—		(78)
Straight line rent adjustments	515		(11)		713		(848)
Loss on early extinguishment of debt	—		6,374		—		6,374


Taxes related to property sales included in general and administrative	10		—		1,458		—
Taxes related to property sales, net included in income tax expense	44		415		79		565


Normalized FFO attributable to EQC common shareholders and unitholders	$	3,716	$	27,236	$	14,168	$	50,350

Weighted average common shares and units outstanding -- basic ⁽¹⁾	121,889		122,168		122,100		122,087
Weighted average common shares and units outstanding -- diluted ⁽¹⁾	123,489		123,345		123,700		123,324
FFO attributable to EQC common shareholders and unitholders per share and unit -- basic and diluted	$	0.03	$	0.17	$	0.10	$	0.36

Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- basic	$	0.03	$	0.22	$	0.12	$	0.41
Normalized FFO attributable to EQC common shareholders and unitholders per share and unit -- diluted	$	0.03	$	0.22	$	0.11	$	0.41


(1)			Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share and unit - basic for the three months ended June 30, 2020 and 2019 include 234 and 46 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only). Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share and unit - basic for the six months ended June 30, 2020 and 2019 include 199 and 46 LTIP/Operating Partnership Units, respectively, that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only). Refer to the schedule of Common & Potential Common Shares for information regarding the components of our weighted average common shares and units outstanding.

DEBT SUMMARY

As of June 30, 2020

(Unaudited, dollars in thousands)

Interest Rate

Principal Balance

Maturity Date

Open at Par Date

Due at Maturity

Years to Maturity

Secured Debt:

Secured Fixed Rate Debt:

206 East 9th Street ⁽¹⁾

5.69

25,139

1/5/2021

7/5/2020

24,836

0.5


Scheduled Principal Payments During Period
Year:	Secured Fixed Rate Debt			Interest Rate

2020	$	303		5.69	%
2021	24,836			5.69	%
Thereafter	—			—	%
	$	25,139	⁽¹⁾	5.69	%



(1)			Total debt outstanding as of June 30, 2020, including net unamortized premiums and deferred financing costs was $25.3 million. As of July 5, 2020, we repaid at par the $25.1 million of mortgage debt at 206 East 9th Street.

LEVERAGE RATIOS, COVERAGE RATIOS AND PUBLIC DEBT COVENANTS

(Unaudited, dollars in thousands)


	As of and for the Three Months Ended
	6/30/2020		3/31/2020		12/31/2019		9/30/2019		6/30/2019
Leverage Ratios
Total debt / total assets	0.7	%	0.7	%	0.8	%	0.7	%	0.7	%
Total debt / total market capitalization	0.6	%	0.6	%	0.6	%	0.6	%	0.6	%
Total debt + preferred stock / total market capitalization	3.9	%	3.8	%	3.9	%	3.7	%	3.9	%
Total debt / annualized adjusted EBITDAre ⁽¹⁾	1.1x		0.6x		0.3x		0.2x		0.2x
Total debt + preferred stock / annualized adjusted EBITDAre ⁽¹⁾	7.0x		3.4x		1.8x		1.5x		1.2x
Net debt / enterprise value	(487.6)	%	(461.3)	%	(194.4)	%	(266.8)	%	(317.7)	%
Net debt + preferred stock / enterprise value	(468.3)	%	(443.7)	%	(184.7)	%	(255.3)	%	(304.0)	%
Net debt / annualized adjusted EBITDAre ⁽¹⁾	(148.9)x		(73.2)x		(30.8)x		(28.7)x		(23.5)x
Net debt + preferred stock / annualized adjusted EBITDAre ⁽¹⁾	(143.0)x		(70.4)x		(29.3)x		(27.5)x		(22.5)x
Secured debt / total assets	0.7	%	0.7	%	0.8	%	0.7	%	0.7	%



Coverage Ratios
Adjusted EBITDAre / interest expense ⁽¹⁾	19.0x		36.7x		72.3x		86.3x		8.2x
Adjusted EBITDAre / interest expense + preferred distributions ⁽¹⁾	2.5x		4.9x		9.7x		11.9x		5.5x



(1)			Refer to the calculation of EBITDA, EBITDAre, and Adjusted EBITDAre for a reconciliation of these measures to Net income.

ACQUISITIONS AND DISPOSITIONS

(Unaudited, 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⁾
109 Brookline Avenue ⁽²⁾	Boston	MA	1	285,556		99.2	%			$	270,000			$	28,069			$	8,772
333 108th Avenue NE ⁽³⁾	Bellevue	WA	1	435,406		100.0	%			401,500				116,928				22,661

Total Q1 Dispositions				2	720,962			99.7	%			$	671,500			$	144,997			$	31,433

Georgetown-Green and Harris Buildings	Washington,	D.C.	1	240,475		100.0	%			$	85,000			$	52,819			$	7,773

Total Q2 Dispositions				1	240,475			100.0	%			$	85,000			$	52,819			$	7,773








Total Disposed Year-to-Date				3	961,437			99.8	%			$	756,500			$	197,816			$	39,206

Dispositions resulted in a net gain on sale of properties of $26.9 million and $446.5 million for the three and six months ended June 30, 2020, respectively.


(1)			As of the quarter-ended preceding each sale.
(2)			Proceeds after credits, primarily for contractual lease costs, and transfer taxes were $259.2 million.
(3)			Proceeds after credits, primarily for contractual lease costs, and transfer taxes were $316.7 million.

PROPERTY DETAIL

As of June 30, 2020

(Unaudited, sorted by annualized rental revenue, dollars in thousands)


Same Property Portfolio⁽¹⁾
Property			City, State	Type	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	1225 Seventeenth Street	Denver, CO	Office	1	695,372	94.3	%	83.3	%	$	24,909	$	167,361	$	123,879	2009	1982
	(17th Street Plaza)
2	Bridgepoint Square	Austin, TX	Office	5	440,007	77.5	%	76.6	%	14,065		102,363		53,382		1997	1995
3	1250 H Street, NW	Washington, D.C.	Office	1	196,490	96.5	%	89.7	%	10,384		75,829		38,591		1998	1992
4	206 East 9th Street	Austin, TX	Office	1	175,510	98.0	%	98.0	%	9,663		52,172		42,812		2012	1984
	(Capitol Tower)
	Total Same Properties			8	1,507,379	90.1	%	83.9	%	$	59,021	$	397,725	$	258,664	2004	1987


(1)			Excludes properties disposed prior to July 1, 2020.
(2)			Weighted based on square feet.

LEASING SUMMARY

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


	As of and for the Three Months Ended
	6/30/2020			3/31/2020			12/31/2019			9/30/2019			6/30/2019
Properties	4			4			7			7			7
Total square feet ⁽¹⁾	1,507			1,507			2,469			2,469			2,469
Percentage leased	90.1		%	90.8		%	94.7		%	93.5		%	90.5		%
Percentage commenced	83.9		%	83.7		%	89.0		%	88.2		%	89.7		%

Total Leases
Square feet	22			75			153			298			58
Lease term (years)	8.0			8.5			6.6			4.6			3.0
Starting cash rent	$	46.34		$	53.14		$	44.36		$	38.89		$	45.83
Percent change in cash rent ⁽²⁾	(4.8)		%	(1.3)		%	1.5		%	(0.7)		%	9.1		%
Percent change in GAAP rent ⁽²⁾	2.3		%	15.9		%	10.1		%	9.1		%	14.5		%
Total TI & LC per square foot ⁽³⁾	$	80.63		$	86.14		$	58.48		$	44.27		$	11.49
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	10.08		$	10.16		$	8.82		$	9.60		$	3.83

Renewal Leases
Square feet	—			41			63			182			43
Lease term (years)	—			7.7			7.8			2.9			2.5
Starting cash rent	—			$	52.76		$	43.47		$	27.88		$	43.58
Percent change in cash rent ⁽²⁾	—			0.1		%	5.3		%	(12.7)		%	8.6		%
Percent change in GAAP rent ⁽²⁾	—			13.2		%	16.9		%	(8.5)		%	13.9		%
Total TI & LC per square foot ⁽³⁾	$	—		$	68.15		$	49.05		$	9.05		$	7.93
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	—		$	8.86		$	6.25		$	3.15		$	3.12

New Leases
Square feet	22			34			90			116			15
Lease term (years)	8.0			9.4			5.8			7.3			4.3
Starting cash rent	$	46.34		$	53.60		$	44.98		$	56.16		$	52.43
Percent change in cash rent ⁽²⁾	(4.8)		%	(3.3)		%	(3.6)		%	11.6		%	21.2		%
Percent change in GAAP rent ⁽²⁾	2.3		%	19.9		%	1.6		%	26.4		%	27.2		%
Total TI & LC per square foot ⁽³⁾	$	80.63		$	107.67		$	65.09		$	99.56		$	21.93
Total TI & LC per sq. ft. per year of lease term ⁽³⁾	$	10.08		$	11.43		$	11.26		$	13.55		$	5.05


The above leasing summary is based on leases executed during the periods indicated, and excludes leasing activity for assets during the quarter in which the asset was sold or classified as held for sale.

(1)			Changes in total square footage result from property dispositions, reclassifications and remeasurement.
(2)			Percent change in GAAP and cash rents is a comparison of current rent, including estimated tenant expense reimbursements, if any, to the rent, including actual/projected tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. Cash rent during the reporting period is calculated before deducting any initial period free rent. New leasing in suites vacant longer than two years was excluded from the calculation.
(3)			Includes tenant improvements (TI) and leasing commissions (LC).

SAME PROPERTY LEASING SUMMARY

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


	As of and for the Three Months Ended
	6/30/2020			3/31/2020			12/31/2019			9/30/2019			6/30/2019
Properties	4			4			4			4			4
Total square feet	1,507			1,507			1,507			1,507			1,507
Percentage leased	90.1		%	90.8		%	91.5		%	89.5		%	85.7		%
Percentage commenced	83.9		%	83.7		%	87.2		%	85.8		%	84.3		%

Total Leases
Square feet	22			75			153			96			58
Lease term (years)	8.0			8.5			6.6			6.3			3.0
Starting cash rent	$	46.34		$	53.14		$	44.36		$	46.71		$	45.83
Percent change in cash rent ⁽¹⁾	(4.8)		%	(1.3)		%	1.5		%	9.2		%	9.1		%
Percent change in GAAP rent ⁽¹⁾	2.3		%	15.9		%	10.1		%	18.0		%	14.5		%
Total TI & LC per square foot ⁽²⁾	$	80.63		$	86.14		$	58.49		$	39.74		$	11.49
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	10.08		$	10.16		$	8.82		$	6.29		$	3.83

Renewal Leases
Square feet	—			41			63			54			43
Lease term (years)	—			7.7			7.8			5.0			2.5
Starting cash rent	—			$	52.76		$	43.47		$	42.02		$	43.58
Percent change in cash rent ⁽¹⁾	—			0.1		%	5.3		%	6.1		%	8.6		%
Percent change in GAAP rent ⁽¹⁾	—			13.2		%	16.9		%	13.9		%	13.9		%
Total TI & LC per square foot ⁽²⁾	$	—		$	68.15		$	49.05		$	23.66		$	7.93
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	—		$	8.86		$	6.25		$	4.76		$	3.12

New Leases
Square feet	22			34			90			42			15
Lease term (years)	8.0			9.4			5.8			8.0			4.3
Starting cash rent	$	46.34		$	53.60		$	44.98		$	52.64		$	52.43
Percent change in cash rent ⁽¹⁾	(4.8)		%	(3.3)		%	(3.6)		%	12.7		%	21.2		%
Percent change in GAAP rent ⁽¹⁾	2.3		%	19.9		%	1.6		%	22.6		%	27.2		%
Total TI & LC per square foot ⁽²⁾	$	80.63		$	107.67		$	65.09		$	60.08		$	21.93
Total TI & LC per sq. ft. per year of lease term ⁽²⁾	$	10.08		$	11.43		$	11.26		$	7.47		$	5.05


The above leasing summary is based on leases executed during the periods indicated.

(1)			Percent change in GAAP and cash rents is a comparison of current rent, including estimated tenant expense reimbursements, if any, to the rent, including actual/projected tenant expense reimbursements, if any, last received for the same space on a GAAP and cash basis, respectively. Cash rent during the reporting period is calculated before deducting any initial period free rent. New leasing in suites vacant longer than two years was excluded from the calculation.
(2)			Includes tenant improvements (TI) and leasing commissions (LC).

CAPITAL SUMMARY

EXPENDITURES & SAME PROPERTY LEASING COMMITMENTS

(Unaudited, dollars and square feet in thousands)


CAPITAL SUMMARY	Three Months Ended
EXPENDITURES	6/30/2020		3/31/2020		12/31/2019		9/30/2019		6/30/2019
Tenant improvements	$	2,448	$	877	$	1,881	$	707	$	2,491
Leasing costs	299		946		1,136		3,056		374
Building improvements ⁽¹⁾	611		351		1,978		804		2,328
Total capital expenditures	$	3,358	$	2,174	$	4,995	$	4,567	$	5,193


Average square feet during period ⁽²⁾	1,628		2,108		2,469		2,469		3,151

Building improvements per average total sq. ft. during period	$	0.38	$	0.17	$	0.80	$	0.33	$	0.74


CAPITAL SUMMARY	Three Months Ended
SAME PROPERTY LEASING COMMITMENTS	June 30, 2020
	New Leases		Renewal Leases		Total
Square feet leased during the period	22		—		22
Total TI & LC ⁽³⁾	$	1,774	$	—	$	1,774
Total TI & LC per square foot ⁽³⁾	$	80.63	$	—	$	80.63
Weighted average lease term by square foot (years)	8.0		—		8.0
Total TI & LC per square foot per year of lease term ⁽³⁾	$	10.08	$	—	$	10.08



(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).

TENANTS REPRESENTING 2.5% OR MORE OF ANNUALIZED RENTAL REVENUE

As of June 30, 2020

(Unaudited, square feet in thousands)


	Tenant	Square Feet ⁽¹⁾	% of Total Sq. Ft. ⁽¹⁾		% of Annualized Rental Revenue		Weighted Average Remaining Lease Term
1	Equinor Energy Services, Inc.	80	5.9	%	5.8	%	3.5
2	KPMG, LLP	71	5.2	%	5.0	%	8.9
3	Crowdstrike, Inc.	36	2.7	%	3.5	%	4.3
4	CBRE, Inc.	40	2.9	%	3.4	%	7.8
5	International Dairy Foods Association ⁽²⁾	23	1.7	%	2.6	%	6.0
6	Kazoo, Inc.	26	1.9	%	2.5	%	1.6
7	Alden Torch Financial, LLC	34	2.5	%	2.5	%	6.7

	Total	310	22.8	%	25.3	%	5.8


(1)			Square footage as of June 30, 2020 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants.
(2)			Approximately 10,000 square feet of International Dairy Foods Association's space expires in 2034. Of the remaining 13,000 square feet, 6,500 square feet expire in 2021 and 6,500 square feet has been backfilled by other tenants until 2022.

SAME PROPERTY LEASE EXPIRATION SCHEDULE

As of June 30, 2020

(Unaudited, dollars and sq. ft. in thousands)


Year	Number of Tenants Expiring ⁽¹⁾	Leased Sq. Ft. Expiring ⁽²⁾	% of Leased Sq. Ft. Expiring		Cumulative % of Leased Sq. Ft. Expiring		Annualized Rental Revenue Expiring ⁽³⁾		% of Annualized Rental Revenue Expiring		Cumulative % of Annualized Rental Revenue Expiring
2020	12	65	4.8	%	4.8	%	$	3,289	5.6	%	5.6	%
2021	21	106	7.8	%	12.6	%	4,758		8.1	%	13.7	%
2022	12	119	8.8	%	21.4	%	6,083		10.3	%	24.0	%
2023	18	215	15.8	%	37.2	%	10,404		17.6	%	41.6	%
2024	14	201	14.8	%	52.0	%	9,159		15.5	%	57.1	%
2025	12	167	12.3	%	64.3	%	5,748		9.7	%	66.8	%
2026	8	80	5.9	%	70.2	%	3,625		6.1	%	72.9	%
2027	5	97	7.2	%	77.4	%	2,811		4.8	%	77.7	%
2028	4	81	6.0	%	83.4	%	2,963		5.0	%	82.7	%
2029	5	117	8.6	%	92.0	%	5,645		9.6	%	92.3	%
Thereafter	6	108	8.0	%	100.0	%	4,536		7.7	%	100.0	%
Total	117	1,356	100.0	%			$	59,021	100.0	%
Weighted average remaining
lease term (in years)			4.9						4.7


(1)			Tenants with leases expiring in multiple years are counted in each year they expire.
(2)			Square footage as of June 30, 2020 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The year expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease.
(3)			Excludes the Annualized Rental Revenue of space that is leased but not commenced.

COMMON & POTENTIAL COMMON SHARES

(Unaudited, share amounts in thousands)


	Three Months Ended			Six Months Ended
	June 30,			June 30,
Weighted Average Share Calculation - GAAP EPS	2020	2019	2020	2019



Weighted average common shares outstanding - basic ⁽¹⁾	121,655	122,122	121,901	122,041
Weighted average Series D preferred shares convertible to common shares	—	2,563	2,857	2,563
Weighted average dilutive RSUs and LTIP Units ⁽²⁾	1,600	1,177	1,600	1,237
Weighted average common shares outstanding - diluted ⁽¹⁾	123,255	125,862	126,358	125,841

	Three Months Ended			Six Months Ended
	June 30,			June 30,
Weighted Average Share and Unit Calculation - FFO and Normalized FFO per share and unit	2020	2019	2020	2019
Weighted average EQC common shares outstanding ⁽¹⁾	121,655	122,122	121,901	122,041
Weighted average Operating Partnership Units outstanding ⁽³⁾	110	14	92	12
Weighted average time-based LTIP Units ⁽²⁾⁽³⁾	124	32	107	34
Weighted average common shares and units outstanding - basic ⁽¹⁾	121,889	122,168	122,100	122,087
Weighted average dilutive RSUs and market-based LTIP Units ⁽²⁾	1,600	1,177	1,600	1,237
Weighted average common shares and units outstanding - diluted⁽¹⁾	123,489	123,345	123,700	123,324


Rollforward of Share Count to June 30, 2020	Series D Preferred Shares ⁽⁴⁾	EQC Common Shares ⁽⁵⁾
Outstanding on December 31, 2019	4,915	121,924
Repurchase of common shares	—	(711)
Share-based compensation grants and vesting, net ⁽⁶⁾	—	309
Outstanding on June 30, 2020	4,915	121,522
Common shares issuable from RSUs, Operating Partnership Units, and LTIP Units as measured on June 30, 2020 ⁽²⁾		1,995
Potential common shares as measured on June 30, 2020 ⁽⁷⁾		123,517


(1)			Weighted average common shares outstanding for the three months ended June 30, 2020 and 2019 includes 150 and 220 unvested, earned RSUs, respectively. Weighted average common shares outstanding for the six months ended June 30, 2020 and 2019 includes 164 and 203 unvested, earned RSUs, respectively.
(2)			We have granted RSUs and LTIP Units to certain employees, officers, an eligible consultant and trustees. RSUs and market-based LTIP Units contain service and market-based vesting components. Time-based LTIP Units contain service-based vesting components.
(3)			Our calculations of FFO and Normalized FFO attributable to EQC common shareholders and unitholders per share and unit - basic include time-based LTIP Units and Operating Partnership Units that are excluded from the calculation of basic earnings per common share attributable to EQC common shareholders (only).
(4)			As of June 30, 2020, we had 4,915 series D preferred shares that were convertible into 2,857 common shares. The series D preferred shares are antidilutive for GAAP EPS for the three months ended June 30, 2020. They are dilutive for GAAP EPS for all other periods presented. The series D preferred shares are antidilutive for all periods presented with respect to FFO and Normalized FFO per common share and unit.
(5)			EQC common shares include unvested restricted shares.
(6)			This amount is net of forfeitures and shares surrendered to satisfy statutory tax witholding obligations.
(7)			Potential common shares as measured on June 30, 2020 include unvested earned RSUs. The 4,915 series D preferred shares outstanding that were convertible into 2,857 common shares as of June 30, 2020 are excluded.

DEFINITIONS

Annualized Rental Revenue

Annualized Rental Revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2020, plus estimated recurring expense reimbursements; 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.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), EBITDAre and Adjusted EBITDAre

We calculate EBITDA as net income (loss) excluding interest expense, income tax expense and depreciation and amortization.

We calculate EBITDAre in accordance with standards established by the National Association of Real Estate Investment Trusts (Nareit). Nareit defines EBITDAre as net income (loss), calculated in accordance with GAAP, plus interest expense, plus income tax expense, plus depreciation and amortization, plus (minus) losses and gains on the disposition of depreciated property, plus impairment write-downs of depreciated property and investments in unconsolidated joint ventures, plus adjustments to reflect the entity's share of EBITDAre of unconsolidated joint ventures. Our calculation of Adjusted EBITDAre differs from our calculations of EBITDA and EBITDAre because we exclude certain items that we view as nonrecurring or impacting comparability from period to period. EBITDA, EBITDAre and Adjusted EBITDAre are supplemental non-GAAP financial measures.

We consider EBITDA, EBITDAre and Adjusted EBITDAre to be appropriate measures of our operating performance, along with net income (loss), net income (loss) attributable to EQC common shareholders, and cash flow from operating activities. We believe that EBITDA, EBITDAre and Adjusted EBITDAre provide useful information to investors because by excluding the effects of certain historical amounts, such as interest, depreciation and amortization expense, EBITDA, EBITDAre and Adjusted EBITDAre may facilitate a comparison of current operating performance with our past operating performance. EBITDA, EBITDAre and Adjusted EBITDAre do not represent cash generated by operating activities in accordance with GAAP and should not be considered alternatives to net income (loss), net income (loss) attributable to EQC common shareholders 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 (loss), net income (loss) attributable to EQC common shareholders 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, EBITDAre and Adjusted EBITDAre differently than we do.

Annualized Adjusted EBITDAre

Annualized Adjusted EBITDAre is Adjusted EBITDAre for the three months ended June 30, 2020 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 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 (loss), net income (loss) attributable to EQC common shareholders 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 (loss), net income (loss) attributable to EQC common shareholders 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 (loss), net income (loss) attributable to EQC

DEFINITIONS

common shareholders 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 include leasing commissions (LCs) 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 quarter-to-date same property versions of these measures include the results of properties continuously owned from April 1, 2019 through June 30, 2020, and the year-to-date same property versions of these measures include the results of properties continuously owned from January 1, 2019 through June 30, 2020. 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 (loss) because they may 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 (loss), net income (loss) attributable to Equity Commonwealth common shareholders 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 (loss), net income (loss) attributable to EQC common shareholders 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 and impairment write-downs, 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).

Operating Partnership Units

Operating Partnership Units are beneficial interests in the Operating Trust.

Other Revenue

Other revenue is primarily comprised of parking revenue that does not represent a component of a lease.

Percentage Commenced

Percentage commenced is the percentage of space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, which includes the space of tenants in a free rent period.

Percentage Leased

Percentage leased is the percentage of space subject to signed leases.

DEFINITIONS

Rental Revenue

Rental revenue is primarily comprised of minimum lease payments from tenants, including tenant reimbursements. In addition, rental revenue includes lease termination fees and straight line rent adjustments.

Same Properties

Our quarter-to-date same property portfolio is comprised of those properties continuously owned from April 1, 2019 through June 30, 2020. Our year-to-date same property portfolio is comprised of those properties continuously owned from January 1, 2019 through June 30, 2020. 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.

Total Debt

Total debt is the balance of mortgage notes payable, net on our condensed consolidated balance sheets.

Undepreciated Book Value

Undepreciated book value represents the carrying value of real estate properties after purchase price allocations and impairment write-downs, if any.

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