(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) | |||||||
(Address of Principal Executive Offices) | (Zip Code) | |||||||
(Registrant’s Telephone Number, Including Area Code) |
Title Of Each Class | Trading Symbol | Name of Each Exchange On Which Registered | ||||||||||||
☒ | Accelerated filer | ☐ | ||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
Emerging growth company |
Page | ||||||||
September 30, 2019 | December 31, 2018 | ||||||||||
(audited) | |||||||||||
ASSETS | |||||||||||
Real estate properties: | |||||||||||
Land | $ | $ | |||||||||
Buildings and improvements | |||||||||||
Accumulated depreciation | ( | ( | |||||||||
Cash and cash equivalents | |||||||||||
Marketable securities | |||||||||||
Restricted cash | |||||||||||
Rents receivable | |||||||||||
Other assets, net | |||||||||||
Total assets | $ | $ | |||||||||
LIABILITIES AND EQUITY | |||||||||||
Senior unsecured debt, net | $ | $ | |||||||||
Mortgage notes payable, net | |||||||||||
Accounts payable, accrued expenses and other | |||||||||||
Rent collected in advance | |||||||||||
Distributions payable | |||||||||||
Total liabilities | |||||||||||
Shareholders' equity: | |||||||||||
Preferred shares of beneficial interest, $ | |||||||||||
Series D preferred shares; 6 1/2% cumulative convertible; outstanding, aggregate liquidation preference of $ | |||||||||||
Common shares of beneficial interest, $ | |||||||||||
Additional paid in capital | |||||||||||
Cumulative net income | |||||||||||
Cumulative other comprehensive loss | ( | ||||||||||
Cumulative common distributions | ( | ( | |||||||||
Cumulative preferred distributions | ( | ( | |||||||||
Total shareholders’ equity | |||||||||||
Noncontrolling interest | |||||||||||
Total equity | |||||||||||
Total liabilities and equity | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Revenues: | |||||||||||||||||||||||
Rental revenue | $ | $ | $ | $ | |||||||||||||||||||
Other revenue | |||||||||||||||||||||||
Total revenues | |||||||||||||||||||||||
Expenses: | |||||||||||||||||||||||
Operating expenses | |||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Loss on asset impairment | |||||||||||||||||||||||
Total expenses | |||||||||||||||||||||||
Interest and other income, net | |||||||||||||||||||||||
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $( $ | ( | ( | ( | ( | |||||||||||||||||||
Loss on early extinguishment of debt | ( | ( | |||||||||||||||||||||
Gain on sale of properties, net | |||||||||||||||||||||||
Income before income taxes | |||||||||||||||||||||||
Income tax benefit (expense) | ( | ( | ( | ||||||||||||||||||||
Net income | |||||||||||||||||||||||
Net income attributable to noncontrolling interest | ( | ( | ( | ( | |||||||||||||||||||
Net income attributable to Equity Commonwealth | $ | $ | $ | $ | |||||||||||||||||||
Preferred distributions | ( | ( | ( | ( | |||||||||||||||||||
Net income attributable to Equity Commonwealth common shareholders | $ | $ | $ | $ | |||||||||||||||||||
Weighted average common shares outstanding — basic | |||||||||||||||||||||||
Weighted average common shares outstanding — diluted | |||||||||||||||||||||||
Earnings per common share attributable to Equity Commonwealth common shareholders: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Distributions declared per common share | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||
Unrealized gain on derivative instruments | |||||||||||||||||||||||
Unrealized gain on marketable securities | |||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||
Comprehensive income attributable to the noncontrolling interest | ( | ( | ( | ( | |||||||||||||||||||
Total comprehensive income attributable to Equity Commonwealth | $ | $ | $ | $ |
Equity Commonwealth Shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Shares | Common Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series D | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Preferred Shares | Cumulative Preferred Distributions | Number of Shares | Common Shares | Cumulative Common Distributions | Additional Paid in Capital | Cumulative Net Income | Cumulative Other Comprehensive Loss | Noncontrolling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2019 | $ | $ | ( | $ | $ | ( | $ | $ | $ | — | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | — | — | ( | — | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment for noncontrolling interest | — | — | — | — | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | ( | $ | $ | ( | $ | $ | $ | — | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2019 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | ( | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | — | — | ( | — | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment for noncontrolling interest | — | — | — | — | — | — | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2019 | $ | $ | ( | $ | $ | ( | $ | $ | $ | — | $ | $ |
Equity Commonwealth Shareholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Shares | Common Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series D | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Preferred Shares | Cumulative Preferred Distributions | Number of Shares | Common Shares | Cumulative Common Distributions | Additional Paid in Capital | Cumulative Net Income | Cumulative Other Comprehensive Loss | Noncontrolling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at July 1, 2018 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | — | — | ( | — | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment for noncontrolling interest | — | — | — | — | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2018 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at January 1, 2018 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification pursuant to change in accounting principle | — | — | — | — | — | — | — | ( | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on derivative instruments | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized gain on marketable securities | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares | — | — | — | ( | ( | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contributions | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | — | — | ( | — | — | ( | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Adjustment for noncontrolling interest | — | — | — | — | — | — | — | — | ( | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at September 30, 2018 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ( | $ | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
Depreciation | |||||||||||
Net amortization of debt discounts, premiums and deferred financing fees | |||||||||||
Straight line rental income | ( | ( | |||||||||
Amortization of acquired real estate leases | |||||||||||
Other amortization | |||||||||||
Amortization of right-of-use asset | — | ||||||||||
Share-based compensation | |||||||||||
Loss on asset impairment | |||||||||||
Loss on marketable securities | |||||||||||
Loss on early extinguishment of debt | |||||||||||
Net gain on sale of properties | ( | ( | |||||||||
Loss on sale of real estate mortgage receivable | |||||||||||
Change in assets and liabilities: | |||||||||||
Rents receivable and other assets | ( | ( | |||||||||
Accounts payable, accrued expenses and other | ( | ( | |||||||||
Rent collected in advance | ( | ( | |||||||||
Cash provided by operating activities | |||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Real estate improvements | ( | ( | |||||||||
Insurance proceeds received | |||||||||||
Proceeds from sale of properties, net | |||||||||||
Proceeds from sale of real estate mortgage receivable | |||||||||||
Proceeds from maturity of marketable securities | |||||||||||
Proceeds from sale of marketable securities | |||||||||||
Cash provided by investing activities | |||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Repurchase and retirement of common shares | ( | ( | |||||||||
Payments on borrowings | ( | ( | |||||||||
Contributions from holders of noncontrolling interest | |||||||||||
Distributions to common shareholders | ( | ||||||||||
Distributions to preferred shareholders | ( | ( | |||||||||
Cash used in financing activities | ( | ( | |||||||||
Increase in cash, cash equivalents, and restricted cash | |||||||||||
Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents, and restricted cash at end of period | $ | $ |
Nine Months Ended September 30, | |||||||||||
2019 | 2018 | ||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | |||||||||||
Interest paid | $ | $ | |||||||||
Taxes paid, net | |||||||||||
NON-CASH INVESTING ACTIVITIES: | |||||||||||
Recognition of right-of-use asset and lease liability | $ | $ | — | ||||||||
Accrued capital expenditures | $ | $ | |||||||||
NON-CASH FINANCING ACTIVITIES: | |||||||||||
Distributions payable | $ | $ |
September 30, | |||||||||||
2019 | 2018 | ||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows | $ | $ |
Property | Date Sold | Number of Properties | Number of Buildings | Square Footage | Gross Sales Price | Gain on Sale | ||||||||||||||||||||||||||||||||
1735 Market Street(1) | March 2019 | $ | $ | |||||||||||||||||||||||||||||||||||
600 108th Avenue NE(2) | April 2019 | |||||||||||||||||||||||||||||||||||||
Research Park(3) | June 2019 | |||||||||||||||||||||||||||||||||||||
$ | $ |
2019 | $ | ||||
2020 | |||||
2021 | |||||
2022 | |||||
2023 | |||||
Thereafter | |||||
$ |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
Lease payments | $ | $ | $ | $ | ||||||||||||||||||||||
Variable lease payments | ||||||||||||||||||||||||||
Rental revenue | $ | $ | $ | $ |
December 31, 2018 | ||||||||||||||||||||
Amortized Cost | Unrealized Loss | Estimated Fair Value | ||||||||||||||||||
Marketable securities | $ | $ | ( | $ |
Declaration Date | Record Date | Payment Date | Series D Dividend Per Share | |||||||||||||||||
January 11, 2019 | January 30, 2019 | February 15, 2019 | $ | |||||||||||||||||
April 11, 2019 | April 29, 2019 | May 15, 2019 | $ | |||||||||||||||||
July 12, 2019 | July 30, 2019 | August 15, 2019 | $ | |||||||||||||||||
October 11, 2019 | October 31, 2019 | November 15, 2019 | $ |
Common Shares | OP Units and LTIP Units | Total | ||||||||||||||||||
Outstanding at January 1, 2019 | ||||||||||||||||||||
Repurchase of shares | ( | ( | ||||||||||||||||||
Restricted share grants, time-based LTIP Unit grants and vested restricted stock units, net of forfeitures | ||||||||||||||||||||
Outstanding at September 30, 2019 | ||||||||||||||||||||
Noncontrolling ownership interest in the Operating Trust | % |
Unrealized Loss on Marketable Securities | ||||||||
Balance as of January 1, 2019 | $ | ( | ||||||
Other comprehensive income | ||||||||
Balance as of September 30, 2019 | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Current: | |||||||||||||||||||||||
State and local | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Deferred: | |||||||||||||||||||||||
State and local | ( | ||||||||||||||||||||||
Income tax benefit (expense) | $ | $ | ( | $ | ( | $ | ( |
2019 | |||||
Fair value of RSUs granted | $ | ||||
Expected term (years) | |||||
Expected volatility | % | ||||
Risk-free rate | % |
September 30, 2019 | December 31, 2018 | ||||||||||||||||||||||
Principal Balance | Fair Value | Principal Balance | Fair Value | ||||||||||||||||||||
Senior unsecured debt and mortgage note payable | $ | $ | $ | $ |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Numerator for earnings per common share - basic: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Net income attributable to noncontrolling interest | ( | ( | ( | ( | |||||||||||||||||||
Preferred distributions | ( | ( | ( | ( | |||||||||||||||||||
Numerator for net income per share - basic | $ | $ | $ | $ | |||||||||||||||||||
Numerator for earnings per common share - diluted: | |||||||||||||||||||||||
Net income | $ | $ | $ | $ | |||||||||||||||||||
Net income attributable to noncontrolling interests | ( | ( | ( | ( | |||||||||||||||||||
Preferred distributions | ( | ( | ( | ||||||||||||||||||||
Numerator for net income per share - diluted | $ | $ | $ | $ | |||||||||||||||||||
Denominator for earnings per common share - basic and diluted: | |||||||||||||||||||||||
Weighted average number of common shares outstanding - basic(1) | |||||||||||||||||||||||
RSUs(2) | |||||||||||||||||||||||
LTIP Units(3) | |||||||||||||||||||||||
Series D preferred shares; 6 1/2% cumulative convertible(4) | |||||||||||||||||||||||
Weighted average number of common shares outstanding - diluted | |||||||||||||||||||||||
Net income per common share attributable to Equity Commonwealth common shareholders: | |||||||||||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||||||||||
Diluted | $ | $ | $ | $ | |||||||||||||||||||
Anti-dilutive securities: | |||||||||||||||||||||||
Effect of Series D preferred shares; 6 1/2% cumulative convertible(4) | |||||||||||||||||||||||
Effect of LTIP Units | |||||||||||||||||||||||
Effect of OP Units(5) |
All Properties(1) | Comparable Properties(2) | ||||||||||||||||||||||
As of September 30, | As of September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Total properties | 7 | 11 | 7 | 7 | |||||||||||||||||||
Total square feet | 2,469 | 5,410 | 2,469 | 2,469 | |||||||||||||||||||
Percent leased(3) | 93.5 | % | 94.0 | % | 93.5 | % | 93.1 | % |
Year | Number of Tenants Expiring | Leased Square Feet Expiring(1) | % of Leased Square Feet Expiring(1) | Cumulative % of Leased Square Feet Expiring(1) | Annualized Rental Revenue Expiring(2) | % of Annualized Rental Revenue Expiring | Cumulative % of Annualized Rental Revenue Expiring | |||||||||||||||||||||||||||||||||||||
2019 | 6 | 18 | 0.8 | % | 0.8 | % | $ | 559 | 0.6 | % | 0.6 | % | ||||||||||||||||||||||||||||||||
2020 | 29 | 192 | 8.3 | % | 9.1 | % | 7,262 | 7.6 | % | 8.2 | % | |||||||||||||||||||||||||||||||||
2021 | 22 | 234 | 10.1 | % | 19.2 | % | 8,326 | 8.7 | % | 16.9 | % | |||||||||||||||||||||||||||||||||
2022 | 14 | 212 | 9.2 | % | 28.4 | % | 8,039 | 8.4 | % | 25.3 | % | |||||||||||||||||||||||||||||||||
2023 | 18 | 264 | 11.4 | % | 39.8 | % | 11,411 | 11.9 | % | 37.2 | % | |||||||||||||||||||||||||||||||||
2024 | 14 | 273 | 11.8 | % | 51.6 | % | 11,142 | 11.5 | % | 48.7 | % | |||||||||||||||||||||||||||||||||
2025 | 9 | 100 | 4.3 | % | 55.9 | % | 6,321 | 6.6 | % | 55.3 | % | |||||||||||||||||||||||||||||||||
2026 | 8 | 80 | 3.5 | % | 59.4 | % | 3,507 | 3.7 | % | 59.0 | % | |||||||||||||||||||||||||||||||||
2027 | 5 | 142 | 6.2 | % | 65.6 | % | 3,173 | 3.3 | % | 62.3 | % | |||||||||||||||||||||||||||||||||
2028 | 3 | 59 | 2.6 | % | 68.2 | % | 2,923 | 3.0 | % | 65.3 | % | |||||||||||||||||||||||||||||||||
Thereafter | 12 | 733 | 31.8 | % | 100.0 | % | 33,327 | 34.7 | % | 100.0 | % | |||||||||||||||||||||||||||||||||
140 | 2,307 | 100.0 | % | $ | 95,990 | 100.0 | % | |||||||||||||||||||||||||||||||||||||
Weighted average remaining lease term (in years): | 7.5 | 8.0 |
Tenant | Square Feet(1) | % of Total Leased Square Feet(1) | % of Annualized Rental Revenue(2) | Weighted Average Remaining Lease Term | ||||||||||||||||||||||||||||
1. | Expedia, Inc.(3) | 427 | 18.5 | % | 23.0 | % | 0.3 | |||||||||||||||||||||||||
2. | Georgetown University(4) | 240 | 10.4 | % | 7.3 | % | 2.0 | |||||||||||||||||||||||||
3. | Beth Israel Deaconess Medical Center, Inc. | 117 | 5.1 | % | 4.1 | % | 4.1 | |||||||||||||||||||||||||
4. | Dana-Farber Cancer Institute, Inc. | 77 | 3.3 | % | 4.1 | % | 9.9 | |||||||||||||||||||||||||
5. | Equinor Energy Services, Inc. | 77 | 3.3 | % | 3.4 | % | 4.3 | |||||||||||||||||||||||||
6. | KPMG, LLP | 66 | 2.9 | % | 2.8 | % | 3.4 | |||||||||||||||||||||||||
7. | Crowdstrike, Inc. | 36 | 1.6 | % | 2.0 | % | 5.1 | |||||||||||||||||||||||||
8. | CBRE, Inc. | 40 | 1.7 | % | 2.0 | % | 8.5 | |||||||||||||||||||||||||
Total | 1,080 | 46.8 | % | 48.7 | % | 2.5 | (5) |
Comparable Properties Results(1) | Other Properties Results(2) | Consolidated Results | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental revenue(3) | $ | 23,839 | $ | 23,177 | $ | 662 | 2.9 | % | $ | 156 | $ | 20,593 | $ | 23,995 | $ | 43,770 | $ | (19,775) | (45.2) | % | |||||||||||||||||||||||||||||||||||||||
Other revenue(3) | 2,727 | 2,561 | 166 | 6.5 | % | 13 | 542 | 2,740 | 3,103 | (363) | (11.7) | % | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | (9,889) | (9,892) | 3 | — | % | (34) | (10,365) | (9,923) | (20,257) | 10,334 | (51.0) | % | |||||||||||||||||||||||||||||||||||||||||||||||
Net operating income(4) | $ | 16,677 | $ | 15,846 | $ | 831 | 5.2 | % | $ | 135 | $ | 10,770 | 16,812 | 26,616 | (9,804) | (36.8) | % | ||||||||||||||||||||||||||||||||||||||||||
Other expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 5,939 | 11,287 | (5,348) | (47.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 8,523 | 10,905 | (2,382) | (21.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total other expenses | 14,462 | 22,192 | (7,730) | (34.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and other income, net | 19,401 | 12,626 | 6,775 | 53.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (321) | (5,085) | 4,764 | (93.7) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of properties, net | 1,945 | 20,877 | (18,932) | (90.7) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 23,375 | 32,842 | (9,467) | (28.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit (expense) | 521 | (65) | 586 | (901.5) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 23,896 | 32,777 | (8,881) | (27.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interest | (10) | (13) | 3 | (23.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Equity Commonwealth | 23,886 | 32,764 | (8,878) | (27.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred distributions | (1,997) | (1,997) | — | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Equity Commonwealth common shareholders | $ | 21,889 | $ | 30,767 | $ | (8,878) | (28.9) | % |
Asset | Gain on Sale, Net | |||||||
777 East Eisenhower Parkway | $ | 5,321 | ||||||
8750 Bryn Mawr Avenue | 15,609 | |||||||
$ | 20,930 |
Comparable Properties Results(1) | Other Properties Results(2) | Consolidated Results | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | 2019 | 2018 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental revenue(3) | $ | 74,548 | $ | 68,303 | $ | 6,245 | 9.1 | % | $ | 18,911 | $ | 76,309 | $ | 93,459 | $ | 144,612 | $ | (51,153) | (35.4) | % | |||||||||||||||||||||||||||||||||||||||
Other revenue(3) | 7,731 | 7,259 | 472 | 6.5 | % | 665 | 2,226 | 8,396 | 9,485 | (1,089) | (11.5) | % | |||||||||||||||||||||||||||||||||||||||||||||||
Operating expenses | (29,084) | (28,189) | (895) | 3.2 | % | (7,593) | (36,188) | (36,677) | (64,377) | 27,700 | (43.0) | % | |||||||||||||||||||||||||||||||||||||||||||||||
Net operating income(4) | $ | 53,195 | $ | 47,373 | $ | 5,822 | 12.3 | % | $ | 11,983 | $ | 42,347 | 65,178 | 89,720 | (24,542) | (27.4) | % | ||||||||||||||||||||||||||||||||||||||||||
Other expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 22,085 | 38,211 | (16,126) | (42.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative | 30,152 | 35,466 | (5,314) | (15.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on asset impairment | — | 12,087 | (12,087) | (100.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total other expenses | 52,237 | 85,764 | (33,527) | (39.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and other income, net | 57,871 | 31,074 | 26,797 | 86.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (8,597) | (21,550) | 12,953 | (60.1) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss on early extinguishment of debt | (6,374) | (6,403) | 29 | (0.5) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of properties, net | 422,148 | 253,025 | 169,123 | 66.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income before income taxes | 477,989 | 260,102 | 217,887 | 83.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense | (1,119) | (2,616) | 1,497 | (57.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | 476,870 | 257,486 | 219,384 | 85.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to noncontrolling interests | (180) | (90) | (90) | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Equity Commonwealth | 476,690 | 257,396 | 219,294 | 85.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preferred distributions | (5,991) | (5,991) | — | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to Equity Commonwealth common shareholders | $ | 470,699 | $ | 251,405 | $ | 219,294 | 87.2 | % |
Asset | Gain on Sale, Net | |||||||
1735 Market Street | $ | 192,985 | ||||||
600 108th Avenue NE | 149,009 | |||||||
Research Park | 78,158 | |||||||
$ | 420,152 |
Asset | Gain on Sale, Net | |||||||
1600 Market Street | $ | 54,599 | ||||||
600 West Chicago Avenue | 107,790 | |||||||
5073, 5075, & 5085 S. Syracuse Street | 42,762 | |||||||
1601 Dry Creek Drive | 26,979 | |||||||
777 East Eisenhower Parkway | 5,321 | |||||||
8750 Bryn Mawr Avenue | 15,609 | |||||||
$ | 253,060 |
Scheduled Principal Payments During Period | ||||||||||||||
Year | Secured Fixed Rate Debt(1) | Interest Rate(2) | ||||||||||||
2019 | $ | 146 | 5.7 | % | ||||||||||
2020 | 597 | 5.7 | % | |||||||||||
2021 | 24,836 | 5.7 | % | |||||||||||
Thereafter | — | — | % | |||||||||||
$ | 25,579 | 5.7 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Tenant improvements(1) | $ | 707 | $ | 11,490 | $ | 5,648 | $ | 36,170 | |||||||||||||||
Leasing costs(2) | 3,056 | 11,699 | 4,273 | 19,450 | |||||||||||||||||||
Building improvements(3) | 804 | 2,223 | 4,388 | 7,110 |
New Leases | Renewals | Total | |||||||||||||||
Rentable square feet leased during the period | 116 | 182 | 298 | ||||||||||||||
Tenant improvements and leasing commissions | $ | 11,549 | $ | 1,647 | $ | 13,196 | |||||||||||
Tenant improvements and leasing commissions per rentable square foot | $ | 99.56 | $ | 9.05 | $ | 44.27 | |||||||||||
Weighted average lease term by square foot (years) | 7.3 | 2.9 | 4.6 | ||||||||||||||
Total tenant improvements and leasing commissions per rentable square foot per year | $ | 13.55 | $ | 3.15 | $ | 9.60 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Reconciliation to FFO: | |||||||||||||||||||||||
Net income | $ | 23,896 | $ | 32,777 | $ | 476,870 | $ | 257,486 | |||||||||||||||
Real estate depreciation and amortization | 5,683 | 10,978 | 21,243 | 37,298 | |||||||||||||||||||
Loss on asset impairment | — | — | — | 12,087 | |||||||||||||||||||
Gain on sale of properties, net | (1,945) | (20,877) | (422,148) | (253,025) | |||||||||||||||||||
FFO attributable to Equity Commonwealth | 27,634 | 22,878 | 75,965 | 53,846 | |||||||||||||||||||
Preferred distributions | (1,997) | (1,997) | (5,991) | (5,991) | |||||||||||||||||||
FFO attributable to Equity Commonwealth common shareholders and unitholders | $ | 25,637 | $ | 20,881 | $ | 69,974 | $ | 47,855 | |||||||||||||||
Reconciliation to Normalized FFO: | |||||||||||||||||||||||
FFO attributable to Equity Commonwealth common shareholders and unitholders | $ | 25,637 | $ | 20,881 | $ | 69,974 | $ | 47,855 | |||||||||||||||
Lease value amortization | (39) | (4) | (117) | 76 | |||||||||||||||||||
Straight line rent adjustments | 499 | (1,435) | (349) | (3,985) | |||||||||||||||||||
Loss on early extinguishment of debt | — | — | 6,374 | 6,403 | |||||||||||||||||||
Loss on sale of securities | — | — | — | 4,987 | |||||||||||||||||||
Loss on sale of real estate mortgage receivable | — | 2,117 | — | 2,117 | |||||||||||||||||||
Income taxes related to gains on property sales, net | (423) | 25 | 142 | 2,498 | |||||||||||||||||||
Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders | $ | 25,674 | $ | 21,584 | $ | 76,024 | $ | 59,951 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Rental revenue | $ | 23,995 | $ | 43,770 | $ | 93,459 | $ | 144,612 | |||||||||||||||
Other revenue | 2,740 | 3,103 | 8,396 | 9,485 | |||||||||||||||||||
Operating expenses | (9,923) | (20,257) | (36,677) | (64,377) | |||||||||||||||||||
NOI | $ | 16,812 | $ | 26,616 | $ | 65,178 | $ | 89,720 | |||||||||||||||
NOI | $ | 16,812 | $ | 26,616 | $ | 65,178 | $ | 89,720 | |||||||||||||||
Depreciation and amortization | (5,939) | (11,287) | (22,085) | (38,211) | |||||||||||||||||||
General and administrative | (8,523) | (10,905) | (30,152) | (35,466) | |||||||||||||||||||
Loss on asset impairment | — | — | — | (12,087) | |||||||||||||||||||
Interest and other income, net | 19,401 | 12,626 | 57,871 | 31,074 | |||||||||||||||||||
Interest expense | (321) | (5,085) | (8,597) | (21,550) | |||||||||||||||||||
Loss on early extinguishment of debt | — | — | (6,374) | (6,403) | |||||||||||||||||||
Gain on sale of properties, net | 1,945 | 20,877 | 422,148 | 253,025 | |||||||||||||||||||
Income before income taxes | 23,375 | 32,842 | 477,989 | 260,102 | |||||||||||||||||||
Income tax benefit (expense) | 521 | (65) | (1,119) | (2,616) | |||||||||||||||||||
Net income | $ | 23,896 | $ | 32,777 | $ | 476,870 | $ | 257,486 |
Exhibit Number | Description | ||||
3.1 | Articles of Amendment and Restatement of Declaration of Trust of the Company, dated July 1, 1994, as amended to date. (Incorporated by reference to the Company’s Current Report on Form 8-K filed August 1, 2014.) | ||||
3.2 | Articles Supplementary, dated October 10, 2006. (Incorporated by reference to the Company’s Current Report on Form 8-K filed October 11, 2006.) | ||||
3.3 | Articles Supplementary, dated May 31, 2011. (Incorporated by reference to the Company’s Current Report on Form 8-K filed May 31, 2011.) | ||||
3.4 | Articles Supplementary, dated March 14, 2018. (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 15, 2018.) | ||||
3.5 | Third Amended and Restated Bylaws of the Company, adopted March 15, 2017. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.) | ||||
4.1 | Form of Common Share Certificate. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.) | ||||
4.2 | Form of 61/2% Series D Cumulative Convertible Preferred Share Certificate. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.) | ||||
31.1 | Rule 13a-14(a) Certification. (Filed herewith.) | ||||
31.2 | Rule 13a-14(a) Certification. (Filed herewith.) | ||||
32.1 | Section 1350 Certification. (Furnished herewith.) | ||||
101.1 | The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Cash Flows and (v) related notes to these condensed consolidated financial statements, tagged as blocks of text and in detail. (Filed herewith.) | ||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
EQUITY COMMONWEALTH | |||||||||||
By: | /s/ David A. Helfand | ||||||||||
David A. Helfand | |||||||||||
President and Chief Executive Officer | |||||||||||
Dated: | October 30, 2019 | ||||||||||
By: | /s/ Adam S. Markman | ||||||||||
Adam S. Markman | |||||||||||
Executive Vice President, Chief Financial Officer and Treasurer | |||||||||||
Dated: | October 30, 2019 |
Date: | October 30, 2019 | /s/ David A. Helfand | |||||||||
David A. Helfand | |||||||||||
President and Chief Executive Officer | |||||||||||
Date: | October 30, 2019 | /s/Adam S. Markman | |||||||||
Adam S. Markman | |||||||||||
Executive Vice President, Chief | |||||||||||
Financial Officer and Treasurer | |||||||||||
Certification Pursuant to 18 U.S.C. Sec. 1350 |
/s/ David A. Helfand | /s/ Adam S. Markman | ||||||||||
David A. Helfand | Adam S. Markman | ||||||||||
President and Chief Executive Officer | Executive Vice President, Chief Financial Officer | ||||||||||
and Treasurer | |||||||||||
Date: | October 30, 2019 | ||||||||||
Indebtedness - Narrative (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2019
USD ($)
property
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2019
USD ($)
property
|
Sep. 30, 2018
USD ($)
|
Jun. 28, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Debt Instrument [Line Items] | ||||||
Senior unsecured notes, net | $ 250,000 | |||||
Interest rate stated percentage | 5.875% | 5.875% | ||||
Loss on early extinguishment of debt | $ 0 | $ 0 | $ 6,374 | $ 6,403 | ||
Real estate properties, net | 460,494 | 460,494 | $ 763,674 | |||
Mortgage notes payable, net | $ 25,896 | $ 25,896 | $ 26,482 | |||
Mortgage notes | ||||||
Debt Instrument [Line Items] | ||||||
Number of real estate properties secured by mortgage | property | 1 | 1 | ||||
Real estate properties, net | $ 43,600 | $ 43,600 | ||||
Mortgage notes payable, net | $ 25,900 | $ 25,900 |
Cumulative Other Comprehensive Loss (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amounts Recognized in Cumulative Other Comprehensive Loss | The following table presents the amounts recognized in cumulative other comprehensive loss for the nine months ended September 30, 2019 (in thousands):
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Segment Information |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information Our primary business is the ownership and operation of office properties, and we currently have one reportable segment. More than 90% of our revenues for the nine months ended September 30, 2019 were from office properties. |
Real Estate Properties (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Properties Sold and Income Statement Information for Properties Disposed of | During the nine months ended September 30, 2019, we sold the following properties, which did not represent strategic shifts under ASC Topic 2015 (dollars in thousands):
(1)Certain of our subsidiaries sold 100% of the equity interests in the fee simple owner of this property. The sale represents an individually significant disposition. The operating results of this property are included in continuing operations for all periods presented through the date of sale. Net income related to this property was $0.1 million and $2.1 million for the three months ended September 30, 2019 and 2018, respectively, and $197.3 million (of which $193.0 million related to the gain on sale) and $5.9 million for the nine months ended September 30, 2019 and 2018, respectively. (2)The property includes an office building and additional development rights. (3)There is consideration of $2.0 million being held in escrow related to the sale of this property. To the extent any of these proceeds are ultimately released to the Company, the gain on sale will increase.
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Schedule of Future Minimum Lease Payments, Excluding Tenant Reimbursement Revenue, Scheduled to be Received | The future minimum lease payments, excluding tenant reimbursement revenue, scheduled to be received by us during the current terms of our leases as of September 30, 2019 are as follows (in thousands):
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Schedule of Rental Revenue | Rental revenue consists of the following (in thousands):
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Indebtedness |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Indebtedness | Indebtedness Senior Unsecured Notes: On June 28, 2019, we redeemed all $250.0 million of our 5.875% senior unsecured notes due 2020 and recognized a loss on early extinguishment of debt of $6.4 million for the nine months ended September 30, 2019 from prepayment fees, the write off of unamortized deferred financing fees and the write off of an unamortized discount. Debt Covenants: After the redemption of our 5.875% senior unsecured notes due 2020 on June 28, 2019, we no longer have any notes outstanding under our public debt indenture and related supplements, collectively the Indenture, and we are no longer required to maintain the financial ratio covenants prescribed in the Indenture. As a result, we are no longer rated by the debt rating agencies. Mortgage Note Payable: At September 30, 2019, one of our properties with an aggregate net book value of $43.6 million had a secured mortgage note totaling $25.9 million (including a net premium and unamortized deferred financing fees) maturing in 2021.
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Income Taxes |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and are generally not subject to federal and state income taxes provided we distribute a sufficient amount of our taxable income to our shareholders and meet other requirements for qualifying as a REIT. We are also subject to certain state and local taxes without regard to our REIT status. Our provision for income taxes consists of the following (in thousands):
During the nine months ended September 30, 2019, we recorded $1.6 million related to uncertain tax positions, as part of our income tax provision.
|
Business (Details) $ in Thousands, ft² in Millions |
Sep. 30, 2019
USD ($)
ft²
building
property
|
Dec. 31, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
|
---|---|---|---|
Noncontrolling Interest [Line Items] | |||
Cash and cash equivalents | $ | $ 3,205,775 | $ 2,400,803 | $ 2,673,328 |
Consolidated Properties | |||
Noncontrolling Interest [Line Items] | |||
Number of real estate properties | property | 7 | ||
Number of buildings | building | 12 | ||
Square footage (in sqft) | ft² | 2.5 | ||
Operating Trust | |||
Noncontrolling Interest [Line Items] | |||
Noncontrolling interest, ownership percentage by parent | 99.96% |
Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Provision for Income Taxes | Our provision for income taxes consists of the following (in thousands):
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Real Estate Properties - Rental Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Real Estate [Abstract] | ||||
Lease payments | $ 16,985 | $ 30,681 | $ 65,319 | $ 100,845 |
Variable lease payments | 7,010 | 13,089 | 28,140 | 43,767 |
Rental revenue | $ 23,995 | $ 43,770 | $ 93,459 | $ 144,612 |
Label | Element | Value |
---|---|---|
AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (1,902,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 1,902,000 |
Fair Value of Assets and Liabilities - Schedule of Fair Value and Carrying Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Principal Balance | ||
Fair value of financial instruments | ||
Senior unsecured debt and mortgage note payable | $ 25,579 | $ 276,000 |
Fair Value | ||
Fair value of financial instruments | ||
Senior unsecured debt and mortgage note payable | $ 26,321 | $ 283,214 |
Related Person Transactions - Narrative (Details) - Two North Riverside Plaza Joint Venture Limited Partnership $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019
USD ($)
option
|
Sep. 30, 2018
USD ($)
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Sep. 30, 2019
USD ($)
option
|
Sep. 30, 2018
USD ($)
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Related Party Transaction [Line Items] | ||||
Lease term | 5 years | 5 years | ||
Number of renewal options of lease arrangement | option | 1 | 1 | ||
Renewal term of lease arrangement | 5 years | 5 years | ||
Tenant improvements | $ 0.7 | $ 0.7 | ||
Lease termination period term | 30 days | |||
Operating lease, expense | $ 0.2 | $ 0.2 | $ 0.7 | $ 0.6 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Income Statement [Abstract] | ||||
Amortization of debt discounts, premiums and deferred financing fees | $ (55) | $ 559 | $ 264 | $ 2,005 |
Business |
9 Months Ended |
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Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business | Business Equity Commonwealth, or the Company, is a real estate investment trust, or REIT, formed in 1986 under the laws of the State of Maryland. Our business is primarily the ownership and operation of office properties in the United States. On November 10, 2016, the Company converted to what is commonly referred to as an umbrella partnership real estate investment trust, or UPREIT. In connection with this conversion, the Company contributed substantially all of its assets to EQC Operating Trust, a Maryland real estate investment trust, or the Operating Trust, and the Operating Trust assumed substantially all of the Company’s liabilities pursuant to a contribution and assignment agreement between the Company and the Operating Trust. The Company now conducts and intends to continue to conduct substantially all of its activities through the Operating Trust. The Company beneficially owned 99.96% of the outstanding shares of beneficial interest, designated as units, in the Operating Trust, or OP Units, as of September 30, 2019, and the Company is the sole trustee of the Operating Trust. As the sole trustee, the Company generally has the power under the declaration of trust of the Operating Trust to manage and conduct the business of the Operating Trust, subject to certain limited approval and voting rights of other holders of OP Units. At September 30, 2019, our portfolio consisted of 7 properties (12 buildings), with a combined 2.5 million square feet. As of September 30, 2019, we had $3.2 billion of cash and cash equivalents.
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Marketable Securities |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities As of December 31, 2018, our marketable securities consisted of United States Treasury notes and were classified as available-for-sale. The United States Treasury notes matured in January and February 2019, and as of September 30, 2019, we do not have any marketable securities. Below is a summary of our marketable securities as of December 31, 2018 (in thousands):
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Cumulative Other Comprehensive Loss |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cumulative Other Comprehensive Loss | Cumulative Other Comprehensive Loss The following table presents the amounts recognized in cumulative other comprehensive loss for the nine months ended September 30, 2019 (in thousands):
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Marketable Securities (Details) - USD ($) |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Investments, Debt and Equity Securities [Abstract] | ||
Amortized Cost | $ 0 | $ 249,944,000 |
Unrealized Loss | (342,000) | |
Estimated Fair Value | $ 249,602,000 |
Real Estate Properties - Narrative (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Sep. 30, 2018 |
|
Real Estate [Abstract] | ||
Real estate improvements | $ 10.0 | $ 43.3 |
Share-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||
Summary of Assumptions and Fair Values for RSUs Granted in the Period | The assumptions and fair value for the RSUs granted during the nine months ended September 30, 2019 are included in the following table on a per share basis.
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Fair Value of Assets and Liabilities - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Assets, fair value | $ 0 |
Total rents | Customer concentration | Tenant | |
Fair value of assets and liabilities | |
Concentration risk, percent | 23.00% |
Segment Information - Narrative (Details) |
9 Months Ended |
---|---|
Sep. 30, 2019
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 1 |
Percentage of revenue from office properties (more than) | 90.00% |
Share-Based Compensation - Summary of Assumptions and Fair Values for Restricted Stock Units Granted in the Period (Details) - RSUs |
9 Months Ended |
---|---|
Sep. 30, 2019
$ / shares
| |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract] | |
Fair value of RSUs granted (in dollars per share) | $ 39.65 |
Expected term | 4 years |
Expected volatility | 13.98% |
Risk-free rate | 2.52% |
Cumulative Other Comprehensive Loss - Schedule of Amounts Recognized in Cumulative Other Comprehensive Loss (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2019
USD ($)
| |
Amounts recognized in cumulative other comprehensive income (Loss) by component | |
Balance as of beginning of period | $ 3,183,998 |
Balance as of end of period | 3,228,113 |
Unrealized Loss on Marketable Securities | |
Amounts recognized in cumulative other comprehensive income (Loss) by component | |
Balance as of beginning of period | (342) |
Other comprehensive income | 342 |
Balance as of end of period | $ 0 |
Earnings Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Common Share | Earnings Per Common Share The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands except per share amounts):
(1) The three months ended September 30, 2019 and 2018, includes 217 and 362 weighted-average, unvested, earned RSUs, respectively, and the nine months ended September 30, 2019 and 2018, includes 208 and 344 weighted-average, unvested, earned RSUs, respectively. (2) Represents weighted-average number of common shares that would have been issued if the quarter-end was the measurement date for unvested, unearned RSUs. (3) Represents the weighted-average dilutive shares issuable from LTIP Units if the quarter-end was the measurement date for the periods shown. (4) The Series D preferred shares are excluded from the diluted earnings per share calculation for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2018 because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution. (5) Beneficial interests in the Operating Trust.
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Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of EQC have been prepared without audit. Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are appropriate. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K, or our Annual Report, for the year ended December 31, 2018. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain reclassifications have been made to the prior year's financial statements to conform to the current year’s presentation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include the assessment of the collectability of rental revenue, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. Share amounts are presented in whole numbers, except where noted.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of FASB Accounting Standards Codification, or ASC, 820. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This update is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. We adopted ASU 2018-07 on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. We do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes previous leasing standards. For leases where we are the lessor, we account for these leases using an approach that is substantially equivalent to previous guidance prior to the adoption of ASU 2016-02. Additionally, under ASU 2016-02, lessors may only capitalize incremental direct leasing costs. For leases in which we are the lessee, we recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments, with rent expense being recognized on a straight-line basis and the right of use asset being reduced when lease payments are made. In July 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of ASU 2016-02. The amendment to the new leases standard includes a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single component under the new leases standard. The amendment also provides a transition option that permits the application of the new guidance as of the adoption date rather than to all periods presented. We elected the practical expedient to account for both our lease (primarily base rent) and non-lease (primarily tenant reimbursements) components as a single component under the leases standard and elected the new transition option. We adopted these pronouncements on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements, both as a lessor and as a lessee. Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations as a result of adopting ASU 2016-02. Amounts that were previously disclosed as "Tenant reimbursements and other income" are now included in "Rental revenue" and are no longer presented as a separate line item. Parking revenues that do not represent components of leases and were previously disclosed as "Rental income" are now included in "Other revenue." Subsequent to January 1, 2019, provisions for credit losses are included in "Rental revenue." Provisions for credit losses prior to January 1, 2019 were disclosed as "Operating expenses" and were not reclassified to conform prior periods to the current presentation.
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Marketable Securities | our marketable securities consisted of United States Treasury notes and were classified as available-for-sale. The United States Treasury notes matured in January and February 2019, and as of September 30, 2019, we do not have any marketable securities. |
Noncontrolling Interest (Tables) |
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Noncontrolling Interest [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Issued and Outstanding Common Shares | The following table presents the changes in Equity Commonwealth’s issued and outstanding common shares and units for the nine months ended September 30, 2019:
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Schedule of Issued and Outstanding Units | The following table presents the changes in Equity Commonwealth’s issued and outstanding common shares and units for the nine months ended September 30, 2019:
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Real Estate Properties - Lease Payments (Details) $ in Thousands |
Sep. 30, 2019
USD ($)
|
---|---|
Real Estate [Abstract] | |
2019 | $ 16,203 |
2020 | 60,083 |
2021 | 66,562 |
2022 | 59,574 |
2023 | 54,130 |
Thereafter | 364,353 |
Total future minimum lease payments to be received | $ 620,905 |
Earnings Per Common Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands except per share amounts):
(1) The three months ended September 30, 2019 and 2018, includes 217 and 362 weighted-average, unvested, earned RSUs, respectively, and the nine months ended September 30, 2019 and 2018, includes 208 and 344 weighted-average, unvested, earned RSUs, respectively. (2) Represents weighted-average number of common shares that would have been issued if the quarter-end was the measurement date for unvested, unearned RSUs. (3) Represents the weighted-average dilutive shares issuable from LTIP Units if the quarter-end was the measurement date for the periods shown. (4) The Series D preferred shares are excluded from the diluted earnings per share calculation for the three months ended September 30, 2019 and 2018 and for the nine months ended September 30, 2018 because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution. (5) Beneficial interests in the Operating Trust.
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Share-Based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | |||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation At our annual meeting of shareholders on June 20, 2019, our shareholders approved an amendment to the Equity Commonwealth 2015 Omnibus Incentive Plan to increase the number of common shares of beneficial interest authorized thereunder by 2,500,000. Recipients of the Company’s restricted shares have the same voting rights as any other common shareholder. During the period of restriction, holders of unvested restricted shares are eligible to receive dividend payments on their shares at the same rate and on the same date as any other common shareholder. The restricted shares are service based awards and vest over a -year period. Recipients of the Company’s restricted stock units, or RSUs, are entitled to receive dividends with respect to the common shares underlying the RSUs if and when the RSUs are earned, at which time the recipient will be entitled to receive an amount in cash equal to the aggregate amount of cash dividends that would have been paid in respect of the common shares underlying the recipient’s earned RSUs had such common shares been issued to the recipient on the first day of the performance period. To the extent that an award does not vest, the dividends related to unvested RSUs will be forfeited. The RSUs are market-based awards with a service condition and recipients may earn RSUs based on the Company’s total shareholder return, or TSR, relative to the TSRs of the companies that comprise the NAREIT Office Index over a -year performance period. Following the end of the -year performance period, the number of earned awards will be determined. The earned awards vest in two tranches with 50% of the earned award vesting following the end of the performance period on the date the Compensation Committee of our Board of Trustees, or the Committee, determines the level of achievement of the performance metric and the remaining 50% of the earned award vesting approximately one year thereafter, subject to the grant recipient’s continued employment. Compensation expense for the RSUs is determined using a Monte Carlo simulation model and is recognized ratably from the grant date to the vesting date of each tranche. LTIP Units are a class of beneficial interests in the Operating Trust that may be issued to employees, officers or trustees of the Operating Trust, the Company or their subsidiaries. Time-based LTIP Units have the same general characteristics as restricted shares and market-based LTIP Units have the same general characteristics as RSUs. Each LTIP Unit will convert automatically into an OP Unit on a one-for-one basis when the LTIP Unit becomes vested and its capital account is equalized with the per-unit capital account of the OP Units. Holders of LTIP Units generally will be entitled to receive the same per-unit distributions as the other outstanding OP Units in the Operating Trust, except that market-based LTIP Units will not participate in distributions until expiration of the applicable performance period, at which time any earned market-based LTIP Units generally will become entitled to receive a catch-up distribution for the periods prior to such time. 2019 Equity Award Activity During the nine months ended September 30, 2019, 384,811 RSUs vested, and, as a result, we issued 384,811 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations (see Note 6). On June 20, 2019, in accordance with the Company’s compensation plan for independent Trustees, the Committee awarded each of the nine independent Trustees $0.1 million in restricted shares or time-based LTIP Units as part of their compensation for the 2019-2020 year of service on the Board of Trustees. These awards equated to 2,940 shares or time-based LTIP Units per Trustee, for a total of 23,520 shares and 2,940 time-based LTIP Units, valued at $34.01 per share and unit, the closing price of our common shares on the New York Stock Exchange (NYSE) on that day. These shares and time-based LTIP Units vest one year after the date of the award. On January 29, 2019, the Committee approved grants in the aggregate amount of 112,359 restricted shares and 228,128 RSUs at target (568,609 RSUs at maximum) to the Company’s officers, certain employees and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2018. The restricted shares granted on January 29, 2019 were valued at $31.77 per share, the closing price of our common shares on the NYSE on that day. The assumptions and fair value for the RSUs granted during the nine months ended September 30, 2019 are included in the following table on a per share basis.
2018 Equity Award Activity During the nine months ended September 30, 2018, 141,605 RSUs vested, and, as a result, we issued 141,605 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations (see Note 6). On June 20, 2018, in accordance with the Company’s compensation plan for independent Trustees, the Committee awarded each of the nine independent Trustees $0.1 million in restricted shares or time-based LTIP Units as part of their compensation for the 2018-2019 year of service on the Board of Trustees. These awards equated to 3,200 shares or time-based LTIP Units per Trustee, for a total of 25,600 shares and 3,200 time-based LTIP Units, valued at $31.25 per share and unit, the closing price of our common shares on the New York Stock Exchange (NYSE) on that day. These shares and time-based LTIP Units vested one year after the date of the award. On January 29, 2018, the Committee approved grants in the aggregate amount of 125,409 restricted shares and 254,615 RSUs at target (634,628 RSUs at maximum) to the Company’s officers, certain employees and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2017. The restricted shares were valued at $29.78 per share, the closing price of our common shares on the NYSE on the grant date. The RSUs were valued at $37.13 per share, their fair value on the grant date. Outstanding Equity Awards As of September 30, 2019, the estimated future compensation expense for all unvested restricted shares and time-based LTIP Units was $7.0 million. Compensation expense for the restricted share and time-based LTIP Unit awards is being recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The weighted average period over which the future compensation expense will be recorded for the restricted shares and time-based LTIP units is approximately 2.3 years. As of September 30, 2019, the estimated future compensation expense for all unvested RSUs and market-based LTIP Units was $14.0 million. The weighted average period over which the future compensation expense will be recorded for the RSUs and market-based LTIP Units is approximately 2.2 years. During the three months ended September 30, 2019 and 2018, we recorded $3.4 million and $5.2 million, respectively, and during the nine months ended September 30, 2019 and 2018, we recorded $11.1 million and $15.7 million, respectively, of compensation expense, net of forfeitures, in general and administrative expense for grants to our trustees and employees related to our equity compensation plans. Compensation expense recorded during the nine months ended September 30, 2019 and 2018 includes $0.8 million and $0.4 million, respectively, of accelerated vesting due to staffing reductions. Forfeitures are recognized as they occur. At September 30, 2019, 2,859,628 shares/units remain available for issuance under the Equity Commonwealth 2015 Omnibus Incentive Plan, as amended.
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Summary of Significant Accounting Policies |
9 Months Ended |
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Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying condensed consolidated financial statements of EQC have been prepared without audit. Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are appropriate. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K, or our Annual Report, for the year ended December 31, 2018. Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report. In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included. All intercompany transactions and balances with or among our subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Certain reclassifications have been made to the prior year's financial statements to conform to the current year’s presentation. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the condensed consolidated financial statements include the assessment of the collectability of rental revenue, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets. Share amounts are presented in whole numbers, except where noted. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of FASB Accounting Standards Codification, or ASC, 820. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. We do not expect the adoption of ASU 2018-13 to have a material impact on our consolidated financial statements. In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This update is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. We adopted ASU 2018-07 on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. We do not expect the adoption of ASU 2016-13 to have a material impact on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes previous leasing standards. For leases where we are the lessor, we account for these leases using an approach that is substantially equivalent to previous guidance prior to the adoption of ASU 2016-02. Additionally, under ASU 2016-02, lessors may only capitalize incremental direct leasing costs. For leases in which we are the lessee, we recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments, with rent expense being recognized on a straight-line basis and the right of use asset being reduced when lease payments are made. In July 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of ASU 2016-02. The amendment to the new leases standard includes a practical expedient that provides lessors an option not to separate lease and non-lease components when certain criteria are met and instead account for those components as a single component under the new leases standard. The amendment also provides a transition option that permits the application of the new guidance as of the adoption date rather than to all periods presented. We elected the practical expedient to account for both our lease (primarily base rent) and non-lease (primarily tenant reimbursements) components as a single component under the leases standard and elected the new transition option. We adopted these pronouncements on January 1, 2019, and the adoption did not have a material impact on our consolidated financial statements, both as a lessor and as a lessee. Certain reclassifications were made to conform the prior period to our presentation of the condensed consolidated statements of operations as a result of adopting ASU 2016-02. Amounts that were previously disclosed as "Tenant reimbursements and other income" are now included in "Rental revenue" and are no longer presented as a separate line item. Parking revenues that do not represent components of leases and were previously disclosed as "Rental income" are now included in "Other revenue." Subsequent to January 1, 2019, provisions for credit losses are included in "Rental revenue." Provisions for credit losses prior to January 1, 2019 were disclosed as "Operating expenses" and were not reclassified to conform prior periods to the current presentation.
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Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity Common Share Issuances: See Note 10 for information regarding equity issuances related to share-based compensation. Common Share Repurchases: On March 13, 2019, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares over the twelve months following the date of authorization. During the nine months ended September 30, 2019, we did not repurchase any of our common shares under our share repurchase program. The $150.0 million of remaining authorization available under our share repurchase program as of September 30, 2019 is scheduled to expire on March 13, 2020. During the nine months ended September 30, 2019 and 2018, certain of our employees surrendered 168,327 and 57,348 common shares owned by them, respectively, to satisfy their statutory tax withholding obligations in connection with the vesting of such common shares. Common Share and Unit Distribution: On September 24, 2019, our Board of Trustees declared a special, one-time cash distribution of $3.50 per common share/unit to shareholders/unitholders of record on October 7, 2019. On October 23, 2019, we paid this distribution to such shareholders/unitholders in the aggregate amount of $427.7 million. On September 26, 2018, our Board of Trustees declared a special, one-time cash distribution of $2.50 per common share/unit to shareholders/unitholders of record on October 9, 2018. On October 23, 2018, we paid this distribution to such shareholders/unitholders in the aggregate amount of $304.7 million. In February 2019, the number of earned awards for certain recipients of the Company's restricted stock units was determined. Pursuant to the terms of such awards, we paid a one-time catch-up cash distribution of $2.50 per common share/unit to these recipients in the aggregate amount of $1.2 million upon such determination. Preferred Share Distributions: In 2019, our Board of Trustees declared distributions on our series D preferred shares to date as follows:
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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Sep. 30, 2019 |
Sep. 30, 2018 |
Sep. 30, 2019 |
Sep. 30, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 23,896 | $ 32,777 | $ 476,870 | $ 257,486 |
Other comprehensive income, net of tax: | ||||
Unrealized gain on derivative instruments | 0 | 0 | ||
Unrealized gain on derivative instruments | 0 | 456 | ||
Unrealized gain on marketable securities | 0 | 463 | 342 | 535 |
Total comprehensive income | 23,896 | 33,240 | 477,212 | 258,477 |
Comprehensive income attributable to the noncontrolling interest | (10) | (13) | (180) | (90) |
Total comprehensive income attributable to Equity Commonwealth | $ 23,886 | $ 33,227 | $ 477,032 | $ 258,387 |
Subsequent Events - Narrative (Details) - Series D - $ / shares |
Nov. 15, 2019 |
Oct. 11, 2019 |
Aug. 15, 2019 |
Jul. 12, 2019 |
May 15, 2019 |
Apr. 11, 2019 |
Feb. 15, 2019 |
Jan. 11, 2019 |
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Subsequent Event [Line Items] | ||||||||
Dividend declared (in dollars per share) | $ 0.40625 | $ 0.40625 | $ 0.40625 | |||||
Dividend paid (in dollars per share) | $ 0.40625 | $ 0.40625 | $ 0.40625 | |||||
Subsequent event | ||||||||
Subsequent Event [Line Items] | ||||||||
Dividend declared (in dollars per share) | $ 0.40625 | |||||||
Scenario, Forecast | ||||||||
Subsequent Event [Line Items] | ||||||||
Dividend paid (in dollars per share) | $ 0.40625 |
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