Q3 2023 Equity Commonwealth Earnings Call

So longer.

Good morning, and thank you for joining this call to discuss equity Commonwealth's results for the quarter ending September 30th 2023, and provide an update on the company at this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If you wish to ask.

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Please be advised that certain matters discussed during this conference call may constitute forward looking statements within the meaning of federal Securities laws.

Please refer to the section titled forward looking statements in the press release issued yesterday as well as the section titled Risk factors in the company's annual report on Form 10-K, and quarterly report on Form 10-Q for subsequent quarters for a discussion of factors that could cause the company's actual results to differ materially.

From any forward looking statements.

The company assumes no obligation to update or supplement any forward looking statements made today the company posts important information on its website at www Dot EQ C. R E dot com, including information that may be material.

The portion of today's remarks on the company's quarterly earnings also incur.

Include certain non-GAAP financial measures, please refer to yesterday's press release and supplemental containing the companies.

And the company's results.

For a reconciliation of non-GAAP measures to the company's GAAP financial measures on the call today, we have David Helfand chair of our board.

Yeah.

David Weinberg.

T O O and Bill Griffith CFO with that I'll turn the call over to David Weinberg.

Good morning, everyone. Thanks for joining us.

To review the company's results for the quarter as well as provide an update on our investment activities.

For the quarter same property NOI decreased six 8% and same property cash NOI was six 6% lower compared to last year, both primarily due to a decrease in average commenced occupancy and an increase in pre leasing demolition costs better.

At our properties in the quarter, we signed 54000 square feet of new leases and renewals rents on those leases were down one 8% on a cash basis and up 6% on a GAAP basis.

As of September 30th leased occupancy was 88% and commenced occupancy was 79, 9%.

In terms of leasing we continue to see a range of deals with some tenants, giving back space. So I'm looking for short term extensions and others more comfortable committing to term.

Turning to the balance sheet, we have approximately $2 1 billion of cash or roughly $19 61 per share and no debt.

The interest rate, we earn on our cash has increased as the fed has moved rates and we are currently earning roughly five 5% compared to three 2% a year ago with the fed's continued rate increases over the past year. Our interest income has grown from $15 million in the third quarter 2022.

$229 million in the third quarter 2023 rigs.

Regarding share buybacks through the end of last week, we have purchased 3 million shares year to date for $56 7 million at an average price of $18 78.

Since we began buying back stock in 2015, we have repurchased a total of 25 4 million shares for an aggregate of $652 million at an average dividend adjusted price of $17 63.

We currently have $93 $3 million of remaining capacity.

Touching on our REIT status, we expect to qualify as a REIT in 2024.

Turning to the capital markets transaction volumes will remain down across all asset classes owners.

Owners do not want to transact at today's pricing and lenders are often willing to work with their borrowers. Nonetheless, we believe it is different today with the 10 year rate around 5% in the credit markets continuing to be challenged owners are under more pressure and have fewer options. Given these conditions, we are more optimistic that our pace.

<unk> and discipline will be rewarded.

While we evaluated a range of asset classes, we still prefer the industrial and residential sectors and continue to work hard to find a compelling investment opportunity.

With that David Bill and I are happy to take your questions.

Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is open the question queue.

Our first question comes from the line of Craig Mailman with Citi. Please proceed with your question.

Hi, guys. This is SaaS burgee on for Craig.

I just wanted to ask you about your appetite for.

Additional share buybacks at this juncture.

Hey, Seth it's bill.

Our approach to share buybacks as we just we take a prudent approach to it.

We look at cash we say, it's $19 60, a share roughly a net of the preferreds its $18 48.

And really we engage in the buybacks when we feel like there is a compelling discount.

On the stock.

Great and then I guess, just you mentioned in your prepared remarks looking at transactions in the industrial and residential space. How are you thinking about.

Our return hurdles for those asset classes, just given the movement in rates.

Well, we're mindful of where rates are and we think it's reflected real time as we look at the public company pricing, which is always informative as we've said in the past.

We look at returns relative to the risk we're taking.

And that is informed by rates as you referenced so it's difficult to specify a specific rate without knowing the risk but.

But I'd say, we're cognizant of where the treasury yield is.

The impact, it's having on pricing and the impact, it's having as we value and underwrite opportunities.

Great. Thanks.

Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.

Ladies and gentlemen, I'm seeing no other questions at this time I will turn the floor back to Mr. Weinberg for final comments.

Thank you for joining us today.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.

Yes.

Yes.

With regard.

Sure.

With regard.