Q2 2024 Equity Commonwealth Earnings Call
Good morning, and thanks for joining this call to discuss equity Commonwealth's results for the quarter ended June 30th 'twenty 'twenty, four and an update on the company.
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Speaker Change: A question and answer session will follow the formal presentation.
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Speaker Change: Please be advised that certain matters discussed during this conference call may constitute forward looking statements within the meaning of federal Securities laws.
Speaker Change: 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 Companys annual report on Form 10-K, and corner really reports on Form 10-Q for subsequent quarters.
Speaker Change: For a discussion of factors for a discussion of factors that could cause the companys actual results to materially differ from any forward looking statements.
Speaker Change: The company assumes no obligation to update or supplement any forward looking statements made today.
Speaker Change: Company posts important information on its website at Www Dot E. Q C. R E dot com, including information that may be material.
Speaker Change: The portion of todays remarks regarding the Companys quarterly earnings is also it also includes certain non-GAAP financial measures.
Speaker Change: Refer to yesterday's press release and supplemental.
Speaker Change: But it will continue the company's results for a reconciliation of these non-GAAP measures of the company's GAAP financial results.
Speaker Change: On the call today are David Helfand, President and CEO, David Weinberg, COO and Bill Griffith CFO with that I will turn the call over to David Helfand.
David A. Helfand: Thank you and good morning, everyone. Thanks for joining us.
Speaker Change: Rather than spend time in the Companys results for the quarter. The details of which are covered in our earnings release and other filings.
Speaker Change: To provide a general update on our business.
Speaker Change: As we discussed on last quarters call, we have been evaluating potential investment opportunities in it.
David A. Helfand: Efforts to create long term value for shareholders.
David A. Helfand: After working through our pipeline, we have been unable to consummate a compelling transaction.
Speaker Change: As a result, our board of trustees has determined that it is.
Speaker Change: <unk> and in the best interest of our shareholders to proceed with the wind down of our operations and the liquidation of our assets in order to maximize value for shareholders.
Speaker Change: The key gating factor and the wind down.
Speaker Change: The timing of the sale of our four remaining properties.
Speaker Change: We disclosed last quarter that we had initiated a process to sell three of our four assets.
Speaker Change: Those properties $12 58 to Washington D C and our two assets in Austin are currently being marketed for sale.
Speaker Change: While our team is focused on achieving the <unk> fusion is important to understand the current market conditions for selling office asset a uniquely challenging.
Speaker Change: Transaction volume for the first six months of the year was the lowest since 2010 and.
Speaker Change: And down 75% from pre Covid levels.
Speaker Change: Moreover, debt availability for office assets is scarce and when available is priced at double digit coupons.
Speaker Change: Given the market environment, it's difficult to estimate the timing and the proceeds from these sales.
Speaker Change: We're hopeful that the dispositions will generate proceeds in excess of our $234 million net book value for the assets.
Speaker Change: As it relates to the timing for the wind down we expect to file a preliminary proxy by mid September recommending that our shareholders approve a plan of sale in liquidation.
Speaker Change: <unk> will be subject to review by the SEC and depending on the length of that process, we anticipate holding the shareholder vote no later than December.
Speaker Change: We also expect to begin marketing for sale, our Denver asset.
Speaker Change: $25 17th Street in early September with closing contingent on shareholder approval of the plan of sale.
Speaker Change: Plan, a sale or require the affirmative vote of two thirds of our outstanding common shares to be approved.
Speaker Change: Assuming the plan as sales improve our shareholders. The next steps will be the redemption of the series D preferred and a distribution to shareholders of substantially all of our cash.
Speaker Change: Then once the remaining assets are sold we expect to distribute the remaining proceeds proceeds shortly thereafter.
Speaker Change: This will likely be the last distribution of material value.
Speaker Change: We will then commence the NYSE listing and SEC registration processes and various other administrative tasks with the goal of substantially winding down the company by the end of the second quarter of 2025.
Speaker Change: We continue to expect to qualify as a REIT in 2024 and 2025.
Speaker Change: Well, we don't have all the answers today and timing is uncertain. We are focused on executing the wind down process as efficiently as possible and we will continue to communicate with shareholders regarding our progress.
Speaker Change: We appreciate the support we've received from our shareholders and want to acknowledge the hard work and dedication of the EQT team.
Speaker Change: With that Dave and Bill and I are happy to take your questions.
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Speaker Change: One moment, please while we poll for questions.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you. Our first question is from Craig Melman from Citi. Please proceed.
Speaker Change: Thanks, Nick Joseph here with Craig.
Craig Allen Mailman: So I appreciate the new news and the update on the process.
Craig Allen Mailman: So maybe just starting with the three assets being marketed and can you just walk through why those are in the process I know the timing is uncertain and I. Appreciate your comments on the debt capital markets, but just kind of buyer interest.
Speaker Change: Pricing expectations, and where each of those three stand right now.
Speaker Change: Hi, Nick it's David I'll take that one so the sales of those three assets.
Nick: Commenced in May.
Speaker Change: And unlike in the past given the current market conditions that David described it's just taking longer so I'd say, we're at the point now we're trying to gauge buyer interest.
Speaker Change: However, given the makeup of bidders and interested parties and the charge environment as opposed to into the past.
Speaker Change: It's harder to predict the timing and execution. So we're learning as we go and we will know more later.
Speaker Change: Thanks, and then just for the Denver asset is there anything unique about that asset that maybe will have it trade sooner rather than later, how do you think about it versus the three that are being marketed right now.
Speaker Change: Well it has a different profile. So the three that are being marketed now or at least kind of in the 55% to 70% our b to B plus properties. So that we're gonna attract one set of buyers.
Speaker Change: Denver asset currently at least in the mid Eighty's, that's a great asset its class a.
Speaker Change: So.
Speaker Change: It should attract more interest from more traditional larger buyers. The wildcard there is in this environment. It is 700000 square feet and they are just few comps for assets of that size for me to kind of have a feel for how that's going to play out.
Speaker Change: Thanks, and then just as you think about the liquidation costs is there an estimate.
Speaker Change: You may now.
Speaker Change: What what the wind down below cost.
William H. Griffiths: Hey, Nick its bill.
Speaker Change: We disclosed last quarter, a 40 to 50 <unk> per share range.
Nicholas Gregory Joseph: We're still comfortable with that and I think there'll be more information forthcoming on that in the proxy.
Speaker Change: Proxy.
Speaker Change: Okay, Great and then maybe just finally just on G&A costs.
Speaker Change: Wind down occurs will there be any change.
Speaker Change: Comp and overhead through the liquidation date.
Speaker Change: We don't expect it to be.
Speaker Change: So <unk> run rate a good run rate for the next next two quarters at least.
Speaker Change: It sounds about right.
Speaker Change: Great well I appreciate I appreciate the time and all the color. Thank you.
Speaker Change: Once again, if anyone would like to join the question queue. Please press one on your telephone keypad.
Speaker Change: This concludes our question and answer session I would like to turn the floor back over to David Helfand for closing comments.
David A. Helfand: Thank you for your time today.
David A. Helfand: We look forward to speaking you, giving you more information as we gain it. Thank you.
Speaker Change: Okay.
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Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your for your parts.
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