Equity Commonwealth

Greetings and welcome to the Equity Commonwealth Third Quarter 2021 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If you would like to ask a question, you may press star 1 on your telephone keypad. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Sarah Burns of Investor Relations, Thank you. Please go ahead.

Thank you, Donna. Good morning, and thanks for joining us to discuss Equity Commonwealth's results for the quarter ending September 30, 2021. On the call today are David Helfand, President and CEO, David Weinberg, COO, and Bill Griffith, CFO. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of federal securities laws. We refer you to the section titled Forward-Looking Statements in the Press Release issued yesterday, as well as the section titled Risk Factor in our annual report on Form 10-K and quarterly reports on Form 10-Q for a discussion of factors that could cause actual results to materially differ from any forward-looking statement. The company assumes no obligation to update or supplement any forward-looking statements made today. We also post important information on our website at eqcre.com. including information that may be material. Today's remarks include certain non-GAAP financial measures. Please refer to yesterday's press release and supplemental containing our results for a reconciliation of these non-GAAP measures to our GAAP financial results. With that, I will turn the call over to David Helfand.

Thanks, Sarah. Good morning, everyone. Thanks for joining us. This morning, I'll begin with an update on the company's results for the quarter, comment briefly on the Monmouth deal, and then provide some thoughts on our future plans. Net loss, FFO and NFFO, declined in the third quarter of 21 compared to the third quarter of 20 due to a decrease in same property lease termination income and a decrease in interest income. Leased occupancy was 82.5 percent and commenced occupancy was 78.6 percent in the third quarter of 2021. Same property NOI declined 20.7 percent in the third quarter of 21 compared to the third quarter of 20. The decline was largely due to a decrease in lease termination fee income and occupancy decreases. Same property cash NOI declined 9.6 percent during the quarter due to occupancy decreases and an increase in free rent. We have approximately $3 billion of cash on our balance sheet, or $24 a share. In the third quarter, we repurchased $11.1 million of our common stock. We purchased an additional $15.7 million subsequent to quarter end for a total year-to-date of approximately 1 million shares at an average price of $25.83 a share, total investment of $26.8 million. We have $123 million remaining on our existing share buyback authorization. With regard to the Monmouth transaction, obviously we were disappointed that Monmouth shareholders did not support the deal. We believe the combination of the two companies was a classic one plus one equals three and offered both company shareholders significant upside potential. We've been asked why we didn't raise our offer for MNR. Our answer is that we made what we felt was a full and fair offer and we were determined to remain disciplined. I do want to acknowledge the strong effort of the EQC team working on the transaction. They did a fantastic job in preparing us if we had been successful. In connection with the termination of the transaction, we were reimbursed for approximately $10 million of our expenses. So where does that leave things? We spent the last few weeks talking with shareholders, our board, SAM, and the team at EQC to determine next steps. There are compelling arguments, we believe, for both continuing to look for investment opportunities as well as for winding down EQC and returning the capital to shareholders. We readily acknowledge the highly competitive environment that we're operating in. Cap rates for most asset classes have never been lower. Debt and equity capital are available. And we're likely to face significant competition for new investment opportunities. That said, We just aren't ready to go quietly into the night. We have tremendous confidence in our team, we have a track record of execution and outperformance, and we remain optimistic and engaged. So our best judgment at this time is to continue to pursue investment opportunities. Some shareholders have asked if our unsuccessful transaction with Monmouth means that future investments will be in the industrial sector. Our answer is not necessarily. We evaluated numerous opportunities before we engaged with Monmouth. We made that deal because we felt the risks associated with the merger were appropriate and manageable, given the upside. As we look for new opportunities, we're open to investments in a variety of sectors, both in and out of favor. If the sector and the specific opportunity offer appropriate upside, considering the associated risks. Finally, we know that shareholders would like more clarity on timing. It's reasonable to ask how much longer we will continue the effort to find the right opportunity. While I don't have a clear answer, what I can say is that we're mindful of the cost of pursuing opportunity and will continue to evaluate the best course of action to maximize shareholder value. With that, we're happy to answer questions.