Equity Commonwealth

Good morning, and thanks for joining this call to discuss Equity Commonwealth's results for the third quarter ending September 30th, 2022, and 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 would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of federal security 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 reports on Form 10-Q for subsequent quarters for discussion of factors that could cause the company's 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. The company posts important information on its website at www.eqcre.com, including information that may be material. The portion of today's remarks on the company's quarterly earnings also includes certain non-GAAP financial measures. These refer to yesterday's press release and supplemental containing the company's results for reconciliation of these non-GAAP measures to the company's GAAP financial results. On the call today are David Hilton, President and CEO, David Weinberg, COO, and Bill Griffith, CFO. And with that, I will turn the call over to David Hilsand. Please go ahead, sir.

David Hilsand Thank you. Thanks for joining us. This morning, I'll review the company's results for the quarter, as well as provide a brief update on the capital markets, our dispositions, and investment activities. Funds from operations were 13 cents per share compared to zero cents per share in the third quarter of 2021. normalized FFO was also 13 cents per share, compared to a loss of 1 cent per share a year ago. The growth in FFO and normalized FFO was largely a result of a 12 cent per share increase in interest and other income, as well as a 1 cent per share increase in same-property cash NOIs. Same property NOI was up 16.8% and same property cash NOI was 19.1% higher compared to the third quarter 2021. At the properties in the third quarter, we signed 55,000 square feet of new leases and renewals. Rents on those leases were down 3.3% on a cash basis and up 2.2% on a gap basis. As of September 30th, leased occupancy was 83.4%, and commenced occupancy was 80.8%. Turning to the balance sheet, we have approximately $2.6 billion of cash for $23 per share, adjusted for the recently paid $1 per share dividend, and we have no debt. With respect to share buybacks, in the quarter we repurchased 590,000 shares for $15 million at an average price of $25.40 per share for 2440 dividend adjusted. Year to date, we've repurchased 6.1 million shares for $155 million at an average dividend adjusted price of $24.64. Since 2015, we've repurchased a total of 22.4 million shares for $595 million at an average dividend adjusted price of $21.73. And today we have $120 million remaining on our existing share buyback authorization. During the quarter, we completed the 351 transaction that we discussed on last quarter's call. The transaction generated $82 million of taxable gain from two of our assets, and that gain made up a significant portion of the $1 per share special distribution that we paid on October 18th. In terms of the current environment, today's debt and equity capital markets are markedly changed from earlier this year. The first half of 2022, sellers completed transactions at aggressive pricing, driven by significant equity and debt availability. Today, the debt market is experiencing disruption, and debt funding costs have more than doubled, with certain asset classes facing a significant shortage of capacity. Given the dearth of financing and the tepid buyer interest for a value-add office, we have decided to hold the three properties we were marketing for sale for the time being. With respect to acquisitions, as we've said on past quarterly calls, We are continuing to evaluate a wide range of potential opportunities across a variety of sectors. As most of you are well aware, we've been looking for a long time. I want to assure you that showing patience has been challenging for us, as I know it's been for our investors. While we'd love to be doing deals, we have a responsibility to be thoughtful stewards of our shareholders' capital, and we take that to heart. We'll continue to work to identify an acquisition opportunity that offers attractive long-term fundamentals at a price that reflects the risk we're taking. We're hopeful that the challenges in the capital markets will be a catalyst for a compelling transaction that can serve as the foundation for long-term growth and outperformance for EQC. The team at EQC remains focused, disciplined, and optimistic. That, David, Bill, and I are happy to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You must press star 2 if you would like to remove your question from the queue. One moment, please, while we poll for questions. Our first question comes from Craig Melman with Citi. Please proceed with your question.