Equity Commonwealth (EQC) 2015 Q4 法說會逐字稿

Greetings and welcome to the Equity Commonwealth fourth-quarter 2015 earnings conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sarah Byrnes. Thank you, Ms. Byrnes. You may begin.

Thank you, Ken. Good morning and thank you for joining us to discuss Equity Commonwealth's results for the quarter and year ended December 31, 2015. Our speakers today are Sam Zell, our Chairman; David Helfand, our President and CEO; Adam Markman, our EVP and CFO; and David Weinberg, our COO. Please be advised that certain matters discussed during the conference call may constitute forward-looking statements within the meaning of federal securities laws.

We refer you to the documents that we file from time to time with the SEC, which refer to risk factors that could adversely affect the Company's operating results and financial condition. The Company assumes no obligation to update or supplement any statements made today that become untrue because of subsequent events or otherwise.

Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's press release announcing our results for a reconciliation of these non-GAAP performance measures to our GAAP financial results, which is available on our website. With that, I will turn the call over to Sam.

Good morning, everybody. Welcome to the EQC conference call. A year ago at this time, which was the last time that I was part of an EQC conference call, I'm very happy to say that which we laid out a year ago has been implemented and we continue to be very positive about our outlook for executing our plan for EQC. Obviously, all of our plans are subject to global economic conditions and obviously specific conditions in the real estate industry.

On the global economic front, I think we have a lot of uncertainty. We've probably had the greatest movement in currencies in the last 12 months that we've had since the end of World War II. That movement in the currencies is having significant impact on a worldwide basis, particularly in the beginning of the slowing of trade, which is really a very unusual set of circumstances but as confidence in currencies go down, the willingness of people to accept them obviously is impacted.

Obviously, on a global basis, the big question is China. We don't know what's going to happen to China, whether it's going to have a soft landing or a hard landing, but what's pretty clear is that it's going to have a landing and the question is, what impact will that have on the United States? And particularly, on what I would call deflationary tendencies that might result from a lowering of the Chinese currency. Obviously, we have a lot to see.

We have a presidential election this year and we have a lot of events going on around the world that could either make things somewhat better or obviously make them worse. It's naive to think that the US real estate market is unaffected by world economic conditions. Yes, we deal in the dollar and the dollar is very strong but the dollar is having, its strength is having impact on business activity in the United States and obviously, it's going to have impact on demand for real estate going forward.

The US real estate market MIP is currently benign. I think that activity level continues to go up, which is very positive. As you will hear from David, we've made significant efforts in renting space and we see the demand side of the real estate space, particularly in what I would call the less high-end part of the business which is where EQC is located. I think that those are all positive steps. In many cases, the leasing will allow us to dispose of the properties at much more attractive prices or in the alternative, hold them as income-producing assets going forward.

Again, I reiterate that I don't think the real estate market in the United States can avoid the impact of what's going on around the world. Personally, I think that we are in the early stages of a mild recession and if we're not, I think we're going to be in another three or four months.

As far as EQC is concerned, our thesis is unchanged. We continue to peruse the portfolio with the objective of creating and establishing values going forward.

We're in what I would call the midstream of our disposition program. We focused from the beginning on asking ourselves the question, do we want to own this asset? And does this asset fit into what we can envision as a future for the Company?

Where we have concluded that's not the case, we've been very enthusiastic sellers. I think that we continue to believe that strategy is in our interest.

So far, through the end of 2015, we've sold $2 billion of properties. We sold $3.1 billion since we took responsibility for the portfolio in 2014. We utilized the proceeds to pay down $1.4 billion of debt and we repurchased approximately $110 million of our common shares.

Our cash balance, as of December 31, was $1.8 billion and our current cash balance is $1.7 billion. We were not required by read laws to pay a dividend in 2015 and we are not going to pay to dividend in 2015. From our perspective, we need to continue to mold the portfolio and we don't feel that there is a need at this time to basically take money out of capital and spend that on dividends when the final assemblage of what the Company is going to look like is still undetermined.

We're positioned for growth when investment opportunities materialize with better risk reward profiles. I would say to you that every single asset that we have disposed of, we would not have bought at the price somebody paid us for. That's the ultimate definition of whether you're a buyer or a seller.

The market continues to be frothy. There continues to be a lot of demand. Obviously, everybody is aware of some degree of consternation about the debt markets. But I would tell you that overall, debt is still very available at very attractive prices, certainly for any historic basis.

We've built a team. We spent an enormous effort over the last 18 months building, honing and making that team better. I think that team has shown its skill base and its ability by virtue of its performance on the disposition side of the takeover of Commonwealth.

We believe that this pool of capital that we are creating will be an enormous competitive advantage over the next 12 to 18 months. And our goal is to make sure that we have in place the team that is able to take advantage of those opportunities. If in the interim, we end up spending a little more maintaining the quality of that team, the price is very, very minimal relative to the potential to the future of EQC.

With that, I'll turn it over to David Helfand.

Thanks, Sam. And thank you all for joining us this morning. I will take a moment to review 2015 activity and then address our strategic priorities for 2016. Since taking responsibility for the Company, the focus has been on reshaping our business. We've worked hard to instill an entrepreneurial, open and transparent culture.

We've been keenly focused on creating value through effective leasing and asset management and we're repositioning our portfolio through dispositions. We've used sale proceeds to repay debt, opportunistically repurchase our stock, and accumulate cash to build capacity for growth.

When we took ownership of the portfolio in 2014, we began with a disparate group of 170 properties, comprised of 45 million square feet. Since then, as Sam mentioned, we've completed $3 billion in disposition activity. This includes the sale of 22 million shares of SUR stock for $32 per share, generating roughly $705 million in proceeds. In addition, we've completed $2.3 billion of property dispositions.

Today our portfolio includes 64 properties, comprising 23.5 million square feet, higher quality assets and a more rational portfolio concentrated in better markets. Sales proceeds have been used to repay $1.4 billion in debt, fund $110 million of common share repurchases and add to our cash balance of $1.7 billion or $13 a share.

In 2015, we closed $2 billion of dispositions, including six portfolio deals and 12 one-off sales, totaling 91 properties and 19 million square feet. In aggregate, pricing was in the low to mid 7% cap rate range.

During the fourth quarter, we completed the sale of nine properties totaling $275 million and 2.6 million square feet at a weighted average cap rate in the low 6% range. Seven of these assets were held for sale at the end of the third quarter and were detailed in our last earnings call.

We also sold 4 South 84th Avenue, 100% leased, 236,000 square foot industrial asset in Tolleson, Arizona for $18 million at a high 6% cap rate. And Arizona center, a 94% leased, 1.1 million square foot mixed-use property in downtown Phoenix that we sold for $126 million at a low 5% cap rate.

Earlier this week, we completed the sale of Executive Park in suburban Atlanta for $50.9 million. This is 72.8% leased, nine building, 427,000 square foot property sits on 60 acres in suburban Atlanta. The property generated approximately $900,000 of cash NOI and was marketed as a major redevelopment opportunity.

Turning to our operating performance, in 2015, we signed 3.9 million square feet of leases, resulting in 140 basis point increase in leased occupancy to 91.4% at year end. Rental rates were 3% higher on a cash basis and 10.6% higher on a GAAP basis. Our leasing success reflects a concerted effort to proactively address known move outs and long-term vacancies and to attract new tenants to the portfolio.

Like everyone else, we're monitoring market conditions. The volatility in the equity and debt markets in recent months raises concerns around the costs and availability of capital, the direction of the economy, and the impact on real estate. Despite the increased volatility in the financial markets, we continue to make steady progress on the leasing front, as a David will address in greater detail.

With respect to dispositions, we currently have 11 properties in the market and we are poised to go to market with additional assets. We anticipate that the next 60 to 90 days will give us a better read on the impact this volatility will have on our 2016 disposition plans. Our willingness to execute will continue to be predicated on maximizing value and monetizing assets when we can achieve prices that exceed the property's intrinsic value.

We are midstream in the turnaround of our business. We've made meaningful progress, but there is significant additional work to do. That said, I'm proud of the dedication of the EQC team and the strides we've made executing our plan. And with that, I'll turn the call over to Adam.

Thanks, David. Good morning. I'll cover our financial results for the quarter and year and provide commentary on the balance sheet.

2015 was a successful year for our Company, as we continued to improve our processes and execute on our business strategy. In addition to the progress we've made with dispositions and leasing, we've greatly de-risked our balance sheet, simplified our platform, improved our liquidity and generated capacity for growth.

Same property cash NOI for the full-year 2015 was 0.8% lower than last year as operating expenses were up and tenant reimbursement income was down. Diluted FFO for the year was $1.53 per share compared to $3.32 a year ago. Normalized FFO was $1.70 per share compared to $2.14 last year. FFO and normalized FFO decreased, largely due to asset sales, partially offset by lower interest expense and lower overhead.

Focusing on the fourth quarter's results, same property cash NOI was down 6.5% from a year ago. The decline was mostly caused by an increase in operating expenses as well as modestly lower revenues as a result of tenant move-outs. Operating expenses were up due to a combination of higher repairs and maintenance across the portfolio, increased spending to make vacant space lease-ready and higher real estate taxes in some of our markets.

As a David mentioned, leased occupancy and rents are both up. That said, we're not yet seeing the benefit of increased leasing activity in our financial results. Approximately 1 million square feet of new leases that we executed in 2015 have not yet commenced and are not reflected in the fourth quarter's earnings.

Of course, there's a lag between lease signing and occupancy. Most of this newly leased square footage takes occupancy in 2016. Because of free rent, these leases will not generate cash revenue until late this year or early 2017.

FFO for the quarter was $0.25 per share compared to $0.47 a year ago. Normalized FFO was $0.27 per share compared to $0.53 last year. Asset sales were the remain driver of the decrease in FFO and normalized FFO, partially offset by interest expense savings from debt repayment.

As we've emphasized since taking responsibility for the portfolio, our disposition efforts are disruptive to earnings. This is consistent with our strategic plan to rationalize the portfolio and to focus on maximizing the Company's net asset value.

Gross proceeds from asset sales were $2 billion in 2015. These dispositions generated a taxable loss. As a result, we're not required to pay a distribution for 2015. With a net operating loss carry forward, so for 2016, the determination of whether a common distribution will be required is highly dependent on whether gains are generated through this year's disposition activity.

Turning to the balance sheet, during the quarter, we prepaid at par the $116 million mortgage loan on one of our assets in Indianapolis. This loan had a 5.24% interest rate. We now have only five remaining mortgages, leaving 59 unencumbered assets.

We continue to focus on maintaining financial flexibility in 2016. We have $875 million in debt and preferred stock that we can repay or prepay at par through the year. This includes the $139 million 6.25% senior unsecured notes due in August 2016 that we redeemed at par earlier this week.

As previously discussed, our goal was to operate with a credit profile consistent with the BBB unsecured debt rating. We made progress with upgrades or outlook improvements from both Moody's and S&P in 2015 and earlier this month, Moody's again revised its outlook on our debt rating this time from stable to positive.

We now have approximately $1.7 billion in cash on the balance sheet and additional assets in the market to be sold. We are evaluating all uses of proceeds, including the previously mentioned debt and preferred repayments, distributions, and new investment opportunities.

We will continue to opportunistically utilize share buybacks. We have repurchased over 861,000 shares to date in 2016 for $22 million. And almost 4.3 million shares for over $110 million since the buyback program was put in place in August.

Our balance sheet is strong. We have significant liquidity and we believe we are well positioned for future opportunities. With that, Ill turn it over to David Weinberg.

Thank you, Adam, and good morning, everyone. I will review our 2015 leasing activity, provide some color on our top markets, and take a quick look at our lease rollover in 2016. In our same-property portfolio, during the fourth quarter, we signed 65 leases, totaling 984,000 square feet which included 399,000 square feet of new leases and 585,000 square feet of renewals, with cash rents increasing 5.6%.

Through the full year, we signed 244 leases, totaling 3.9 million square feet, which included 1.9 million square feet of new leases and 2 million square feet of renewals, with cash rents increasing 3%. We are pleased with the 1.9 million square feet of new leasing, especially the 680,000 square feet of leases in a space that had been vacant more than one year. Our 1.9 million square feet of new leasing is two times the volume of new leasing done in 2013 and three times the amount done in 2014.

We have not seen a slow down in leasing and are focused on trying to maintain our momentum given economic climate and supply risk in certain of our markets. In Bellevue for the year, we signed 13 leases, totaling 66,000 square feet, with cash rents swelling up 14%. While these CP deals relatively flat in terms of absorption and had a year-end vacancy rate of 8.5%.

As we have said before, we like this market long-term, but are concerned in the short-term with 1.5 million square feet of development coming online in an 8 million square foot market.

At 17th Street Plaza, our Class A office tower in Denver CBD, for the year, we signed 13 leases, totaling 225,000 square feet, with cash rents swelling up 19%. The vacancy rates in Denver CBD climbed 230 basis points to 14.3% due to new supply delivered in 2015. There is also almost 1 million square feet of sublease space on the market primarily related to the slowdown in the energy sector.

To date, this sublease space has not impacted us. We are one of the premier buildings in the market and the sublease space is not competitive. However, as we look down the road, we anticipate much of this sublease space will be given back. Additionally, with 1.3 million square feet of supply coming online in the next two years, the leasing fundamentals in Denver's CBD could weaken.

The lease occupancy on our one property in Chicago CBD, 600 West Chicago, decreased 10% in the fourth quarter, primarily due to level 3 giving back 117,000 square feet of space. Earlier this week, we signed a lease with an existing tenant that includes an expansion into this space. As a result, 600 West Chicago is now 97% leased.

For the full-year, we signed six leases at this property, totaling 414,000 square feet with cash rents rolling up 11%. The Chicago CBD continues to draw new tenants from the suburbs, offsetting the negative impact on the market from densification trends. 2015 had net absorption of 1.3 million square feet and a year-end vacancy rate of 12%.

Boston continues to be one of our top performers. For the full-year, we signed 49 leases, totaling 355,000 square feet with cash rents rolling up 17%. Boston had a record year with net absorption of 2.1 million square feet and ended the year with a vacancy rate of 9.6%.

In 2015, 2.8 million square feet was added to the market and there was another 2.7 million square feet under construction that should deliver the next four quarters. And as a result, we expect Boston's vacancy rate to tick up.

Indianapolis' CBD absorbed 220,000 square feet and it's vacancy rate declined 240 basis points to 17.8%. While this market continues to be very competitive, it is beginning to experience an urban invasion that is drawing new interest downtown.

There was little evidence of such movement a few years ago. But in 2015, about 100,000 square feet of leases were signed with tenants new to the market. For the full year, we signed 23 leases, totaling 166,000 square feet, including 108,000 square feet of new leases with cash rents rolling down 16%.

Philadelphia's CBD absorbed 870,000 square feet and it's vacancy rate is 10.9%. The center benefited from the movement of tenants from outside the CBD. It began in 2014 with 150,000 square feet leased to tenants new to market. In 2015, there were 16 such leases signed, totaling 625,000 square feet.

For the year, we signed 39 leases totaling 844,000 square feet, including 423,000 square feet of new leases with cash rents flat. In particular, we had a great year at the 1.8 million square foot two tower property Center Square located directly across from city hall. We signed 295,000 square feet of new leases, including 200,000 square feet of space that had been vacant nearly 10 years.

At year-end 2014, Center Square was 79.5% leased. It is now 94.6% leased. In addition, at 1735 Market, which has the most availability in our portfolio, we are seeing good activity.

Overall, our markets have been performing well and our leasing activity continues to be strong. Having said that, we are mindful of the impact that economic slowdown or new supply could have on leasing.

Switching gears, I would like to address our lease rollover in 2016. Excluding month-to-month and cell storage tenants, we have 2 million square feet expiring this year. The largest expiration is Carmike Cinemas, a 550,000 square foot tenant occupying six theaters. Earlier this week, we signed a 15-year extension with them.

Backing out Carmike, we have a 1.5 million square feet rolling this year, which includes a 100,000 square foot tenant at an industrial building that will vacate. This leaves 1.4 million square feet or 7% of our office space rolling in 2016. This is a manageable amount of lease roll.

We have a great team and are focused on engagement, responsiveness and improving the overall customer experience to continue to drive leasing results. With that, we will open it up to Q&A.

Thank you. At this time we will be conducting a question-and-answer session.

(Operator Instructions)

Mitch Germain, JMP Securities.

Good morning, guys. It seems like sales volumes probably surprise to the upside in 2015. I'm curious about pricing relative to what your expectations were.

We've addressed that before and to update you on the sales that have happened in the interim, we continue to see pricing in excess of our targeted numbers, modestly. On the full $2 billion of dispositions done in 2015, they've done, in aggregate, modestly ahead of our internal numbers.

We discussed in the prepared remarks, we continue disposition program. To date, we've seen continued depth of demand from multiple buyers and a good but competitive dynamic and as we mentioned, the question is, will the impact of the events in the economy start to affect that? And we should have a better sense of that as we get pricing feedback over the next 60 to 90 days.

Any thinning out in the buyer pool?

No. It's David Weinberg. It's too early to know, as David said. We have some assets in the market. We'll be taking bids in the next few weeks. I think at that point, we'll have a better sense.

Great. I know, Adam, I know you guys have, I think you kind of left it open, as to what you're planning to do with the cash. Previously, I think there was a November presentation you guys had suggested paying down the preferred. Is that still the plan? Or are you just going to kind of consider it on when that becomes available?

We do have time before that decision has to be made. So, we will tick off the debt maturities as they come to us and the preferred is the next opportunity, but we haven't yet made a decision.

Okay. And then while I have you, the operating expense, I know you've talked about some repair and maintenance and higher taxes. How much of that, I mean we saw a pretty good decline in a line margin, how much of that would you consider to be one-time in nature? And how should we think about that margin going forward?

Well, I think you named sort of two of the three reasons that expenses were up. And the third is important. And that is that we're spending more prepping vacant space to make it lease ready. When you look at where expenses are, I think that this quarter is a better reflection of what it will really cost us to own and maintain these assets.

That being said, the more important part here is what's happening on the revenue side and that's the piece that we discussed. This 1 million square feet of space where we have leases executed but there's no economic impact in our financial statements as of yet.

Great. Congrats on the year.

Thank you.

Jamie Feldman, Bank of America.

Great. Thank you and good morning. I guess just sticking with the last question, can you quantify the amount of NOIs that come online from the 1 million square feet of leases?

Well, we don't give guidance and we haven't provided that number but there's a lot of places where you can get there, right? We talked about 1 million square feet. You know our, in our disclosure in the supplemental, you know the rental rates that those leases have been signed at and you also have to be thoughtful about the fact that we are now over 91% occupied and the margins on this incremental leasing should be better than what we see for the portfolio as a whole.

Okay. How do we think about, I know what your gross rents were, but what about on net rent? How do we think about the, on the new leases signed, the difference between --

I can't hear.

Hi, James. It's David. I think that's what Adam was getting to. Net rents in a traditional building if you're doing $25 gross, expenses could be $10, $12, $14, but most of those expenses are fixed in nature. So it's that incremental leasing that will have a much higher contribution to the NOI than what you might otherwise think when you're just considering net lease.

Right.

Okay. All right and then Sam, we appreciate your color and views on the economy and world to start the call. When you think about your base case of what might happen here, and you think about how we may see a downturn in commercial real estate, do you see it driven more by credit? By buyer pool? By less capital flowing into the US? Or by tenant demand? It's hard to get a sense of what may, either what's changed so far and what may change first?

Wow. First of all, I think all of the variables that you just described are all applicable. Whether it's going to manifest itself in lesser demand, whether, as we've already seen, there's been some dislodgment in the financing market. We don't know the answer to tomorrow, today. But, what we're trying to do is look at all of the different variables and be up-to-date on what the options are and what steps we should be taking.

And I think that's basically what we've been doing. We've been trying to do it from the prism of what we consider to be a very realistic assessment of what's going on. And maybe that doesn't necessarily comport with what everybody else's assessment is but this wouldn't be the first time that we were the lone ranger.

Okay. That's helpful. And David, you mentioned in several markets, urbanization helping the trend or helping demand trend? Are you guys surprised since you took over the portfolio of how some of the secondary markets have acted? And maybe give you more confidence on the assets you have left and the potential for the future?

Well, I can't speak for everyone. I've been surprised because I had limited experience in many of these secondary markets. And the fact is, with all the progress we made last year, the remaining portfolio is a much nicer concentration asset in these types of markets and as I covered in my prepared remarks, you go market by market, be it Philly, be it Indy, you can definitely feel and see the change that is going on.

You spend time there, you talk to brokers. One of the things I keep hearing is a few years ago, I'd never imagined I would come down to either live or actually even come down for a dinner or see a show and you are seeing that change and it is impacting leasing.

Does this seem sustainable to you? Or is this more of a cyclical trend and if we head into a recession things slow?

Well I think, others can weigh in, but the new demographic trend, the delay in marriage, the delays in having families is impacting where people are choosing to live, work, and play. And they're choosing to do this in the cities. And employers are following the employees and that's what we're seeing.

Or other way to put it, it's not a terribly optimistic story for suburban America. I think we're seeing a historical reversal from Levittown. After World War II and all through the 50s and 60s we basically moved to the suburbs, we built the expressways and now we're seeing a reversal of that process. So, close to the suburbs, they're doing okay. The further out you get, the greater the distress and dislocation.

Okay. I appreciate your color. Thank you.

(Operator Instructions)

John Bejjani, Green Street Advisors.

Morning, everyone. So you guys are selling assets across the quality spectrum, across a variety of markets. I know you're still in the marketing process for a number of properties to begin the year, but can you speak to what you're seeing or hearing as far as financing availability and investor demand across these spectrums?

Sure. Good morning, John. What we're seeing is not so different from what we're seeing in the leasing markets which is if we look at our portfolio and just review what we've accomplished, look at our pipeline, we feel very good. When we listen to all the market chatter we become concerned. So we try and keep a balanced outlook.

On the disposition side, the credit markets are obviously in some dislocation, certainly CMBS is a question mark. It's gotten off to a reasonable start for the first quarter, but now there some repricing going on, some concern in that market. On the live company side and the debt markets, we see fresh books and people looking to do business with good sponsors and good assets so I think it's a mixed bag on the debt side.

And as we mentioned, I think we'll have a better sense over the next 60 or 90 days because we'll get pricing in on a variety of assets across the spectrum as you mentioned -- quality wise, and geography, and have a better sense realtime. But to date, I'd say it's a mixed bag.

Okay. Great. You guys have spoken to your huge cash balance and wanting to potentially be able to opportunistically acquire. Just thinking if we hit a recession, and the asset values do start to move in a meaningful way, how do you approach opportunities that can arise?

I know there's a lot of moving pieces, but what are your different considerations in that situation? Or what kind of IRRs would you look for in your target markets to feel comfortable being contrarian?

This is Sam. I think that number one, we've already started to see opportunities. As a REIT investor, you may be aware of the fact that there has been some dislocations. I'm not necessarily sure that any of those dislocations are opportunities. That remains to be seen. But one the thing I can assure you of, we don't have any IRR minimums. We don't have any unbreakable rules. We're professional opportunists.

The whole idea behind this whole Company was that we had a very unique opportunity to generate an enormous amount of cash at very low break up costs and recognize values that frankly, we were happy to be sellers at. At the same time, we are savvy enough I think to know that the most important thing we need to be is open to anything.

And consequently, we've looked at all kinds of things so far based on what we see going out there. We think were going to have an opportunity to look at a lot more and I think our decisions will ultimately be made, not on IRRs or anything like that, but on whether we in effect can achieve meaningful real estate value creation by virtue of our efforts and by virtue of the cash bores that we control.

Okay. Thanks for that, Sam. And, Adam, a quick one for you. You've mentioned the loss carry-forwards that you guys have. How much more gains can you continue to offset with those? Do you anticipate having to pay a dividend in 2016?

Yes. It's going to be highly dependent on which specific assets are sold and which don't transact. Some of our assets have a built-in gains, others continue to generate losses like the assets that we've sold to date. So, we're just not going to know until we see what actually transacts, and of course, we'll keep you informed as that information comes to light.

But I guess it just in general, what kind of or how much taxable gains can you continue to offset? Or how much is left?

We haven't disclosed that number, John.

Okay. All right. Thanks, guys.

Mr. Sam Zell, there are no further questions at this time. Would you like to make any closing remarks?

Yes. Once again, I want to thank everybody for participating in this meeting or conference call this morning. I kind of wanted to end up this morning's session by making a couple of general comments. First, I'm not sure that calling the Company Equity Commonwealth was really an accurate choice of names and maybe we really should've called it Equity Reposition. Because effectively, that's what we've been all about.

We're concerned, we're reporting to you in a manner that's identical to any other REIT. But I would admonish all of you that in order to understand what we're doing, that's exactly what you can't do. Because if you use, quote, the standards of every other ongoing REIT, you come up with results that are probably contrary to what we're actually producing. As a normal REIT, there's a focus on month-to-month changes and NOI growth and movement in a repositioned environment like this, these are just noise along the way.

And frankly, we don't think a focus on them is going to give anybody any great new insight. You can't forget that this was an orphaned Company. This was a Company that had a huge number of assets that nobody seemed to pay too much attention to. This Company previously was focused on AUM, access under management. This Company today is focused on performance. And most important of all, this Company today, has a strategy.

I don't even think the word strategy was in the lexicon of the previous management of this Company. We are in an environment that in many respects is Darwinian. Little by little, we are seeing the separation of the men from the boys. And I think some of the dislocations that you're seeing in the REIT market are very much an indictment of the strategies implemented usually at a different time, in a different perspective relative to the cycle.

Those previous mistakes will become our opportunities in the future. So in closing, I'd say that our focus is not on what we own, but what we want to own. EQC is a work in process. We're all happy with the work so far. We hope you are too. We think there's a lot more excitement and opportunity in the future. Thank you very much for participating this morning.

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