Equity Commonwealth (EQC) 2023 Q2 法說會逐字稿

Good morning, and thanks for joining this call to discuss Equity Commonwealth's results for the quarter ending June 3, 2023, and provide an update on the company. (Operator Instructions) As a reminder, this conference is being recorded. Please be advised that certain matters discussed during this conference call may be constitute forward-looking statements within the meaning of Federal Security laws.

早上好，感謝您參加本次電話會議，討論 Equity Commonwealth 截至 2023 年 6 月 3 日的季度業績，並提供公司的最新信息。 （操作員指示）謹此提醒，本次會議正在錄製中。請注意，本次電話會議中討論的某些事項可能構成聯邦安全法含義內的前瞻性陳述。

Please refer to the session highlight 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 partly reports on Form 10-Q for subsequent quarter for a discussion of factors that could cause the company's actual results to materially differ from any forward-looking statements.

請參閱昨天發布的新聞稿中的會議重點前瞻性陳述以及公司 10-K 表格年度報告和下季度 10-Q 表格部分報告中標題為“風險因素”的部分，以了解對因素的討論這可能導致公司的實際結果與任何前瞻性陳述存在重大差異。

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 also include certain non-GAAP financial measures.

該公司不承擔更新或補充今天所做的任何前瞻性陳述的義務。公司在其網站 www.eqcre.com 上發布重要信息，包括可能重要的信息。今天對公司季度報告的評論部分還包括某些非公認會計準則財務指標。

Please refer to yesterday's press release and supplemental containing the company's results for a reconciliation of these non-GAAP measure to the company's GAAP financial results. On the call today are David Helfand, Chair of our Board, President and CEO; Dave Weinberg, COO; and Bill Griffiths, CFO. With that, I would turn the call over to David Weinberg. Please go ahead.

請參閱昨天的新聞稿和包含公司業績的補充材料，以了解這些非公認會計準則衡量標準與公司公認會計準則財務業績的對賬情況。今天參加電話會議的是我們董事會主席、總裁兼首席執行官 David Helfand；戴夫·溫伯格，首席運營官；和首席財務官比爾·格里菲思 (Bill Griffiths)。這樣，我就把電話轉給大衛·溫伯格。請繼續。

Good morning, everyone. Thanks for joining us. Today, I'll review the company's results for the quarter as well as provide an update on the capital markets and our investment activities. For the quarter, funds from operations were $0.16 per share compared to $0.05 per share in the second quarter of 2022.

大家，早安。感謝您加入我們。今天，我將回顧公司本季度的業績，並提供資本市場和我們投資活動的最新情況。本季度運營資金為每股 0.16 美元，而 2022 年第二季度為每股 0.05 美元。

The growth in FFO was largely the result of a $0.19 per share increase in interest and other income, partially offset by a $0.05 per share increase in G&A related to compensation expense due to Sam Zell's passing and $0.01 per share each from a decrease in same-property NOI and an increase in income tax expense. Normalized FFO was $0.22 per share compared to $0.04 per share a year ago.

FFO 的增長主要是由於利息和其他收入每股增加 0.19 美元，部分被與薩姆·澤爾去世導致的補償費用相關的一般管理費用每股增加 0.05 美元以及每股 0.01 美元的增加所部分抵消。財產NOI 和所得稅費用增加。標準化 FFO 為每股 0.22 美元，而一年前為每股 0.04 美元。

The growth in normalized FFO was largely the result of a $0.19 per share increase in interest and other income partially offset by a $0.01 per share decrease in same-property NOI and a $0.01 per share increase in income tax expense. Same-property NOI decreased 14.8% and same-property cash NOI was 9.4% lower compared to last year, both primarily due to an increase of pre-leasing demolition costs and a decrease in average commenced occupancy for this quarter.

正常化 FFO 的增長主要是由於利息和其他收入每股增加 0.19 美元，但部分被相同財產 NOI 每股減少 0.01 美元和所得稅費用每股增加 0.01 美元所抵消。與去年相比，同物業 NOI 下降 14.8%，同物業現金 NOI 下降 9.4%，這主要是由於本季度預租拆除成本增加和平均開始入住率下降。

At our properties in the quarter, we signed 68,000 square feet of new leases and renewals. Rent on those leases were down 0.7% on a cash basis and up 15.3% on a GAAP basis. As of June 30, lease occupancy was 82%, and commenced occupancy was 78.2%. In terms of leasing, we continue to see a range of deals with some tenants giving back space, some looking for short-term extensions and others more comfortable committing to term. It is a (inaudible) leasing environment, and we are more actively preparing spaces for lease, in addition to been more aggressive on terms.

本季度我們的物業簽署了 68,000 平方英尺的新租約和續約合同。這些租賃的租金按現金基準計算下降了 0.7%，按 GAAP 基準計算上漲 15.3%。截至6月30日，租賃入住率為82%，開工入住率為78.2%。在租賃方面，我們繼續看到一系列交易，一些租戶回饋空間，一些租戶尋求短期延期，而另一些租戶更願意承諾租期。這是一個（聽不清）租賃環境，我們除了在條款上更加積極外，還更加積極地準備租賃空間。

Turning to the balance sheet. We have approximately $2.2 billion of cash or $19 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 5.25% compared to 1.6% a year ago. We continue to actively manage our cash balances among our banks to minimize risk and maximize yield, (inaudible) daily liquidity. With the Fed's continued rate increases over the past year, our interest income has grown from $6 million in the second quarter 2022 to $27.4 million in the second quarter of 2023.

轉向資產負債表。我們擁有大約 22 億美元現金或每股 19 美元，沒有債務。隨著美聯儲調整利率，我們的現金利率有所增加，目前我們的收入約為 5.25%，而一年前為 1.6%。我們繼續積極管理銀行之間的現金餘額，以最大限度地降低風險並最大限度地提高收益和（聽不清）每日流動性。隨著美聯儲過去一年的持續加息，我們的利息收入從2022年第二季度的600萬美元增長到2023年第二季度的2740萬美元。

Regarding share buybacks, we have not repurchased any shares year-to-date. Since we began buying back stock in 2015, we've repurchased a total of 22.4 million shares for an aggregate of $595 million at an average dividend-adjusted price of $17.48. We renewed our authorization as of June 30 and currently have $150 million of capacity.

關於股票回購，我們今年迄今尚未回購任何股票。自 2015 年開始回購股票以來，我們已回購了總計 2240 萬股股票，總金額為 5.95 億美元，股息調整後的平均價格為 17.48 美元。我們於 6 月 30 日更新了授權，目前擁有 1.5 億美元的產能。

Turning to the capital markets. Things continue to be slow, and our pipeline is modest. Transaction volumes are down across all asset classes with just $35 billion in total investment sales for the second quarter or nearly 70% lower on an annualized basis. With so little trading, there has been limited price discovery and assets are difficult to value. To date, there has not been a catalyst creating actionable investment opportunities. Owners do not want to transact at today's pricing and lenders are often willing to work with the borrowers.

轉向資本市場。事情仍然進展緩慢，我們的管道也很有限。所有資產類別的交易量均下降，第二季度投資銷售總額僅為 350 億美元，按年化計算下降了近 70%。由於交易量如此之少，價格發現有限，資產也難以估值。迄今為止，還沒有創造可操作投資機會的催化劑。業主不想按照目前的定價進行交易，而貸方往往願意與借款人合作。

In terms of potential investments, we continue to evaluate a wide range of asset classes. We still like industrial and residential with operating conditions remaining relatively strong, though decelerating. For other asset classes, fundamentals range from decent to challenging and the lack of debt availability is a significant issue.

在潛在投資方面，我們繼續評估廣泛的資產類別。我們仍然看好工業和住宅，其經營狀況儘管有所放緩，但仍相對強勁。對於其他資產類別來說，基本面從良好到充滿挑戰不等，缺乏可用債務是一個重大問題。

Against this backdrop, it's difficult to know where we might find a compelling opportunity to invest. A prolonged period of this challenging credit environment may create such an opportunity or perhaps it's a large private real estate company that believes a deal with us is the best way to access the public markets. It could also be a business with a broken balance sheet or one that needs meaningful growth capital. We remain hopeful that such scenarios or others will be a catalyst for a transaction.

在這種背景下，我們很難知道在哪裡可以找到令人信服的投資機會。這種充滿挑戰的信貸環境長期存在可能會創造這樣的機會，或者可能是一家大型私人房地產公司認為與我們達成協議是進入公開市場的最佳方式。它也可能是一家資產負債表破裂的企業，或者是一家需要有意義的增長資本的企業。我們仍然希望此類情況或其他情況將成為交易的催化劑。

In the meantime, we will continue to be patient. If we do not find an opportunity during this cycle, however long that might last, we will likely sell the remaining properties and return the capital. With that, David, Bill and I are happy to take your questions.

與此同時，我們將繼續保持耐心。如果我們在這個週期中找不到機會，無論持續多久，我們都可能會出售剩餘的房產並返還資本。大衛、比爾和我很樂意回答你們的問題。

(Operator Instructions) Our first question comes from Craig Mailman with Citi.

（操作員說明）我們的第一個問題來自花旗銀行的 Craig Mailman。

It's actually Seth Bergey on for Craig. I know in your remarks, you mentioned that current deal pipeline is slow and transaction have been down in the first half. But just -- and kind of relative to the first half the volume of transaction you're looking about changed at all? Or how are you thinking about kind of underwriting different return hurdles for different asset classes?

實際上是賽斯·伯吉（Seth Bergey）代替克雷格（Craig）。我知道您在講話中提到目前的交易渠道緩慢，上半年交易量有所下降。但是，相對於上半年，您所關注的交易量有什麼變化嗎？或者您如何考慮為不同資產類別承保不同的回報障礙？

Good question. It's David Weinberg. I'd say -- our conversations have slowed down a little bit relative to perhaps first quarter, maybe not unusual, it is July. So things tend to be slow anyway. I'd also say many of our conversations earlier in the year were preliminary with groups that are perhaps kicking the can trying to see what their options may be. And it's going to take more time to play out to see whether those translate into actionable investment opportunities.

好問題。我是大衛·溫伯格。我想說 - 相對於第一季度，我們的談話速度可能有所放緩，也許並不罕見，因為現在是 7 月。所以無論如何，事情往往會很慢。我還想說，今年早些時候我們與一些團體的對話都是初步的，這些團體可能正在嘗試看看他們的選擇是什麼。需要更多的時間來檢驗這些是否能轉化為可行的投資機會。

In terms of just thinking about pricing, that really hasn't changed. We recognize it's a higher interest rate environment. We also recognize where the public comps depending on the sector are trading. All that's baked into our pricing. But I want to kind of restate what we've said on prior calls. We're looking across sectors, but it often begins with the story and then we figure out what price makes the most sense.

就定價而言，這確實沒有改變。我們認識到這是一個更高的利率環境。我們還認識到取決於行業的上市公司的交易地點。所有這些都已納入我們的定價中。但我想重申一下我們在之前的電話會議中所說的話。我們正在跨行業進行研究，但通常是從故事開始，然後我們找出最合理的價格。

And the story is often why that deal, why us and then it evolves into kind of what the base is, what the yields are, what the all-in return looks like. And that's how we think about investments.

這個故事通常是為什麼要進行這筆交易，為什麼是我們，然後它演變成基礎是什麼，收益率是多少，總回報是什麼樣子。這就是我們對投資的看法。

And then on the last call, you mentioned looking at industrial and single-family rentals as well as maybe taking a look at office. We saw a large industrial transaction happened for the largest deal. Did you take a look at that? Or have you talked to any private equity sellers that are kind of looking to sell industrial products?

然後在最後一次電話中，您提到考慮工業和單戶租賃，以及可能考慮辦公室。我們看到一筆最大的工業交易發生了。你看過那個嗎？或者您是否與任何想要銷售工業產品的私募股權賣家交談過？

So I don't want to comment on specific deals we looked at. But I would say, we have looked at some large industrial portfolios, but for different reasons, they did not translate into what we described as an actionable opportunity.

所以我不想對我們研究過的具體交易發表評論。但我想說，我們已經研究了一些大型工業投資組合，但由於不同的原因，它們並沒有轉化為我們所說的可行的機會。

Okay. Great. And then just touching on office, is that something you're still interested in, given kind of the dislocation and the lack of debt availability.

好的。偉大的。然後談到辦公室，考慮到這種混亂和缺乏可用債務，你仍然對辦公室感興趣。

I'd say that varies day to day. I'd say rather than describing is interested in office, right now, we're interested in learning more about the opportunities with respect to office, still early. Fundamentals continue to weaken, and we have yet to find large owners with really high-quality portfolios that one, either have equity in them or 2 are willing to transact what we think pricing should be today.

我想說這每天都在變化。我想說的不是描述對辦公室感興趣，現在，我們有興趣了解更多有關辦公室的機會，但還為時過早。基本面繼續疲軟，我們還沒有找到擁有真正高質量投資組合的大股東，其中一個擁有其股權，或者兩個願意按照我們認為今天的定價進行交易。

Great. And then I guess just one more on maintaining REIT status. Is there any kind of additional restructuring you would need to do or a special dividend that you would have to kind of maintain that REIT status?

偉大的。然後我想還有一個關於維持房地產投資信託基金地位的問題。為了維持房地產投資信託基金的地位，您是否需要進行任何類型的額外重組或特別股息？

Sure. It's Bill. Last year, as you know, we did do an internal restructuring to generate some gain to qualify for this year. We expect to qualify again by completing a similar restructuring. And then looking forward, we have some options for '24 that we are currently evaluating. As far as the dividend goes, we don't -- it depends on any sort of future transaction, but the dividend that we paid in March will cover everything that we expect to do so far this year.

當然。是比爾。如您所知，去年我們確實進行了內部重組，以產生一些收益以獲得今年的資格。我們希望通過完成類似的重組再次獲得資格。然後展望未來，我們目前正在評估 24 年的一些選擇。就股息而言，我們不會——這取決於任何類型的未來交易，但我們在三月份支付的股息將涵蓋我們今年迄今為止預計要做的一切。

(Operator Instructions) There are no further questions. At this time, I would like to turn the floor back over to David Weinberg for closing comments. Please go ahead.

（操作員說明）沒有其他問題。現在，我想把發言權交還給大衛·溫伯格（David Weinberg）以供結束評論。請繼續。

Thank you again for joining us today, and we look forward to next time.

再次感謝您今天加入我們，我們期待下次。

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與，祝您有美好的一天。