Equity Commonwealth's (NYSE:EQC) slow strategic repositioning continued during the first quarter. The real estate investment trust sold three more properties, bringing its portfolio down to just 30 holdings at the end of the quarter. Further, despite reaching its disposition goal several quarters ago, the company continues to jettison properties from its portfolio. While the company still has additional asset sales underway, its plan isn't to stay small forever, with its intention to use its financial firepower to create meaningful value for investors over the long term.

Equity Commonwealth results: The raw numbers


Q1 2017

Q1 2016

Year-Over-Year Change

Normalized FFO

$29.5 million

$37.3 million


Normalized FFO per share




Data source: Equity Commonwealth. FFO = Funds from operations.

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What happened with Equity Commonwealth this quarter? 

Earnings continue to drop alongside the property count:

  • Equity Commonwealth sold 32 properties over the past year, which knocked $0.18 per share off FFO during the quarter versus last year. That said, the company partially offset that impact by redeploying the cash proceeds to buy back stock and pay down debt, which, in aggregate, added $0.13 per share back to the bottom line.  
  • The company's retained portfolio, which now consists of 28 properties, had same-property leased occupancy of 89% during the quarter, that's down from 91.3% at the end of December and 91.6% in the year-ago period. On a more positive note, the company did sign 331,000 square feet of leases during the quarter, including 264,000 square feet of renewals and 67,000 square feet of new leases. Further, the rental rates on these leases were 21.6% higher compared to the prior rental rates for the same space.
  • The company closed the sale of three properties during the quarter for a gross sales price of $113.1 million as well as selling a vacant land parcel for $0.6 million. Meanwhile, it closed the sale of two more properties for $64.5 million shortly after the quarter ended.
  • The company ended the quarter with nearly $1.9 billion of cash on the balance sheet and less than $1.1 billion of debt. With more money coming in the door from asset sales underway, the company's board authorized a new $150 million share repurchase program to help offset some of the lost income from asset sales.

What management had to say 

Speaking on the conference call, CEO David Helfand pointed out:

At EQC it was a relatively quiet quarter. Leasing activity includes the renewals of a large tenant in Philadelphia and in April we completed another large renewal at our Delaware property, further reducing our near-term expiration risk. In terms of dispositions, we closed on the sale of three properties in the quarter and another two subsequent to quarter end for a total of $178 million. 

Equity Commonwealth continues plodding along on its dual-focused strategy of leasing up space across its retained portfolio and selling properties it no longer wishes to keep. Helfand went on to note:

Since taking ownership of EQC, we have had success selling assets ... with completed sales now exceeding $4.3 billion. The team at EQC has done an outstanding job adding value to our portfolio through entrepreneurial leasing and repositioning of assets. These efforts will improve the marketability of our properties and our portfolio repositioning has occurred at a pace that exceeded our initial expectations. Today we own a higher quality portfolio that is more concentrated and in better markets.

Looking forward 

That said, one thing Helfand made clear on the call was that the company has no intention of staying small. He stated that:

We have significant investment capacity, $2.9 billion of liquidity and are focused on identifying the right opportunities to deploy capital. The combination of our people, platform and balance sheet provides tremendous opportunities to create long-term value for shareholders. We are keenly focused on that objective.

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