Equity Commonwealth (EQC 0.95%), a real estate investment trust (REIT) with a small portfolio of office properties, announced its third-quarter 2024 results on Oct. 23. The REIT faced significant hurdles in the period, and reported a net loss of $28.2 million compared to a net income of $24.1 million in the same quarter of 2023, primarily due to a $50.2 million asset impairment charge. Funds from operations (FFO) were $26.2 million, down from $28.7 million a year ago.
| Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Net income | ($28.2 million) | $24.1 million | N/A |
| FFO per share | $0.24 | $0.26 | (7.7%) |
| Same-property occupancy | 69.7% | 80.8% | (1,110 basis points) |
Equity Commonwealth: Business Overview
After years of property sales, Equity Commonwealth, a real estate investment trust, has a streamlined portfolio with only four office buildings remaining.
In recent quarters, amid challenging office market conditions, Equity Commonwealth has determined that it will fully liquidate its portfolio, return all funds to shareholders, and dissolve the REIT. As a result of its prior sales, it holds a strong cash reserve of $2.2 billion without any debt.
A Detailed Look at Recent Developments
In the third quarter, Equity Commonwealth's financial outcomes were notably shaped by a $50.2 million asset impairment, driving it into a net loss position. This contrasts sharply with its net income of $24.1 million in the prior-year period. According to management, $33.9 million of that impairment came from writing down the net book value of real estate under contract for sale, and $16.3 million was related to non-real estate assets that will be transferred to a buyer or written off. No new lease activities were completed during the period.
Operationally, there was a 16% decline in the net operating income (NOI) due to diminished occupancy. Its same-property portfolio leased rate dropped from 80.8% last year to just 69.7%.
The company's two properties in Austin, Texas, and its 1250 H Street property Washington, D.C., are now under contract. Sales and liquidation plans will be presented for shareholder approval on Nov. 12, but their approval is not required.
Equity Commonwealth's operational strategy also involved reducing expenses. This was evident from the slight increase in shareholders' equity to $2.41 billion and the decrease in total liabilities to $27.9 million by the end of the quarter.
NYSE: EQC
Key Data Points
Looking Ahead
Equity Commonwealth's focus is firmly on asset disposals that maximize shareholder returns. The management reemphasized its commitment to liquidate all assets and distribute the proceeds. Its fourth property, located in Denver, was put on the market in September.
For the remainder of the year and beyond, investors should closely monitor the complete execution of asset sales and the shareholder meeting outcome in November, which could pivot the company into an all-cash liquid position. Attention should also be given to any adjustments in market conditions that might influence asset valuations or sales timelines.
