Equity Commonwealth(US:EQC)2023-05-03 16:00Portfolio Performance - As of March 31, 2023, the overall portfolio was 81.6% leased, down from 83.3% in the same period of 2022[79] - The comparable property portfolio was 81.6% leased as of March 31, 2023, compared to 91.5% as of December 31, 2019[78] - Approximately 7.4% of leased square feet and annualized rental revenue are scheduled to expire through December 31, 2023[80] - Total annualized rental revenue as of March 31, 2023, was $56.4 million, with 35.6% of total leased square feet represented by the top ten tenants[82] Financial Performance - Net income for Q1 2023 was $22.8 million, a significant increase of $21.4 million, or 1,643.4%, compared to Q1 2022[89] - Funds from Operations (FFO) attributable to common shareholders and unitholders for Q1 2023 was $25,053,000, compared to $3,681,000 in Q1 2022, reflecting a growth of approximately 579%[109] - Normalized FFO for Q1 2023 reached $25,332,000, up from $3,691,000 in Q1 2022, indicating a substantial increase of about 585%[109] - The company reported a total income before income taxes of $23,831,000 for Q1 2023, compared to $1,313,000 in Q1 2022[113] Revenue and Expenses - Rental revenue decreased by $1.6 million, or 10.2%, in Q1 2023 compared to Q1 2022, primarily due to a decrease in rental revenue at comparable properties[89] - Other revenue, primarily from parking, increased by $0.5 million, or 59.6%, in Q1 2023 compared to Q1 2022, driven by higher parking demand[90] - Operating expenses increased by $2.7 million, or 60.1%, in Q1 2023 compared to Q1 2022, mainly due to a real estate tax refund received in 2022[91] - Property Net Operating Income (NOI) for Q1 2023 was $8,320,000, down from $12,153,000 in Q1 2022, representing a decline of approximately 31%[113] - Operating expenses increased to $7,256,000 in Q1 2023, compared to $4,533,000 in Q1 2022, marking an increase of approximately 60%[113] Cash and Distributions - The company declared a special cash distribution of $4.25 per common share/unit, totaling $468.3 million, paid on March 9, 2023[75] - As of March 31, 2023, the company had $2.1 billion in cash and cash equivalents[73] - A special cash distribution of $4.25 per common share/unit was declared on February 13, 2023, totaling $468.3 million paid on March 9, 2023[100] - As of March 31, 2023, the company had $2.1 billion in cash and cash equivalents, expected to fund operations and investments[95] Leasing Activity - During the three months ended March 31, 2023, the company entered into leases for 60,000 square feet, with renewal leases having cash and GAAP rental rates approximately 4.8% and 16.8% higher, respectively, compared to prior rates[74] - The weighted average remaining lease term for leases entered into during the three months ended March 31, 2023, was 5.8 years[79] - Tenant improvements and leasing costs capitalized in Q1 2023 amounted to $1.8 million and $1.2 million, respectively, compared to $0.6 million and $0.6 million in Q1 2022[104] Market and Economic Conditions - Future cash flows will depend on the ability to collect rent and generate parking revenue, which may be impacted by economic uncertainty and remote working trends[96] - Market risk exposure has not materially changed from previous reports, indicating stability in the company's risk profile[115] Share Repurchase - The company did not repurchase any common shares during Q1 2023, with $120.4 million remaining under its share repurchase program[102] Income and Interest - Interest and other income, net, rose by $26.8 million in Q1 2023 compared to Q1 2022, primarily due to higher average interest rates[93] - Interest and other income, net, surged to $28,376,000 in Q1 2023 from $1,574,000 in Q1 2022, reflecting a dramatic increase of around 1700%[113] Performance Metrics - The company continues to utilize NOI as a key performance measure to evaluate property-level performance, despite its limitations as a cash flow indicator[110]