Equity Commonwealth(EQC) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the month of April, 98% of contractual rents were paid, with 3% from security deposits and letters of credit [7] - The company completed the sale of two properties for $672 million, with taxable gains from these dispositions totaling $419 million [9][10] - The same property portfolio of four properties totaling 1.5 million square feet was 90.8% leased at the end of Q1 2020, a decrease of 70 basis points from Q4 2019 [10] - The company has a strong balance sheet with net cash of $3.3 billion, approximately $27 per share [11] Business Line Data and Key Metrics Changes - The company sold a 286,000 square foot property in Boston for $270 million and a 435,000 square foot office property in Bellevue, Washington for $401.5 million [9] - Same property cash NOI was up 1% [10] Market Data and Key Metrics Changes - The COVID-19 pandemic has led to significant dislocation in the capital markets and the real estate industry, particularly in office leasing and investment sales activity [6] - The company has no exposure to retail tenants and no co-working exposure, which mitigates some risk [7] Company Strategy and Development Direction - The company is focused on the health and safety of employees and tenants, implementing precautionary measures as stay-at-home orders are lifted [5] - The company plans to remain patient and disciplined in seeking investment opportunities, monitoring both public and private market activities [15][26] - The management emphasizes a fresh perspective on investment opportunities, challenging previous assumptions due to the unprecedented nature of the current environment [26][27] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the uncertainty surrounding the impact of COVID-19 on tenants and the portfolio [7] - The company is optimistic but practical about the reopening process and its implications for the market [19] - Management believes it is still early to predict the direction of the market and actionable opportunities may take months or quarters to materialize [15] Other Important Information - The company is in the process of selling the Green and Harris Buildings in Georgetown, with closing scheduled for June [10] - The management team is actively engaged in supporting tenants and monitoring market conditions [23] Q&A Session Summary Question: How is the company viewing opportunities in the current market dislocation? - Management believes it is early in the process and is monitoring both public and private market activities for actionable opportunities [15] Question: Are sellers likely to change their approach due to rent collection stresses? - Management indicates that owners of real estate are reviewing their assumptions and may sell assets they previously considered stable [16] Question: How does the current dislocation compare to the Great Financial Crisis? - Management finds it difficult to compare due to the early stage of the current situation and the lack of clarity on its development [18][19] Question: What will happen if no opportunities are found in a year? - Management considers it premature to speculate on that scenario [20] Question: Can the company provide details on the expected special dividend? - Management states that the size and timing of the special dividend will depend on earnings from operations and the Board's decision [21] Question: What is the focus of the investment strategy moving forward? - The focus will be on creating a platform for growth, primarily in real estate, while remaining open to various opportunities [32][35] Question: Is the company considering investing in non-real estate operational businesses? - Management indicates that while they are open to various asset classes, the focus will almost certainly remain on real estate [34][35] Question: Is the company looking at M&A opportunities? - Management states that pursuing activist positions is not a focus at this time [37]