Equity Commonwealth (EQC) Q3 Earnings call transcript Oct 24, 2024
2min read In Equity Commonwealth's recent earnings call, management provided updates on the company's progress, focusing on the status of asset sales and the upcoming shareholder vote. The call, led by David Helfand, President and CEO, highlighted key developments and expectations for the company.
Asset Sales and Impairment Charges
Equity Commonwealth announced that its 2 Austin properties and a DC property are now under contract, with the sales expected to begin in early November. The company recognized a $50 million noncash impairment charge in this quarter's financials, and these assets are held for sale on the September 30 balance sheet. The pricing for these sales, along with the expectation for Denver, remains consistent with the $234 million estimate discussed in the last quarter's call.
Upcoming Shareholder Meeting
The company also provided an update on the upcoming special shareholder meeting scheduled for November 12. Shareholders of record as of the close of business on October 1 will vote to approve the Plan of Sale as well as the related advisory vote on the Say on Pay. The Plan of Sale requires the affirmative vote of 2/3 of the outstanding common shares to be approved.
Distributions and Liquidation Basis Accounting
Assuming shareholders approve the Plan of Sale, Equity Commonwealth will adopt liquidation basis accounting for its 2024 10-K. Under this method, assets will be recognized at the amount expected to be collected, and estimated expenses will be accrued in full as of December 31, 2024. The year-end and future quarters' financials will outline any changes to the estimates and the statement of changes in net assets.
Following shareholder approval and subject to Board approval, the company will pay off the Series D preferred and declare a common distribution of $18 to $19 per share. The exact amount of the common distribution will depend on the status of the dispositions at that time. After all remaining assets are sold, which is estimated to be by the end of the first quarter of 2025, the company will distribute substantially all of its remaining cash, net of a reserve for any remaining liabilities.
Challenges in the Disposition Process
David Helfand acknowledged the challenges in selling office buildings during this time and emphasized the importance of executing the wind-down process prudently and efficiently. The company continues to expect to qualify as a REIT in 2024 and 2025.
Shareholder Support and Team Dedication
Throughout the call, Equity Commonwealth expressed appreciation for shareholder support and the hard work and dedication of its team. The company will continue to communicate its progress and is focused on executing the wind-down process effectively.
Clarifying Questions from Craig Mailman
Craig Mailman, an analyst from Citi, asked several questions to clarify details about the Series D preferred payment, asset sales, and expected distributions. The management team provided clear answers, addressing concerns about the timing of payments and the status of asset sales.
Key Takeaways
Equity Commonwealth's earnings call provided a comprehensive update on the company's progress, including the status of asset sales, the upcoming shareholder vote, and expectations for distributions. The call highlighted the challenges in the disposition process and the company's focus on executing the wind-down process efficiently. Shareholders and investors will closely watch the progress of these developments and the impact on the company's financial health and future prospects.
