Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172021
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-9317
EQUITY COMMONWEALTH
(Exact Name of Registrant as Specified in Its Charter)
Maryland04-6558834
(State or Other Jurisdiction of Incorporation or Organization)(IRS Employer Identification No.)
Two North Riverside Plaza, Suite 2100, Chicago, IL60606
(Address of Principal Executive Offices)(Zip Code)
(312) 646-2800
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:
Title Of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Shares of Beneficial InterestEQCThe New York Stock Exchange
6.50% Series D Cumulative Convertible Preferred Shares of Beneficial InterestEQCpDThe New York Stock Exchange
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Large accelerated filer x
Accelerated filer o
Non-accelerated filero
☐
Smaller reporting companyo☐
(Do not check if a smaller reporting company)
Emerging growth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o☐  No ý
Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of October 20, 2017:  124,089,443.
July 26, 2021:  121,940,355.



Table of Contents

EQUITY COMMONWEALTH
 
FORM 10-Q
 
SeptemberJune 30, 20172021
 
INDEX
Page
Page
Financial Information
Item 1.
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Operations
2
Condensed Consolidated Statements of Comprehensive (Loss) Income
3
Condensed Consolidated Statements of Equity
4
Condensed Consolidated Statements of Cash Flows
56
Notes to Condensed Consolidated Financial Statements
78
2116
3527
3727
3828
3828
3832
3833
3833
3833
3934
4035



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EXPLANATORY NOTE
 
References in this Quarterly Report on Form 10-Q to the Company, EQC, we, us“Company,” “EQC,” “we,” “us” or our,“our,” refer to Equity Commonwealth and its consolidated subsidiaries as of SeptemberJune 30, 2017,2021, unless the context indicates otherwise.



i
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PART I.Financial Information


Item 1.Financial Statements.

EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
June 30,
2021		December 31,
2020
(audited)
ASSETS
Real estate properties:
Land$44,060 $44,060 
Buildings and improvements361,592 357,650 
405,652 401,710 
Accumulated depreciation(150,754)(143,319)
254,898 258,391 
Cash and cash equivalents2,965,788 2,987,225 
Rents receivable15,310 14,702 
Other assets, net20,272 17,353 
Total assets$3,256,268 $3,277,671 
LIABILITIES AND EQUITY
Accounts payable, accrued expenses and other$19,209 $20,588 
Rent collected in advance2,373 2,928 
Distributions payable2,850 10,991 
Total liabilities24,432 34,507 
Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;
Series D preferred shares; 6.50% cumulative convertible; 4,915,196 shares issued and
   outstanding, aggregate liquidation preference of $122,880
119,263 119,263 
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized;
   121,940,355 and 121,522,555 shares issued and outstanding, respectively
1,219 1,215 
Additional paid in capital4,297,197 4,294,632 
Cumulative net income3,802,994 3,814,948 
Cumulative common distributions(4,281,670)(4,283,668)
Cumulative preferred distributions(713,706)(709,712)
Total shareholders’ equity3,225,297 3,236,678 
Noncontrolling interest6,539 6,486 
Total equity3,231,836 3,243,164 
Total liabilities and equity$3,256,268 $3,277,671 
See accompanying notes.
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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Revenues:
Rental revenue$14,114 $15,248 $28,283 $32,391 
Other revenue761 1,017 1,443 2,694 
Total revenues14,875 16,265 29,726 35,085 
Expenses:
Operating expenses6,588 6,677 13,209 15,438 
Depreciation and amortization4,432 4,398 8,783 9,512 
General and administrative7,390 8,302 23,119 18,906 
Total expenses18,410 19,377 45,111 43,856 
Interest and other income, net1,626 4,443 3,469 16,338 
Interest expense (including net amortization of debt premiums and deferred financing fees of $0, $(60), $0 and $(116), respectively)0 (302)0 (611)
Gain on sale of properties, net0 26,916 0 446,536 
(Loss) income before income taxes(1,909)27,945 (11,916)453,492 
Income tax expense(31)(59)(62)(99)
Net (loss) income(1,940)27,886 (11,978)453,393 
Net loss (income) attributable to noncontrolling interest4 (54)24 (802)
Net (loss) income attributable to Equity Commonwealth(1,936)27,832 (11,954)452,591 
Preferred distributions(1,997)(1,997)(3,994)(3,994)
Net (loss) income attributable to Equity Commonwealth common shareholders$(3,933)$25,835 $(15,948)$448,597 
Weighted average common shares outstanding — basic122,189 121,655 122,096 121,901 
Weighted average common shares outstanding — diluted122,189 123,255 122,096 126,358 
Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic$(0.03)$0.21 $(0.13)$3.68 
Diluted$(0.03)$0.21 $(0.13)$3.58 

See accompanying notes.
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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(amounts in thousands)
(unaudited)
Three Months Ended
June 30,		Six Months Ended
June 30,
2021202020212020
Net (loss) income$(1,940)$27,886 $(11,978)$453,393 
Total comprehensive (loss) income$(1,940)$27,886 $(11,978)$453,393 
Comprehensive loss (income) attributable to noncontrolling interest4 (54)24 (802)
Total comprehensive (loss) income attributable to Equity Commonwealth$(1,936)$27,832 $(11,954)$452,591 

See accompanying notes.

3
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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(amounts in thousands, except share data)
(unaudited)
 Equity Commonwealth Shareholders
Number of Series D Preferred SharesSeries D Preferred
Shares		Number of Common SharesCommon
Shares		Additional
Paid
in
Capital		Cumulative
Net
Income		Cumulative
Common
Distributions		Cumulative
Preferred
Distributions		Noncontrolling InterestTotal
Balance at April 1, 20214,915,196 $119,263 121,916,875 $1,219 $4,295,226 $3,804,930 $(4,283,753)$(711,709)$6,442 $3,231,618 
Net loss— — — — — (1,936)— — (4)(1,940)
Surrender of shares for tax withholding— — (33,695)— (948)— — — — (948)
Share-based compensation— — 57,175 — 2,683 — — — 231 2,914 
Distributions— — — — — — 2,083 (1,997)106 192 
Adjustment for noncontrolling interest— — — — 236 — — — (236)— 
Balance at June 30, 20214,915,196 $119,263 121,940,355 $1,219 $4,297,197 $3,802,994 $(4,281,670)$(713,706)$6,539 $3,231,836 
Balance at January 1, 20214,915,196 $119,263 121,522,555 $1,215 $4,294,632 $3,814,948 $(4,283,668)$(709,712)$6,486 $3,243,164 
Net loss— — — — — (11,954)— — (24)(11,978)
Surrender of shares for tax withholding— — (244,029)(2)(7,039)— — — — (7,041)
Share-based compensation— — 661,829 6 9,088 — — — 507 9,601 
Distributions— — — — — — 1,998 (3,994)86 (1,910)
Adjustment for noncontrolling interest— — — — 516 — — — (516)— 
Balance at June 30, 20214,915,196 $119,263 121,940,355 $1,219 $4,297,197 $3,802,994 $(4,281,670)$(713,706)$6,539 $3,231,836 
 September 30,
2017		 December 31,
2016
   (audited)
ASSETS   
Real estate properties:   
Land$216,957
 $286,186
Buildings and improvements1,841,230
 2,570,704
 2,058,187
 2,856,890
Accumulated depreciation(554,411) (755,255)
 1,503,776
 2,101,635
Acquired real estate leases, net28,108
 48,281
Cash and cash equivalents2,233,077
 2,094,674
Marketable securities279,626
 —
Restricted cash7,657
 6,532
Rents receivable, net of allowance for doubtful accounts of $4,217 and $5,105, respectively107,832
 152,031
Other assets, net100,213
 122,922
Total assets$4,260,289
 $4,526,075
    
LIABILITIES AND EQUITY   
Senior unsecured debt, net$815,577
 $1,063,950
Mortgage notes payable, net34,999
 77,717
Accounts payable and accrued expenses63,506
 95,395
Assumed real estate lease obligations, net1,215
 1,946
Rent collected in advance14,355
 18,460
Security deposits5,938
 8,160
Total liabilities935,590
 1,265,628
    
Shareholders' equity:   
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;   
Series D preferred shares; 6 1/2% cumulative convertible; 4,915,196 shares issued and outstanding, aggregate liquidation preference of $122,880119,263
 119,263
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 124,089,443 and 123,994,465 shares issued and outstanding, respectively1,241
 1,240
Additional paid in capital4,378,184
 4,363,177
Cumulative net income2,617,820
 2,566,603
Cumulative other comprehensive income (loss)2,671
 (208)
Cumulative common distributions(3,111,868) (3,111,868)
Cumulative preferred distributions(683,751) (677,760)
Total shareholders’ equity3,323,560
 3,260,447
Noncontrolling interest1,139
 —
Total equity3,324,699
 3,260,447
Total liabilities and equity$4,260,289
 $4,526,075

See accompanying notes.

















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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues:       
Rental income$61,091
 $92,722
 $215,648
 $324,345
Tenant reimbursements and other income16,707
 21,910
 53,300
 72,789
Total revenues77,798
 114,632
 268,948
 397,134
Expenses:       
Operating expenses32,380
 49,313
 110,751
 157,964
Depreciation and amortization21,133
 29,184
 71,970
 102,766
General and administrative11,689
 13,277
 35,727
 38,766
Loss on asset impairment—
 —
 19,714
 43,736
Total expenses65,202
 91,774
 238,162
 343,232
Operating income12,596
 22,858
 30,786
 53,902
Interest and other income7,596
 3,013
 17,987
 7,184
Interest expense (including net amortization of debt discounts, premiums and deferred financing fees of $784, $948, $2,346 and $2,880, respectively)(11,510) (21,427) (41,387) (65,074)
Loss on early extinguishment of debt(203) —
 (266) (118)
Foreign currency exchange loss—
 —
 —
 (5)
Gain on sale of properties, net25,080
 82,169
 44,670
 225,210
Income before income taxes33,559
 86,613
 51,790
 221,099
Income tax expense(335) (225) (555) (465)
Net income33,224
 86,388
 51,235
 220,634
Net income attributable to noncontrolling interest(12) —
 (18) —
Net income attributable to Equity Commonwealth$33,212
 $86,388
 $51,217
 $220,634
Preferred distributions(1,997) (1,997) (5,991) (15,959)
Excess fair value of consideration paid over carrying value of preferred shares—
 —
 —
 (9,609)
Net income attributable to Equity Commonwealth common shareholders$31,215
 $84,391
 $45,226
 $195,066
Weighted average common shares outstanding — basic124,089
 125,533
 124,068
 125,627
Weighted average common shares outstanding — diluted125,175
 126,568
 125,194
 127,009
Earnings per common share attributable to Equity Commonwealth common shareholders:       
Basic$0.25
 $0.67
 $0.36
 $1.55
Diluted$0.25
 $0.67
 $0.36
 $1.54

See accompanying notes.

EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(amounts in thousands)
(unaudited)
 Three Months Ended 
 September 30,		 Nine Months Ended 
 September 30,
 2017 2016 2017 2016
Net income$33,224
 $86,388
 $51,235
 $220,634
        
Other comprehensive (loss) income, net of tax:       
Unrealized (loss) gain on derivative instruments(19) 1,117
 (280) 2,570
Unrealized gain on marketable securities1,455
 —
 3,159
 —
Total comprehensive income34,660
 87,505
 54,114
 223,204
Comprehensive income attributable to the noncontrolling interest(12) —
 (18) —
Total comprehensive income attributable to Equity Commonwealth$34,648
 $87,505
 $54,096
 $223,204

See accompanying notes.


EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)
(amounts in thousands, except share data)
(unaudited)
 Equity Commonwealth Shareholders
Number of Series D Preferred SharesSeries D Preferred
Shares		Number of Common
Shares		Common
Shares		Additional
Paid
in
Capital		Cumulative
Net
Income		Cumulative
Common
Distributions		Cumulative
Preferred
Distributions		Noncontrolling InterestTotal
Balance at April 1, 20204,915,196 $119,263 121,502,520 $1,215 $4,285,266 $3,788,413 $(3,852,856)$(703,721)$7,034 $3,644,614 
Net income— — — — — 27,832 — — 54 27,886 
Share-based compensation— — 19,104 — 2,906 — — — 362 3,268 
Contributions— — — — — — — — 1 1 
Distributions— — — — — — 0 (1,997)0 (1,997)
Redemption of noncontrolling interest— — — — — — — — (31)(31)
Adjustment for noncontrolling interest— — — — 73 — — — (73)— 
Balance at June 30, 20204,915,196 $119,263 121,521,624 $1,215 $4,288,245 $3,816,245 $(3,852,856)$(705,718)$7,347 $3,673,741 
Balance at January 1, 20204,915,196 $119,263 121,924,199 $1,219 $4,313,831 $3,363,654 $(3,851,666)$(701,724)$1,295 $3,245,872 
Net income— — — — — 452,591 — — 802 453,393 
Repurchase of shares— — (711,000)(7)(20,862)— — — — (20,869)
Surrender of shares for tax withholding— — (183,466)(2)(6,010)— — — — (6,012)
Share-based compensation— — 491,891 5 5,859 — — — 707 6,571 
Contributions— — — — — — — — 1 1 
Distributions— — — — — — (1,190)(3,994)— (5,184)
Redemption of noncontrolling interest— — — — — — — — (31)(31)
Adjustment for noncontrolling interest— — — — (4,573)— — — 4,573 — 
Balance at June 30, 20204,915,196 $119,263 121,521,624 $1,215 $4,288,245 $3,816,245 $(3,852,856)$(705,718)$7,347 $3,673,741 
 Equity Commonwealth Shareholders    
 Preferred Shares Common Shares    
 Series D                  
 Number
of
Shares		 Preferred
Shares		 Cumulative
Preferred
Distributions		 Number
of
Shares		 Common
Shares		 Cumulative
Common
Distributions		 Additional
Paid
in
Capital		 Cumulative
Net
Income		 Cumulative Other Comprehensive Income (Loss) Noncontrolling Interest Total
Balance at December 31, 20164,915,196
 $119,263
 $(677,760) 123,994,465
 $1,240
 $(3,111,868) $4,363,177
 $2,566,603
 $(208) $—
 $3,260,447
Net income—
 —
 —
 —
 —
 —
 —
 51,217
 —
 18
 51,235
Unrealized loss on derivative instruments—
 —
 —
 —
 —
 —
 —
 —
 (280) —
 (280)
Unrealized gain on marketable securities—
 —
 —
 —
 —
 —
 —
 —
 3,159
 —
 3,159
Purchase of shares—
 —
 —
 (6,694) —
 —
 (209) —
 —
 —
 (209)
Share-based compensation—
 —
 —
 101,672
 1
 —
 15,430
 —
 —
 876
 16,307
Contributions—
 —
 —
 —
 —
 —
 —
 —
 —
 31
 31
Distributions—
 —
 (5,991) —
 —
 —
 —
 —
 —
 —
 (5,991)
Adjustment for noncontrolling interest—
 —
 —
 —
 —
 —
 (214) —
 —
 214
 —
Balance at September 30, 20174,915,196
 $119,263
 $(683,751) 124,089,443
 $1,241
 $(3,111,868) $4,378,184
 $2,617,820
 $2,671
 $1,139
 $3,324,699


See accompanying notes.

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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
 Nine Months Ended September 30,
 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:   
Net income$51,235
 $220,634
Adjustments to reconcile net income to cash provided by operating activities:   
Depreciation58,178
 79,128
Net amortization of debt discounts, premiums and deferred financing fees2,346
 2,880
Straight line rental income(12,487) (12,384)
Amortization of acquired real estate leases7,073
 18,289
Other amortization7,970
 11,219
Share-based compensation16,307
 13,871
Loss on asset impairment19,714
 43,736
Loss on early extinguishment of debt266
 118
Foreign currency exchange loss—
 5
Net gain on sale of properties(44,670) (225,210)
Change in assets and liabilities:   
Restricted cash1,508
 (6,119)
Rents receivable and other assets(20,762) (20,474)
Accounts payable and accrued expenses(18,759) (5,303)
Rent collected in advance(3,610) (3,912)
Security deposits17
 234
Cash provided by operating activities64,326
 116,712
CASH FLOWS FROM INVESTING ACTIVITIES:   
Real estate improvements(51,700) (92,106)
Insurance proceeds received4,000
 —
Proceeds from sale of properties, net699,289
 1,034,403
Purchase of marketable securities(276,238) —
(Increase) decrease in restricted cash(2,633) 1,609
Cash provided by investing activities372,718
 943,906
CASH FLOWS FROM FINANCING ACTIVITIES:   
Purchase and retirement of common shares(209) (25,563)
Redemption of preferred shares—
 (275,000)
Payments on borrowings(292,472) (141,591)
Deferred financing fees—
 (52)
Contributions from holders of noncontrolling interest31
 —
Distributions to preferred shareholders(5,991) (15,959)
Cash used in financing activities(298,641) (458,165)
    
Effect of exchange rate changes on cash—
 (8)
    
Increase in cash and cash equivalents138,403
 602,445
Cash and cash equivalents at beginning of period2,094,674
 1,802,729
Cash and cash equivalents at end of period$2,233,077
 $2,405,174
Six Months Ended June 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income$(11,978)$453,393 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation7,531 8,105 
Net amortization of debt premiums and deferred financing fees0 (116)
Straight-line rental income(868)713 
Other amortization1,252 1,407 
Amortization of right-of-use asset0 379 
Share-based compensation9,601 6,571 
Net gain on sale of properties0 (446,536)
Change in assets and liabilities:
Rents receivable and other assets327 515 
Accounts payable, accrued expenses and other(2,199)(576)
Rent collected in advance(555)(606)
Net cash provided by operating activities3,111 23,249 
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate improvements(4,074)(2,937)
Payment of transaction costs(3,382)0 
Proceeds from sale of properties, net0 655,053 
Net cash (used in) provided by investing activities(7,456)652,116 
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common shares(7,041)(26,881)
Payments on borrowings0 (294)
Contributions from holders of noncontrolling interest0 1 
Distributions to common shareholders(6,024)(1,936)
Distributions to preferred shareholders(3,994)(3,994)
Distributions to holders of noncontrolling interest(33)(997)
Redemption of noncontrolling interest0 (31)
Net cash used in financing activities(17,092)(34,132)
(Decrease) increase in cash, cash equivalents, and restricted cash(21,437)641,233 
Cash, cash equivalents, and restricted cash at beginning of period2,987,225 2,800,645 
Cash, cash equivalents, and restricted cash at end of period$2,965,788 $3,441,878 
See accompanying notes.











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EQUITY COMMONWEALTH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(amounts in thousands)
(unaudited)

Six Months Ended June 30,
20212020
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid$0 $732 
Taxes paid (refunded), net263 (1,555)
NON-CASH INVESTING ACTIVITIES:
Accrued capital expenditures$854 $2,733 
NON-CASH FINANCING ACTIVITIES:
Distributions payable$2,850 $5,791 

 Nine Months Ended September 30,
 2017 2016
SUPPLEMENTAL CASH FLOW INFORMATION:   
Interest paid$50,408
 $69,373
Taxes paid730
 103
    
NON-CASH INVESTING ACTIVITIES:   
Increase in capital expenditures recorded as liabilities$3,876
 $3,191
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands):
June 30,
20212020
Cash and cash equivalents$2,965,788 $3,437,775 
Restricted cash0 4,103 
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows$2,965,788 $3,441,878 


See accompanying notes.



7
Table of Contents

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1.  Business


Equity Commonwealth, (the Company)or the Company, is a real estate investment trust, or REIT, formed in 1986 under the laws of the State of Maryland. Our business is primarily the ownership and operation of real estate, primarily office buildings, throughoutproperties in the United States.


On November 10, 2016, theThe Company converted to what is commonly referred to asoperates in an umbrella partnership real estate investment trust, or UPREIT, structure. In connection with this conversion, the Company contributedand conducts substantially all of its assets toactivities through EQC Operating Trust, a Maryland real estate investment trust, (the Operating Trust), and the Operating Trust assumed substantially all of the Company’s liabilities pursuant to a contribution and assignment agreement between the Company and the Operating Trust.
The Company now conducts and intends to continue to conduct substantially all of its activities throughor the Operating Trust. The Company beneficially owned 99.97%99.8% of the outstanding shares of beneficial interest, designated as units, in the Operating Trust, (OP Units)or OP Units, as of SeptemberJune 30, 2017,2021, and the Company is the sole trustee of the Operating Trust.  As the sole trustee, the Company generally has the exclusive power under the declaration of trust of the Operating Trust to manage and conduct the business of the Operating Trust, subject to certain limited approval and voting rights of other holders of OP Units.


At SeptemberJune 30, 2017,2021, our portfolio included 20consisted of 4 properties (44(8 buildings), and one land parcel, with a combined 11.01.5 million square feet. As of SeptemberJune 30, 2017,2021, we had $2.5$3.0 billion of cash and cash equivalentsequivalents.

Merger Agreement

On May 4, 2021, the Company, Monmouth Real Estate Investment Corporation (NYSE: MNR), or Monmouth, and marketable securities.a subsidiary of the Company entered into a definitive agreement and plan of merger, or the Merger Agreement, pursuant to which Monmouth will merge with and into a subsidiary of the Company. Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, upon closing of the merger, each share of Monmouth common stock issued and outstanding will be converted into the right to receive 0.67 of a newly issued share of our common shares of beneficial interest, with cash paid in lieu of any fractional shares. The Merger Agreement provides for Monmouth to declare and pay one additional regular quarterly common stock dividend of $0.18 per share without Equity Commonwealth paying a corresponding common dividend to its shareholders, which Monmouth declared on July 1, 2021, payable on September 15, 2021. In addition, upon closing, holders of Monmouth Series C preferred stock will receive $25.00 per share plus accumulated and unpaid dividends pursuant to the governing documents of the Monmouth Series C preferred stock. We currently expect the transaction to close in the second half of 2021, subject to the approval of our common shareholders and the Monmouth common shareholders and other customary closing conditions. As of June 30, 2021, we recorded transaction costs of $4.2 million, included in Other assets, net, in connection with the merger.


Note 2.  Summary of Significant Accounting Policies


Basis of Presentation


The accompanying condensed consolidated financial statements of EQC have been prepared without audit.  Certain information and footnote disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted.  We believe the disclosures made are adequate to make the information presented not misleading.  However, theappropriate.  The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K, (Annual Report)or our Annual Report, for the year ended December 31, 2016.2020.  Capitalized terms used, but not defined in this Quarterly Report, have the same meanings as in our Annual Report.


In the opinion of our management, all adjustments, which include only normal recurring adjustments considered necessary for a fair presentation, have been included.  All intercompany transactions and balances with or among our subsidiaries have been eliminated.  Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.  ReclassificationsCertain reclassifications have been made to the prior years’year’s financial statements to conform to the current year’s presentation.


The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts.  Actual results could differ from those estimates.  Significant estimates in the condensed consolidated financial statements include the allowance for doubtful accounts,assessment of the collectability of rental revenue, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets.


Share amounts are presented in whole numbers, except where noted.

8
Table of Contents
Recent Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, to enable entities to better portray the economics of their risk management activities in the financial statements and enhance the transparency and understandability of hedge results. The amendments also simplify the application of hedge accounting in certain situations. This update is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. We are evaluating the impact ASU 2017-12 will have on our financial position and results of operations.


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)





In February 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, that changes the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. This update is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. We early adopted this ASU effective January 1, 2017, and the adoption of this ASU did not have a material impact on our consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05 Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 is designed to provide guidance on how to recognize gain and losses on sales, including partial sales, of nonfinancial assets to noncustomers. ASU 2017-05 is effective beginning January 1, 2018. Early adoption is permitted but the standard is required to be adopted concurrently with ASU 2014-09. We do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which amends FASB Accounting Standards Codification (ASC) Topic 230, Statements of Cash Flows, to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This update is effective for fiscal years beginning after December 15, 2017, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires more timely recognition of credit losses associated with financial assets. This update is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2018. We are currently in the process of evaluating the impact, if any, the adoption of this ASU will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase of the leased asset by the lessee. This classification will determine whether the lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASU 2016-02 supersedes previous leasing standards. ASU 2016-02 is effective for us for reporting periods beginning after December 15, 2018, with early adoption permitted. We are still assessing the impact of adopting ASU 2016-02. For leases where we are the lessor, we expect to account for these leases using an approach that is substantially equivalent to current guidance. However, we expect that certain executory and non-lease components (such as common area maintenance), will need to be accounted for separately from the lease component of the lease with the lease component continuing to be recognized on a straight-line basis over the lease term. We intend to account for the executory and non-lease components under the new revenue recognition guidance in ASU 2014-09, upon our adoption of ASU 2016-02. When the revenue for such activities is not separately stipulated in the lease, we will need to separate the lease components of revenue due under leases from the non-lease components. Additionally, under ASU 2016-02 lessors may only capitalize incremental direct leasing costs. For leases in which we are the lessee, we expect to recognize a right-of-use asset and a lease liability equal to the present value of the minimum lease payments with rent expense being recognized on a straight-line basis and the right of use asset being reduced when lease payments are made.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, related to certain aspects of recognition, measurement, presentation, and disclosure of

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


financial instruments. ASU 2016-01 will require entities to measure their equity investments at fair value and recognize any changes in fair value in net income, with certain exceptions, rather than other comprehensive income. This update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. We are currently evaluating the impact that the adoption of the new standard will have on our consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. The objective of ASU 2014-09, as amended, is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying ASU 2014-09, companies will perform a five-step analysis of transactions to determine when and how revenue is recognized. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB’s ASC, and more particularly lease contracts with customers, which are a scope exception. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2017, with early adoption permitted. While our consideration of this matter is ongoing, we are not planning to early adopt ASU 2014-09, as amended, and we expect to use the modified retrospective method of adoption that will result in a cumulative effect adjustment as of the date of adoption. We developed a project plan and have begun the execution of this plan, which consists of gathering and evaluating the inventory of our revenue streams. We believe the effects on our existing accounting policies will be associated with our non-leasing revenue components. As our portfolio is currently comprised, we do not expect that the adoption of this ASU will have a material impact on our consolidated financial statements.

Note 3.  Real Estate Properties


During the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, we made improvements, excluding tenant-funded improvements, to our properties totaling $43.3$3.9 million and $88.5$4.3 million,, respectively.

Properties Held For Sale:

We classify all properties that meet the criteria outlined in the Property, Plant and Equipment Topic of the FASB ASC as held for sale on our condensed consolidated balance sheets.  As of September 30, 2017 and December 31, 2016, we had no properties classified as held for sale.

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Property Dispositions:


We did not sell any properties during the six months ended June 30, 2021. During the ninesix months ended SeptemberJune 30, 2017,2020, we sold the following properties, which did not represent strategic shifts under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205 (dollars in thousands):
PropertyDate SoldNumber of
Properties		Number of
Buildings		Square
Footage		Gross Sale Price(1)Gain on Sale
109 Brookline AvenueFebruary 20201 1 285,556 $270,000 $225,190 
333 108th Avenue NE(2)
March 20201 1 435,406 401,500 194,424 
Georgetown-Green and Harris BuildingsMay 20201 2 240,475 $85,000 $24,916 
3 4 961,437 $756,500 $444,530 


(1)Gross sale price is before transfer taxes and credits, such as capital costs, contractual lease costs and rent abatements.
Asset Date Sold Number of
Properties		 Number of
Buildings		 
Square
Footage
 Gross Sales Price Gain (Loss) on Sale
Properties            
111 Market Place January 2017 1
 1
 589,380
 $60,100
 $(5,968)
Cabot Business Park Land March 2017 —
 —
 —
 575
 (57)
Parkshore Plaza April 2017 1
 4
 271,072
 40,000
 (2,460)
25 S. Charles Street April 2017 1
 1
 359,254
 24,500
 (3,487)
802 Delaware Avenue May 2017 1
 1
 240,780
 34,000
 9,046
1500 Market Street July 2017 1
 1
 1,759,193
 328,000
 38,585
6600 North Military Trail August 2017 1
 3
 639,825
 132,050
 (14,175)
             
Portfolios of properties            
4515 Seton Center Parkway March 2017 1
 1
 117,265
    
4516 Seton Center Parkway March 2017 1
 1
 120,559
    
Seton Center   2
 2
 237,824
 $52,450
 $22,479
             
820 W. Diamond July 2017 1
 1
 134,933
    
Danac Stiles Business Park July 2017 1
 3
 276,637
    
411 Farwell Avenue July 2017 1
 1
 422,727
    
2250 Pilot Knob Road July 2017 1
 1
 87,183
    
4700 Belleview Avenue July 2017 1
 1
 80,615
    
Five Property Portfolio   5
 7
 1,002,095
 $84,000
 $702
    13
 20
 5,099,423
 $755,675
 $44,665
(2)The sale represents an individually significant disposition. The operating results of this property are included in continuing operations for all periods presented through the date of sale. Net (loss) income related to this property was $(9,000) and $28,000 for the three months ended June 30, 2021 and 2020, respectively, and $(14,000) and $193.2 million, of which $194.4 million related to the gain on sale, for the six months ended June 30, 2021 and 2020, respectively.


DuringLease Payments

The FASB has issued additional guidance for companies to account for any COVID-19 related rent concessions in the yearform of FASB staff and board members’ remarks at the April 8, 2020 public meeting and the FASB staff question-and-answer document issued on April 10, 2020. We have elected the practical expedient to account for COVID-19 related rent concessions as if they were part of the enforceable rights and obligations of the parties under the existing lease contract. This policy has been elected for our lessor portfolio for any rent deferrals, and we have elected to treat the related leases as if they are unchanged. For the three and six months ended December 31, 2016,June 30, 2021, we sold 30 properties (62 buildings) with a combined 8.0 million square feet for an aggregate gross sales pricedeferred collection of $1.3 billion, excluding closing costs.

Note 4.  Marketable Securities

Allapproximately $0 and $20,000, respectively, of our marketable securities are classified as available-for-sale and consist of United States Treasury notes, which mature in 2019, and common stock. Available-for-sale securities are presentedrental income on our condensed consolidated balance sheets at fair value. Changes in values of these securities arerevenue that was recognized in accumulated other comprehensive income (loss). Realized gains and losses are recognized in earnings only upon the salethat period.

Rental revenue consists of the securities.

We evaluate our marketable securities for impairment each reporting period. For securities with unrealized losses, we review the underlying cause of the decline in value and the estimated recovery period, as well as the severity and duration of the decline. In our evaluation, we consider our ability and intent to hold these investments for a reasonable period of time sufficient for us to recover our cost basis. To the extent an other-than-temporary impairment is deemed to have occurred, an impairment charge is recorded and a new cost basis is established.

Below is a summary of our marketable securities as of September 30, 2017following (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Lease payments$9,192 $9,983 $18,449 $21,753 
Variable lease payments4,922 5,265 9,834 10,638 
Rental revenue$14,114 $15,248 $28,283 $32,391 

  September 30, 2017
  Cost or Amortized Cost Unrealized Gains Estimated Fair Value
Marketable securities $276,467
 $3,159
 $279,626

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Note 5.  Indebtedness
Unsecured Revolving Credit Facility and Term Loan:
We are party to a credit agreement pursuant to which the lenders agreed to provide a $750.0 million unsecured revolving credit facility, a $200.0 million 5-year term loan facility, and a $200.0 million 7-year term loan facility. The revolving credit facility has a scheduled maturity date of January 28, 2019, which maturity date may be extended for up to two additional periods of six months at our option subject to satisfaction of certain conditions and the payment of an extension fee of 7.5 basis points of the aggregate amount available under the revolving credit facility. The 5-year term loan and the 7-year term loan have scheduled maturity dates of January 28, 2020 and January 28, 2022, respectively.

The credit agreement permits us to utilize up to $100.0 million of the revolving credit facility for the issuance of letters of credit. Amounts outstanding under the credit agreement generally may be prepaid at any time without premium or penalty, subject to certain exceptions. We have the right to request increases in the aggregate maximum amount of borrowings available under the revolving credit facility and term loans up to an additional $1.15 billion, subject to certain conditions.
Borrowings under the 5-year term loan and 7-year term loan will, subject to certain exceptions, bear interest at a LIBOR rate plus a margin of 90 to 180 basis points for the 5-year term loan and 140 to 235 basis points for the 7-year term loan, in each case depending on our credit rating. Borrowings under the revolving credit facility will, subject to certain exceptions, bear interest at a rate equal to, at our option, either a LIBOR rate or a base rate plus a margin of 87.5 to 155 basis points for LIBOR rate advances and 0 to 55 basis points for base rate advances, in each case depending on our credit rating. In addition, we are required to pay a facility fee of 12.5 to 30 basis points, depending on our credit rating, on the borrowings available under the revolving credit facility, whether or not utilized.

Borrowings under our revolving credit facility currently bear interest at LIBOR plus a spread, which was 125 basis points as of September 30, 2017.  As of September 30, 2017, the interest rate payable on borrowings under our revolving credit facility was 2.48%.  As of September 30, 2017, we had no balance outstanding and $750.0 million available under our revolving credit facility and the facility fee as of September 30, 2017 was 25 basis points. Our term loans currently bear interest at a rate of LIBOR plus a spread, which was 140 and 180 basis points for the 5-year and 7-year term loan, respectively, as of September 30, 2017.  As of September 30, 2017, the interest rates for the amounts outstanding under our 5-year term loan and 7-year term loan were 2.63% and 3.03%, respectively.  As of September 30, 2017, we had $200.0 million outstanding under each of our 5-year and 7-year term loans.

Debt Covenants:
Our public debt indenture and related supplements and our credit agreement contain a number of financial and other covenants, including covenants that restrict our ability to incur indebtedness or to make distributions under certain circumstances and require us to maintain financial ratios and a minimum net worth.  At September 30, 2017, we believe we were in compliance with all of our respective covenants under our public debt indenture and related supplements and our credit agreement.

Senior Unsecured Notes:

At September 30, 2017, we had senior unsecured notes of $425.0 million (excluding net discounts and unamortized deferred financing fees) maturing from 2020 through 2042.

On July 15, 2017, we redeemed at par $250.0 million of our 6.65% senior unsecured notes due 2018 and recognized a loss on early extinguishment of debt of $0.2 million from the write off of unamortized deferred financing fees and the write off of an unamortized discount.


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Mortgage Notes Payable:
At September 30, 2017, three of our properties with an aggregate net book value of $63.5 million had secured mortgage notes totaling $35.0 million (including net premiums and unamortized deferred financing fees) maturing from 2021 through 2026.

In April 2017, we repaid at par $41.3 million of mortgage debt at Parkshore Plaza and recognized a loss on early extinguishment of debt of $0.1 million from prepayment fees and the write off of unamortized deferred financing fees, net of the write off of an unamortized premium.

Note 6.4.  Shareholders’ Equity
 
Common Share Issuances:


See Note 117 for information regarding equity issuances related to share-based compensation.


Common Share Repurchases:


On March 17, 2016,1, 2021, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares over the twelve month period following the date of authorization. In March 2017, thisthrough June 30, 2022. We did 0t repurchase any common shares under our common share repurchase authorization, of which $106.6 million was not utilized, expired. On March 15, 2017, our Board of Trustees authorizedprogram during the repurchase of up to an additional $150.0 million of our outstanding common shares over the twelve month period following the date of authorization. During the ninesix months ended SeptemberJune 30, 2017, we did not purchase any common shares.2021.


9
Table of Contents

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the ninesix months ended SeptemberJune 30, 2017,2021 and 2020, certain of our employees and former employees surrendered 6,694244,029 and 183,466 common shares owned by them, respectively, to satisfy their statutory tax withholding obligations in connection with the vesting of such common shares underpursuant to our equity compensation plans.

Common Share and Unit Distribution:

In February 2021, the Equity Commonwealth 2015 Omnibus Incentive Plan, as amended (the 2015 Incentive Plan).

Preferred Share Redemption:

On May 15, 2016, we redeemed allnumber of our 11,000,000 outstanding series E preferred shares at a priceearned awards for recipients of $25.00 per share, for a total of $275.0 million, plus any accrued and unpaid dividends. The redemption payment occurred on May 16, 2016 (the first business day following the redemption date). We recorded $9.6 million relatedCompany’s restricted stock units granted in January 2018 was determined. Pursuant to the excess fair valueterms of considerationsuch awards, we paid overa one-time catch-up cash distribution to these recipients in the carrying valueaggregate amount of the preferred shares as a reduction to net income attributable$6.0 million for distributions to common shareholders for the nine months ended September 30, 2016.declared by our Board of Trustees during such awards' performance measurement period.


Preferred Share Distributions:


In 2017,2021, our Board of Trustees declared distributions on our series D preferred shares to date as follows:
Declaration DateRecord DatePayment DateSeries D Dividend Per Share
January 11, 2021January 28, 2021February 16, 2021$0.40625 
April 9, 2021April 29, 2021May 17, 2021$0.40625 
July 6, 2021July 30, 2021August 16, 2021$0.40625 

Declaration Date Record Date Payment Date Series D Dividend Per Share
January 12, 2017 January 30, 2017 February 15, 2017 $0.40625
April 10, 2017 April 28, 2017 May 15, 2017 $0.40625
June 30, 2017 July 28, 2017 August 15, 2017 $0.40625
October 12, 2017 October 30, 2017 November 15, 2017 $0.40625

Note 7.5.  Noncontrolling Interest


Noncontrolling interest represents the portion of the units in the Operating TrustOP Units not beneficially owned by the Company. An operating partnership unit (OP Unit)The ownership of an OP Unit and a common share of our common stockbeneficial interest have essentially the same economic characteristics. Distributions with respect to OP Units will generally mirror distributions with respect to the Company’s common shares. Unitholders (other than the Company) generally have the right, commencing six months from the date of issuance of such OP Units, to cause the Operating Trust to redeem their OP Units in exchange for cash or, at the option of the Company, common shares of the Company on a one-for-one1-for-one basis. As sole trustee, the Company will havehas the sole discretion to elect whether the

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


redemption right will be satisfied by the Company in cash or the Company’s common shares. As a result, the Noncontrolling interest is classified as permanent equity. As of SeptemberJune 30, 2017,2021, the portion of the Operating Trust not beneficially owned by the Company is in the form of OP Units and LTIP Units (see Note 117 for a description of LTIP Units). LTIP Units may be subject to additional vesting requirements.


The following table presents the changes in Equity Commonwealth’s issued and outstanding common shares and units for the ninesix months ended SeptemberJune 30, 2017:2021:
Common SharesOP Units and LTIP UnitsTotal
Outstanding at January 1, 2021121,522,555 243,516 121,766,071 
Repurchase of shares(244,029)0 (244,029)
Share-based compensation grants and vesting, net of forfeitures661,829 3,701 665,530 
Outstanding at June 30, 2021121,940,355 247,217 122,187,572 
Noncontrolling ownership interest in the Operating Trust0.20 %
  Common Shares LTIP Units Total
Outstanding at January 1, 2017 123,994,465
 —
 123,994,465
Restricted share and time-based LTIP Unit grants, net of forfeitures 94,978
 42,520
 137,498
Outstanding at September 30, 2017 124,089,443
 42,520
 124,131,963
Noncontrolling ownership interest in the Operating Trust 

 

 0.03%


The carrying value of the Noncontrolling interest is allocated based on the number of OP Units and LTIP Units in proportion to the number of OP Units and LTIP Units plus the number of common shares. We adjust the noncontrollingNoncontrolling interest balance at the end of each period to reflect the noncontrolling partners’ interest in the net assets of the Operating Trust. Net income is allocated to the Noncontrolling interest in the Operating Trust based on the weighted average ownership percentage during the period. Equity Commonwealth’s weighted average ownership interest in the Operating Trust was 99.97%99.80% and 99.97%99.80% for the three and ninesix months ended SeptemberJune 30, 2017.2021, respectively.

Note 8.  Cumulative Other Comprehensive Income (Loss)
The following table presents the amounts recognized in cumulative other comprehensive income (loss) for the three and nine months ended September 30, 2017 (in thousands):
10
 Unrealized Loss on Derivative Instruments Unrealized Gain on Marketable Securities Total
Balance as of July 1, 2017$(469) $1,704
 $1,235
      
Other comprehensive (loss) income before reclassifications(32) 1,455
 1,423
Amounts reclassified from cumulative other comprehensive income (loss) to net income13
 —
 13
Net current period other comprehensive (loss) income(19) 1,455
 1,436
      
Balance as of September 30, 2017$(488) $3,159
 $2,671
Table of Contents
 Unrealized Loss on Derivative Instruments Unrealized Gain on Marketable Securities Total
Balance as of January 1, 2017$(208) $—
 $(208)
      
Other comprehensive (loss) income before reclassifications(300) 3,159
 2,859
Amounts reclassified from cumulative other comprehensive income (loss) to net income20
 —
 20
Net current period other comprehensive (loss) income(280) 3,159
 2,879
      
Balance as of September 30, 2017$(488) $3,159
 $2,671


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)




The following table presents reclassifications out of cumulative other comprehensive income (loss) for the three and nine months ended September 30, 2017 (in thousands):
  Amounts Reclassified from Cumulative Other Comprehensive Income (Loss) to Net Income
Details about Cumulative Other Comprehensive Income (Loss) Components Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Affected Line Items in the Statement of Operations
Interest rate cap contract $13
 $20
 Interest expense
Note 9.6.  Income Taxes
 
We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, and are generally not subject to federal and state income taxes provided we distribute a sufficient amount of our taxable income to our shareholders and meet other requirements for qualifying as a REIT.  WeHowever, we are also subject to certain state and local taxes without regard to our REIT status. We have a net operating loss carryforward from prior years and we have fully reserved the associated deferred tax assets due to the uncertainty of our ability to utilize the net operating losses in the future.


Our provision for income taxes consists of the following (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Current:
State and local$(31)$(59)$(62)$(99)
Income tax expense$(31)$(59)$(62)$(99)


 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Current:       
State$335
 $225
 $550
 $465
Federal—
 —
 5
 —
Income tax expense335
 225
 $555
 $465

Note 10.  Derivative Instruments

Risk Management Objective of Using Derivatives

We are exposed to certain risks relating to our ongoing business operations, including the effect of changes in interest rates.  The only risk we currently manage by using derivative instruments is related to our interest rate risk. 

We may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. We do not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, we only enter into derivative financial instruments with counterparties with high credit ratings or with major financial institutions with which we and our affiliates may also have other financial relationships. We do not anticipate that any of the counterparties will fail to meet their obligations.

Cash Flow Hedges of Interest Rate Risk

Our objectives in using interest rate derivatives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish this objective, we use interest rate caps, as part of our interest rate risk management strategy. Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts if interest rates rise above the cap strike rate.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in cumulative other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


hedged forecasted transaction affects earnings. During 2017, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

Amounts reported in cumulative other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. During the next twelve months, we estimate that an additional $0.3 million will be reclassified from cumulative other comprehensive income (loss) as an increase to interest expense.

On March 4, 2016, we purchased an interest rate cap with a LIBOR strike price of 2.50%. The interest rate cap, effective April 1, 2016, has a notional amount of $400.0 million and a maturity date of March 1, 2019.

As of September 30, 2017, we had the following outstanding interest rate derivative that was designated as a cash flow hedge of interest rate risk:
Interest Rate Derivative Number of Instruments Notional Amount (in thousands)
Interest rate cap 1
 $400,000

The table below presents the fair value of our derivative financial instrument as well as its classification on the condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016 (amounts in thousands):
    Fair Value as of
Interest Rate Derivative Designated as Hedging Instrument Balance Sheet Location September 30,
2017		 December 31,
2016
Interest rate cap Other assets $14
 $314

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three and nine months ended September 30, 2017 and 2016 (amounts in thousands):
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Amount of loss recognized in cumulative other comprehensive income (loss)$(32) $23
 $(300) $(748)
Amount of loss reclassified from cumulative other comprehensive income (loss) into interest expense13
 1,094
 20
 3,318

Credit-risk-related Contingent Features

As of September 30, 2017, we did not have any derivatives in a net liability position including accrued interest but excluding any adjustment for nonperformance risk.

Note 11.7. Share-Based Compensation
Equity Commonwealth 2015 Omnibus Incentive Plan

Recipients of the Company’s restricted shares have the same voting rights as any other common shareholder. During the period of restriction, the Company’sholders of unvested restricted shareholdersshares are eligible to receive dividend payments on their shares at the same rate and on the same date as any other common shareholder.  The restricted shares are service based awards and vest over a four-year period.


Recipients of the Company’s restricted stock units, (RSUs)or RSUs, are entitled to receive dividends with respect to the common shares underlying the RSUs if and when the RSUs are earned, at which time the recipient will be entitled to receive an amount in cash equal to the aggregate amount of cash dividends that would have been paid in respect ofto the common shares underlying the recipient’s earned RSUs had such common shares been issued to the recipient on the first day of the performance period. To the extent that an award does not vest, the dividends related to unvested RSUs will be forfeited. The RSUs are market based

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


market-based awards with a service condition and recipients may earn RSUs based on the Company’s total shareholder return, (TSR)or TSR, relative to the TSRs of the companies that comprise the NAREITNareit Office Index over a three yearthree-year performance period. Following the end of the three-year performance period, the number of earned awards will be determined. The earned awards vest in two2 tranches with 50% of the earned award vesting atfollowing the end of the performance period on the date the Compensation Committee of our Board of Trustees, or the Committee, determines the level of achievement of the performance metric and the remaining 50% of the earned award vesting approximately one year after the end of the performance period,thereafter, subject to the grant recipient’s continued employment. Compensation expense for the RSUs is determined using a Monte Carlo simulation model and is recognized ratably from the grant date to the vesting date of each tranche.


LTIP Units are a class of beneficial interests in the Operating Trust that may be issued to employees, officers or trustees of the Operating Trust, the Company or their subsidiaries (LTIP Units).subsidiaries. Time-based LTIP Units have the same general characteristics as restricted shares and market-based LTIP Units have the same general characteristics as RSUs. Each LTIP Unit will convert automatically into an OP Unit on a one-for-one1-for-one basis when the LTIP Unit becomes vested and its capital account is equalized with the per-unit capital account of the OP Units. Holders of LTIP Units generally will be entitled to receive the same per-unit distributions as the other outstanding OP Units in the Operating Trust, except that market-based LTIP Units will not participate in distributions until expiration of the applicable performance period, at which time any earned market-based LTIP Units generally will become entitled to receive a catch-up distribution for the periods prior to such time.
20172021 Equity Award Activity


During the six months ended June 30, 2021, 520,858 RSUs vested, and, as a result, we issued 520,858 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations (see Note 4).
On June 20, 2017,23, 2021, in accordance with the Company’s compensation planprogram for independent Trustees, the Compensation Committee of our Board of Trustees (the Committee) awarded each of the nine6 independent Trustees $0.1 million in restricted shares or time-based LTIP Units as part of their compensation for the 2017-20182021-2022 year of service on the Board of Trustees. These awards equated to 3,1563,701 shares or time-based LTIP Units per Trustee, for a total of 25,24818,505 shares and 3,1563,701 time-based LTIP Units, valued at $31.69$27.02 per share and unit, the
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closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day. These shares and time-based LTIP Units vest one year after the date of the award.award, on June 23, 2022.
On January 24, 2017,25, 2021, the Committee approved a grantgrants in the aggregate amount of 119,288 LTIP Units (which includes time-based LTIP Units and market-based LTIP Units), 76,424122,466 restricted shares and 155,168248,646 RSUs at target (386,756(619,750 RSUs at maximum) to the Company’s officers, certain employees, and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2016. The LTIP Unit grant includes 39,364 time-based LTIP Units and 79,924 market-based LTIP Units at target (199,211 market-based LTIP Units at maximum).2020. The restricted shares and time-based LTIP Units were granted on January 24, 2017 and were valued at $31.47$28.25 per share, the closing price of our common shares on the NYSE on that day.the grant date. The assumptions and fair valuesvalue for the RSUs and market-based LTIP Units granted forduring the ninesix months ended SeptemberJune 30, 20172021 are included in the following table on a per share and unit basis.
 2021
Fair value of market-based awards granted$37.87
Expected term (years)4
Expected volatility16.99 %
Risk-free rate0.17 %
 2017
Fair value of RSUs and market-based LTIP units granted$39.81
Expected term (years)4
Expected volatility—
Expected dividend yield1.59%
Risk-free rate1.49%
20162020 Equity Award Activity


During the six months ended June 30, 2020, 387,729 RSUs vested, and, as a result, we issued 387,729 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations.
On June 15, 2016,23, 2020, in accordance with the Company’s compensation planprogram for independent Trustees, the Committee awarded each of the ninethen 9 independent Trustees $0.1 million in restricted shares or time-based LTIP Units as part of their compensation for the 2016-20172020-2021 year of service on the Board of Trustees. These awards equated to 3,4633,184 shares or time-based LTIP Units per Trustee, for a total of 31,16719,104 shares and 9,552 time-based LTIP Units, valued at $28.88$31.41 per share and unit, the closing price of our common shares on the New York Stock Exchange, or the NYSE, on that day. These shares vest one year after the date of the award.and time-based LTIP Units vested on June 23, 2021.
On January 26, 2016,27, 2020, the Committee approved a grantgrants in the aggregate amount of 136,62320,116 time-based LTIP Units, 40,841 market-based LTIP Units at target (101,796 market-based LTIP Units at maximum), 85,058 restricted shares and 277,386172,697 RSUs at target (691,385(430,447 RSUs at maximum) to the Company’s officers, certain employees, an eligible consultant and to Mr. Zell, the Chairman of our Board of Trustees, as part of their compensation for fiscal year 2015.


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2019. The restricted shares and time-based LTIP Units were valued at $32.81 per share and per unit, the closing price of our common shares on the NYSE on the grant date. The RSUs and market-based LTIP Units were valued at $40.17 per share and per unit, their fair value on the grant date.
Outstanding Equity Awards
As of SeptemberJune 30, 2017,2021, the estimated future compensation expense for all unvested restricted shares and time-based LTIP Units was $11.3$6.9 million. Compensation expense for the restricted share and time-based LTIP Unit awards is being recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The weighted average period over which the future compensation expense will be recorded for the restricted shares and time-based LTIP units is approximately 1.92.5 years.
As of SeptemberJune 30, 2017,2021, the estimated future compensation expense for all unvested RSUs and market-based LTIP Units was $17.9$14.4 million. The weighted average period over which the future compensation expense will be recorded for the RSUs and market-based LTIP Units is approximately 2.02.4 years.
During the three months ended SeptemberJune 30, 20172021 and 2016,2020, we recorded $5.6$2.9 million and $4.9$3.3 million, respectively, and during the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, we recorded $16.3$9.6 million and $13.9$6.6 million, respectively, of compensation expense, net of forfeitures, in general and administrative expense for grants to our Trusteestrustees, eligible consultants and employees related to our 2015 Incentive Plan.equity compensation plans. Compensation expense recorded during the six months ended June 30, 2021 and 2020 includes $3.4 million and $18,000, respectively, of accelerated vesting due to staffing reductions. We did 0t record any accelerated vesting due to staffing reductions during the three months ended June 30, 2021 and 2020. Forfeitures are recognized as they occur. At SeptemberJune 30, 2017, 1,628,3052021, 1,526,730 shares/units remain available for issuance under the Equity Commonwealth 2015 Omnibus Incentive Plan.Plan, as amended.


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Note 12.8.  Fair Value of Assets and Liabilities
 
The table below presentsAs of June 30, 2021, we do 0t have any assets or liabilities measured at fair value during 2017, categorized by the level of inputs used in the valuation of the assets (dollars in thousands):value.
    Fair Value at September 30, 2017 Using
    
Quoted Prices in Active Markets for
Identical Assets
 
Significant Other
Observable Inputs
 
Significant Unobservable
Inputs
Description Total (Level 1) (Level 2) (Level 3)
Recurring Fair Value Measurements:        
Interest rate cap contract $14
 $—
 $14
 $—
Marketable securities $279,626
 $279,626
 $—
 $—

Interest Rate Cap Contract

The fair value of our interest rate cap contract is determined using the net discounted cash flows of the derivative based on the market based interest rate curve (level 2 inputs) and adjusted for our credit spread and the actual and estimated credit spreads of the counterparties (level 3 inputs).  Although we have determined that the majority of the inputs used to value our derivative fall within level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivative utilize level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and the counterparties.  As of September 30, 2017, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivative.  As a result, we have determined that our derivative valuation in its entirety is classified as level 2 inputs in the fair value hierarchy.

Properties Held and Used and Properties Held for Sale

As part of our office repositioning strategy adopted by our Board of Trustees in December 2016, and pursuant to our accounting policy, in 2017, we evaluated the recoverability of the carrying values of each of the real estate assets that comprised our portfolio and determined that due to the shortening of the expected periods of ownership as a result of the office repositioning strategy and current estimates of market value less estimated costs to sell, it was necessary to reduce the net book value of a portion of the real estate assets in our portfolio to their estimated fair values. We anticipate the potential disposition of certain properties prior to the end of their remaining useful lives. As a result, in the first quarter of 2017, we recorded an impairment charge related to 25 S. Charles Street of $1.3 million in accordance with our impairment analysis procedures. We determined this impairment based on third party offer prices, which are level 2 inputs according to the fair value hierarchy established in ASC 820. We reduced the aggregate carrying value of this property from $24.6 million to its estimated fair value less estimated costs to sell of $23.3 million. This property was sold in April 2017 (see Note 3 for additional information). In

EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


the second quarter of 2017, we recorded an impairment charge related to the Five Property Portfolio held for sale as of June 30, 2017 of $18.4 million in accordance with our impairment analysis procedures. We determined this impairment based on third party offer prices, which are level 2 inputs according to the fair value hierarchy established in ASC 820. We reduced the aggregate carrying value of these properties from $99.0 million to their estimated fair value less estimated costs to sell of $80.6 million. We evaluated each of our properties and determined there were no additional valuation adjustments necessary at September 30, 2017.


Financial Instruments


In addition to the assets and liabilities described in the above table, ourOur financial instruments include our cash and cash equivalents, real estate mortgages receivable, restricted cash, marketable securities, senior unsecured debt and mortgage notes payable.equivalents.  At SeptemberJune 30, 20172021 and December 31, 2016,2020, the fair value of these additional financial instruments werewas not materially different from their carrying values, except as follows (in thousands):
 September 30, 2017 December 31, 2016
 Carrying Amount Fair Value Carrying Amount Fair Value
Senior unsecured debt and mortgage notes payable$859,317
 $878,403
 $1,151,634
 $1,167,031
values.
 
The fair values of our senior notes and mortgage notes payable are based on estimates using discounted cash flow analyses and currently prevailing interest rates adjusted by credit risk spreads (level 3 inputs).

Other financial instruments that potentially subject us to concentrations of credit risk consist principally of rents receivable; however, asreceivable. As of SeptemberJune 30, 2017,2021, no single tenant of ours is responsible for more than 8.0%10% of our total annualized rents.consolidated revenues.

Our derivative financial instruments, including interest rate swaps and cap, are entered with major financial institutions and we monitor the amount of credit exposure to any one counterparty.


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 13.9.  Earnings Per Common Share


The following table sets forth the computation of basic and diluted earnings per share (amounts in thousands except per share amounts):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Numerator for earnings per common share - basic:  
Net (loss) income$(1,940)$27,886 $(11,978)$453,393 
Net loss (income) attributable to noncontrolling interest4 (54)24 (802)
Preferred distributions(1,997)(1,997)(3,994)(3,994)
Numerator for net (loss) income per share - basic$(3,933)$25,835 $(15,948)$448,597 
Numerator for earnings per common share - diluted:
Net (loss) income$(1,940)$27,886 $(11,978)$453,393 
Net loss (income) attributable to noncontrolling interests4 (54)24 (802)
Preferred distributions(1,997)(1,997)(3,994)0 
Numerator for net (loss) income per share - diluted$(3,933)$25,835 $(15,948)$452,591 
Denominator for earnings per common share - basic and diluted:
Weighted average number of common shares outstanding - basic(1)
122,189 121,655 122,096 121,901 
RSUs(2)
0 1,524 0 1,524 
LTIP Units(3)
0 76 0 76 
Series D preferred shares; 6.50% cumulative convertible0 0 0 2,857 
Weighted average number of common shares outstanding - diluted122,189 123,255 122,096 126,358 
Net (loss) income per common share attributable to Equity Commonwealth common shareholders:
Basic$(0.03)$0.21 $(0.13)$3.68 
Diluted$(0.03)$0.21 $(0.13)$3.58 
Anti-dilutive securities(4):
Effect of Series D preferred shares; 6.50% cumulative convertible3,237 2,857 3,237 0 
Effect of RSUs(2)
466 0 657 0 
Effect of LTIP Units65 124 107 107 
Effect of OP Units(5)
215 110 193 92 

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 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Numerator for earnings per common share - basic: 
  
    
Net income$33,224
 $86,388
 $51,235
 $220,634
Net income attributable to noncontrolling interest(12) —
 (18) —
Preferred distributions(1,997) (1,997) (5,991) (15,959)
Excess fair value of consideration paid over carrying value of preferred shares—
 —
 —
 (9,609)
Numerator for net income per share - basic$31,215
 $84,391
 $45,226

$195,066
        
Numerator for earnings per common share - diluted:       
Net income$33,224
 $86,388
 $51,235
 $220,634
Preferred distributions(1,997) (1,997) (5,991) (15,959)
Excess fair value of consideration paid over carrying value of preferred shares—
 —
 —
 (9,609)
Numerator for net income per share - diluted$31,227
 $84,391
 $45,244
 $195,066
        
Denominator for earnings per common share - basic and diluted:       
Weighted average number of common shares outstanding - basic124,089
 125,533
 124,068
 125,627
RSUs983
 1,035
 1,023
 1,382
LTIP Units103
 —
 103
 —
Weighted average number of common shares outstanding - diluted(1)
125,175
 126,568
 125,194
 127,009
        
Net income per common share attributable to Equity Commonwealth common shareholders:       
Basic$0.25
 $0.67
 $0.36
 $1.55
Diluted$0.25
 $0.67
 $0.36
 $1.54
        
Anti-dilutive securities:       
Effect of Series D preferred shares; 6 1/2% cumulative convertible(2)
2,363
 2,363
 2,363
 2,363
(1) The three months ended June 30, 2021 and 2020, include 266 and 150 weighted-average, unvested, earned RSUs, respectively, and the six months ended June 30, 2021 and 2020, include 251 and 164 weighted-average, unvested, earned RSUs, respectively.

(1)As of September 30, 2017, we had granted RSUs and LTIP Units to certain employees, officers, and trustees.  The RSUs and LTIP Units contain service and market-based vesting components.  None of the RSUs or LTIP Units have vested. If the market-based vesting component of these awards was measured as of September 30, 2017, and 2016, 1,085 and 1,035 common shares would be issued, respectively.
(2)The Series D preferred shares are excluded from the diluted earnings per share calculation because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution during the periods presented.

(2) Represents weighted-average number of common shares that would have been issued if the quarter-end was the measurement date for unvested, unearned RSUs.
(3) Represents the weighted-average dilutive shares issuable from LTIP Units if the quarter-end was the measurement date for the periods shown.
(4) The Series D preferred shares are excluded from the diluted earnings per share calculation for the three and six months ended June 30, 2021 and for the three months ended June 30, 2020, because including the Series D preferred shares would also require that the preferred distributions be added back to net income, resulting in anti-dilution. The RSUs and market-based LTIP Units are excluded from the diluted earnings per share calculation for the three and six months ended June 30, 2021, because including them results in anti-dilution.
(5) Beneficial interests in the Operating Trust.

Note 14.10.  Segment Information
 
Our primary business is the ownership and operation of office properties, and we currently have one1 reportable segment.  More than 95%NaN percent of our revenues for the ninesix months ended SeptemberJune 30, 2017 are2021 were from office properties. 


EQUITY COMMONWEALTH
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Note 15.11.  Related Person Transactions
 
The following discussion includes a description of our related person transactions for the ninesix months ended SeptemberJune 30, 20172021 and 2016.2020.


Two North Riverside Plaza Joint Venture Limited Partnership: We haveentered into a lease on July 20, 2015 with Two North Riverside Plaza Joint Venture Limited Partnership, an entity associated with Mr. Zell, our Chairman, to occupy office space on the twentieth and twenty-first floors of Two North Riverside Plaza in Chicago, Illinois (20th/21st Floor Office Lease). The initial term of the lease iswas approximately five years, with one 5-year renewal option.expiring on December 31, 2020. We have completedmade improvements to the office space utilizing the $0.7 million tenant improvement allowance pursuant to the lease. In connection with the 20th/21st Floor Office Lease, we also havehad a storage lease with Two North Riverside Plaza Joint Venture Limited Partnership for storage space in the basement of Two North Riverside Plaza. We terminated the storage lease, effective August 31, 2020.

In December 2020, we entered into an amendment to the 20th/21st Floor Office Lease extending the lease term for one year, through December 31, 2021. There are 0 renewal options. The lease expires December 31, 2020; however, each party haspayment for the right to terminate on 30 days' prior written notice. extended term is approximately $0.3 million.

During the three months ended SeptemberJune 30, 20172021 and 2016,2020, we recognized expense of $0.2$0.1 million and $0.2 million, respectively, and during the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, we recognized expense of $0.6$0.2 million and $0.6$0.5 million, respectively, pursuant to the 20th/21st20th/21st Floor Office Lease and the related storage space. As of June 30, 2021 and December 31, 2020, we did not have any amounts due to Two North Riverside Plaza Joint Venture Limited Partnership pursuant to the 20th/21st Floor Office Lease.


Related/Corvex:
Note 12.  Subsequent Events

Merger Agreement

In connection with the proposed merger and following the filing of the Company’s registration statement on Form S-4, the Company was named in a lawsuit challenging the merger-related disclosures in the Form S-4 (Whitfield v. Monmouth Real Estate Investment Corporation, et. al., Case No. 1:21-cv-05875 (D. Ct. S.D.N.Y., July 8, 2021) (the “Whitfield Complaint”).

The Whitfield Complaint alleges that the Company, EQC Maple Industrial LLC (f/k/a RS18 LLC), a subsidiary of the Company, Monmouth Real Estate Investment Corporation (“Monmouth”) and the Monmouth board of directors violated federal securities laws by omitting certain allegedly material information from the Form S-4. The Whitfield Complaint seeks,
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among other things, (i) injunctive relief enjoining the consummation of the merger, (ii) rescission or rescissory damages, if the merger is consummated, and (iii) an award of the plaintiff’s costs, including attorneys’ and experts’ fees. Although the ultimate outcome of litigation cannot be predicted with certainty, the Company believes this lawsuit is without merit and intends to defend against this action vigorously. The Company may be named in additional lawsuits concerning the merger in the future.

Preferred Share Distribution

On July 31, 2014, at6, 2021, our 2014 annual meeting of shareholders, our shareholders voted to approve the reimbursement of approximately $33.5 million of verified expenses incurred by Related Fund Management, LLC and Corvex Management LP (Related/Corvex) beginning February 2013 in connection with their consent solicitations to remove our former Trustees, elect the new Board of Trustees anddeclared a dividend of $0.40625 per series D preferred share, which will be paid on August 16, 2021 to engage in related litigation. We paid approximately $16.7 million during the year ended December 31, 2014.  Approximately $8.4 million was to be reimbursed only if the average closing priceshareholders of our common shares was at least $26.00 (as adjusted for any share splits or share dividends) during the one year period after the daterecord on which the reimbursement was approved by shareholders, and up to $8.4 million was to be reimbursed only if the average closing priceJuly 30, 2021.
15
Table of our common shares was at least $26.00 (as adjusted for any share splits or share dividends) during the one year period between the first and second anniversaries of the date on which the reimbursement was approved by shareholders. The average closing price of our common shares was at least $26.00 during both the first and second one year periods after the date on which the reimbursement was approved by shareholders, and as a result, in August 2016 and 2015 we paid an $8.2 million final payment and $8.4 million, respectively, to Related/Corvex.Contents


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
The following discussion should be read in conjunction with our consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q, and in our Annual Report.


FORWARD-LOOKING STATEMENTS
 
Some of the statements contained in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the federal securities laws.laws including, but not limited to, statements pertaining to our capital resources, portfolio performance, results of operations or anticipated market conditions, including our statements regarding the overall impact of COVID-19 on the foregoing to the extent we make any such statements. Any forward-looking statements contained in this Quarterly Report on Form 10-Q are intended to be made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in market conditions are forward-looking statements. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
 
The forward-looking statements contained in this Quarterly Report on Form 10-Q reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause our future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in our Annual Report and in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-K.10-Q.


OVERVIEW
 
We are an internally managed and self-advised REIT primarily engaged in the ownership and operation of office buildings throughoutproperties in the United States. We were formed in 1986 under Maryland law. On November 10, 2016, we converted to what is commonly referred toThe Company operates as an umbrella partnership real estate investment trust, or UPREIT, structure. Substantiallyconducting substantially all of its activities through the Company’s assets and liabilities are now held in an Operating Trust through whichTrust. As of June 30, 2021, the Company conducts its business.beneficially owned 99.8% of the outstanding OP Units.


At SeptemberJune 30, 2017,2021, our portfolio included 20consisted of four properties (44(eight buildings) and one land parcel,, with a combined 11.01.5 million square feet for a total investment of $2.1 billion at cost and a depreciated book value of $1.5 billion.feet. As of SeptemberJune 30, 2017,2021, we had $2.5$3.0 billion of cash and cash equivalentsequivalents.

We use leasing and marketable securities.occupancy metrics to evaluate the performance of our properties. We believe these metrics provide useful information to investors because they reflect the leasing activity and vacant space at the properties and may facilitate comparisons of our leasing and occupancy metrics with other REITs and real estate companies.


As of SeptemberJune 30, 2017,2021, our overall portfolio was 88.3%83.1% leased. During the three months ended SeptemberJune 30, 2017,2021, we entered into leases for 273,00029,000 square feet, including lease renewals for 81,00021,000 square feet and new leases for 192,0008,000 square feet. Renewal leases entered into during the three months ended SeptemberJune 30, 20172021 had weighted average cash and GAAP rental rates that were approximately 3.7%13.2% higher and 10.9%20.3% higher, respectively, as compared to prior rental rates for the same space, and newspace. New leases entered into during the three months ended SeptemberJune 30, 2017 had2021 were excluded from the weighted average cash and GAAP rental rates thatrate calculations because the suites were approximately 1.5% higher and 6.4% higher, respectively,vacant longer than prior rental rates for the same space.two years. The change in GAAP rents is different than the change in cash rents due to differences in the amount of rent abatements, the magnitude and timing of contractual rent increases over the lease term, and the yearslength of term for the newly executed leases compared to the prior leases.

During the year ended December 31, 2016, we sold 30 properties (62 buildings) with a combined 8.0 million square feet for an aggregate gross sales price of $1.3 billion, excluding closing costs. During the nine months ended September 30, 2017, we sold 13 properties (20 buildings) and one land parcel with a combined 5.1 million square feet for an aggregate gross sales price of $755.7 million, excluding closing costs. We have generated significant proceeds from our dispositions to date and have cash Percent change in GAAP and cash equivalents and marketable securitiesrents is a comparison of $2.5 billion as of September 30, 2017. For more information regarding these transactions, see Note 3current rent, including estimated tenant expense reimbursements, if any, to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report. In addition, as our real estate investments have decreased, our income from operations has also declined.


In connection with our office portfolio, in December 2016, our Board of Trustees adopted an office repositioning strategy to own and acquire at a discount to replacement cost high-quality, multi-tenant office assets in markets and sub-markets with favorable long-term supply and demand fundamentals. Our efforts within our office portfolio will primarily be focused on larger buildings in central business districts and major urban areas that offer an attractive quality of life,rent, including opportunities for tenants to live and play in close proximity to where they work, with a preference for markets that have above average limitations on new supply.

While executing this strategy, depending on market conditions, we may sell additional properties and are seeking to acquire attractive properties in markets meeting the criteria above. With the progress we have had executing dispositions, and the strength and liquidity of our balance sheet, we are in a position to increasingly shift our focus to capital allocation. We seek to use this capital to purchase new properties, repay debt, buy back common shares or make other investments or distributions that further our long-term strategic goals.

As we continue to reposition our portfolio, we expect our efforts will be balanced among leasing assets to create value, selling assets when we are able to achieve attractive pricing, and evaluating a wide range of opportunities to deploy capital. Our goal is to utilize the proceeds from asset dispositions to make new investments that will create shareholder value, but we may be unable to identify suitable opportunities. If we do not redeploy capital, we will strive to achieve an unwinding of the Company in a manner that optimizes shareholder value.

As part of the office repositioning strategy noted above, and pursuant to our accounting policy, in 2017, we evaluated the recoverability of the carrying values of each of the real estate assets that comprised our portfolio and determined that due to the shortening of the expected periods of ownership as a result of our office repositioning strategy and current estimates of market value, it was necessary to reduce the net book value of a portion of the real estate assets in our portfolio to their estimated fair values less estimated costs to sell. As a result, we recorded an impairment charge of $19.7 millionactual/projected tenant expense reimbursements, if any, last received for the nine months ended September 30, 2017 in accordance with our impairment analysis procedures.same space on a GAAP and cash basis, respectively. Cash rent during the reporting period is calculated before deducting any initial period free rent.


We have engaged CBRE, Inc. (CBRE), or CBRE, to provide property management services for our properties.services. We pay CBRE a property-by-property management fee and may engage CBRE from time-to-time to perform project management services, such as coordinating and overseeing the completion of tenant improvements and other capital projects at the properties. We reimburse
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CBRE for certain expenses incurred in the performance of its duties, including certain personnel and equipment costs.

For the three months ended SeptemberJune 30, 20172021 and 2016,2020, we incurred expenses of $4.0$0.7 million and $6.3$0.7 million, respectively, and for the ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, we incurred expenses of $14.1$1.5 million and $20.6$1.7 million, respectively, related to our property management agreement with CBRE, for property management fees, typically calculated as a portionpercentage of the properties'properties’ revenues, and salary and benefits reimbursements for property personnel, such as property managers, engineers and maintenance staff.  As of SeptemberJune 30, 20172021 and December 31, 2016,2020, we had amounts payable pursuant to these services of $2.1$0.3 million and $2.7$0.3 million, respectively.


With the progress we made executing dispositions along with the strength and liquidity of our balance sheet, we shifted our primary focus to capital allocation, including the pursuit of acquisitions and/or investments in high-quality assets or businesses in a range of property types in favorable markets that offer a compelling risk-reward profile.

After evaluating a variety of opportunities to invest our capital, on May 4, 2021, we entered into a definitive agreement and plan of merger, or the Merger Agreement, with Monmouth Real Estate Investment Corporation, or Monmouth, pursuant to which we agreed to acquire Monmouth in an all-stock transaction. The closing of this transaction, which is subject to shareholder approval and other customary closing conditions, would represent a strategic transition for us into the industrial sector, and we plan to pursue opportunities to dispose of our remaining office properties over time following such closing.

As of June 30, 2021, we recorded transaction costs of $4.2 million, included in Other assets, net, in connection with the merger. If the transaction closes, we estimate recording a total of approximately $77 million of transaction costs on our consolidated balance sheet. If the transaction does not close, any transaction costs will be reclassified to expenses on our consolidated statement of operations.

Our business has been and may continue to be impacted by the evolving COVID-19 outbreak. Since first surfacing, the outbreak has spread throughout the world and has significantly impacted the United States. The pandemic has led to severe business disruptions, including a dramatic decline in economic activity generally. The duration of the business disruption continues to be unknown at this time. The vast majority of our employees and our tenants' employees are currently working at least in part remotely and may be subject to government-imposed restrictions. Due to the uncertainty created by the pandemic, the Company has experienced a significant reduction in leasing interest and activity when compared to pre-pandemic levels. For the three months ended June 30, 2021, in our comparable property portfolio, we collected 97% of contractual rents. For July, to date, we have collected 96% of contractual rents. We currently are not able to estimate the full impact of the COVID-19 outbreak on our business.

Property Operations


Leased occupancy data for 20172021 and 20162020 are as follows (square feet in thousands):
All PropertiesComparable Properties(1)
As of June 30,As of June 30,
2021202020212020
Total properties4 4 4 4 
Total square feet1,507 1,507 1,507 1,507 
Percent leased(2)
83.1 %90.1 %83.1 %90.1 %

(1)Based on properties owned continuously from January 1, 2020 through June 30, 2021, and excludes properties sold.
(2)Percent leased is the percent of space subject to signed leases. Percent leased is disclosed to quantify the ratio of leased square feet to rentable square feet and we believe provides useful information as to the proportion of rentable square feet subject to a lease.
 
 All Properties(1) Comparable Properties(2)
 As of September 30, As of September 30,
 2017 2016 2017 2016
Total properties20
 37
 20
 20
Total square feet11,031
 16,710
 11,031
 10,931
Percent leased(3)
88.3% 91.2% 88.3% 89.6%

(1)Excludes properties sold in the period. 
(2)Based on properties owned continuously from January 1, 2016 through September 30, 2017, and excludes properties sold during the period.
(3)Percent leased includes (i) space being fitted out for occupancy pursuant to existing leases and (ii) space which is leased but is not occupied or is being offered for sublease by tenants.

The weighted average lease term based on square feet for leases entered into during the three months ended SeptemberJune 30, 20172021 was 7.56.5 years.  Commitments made for leasing expenditures and concessions, such as tenant improvements and leasing commissions, for the leases entered into during the three months ended SeptemberJune 30, 20172021 totaled $11.0$1.8 million, or $40.37$60.47 per square foot on average (approximately $5.35$9.33 per square foot per year of the lease term).
 
As of SeptemberJune 30, 2017,2021, approximately 1.3%4.1% of our leased square feet and 1.1%4.3% of our annualized rental revenue, determined as set forth below, are included in leases scheduled to expire through December 31, 2017.  Renewed2021.  Renewal and new leases and rental rates at which available space may be relet in the future will depend on prevailing market conditions at the times these leases are negotiated.  We believe that the in-place cash rents for leases expiring for the remainder of 20172021, that have not been
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backfilled, are belowslightly above market. Lease expirations by year, as of SeptemberJune 30, 2017,2021, are as follows (square feet and dollars in thousands):
YearNumber
of Tenants Expiring(1)		Leased Square
 Feet Expiring(2)		% of Leased
Square Feet Expiring(2)		Cumulative
% of Leased Square
Feet Expiring(2)		Annualized Rental
Revenue Expiring(3)		% of
Annualized Rental
Revenue Expiring		Cumulative
% of
Annualized Rental Revenue Expiring
20216 51 4.1 %4.1 %$2,416 4.3 %4.3 %
202212 98 7.8 %11.9 %4,856 8.6 %12.9 %
202318 195 15.5 %27.4 %8,983 15.9 %28.8 %
202416 213 17.0 %44.4 %9,711 17.2 %46.0 %
202511 145 11.6 %56.0 %5,741 10.2 %56.2 %
20269 86 6.9 %62.9 %4,221 7.5 %63.7 %
202711 122 9.7 %72.6 %5,267 9.3 %73.0 %
20284 63 5.0 %77.6 %3,194 5.7 %78.7 %
20297 144 11.5 %89.1 %6,755 11.9 %90.6 %
20304 66 5.3 %94.4 %2,513 4.4 %95.0 %
Thereafter5 70 5.6 %100.0 %2,823 5.0 %100.0 %
103 1,253 100.0 %$56,480 100.0 %
Weighted average remaining lease term (in years):4.6 4.6 

Year 
Number
of Tenants Expiring
 
Leased Square
 Feet Expiring(1)
 
% of Leased
Square Feet Expiring(1)
 
Cumulative
% of Leased Square
Feet Expiring(1)
 
Annualized Rental
Revenue Expiring(2)
 
% of
Annualized Rental
Revenue Expiring
 
Cumulative
% of
Annualized Rental Revenue Expiring
2017 17
 128
 1.3% 1.3% $2,949
 1.1% 1.1%
2018 73
 542
 5.6% 6.9% 16,195
 6.1% 7.2%
2019 82
 1,116
 11.5% 18.4% 33,693
 12.6% 19.8%
2020 72
 1,296
 13.3% 31.7% 40,522
 15.2% 35.0%
2021 58
 836
 8.6% 40.3% 25,405
 9.4% 44.4%
2022 40
 637
 6.5% 46.8% 20,732
 7.8% 52.2%
2023 41
 598
 6.1% 52.9% 19,479
 7.3% 59.5%
2024 10
 145
 1.5% 54.4% 4,697
 1.8% 61.3%
2025 16
 345
 3.5% 57.9% 10,868
 4.1% 65.4%
2026 11
 579
 6.0% 63.9% 18,232
 6.8% 72.2%
Thereafter 61
 3,514
 36.1% 100.0% 74,095
 27.8% 100.0%
  481
 9,736
 100.0%   $266,867
 100.0%  
               
Weighted average remaining lease term (in years):   6.9
     6.1
    
(1)Tenants with leases expiring in multiple years are counted in each year they expire.

(2)Leased Square Feet as of June 30, 2021 includes space subject to leases that have commenced for revenue recognition purposes in accordance with GAAP, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. The Leased Square Feet Expiring corresponds to the latest-expiring signed lease for a given suite. Thus, backfilled suites expire in the year stipulated by the new lease. 
(1)Square footage is pursuant to existing leases as of September 30, 2017 and includes (i) space being fitted out for occupancy and (ii) space which is leased but is not occupied or is being offered for sublease. 
(2)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of September 30, 2017, plus estimated recurring expense reimbursements; includes triple net lease rents and excludes lease value amortization, straight line rent adjustments, abated (free) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.  Annualized rental revenue is a forward-looking non-GAAP measure.  Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
(3)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight-line rent adjustments, abated (free) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.  Annualized rental revenue is a forward-looking non-GAAP measure.  Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
 

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AThe principal source of funds for our operations is rents from tenants at our properties.  Rents are generally received from our tenants monthly in advance, except from our government tenants, who usually pay rents monthly in arrears.advance.  As of SeptemberJune 30, 2017,2021, tenants representing 1.5%2.5% or more of our total annualized rental revenue were as follows (square feet in thousands):
TenantSquare Feet(1)% of Total Leased Square Feet(1)% of Annualized Rental Revenue(2)Weighted Average Remaining Lease Term
1.Equinor Energy Services, Inc.80 6.4 %6.0 %2.5 
2.KPMG, LLP71 5.7 %5.3 %7.9 
3.Crowdstrike, Inc.36 2.9 %3.8 %3.3 
4.CBRE, Inc.40 3.2 %3.6 %6.8 
5.
Salesforce.com, Inc.(3)
65 5.2 %3.5 %4.4 
6.
Kazoo, Inc.(4)
26 2.1 %2.8 %2.0 
7.Alden Torch Financial, LLC34 2.7 %2.7 %5.7 
8.The Boon Group, Inc.36 2.9 %2.6 %4.7 
9.Capitol Services, Inc.26 2.1 %2.5 %1.1 
Total414 33.2 %32.8 %4.5 

Tenant Square Feet(1) % of Total Square Feet(1) % of Annualized Rental Revenue(2) Weighted Average Remaining Lease Term
1.Expedia, Inc. 427
 4.4% 7.7% 2.3
2.
Groupon, Inc. (3)
 376
 3.9% 4.5% 8.4
3.PNC Financial Services Group 363
 3.7% 4.1% 9.3
4.Flextronics International Ltd. 1,051
 10.8% 3.9% 12.3
5.Ballard Spahr LLP 219
 2.2% 3.0% 12.4
6.RE/MAX Holdings, Inc. 248
 2.5% 2.8% 10.7
7.Georgetown University 240
 2.5% 2.5% 2.1
8.Echo Global Logistics, Inc. 223
 2.3% 2.2% 10.1
9.West Corporation 336
 3.5% 2.2% 11.5
10.Wm. Wrigley Jr. Company 150
 1.5% 2.1% 4.4
11.ProQuest, LLC 131
 1.3% 1.6% 3.7
12.Level 3 Communications, LLC 95
 1.0% 1.6% 8.4
13.Jump Operations, LLC 113
 1.2% 1.5% 3.3
 Total 3,972
 40.8% 39.7% 8.7
(1)Total Leased Square Feet as of June 30, 2021 includes space subject to leases that have commenced, space being fitted out for occupancy pursuant to existing leases, and space which is leased but is not occupied or is being offered for sublease by tenants. 

(1)Square footage is pursuant to existing leases as of September 30, 2017, and includes (i) space being fitted out for occupancy and (ii) space which is leased but is not occupied or is being offered for sublease. 
(2)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of September 30, 2017, plus estimated recurring expense reimbursements; includes triple net lease rents and excludes lease value amortization, straight line rent adjustments, abated (free) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.  Annualized rental revenue is a forward-looking non-GAAP measure.  Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
(3)Groupon, Inc. statistics include 207,536 square feet that are sublet from Bankers Life and Casualty Company.
(2)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2021, plus estimated recurring expense reimbursements; excludes lease value amortization, straight-line rent adjustments, abated (free) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues.  Annualized rental revenue is a forward-looking non-GAAP measure.  Annualized rental revenue cannot be reconciled to a comparable GAAP measure without unreasonable efforts, primarily due to the fact that it is calculated from the billings of tenants in the most recent month at the most recent rental rates during the quarter reported, whereas historical GAAP measures include billings from a potentially different group of tenants over multiple months at potentially different rental rates.
Financing Activities

In April 2017, we repaid at par $41.3 million(3)Our lease with Salesforce.com, Inc. has partially commenced. Approximately 44,000 square feet commenced as of mortgage debt at Parkshore Plaza and recognized a loss on early extinguishment of debt of $0.1 million from prepayment feesDecember 31, 2020, and the write offremaining 21,000 square feet are expected to commence in the fourth quarter of unamortized deferred financing fees, net2021.
(4)During the second quarter of 2021, Kazoo, Inc. signed a five-year extension for approximately 13,000 square feet. The extension is expected to commence in the write offfourth quarter of an unamortized premium.

On July 15, 2017, we redeemed at par $250.0 million of our 6.65% senior unsecured notes due 2018 and recognized a loss on early extinguishment of debt of $0.2 million from the write off of unamortized deferred financing fees and the write off of an unamortized discount.2021.
Regulation FD Disclosures
We intend to use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the companyCompany to monitor these distribution channels for material disclosures. Our website address is included in this Quarterly Report on Form 10-Q as a textual reference only and the information on the website is not incorporated by reference into this Quarterly Report on Form 10-Q.Report.

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RESULTS OF OPERATIONS


Three Months Ended SeptemberJune 30, 2017,2021, Compared to Three Months Ended SeptemberJune 30, 2016
2020
Comparable Properties Results(1)Other Properties Results(2)Consolidated Results
Three Months Ended June 30,
20212020$ Change% Change2021202020212020$ Change% Change
(dollars in thousands)
Rental revenue$14,114 $14,044 $70 0.5 %$— $1,204 $14,114 $15,248 $(1,134)(7.4)%
Other revenue761 933 (172)(18.4)%— 84 761 1,017 (256)(25.2)%
Operating expenses(6,566)(6,503)(63)1.0 %(22)(174)(6,588)(6,677)89 (1.3)%
Net operating income(3)$8,309 $8,474 $(165)(1.9)%$(22)$1,114 8,287 9,588 (1,301)(13.6)%
Other expenses:
Depreciation and amortization4,432 4,398 34 0.8 %
General and administrative7,390 8,302 (912)(11.0)%
Total other expenses11,822 12,700 (878)(6.9)%
Interest and other income, net1,626 4,443 (2,817)(63.4)%
Interest expense— (302)302 (100.0)%
Gain on sale of properties, net— 26,916 (26,916)(100.0)%
(Loss) income before income taxes(1,909)27,945 (29,854)(106.8)%
Income tax expense(31)(59)28 (47.5)%
Net (loss) income(1,940)27,886 (29,826)(107.0)%
Net loss (income) attributable to noncontrolling interest4 (54)58 (107.4)%
Net (loss) income attributable to Equity Commonwealth(1,936)27,832 (29,768)(107.0)%
Preferred distributions(1,997)(1,997)— — %
Net (loss) income attributable to Equity Commonwealth common shareholders$(3,933)$25,835 $(29,768)(115.2)%
 Comparable Properties Results(1) Other Properties Results(2) Consolidated Results
 Three Months Ended September 30,
 2017 2016 $ Change % Change 2017 2016 2017 2016 $ Change % Change
 (dollars in thousands)
Rental income$57,092
 $55,051
 $2,041
 3.7% $3,999
 $37,671
 $61,091
 $92,722
 $(31,631) (34.1)%
Tenant reimbursements and other income16,346
 16,219
 127
 0.8% 361
 5,691
 16,707
 21,910
 (5,203) (23.7)%
Operating expenses(30,855) (30,589) (266) 0.9% (1,525) (18,724) (32,380) (49,313) 16,933
 (34.3)%
Net operating income(3)$42,583
 $40,681
 $1,902
 4.7% $2,835
 $24,638
 45,418
 65,319
 (19,901) (30.5)%
Other expenses:                   
Depreciation and amortization           21,133
 29,184
 (8,051) (27.6)%
General and administrative            11,689
 13,277
 (1,588) (12.0)%
Total other expenses           32,822
 42,461
 (9,639) (22.7)%
Operating income            12,596
 22,858
 (10,262) (44.9)%
Interest and other income            7,596
 3,013
 4,583
 152.1 %
Interest expense            (11,510) (21,427) 9,917
 (46.3)%
Loss on early extinguishment of debt         (203) —
 (203) (100.0)%
Gain on sale of properties, net           25,080
 82,169
 (57,089) (69.5)%
Income before income taxes         33,559
 86,613
 (53,054) (61.3)%
Income tax expense           (335) (225) (110) 48.9 %
Net income            33,224
 86,388
 (53,164) (61.5)%
Net income attributable to noncontrolling interest       (12) —
 (12) 100.0 %
Net income attributable to Equity Commonwealth       33,212
 86,388
 (53,176) (61.6)%
Preferred distributions            (1,997) (1,997) —
 — %
Net income attributable to Equity Commonwealth common shareholders         $31,215
 $84,391
 $(53,176) (63.0)%


(1)(1)Comparable properties consist of four properties consist of 20 properties (44 buildings) we owned continuously from July 1, 2016 to September 30, 2017.
(2)Other properties consist of properties sold.

(3)We define net operating income, or NOI, as shown above, as income from our real estate including lease termination fees received from tenants less our property operating expenses.  NOI excludes amortization of capitalized tenant improvement costs and leasing commissions.  We consider NOI to be an appropriate supplemental measure to net income because it may help both investors and management to understand the operations of our properties.  We use NOI internally to evaluate property level performance, and we believe that NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs.  NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income, net income attributable to Equity Commonwealth common shareholders, operating income or cash flow from operating activities, determined in accordance with GAAP, or as an indicator of our financial performance or liquidity, nor is this measure necessarily indicative of sufficient cash flow to fund all of our needs.  This measure should be considered in conjunction with net income, net income attributable to Equity Commonwealth common shareholders, operating income and cash flow from operating activities as presented in our consolidated statements of operations, consolidated statements of comprehensive income and consolidated statements of cash flows.  Other REITs and real estate companies may calculate NOI differently than we do.

We refer to the 20 properties (44 buildings) we owned continuously from JulyApril 1, 20162020 to SeptemberJune 30, 2017,2021.
(2)Other properties consist of properties sold.

(3)We define net operating income, or NOI, as income from our real estate including lease termination fees received from tenants less our property operating expenses.  NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses.  For a discussion of why we consider NOI to be an appropriate supplemental measure to net income as well as a reconciliation of NOI to net income, the most directly comparable properties.  We refer to the sold properties as other properties.  Our condensedfinancial measure under GAAP reported on our consolidated financial statements, of operations for the three months ended September 30, 2017please see "- Liquidity and 2016 include the operating results of 20 properties for the entire periods, as we owned these properties as of July 1, 2016. Capital Resources - Property Net Operating Income (NOI)."



Rental income.revenue.Rental incomerevenue decreased $31.6$1.1 million, or 34.1%7.4%, in the 20172021 period, compared to the 20162020 period, primarily due to the loss of revenue from properties sold in 2020. Rental revenue at the comparable properties increased $0.1 million, or 0.5%, in the 2021 period, compared to the 2020 period, primarily due to a $0.2 million increase in escalations, a $0.2 million increase in base rent and a $0.1 million increase in real estate tax recoveries, partially offset by a $0.4 million increase in uncollectible receivables.

Other revenue. Other revenue, which primarily includes parking revenue, decreased $0.3 million, or 25.2%, in the 2021 period, compared to the 2020 period, primarily due to the decrease at the comparable properties. Other revenue decreased $0.2 million, or 18.4%, at the comparable properties in the 2021 period, compared to the 2020 period, primarily due to decreased parking revenue during the 2021 period as a result of the COVID-19 outbreak.

Operating expenses. Operating expenses decreased $0.1 million, or 1.3%, in the 2021 period, compared to the 2020 period, primarily due to the properties sold in 2017 and 2016. Rental income2020. Operating expenses increased $2.0$0.1 million, or 3.7%1.0%, at the comparable properties due to an increase in lease termination revenue and an increase in rents resulting from new leasing activity, partially offset by several large tenant lease expirations.

Rental income includes increases for straight line rent adjustments totaling $3.6 million in the 2017 period and $3.0 million in the 2016 period, and net reductions for amortization of acquired real estate leases and assumed real estate lease obligations totaling $0.4 million in the 2017 period and $0.9 million in the 2016 period. Rental income also includes the recognition of lease termination fees totaling $1.5 million in the 2017 period and $1.8 million in the 2016 period.
Tenant reimbursements and other income. Tenant reimbursements and other income decreased $5.2 million, or 23.7%, in the 20172021 period, compared to the 20162020 period, primarily due to the properties sold in 2017 and 2016. Tenant reimbursements and other income increaseda $0.1 million or 0.8%, at the comparable properties primarily due to an increase in reimbursements related to new leasing activity, partially offset by a decrease in utility expense.
Operating expenses. Operating expenses decreased $16.9 million, or 34.3%, in the 2017 period, compared to the 2016 period, primarily due to the properties sold in 2017 and 2016. Operating expenses increased $0.3 million, or 0.9%, at the comparable properties primarily due to an increase in real estate tax expense and an increase in maintenance and repairs, partially offset by a decrease in utility expense due to the milder weather in 2017 and a decrease in tenant usage.expense.


Depreciation and amortization. Depreciation and amortization decreased $8.1 million, or 27.6%, in the 2017 period, compared to the 2016 period primarily due to properties sold in 2017 and 2016.

General and administrative. General and administrative expenses decreased $1.6$0.9 million, or 12.0%11.0%, in the 20172021 period, compared to the 20162020 period, primarily due to $1.7a $0.4 million of compensation expenses in the 2016 period relating to a staffing reduction, and decreases in payroll and legal expenses, partially offset by a $0.9 million increasedecrease in share-based compensation expense.expenses, a $0.2 million decrease in corporate rent expense and a $0.2 million decrease in legal expenses.

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Operating income. Operating
Interest and other income, net. Interest and other income, net decreased $10.3$2.8 million, or 44.9%,63.4% in the 20172021 period, compared to the 20162020 period, primarily due to the properties sold in 2017less interest received from lower average interest rates and 2016.lower average balances.


Interest and other income.expense. Interest and other income increased $4.6expense decreased $0.3 million, or 100.0%, in the 20172021 period, compared to the 20162020 period, primarily due to additional interest received on higher invested balances and higher average interest rates in 2017.

Interest expense. Interest expense decreased $9.9 million, or 46.3%, in the 2017 period, compared to the 2016 period, primarily due to the repayment at par in July 2020 of the $167.8 million mortgage debt at 1735 Market Street in November 2016, the prepayment of $250.0 million of our 6.25% senior unsecured notes in December 2016, the repayment of the $41.3 million mortgage debt at Parkshore Plaza in April 2017, the prepayment of $250.0 million of our 6.65% senior unsecured notes in July 2017, partially offset by an increase in interest expense related to our term loans as a result of an increase in interest rates.206 East 9th Street.


Loss on early extinguishment of debt. The loss on early extinguishment of debt of $0.2 million in the 2017 period reflects the write off of unamortized deferred financing fees and the write off of an unamortized discount related to our repayment at par of $250.0 million of our 6.65% senior unsecured notes due 2018.

Gain on sale of properties, net. We did not have any Gain on sale of properties, net decreased $57.1 million in the 2017 period, as compared to the 20162021 period. Gain on sale of properties, net in the 20172020 period primarily relatesrelated to the following (dollars in thousands):

AssetGain on Sale, Net
Georgetown-Green and Harris Buildings$24,916 
Research Park(1)
2,000 
$26,916 

(1) There was consideration of $2.0 million being held in escrow related to the sale of this property in 2019. In June 2020, these proceeds were released to the Company, and we recorded an additional $2.0 million gain on the sale for the three months ended June 30, 2020.

Income tax expense. Income tax expense decreased $28,000, or 47.5%, in the 2021 period, compared to the 2020 period, primarily due to a decrease in state and local taxes as a result of the sale of properties in 2020.

Net loss (income) attributable to noncontrolling interest. In 2017 through 2020, we granted LTIP Units to certain of our trustees and employees. Net loss (income) attributable to noncontrolling interest of $4,000 in the 2021 period and $(54,000) in the 2020 period relates to the allocation to the LTIP/OP Unit holders.
21
Asset Gain (Loss) on Sale
1500 Market Street $38,585
6600 North Military Trail (14,175)
Five Property Portfolio 702
  $25,112
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RESULTS OF OPERATIONS

Six Months Ended June 30, 2021, Compared to Six Months Ended June 30, 2020
Comparable Properties Results(1)Other Properties Results(2)Consolidated Results
Six Months Ended June 30,
20212020$ Change% Change2021202020212020$ Change% Change
(dollars in thousands)
Rental revenue$28,140 $28,130 $10 — %$143 $4,261 $28,283 $32,391 $(4,108)(12.7)%
Other revenue1,443 2,466 (1,023)(41.5)%— 228 1,443 2,694 (1,251)(46.4)%
Operating expenses(13,168)(13,371)203 (1.5)%(41)(2,067)(13,209)(15,438)2,229 (14.4)%
Net operating income(3)$16,415 $17,225 $(810)(4.7)%$102 $2,422 16,517 19,647 (3,130)(15.9)%
Other expenses:
Depreciation and amortization8,783 9,512 (729)(7.7)%
General and administrative23,119 18,906 4,213 22.3 %
Total other expenses31,902 28,418 3,484 12.3 %
Interest and other income, net3,469 16,338 (12,869)(78.8)%
Interest expense— (611)611 (100.0)%
Gain on sale of properties, net— 446,536 (446,536)(100.0)%
(Loss) income before income taxes(11,916)453,492 (465,408)(102.6)%
Income tax expense(62)(99)37 (37.4)%
Net (loss) income(11,978)453,393 (465,371)(102.6)%
Net loss (income) attributable to noncontrolling interests24 (802)826 (103.0)%
Net (loss) income attributable to Equity Commonwealth(11,954)452,591 (464,545)(102.6)%
Preferred distributions(3,994)(3,994)— — %
Net (loss) income attributable to Equity Commonwealth common shareholders$(15,948)$448,597 $(464,545)(103.6)%

(1)Comparable properties consist of four properties we owned continuously from January 1, 2020 to June 30, 2021.
(2)Other properties consist of properties sold.

(3)We define net operating income, or NOI, as income from our real estate including lease termination fees received from tenants less our property operating expenses.  NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses.  For a discussion of why we consider NOI to be an appropriate supplemental measure to net income as well as a reconciliation of NOI to net income, the most directly comparable financial measure under GAAP reported on our consolidated financial statements, please see the section entitled “- Liquidity and Capital Resources - Property Net Operating Income (NOI).”

Rental revenue.Rental revenue decreased $4.1 million, or 12.7%, in the 2021 period, compared to the 2020 period, primarily due to the loss of revenue from properties sold in 2020. Rental revenue at the comparable properties slightly increased in the 2021 period, compared to the 2020 period, primarily due to a $0.4 million increase in base rent, a $0.2 million increase in real estate tax recoveries and a $0.2 million increase in escalations, partially offset by a $0.7 million increase in uncollectible receivables.

Other revenue. Other revenue, which primarily includes parking revenue, decreased $1.3 million, or 46.4%, in the 2021 period, compared to the 2020 period, primarily due to the decrease at the comparable properties. Other revenue decreased $1.0 million, or 41.5%, at the comparable properties in the 2021 period, compared to the 2020 period, primarily due to decreased parking revenue during the 2021 period as a result of the COVID-19 outbreak.

Operating expenses. Operating expenses decreased $2.2 million, or 14.4%, in the 2021 period, compared to the 2020 period, primarily due to the properties sold in 2020. Operating expenses decreased $0.2 million, or 1.5%, at the comparable properties in the 2021 period, compared to the 2020 period, primarily due to a $0.1 million decrease in utilities expense and a $0.1 million decrease in parking expense.

Depreciation and amortization. Depreciation and amortization decreased $0.7 million, or 7.7%, in the 2021 period, compared to the 2020 period, primarily due to the properties sold in 2020 and a decrease in depreciation and amortization of the corporate assets.
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General and administrative. General and administrative expenses increased $4.2 million, or 22.3%, in the 2021 period, compared to the 2020 period, primarily due to a $7.1 million increase in compensation expenses primarily related to severance for our former Executive Vice President, Chief Financial Officer and Treasurer, partially offset by a $1.7 million decrease in state franchise taxes largely related to the 2020 property sales a $0.4 million decrease in bonus expense, a $0.4 million decrease in share-based compensation expense and a $0.3 million decrease in corporate rent expense.

Interest and other income, net. Interest and other income, net decreased $12.9 million, or 78.8%, in the 2021 period, compared to the 2020 period, primarily due to less interest received from lower average interest rates and lower average balances.

Interest expense. Interest expense decreased $0.6 million, or 100.0%, in the 2021 period, compared to the 2020 period, due to the repayment at par in July 2020 of mortgage debt at 206 East 9th Street.

Gain on sale of properties, net. We did not have any Gain on sale of properties, net in the 2016 period primarily relates to the following (dollars in thousands):
Asset Gain (Loss) on Sale
111 River Street $78,240
Sky Park Centre 4,745
Raintree Industrial Park (653)
8701 N Mopac 8,394
South Carolina Industrial Portfolio 7,244
Midwest Portfolio (15,808)
  $82,162

Income tax expense. Income tax expense increased $0.1 million, or 48.9%, in the 2017 period, compared to the 2016 period, primarily due to the sale of properties in certain states.

Net income attributable to noncontrolling interest. In 2017, we granted LTIP Units. The net income attributable to noncontrolling interest of $12,000 in the 2017 period relates to the allocation of net income to the LTIP Unit holders.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 2017, Compared to Nine Months Ended September 30, 2016
 Comparable Properties Results(1) Other Properties Results(2) Consolidated Results
 Nine Months Ended September 30,
 2017 2016 $ Change % Change 2017 2016 2017 2016 $ Change % Change
 (dollars in thousands)
Rental income$168,680
 $164,932
 $3,748
 2.3% $46,968
 $159,413
 $215,648
 $324,345
 $(108,697) (33.5)%
Tenant reimbursements and other income50,040
 47,870
 2,170
 4.5% 3,260
 24,919
 53,300
 72,789
 (19,489) (26.8)%
Operating expenses(91,810) (86,061) (5,749) 6.7% (18,941) (71,903) (110,751) (157,964) 47,213
 (29.9)%
Net operating income(3)$126,910
 $126,741
 $169
 0.1% $31,287
 $112,429
 158,197
 239,170
 (80,973) (33.9)%
Other expenses:                   
Depreciation and amortization           71,970
 102,766
 (30,796) (30.0)%
General and administrative           35,727
 38,766
 (3,039) (7.8)%
Loss on asset impairment         19,714
 43,736
 (24,022) (54.9)%
Total other expenses           127,411
 185,268
 (57,857) (31.2)%
Operating income            30,786
 53,902
 (23,116) (42.9)%
Interest and other income            17,987
 7,184
 10,803
 150.4 %
Interest expense            (41,387) (65,074) 23,687
 (36.4)%
Loss on early extinguishment of debt         (266) (118) (148) 125.4 %
Foreign currency exchange loss           —
 (5) 5
 (100.0)%
Gain on sale of properties, net           44,670
 225,210
 (180,540) (80.2)%
Income before income taxes         51,790
 221,099
 (169,309) (76.6)%
Income tax expense           (555) (465) (90) 19.4 %
Net income            51,235
 220,634
 (169,399) (76.8)%
Net income attributable to noncontrolling interests       (18) —
 (18) (100.0)%
Net income attributable to Equity Commonwealth       51,217
 220,634
 (169,417) (76.8)%
Preferred distributions            (5,991) (15,959) 9,968
 (62.5)%
Excess fair value of consideration paid over carrying value of preferred shares         —
 (9,609) 9,609
 (100.0)%
Net income attributable to Equity Commonwealth common shareholders         $45,226
 $195,066
 $(149,840) (76.8)%

(1)Comparable properties consist of 20 properties (44 buildings) we owned continuously from January 1, 2016 to September 30, 2017.
(2)Other properties consist of properties sold.

(3)See Note 3 on page 25 for further information regarding NOI.

We refer to the 20 properties (44 buildings) we owned continuously from January 1, 2016 to September 30, 2017, as comparable properties.  We refer to the sold properties as other properties.  Our condensed consolidated statements of operations for the nine months ended September 30, 2017 and 2016 include the operating results of 20 properties for the entire periods, as we owned these properties as of January 1, 2016. 

Rental income.Rental income decreased $108.7 million, or 33.5%, in the 2017 period, compared to the 2016 period, primarily due to the properties sold in 2017 and 2016. Rental income at the comparable properties increased $3.7 million, or 2.3%, due to an increase in lease termination fees and an increase in rents resulting from new leasing activity, partially offset by several large tenant lease expirations and lease contractions.

Rental income includes increases for straight line rent adjustments totaling $12.5 million in the 2017 period and $12.4 million in the 2016 period, and net reductions for amortization of acquired real estate leases and assumed real estate lease obligations totaling $1.5 million in the 2017 period and $5.9 million in the 2016 period. Rental income also includes the recognition of lease termination fees totaling $4.0 million in the 2017 period and $19.6 million in the 2016 period.

Tenant reimbursements and other income. Tenant reimbursements and other income decreased $19.5 million, or 26.8%, in the 2017 period, compared to the 2016 period, primarily due to the properties sold in 2017 and 2016. Tenant reimbursements and other income increased $2.2 million, or 4.5%, at our comparable properties primarily due to an increase in real estate tax reimbursements and an increase in reimbursements related to new leasing activity, partially offset by a decrease in utility expense.
Operating expenses. Operating expenses decreased $47.2 million, or 29.9%, in the 2017 period, compared to the 2016 period, primarily due to the properties sold in 2017 and 2016. Operating expenses increased $5.7 million, or 6.7%, at the comparable properties primarily due to an increase in real estate tax expense, partially offset by a decrease in utility expense due to the milder weather in 2017 and a decrease in tenant usage.

Depreciation and amortization. Depreciation and amortization decreased $30.8 million, or 30.0%, in the 2017 period, as compared to the 2016 period, primarily due to the properties sold in 2017 and 2016.

General and administrative. General and administrative expenses decreased $3.0 million, or 7.8%, in the 2017 period, compared to the 2016 period, primarily due to $1.7 million of compensation expenses in the 2016 period related to a staffing reduction, a $1.0 million decrease related to the shareholder approved reimbursement of expenses incurred by Related/Corvex in connection with their consent solicitation to remove our former Trustees and decreases in technology, payroll and legal expenses, partially offset by a $2.7 million increase in share-based compensation expense.

Loss on asset impairment. We recorded impairment charges of $19.7 million in the 2017 period related to 25 S. Charles Street and the Five Property Portfolio, based upon the shortening of our expected period of ownership and updated market information in accordance with our impairment analysis procedures. We recorded impairment charges of $43.7 million in the 2016 period related to 111 Monument Circle, 101-115 W. Washington Street and 100 East Wisconsin Avenue, based upon the shortening of our expected periods of ownership and updated market information in accordance with our impairment analysis procedures.

Operating income. Operating income decreased $23.1 million, or 42.9%, in the 2017 period, compared to the 2016 period, primarily due to the properties sold in 2017 and 2016, partially offset by a decrease in the loss on asset impairment.

Interest and other income. Interest and other income increased $10.8 million in the 2017 period, as compared to the 2016 period, primarily due to additional interest received on higher invested balances and higher average interest rates in 2017.

Interest expense. Interest expense decreased $23.7 million, or 36.4%, in the 2017 period, compared to the 2016 period, primarily due to the prepayment of $139.1 million of our 6.25% senior unsecured notes in February 2016, the repayment of the $167.8 million mortgage debt at 1735 Market Street in November 2016, the prepayment of $250.0 million of our 6.25% senior unsecured notes in December 2016, the repayment of the $41.3 million mortgage debt at Parkshore Plaza, the prepayment of $250.0 million of our 6.65% senior unsecured notes in July 2017 and a decrease in amortization of deferred financing fees, partially offset by an increase in interest expense related to our term loans as a result of an increase in interest rates.

Loss on early extinguishment of debt. The loss on early extinguishment of debt of $0.3 million in the 2017 period reflects prepayment fees and the write off of unamortized deferred financing fees, net of the write off of an unamortized premium related to our repayment at par of $41.3 million of mortgage debt at Parkshore Plaza and the write off of unamortized deferred financing fees and the write off of an unamortized discount related to our repayment at par of $250.0 million of our 6.65% senior unsecured notes due 2018. The loss on early extinguishment of debt of $0.1 million in the 2016 period reflects the write-off of an unamortized discount and unamortized deferred financing fees related to our redemption of $139.1 million of our 6.25% senior unsecured notes due 2016.


Gain on sale of properties, net. Gain on sale of properties, net decreased $180.5 million in the 2017 period as compared to the 20162021 period. Gain on sale of properties, net in the 20172020 period primarily relatesrelated to the following (dollars in thousands):
Asset Gain (Loss) on Sale
111 Market Place $(5,968)
Cabot Business Park Land (57)
Parkshore Plaza (2,460)
25 S. Charles Street (3,487)
802 Delaware Avenue 9,046
1500 Market Street 38,585
6600 North Military Trail (14,175)
Seton Center Portfolio 22,479
Five Property Portfolio 702
  $44,665

AssetGain on Sale, Net
109 Brookline Avenue$225,190 
333 108th Avenue NE194,424 
Georgetown-Green and Harris Buildings24,916 
Research Park(1)
2,000 
$446,530 

(1) There was consideration of $2.0 million being held in escrow related to the sale of properties, netthis property in the 2016 period primarily relates2019. In June 2020, these proceeds were released to the following (dollars in thousands):Company, and we recorded an additional $2.0 million gain on the sale for the six months ended June 30, 2020.

Asset Gain (Loss) on Sale
Executive Park $16,531
3330 N Washington Boulevard 5,455
111 East Kilbourn Avenue 14,677
1525 Locust Street 8,956
633 Ahua Street 15,963
Lakewood on the Park 13,616
Leased Land 15,914
9110 East Nichols Avenue 642
111 River Street 78,240
Sky Park Centre 4,745
Raintree Industrial Park (653)
8701 N Mopac 8,394
Downtown Austin Portfolio 20,584
Movie Theater Portfolio 30,595
South Carolina Industrial Portfolio 7,244
Midwest Portfolio (15,808)
  $225,095

Income tax expense. Income tax expense increased $0.1 million,decreased $37,000, or 19.4%37.4%, in the 20172021 period, compared to the 20162020 period, primarily due to a decrease in state and local taxes as a result of the sale of properties in certain states.2020.


Net incomeloss (income) attributable to noncontrolling interest. In 2017 through 2020, we granted LTIP Units. The net incomeUnits to certain of our trustees and employees. Net loss (income) attributable to noncontrolling interest of $18,000$24,000 in the 20172021 period and $(0.8) million in the 2020 period relates to the allocation of net income to the LTIPLTIP/OP Unit holders.


Preferred distributions. The $10.0 million decrease in preferred distributions is due to the redemption
23
Table of all of our 11,000,000 outstanding series E preferred shares on May 15, 2016.Contents

Excess fair value of consideration paid over carrying value of preferred shares. On May 15, 2016, we redeemed all of our 11,000,000 outstanding series E preferred shares at a price of $25.00 per share and recorded $9.6 million related to the excess fair value of consideration paid over the carrying value of the preferred shares as a reduction to net income attributable to common shareholders for the nine months ended September 30, 2016.


LIQUIDITY AND CAPITAL RESOURCES
 
Our Operating Liquidity and Resources
 
As of SeptemberJune 30, 2017,2021, we had $2.5$3.0 billion of cash and cash equivalents and marketable securities.equivalents.  We expect to use our cash balances, cash flow from our operations and proceeds of any future property sales to fund our operations, repay debt, make distributions, purchaserepurchase our common shares, acquire assets make acquisitions and/or entities,investments in properties or businesses, fund tenant improvements and leasing costs and for other general business purposes.  We believe our cash balances and the cash flow from our operations will be sufficient to fund our ordinary course activities.


Our future cash flows from operating activities will depend primarilyon our ability to collect rent from our current tenants under their leases. Our ability to collect rent and generate parking revenue in the near term may continue to be adversely impacted by the market disruption caused by the COVID-19 outbreak. We cannot predict the ultimate impact of the pandemic on our results of operations.

Our future cash flows from operating activities will also depend upon our:
 
•ability to maintain or improve the occupancy of, and the rental rates at, our properties;
 
•ability to control operating and financing costexpense increases at our properties; and
 
•ability to purchase additional properties, consistent with our office repositioning strategy, which produce rents, less property operating expenses, in excess of our costs of acquisition capital.

In addition, our future cash flows will also depend in part on interest income earned on our invested cash balances.

Volatility in energy costs and real estate taxes may cause our future operating costsexpenses to fluctuate; however, the impact of these fluctuations is expected to be partially offset by the pass through of operating costsexpenses to our tenants pursuant to lease terms, although there can be no assurance that we will be able to successfully offset these costsexpenses or that doing so would not negatively impact our competitive position or business. 
 
CashNet cash flows provided by (used in) operating, investing and financing activities were $64.3$3.1 million, $372.7$(7.5) million and $(298.6)$(17.1) million, respectively, for the ninesix months ended SeptemberJune 30, 2017,2021, and $116.7$23.2 million, $943.9$652.1 million and $(458.2)$(34.1) million, respectively, for the ninesix months ended SeptemberJune 30, 2016.2020.  Changes in these three categories of our cash flows between 20172021 and 20162020 are primarily related to a decrease in property net operating income (as a result of property dispositions), a decrease in interest income (as a result of lower average interest rates on lower average balances in 2021), an increase in real estate improvements, payment of transaction costs, dispositions of properties, purchase of marketable securities, redemption of preferred shares, repayments of debt and repurchase of our common shares.shares and distributions to common shareholders.
 
Our Investment and Financing Liquidity and Resources
 
In order to maintain financial flexibility, to fund potential acquisitions and to meet cash needs that may result from timing differences between our receipt of rents and our desire or need to make distributions and investments or pay operating or capital expenses, we maintain an unsecured revolving credit facility with a group of institutional lenders. Our credit agreement provides us with (i) a $750.0 million unsecured revolving credit facility, (ii) a $200.0 million 5-year term loan facility and (iii) a $200.0 million 7-year term loan facility. The revolving credit facility has a scheduled maturity date of January 28, 2019, which maturity date may be extended for up to two additional periods ofDuring the six months at our option subject to satisfaction of certain conditions and the payment of an extension fee of 7.5 basis points of the aggregate amount available under the revolving credit facility. The 5-year term loan and the 7-year term loan have scheduled maturity dates of January 28, 2020 and January 28, 2022, respectively.

Borrowings under our revolving credit facility currently bear interest at LIBOR plus a spread, which was 125 basis points as of Septemberended June 30, 2017.  We also pay a facility fee of 25 basis points per annum on the total amount of lending commitments under our revolving credit facility.  Both the interest rate spread and the facility fee are subject to adjustment based upon changes to our credit ratings.  We are allowed to borrow, repay and reborrow funds available under our revolving credit facility until maturity, and no principal repayment is due until maturity.  As of September 30, 2017, the interest rate payable on borrowings under our revolving credit facility was 2.48%.  As of September 30, 2017, we had no balance outstanding under our revolving credit facility.
Our term loans currently bear interest at a rate of LIBOR plus a spread, which was 140 and 180 basis points for the 5-year and 7-year term loan, respectively, as of September 30, 2017.  The interest rate spread is subject to adjustment based upon changes to our credit ratings.  As of September 30, 2017, the interest rate for the amounts outstanding under our term loan was 2.63% and 3.03% for the 5-year and 7-year term loan, respectively. As of September 30, 2017, our 5-year and 7-year term loans each had outstanding balances of $200.0 million.

During the nine months ended September 30, 2017,2021, we paid an aggregate of $6.0$4.0 million of distributions on our series D preferred shares.  On October 12, 2017, we announced thatJuly 6, 2021, our Board of Trustees declared a dividend of $0.40625 per series D preferred share, which is expected towill be paid on November 15, 2017August 16, 2021 to shareholders of record on OctoberJuly 30, 2017.2021.


On March 17, 2016,1, 2021, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares over the twelve month period following the date of authorization. In March 2017, thisthrough June 30, 2022. We did not repurchase any common shares under our common share repurchase authorization, of which $106.6 million was not utilized, expired. On March 15, 2017, our Board of Trustees authorizedprogram during the repurchase of up to an additional $150.0 million of our outstanding common shares over the twelve month period following the date of authorization. During the ninethree months ended SeptemberJune 30, 2017, we did not purchase any common shares.2021.
 
During the nine months ended September 30, 2017, we purchased $276.2 million of marketable securities. For further information about our marketable securities, see Note 4 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

Our outstanding debt maturities and weighted average interest rates as of September 30, 2017, were as follows (dollars in thousands):
  Scheduled Principal Payments During Period  
Year Unsecured Floating Rate Debt Unsecured Fixed Rate Debt Secured Fixed Rate Debt Total(1) Weighted Average Interest Rate(2)
2017 $—
 $—
 $359
 $359
 6.0%
2018 —
 —
 1,487
 1,487
 6.0%
2019 —
 —
 1,580
 1,580
 6.0%
2020 200,000
 250,000
 1,674
 451,674
 4.4%
2021 —
 —
 25,982
 25,982
 5.7%
2022 200,000
 —
 799
 200,799
 3.0%
2023 —
 —
 702
 702
 5.7%
2024 —
 —
 743
 743
 5.7%
2025 —
 —
 787
 787
 5.7%
2026 —
 —
 204
 204
 5.7%
Thereafter —
 175,000
(3)—
 175,000
 5.8%
  $400,000
 $425,000
 $34,317
 $859,317
 4.4%

(1)Total debt outstanding as of September 30, 2017, including net unamortized premiums and discounts and net unamortized deferred financing costs, equals $850,576.
(2)Weighted based on current contractual interest rates.
(3)The 5.75% senior unsecured notes due 2042 are callable at par through maturity.
For further information about our indebtedness, see Note 5 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
When significant amounts are outstanding under our revolving credit facility, or as the maturity dates of our revolving credit facility and term debts approach, we explore alternatives to repay amounts due. Such alternativesWe may include incurring additional debt and issuing new equity securities, extending the maturity of our revolving credit facility and entering into a new revolving credit facility. We have an effective shelf registration statement that allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for such securities.
We believe that we will have access toutilize various types of financings, including debt or equity, offerings, to fund any future acquisitions and/or investments and to pay our debtsany debt we may incur and other obligations as they become due. TheAlthough we are not currently rated by the debt rating agencies, the completion and the costs of any future debt transactions will depend primarily upon market conditions and our credit ratings.ratings at such time, if any. We have no control over market conditions. OurAny credit ratings will depend upon evaluations by credit rating agencies of our business practices and plans and, in particular, whether we appear to have the ability to maintain our earnings, to space ourany debt maturities and to balance our use of debt and equity capital so that our financial performance and leverage ratios afford us flexibility to withstand any reasonably foreseeable adverse changes. We intend to conduct our business activities in a manner which will continue to afford us reasonable access to capital for investment and financing
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activities. However, there can be no assurance regarding our credit ratings or our ability to complete any debt or equity offerings or that our cost of any future public or private financings will not increase.


During the nine months ended September 30, 2017, we sold 13 properties (20 buildings) and one land parcel with a combined 5,099,423 square feet for an aggregate sales price of $755.7 million, excluding closing costs. For more information regarding these transactions, see Notes 3 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

During the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, amounts capitalized at our properties, including properties sold, for tenant improvements, leasing costs and building improvements were as follows (amounts in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Tenant improvements(1)
$394 $2,448 $3,613 $3,325 
Leasing costs(2)
501 299 769 1,245 
Building improvements(3)
91 611 329 962 

 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Tenant improvements(1)
$3,015
 $20,411
 $22,751
 $65,339
Leasing costs(2)
3,070
 2,292
 12,665
 22,666
Building improvements(3)
8,469
 8,942
 20,569
 23,196
(1)Tenant improvements include capital expenditures to improve tenants’ spaces.

(2)Leasing costs include leasing commissions and related legal expenses.
(1)Tenant improvements include capital expenditures to improve tenants’ spaces.
(2)Leasing costs primarily include brokerage commissions and legal expenses.
(3)Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets. Tenant-funded capital expenditures are excluded.
(3)Building improvements generally include expenditures to replace obsolete building components and expenditures that extend the useful life of existing assets. Tenant-funded capital expenditures are excluded.
 
During the three months ended SeptemberJune 30, 2017,2021, commitments made for expenditures in connection with leasing space at our properties were as follows (dollar and square foot measures in thousands):
 
New
Leases
 Renewals Total
Rentable square feet leased during the period192
 81
 273
Tenant improvements and leasing commissions$9,577
 $1,455
 $11,032
Tenant improvements and leasing commissions per rentable square foot$49.75
 $18.00
 $40.37
Weighted average lease term by square foot (years)9.0
 4.0
 7.5
Total tenant improvements and leasing commissions per rentable square foot per year$5.51
 $4.51
 $5.35
New
Leases		RenewalsTotal
Square feet leased during the period8 21 29 
Tenant improvements and leasing commissions$855 $913 $1,768 
Tenant improvements and leasing commissions per square foot$106.93 $43.48 $60.47 
Weighted average lease term by square foot (years)(1)
8.5 5.7 6.5 
Tenant improvements and leasing commissions per square foot per year$12.57 $7.57 $9.33 
 
Debt Covenants(1)For renewal lease terms, if the existing rents of an original lease term are modified, the new term starts at the rent modification date. Weighted average lease term generally excludes renewal options.

Our unsecured debt obligations at September 30, 2017 were our term loans and our publicly issued senior unsecured notes. Our public debt indenture and related supplements and our credit agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, in excess of calculated amounts, restrict our ability to make distributions under certain circumstances and require us to maintain other financial ratios.  At September 30, 2017, we believe we were in compliance with all covenants under both our indenture and related supplements, and under our credit agreement.  In addition to our unsecured debt obligations, we had $35.0 million (including net unamortized premiums and net unamortized deferred financing costs) of mortgage notes outstanding at September 30, 2017.NON-GAAP MEASURES
None of our indenture and related supplements, our credit agreement, or our mortgage notes contain provisions for acceleration or require us to provide collateral security which could be triggered by our debt ratings.  However, our senior debt rating is used to determine the interest rate and the fees payable under our credit agreement.

Off Balance Sheet Arrangements
As of September 30, 2017, we had no off balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.  We had no swaps or hedges as of September 30, 2017, other than the interest rate cap described in Note 10 to the notes to our condensed consolidated financial statements, and under “Quantitative and Qualitative Disclosures About Market Risk” included in Part I, Item 3 of this Quarterly Report.

Funds from Operations (FFO) and Normalized FFO


We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, (NAREIT). NAREITor Nareit. Nareit defines FFO as net income (loss), calculated in accordance with GAAP, excluding real estate depreciation and amortization, gains (or losses) from sales of depreciable property, impairment of depreciable real estate, and our portion of these items related to equity investees and non-controlling interests.  Our calculation of Normalized FFO differs from

NAREIT’s Nareit’s definition of FFO because we exclude certain items that we view as nonrecurring or impacting comparability from period to period.  We consider FFO and Normalized FFO to be appropriate measures of operating performance for a REIT, along with net income, net income attributable to Equity Commonwealth common shareholders operating income and cash flow from operating activities.


We believe that FFO and Normalized FFO provide useful information to investors because by excluding the effects of certain historical amounts, such as depreciation expense, FFO and Normalized FFO may facilitate a comparison of our operating performance between periods and with other REITs.  FFO and Normalized FFO do not represent cash generated by operating activities in accordance with GAAP and should not be considered as alternatives to net income, net income attributable to Equity Commonwealth common shareholders operating income or cash flow from operating activities, determined in accordance with GAAP, or as indicators of our financial performance or liquidity, nor are these measures necessarily indicative of sufficient cash flow to fund all of our needs.  These measures should be considered in conjunction with net income, net income attributable to Equity Commonwealth common shareholders operating income and cash flow from operating activities as presented in our condensed consolidated statements of operations, condensed consolidated statements of comprehensive income and condensed consolidated statements of cash flows.  Other REITs and real estate companies may calculate FFO and Normalized FFO differently than we do.
The following table provides a reconciliation of net income to FFO attributable to Equity Commonwealth common shareholders and unitholders and a calculationreconciliation to Normalized FFO attributable to Equity Commonwealth common
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shareholders and unitholders (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Reconciliation to FFO:
Net (loss) income$(1,940)$27,886 $(11,978)$453,393 
Real estate depreciation and amortization4,385 4,174 8,686 9,055 
Gain on sale of properties, net— (26,916)— (446,536)
FFO attributable to Equity Commonwealth2,445 5,144 (3,292)15,912 
Preferred distributions(1,997)(1,997)(3,994)(3,994)
FFO attributable to Equity Commonwealth common shareholders and unitholders$448 $3,147 $(7,286)$11,918 
Reconciliation to Normalized FFO:    
FFO attributable to Equity Commonwealth common shareholders and unitholders$448 $3,147 $(7,286)$11,918 
Straight-line rent adjustments(561)515 (868)713 
Executive severance expense— — 7,107 — 
Taxes related to property sales included in general and administrative— 10 — 1,458 
Taxes related to property sales, net included in income tax expense— 44 — 79 
Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders$(113)$3,716 $(1,047)$14,168 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Reconciliation to FFO:       
Net income$33,224
 $86,388
 $51,235
 $220,634
Real estate depreciation and amortization20,842
 28,907
 71,077
 102,015
Loss on asset impairment—
 —
 19,714
 43,736
Gain on sale of properties, net(25,080) (82,169) (44,670) (225,210)
FFO attributable to Equity Commonwealth28,986
 33,126
 97,356
 141,175
Preferred distributions(1,997) (1,997) (5,991) (15,959)
Excess fair value of consideration paid over carrying value of preferred shares—
 —
 —
 (9,609)
FFO attributable to Equity Commonwealth common shareholders and unitholders$26,989
 $31,129
 $91,365
 $115,607
        
Reconciliation to Normalized FFO: 
  
  
  
FFO attributable to Equity Commonwealth common shareholders and unitholders$26,989
 $31,129
 $91,365
 $115,607
Lease value amortization388
 882
 1,479
 5,870
Straight line rent adjustments(3,557) (2,954) (12,487) (12,384)
Loss on early extinguishment of debt203
 —
 266
 118
Transition-related expenses—
 (138) —
 999
Foreign currency exchange loss—
 —
 —
 5
Excess fair value of consideration paid over carrying value of preferred shares—
 —
 —
 9,609
Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders$24,023
 $28,919
 $80,623
 $119,824


Property Net Operating Income (NOI)


We use another non-GAAP measure, property net operating income, or NOI, to evaluate the performance of our properties. We define NOI as income from our real estate including lease termination fees received from tenants less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses.



The following table includes the reconciliation of NOI to net income, the most directly comparable financial measure under GAAP reported in our consolidated financial statements.  We consider NOI to be an appropriate supplemental measure to net income because we believe it helpsmay help to understand the operations of our properties.  We use NOI internally to evaluate property level performance, and we believe that NOI provides useful information to investors regarding our results of operations because it reflects only those income and expense items that are incurred at the property level and may facilitate comparisons of our operating performance between periods and with other REITs.  NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered as an alternative to net income, net income attributable to Equity Commonwealth common shareholders operating income or cash flow from operating activities, determined in accordance with GAAP, or as an indicator of our financial performance or liquidity, nor is this measure necessarily indicative of sufficient cash flow to fund all of our needs.  This measure should be considered in conjunction with net income, net income attributable to Equity Commonwealth common shareholders operating income and cash flow from operating activities as presented in our consolidated statements of operations, consolidated statements of comprehensive income and consolidated statements of cash flows.  Other REITs and real estate companies may calculate NOI differently than we do. 


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A reconciliation of NOI to net income for the three and ninesix months ended SeptemberJune 30, 20172021 and 2016,2020, is as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Rental revenue$14,114 $15,248 $28,283 $32,391 
Other revenue761 1,017 1,443 2,694 
Operating expenses(6,588)(6,677)(13,209)(15,438)
NOI$8,287 $9,588 $16,517 $19,647 
NOI$8,287 $9,588 $16,517 $19,647 
Depreciation and amortization(4,432)(4,398)(8,783)(9,512)
General and administrative(7,390)(8,302)(23,119)(18,906)
Interest and other income, net1,626 4,443 3,469 16,338 
Interest expense— (302)— (611)
Gain on sale of properties, net— 26,916 — 446,536 
(Loss) income before income taxes(1,909)27,945 (11,916)453,492 
Income tax expense(31)(59)(62)(99)
Net (loss) income$(1,940)$27,886 $(11,978)$453,393 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Rental income$61,091
 $92,722
 $215,648
 $324,345
Tenant reimbursements and other income16,707
 21,910
 53,300
 72,789
Operating expenses(32,380) (49,313) (110,751) (157,964)
NOI$45,418
 $65,319
 $158,197
 $239,170
        
NOI$45,418
 $65,319
 $158,197
 $239,170
Depreciation and amortization(21,133) (29,184) (71,970) (102,766)
General and administrative(11,689) (13,277) (35,727) (38,766)
Loss on asset impairment—
 —
 (19,714) (43,736)
Operating income12,596
 22,858
 30,786
 53,902
        
Interest and other income7,596
 3,013
 17,987
 7,184
Interest expense(11,510) (21,427) (41,387) (65,074)
Loss on early extinguishment of debt(203) —
 (266) (118)
Foreign currency exchange loss—
 —
 —
 (5)
Gain on sale of properties, net25,080
 82,169
 44,670
 225,210
Income from continuing operations before income taxes33,559
 86,613
 51,790
 221,099
Income tax expense(335) (225) (555) (465)
Net income$33,224
 $86,388
 $51,235
 $220,634


Related Person Transactions
 
For information about our related person transactions, and about the risks that may arise as a result of these related person transactions and relationships, see Note 1511 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.Report on Form 10-Q.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk.
 
We are exposed to risks associated withThe Company’s market changesrisk has not changed materially from the amounts and information reported in interest rates, as set forth below.Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report.
 
Interest Rate Risk

We manage our exposure to interest rate risk by monitoring available financing alternatives. Other than as described below, we do not currently foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

At September 30, 2017, our outstanding fixed rate debt consisted of the following senior unsecured notes and secured mortgage notes (dollars in thousands):
Senior Unsecured Notes:
Debt Principal Balance(1) Annual Interest Rate(1) Annual Interest Expense(1) Maturity Open at Par Date
5.875% senior unsecured notes due 2020 $250,000
 5.88% $14,688
 9/15/2020 3/15/2020
5.750% senior unsecured notes due 2042 175,000
 5.75% 10,063
 8/1/2042 Open
  $425,000
   $24,751
    

(1)The principal balance, annual interest rate and annual interest expense are the amounts stated in the applicable contracts.  In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions and issuance costs at the time we issued these debts.  For more information, see Note 5 to the notes to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report.
No principal repayments are due under our senior unsecured notes until maturity.

Secured Mortgage Notes:
Debt Principal Balance(1) Annual Interest Rate(1) Annual Interest Expense(1) Maturity Open at Par Date
206 East 9th Street $26,666
 5.69% $1,601
 1/5/2021 7/5/2020
33 Stiles Lane 2,119
 6.75% 201
 3/1/2022 12/1/2021
97 Newberry Road 5,532
 5.71% 378
 3/1/2026 None
  $34,317
   $2,180
    

(1)The principal balance, annual interest rate and annual interest expense are the amounts stated in the applicable contracts.  In accordance with GAAP, our carrying values and recorded interest expense may differ from these amounts because of market conditions and issuance costs at the time we assumed or issued these debts.  For more information, see Note 5 to the notes to our condensed consolidated financial statements included in Part I, Item I of this Quarterly Report.
Some of our secured notes require principal and interest payments through maturity pursuant to amortization schedules, and one of our secured notes require interest only payments through maturity.
Swap Agreements

We have utilized and may utilize in the future interest rate swap agreements to manage our interest rate risk exposure on mortgage notes. We previously had interest rate swap agreements on mortgage debt, which required us to pay interest at a rate equal to a spread over LIBOR.  These interest rate swap agreements effectively modified our exposure to interest rate risk arising from this floating rate mortgage loan by converting this floating rate debt to a fixed rate, thus reducing the impact of interest rate changes on future interest expense.   
Cap Agreement

We entered into an interest rate cap agreement on March 4, 2016, effective April 1, 2016, to manage our interest rate risk exposure on $400.0 million of floating rate debt, which requires us to pay interest at a rate equal to a spread over LIBOR. The interest rate cap has a maturity date of March 1, 2019. From and after the effective date, this interest rate cap agreement reduces our exposure to variability in expected future cash outflows attributable to changes in LIBOR, relating to a portion of our outstanding floating rate debt, by protecting us from increases in the hedged cash flows on our floating rate debt attributable to changes in LIBOR above the strike rate of the interest rate cap. As of September 30, 2017, the fair value of our derivative instruments included in other assets and cumulative other comprehensive income (loss) in our condensed consolidated balance sheet totaled $14,000.

Fixed Rate Debt

Because our fixed rate unsecured and secured notes bear interest at fixed rates, changes in market interest rates during the term of these debts will not affect our interest obligations.  If all of these notes were refinanced at interest rates which are 100 basis points higher or lower than shown above, our per annum interest cost would increase or decrease, respectively, by approximately $4.6 million.
Each of our fixed rate unsecured debt arrangements and some of our secured debt arrangements allow us to make repayments earlier than the stated maturity date.  In some cases, we are not allowed to make early repayment prior to a cutoff date, and we are generally allowed to make prepayments only at a premium equal to a make whole amount, as defined, which is generally designed to preserve a stated yield to the note holder.  Also, we have repurchased and retired some of our outstanding debts and we may do so again in the future.  These prepayment rights and our ability to repurchase and retire outstanding debt may afford us opportunities to mitigate the risk of refinancing our debts at maturity at higher rates by refinancing prior to maturity.
Floating Rate Debt

At September 30, 2017, our outstanding floating rate debt consisted of our term loans.  Our $200.0 million 5-year term loan matures in January 2020 and our $200.0 million 7-year term loan matures in January 2022.  Borrowings under our revolving credit facility and term loan are in U.S. dollars and bear interest at LIBOR plus spreads that are subject to adjustment based upon changes to our credit ratings, but as of September 30, 2017, we had no balance outstanding and $750.0 million available under our revolving credit facility.  Accordingly, we are vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR.  Effective April 1, 2016, we entered into an interest rate cap agreement with respect to $400.0 million of floating rate debt, as described above under “Cap Agreement.” In addition, upon renewal or refinancing of our revolving credit facility or term loan, we are vulnerable to increases in interest rates due to market conditions or our perceived credit risk.  Generally, a change in market interest rates would not affect the value of these floating rate debts, but would affect our operating results. 

The following table presents the impact a 100 basis point increase in interest rates would have on our floating rate interest expense as of September 30, 2017 (dollars in thousands):
 Impact of Changes in Interest Rates
 
Interest Rate
Per Year(1)
 
Outstanding
Debt
 
Total Interest Expense
Per Year
Term loans at September 30, 20172.63%/3.03% $400,000
 $11,329
100 basis point increase3.63%/4.03% $400,000
 $15,329

(1)Based on the interest rates and outstanding borrowings of our floating rate debt as of September 30, 2017.
Foreign Currency Risk
As of September 30, 2017, we do not have any foreign currency risk.
Item 4.  Controls and Procedures.
 
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our ExecutiveSenior Vice President, Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to the Securities Exchange Act of 1934, or the Exchange Act, RulesRule 13a-15 and Rule 15d-15. Based upon that evaluation, our President and Chief Executive Officer and our ExecutiveSenior Vice President, Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.
 
There have been no changes in our internal control over financial reporting during the quarter ended SeptemberJune 30, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II.  Other Information
 
Item 1. Legal Proceedings.
 
We are or may bebecome a party to various legal proceedings that arise in the ordinary course of business.proceedings. We are not currently involved in any litigation nor, to our knowledge, is any litigation threatened against us where the outcome would, in our judgment based on information currently available to us, have a material adverse effect on the Company.

In connection with the Merger Agreement as of July 27, 2021, one lawsuit has been filed against the Company seeking damages and/or rescission, among other things. An adverse decision being entered for any lawsuit may adversely affect our consolidated financial position or consolidated results of operations.results. See Note 12 to the Condensed Consolidated Financial Statements in Item 1. Financial Statements for further information on the Merger Agreement.


Item 1A. Risk Factors.
 
ThereOther than the additional risk factors below related to our recently announced merger with Monmouth, there have been no material changes to the risk factors relatingpreviously disclosed in our Annual Report.

Risks Related to the Merger with Monmouth

The proposed merger with Monmouth presents certain risks to our business, operations and financial condition.

On May 4, 2021, we entered into the merger agreement with Monmouth, which provides for the merger of Monmouth with and into one of our subsidiaries. Pursuant to the terms and subject to the conditions set forth in the merger agreement, upon closing, each share of Monmouth common stock issued and outstanding will be converted into the right to receive 0.67 of a newly issued share of our common shares of beneficial interest, with cash paid in lieu of any fractional shares.

In addition to the common dividend Monmouth paid on June 15, 2021, the merger agreement permits Monmouth to declare and pay one additional regular quarterly common dividend of $0.18 per share, which the Monmouth board of directors declared on July 1, 2021, without triggering our right to declare and pay a corresponding common dividend to our shareholders. In addition, upon closing, shares of Monmouth Series C preferred stock will be converted automatically into the right to receive $25.00 per share plus accumulated and unpaid accrued dividends. The merger is currently expected to close in the second half of 2021, subject to the approval of our common shareholders and the Monmouth common shareholders and the satisfaction or waiver of other customary closing conditions. However, there is no guarantee that the conditions to the merger will be satisfied or waived, or that the merger will close in the time frame currently anticipated, or at all.

Prior to closing, the merger may present certain risks to our business, operations, and financial condition, including, among other things, that:

• failure to complete the merger, including due to the failure to obtain the approval of our shareholders or the Monmouth shareholders required to complete the merger or the failure of us or Monmouth to satisfy another closing condition, could negatively impact our stock price and future business and financial results;
• we expect to incur substantial expenses related to the merger, regardless of whether the merger is ultimately completed; and
• the pendency of the merger could adversely affect our business, operations, and financial condition, including by diverting significant focus of management and other resources or preventing us from undertaking other strategic transactions.

In addition, certain risks may continue to exist following the closing of the merger, including, among other things, that:

• we may be unable to successfully integrate Monmouth’s business;
• we may be unable to realize the anticipated benefits of the merger;
• our future results will suffer if we do not effectively manage our portfolio following the merger; and
• the market price of our common shares may decline as a result of the merger.

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The exchange ratio will not be adjusted to address changes in the share prices of either the Company disclosedor Monmouth following the public announcement of the merger.

Upon the consummation of the merger, each outstanding share of Monmouth common stock will be converted automatically into the right to receive 0.67 of a newly issued share of our common shares of beneficial interest, with cash paid in lieu of any fractional shares. Pursuant to the terms of the Merger Agreement, the exchange ratio of 0.67 will not be adjusted for changes in the market price of either our common shares or Monmouth common shares. Changes in the market price of our common shares prior to the closing of the merger will affect the market value of the merger consideration that the holders of Monmouth common shares, stock options, and stock awards will receive upon completion of the merger. Stock price changes may result from a variety of factors (many of which are beyond our control), including the following factors:

• market reaction to the announcement of the merger;
• changes in the respective businesses, operations, assets, liabilities and prospects of the Company and Monmouth;
• changes in market assessments of the business, operations, financial position and prospects of the Company and/or Monmouth;
• market assessments of the likelihood that the merger will be completed;
• interest rates, general market and economic conditions and other factors generally affecting the market prices of our common shares or Monmouth common shares;
• federal, state and local legislation, governmental regulation and legal developments in the businesses in which we and Monmouth operate; and
• other factors beyond our control, including those described or referred to elsewhere in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2020.


The market price of our common shares at the closing of the merger may vary from the price on the date the Merger Agreement was executed and on the date of the special meeting of the Company. As a result, the market value of the merger consideration represented by the exchange ratio will also vary. Therefore, our shareholders cannot be sure of the market value of the consideration that will be paid to the holders of Monmouth common shares, stock options and stock awards upon completion of the merger.

The merger may not be completed on the terms or timeline currently contemplated, or at all.

Following the initial filing of the Company’s registration statement on Form S-4, Monmouth notified EQC that Monmouth received unsolicited acquisition proposals from Starwood Real Estate Investment Trust, Inc., which had participated in the recent strategic alternatives review process undertaken by the Monmouth board of directors. Although Monmouth's board of directors rejected each of the proposals received from Starwood, we cannot provide any assurances that Starwood or other third parties will not make additional unsolicited acquisition proposals that could prevent the completion of our pending merger with Monmouth.

In addition, each of Starwood and Blackwells has opposed our pending merger with Monmouth and Starwood has filed a proxy statement soliciting proxies from Monmouth’s shareholders in opposition to our pending merger. Such opposition increases the risk that our pending merger with Monmouth will not be approved by Monmouth’s shareholders.

In addition to the risk described above, under the terms of the Merger Agreement, the completion of the merger is subject to certain customary closing conditions, including, without limitation: (i) approval by our common shareholders of the issuance of our common shares in connection with the merger and approval by the Monmouth common shareholders of the merger and the other transactions contemplated by the Merger Agreement; (ii) approval from the New York Stock Exchange for the listing of our common shares to be issued in the merger; (iii) the absence of an injunction or law prohibiting the merger; (iv) the absence of any pending, threatened or outstanding government investigation with respect to the merger; (v) the accuracy of each party’s representations and warranties, subject in most cases to material adverse effect qualifications, and receipt by each party of a certificate to such effect from an officer of the other party; (vi) the absence of any material adverse effect with respect to either us or Monmouth; (vii) material compliance by each party with its covenants and agreements; (viii) receipt by us and by Monmouth of an opinion to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code and of an opinion as to the qualification of Monmouth and us, respectively, as a REIT under the Code; and (ix) effectiveness of the registration statement on Form S-4 filed by us with the SEC containing the joint proxy statement/prospectus being sent to our common shareholders and the Monmouth common shareholders. We cannot provide assurances that the merger will be consummated on the terms or timeline currently contemplated, or at all.

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Failure to complete the merger could negatively impact our stock price and future business, operating and financial results.

If the merger is not completed, our ongoing business will be different and could be adversely affected and the Company will be subject to a variety of risks associated with the failure to complete the merger, including the following:

• the Company being required to reimburse Monmouth for its expenses up to $10.0 million if the Merger Agreement is terminated because our shareholders fail to approve the issuance of our common shares in connection with the merger
• the Company having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;
• diversion of management focus and resources from operational matters and other strategic opportunities while working to implement the merger; and
• loss of the opportunity to strategically transition our business into the industrial sector.

If the merger is not completed, these risks could materially affect our business, operating and financial results, and stock price.

The pendency of the merger could materially and adversely affect our business and operations.

In response to the pending merger, some of our tenants, prospective tenants, or vendors may make decisions which could adversely affect our revenues, earnings, cash flows, and expenses, regardless of whether the merger is completed. In addition, due to operating restrictions in the Merger Agreement, we may be unable, during the pendency of the merger, to pursue other strategic transactions.

Monmouth and/or the Company have become (and could become) the target of shareholder litigation that could result in substantial costs and may delay or prevent the merger from being completed.
Shareholder litigation is often brought against companies that have entered into merger agreements. As of July 27, 2021, four lawsuits have been filed by purported Monmouth shareholders in the United States District Court for the Southern District of New York in connection with the proposed merger. In addition to naming Monmouth and the members of the Monmouth board of directors as defendants, one of the lawsuits names the Company as a defendant. The lawsuits challenge the merger-related disclosures in the Company’s registration statement on Form S-4. Although the Company and Monmouth believe these lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. There can be no assurances as to the outcome of these lawsuits or any future lawsuits, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims, and, if the merger closes, the Company will generally succeed to and be responsible for any costs and/or liabilities associated with such lawsuits or claims against or other such liabilities incurred by Monmouth. Additionally, if a plaintiff is successful in obtaining an injunction prohibiting consummation of the merger on the agreed-upon terms, such an injunction may delay or prevent the merger from being completed, which may adversely affect our business, results of operations and financial position.

Our shareholders will be diluted by the merger.

The merger will dilute the ownership position of our common shareholders. Upon completion of the merger and after giving effect to the issuance of our common shares in connection therewith, we estimate that our continuing shareholders will own approximately 65% of our issued and outstanding common shares, and former Monmouth common shareholders will own approximately 35% of our issued and outstanding common shares. Consequently, our shareholders, as a general matter, will have less influence over our management and policies after the effective time of the merger than they currently exercise.

We have incurred substantial expenses related to the merger which could materially and adversely affect our financial results.

We have incurred substantial expenses in connection with pursuing the merger and expect to continue to incur substantial expenses in connection with integrating the business, operations, networks, systems, technologies, policies, and procedures of Monmouth with those of the Company. There are several systems that must be integrated, including accounting, finance, and property management. While we have assumed that we will incur significant transaction and integration expenses, there are a number of factors beyond our control that could affect the total amount or timing of our integration expenses. Many of the transaction and integration expenses that will be incurred, by their nature, are difficult to estimate accurately. As a result, the actual transaction and integration expenses incurred in connection with the merger could exceed the expenses estimated to be incurred in connection with the integration of the business.
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Following the merger, we may be unable to timely and successfully integrate our current operations with those of Monmouth or realize the anticipated benefits of the merger.

The merger involves the combination of two companies that currently operate as independent public companies. We will be required to devote significant management attention and resources to integrating the companies’ portfolio and operations. Potential difficulties that we may encounter in the integration process include, among others, the following:

• the inability to successfully manage and grow the industrial portfolio in a manner that permits us to achieve the benefits anticipated from the merger, in the time frame currently anticipated, or at all;
• the inability to successfully realize the anticipated value from some of Monmouth’s assets or our assets;
• potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger;
• performance shortfalls as a result of the diversion of management's attention caused by completing the merger and integrating the companies’ operations; and
• the possibility that the integration process results in the distraction of our management, the disruption of our business or inconsistencies in our operations, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with tenants, employees and service providers or to achieve the anticipated benefits of the merger, or could otherwise adversely affect our business, results of operations and financial condition.

Our future results will suffer if we do not effectively manage our expanded operations following the merger.

Following the merger, we expect to continue to expand our portfolio through additional acquisitions. Our future success will depend, in part, upon our ability to expand our portfolio and manage our expanded operations, which may pose substantial challenges for us. There is no assurance that our expansion or acquisition opportunities will be successful, that we will manage our expanded portfolio successfully or that we will achieve the benefits anticipated from the merger.

Counterparties to certain significant agreements with Monmouth have, and may exercise, contractual rights under such agreements in connection with the merger.

Monmouth is party to certain agreements, including loan agreements, leases and certain other contracts, that may give the counterparty certain rights in connection with the merger, including in some cases certain consent rights or preferential options with respect to certain properties or the right to call an event of default under certain loan agreements if no such consent is provided. Under some of these agreements, the merger may trigger such rights, and any such counterparty may request modifications of their respective agreement as a condition to granting a waiver or consent We cannot provide any assurances that such counterparties will not exercise, or attempt to exercise, their rights under these agreements, or that the exercise, or attempted exercise, of rights under, or modification of, these agreements will not adversely affect our business or operations following the merger.

The merger represents a strategic transition for our business and we may encounter unanticipated difficulties and costs managing, growing, and integrating the Monmouth industrial portfolio which may have a material adverse effect on us.

The Monmouth portfolio is comprised primarily of industrial assets and the merger represents a strategic transition for our business into the industrial sector that will require a different set of management expertise and experience. We expect to have access to the appropriate resources, relationships and expertise to manage and grow the Monmouth portfolio, but there can be no assurance that we will be successful in our utilization, development, or procurement of such resources, relationships, and expertise. As a result, we may not be able to successfully manage and grow the Monmouth portfolio, and may not achieve the returns we expect, which could have a material adverse effect on us.

Following the merger, we may have difficulty selling our remaining office properties on favorable terms, or at all.

Following completion of the merger, we plan to sell our office properties, but we may not be able to do so on favorable terms, or at all. This may limit our ability to successfully manage and grow our industrial portfolio following the merger which could adversely affect our business or operations.

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Following the merger, we may experience competition in acquiring industrial properties, which could adversely affect our business or operations.

We may face competition from various entities for investment opportunities in industrial properties, including other REITs, pension funds, insurance companies, investment funds and companies, partnerships and developers. Competition from these entities may reduce the number of suitable investment opportunities available to us or increase the bargaining power of property owners seeking to sell. This competition may cause us to acquire properties at higher prices than we would otherwise, and in such case our returns would be lower than they otherwise would be.

We may incur adverse tax consequences if Monmouth has failed or fails to qualify to be taxed under the Code as a REIT.

It is a condition to the obligation of the Company to complete the merger that it receive a written opinion of Monmouth’s tax counsel to the effect that, for Monmouth’s taxable year ended September 30, 2008 and through its taxable year ended September 30, 2020, Monmouth has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation through the date of such opinion has enabled, and its proposed method of operation will continue to enable, Monmouth to meet the requirements for qualification and taxation as a REIT through the effective time of the merger. The opinion will be subject to customary exceptions, assumptions, and qualifications and will be based on customary representations made by Monmouth, and if any such representations are or become inaccurate or incomplete, such opinion may be invalid and the conclusions reached therein could be jeopardized. In addition, the opinion will not be binding on the Internal Revenue Service, or the IRS, or any court, and there can be no assurance that the IRS will not take a contrary position or that such position would not be sustained. If Monmouth has failed or fails to qualify to be taxed under the Code as a REIT and the merger is completed, we generally would succeed to and may incur significant tax liabilities and we could possibly fail to qualify as a REIT. In addition, if Monmouth has failed or fails to qualify to be taxed under the Code as a REIT and the merger is completed, for the five-year period following the merger closing, upon a taxable disposition of any of Monmouth’s assets, we generally would be subject to corporate level tax with respect to any gain in such asset at the time of the merger, and any of Monmouth’s earnings and profits accumulated in a non-REIT year must be distributed by us before the end of the taxable year in which the merger closes. For more information, see “Risk Factors—Risks Related to Our Taxation as a REIT” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

Following the merger, the market price of our common shares may decline due to new risks confronting us.

After the closing of the merger, our results of operations and the market price of our common shares may be affected by other factors in addition to those currently affecting our stand-alone businesses. These factors include:

• a greater number of our common shares outstanding as compared to the number of common shares currently outstanding;
• risks associated with selling our four remaining office properties;
• risks associated with managing and growing the industrial portfolio; and
• risks associated with our management team managing a different asset class.

The market price of our common shares may decline as a result of the merger if we do not achieve the anticipated benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts, or the effect of the merger on our financial results is not consistent with the expectations of financial or industry analysts. In addition, following completion of the merger, our shareholders will own interests in a company managing a portfolio in a new sector with a different mix of properties, risks, and liabilities. Accordingly, our historical market prices and financial results may not be indicative for the Company after the merger.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
Not applicable.Surrender of Common Shares for Tax Withholding

During the three months ended June 30, 2021, certain of our employees surrendered common shares to satisfy their statutory tax withholding obligations in connection with the vesting of restricted common shares and restricted stock units. 
 
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The following table summarizes all of these repurchases during the three months ended June 30, 2021:
PeriodTotal Number of Shares Purchased(1)Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
April 202133,695 $28.15 N/AN/A
May 2021— $— N/AN/A
June 2021— $— N/AN/A
Total$33,695 $28.15 

(1) The number of shares repurchased represents common shares surrendered by certain of our employees to satisfy their statutory federal and state tax obligations associated with the vesting of restricted common shares and restricted stock units of beneficial interest. With respect to these shares, the price paid per share is based on the closing price of our common shares as of the date of the determination of the statutory minimum federal and state tax obligations.

Item 3. Defaults Upon Senior Securities.
 
Not applicable.


Item 4. Mine Safety Disclosures.
 
Not applicable.


Item 5. Other Information.
 
Not applicable.



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Item 6.  Exhibits.
Exhibit 

Number
Description
3.1
Articles of Amendment and Restatement of Declaration of Trust of the Company, dated July 1, 1994, as amended to date. (Incorporated by reference to the Company’s Current Report on Form 8-K filed August 1, 2014.)
3.2
Articles Supplementary, dated October 10, 2006. (Incorporated by reference to the Company’s Current Report on Form 8-K filed October 11, 2006.)
3.3
Articles Supplementary, dated May 31, 2011. (Incorporated by reference to the Company’s Current Report on Form 8-K filed May 31, 2011.)
3.4
ThirdArticles Supplementary, dated March 14, 2018. (Incorporated by reference to the Company’s Current Report on Form 8-K filed March 15, 2018.)
3.5
Fourth Amended and Restated Bylaws of the Company, adopted March 15, 2017April 2, 2020. (Incorporated by reference to the Company's QuarterlyCompany’s Current Report on Form 10-Q for the quarter ended March 31, 2017.8-K filed April 3, 2020.)
4.1
Form of Common Share Certificate. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.)
4.2
Form of 61/6 1/2% Series D Cumulative Convertible Preferred Share Certificate. (Incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.)
4.310.1
Indenture,Agreement and Plan of Merger, dated as of July 9, 1997, between the CompanyMay 4, 2021, by and State Street Bankamong Equity Commonwealth, Monmouth Real Estate Investment Corporation and Trust Company, as TrusteeRS18 LLC. (Incorporated by reference to Exhibit 4.10 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1997, File Number 001-09317.)
4.4
Supplemental Indenture No. 18, dated as of September 18, 2007, between the Company and U.S. Bank, relating to the Company’s 6.65% Senior Notes due 2018, including form thereof. (Incorporated by reference to the Company’s QuarterlyCurrent Report on Form 10-Q for the quarter ended September 30, 2007, File Number 001-09317.8-K filed May 5, 2021.)
4.531.1
Supplemental Indenture No. 20, dated as of September 17, 2010, between the Company and U.S. Bank, relating to the Company’s 5.875% Senior Notes due 2020, including form thereof. (Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010.)
4.6
Supplemental Indenture No. 21, dated as of July 25, 2012, between the Company and U.S. Bank, relating to the Company’s 5.75% Senior Notes due 2042, including form thereof. (Incorporated by reference to the Company’s Registration Statement on Form 8-A dated July 25, 2012.)
31.1
Rule 13a-14(a) Certification. (Filed herewith.)
31.2
Rule 13a-14(a) Certification. (Filed(Filed herewith.)
32.1
Section 1350 Certification. (Furnished herewith.)
101.1101The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended SeptemberJune 30, 2017,2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive (Loss) Income, (iv) the Condensed Consolidated Statements of Equity, (v) the Condensed Consolidated Statements of Cash Flows and (v)(vi) related notes to these condensed consolidated financial statements, tagged as blocks of text and in detail. (Filed herewith.)
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


(+)    Management contract or compensatory plan or arrangement.




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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EQUITY COMMONWEALTH
EQUITY COMMONWEALTH
By:
By:/s/ David A. Helfand
David A. Helfand
President and Chief Executive Officer
Dated:  October 25, 2017July 29, 2021
By:/s/ Adam S. MarkmanWilliam H. Griffiths
Adam S. MarkmanWilliam H. Griffiths
ExecutiveSenior Vice President, Chief Financial Officer and Treasurer
Dated:  October 25, 2017July 29, 2021



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