UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

☐ 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)


Maryland						04-6558834
(State or Other Jurisdiction of Incorporation or Organization)						(IRS Employer Identification No.)

Two North Riverside Plaza, Suite 2100, Chicago, IL						60606
(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 Class

Trading Symbol

Name of Each Exchange On Which Registered

Common Shares of Beneficial Interest

EQC

The New York Stock Exchange

6.50% Series D Cumulative Convertible Preferred Shares of Beneficial Interest

EQCpD

The 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 every Interactive Data File required to be submitted 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 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 growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ☐ No ý

Number of registrant’s common shares of beneficial interest, $0.01 par value per share, outstanding as of ~~October 26, 2021: 120,905,251.~~April 29, 2022: 112,670,136.

Table of Contents

EQUITY COMMONWEALTH

FORM 10-Q

~~September 30, 2021~~March 31, 2022

INDEX

Table of Contents

EXPLANATORY NOTE

References in this Quarterly Report on Form 10-Q to the “Company,” “EQC,” “we,” “us” or “our,” refer to Equity Commonwealth and its consolidated subsidiaries as of ~~September 30, 2021,~~March 31, 2022, unless the context indicates otherwise.

Table of Contents

PART I. Financial Information

Item 1. Financial Statements.

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

(unaudited)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
				(audited)					(audited)
ASSETS	ASSETS					ASSETS
Real estate properties:	Real estate properties:					Real estate properties:
Land	Land	$	44,060	$	44,060	Land	$	44,060	$	44,060
Buildings and improvements	Buildings and improvements	362,391		357,650		Buildings and improvements	362,464		362,042
		406,451		401,710			406,524		406,102
Accumulated depreciation	Accumulated depreciation	(154,230)		(143,319)		Accumulated depreciation	(159,755)		(156,439)
		252,221		258,391			246,769		249,663

Cash and cash equivalents	Cash and cash equivalents	2,961,564		2,987,225		Cash and cash equivalents	2,721,929		2,800,998

Rents receivable	Rents receivable	15,473		14,702		Rents receivable	15,644		15,549
Other assets, net	Other assets, net	15,345		17,353		Other assets, net	15,676		15,173
Total assets	Total assets	$	3,244,603	$	3,277,671	Total assets	$	3,000,018	$	3,081,383

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY

Accounts payable, accrued expenses and other	Accounts payable, accrued expenses and other	$	27,391	$	20,588	Accounts payable, accrued expenses and other	$	15,505	$	19,762

Rent collected in advance	Rent collected in advance	2,424		2,928		Rent collected in advance	3,732		3,986

Distributions payable	Distributions payable	2,954		10,991		Distributions payable	514		2,365
Total liabilities	Total liabilities	32,769		34,507		Total liabilities	19,751		26,113

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;	Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized;					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	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		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; 121,511,102 and 121,522,555 shares issued and outstanding, respectively		1,215		1,215
Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 112,670,401 and 115,205,818 shares issued and outstanding, respectively						Common shares of beneficial interest, $0.01 par value: 350,000,000 shares authorized; 112,670,401 and 115,205,818 shares issued and outstanding, respectively	1,127		1,152
Additional paid in capital	Additional paid in capital	4,282,106		4,294,632		Additional paid in capital	4,053,256		4,128,656
Cumulative net income	Cumulative net income	3,800,186		3,814,948		Cumulative net income	3,799,854		3,798,552

Cumulative common distributions	Cumulative common distributions	(4,281,754)		(4,283,668)		Cumulative common distributions	(4,280,826)		(4,281,195)
Cumulative preferred distributions	Cumulative preferred distributions	(715,703)		(709,712)		Cumulative preferred distributions	(719,697)		(717,700)
Total shareholders’ equity	Total shareholders’ equity	3,205,313		3,236,678		Total shareholders’ equity	2,972,977		3,048,728
Noncontrolling interest	Noncontrolling interest	6,521		6,486		Noncontrolling interest	7,290		6,542
Total equity	Total equity	3,211,834		3,243,164		Total equity	2,980,267		3,055,270
Total liabilities and equity	Total liabilities and equity	$	3,244,603	$	3,277,671	Total liabilities and equity	$	3,000,018	$	3,081,383

See accompanying notes.

Table of Contents

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,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Revenues:	Revenues:									Revenues:
Rental revenue	Rental revenue	$	13,141	$	15,742	$	41,424	$	48,133	Rental revenue		$	15,840	$	14,169
Other revenue	Other revenue	740		743		2,183		3,437		Other revenue		846		682
Total revenues	Total revenues	13,881		16,485		43,607		51,570		Total revenues		16,686		14,851
Expenses:	Expenses:									Expenses:
Operating expenses	Operating expenses	6,102		6,444		19,311		21,882		Operating expenses		4,533		6,621
Depreciation and amortization	Depreciation and amortization	4,588		5,137		13,371		14,649		Depreciation and amortization		4,412		4,351
General and administrative	General and administrative	7,572		7,191		30,691		26,097		General and administrative		8,002		15,729

Total expenses	Total expenses	18,262		18,772		63,373		62,628		Total expenses		16,947		26,701
Interest and other income, net	Interest and other income, net	1,599		2,606		5,068		18,944		Interest and other income, net		1,574		1,843
Interest expense (including net amortization of debt premiums and deferred financing fees of $—, $(3), $— and $(119), respectively)		—		(9)		—		(620)
Gain on early extinguishment of debt		—		131		—		131

Gain on sale of properties, net		—		—		—		446,536
(Loss) income before income taxes		(2,782)		441		(14,698)		453,933

Income (loss) before income taxes										Income (loss) before income taxes		1,313		(10,007)
Income tax expense	Income tax expense	(32)		(71)		(94)		(170)		Income tax expense		(8)		(31)
Net (loss) income		(2,814)		370		(14,792)		453,763
Net loss (income) attributable to noncontrolling interest		6		(1)		30		(803)
Net (loss) income attributable to Equity Commonwealth		(2,808)		369		(14,762)		452,960
Net income (loss)										Net income (loss)		1,305		(10,038)
Net (income) loss attributable to noncontrolling interest										Net (income) loss attributable to noncontrolling interest		(3)		20
Net income (loss) attributable to Equity Commonwealth										Net income (loss) attributable to Equity Commonwealth		1,302		(10,018)
Preferred distributions	Preferred distributions	(1,997)		(1,997)		(5,991)		(5,991)		Preferred distributions		(1,997)		(1,997)

Net (loss) income attributable to Equity Commonwealth common shareholders		$	(4,805)	$	(1,628)	$	(20,753)	$	446,969
Net loss attributable to Equity Commonwealth common shareholders										Net loss attributable to Equity Commonwealth common shareholders		$	(695)	$	(12,015)

Weighted average common shares outstanding — basic	Weighted average common shares outstanding — basic	122,190		121,673		122,128		121,824		Weighted average common shares outstanding — basic		113,740		122,002
Weighted average common shares outstanding — diluted	Weighted average common shares outstanding — diluted	122,190		121,673		122,128		126,282		Weighted average common shares outstanding — diluted		113,740		122,002
Earnings per common share attributable to Equity Commonwealth common shareholders:	Earnings per common share attributable to Equity Commonwealth common shareholders:									Earnings per common share attributable to Equity Commonwealth common shareholders:
Basic	Basic	$	(0.04)	$	(0.01)	$	(0.17)	$	3.67	Basic		$	(0.01)	$	(0.10)
Diluted	Diluted	$	(0.04)	$	(0.01)	$	(0.17)	$	3.59	Diluted		$	(0.01)	$	(0.10)

Distributions declared per common share		$	—	$	3.50	$	—	$	3.50

See accompanying notes.

Table of Contents

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(amounts in thousands, except share data)

(unaudited)


		Equity Commonwealth Shareholders																			Equity Commonwealth Shareholders
		Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total			Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total
Balance at July 1, 2021		4,915,196	$	119,263	121,940,355	$	1,219	$	4,297,197	$	3,802,994	$	(4,281,670)	$	(713,706)	$	6,539	$	3,231,836
Net loss		—	—		—	—		—		(2,808)		—		—		(6)		(2,814)
Repurchase of shares		—	—		(430,871)	(4)		(18,041)		—		—		—		—		(18,045)
Surrender of shares for tax withholding		—	—		(1,186)	—		(31)		—		—		—		—		(31)
Share-based compensation		—	—		2,804	—		2,801		—		—		—		187		2,988

Distributions		—	—		—	—		—		—		(84)		(1,997)		(19)		(2,100)

Adjustment for noncontrolling interest		—	—		—	—		180		—		—		—		(180)		—
Balance at September 30, 2021		4,915,196	$	119,263	121,511,102	$	1,215	$	4,282,106	$	3,800,186	$	(4,281,754)	$	(715,703)	$	6,521	$	3,211,834

Balance at January 1, 2021		4,915,196	$	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		—	—		—	—		—		(14,762)		—		—		(30)		(14,792)

Balance at January 1, 2022																				Balance at January 1, 2022	4,915,196	$	119,263	115,205,818	$	1,152	$	4,128,656	$	3,798,552	$	(4,281,195)	$	(717,700)	$	6,542	$	3,055,270

Net income																				Net income	—	—		—	—		—		1,302		—		—		3		1,305

Repurchase of shares	Repurchase of shares	—	—		(430,871)	(4)		(18,041)		—		—		—		—		(18,045)		Repurchase of shares	—	—		(2,851,030)	(29)		(73,715)		—		—		—		—		(73,744)
Surrender of shares for tax withholding	Surrender of shares for tax withholding	—	—		(245,215)	(2)		(7,070)		—		—		—		—		(7,072)		Surrender of shares for tax withholding	—	—		(159,566)	(1)		(4,132)		—		—		—		—		(4,133)
Share-based compensation	Share-based compensation	—	—		664,633	6		11,889		—		—		—		694		12,589		Share-based compensation	—	—		475,179	5		2,847		—		—		—		324		3,176

Contributions																				Contributions	—	—		—	—		—		—		—		—		1		1
Distributions	Distributions	—	—		—	—		—		—		1,914		(5,991)		67		(4,010)		Distributions	—	—		—	—		—		—		369		(1,997)		20		(1,608)

Adjustment for noncontrolling interest	Adjustment for noncontrolling interest	—	—		—	—		696		—		—		—		(696)		—		Adjustment for noncontrolling interest	—	—		—	—		(400)		—		—		—		400		—
Balance at September 30, 2021		4,915,196	$	119,263	121,511,102	$	1,215	$	4,282,106	$	3,800,186	$	(4,281,754)	$	(715,703)	$	6,521	$	3,211,834
Balance at March 31, 2022																				Balance at March 31, 2022	4,915,196	$	119,263	112,670,401	$	1,127	$	4,053,256	$	3,799,854	$	(4,280,826)	$	(719,697)	$	7,290	$	2,980,267


	Equity Commonwealth Shareholders
	Number of Series D Preferred Shares	Series D Preferred Shares		Number of Common Shares	Common Shares		Additional Paid in Capital		Cumulative Net Income		Cumulative Common Distributions		Cumulative Preferred Distributions		Noncontrolling Interest		Total













Balance at January 1, 2021	4,915,196	$	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	—	—		—	—		—		(10,018)		—		—		(20)		(10,038)



Surrender of shares for tax withholding	—	—		(210,334)	(2)		(6,091)		—		—		—		—		(6,093)
Share-based compensation	—	—		604,654	6		6,405		—		—		—		276		6,687

Distributions	—	—		—	—		—		—		(85)		(1,997)		(20)		(2,102)

Adjustment for noncontrolling interest	—	—		—	—		280		—		—		—		(280)		—
Balance at March 31, 2021	4,915,196	$	119,263	121,916,875	$	1,219	$	4,295,226	$	3,804,930	$	(4,283,753)	$	(711,709)	$	6,442	$	3,231,618

See accompanying notes.

Table of Contents

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	1,305	$	(10,038)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	3,776		3,769

Straight-line rental income	10		(307)

Other amortization	636		582

Share-based compensation	3,176		6,687






Change in assets and liabilities:
Rents receivable and other assets	(1,265)		269
Accounts payable, accrued expenses and other	(4,468)		535
Rent collected in advance	(254)		51

Net cash provided by operating activities	2,916		1,548

CASH FLOWS FROM INVESTING ACTIVITIES:

Real estate improvements	(650)		(3,607)







Net cash used in investing activities	(650)		(3,607)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchase and retirement of common shares	(77,877)		(6,093)





Contributions from holders of noncontrolling interest	1		—
Distributions to common shareholders	(1,462)		(6,024)
Distributions to preferred shareholders	(1,997)		(1,997)


Net cash used in financing activities	(81,335)		(14,114)

Decrease in cash, cash equivalents, and restricted cash	(79,069)		(16,173)
Cash, cash equivalents, and restricted cash at beginning of period	2,800,998		2,987,225
Cash and cash equivalents at end of period	$	2,721,929	$	2,971,052

See accompanying notes.

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)~~

~~(amounts in thousands, except share data)~~

~~(unaudited)~~

Equity Commonwealth Shareholders
Number of Series D Preferred Shares Series D Preferred
Shares Number of Common
Shares Common
Shares Additional
Paid
in
Capital Cumulative
Net
Income Cumulative
Common
Distributions Cumulative
Preferred
Distributions Noncontrolling Interest Total
Balance at July 1, 2020 4,915,196 $ 119,263 121,521,624 $ 1,215 $ 4,288,245 $ 3,816,245 $ (3,852,856) $ (705,718) $ 7,347 $ 3,673,741
Net income — — — — — 369 — — 1 370
Surrender of shares for tax withholding — — (526) — (14) — — — — (14)
Share-based compensation — — 3,412 — 2,908 — — — 412 3,320
Distributions — — — — — — (431,194) (1,997) (1,120) (434,311)
Adjustment for noncontrolling interest — — — — 154 — — — (154) —
Balance at September 30, 2020 4,915,196 $ 119,263 121,524,510 $ 1,215 $ 4,291,293 $ 3,816,614 $ (4,284,050) $ (707,715) $ 6,486 $ 3,243,106
Balance at January 1, 2020 4,915,196 $ 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 — — — — — 452,960 — — 803 453,763
Repurchase of shares — — (711,000) (7) (20,862) — — — — (20,869)
Surrender of shares for tax withholding — — (183,992) (2) (6,024) — — — — (6,026)
Share-based compensation — — 495,303 5 8,767 — — — 1,119 9,891
Contributions — — — — — — — — 1 1
Distributions — — — — — — (432,384) (5,991) (1,120) (439,495)
Redemption of noncontrolling interest — — — — — — — — (31) (31)
Adjustment for noncontrolling interest — — — — (4,419) — — — 4,419 —
Balance at September 30, 2020 4,915,196 $ 119,263 121,524,510 $ 1,215 $ 4,291,293 $ 3,816,614 $ (4,284,050) $ (707,715) $ 6,486 $ 3,243,106

~~See accompanying notes.~~

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(amounts in thousands)~~

~~(unaudited)~~
Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (14,792) $ 453,763
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation 11,471 12,292
Net amortization of debt premiums and deferred financing fees — (119)
Straight-line rental income (1,277) 346
Other amortization 1,900 2,357
Amortization of right-of-use asset — 572
Share-based compensation 12,589 9,891
Gain on early extinguishment of debt — (131)
Net gain on sale of properties — (446,536)
Change in assets and liabilities:
Rents receivable and other assets 407 (1,015)
Accounts payable, accrued expenses and other 735 1,556
Rent collected in advance (504) (1,266)
Net cash provided by operating activities 10,529 31,710
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate improvements (5,979) (7,878)
Proceeds from sale of properties, net — 655,053
Net cash (used in) provided by investing activities (5,979) 647,175
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase and retirement of common shares (18,163) (26,895)
Payments on borrowings — (25,441)
Contributions from holders of noncontrolling interest — 1
Distributions to common shareholders (6,024) (1,936)
Distributions to preferred shareholders (5,991) (5,991)
Distributions to holders of noncontrolling interest (33) (997)
Redemption of noncontrolling interest — (31)
Net cash used in financing activities (30,211) (61,290)
(Decrease) increase in cash, cash equivalents, and restricted cash (25,661) 617,595
Cash, cash equivalents, and restricted cash at beginning of period 2,987,225 2,800,645
Cash and cash equivalents at end of period $ 2,961,564 $ 3,418,240

~~See accompanying notes.~~

Table of Contents

EQUITY COMMONWEALTH

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(amounts in thousands)

(unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
SUPPLEMENTAL CASH FLOW INFORMATION:	SUPPLEMENTAL CASH FLOW INFORMATION:					SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$	—	$	843
Taxes paid (refunded), net		244		(1,555)

Taxes refunded, net						Taxes refunded, net	(12)		(12)

NON-CASH INVESTING ACTIVITIES:	NON-CASH INVESTING ACTIVITIES:					NON-CASH INVESTING ACTIVITIES:

Accrued capital expenditures	Accrued capital expenditures	$	169	$	980	Accrued capital expenditures	$	703	$	840

NON-CASH FINANCING ACTIVITIES:	NON-CASH FINANCING ACTIVITIES:					NON-CASH FINANCING ACTIVITIES:
Distributions payable	Distributions payable	$	2,954	$	438,105	Distributions payable	$	514	$	5,072

See accompanying notes.

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Business

Equity Commonwealth, 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 office properties in the United States.

The Company operates in an umbrella partnership real estate investment trust, or UPREIT, and conducts substantially all of its activities through EQC Operating Trust, a Maryland real estate investment trust, or the Operating Trust. The Company beneficially owned ~~99.8%~~99.76% of the outstanding shares of beneficial interest, designated as units, in the Operating Trust, or OP Units, as of ~~September 30, 2021,~~March 31, 2022, and the Company is the sole trustee of the Operating Trust. As the sole trustee, the Company generally has the 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 ~~September 30, 2021,~~March 31, 2022, our portfolio consisted of 4 properties (8 buildings), with a combined 1.5 million square feet. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$3.0~~$2.7 billion of cash and cash equivalents.

On May 4, 2021, we entered into a merger agreement to acquire Monmouth Real Estate Investment Corporation (NYSE: MNR), or Monmouth, a publicly-traded industrial REIT. On August 31, 2021, following Monmouth’s failure to obtain shareholder approval of the merger, in accordance with the terms of the merger agreement, we terminated the merger agreement and were reimbursed $10.0 million by Monmouth for our out-of-pocket expenses. Total transaction costs net of the reimbursement resulted in $0.1 million of general and administrative expense recorded in the three and nine months ended September 30, 2021. For more information regarding the termination of the merger agreement, please read the Current Report on Form 8-K filed with the United States Securities and Exchange Commission on August 31, 2021.

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 appropriate. 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, or our Annual Report, for the year ended December 31, ~~2020.~~2021. 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. Certain reclassifications have been made to the prior 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 assessment of the collectability of rental revenue, purchase price allocations, useful lives of fixed assets and impairment of real estate and intangible assets.

Dollar amounts presented may be approximate. Share amounts are presented in whole numbers, except where noted.

Note 3. Real Estate Properties

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we made improvements, excluding tenant-funded improvements, to our properties totaling ~~$5.2~~$0.8 million and ~~$7.5~~$3.5 million, respectively.

Property Dispositions:

We did not sell any properties during the three months ended March 31, 2022 or three months ended March 31, 2021.

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

~~Property Dispositions:~~

We did not sell any properties during the nine months ended September 30, 2021. During the nine months ended September 30, 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):
Property Date Sold Number of
Properties Number of
Buildings Square
Footage Gross Sale Price(1) Gain on Sale
109 Brookline Avenue February 2020 1 1 285,556 $ 270,000 $ 225,190
333 108th Avenue NE(2)
March 2020 1 1 435,406 401,500 194,424
Georgetown-Green and Harris Buildings May 2020 1 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.~~

~~(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 income (loss) related to this property was $0 and $21,000 for the three months ended September 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 nine months ended September 30, 2021 and 2020, respectively.

Lease Payments

The FASB has issued additional guidance for companies to account for any COVID-19 related rent concessions in the form 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 nine months ended September 30, 2021, we deferred collection of $0 and $20,000, respectively, of rental income on revenue that was recognized in that period.

Rental revenue consists of the following (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Lease payments	Lease payments	$	8,989	$	9,692	$	27,438	$	31,445	Lease payments		$	10,103	$	9,257
Variable lease payments	Variable lease payments	4,152		6,050		13,986		16,688		Variable lease payments		5,737		4,912
Rental revenue	Rental revenue	$	13,141	$	15,742	$	41,424	$	48,133	Rental revenue		$	15,840	$	14,169

Note 4. Shareholders’ Equity

Common Share Issuances:

See Note 7 for information regarding equity issuances related to share-based compensation.

Common Share Repurchases:

On March 1, 2021, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares through June 30, 2022. On December 14, 2021, our Board of Trustees authorized the repurchase of up to an additional $150.0 million of our outstanding common shares through December 31, 2022. On March 15, 2022, orour Board of Trustees authorized the ~~March 2021 Authorization.~~repurchase of up to an additional $150.0 million of our outstanding common shares through June 30, 2023. During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we repurchased ~~430,871~~2,851,030 of our common shares under the ~~March~~ 2021 ~~Authorization,~~authorizations, at a weighted average price of ~~$25.70~~$25.83 per share, for a total investment of ~~$11.1~~$73.6 million. As of ~~September 30, 2021,~~March 31, 2022, we have ~~$138.9~~$202.2 million of remaining authorization available under our share repurchase program.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ certain of our employees and former employees surrendered ~~245,215~~159,566 and ~~183,992~~210,334 common shares owned by them, respectively, to satisfy their statutory tax withholding obligations in connection with the vesting of such common shares pursuant to our equity compensation plans.

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Common Share and Unit Distribution:

In February ~~2021,~~2022, the number of earned awards for recipients of the Company’s restricted stock units granted in January ~~2018~~2019 was determined. Pursuant to the terms of such awards, we paid a one-time catch-up cash distribution to these recipients in the aggregate amount of ~~$6.0~~$1.5 million for distributions to common shareholders declared by our Board of Trustees during such ~~awards'~~awards’ performance measurement period.

Preferred Share Distributions:

In ~~2021,~~2022, our Board of Trustees declared distributions on our series D preferred shares to date as follows:

Declaration Date

Record Date

Payment Date

Series D Dividend Per Share

January 11, ~~2021~~2022

January 28, ~~2021~~2022

February ~~16, 2021~~15, 2022

0.40625

April ~~9, 2021~~11, 2022

April 29, ~~2021~~2022

May ~~17, 2021~~16, 2022

0.40625

~~July 6, 2021~~

~~July 30, 2021~~

~~August 16, 2021~~

~~0.40625~~

~~October 7, 2021~~

~~October 29, 2021~~

~~November 15, 2021~~

~~0.40625~~

Note 5. Noncontrolling Interest

Noncontrolling interest represents the portion of the OP Units not beneficially owned by the Company. The ownership of an OP Unit and a common share of beneficial 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 1-for-one basis. As sole trustee, the Company has the sole discretion to elect whether the 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 ~~September 30, 2021,~~March 31, 2022, the portion of the Operating Trust not beneficially owned by the

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Company is in the form of OP Units and LTIP Units (see Note 7 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 ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:


		Common Shares	OP Units and LTIP Units	Total			Common Shares	OP Units and LTIP Units	Total
Outstanding at January 1, 2021		121,522,555	243,516	121,766,071
Outstanding at January 1, 2022						Outstanding at January 1, 2022	115,205,818	247,217	115,453,035
Repurchase and surrender of shares	Repurchase and surrender of shares	(676,086)	—	(676,086)		Repurchase and surrender of shares	(3,010,596)	—	(3,010,596)

Share-based compensation grants and vesting, net of forfeitures	Share-based compensation grants and vesting, net of forfeitures	664,633	3,701	668,334		Share-based compensation grants and vesting, net of forfeitures	475,179	29,071	504,250
Outstanding at September 30, 2021		121,511,102	247,217	121,758,319
Outstanding at March 31, 2022						Outstanding at March 31, 2022	112,670,401	276,288	112,946,689
Noncontrolling ownership interest in the Operating Trust	Noncontrolling ownership interest in the Operating Trust			0.20	%	Noncontrolling ownership interest in the Operating Trust			0.24	%

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 Noncontrolling 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 ~~99.80% and 99.80%~~99.76% for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, respectively.

Note 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. However, we are subject to certain state and local taxes without regard to our REIT status.

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Our provision for income taxes consists of the following (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Current:	Current:									Current:
State and local	State and local	$	(32)	$	(71)	$	(94)	$	(170)	State and local		$	(8)	$	(31)

Income tax expense	Income tax expense	$	(32)	$	(71)	$	(94)	$	(170)	Income tax expense		$	(8)	$	(31)

Note 7. Share-Based Compensation

Recipients of the Company’s restricted shares have the same voting rights as any other common shareholder. During the period of restriction, holders of unvested restricted shares 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.~~service period determined by the Compensation Committee of our Board of Trustees, or the Compensation Committee.

Recipients of the Company’s restricted stock units, 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 to 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 awards with a service condition and recipients may earn RSUs based on the Company’s total shareholder return, or TSR, relative to the TSRs of the companies that comprise the Nareit Office Index over a three-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 2 tranches with 50% of the earned award vesting following 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

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

approximately one year 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. 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 1-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.

~~2021~~2022 Equity Award Activity

During the ~~nine~~three months ended ~~September 30, 2021, 523,662~~March 31, 2022, 382,606 RSUs vested, and, as a result, we issued ~~523,662~~382,606 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations (see Note 4).

On ~~June 23, 2021,~~January 26, 2022, the Compensation Committee approved grants in ~~accordance with~~the aggregate amount of 29,071 time-based LTIP Units, 59,024 market-based LTIP Units at target (147,117 market-based LTIP Units at maximum) 92,573 restricted shares and 187,951 RSUs at target (468,468 RSUs at maximum) to the Company’s ~~compensation program for independent~~officers, certain employees, and to Mr. Zell, the Chairman of our Board of Trustees, ~~the Committee awarded each of the 6 independent Trustees $0.1 million in restricted shares or time-based LTIP Units~~ as part of their compensation for ~~the 2021-2022~~fiscal year ~~of service on the Board of Trustees. These awards equated to 3,701~~2021. The restricted shares orand time-based LTIP Units ~~per Trustee, for a total of 18,505 shares and 3,701 time-based LTIP Units,~~were valued at ~~$27.02~~$25.50 per ~~share and~~ share/unit, the closing price of our common shares on the ~~New York Stock Exchange, or the~~ NYSE on ~~that day. These shares~~the grant date. The assumptions and ~~time-based~~fair value for the RSUs and market-based LTIP Units ~~vest one year after~~granted during the ~~date of~~three months ended March 31, 2022 are included in the ~~award,~~following table on ~~June 23, 2022.~~a per share/unit basis.


	2022
Fair value of market-based awards granted	$	35.11
Expected term (years)	4
Expected volatility	17.04		%

Risk-free rate	1.39		%

2021 Equity Award Activity

During the three months ended March 31, 2021, 482,188 RSUs vested, and, as a result, we issued 482,188 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations.

On January 25, 2021, the Compensation Committee approved grants in the aggregate amount of 122,466 restricted shares and 248,646 RSUs at target (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 2020. The restricted shares were valued at $28.25 per share, the closing price of our common shares on the NYSE on the grant date. The ~~assumptions and fair value for the~~ RSUs ~~and~~

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

~~market-based LTIP Units granted during the nine months ended September 30, 2021 are included in the following table on a per share basis.~~
2021
Fair value of market-based awards granted $ 37.87
Expected term (years) 4
Expected volatility 16.99 %
Risk-free rate 0.17 %

~~2020 Equity Award Activity~~

During the nine months ended September 30, 2020, 388,615 RSUs vested, and, as a result, we issued 388,615 common shares, prior to certain employees surrendering their common shares to satisfy tax withholding obligations.

On January 27, 2020, the Committee approved grants in the aggregate amount of 20,116 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 172,697 RSUs at target (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 2019. The restricted shares and time-based LTIP Units were valued at ~~$32.81~~$37.87 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.

On June 23, 2020, in accordance with the Company’s compensation program for independent Trustees, the Committee awarded each of the then-existing 9 independent Trustees $0.1 million in restricted shares or time-based LTIP Units as part of their compensation for the 2020-2021 year of service on the Board of Trustees. These awards equated to 3,184 shares or time-based LTIP Units per Trustee, for a total of 19,104 shares and 9,552 time-based LTIP Units, valued at $31.41 per share and unit, the closing price of our common shares on the NYSE on that day. These shares and time-based LTIP Units vested on June 23, 2021.

On September 16, 2020, following the resignation of one of our then-existing nine independent trustees, our Board of Trustees appointed a new independent Trustee. In accordance with the Company's compensation plan for independent Trustees, the Committee awarded this Trustee $0.1 million in restricted shares as part of her prorated compensation for the 2020-2021 year of service on the Board of Trustees. This award equated to 2,526 shares valued at $30.39 per share, the closing price of our common shares on the NYSE on that day. These shares vested on June 23, 2021.

Outstanding Equity Awards

As of ~~September 30, 2021,~~March 31, 2022, the estimated future compensation expense for all unvested restricted shares and time-based LTIP Units was ~~$5.9~~$7.1 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~~Units is approximately ~~2.4~~2.8 years.

As of ~~September 30, 2021,~~March 31, 2022, the estimated future compensation expense for all unvested RSUs and market-based LTIP Units was ~~$12.4~~$16.9 million. The weighted average period over which the future compensation expense will be recorded for the RSUs and market-based LTIP Units is approximately ~~2.2~~2.6 years.

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recorded ~~$3.0~~$3.2 million and ~~$3.3 million, respectively, and during the nine months ended September 30, 2021 and 2020, we recorded $12.6 million and $9.9~~$6.7 million, respectively, of compensation expense, net of forfeitures, in general and administrative expense for grants to our trustees, eligible consultants and employees related to our equity compensation plans. Compensation expense recorded during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ includes ~~$3.5~~$0.3 million and ~~$17,000,~~$3.4 million, respectively, of accelerated vesting due to staffing reductions. Forfeitures are recognized as they occur. At ~~September 30, 2021, 1,526,730~~March 31, 2022, 1,148,195 shares/units remain available for issuance under the Equity Commonwealth 2015 Omnibus Incentive Plan, as amended.

~~Table of Contents~~

~~EQUITY COMMONWEALTH~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)~~

Note 8. Fair Value of Assets and Liabilities

As of ~~September 30, 2021,~~March 31, 2022, we do not have any assets or liabilities measured at fair value.

Financial Instruments

Our financial instruments include our cash and cash equivalents. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the fair value of these financial instruments was not different from their carrying values.

Other financial instruments that potentially subject us to concentrations of credit risk consist principally of rents receivable. As of ~~September 30, 2021,~~March 31, 2022, no single tenant of ours is responsible for more than 10% of our consolidated revenues.

1210

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Numerator for earnings per common share - basic:	Numerator for earnings per common share - basic:									Numerator for earnings per common share - basic:
Net (loss) income		$	(2,814)	$	370	$	(14,792)	$	453,763
Net loss (income) attributable to noncontrolling interest		6		(1)		30		(803)
Net income (loss)										Net income (loss)		$	1,305	$	(10,038)
Net (income) loss attributable to noncontrolling interest										Net (income) loss attributable to noncontrolling interest		(3)		20
Preferred distributions	Preferred distributions	(1,997)		(1,997)		(5,991)		(5,991)		Preferred distributions		(1,997)		(1,997)

Numerator for net (loss) income per share - basic		$	(4,805)	$	(1,628)	$	(20,753)	$	446,969
Numerator for net loss per share - basic										Numerator for net loss per share - basic		$	(695)	$	(12,015)

Numerator for earnings per common share - diluted:	Numerator for earnings per common share - diluted:									Numerator for earnings per common share - diluted:
Net (loss) income		$	(2,814)	$	370	$	(14,792)	$	453,763
Net loss (income) attributable to noncontrolling interests		6		(1)		30		(803)
Net income (loss)										Net income (loss)		$	1,305	$	(10,038)
Net (income) loss attributable to noncontrolling interest										Net (income) loss attributable to noncontrolling interest		(3)		20
Preferred distributions	Preferred distributions	(1,997)		(1,997)		(5,991)		—		Preferred distributions		(1,997)		(1,997)

Numerator for net (loss) income per share - diluted		$	(4,805)	$	(1,628)	$	(20,753)	$	452,960
Numerator for net loss per share - diluted										Numerator for net loss per share - diluted		$	(695)	$	(12,015)

Denominator for earnings per common share - basic and diluted:	Denominator for earnings per common share - basic and diluted:									Denominator for earnings per common share - basic and diluted:
Weighted average number of common shares outstanding - basic(1)	Weighted average number of common shares outstanding - basic(1)	122,190		121,673		122,128		121,824		Weighted average number of common shares outstanding - basic(1)		113,740		122,002
RSUs(2)		—		—		—		1,525
LTIP Units(3)		—		—		—		76

Series D preferred shares; 6.50% cumulative convertible		—		—		—		2,857

Weighted average number of common shares outstanding - diluted	Weighted average number of common shares outstanding - diluted	122,190		121,673		122,128		126,282		Weighted average number of common shares outstanding - diluted		113,740		122,002

Net (loss) income per common share attributable to Equity Commonwealth common shareholders:
Net loss per common share attributable to Equity Commonwealth common shareholders:										Net loss per common share attributable to Equity Commonwealth common shareholders:
Basic	Basic	$	(0.04)	$	(0.01)	$	(0.17)	$	3.67	Basic		$	(0.01)	$	(0.10)
Diluted	Diluted	$	(0.04)	$	(0.01)	$	(0.17)	$	3.59	Diluted		$	(0.01)	$	(0.10)

Anti-dilutive securities(4):
Anti-dilutive securities(2):										Anti-dilutive securities(2):
Effect of Series D preferred shares; 6.50% cumulative convertible	Effect of Series D preferred shares; 6.50% cumulative convertible	3,237		2,857		3,237		—		Effect of Series D preferred shares; 6.50% cumulative convertible		3,237		3,237
Effect of RSUs~~(2)~~(3)	Effect of RSUs~~(2)~~(3)	490		1,525		601		—		Effect of RSUs~~(2)~~(3)		357		848
Effect of LTIP Units(4)	Effect of LTIP Units(4)	66		206		93		115		Effect of LTIP Units(4)		148		149
Effect of OP Units(5)	Effect of OP Units(5)	223		113		203		99		Effect of OP Units(5)		223		170

(1) The three months ended ~~September 30,~~March 31, 2022 and 2021, include 162 and ~~2020, include 262 and 150 weighted-average, unvested, earned RSUs, respectively, and the nine months ended September 30, 2021 and 2020, include 255 and 159~~236 weighted-average, unvested, earned RSUs, respectively.

(2) The Series D preferred shares are excluded from the diluted earnings per share calculation for the three months ended March 31, 2022 and 2021, 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 months ended March 31, 2022 and 2021, because including them results in anti-dilution.

(3) Represents the weighted-average number of common shares that would have been issued if the quarter-end was the measurement date for unvested, unearned RSUs.

~~(3)~~(4) 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~~(5) Beneficial interests in the diluted earnings per share calculation for the three and nine months ended September 30, 2021 and for the three months ended September 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. TheOperating Trust.

1311

Table of Contents

EQUITY COMMONWEALTH

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

RSUs and market-based LTIP Units are excluded from the diluted earnings per share calculation for the three and nine months ended September 30, 2021 and for the three months ended September 30, 2020, because including them results in anti-dilution.

~~(5) Beneficial interests in the Operating Trust.~~

Note 10. Segment Information

Our primary business is the ownership and operation of office properties, and we currently have 1 reportable segment. NaN percent of our revenues for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 were from office properties.

Note 11. Related Person Transactions

The following discussion includes a description of our related person transactions for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

Two North Riverside Plaza Joint Venture Limited Partnership: We entered 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 was approximately five years, expiring on December 31, 2020. We made 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 had a storage lease with Two North Riverside Plaza Joint Venture Limited Partnership for storage space in the basement of Two North Riverside ~~Plaza. We~~Plaza, which 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~~2021, with no renewal options. The lease payment for the extended term was $0.3 million. In December 2021, we entered into a second amendment to the 20th/21st Floor Office Lease extending the lease term for one year, through December 31, 2022, with no renewal options. The lease payment for the second extended term is ~~$0.3~~$0.4 million.

During the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized expense of $0.1 million and ~~$0.2 million, respectively, and during the nine months ended September 30, 2021 and 2020, we recognized expense of $0.2 million and $0.7~~$0.1 million, respectively, pursuant to the 20th/21st Floor Office ~~Lease and the related storage space.~~Lease. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we did not have any amounts due to Two North Riverside Plaza Joint Venture Limited Partnership pursuant to the 20th/21st Floor Office Lease.

Note 12. Subsequent Events

Preferred Share Distribution

On ~~October 7, 2021,~~April 11, 2022, our Board of Trustees declared a dividend of $0.40625 per series D preferred share, which will be paid on ~~November 15, 2021~~May 16, 2022 to shareholders of record on ~~October~~April 29, ~~2021.~~2022.

Common Share Repurchases

From ~~October~~April 1, ~~2021~~2022 through ~~October 26, 2021,~~May 3, 2022, we repurchased ~~605,506 of our common shares under the March 2021 Authorization, at a weighted average price of $25.93 per share, for a total investment of $15.7 million. In total, we have repurchased 1,036,377~~156,400 of our common shares at a weighted average price of ~~$25.83~~$25.98 per share, ~~through October 26, 2021 under the March 2021 Authorization and~~for a total investment of $4.1 million. We have ~~$123.2~~$198.2 million of remaining authorization available under our share repurchase program.

1412

Table of 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 including, but not limited to, statements pertaining to our anticipated business strategies, goals, policies and objectives, capital resources and financing, portfolio performance, lease expiration schedules, results of operations or anticipated market conditions, including our statements regarding the overall impact of COVID-19, and changing laws, statutes, regulations, and the interpretations thereof, on the ~~foregoing to the extent we make any such statements.~~foregoing. 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 some cases, you~~You can identify forward-looking statements by the use of forward-looking terminology, ~~such as~~including but not limited to, “may,” “will,” “should,” “could,” “would,” “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~~Any 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 most recent Annual Report and in Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q.

OVERVIEW

We are an internally managed and self-advised REIT primarily engaged in the ownership and operation of office properties in the United States. We were formed in 1986 under Maryland law. The Company operates as an UPREIT, conducting substantially all of its activities through the Operating Trust. As of ~~September 30, 2021,~~March 31, 2022, the Company beneficially owned ~~99.8%~~99.76% of the outstanding OP Units.

At ~~September 30, 2021,~~March 31, 2022, our portfolio consisted of four properties (eight buildings), with a combined 1.5 million square feet. As of ~~September 30, 2021,~~March 31, 2022, we had ~~$3.0~~$2.7 billion of cash and cash equivalents.

We use leasing and 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 ~~September 30, 2021,~~March 31, 2022, our overall portfolio was ~~82.5%~~83.3% leased. During the three months ended ~~September 30, 2021,~~March 31, 2022, we entered into leases for ~~9,000~~40,000 square feet, including a lease ~~renewal~~renewals for ~~3,000~~30,000 square feet and a new ~~leases~~lease for ~~6,000~~10,000 square feet. The renewal ~~lease~~leases entered into during the three months ended ~~September 30, 2021~~March 31, 2022 had cash and GAAP rental rates that were approximately ~~1.7%~~2.8% higher and 4.9% lower, respectively, compared to prior rental rates for the same space, and new leases entered into during the three months ended September 30, 2021 had weighted average cash and GAAP rental rates that were approximately 0.4% lower and 4.0%5.0% higher, respectively, compared to prior rental rates for the same space. The new lease entered into during the three months ended March 31, 2022 was excluded from the weighted average cash and GAAP rental rate calculations because the suite was vacant longer than 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 length of term for the newly executed leases compared to the prior leases. Percent change in GAAP and cash rents is a comparison of current rent, including estimated tenant expense reimbursements, if any, to the rent, including actual/projected tenant expense reimbursements, if any, last received for the 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., or CBRE, to provide property management 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

1513

Table of Contents

coordinating and overseeing the completion of tenant improvements and other capital projects at the properties. We reimburse CBRE for certain expenses incurred in the performance of its duties, including certain personnel and equipment costs. For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we incurred expenses of ~~$0.7~~$0.8 million and ~~$0.7 million, respectively, and for the nine months ended September 30, 2021 and 2020, we incurred expenses of $2.2 million and $2.5~~$0.8 million, respectively, related to our property management agreement with CBRE, for property management fees, typically calculated as a percentage of the properties’ revenues, and salary and benefits reimbursements for property personnel, such as property managers, engineers and maintenance staff. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had amounts payable pursuant to these services of $0.3 million and $0.3 million, respectively.

After executing on our disposition strategy and evaluating a variety of opportunities to invest our capital, on May 4, 2021, we entered into a merger agreement to acquire Monmouth Real Estate Investment Corporation, or Monmouth, a publicly-traded industrial REIT. On August 31, 2021, following Monmouth’s failure to obtain shareholder approval of the merger, in accordance with the terms of the merger agreement, we terminated the merger agreement.

Following the termination of the merger agreement with Monmouth, we ~~have~~ shifted our focus to capital allocation and are continuing to evaluate investment opportunities. We are seeking to use the strength and liquidity of our balance sheet for investments in high-quality assets or businesses in a range of property types that offer a compelling risk-reward profile. We may also determine to sell, liquidate or otherwise exit our business if we believe doing so will maximize shareholder value.

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. Many of our employees and the ~~vast~~ majority of 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~~While we cannot make any assurances as to the impact of COVID-19 on our business going forward, for the three months ended ~~September 30, 2021,~~March 31, 2022, in our comparable property portfolio, we collected ~~97% of contractual rents. For October, to date, we have collected 96%~~approximately 100% 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 ~~2021~~2022 and ~~2020~~2021 are as follows (square feet in thousands):


		All Properties				Comparable Properties(1)					All Properties				Comparable Properties(1)
		As of September 30,				As of September 30,					As of March 31,				As of March 31,
		2021		2020		2021		2020			2022		2021		2022		2021
Total properties	Total properties	4		4		4		4		Total properties	4		4		4		4
Total square feet	Total square feet	1,507		1,507		1,507		1,507		Total square feet	1,507		1,507		1,507		1,507
Percent leased(2)	Percent leased(2)	82.5	%	87.7	%	82.5	%	87.7	%	Percent leased(2)	83.3	%	85.6	%	83.3	%	85.6	%

(1)Based on properties owned continuously from January 1, ~~2020~~2021 through ~~September 30, 2021, and excludes properties sold.~~March 31, 2022.

(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.

The weighted average lease term based on square feet for leases entered into during the three months ended ~~September 30, 2021~~March 31, 2022 was ~~3.3~~5.2 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 ~~September 30, 2021~~March 31, 2022 totaled ~~$0.1~~$1.4 million, or ~~$13.50~~$35.71 per square foot on average (approximately ~~$4.14~~$6.85 per square foot per year of the lease term).

As of ~~September 30, 2021,~~March 31, 2022, approximately ~~3.1%~~5.7% of our leased square feet and ~~3.9%~~6.7% of our annualized rental revenue, determined as set forth below, are included in leases scheduled to expire through December 31, ~~2021.~~2022. 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 ~~2021,~~2022, that have not been backfilled, are ~~slightly above~~approximately market. Lease expirations by year, as of ~~September 30, 2021,~~March 31, 2022, are as follows (square feet and

1614

Table of Contents

dollars in thousands):


Year	Year	Number 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		Year	Number 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
2021		3	38	3.1	%	3.1	%	$	2,169	3.9	%	3.9	%
2022	2022	13	108	8.7	%	11.8	%	5,658		10.1	%	14.0	%	2022	9	71	5.7	%	5.7	%	$	3,798	6.7	%	6.7	%
2023	2023	18	199	16.0	%	27.8	%	8,983		16.1	%	30.1	%	2023	18	227	18.1	%	23.8	%	10,405		18.2	%	24.9	%
2024	2024	17	216	17.3	%	45.1	%	9,918		17.8	%	47.9	%	2024	18	227	18.1	%	41.9	%	10,674		18.7	%	43.6	%
2025	2025	11	145	11.7	%	56.8	%	5,558		10.0	%	57.9	%	2025	12	155	12.2	%	54.1	%	7,170		12.6	%	56.2	%
2026	2026	8	76	6.1	%	62.9	%	2,942		5.3	%	63.2	%	2026	7	44	3.5	%	57.6	%	2,246		3.9	%	60.1	%
2027	2027	12	124	10.0	%	72.9	%	5,088		9.1	%	72.3	%	2027	14	176	14.0	%	71.6	%	6,613		11.6	%	71.7	%
2028	2028	4	63	5.0	%	77.9	%	3,202		5.7	%	78.0	%	2028	6	75	6.0	%	77.6	%	3,253		5.7	%	77.4	%
2029	2029	6	139	11.2	%	89.1	%	6,699		11.9	%	89.9	%	2029	7	145	11.5	%	89.1	%	6,970		12.2	%	89.6	%
2030	2030	4	66	5.3	%	94.4	%	2,771		5.0	%	94.9	%	2030	4	66	5.3	%	94.4	%	2,891		5.1	%	94.7	%
2031														2031	1	12	1.0	%	95.4	%	580		1.0	%	95.7	%
Thereafter	Thereafter	5	70	5.6	%	100.0	%	2,835		5.1	%	100.0	%	Thereafter	4	58	4.6	%	100.0	%	2,470		4.3	%	100.0	%
		101	1,244	100.0	%			$	55,823	100.0	%				100	1,256	100.0	%			$	57,070	100.0	%

Weighted average remaining lease term (in years):	Weighted average remaining lease term (in years):		4.4					4.3						Weighted average remaining lease term (in years):		4.1					4.1

(1)Tenants with leases expiring in multiple years are counted in each year they expire.

(2)Leased Square Feet as of ~~September 30, 2021~~March 31, 2022 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.

(3)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of ~~September 30, 2021,~~March 31, 2022, 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.

~~Table of Contents~~

The principal source of funds for our operations is rents from tenants at our properties. Rents are generally received from our tenants monthly in advance. As of ~~September 30, 2021,~~March 31, 2022, tenants representing 2.5% or more of our total annualized rental revenue were as follows (square feet in thousands):


Tenant	Tenant		Square Feet(1)	% of Total Leased Square Feet(1)		% of Annualized Rental Revenue(2)		Weighted Average Remaining Lease Term	Tenant		Square Feet(1)	% of Total Leased Square Feet(1)		% of Annualized Rental Revenue(2)		Weighted Average Remaining Lease Term
1.	1.	Equinor Energy Services, Inc.	80	6.4	%	6.0	%	2.3	1.	Equinor Energy Services, Inc.	80	6.4	%	6.1	%	1.8
2.	2.	KPMG, LLP	71	5.7	%	5.4	%	7.7	2.	KPMG, LLP	71	5.7	%	5.3	%	7.2
3.	3.	Crowdstrike, Inc.	36	2.9	%	3.9	%	3.1	3.	Salesforce.com, Inc.	65	5.2	%	5.2	%	3.7
4.	4.	CBRE, Inc.	40	3.2	%	3.6	%	6.5	4.	Wunderman Thompson, LLC(3)	39	3.1	%	4.0	%	3.5
5.	5.	Salesforce.com, Inc.(3)	65	5.2	%	3.6	%	4.2	5.	Crowdstrike, Inc.	36	2.9	%	4.0	%	2.6
6.	6.	Kazoo, Inc.(4)	26	2.1	%	2.8	%	1.7	6.	CBRE, Inc.	40	3.2	%	3.9	%	6.0
7.	7.	Alden Torch Financial, LLC	34	2.7	%	2.7	%	5.4	7.	Alden Torch Financial, LLC	34	2.7	%	3.5	%	5.0
8.	8.	Capitol Services, Inc.	26	2.1	%	2.6	%	0.8	8.	Capitol Services, Inc.	26	2.1	%	2.7	%	0.4
9.		Young & Rubicam LLC	24	1.9	%	2.5	%	0.3
		Total	402	32.2	%	33.1	%	4.0		Total	391	31.3	%	34.7	%	4.0

Table of Contents

(1)Total Leased Square Feet as of ~~September 30, 2021~~March 31, 2022 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.

(2)Annualized rental revenue is annualized contractual rents from our tenants pursuant to leases which have commenced as of ~~September 30, 2021,~~March 31, 2022, 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.

(3)~~Our lease with Salesforce.com, Inc. had partially commenced as of September 30, 2021.~~ Approximately ~~44,000~~24,000 square feet ~~commenced as~~ of ~~December 31, 2020, and the~~Wunderman Thompson, LLC’s space expire in 2027. The remaining ~~21,000~~15,000 square feet ~~commenced~~expire in ~~October of 2021.~~

~~(4)During the second quarter of 2021, Kazoo, Inc. signed a five-year extension for approximately 13,000 square feet. The extension commenced in October of 2021.~~2022.

Regulation FD Disclosures

We 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 Company to monitor these distribution channels for material disclosures. Our website address is included in this Quarterly Report as a textual reference only and the information on the website is not incorporated by reference into this Quarterly Report.

1816

Table of Contents

RESULTS OF OPERATIONS

Three Months Ended ~~September 30, 2021,~~March 31, 2022, Compared to Three Months Ended ~~September 30, 2020~~March 31, 2021


		Comparable Properties Results(1)								Other Properties Results(2)				Consolidated Results									Comparable Properties Results(1)								Other Properties Results(2)				Consolidated Results
		Three Months Ended September 30,																					Three Months Ended March 31,
		2021		2020		$ Change		% Change		2021		2020		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change		2022		2021		2022		2021		$ Change		% Change
		(dollars in thousands)																					(dollars in thousands)
Rental revenue	Rental revenue	$	13,142	$	15,540	$	(2,398)	(15.4)	%	$	(1)	$	202	$	13,141	$	15,742	$	(2,601)	(16.5)	%	Rental revenue	$	15,989	$	14,026	$	1,963	14.0	%	$	(149)	$	143	$	15,840	$	14,169	$	1,671	11.8	%
Other revenue	Other revenue	739		736		3		0.4	%	1		7		740		743		(3)		(0.4)	%	Other revenue	836		682		154		22.6	%	10		—		846		682		164		24.0	%
Operating expenses	Operating expenses	(6,090)		(6,452)		362		(5.6)	%	(12)		8		(6,102)		(6,444)		342		(5.3)	%	Operating expenses	(6,371)		(6,602)		231		(3.5)	%	1,838		(19)		(4,533)		(6,621)		2,088		(31.5)	%
Net operating income(3)	Net operating income(3)	$	7,791	$	9,824	$	(2,033)	(20.7)	%	$	(12)	$	217	7,779		10,041		(2,262)		(22.5)	%	Net operating income(3)	$	10,454	$	8,106	$	2,348	29.0	%	$	1,699	$	124	12,153		8,230		3,923		47.7	%
Other expenses:	Other expenses:																					Other expenses:
Depreciation and amortization	Depreciation and amortization													4,588		5,137		(549)		(10.7)	%	Depreciation and amortization													4,412		4,351		61		1.4	%
General and administrative	General and administrative													7,572		7,191		381		5.3	%	General and administrative													8,002		15,729		(7,727)		(49.1)	%

Total other expenses	Total other expenses													12,160		12,328		(168)		(1.4)	%	Total other expenses													12,414		20,080		(7,666)		(38.2)	%
Interest and other income, net	Interest and other income, net													1,599		2,606		(1,007)		(38.6)	%	Interest and other income, net													1,574		1,843		(269)		(14.6)	%
Interest expense														—		(9)		9		(100.0)	%
Gain on early extinguishment of debt														—		131		(131)		(100.0)	%

(Loss) income before income taxes														(2,782)		441		(3,223)		(730.8)	%

Income (loss) before income taxes																						Income (loss) before income taxes													1,313		(10,007)		11,320		(113.1)	%
Income tax expense	Income tax expense													(32)		(71)		39		(54.9)	%	Income tax expense													(8)		(31)		23		(74.2)	%
Net (loss) income														(2,814)		370		(3,184)		(860.5)	%
Net loss (income) attributable to noncontrolling interest														6		(1)		7		(700.0)	%
Net (loss) income attributable to Equity Commonwealth														(2,808)		369		(3,177)		(861.0)	%
Net income (loss)																						Net income (loss)													1,305		(10,038)		11,343		(113.0)	%
Net (income) loss attributable to noncontrolling interest																						Net (income) loss attributable to noncontrolling interest													(3)		20		(23)		(115.0)	%
Net income (loss) attributable to Equity Commonwealth																						Net income (loss) attributable to Equity Commonwealth													1,302		(10,018)		11,320		(113.0)	%
Preferred distributions	Preferred distributions													(1,997)		(1,997)		—		—	%	Preferred distributions													(1,997)		(1,997)		—		—	%

Net (loss) income attributable to Equity Commonwealth common shareholders														$	(4,805)	$	(1,628)	$	(3,177)	195.1	%
Net loss attributable to Equity Commonwealth common shareholders																						Net loss attributable to Equity Commonwealth common shareholders													$	(695)	$	(12,015)	$	11,320	(94.2)	%

(1)Comparable properties consist of four properties we owned continuously from ~~July~~January 1, ~~2020~~2021 to ~~September 30, 2021.~~March 31, 2022.

(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 (loss) as well as a reconciliation of NOI to net income (loss), the most directly comparable financial measure under GAAP reported on our consolidated financial statements, please see ~~"- Liquidity and Capital Resources - Property Net Operating Income (NOI)."~~

~~Rental revenue.~~Rental revenue decreased $2.6 million, or 16.5%, in the 2021 period, compared to the 2020 period, primarily due to the decrease in rental revenue at the comparable properties. Rental revenue at the comparable properties decreased $2.4 million, or 15.4%, in the 2021 period, compared to the 2020 period, primarily due to a $1.3 million decrease in lease termination fees, a $0.5 million decrease in real estate tax recoveries and a $0.4 million increase in uncollectible receivables.

~~Operating expenses.~~ Operating expenses decreased $0.3 million, or 5.3%, in the 2021 period, compared to the 2020 period, primarily due to the decrease at the comparable properties. Operating expenses decreased $0.4 million, or 5.6%, at the comparable properties in the 2021 period, compared to the 2020 period, primarily due to a $0.6 million decrease in real estate tax expense.

~~Depreciation and amortization.~~ Depreciation and amortization decreased $0.5 million, or 10.7%, in the 2021 period, compared to the 2020 period, primarily due to a decrease in depreciation and amortization related to an early lease termination in 2020 and a decrease in depreciation and amortization of the corporate assets.

~~General and administrative.~~ General and administrative expenses increased $0.4 million, or 5.3%, in the 2021 period, compared to the 2020 period, primarily due to a $0.6 million increase in bonus expense and a $0.4 million increase in compensation expenses primarily related to severance, partially offset by a $0.4 million decrease in share-based compensation expenses and a $0.2 million decrease in corporate rent expense.

~~Table of Contents~~

~~Interest and other income, net.~~ Interest and other income, net decreased $1.0 million, or 38.6% in the 2021 period, compared to the 2020 period, primarily due to less interest received from lower average interest rates and lower average balances, partially offset by sold property expense in the 2020 period.

~~Gain on early extinguishment of debt.~~ The gain on early extinguishment of debt of $0.1 million in the 2020 period reflects the write off of an unamortized premium, net of prepayment fees and the write off of unamortized deferred financing fees related to the repayment at par of mortgage debt at 206 East 9th Street.

~~Income tax expense.~~ ~~Income tax expense decreased $39,000 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 $6,000 in the 2021 period and $(1,000) in the 2020 period relates to the allocation to the LTIP/OP Unit holders.

~~Table of Contents~~

~~RESULTS OF OPERATIONS~~

~~Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020~~
Comparable Properties Results(1) Other Properties Results(2) Consolidated Results
Nine Months Ended September 30,
2021 2020 $ Change % Change 2021 2020 2021 2020 $ Change % Change
(dollars in thousands)
Rental revenue $ 41,282 $ 43,670 $ (2,388) (5.5) % $ 142 $ 4,463 $ 41,424 $ 48,133 $ (6,709) (13.9) %
Other revenue 2,182 3,202 (1,020) (31.9) % 1 235 2,183 3,437 (1,254) (36.5) %
Operating expenses (19,258) (19,823) 565 (2.9) % (53) (2,059) (19,311) (21,882) 2,571 (11.7) %
Net operating income(3) $ 24,206 $ 27,049 $ (2,843) (10.5) % $ 90 $ 2,639 24,296 29,688 (5,392) (18.2) %
Other expenses:
Depreciation and amortization 13,371 14,649 (1,278) (8.7) %
General and administrative 30,691 26,097 4,594 17.6 %
Total other expenses 44,062 40,746 3,316 8.1 %
Interest and other income, net 5,068 18,944 (13,876) (73.2) %
Interest expense — (620) 620 (100.0) %
Gain on early extinguishment of debt — 131 (131) (100.0) %
Gain on sale of properties, net — 446,536 (446,536) (100.0) %
(Loss) income before income taxes (14,698) 453,933 (468,631) (103.2) %
Income tax expense (94) (170) 76 (44.7) %
Net (loss) income (14,792) 453,763 (468,555) (103.3) %
Net loss (income) attributable to noncontrolling interests 30 (803) 833 (103.7) %
Net (loss) income attributable to Equity Commonwealth (14,762) 452,960 (467,722) (103.3) %
Preferred distributions (5,991) (5,991) — — %
Net (loss) income attributable to Equity Commonwealth common shareholders $ (20,753) $ 446,969 $ (467,722) (104.6) %

~~(1)Comparable properties consist of four properties we owned continuously from January 1, 2020 to September 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 $6.7~~increased $1.7 million, or ~~13.9%~~11.8%, in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to the ~~loss of revenue from properties sold in 2020 and a decrease~~increase in rental revenue at the comparable properties. Rental revenue at the comparable properties ~~decreased $2.4~~increased $2.0 million, or ~~5.5%~~14.0%, in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to the $1.9 million collection of a ~~$1.3 million decrease in lease termination fees, a $1.1 million increase in uncollectible receivables~~previously reserved receivable and a $0.3 million ~~decrease in real estate tax recoveries, partially offset by a $0.4 million~~ increase in ~~escalations.~~lease termination fees.

Other revenue. Other revenue, which primarily includes parking revenue, ~~decreased $1.3~~increased $0.2 million, or ~~36.5%~~24.0%, in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to the ~~decrease at the comparable properties. Other~~increase in parking revenue ~~decreased $1.0 million, or 31.9%,~~ at the comparable properties in the ~~2021~~2022 period compared to the ~~2020 period,~~2021 period. The increase in parking revenue is primarily due to ~~decreased~~an increase in the number of parking ~~revenue as a result of the COVID-19 outbreak.~~garage tenants.

Operating expenses. Operating expenses decreased ~~$2.6~~$2.1 million, or ~~11.7%~~31.5%, in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to ~~the properties~~a $1.8 million real estate tax refund received at a sold ~~in 2020.~~property. Operating expenses decreased ~~$0.6~~$0.2 million, or ~~2.9%~~3.5%, at the comparable properties in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to a ~~$0.5~~$0.2 million decrease in real estate tax expense.

~~Depreciation and amortization.~~ Depreciation and amortization decreased $1.3 million, or 8.7%, in the 2021 period, compared to the 2020 period, primarily due to the properties sold in 2020, a decrease in depreciation and amortization related to an early lease termination in 2020 and a decrease in depreciation and amortization of the corporate assets.

~~Table of Contents~~

General and administrative. General and administrative expenses ~~increased $4.6~~decreased $7.7 million, or ~~17.6%~~49.1%, in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to a ~~$7.5~~$6.6 million ~~increase~~decrease in compensation expenses primarily related to severance, ~~for our former Executive Vice President, Chief Financial Officer and Treasurer, partially offset by~~ a ~~$1.7~~$0.5 million decrease in ~~state franchise~~payroll taxes ~~largely related~~primarily due to ~~the 2020 property sales,~~refunds received in 2022 and a ~~$0.7~~$0.4 million decrease in share-based compensation ~~expense and a $0.5 million decrease in corporate rent expense.~~expenses.

Table of Contents

Interest and other income, net. Interest and other income, net decreased ~~$13.9~~$0.3 million, or ~~73.2%,~~14.6% in the ~~2021~~2022 period, compared to the ~~2020~~2021 period, primarily due to less interest received from lower average interest rates and lower average ~~balances, partially offset by sold property expense in the 2020 period.~~

~~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 2021 period. Gain on sale of properties, net in the 2020 period primarily related to the following (dollars in thousands):~~


~~Asset~~	~~Gain on Sale, Net~~
~~109 Brookline Avenue~~	$	~~225,190~~
~~333 108th Avenue NE~~	~~194,424~~
~~Georgetown-Green and Harris Buildings~~	~~24,916~~
~~Research Park(1)~~	~~2,000~~
	$	~~446,530~~

(1) There was consideration of $2.0 million being held in escrow related to the sale of 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 nine months ended September 30, 2020.

~~Income tax expense.~~ ~~Income tax expense decreased $76,000 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.~~cash balances.

Net (income) loss ~~(income)~~ attributable to noncontrolling interest. In 2017 through ~~2020,~~2022, we granted LTIP Units to certain of our trustees and employees. Net (income) loss ~~(income)~~ attributable to noncontrolling interest of ~~$30,000~~$(3,000) in the 2022 period and $20,000 in the 2021 period ~~and $(0.8) million in the 2020 period~~ relates to the allocation of (income) loss to the LTIP/OP Unit holders.

~~Table of Contents~~

LIQUIDITY AND CAPITAL RESOURCES

Our Operating Liquidity and Resources

As of ~~September 30, 2021,~~March 31, 2022, we had ~~$3.0~~$2.7 billion of cash and cash equivalents. We expect to use our cash balances, cash flow from our operations and proceeds of any future property sales to fund our operations, make distributions, repurchase our common shares, make ~~acquisitions and/or~~ 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 on 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 expense increases at our properties; and

•ability to purchase additional properties, 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 expenses to fluctuate; however, the impact of these fluctuations is expected to be partially offset by the pass through of operating expenses to our tenants pursuant to lease terms, although there can be no assurance that we will be able to successfully offset these expenses or that doing so would not negatively impact our competitive position or business.

Net cash flows provided by (used in) operating, investing and financing activities were ~~$10.5~~$2.9 million, ~~$(6.0)~~$(0.7) million and ~~$(30.2)~~$(81.3) million, respectively, for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, and ~~$31.7~~$1.5 million, ~~$647.2~~$(3.6) million and ~~$(61.3)~~$(14.1) million, respectively, for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Changes in these three categories of our cash flows between ~~2021~~2022 and ~~2020~~2021 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), a decrease in~~ real estate improvements, ~~dispositions of properties, repayments of debt,~~ repurchase of our common shares and distributions to common shareholders.

Our Investment and Financing Liquidity and Resources

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we paid an aggregate of ~~$6.0~~$2.0 million of distributions on our series D preferred shares. On ~~October 7, 2021,~~April 11, 2022, our Board of Trustees declared a dividend of $0.40625 per series D preferred share, which will be paid on ~~November 15, 2021~~May 16, 2022 to shareholders of record on ~~October~~April 29, ~~2021.~~2022.

Table of Contents

We may utilize various types of financings, including debt or equity, to fund future ~~acquisitions and/or~~ investments and to pay any debt we may incur and other obligations as they become due. Although 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 at such time, if any. We have no control over market conditions. Any 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 any 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

~~Table of Contents~~

business activities in a manner which will continue to afford us reasonable access to capital for investment and financing activities. However, there can be no assurance regarding 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 three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Tenant improvements(1)	Tenant improvements(1)	$	1,001	$	2,491	$	4,614	$	5,816	Tenant improvements(1)		$	579	$	3,219
Leasing costs(2)	Leasing costs(2)	34		29		803		1,274		Leasing costs(2)		590		268
Building improvements(3)	Building improvements(3)	219		697		548		1,659		Building improvements(3)		265		238

(1)Tenant improvements include capital expenditures to improve tenants’ spaces.

(2)Leasing costs include leasing commissions and related 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.

During the three months ended ~~September 30, 2021,~~March 31, 2022, 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			New Leases		Renewals		Total
Square feet leased during the period	Square feet leased during the period	6		3		9		Square feet leased during the period	10		30		40
Tenant improvements and leasing commissions	Tenant improvements and leasing commissions	$	113	$	8	$	121	Tenant improvements and leasing commissions	$	231	$	1,202	$	1,433
Tenant improvements and leasing commissions per square foot	Tenant improvements and leasing commissions per square foot	$	18.82	$	2.67	$	13.50	Tenant improvements and leasing commissions per square foot	$	23.12	$	40.05	$	35.71
Weighted average lease term by square foot (years)(1)	Weighted average lease term by square foot (years)(1)	3.3		3.3		3.3		Weighted average lease term by square foot (years)(1)	6.0		4.9		5.2
Tenant improvements and leasing commissions per square foot per year	Tenant improvements and leasing commissions per square foot per year	$	5.77	$	0.82	$	4.14	Tenant improvements and leasing commissions per square foot per year	$	3.85	$	8.11	$	6.85

(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.

NON-GAAP MEASURES

Funds from Operations (FFO) and Normalized FFO

We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or 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~~noncontrolling interests. Our calculation of Normalized FFO differs from 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 (loss), net income (loss) attributable to Equity Commonwealth common shareholders 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 (loss), net income (loss) attributable to Equity Commonwealth common shareholders or cash flow from operating activities, determined in

Table of Contents

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 (loss), net income (loss) attributable to Equity Commonwealth common shareholders 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.

~~Table of Contents~~

The following table provides a reconciliation of net income (loss) to FFO attributable to Equity Commonwealth common shareholders and unitholders and a reconciliation to Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Reconciliation to FFO:	Reconciliation to FFO:									Reconciliation to FFO:
Net (loss) income		$	(2,814)	$	370	$	(14,792)	$	453,763
Net income (loss)										Net income (loss)		$	1,305	$	(10,038)
Real estate depreciation and amortization	Real estate depreciation and amortization	4,546		4,917		13,232		13,972		Real estate depreciation and amortization		4,373		4,301

Gain on sale of properties, net		—		—		—		(446,536)

FFO attributable to Equity Commonwealth	FFO attributable to Equity Commonwealth	1,732		5,287		(1,560)		21,199		FFO attributable to Equity Commonwealth		5,678		(5,737)
Preferred distributions	Preferred distributions	(1,997)		(1,997)		(5,991)		(5,991)		Preferred distributions		(1,997)		(1,997)

FFO attributable to Equity Commonwealth common shareholders and unitholders	FFO attributable to Equity Commonwealth common shareholders and unitholders	$	(265)	$	3,290	$	(7,551)	$	15,208	FFO attributable to Equity Commonwealth common shareholders and unitholders		$	3,681	$	(7,734)

Reconciliation to Normalized FFO:	Reconciliation to Normalized FFO:									Reconciliation to Normalized FFO:
FFO attributable to Equity Commonwealth common shareholders and unitholders	FFO attributable to Equity Commonwealth common shareholders and unitholders	$	(265)	$	3,290	$	(7,551)	$	15,208	FFO attributable to Equity Commonwealth common shareholders and unitholders		$	3,681	$	(7,734)

Straight-line rent adjustments	Straight-line rent adjustments	(409)		(367)		(1,277)		346		Straight-line rent adjustments		10		(307)
Sold property expense included in interest and other income, net		—		515		—		515
Gain on early extinguishment of debt		—		(131)		—		(131)

Executive severance expense	Executive severance expense	—		—		7,107		—		Executive severance expense		—		7,107
Taxes related to property sales included in general and administrative		—		—		—		1,458
Taxes related to property sales, net included in income tax expense		—		99		—		178

Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders	Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders	$	(674)	$	3,406	$	(1,721)	$	17,574	Normalized FFO attributable to Equity Commonwealth common shareholders and unitholders		$	3,691	$	(934)

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 (loss) because it may 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 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 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.

2520

Table of Contents

A reconciliation of NOI to net income (loss) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ is as follows (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
Rental revenue	Rental revenue	$	13,141	$	15,742	$	41,424	$	48,133	Rental revenue		$	15,840	$	14,169
Other revenue	Other revenue	740		743		2,183		3,437		Other revenue		846		682
Operating expenses	Operating expenses	(6,102)		(6,444)		(19,311)		(21,882)		Operating expenses		(4,533)		(6,621)
NOI	NOI	$	7,779	$	10,041	$	24,296	$	29,688	NOI		$	12,153	$	8,230

NOI	NOI	$	7,779	$	10,041	$	24,296	$	29,688	NOI		$	12,153	$	8,230
Depreciation and amortization	Depreciation and amortization	(4,588)		(5,137)		(13,371)		(14,649)		Depreciation and amortization		(4,412)		(4,351)
General and administrative	General and administrative	(7,572)		(7,191)		(30,691)		(26,097)		General and administrative		(8,002)		(15,729)

Interest and other income, net	Interest and other income, net	1,599		2,606		5,068		18,944		Interest and other income, net		1,574		1,843
Interest expense		—		(9)		—		(620)
Gain on early extinguishment of debt		—		131		—		131
Gain on sale of properties, net		—		—		—		446,536
(Loss) income before income taxes		(2,782)		441		(14,698)		453,933

Income (loss) before income taxes										Income (loss) before income taxes		1,313		(10,007)
Income tax expense	Income tax expense	(32)		(71)		(94)		(170)		Income tax expense		(8)		(31)
Net (loss) income		$	(2,814)	$	370	$	(14,792)	$	453,763
Net income (loss)										Net income (loss)		$	1,305	$	(10,038)

Related Person Transactions

For information about our related person transactions, see Note 11 to the notes to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s market risk has not changed materially from the amounts and information reported in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report.

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 ~~Senior~~Executive Vice President, Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to the Exchange Act Rule 13a-15 and Rule 15d-15. Based upon that evaluation, our President and Chief Executive Officer and our ~~Senior~~Executive 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 ~~September 30, 2021~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2621

Table of Contents

PART II. Other Information

Item 1. Legal Proceedings.

We are or may become a party to various legal 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.

Item 1A. Risk Factors.

There have been no material changes to the risk factors previously disclosed in our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Common Share Repurchase Program

The following table provides information with respect to the common share repurchases made by the Company during the three months ended ~~September 30, 2021:~~March 31, 2022:

Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
July 2021 — $ — — $ 150,000,000
August 2021 — $ — — $ 150,000,000
September 2021 430,871 $ 25.70 430,871 $ 138,926,302
Total 430,871 $ 25.70 430,871 $ 138,926,302


Period	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
January 2022	1,163,184	$	25.77	1,163,184	$	95,884,479
February 2022	1,687,846	$	25.86	1,687,846	$	52,232,568
March 2022	—	$	—	—	$	202,232,568
Total	2,851,030	$	25.83	2,851,030	$	202,232,568

(1) On August 24, 2015, our Board of Trustees approved a common share repurchase program. On March 1, 2021, our Board of Trustees authorized the repurchase of up to $150.0 million of our outstanding common shares through June 30, 2022. On December 14, 2021, our Board of Trustees authorized the repurchase of up to an additional $150.0 million of our outstanding common shares through December 31, 2022. On March 15, 2022, our Board of Trustees authorized the repurchase of up to an additional $150.0 million of our outstanding common shares through June 30, 2023.

Surrender of Common Shares for Tax Withholding

During the three months ended ~~September 30, 2021,~~March 31, 2022, 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.

The following table summarizes all of these repurchases during the three months ended ~~September 30, 2021:~~March 31, 2022:

Period Total Number of Shares Purchased(1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
July 2021 — $ — N/A N/A
August 2021 17 $ 25.97 N/A N/A
September 2021 1,169 $ 26.00 N/A N/A
Total $ 1,186 $ 26.00


Period	Total Number of Shares Purchased(1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
January 2022	—		$	—	N/A	N/A
February 2022	158,276		$	25.89	N/A	N/A
March 2022	1,290		$	27.51	N/A	N/A
Total	$	159,566	$	25.90

(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.

Table of Contents

Item 3. Defaults Upon Senior Securities.

Not applicable.

~~Table of Contents~~

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

2823

Table of Contents

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			Articles 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 April 2, 2020. (Incorporated by reference to the Company’s Current Report on Form 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 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.)

~~10.1~~			~~Amended and Restated Agreement and Plan of Merger, dated August 15, 2021, by and among Equity Commonwealth, Monmouth Real Estate Investment Corporation and EQC Maple Industrial LLC (f/k/a RS18 LLC). (Incorporated by reference to the Company’s Current Report on Form 8-K filed August 16, 2021.)~~

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			The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021,~~March 31, 2022, 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 Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) related notes to these condensed consolidated financial statements, tagged as blocks of text and in detail. (Filed herewith.)

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(+) Management contract or compensatory plan or arrangement.

2924

Table of Contents

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


By:	/s/ David A. Helfand
	David A. Helfand
	President and Chief Executive Officer
	Dated:	~~October 28, 2021~~May 5, 2022


By:	/s/ William H. Griffiths
	William H. Griffiths
	~~Senior~~Executive Vice President, Chief Financial Officer and Treasurer
	Dated:	~~October 28, 2021~~May 5, 2022

3025


		Page

PART I	Financial Information

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations	2

	Condensed Consolidated Statements of Equity	3

	Condensed Consolidated Statements of Cash Flows	54

	Notes to Condensed Consolidated Financial Statements	76

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1513

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2621

Item 4.	Controls and Procedures	2621

PART II	Other Information

Item 1.	Legal Proceedings	2722

Item 1A.	Risk Factors	2722

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2722

Item 3.	Defaults Upon Senior Securities	2723

Item 4.	Mine Safety Disclosures	2823

Item 5.	Other Information	2823

Item 6.	Exhibits	2924

	Signatures	3025


Property	Date Sold	Number of Properties	Number of Buildings	Square Footage	Gross Sale Price(1)		Gain on Sale
109 Brookline Avenue	February 2020	1	1	285,556	$	270,000	$	225,190
333 108th Avenue NE(2)	March 2020	1	1	435,406	401,500		194,424
Georgetown-Green and Harris Buildings	May 2020	1	2	240,475	$	85,000	$	24,916
		3	4	961,437	$	756,500	$	444,530


	2021
Fair value of market-based awards granted	$	37.87
Expected term (years)	4
Expected volatility	16.99		%

Risk-free rate	0.17		%