Equity Commonwealth (NYSE:EQC)
Q4 2015 Earnings Conference Call
February 18, 2016 10:00 ET
Sarah Byrnes - VP, IR
Sam Zell - Chairman
David Helfand - President & CEO
Adam Markman - EVP & CFO
David Weinberg - COO
Mitch Germain - JMP Securities
James Feldman - Bank of America
John Bejjani - Green Street Advisors
Greetings and welcome to the Equity Commonwealth Fourth Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Ms. Sarah Byrnes. Thank you, Ms Byrnes, you may begin.
Thank you, Tim. Good morning and thank you for joining us to discuss Equity Commonwealth's results for the quarter and year ended December 31, 2015. Our speakers today are Sam Zell, our Chairman; David Helfand, our President and CEO; Adam Markman, our EVP and CFO; and David Weinberg, our COO.
Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of Federal Securities Laws. We refer you to the documents that we filed from time-to-time with the SEC, which refer to risk factors that could adversely affect the company's operating results and financial condition. The company assumes no obligation to update or supplement any statements made today that become untrue because of subsequent events or otherwise.
Today's remarks also include certain that are non-GAAP financial measures. Please refer to yesterday's press release announcing our results for a reconciliation of these non-GAAP performance measures to our GAAP financial results, which is available on our web site.
With that, I will turn the call over to Sam.
Good morning, everybody, welcome to the EQC conference call. A year ago at this time I - which was the last time that I was a part of an EQC conference call. I am very happy to say that - that which we laid out a year ago has been implemented and we continue to be very positive about our outlook or ex-clean our plans for EQC.
Obviously, all of our plans are subject to global economic conditions and obviously specific conditions in the real estate industry. On the global economic front, I think we have a lot of uncertainty. We probably had the greatest movement in currencies in the last twelve months that we've had since the end of World War II. That movement in the currencies has stopped having significant impact on a worldwide basis, particularly, in the beginning of the slowing of trade which is really a very usual set of circumstances, but as consensus in these currencies go down, the willingness of people to accept them obviously is impacted.
Obviously on a global basis, the big question is China, we don't know what's going to happen to China, whether it's going to have a soft landing or a hard landing but what's pretty clear is that it's going to have a landing and the question is what impact will that have on the United States and particularly, on what I would call deflationary tendencies, that might result from the lowering of the Chinese currency.
Obviously, we have a lot to see. We have Presidential election here and we have a lot of events going on around the world that could either make things somewhat better or obviously make them worse. It's naive to think that the U.S. real estate is unaffected by world economic conditions. Yes, we deal in the dollar and the dollar is very strong but the dollar is having - its strengths is having impact on business activity in the United States and obviously, it's going to have impact on demand for real estate going forward.
The U.S. real estate market, in my opinion is currently benign. I think that activity level continues to go up which is very positive, as you will hear from David, we've made significant efforts in renting space and we see the demand side of the real estate space particularly, in what I would call the less high end part of the business which is where EQC is located. I think that those are all positive steps. In many cases, the leasing will allow us to dispose of the properties at much more attractive prices or in their alternative hold them as asset - income producing assets going forward. I, again reiterate that I don't think the real estate market of the United States can avoid the impact of what's going on around the world. Personally, I think that we are in the early stages of a mild recession and if we're not, I think we're going to be in another three or four months.
As far as EQC is concerned, our thesis is unchanged. We continue to peruse the portfolio with the objective of creating and establishing values going forward. In what I would call the midstream of our disposition program, we focused from the beginning on asking ourselves the question, do we want to run/own this asset and does this asset fit into what we could envision as a future for the company. What we have concluded that that's not the case, we've been very enthusiastic sellers. I think that we continue to believe that that strategy is in our interest. So far through the end of 2015, we've sold $2 billion of properties. We sold $3.1 billion since we took responsibility of the portfolio in 2014. Rewrite the proceeds to pay down $1.4 billion of debt and we repurchased approximately $110 million of our common shares. Our cash balance as of December 31, was $1.8 billion and our current cash balance is $1.7 billion.
We were not required by R.E. laws to pay dividend in 2015, and we are not going to pay the dividend in 2015. From our perspective, we need to continue to mould the portfolio and we don't feel that there is a need to find - basically take money out of capital and spend that on dividends when the final - a symbol as what the company is going to look like is still undetermined. We're positioned for growth when investment opportunities materialise with better risk-reward profile.
I would say to you that, every single asset that we have disposed of, we would not have bought at the price somebody paid us for, that's the ultimate definition of whether you are a buyer or a seller. The market continues to be profit, there continues to be a lot of demand. Obviously, everybody is aware of some degree of consternation about the debt markets but I would tell you that overall debt is still very available at very attractive prices certainly for many historic places.
We've built a team, we've spent enormous effort over the last 18 months building, honing and making that team better. I think that team has shown its skill base and its ability by virtue of its performance on the dispositions side of the takeover of Commonwealth. We believe that this pool of capital that we're creating will be an enormous competitive advantage over the next 12 to 18 months. And our goal is to make sure that we have in place a team that is able to take advantage of those opportunities.
If in the interim, we end up spending a little more, maintaining the quality of that team, price is very, very minimal relative to the potential to the future of EQC.
With that, I'll turn it over to David Helfand.
Thanks, Sam. And thank you all for joining us this morning. I will take a moment to review 2015 activity and then address our strategic priorities for 2016. Since taking responsibility for the company, the focus has been on re-shaping our business. We've worked hard to instil an entrepreneurial open and transparent culture. We have been keenly focused on creating value to effective leasing and asset management and we're repositioning our portfolio for dispositions. We use sales proceeds to repay debts, opportunistically repurchase our stock and accumulate cash to build capacity for growth.
When we took ownership of the portfolio in 2014, we began with a desperate group of 170 properties comprised of 45 million square feet. Since then as Sam mentioned, we've completed $3 billion of disposition activity. This includes the sale of 22 million shares of surged stock for $32 per share, generating roughly $705 million in proceeds, and additionally completed $2.3 billion of property dispositions. Today our portfolio includes 64 properties comprising 23.5 million square feet of higher quality assets and a more rational portfolio concentrated in better markets. Sales proceeds have been used to repay $1.4 billion in debt, fund a $110 million of common share repurchases and add to our cash balance of $1.7 billion or $13 a share. In 2015, we've closed $2 billion of dispositions including 6 portfolio deals and 12 one-off sales totalling 91 properties and 19 million square feet. In aggregate, pricing was in the lower to mid-7% cap rate range.
During the fourth quarter we completed the sale of 9 properties totalling $275 million and 2.6 million square feet, a weighted average cap rate of low 6% range. Several of these assets were held for sale at the end of third quarter and were detailed in our last earnings call. We also sold 4 South 84th Avenue 100% leased 236,000 square feet industrial asset in Taliesin, Arizona for $18 million at a high 6% cap rate. And Arizona Centre, a 94% leased, 1.1 million square feet mixed use of property in downtown Phoenix that we sold for $126 million at a low 5% cap rate. Earlier this week we completed the sale of Executive Park in suburban Atlanta for $50.9 million. This 72.8% leased, 9 building, 427,000 square foot property sits on 60 acres in suburban Atlanta. The property generated approximately $900,000 of cash NOI and was marketed as a major redevelopment opportunity.
Turning to our operating performance, in 2015 we signed 3.9 million square feet of leases resulting in 140 basis point increase in lease occupancy to 91.4% at yearend. Rental rates were 30% higher on a cash basis, 10.6% higher on a GAAP basis. Our recent success reflects conservative effort to proactively address move outs, long term vacancies and to attract new tenants to the portfolio. Like everyone else, we're monitoring market conditions and volatility in the equity and debt markets in recent months raises concerns around the cost and availability of capital, the direction of the economy and the impact on real estate. Despite the increased volatility in the financial markets, we continue to make steady progress on the leasing front that Adam will address in greater detail.
With respect to dispositions, we currently have 11 properties in the market and we are poised to go to market with additional assets. We anticipate the next 60 to 90 days will give us a better read on the impact this volatility will on our 2016 disposition plans. Our execute [ph] will continue to be predicated on maximizing value and monetizing assets when we can achieve prices that exceed the properties intrinsic value. We are midstream in the turnaround of our business. We made meaningful progress but there are significant additional work to do.
That said, and part of the dedication to EQC team, and the strives we made executing our plan. And with that I'll turn the call over to Adam.
Thanks David, good morning. I will cover our financial results for the quarter and year, and provide commentary on the balance sheet.
2015 was a successful year for our company as we continue to improve our processes and execute on our business strategy. In addition to the progress we've made with dispositions and leasing, we greatly direst our balance sheet, simplified our platform, improved our liquidity and generated capacity.
Same property cash NOI for the full year 2015 was 0.8% lower than last year as operating expenses were up and tenant reimbursement income was down. Diluted FFO for the year was $1.53 per share compared to $3.32 a year ago. Normalized FFO was $1.70 per share compared to $2.14 last year. FFO and normalized FFO decreased largely due to asset sales, partially offset by lower interest expense and lower overhead.
Focusing on the fourth quarter's results, same property cash NOI was down 6.5% from a year ago. The decline was mostly caused by an increase in operating expenses, as well as modestly lower revenues as a result of tenant move outs. Operating expenses were up due to a combination of higher repairs and maintenance across the portfolio, increased spending to make vacant space lease ready, and higher real estate taxes in some of our markets.
As David mentioned, lease occupancy and rents are both up. That said, we're not yet seeing the benefit of increased leasing activity in our financial results. Approximately 1 million square feet of new leases that we executed in 2015 have not yet commenced and are not reflected in the fourth quarter's earnings. Of course there is a lag between lease signing and occupancy, most of this newly lease square footage takes occupancy in 2016. Because they are fully rent, these leases will not generate cash revenue until late this year or early 2017. FFO for the quarter was $0.25 per share compared to $0.47 a year ago. Normalized FFO was $0.27 per share compared to $0.53 last year. Asset sales were the main driver of the decrease in FFO and normalized FFO partially offset by interest expense savings from debt repayment.
As we've emphasized since taking responsibility for the portfolio, our disposition efforts are disrupted to earnings. This is consistent with our strategic plan to rationalize the portfolio and to focus on maximizing the company's net asset value. Gross proceeds from asset sales were $2 billion in 2015. These dispositions generated a taxable loss. As a result, we are not required to pay distribution for 2015. We have a net operating loss carry forward, so for 2016 the determination of whether a common distribution will be required is highly dependent on whether gains are generated through this year's disposition activity.
Turning to the balance sheet, during the quarter we prepaid at par the $116 million mortgage loan on one of our assets in Indianapolis. This loan had 5.24% interest rate. We now have only five remaining mortgages leaving 59 unencumbered assets. We continue to focus on maintaining financial flexibility in 2016. We have $875 million in debt and preferred stock that we can repay or prepay at par through the year. This includes the $139 million, 6.25% senior unsecured notes due in August 2016 that we redeemed at par earlier this week.
As previously discussed, our goal is to operate the credit profile consistent with the triple B unsecured debt rating. We make progress with upgrades or outlook improvements from both Moody's and S&P in 2015, and earlier this month Moody's again revised its outlook on our debt rating, this time from stable to positive. We now have approximately $1.7 billion in cash on the balance sheet and additional assets in the market to be sold. We are evaluating all uses of proceeds including the previously mentioned debt and preferred repayments, distributions and new investment opportunities.
We will continue to opportunistically utilize share buybacks. We have repurchased over 861,000 shares to-date in 2016 for $22 million and almost 4.3 million shares for over $110 million since the buyback program was put in place in August. Our balance sheet is strong and we have significant liquidity and we believe we're well positioned for future opportunities.
With that I'll turn it over to David Weinberg.
Thank you, Adam and good morning everyone. I will review our 2015 recently activity, provide some color on our stock markets and take a quick look at our lease roll over in 2016.
In our same property portfolio, during the fourth quarter, we signed 65 leases totaling 984,000 square feet, which included 399,000 square feet of new leases and 585,000 square feet of renewals with cash rents increasing 5.6%. For the full year we signed 244 leases totaling 349 million square feet which included 1.9 million square feet of new leases and 2 million square feet of renewals with cash rents increasing 3%. We are pleased with the 1.9 million square feet of new leasing, especially the 680,000 square feet of leases in a space that has been vacant more than one year.
Our 1.9 million square feet of new leasing is two times the volume of new leasing done in 2013 and three times the amount done in 2014. We are not seeing a slowdown in lease and are focused on trying to maintain a momentum due to economic slowdown, the supply risk in certain of our markets.
In Bellevue, for the year we signed 13 leases totaling 66,000 square feet with cash rents falling at 14%. Bellevue CBD was relatively flat in terms of absorption and had a year on vacancy rate of 8.5%. As we have said before, we like this market long term but our concern in the short term was 1.5 million square feet of development coming online in an 8 million square foot market. At 17th Street Plaza, our Class A office tower in Denver CBD for the year we signed 13 leases, sold 225,000 square feet with cash rents rolling at 19%. The vacancy rate in Denver CBD climbed 230 basis points to 14.3% due to new supply delivered in 2015.
There is also on this 1 million square feet of subleased space on the market primarily related to the slowdown in the energy factor. To-date the subleased space has not impacted us. We are one of the premier buildings in the market and the subleased space is not competitive. However, as we look down the road, we anticipate much of the subleased space will be given back. Additionally with 1.3 million square feet of supply coming online the next two years, leasing fundamentals in Denver CBD could weaken.
The lease occupancy in our one property Chicago CBD - Chicago decreased 10% in the fourth quarter, primarily due to levels giving back 117,000 square feet of space. Earlier this week we signed a lease with an existing tenant, this includes an expansion into this space. And as a result 600 was Chicago, now 97%. For the full year we signed 6 leases at this property totaling 414,000 square feet with cash rents rolling up 11%. The Chicago CBD continues to draw new tenants from the suburbs offsetting the negative impact on the market from identification trends. 2015 had net absorption of 1.3 million square feet in the year end vacancy rate of 12%.
Austin continues to be one of our top performers. For the full year we signed 49 leases totaling 355,000 square feet with cash rents rolling up 17%. Austin had a record year with net absorption of 2.1 million square feet and added the year with a vacancy rate of 9.6%. In 2015, 2.8 million square feet was added to the market and there was another 2.7 million square feet under construction that should deliver the next four quarters. As a result, we expect Austin's vacancy rate to tick up.
Indianapolis's CBD absorbed 220,000 square feet and its vacancy rate declined 240 basis points to 17.8%. While this market continues to be very competitive, just beginning to experience an urbanization that is drawing net interest downtown. With as little evidence of such movement in few years ago, in 2015 about 100,000 square feet of leases were signed with tenants new to the market. For the full year we signed 23 leases totaling 166,000 square feet, including 108,000 square feet of new leases with cash rents rolling down 16%.
Philadelphia CBD absorbed 870,000 square feet and its vacancy rate is 10.9%. The city has benefited from the movement of tenants from outside the CBD. It began in 2014 with a 150,000 square feet leased to tenants new to the market. In 2015, only 16 such leases signed, totaling 625,000 square feet. For the year we signed 39 leases totaling 844,000 square feet, including 423,000 square feet of new leases with cash rents flat.
In particular, we had a great year with 1.8 million square feet two property - two tailored property Centre Square, located directly across from City Hall. We signed 295,000 square feet of new leases including 200,000 square feet of space that has been vacant nearly 10 years. At year-end 2014, Centre Square was 79.5% leased. It is now 94.6% leased. In addition, the 1735 market which has the most availability in our portfolio, we are seeing good activity.
Overall, our markets have been performing well and our leasing activity continues to be strong. Having said that, we are mindful of the impact that economic slowdown or new supply could have on leasing.
Switching gears I would like to address our lease roll over in 2016. Excluding month-to-market self-storage tenants we have 2 million square feet expiring this year, the largest exploration with Carmike Cinemas, a 550,000 square feet tenant occupying six theaters. Earlier this week, we signed a 15-year extension with Carmike. Banking up Carmike, we have 1.5 million square feet rolling this year which includes a 100,000 square feet tenant in an industrial building that won't vacate. This was 1.4 million square feet or 7% of our office space rolled in 2016. This is a manageable amount of lease results. We have a great team, and are focused on engagement, responsiveness and an improvement with overall customer experience to continue to drive leasing results.
With that, we will open it up to Q&A.
Thank you. [Operator Instructions] Our first question comes from the line of Mitch Germain of JMP Securities. Please proceed with your question.
Good morning guys. So it seems like sales volumes probably surprised for the upside in 2015. I'm curious about pricing relative to what your expectations were.
We address that before and to update you on the sales that happened interim, we continue to see pricing in excess of our target numbers modestly. On the full $2 billion of dispositions done in '15, they've done in aggregate modestly ahead of our internal numbers. And we discussed in the prepared remarks we continue to disposition program. To date, when you're seeing continued depth of demand, multiple buyers in a good competitive dynamic, and as we mentioned the question is will the impact of the events in the economy start to affect that. And we should have a better sense of that as we get pricing feedback over the next 60 to 90 days.
And sending out in the buyer pool?
No, it's David Weinberg. It's been too early to now. As David said, we've got some essence in the market, we'll be taking mid to the next few weeks, I think at that point we'll have better stats.
Great. I know - Adam, I know you guys have - I think you kind of left it open as to what you're planning to do with the cash. Previously, I think it goes in November presentation, you guys had suggested paying down the preferred. Is that still the plan or you're just going to kind of consider it on - when that becomes available?
We do have time before that decision has to be made. So we will kick off the debt maturities as they come to us and the preferred is the next opportunity but we haven't yet made a decision.
Okay. And then will I have you - the operating expense, I know you've talked about some repair maintenance and higher taxes, how much of that - I mean, we saw a pretty big decline in the NOI margin. How much of that would you consider it to be kind of one-time in nature and how should we think about that margin going forward?
Well, I think it names sort of two of three reasons that expenses were up. And the third is important and that's that we're spending more, trapping vacant space to make it lease ready. And when you look at where expenses are, I think that this quarter is a better reflection of whether that really cost just to own and maintain these assets. That being said, the more important part is what's happening on the revenue side, and that's the piece that we discussed, this million square feet space where we have leases executed but there is no economic impact in our financial statements as of yet.
Great, congrats on the year.
Our next question comes from the line of Jamie Feldman of Bank of America. Please proceed with your question.
Thank you and good morning. I guess just sticking with the last question, can you quantify the amount of NOIs that come online from the million square feet of leases?
Well, we don't give guidance and we haven't provided that number but there is a lot of places where you can get there, right. We've talked about a million square feet. You know our - in our disclosure in the supplemental, you know the rental rates that those leases have been signed at. And then you also have to be thoughtful about the fact that we're now over 91% occupied and the margins on this incremental leasing should be better than what we see for the portfolio as a whole.
Okay. How do we think about - I know what your growth rents were, but what about our net rent? And kind of we think about - on the new leases signed, the difference between…
Hey James, this is David. I think that's what Adam was getting to. Net revs in a traditional building if you don't get a $25 growth, expenses could be $10, $12, $14. But most of those expenses are fixed in nature. So that incremental leasing will have a much higher contribution to the NOI. So what you might otherwise think when you're just considering that lease.
Okay. And then, Sam, I guess we appreciate your color and views on the economy and world to start the call. When you think about your base case as what might happen here? And you think about how we made the downturn in commercial real estates, do you see it driven more by credit, by buyer pool, by less capital flowing into the U.S. or by tenant demand? It's hard to get a sense of what may - what's changed so far and what may change first.
Well, first of all, I think all of the variables, like you just described are all applicable. Whether it's going to be an effective chopping, lesser demand, whether it's already seen, there has been some dislodgement in the financing market. We don't know the answer tomorrow, today, but what we're trying to do is look at all of the different variables and be up-to-date on what the actions are and what steps we should be taking and I think that's basically what we've been doing. We've been trying to do it from the prism of what we consider to be a very realistic assessment of what's going on, and maybe that doesn't necessarily confront with what everybody else's assessment is. But this wouldn't be the first time that we were the lone ranger.
Okay, that's helpful. And then David you mentioned in several markets, urbanization helping the trends or helping demand trends. Are you guys surprised since you took over the portfolio of how some of these secondary markets have acted, and maybe give you more confidence on the asset you have left and their potential for the future?
Well, I can't speak for everyone. I've been surprised because I had limited experience in many of these secondary markets. And the fact is, with all the progress we've made last year, the remaining portfolio is a much nicer concentration asset in these types of markets. And as I've covered in my prepared remarks, you go market-by-market, be it Philly, be it Indy, you can definitely feel and see the change that's going on. You spend time there, you talk to brokers. One of the things I keep hearing, few years ago I never imagined I'd come down, see either - perhaps even come down for the entire sea [ph] and you are seeing that change and it is impacting leasing.
Does this seem sustainable to you or is this more of a cyclical trend and if we head into a recession, things slow.
What I think - others can wait in, but the new demographic trends, the delay in marriage, the delays in having families is impacting where people are choosing to live, work and play; and they are choosing to do this in the cities and employers are following the employees and that's what we're seeing.
Another way to put it is, it's not a terribly optimistic story for suburban America. I think we're seeing historical reverse from less account, after World War II, and all through the '15 to '16 we basically moved to the suburbs, we've built the expressways and now we're seeing a reversal of that process. So even close-end suburbs are okay, further up you will get greater the distraction and dislocation.
Okay. I appreciate your color. Thank you.
[Operator Instructions] Our next question comes from the line of John Bejjani of Green Street Advisors. Please proceed with your question.
Morning, everyone. So you guys are selling as of the cross for quality spectrum, a cross of variety of markets. I know you're still in the marketing process for a number of properties beginning the year but can you speak to what you're saying or hearing as far as financing availability and investor demand across these spectrums?
Sure, good morning John. What we're seeing is not so different from what we're seeing in the leasing market which is, if we look at our portfolio and just review what we've accomplished with our pipeline we feel very good. When we listen to all the market chatter, we become concern so we try and keep a balanced outlook. On the disposition side, the credit markets in some dislocation, certainly CMBS is a question mark which has gotten off to a reasonable start for the first quarter but now there is some reprising going on, some concern in that market. On the live company side in the dead markets, we see some fresh books and people looking to do business with good sponsors and good assets. So I think it's a mixed bag on the debt side. And as we mentioned, I think we have a better sense over the next 60 to 90 days because we will get pricing on a variety of assets across the sector as you mentioned quality-wise, geography and have better sense real-time but today that says mixed bag.
Okay, great. So I mean you guys have spoken to your huge cash balance and wanting to potentially be able to opportunistically acquire, I guess just thinking if we hit a recession and asset values do start to move in a meaningful way, how do you approach opportunities that can arise? I know there is a lot of moving pieces but what are your different considerations in that situation or what kind of IRRs would you look for in your target markets to feel comfortable in contrary?
This is Sam. I think that number one, we've already started to see opportunities. As a REIT investor you may be aware but back to, there has been some dislocations, I'm not necessarily sure if that any of those dislocations opportunities that remains to be seen. But one thing I can assure you of, we don't have any IRR minimums, we don't have any unbreakable rules, we're potential opportunists. The whole idea behind this whole company was, we have very unique opportunity to generate an enormous amount of cash at very little breakup cost and recognize values that frankly you were happy to be sold [ph]. At the same time, we are savvy enough I think to know that the most important thing we need to be is open to anything, and consequently we've looked at all kinds of things so far based on what we see going out there. We think we're going to have an opportunity to look at a lot more, and I think our decision will ultimately be made not on IRRs or anything like that but whether we enter that can achieve meaningful real estate value creation by virtue of our efforts and by virtue of the cash or that we control.
Okay, thanks for that Sam. And Adam, I guess a quick one for you. You've mentioned the loss carry forwards that you guys have, how much more gains can you continue to offset with those. Do you anticipate having a paid dividend in 2016?
Yes, it's going to be highly dependent on which specific assets are sold and which don't transact. Some of our assets have - they have built in gains, others continue to generate losses like the assets that we've sold to-date. So we're just not going to know until we see what actually transacts and of course we'll keep you informed as that information comes to life.
But I guess just in general, what kind of, or how much taxable gains can you continue to offset or how much is left?
We haven't disclosed that number John.
Okay. All right, thanks guys.
Mr. Sam Zell, there are no further questions at this time. Would you like to make any closing remarks?
Yes. Once again, I want to thank everybody for participating in this meeting or conference call this morning. I wanted to end up this morning session by making a couple of general comments.
First, I'm not sure that calling the company Equity Commonwealth was really an accurate choice of name, and maybe even we should have called it Equity Reposition because effectively that's what we have been all about. We're concerned - we're reporting to you and again, that's identical to any other reach. But I would admire-ish all of you that we were to understand what we're doing, that's exactly why you can't do it because if you used standards of every other ongoing REIT, you'd come up with result that are probably contrary to what we're actually producing.
As a normal REIT, as a focus on month-to-month changes and NOI growth and movement, in a weak positioned environment like this, these are just noise along the way. And frankly, we don't think the focus on them is going to give anybody any great new insight. You can't forget that this was an orphaned company. This was a company that has huge number of asset that nobody has seen or paid too much attention too. This company previously was focused on AUM, assets under management. This company today is focused on pro forma.
And most important of all, this company today has the strategy. I don't even think the work strategy was in the time of the previous management of this counter. We're in an environment where in any respect to the [ph] winning it little by little. We're seeing the separation of the men's and the boys. And I think some of the dislocations that you're seeing in the weak market are very in enticement of the strategy implemented usually at different times in a different perspective relative to the cycle. Those previous will become our opportunities in the future.
So in closing I'd say that our focus is not on what we own but we want to own. EQC is a work and process. We're all happy with the work so far, we hope you are turned. We think this is a lot more excitement in opportunity in the future. Thank you very much for participating quarterly.
This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.
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