INVESTOR PRESENTATION September 2016 Forward-Looking Statements - - PowerPoint PPT Presentation

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INVESTOR PRESENTATION September 2016 Forward-Looking Statements - - PowerPoint PPT Presentation

INVESTOR PRESENTATION September 2016 Forward-Looking Statements Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws. Any forward-looking statements


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September 2016

INVESTOR PRESENTATION

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September 2016

Forward-Looking Statements Some of the statements contained in this presentation constitute forward-looking statements within the meaning of the federal securities laws. Any forward-looking statements contained in this presentation are intended to be made pursuant to the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995. 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 can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions. The forward-looking statements contained in this presentation 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). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:  changes in the real estate industry, particularly in those markets in which our properties are located; 

  • ur ability to raise equity or debt capital;

 the future amount of leasing activity and occupancy rates at our properties;  the future rent rates we will be able to charge at our properties;  the costs we may incur to lease space in our properties; 

  • ur ability to declare or pay distributions to our shareholders and the amounts of such distributions;

 the credit quality of our tenants;  the likelihood that our tenants will pay rent, renew leases, enter into new leases or be affected by cyclical economic conditions; 

  • ur sales of properties;

  • ur ability to compete for tenancies effectively;

  • ur ability to pay interest on and principal of our debt;

  • ur ability to obtain credit facilities, and the availability of borrowings under those credit facilities; and

  • ur tax status as a REIT.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. 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 sections entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. NOTE: Data in presentation as of June 30, 2016 unless otherwise noted

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September 2016

  • Chicago-based internally managed and self-

advised office real estate investment trust (REIT)

  • Corporate culture that incorporates Equity

company values of alignment with stakeholders and focus on value creation

  • Strategic priorities:

─ Rationalize the portfolio ─ Lease and operate entrepreneurially ─ Emphasize financial flexibility ─ Allocate capital opportunistically to grow net asset value

COMPANY OVERVIEW

1735 Market Street Philadelphia

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September 2016

  • 96% of total Annualized Rental Revenue (ARR) from office assets and 4% from industrial/flex1
  • 70% of ARR is in our five largest markets, up from 46% in our six largest markets in 4Q 2014

Current portfolio comprised of 38 properties totaling 16.9 MSF

PORTFOLIO OVERVIEW

Year-End 2014 Portfolio 156 Properties Current Portfolio 38 Properties

Other 30% Philadelphia 24% Chicago 18% Austin 11% Denver 10% Bellevue 7%

% of 2Q 2016 Annualized Rental Revenue1

Other 54% Chicago 15% Philadelphia 12% Austin 6% Denver 5% Indianapolis 5% Bellevue 3%

% of 4Q 2014 Annualized Rental Revenue1

1 Annualized rental revenue (ARR) is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2016, plus estimated recurring expense

reimbursements; includes triple net lease rents and excludes lease value amortization, straight line rent adjustments, abated (“free”) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues. As of 4Q 2014, ARR included revenue from straight line rent adjustments and excluded revenue during free rent periods.

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September 2016

  • Rationalize the portfolio: closed $4.1bn of dispositions since taking ownership responsibility in 20141,2

― $3.1bn of sales completed since 20152

  • Lease and operate with an entrepreneurial focus

― Develop strong relationships with brokers and tenants ― Focus on tenant engagement and responsiveness ― Review vacant inventory and ensure it is priced and positioned appropriately ― Identify incremental cost savings and value-creation opportunities

  • Continue to improve the balance sheet

― Decreased liabilities and preferred equity by $2.0bn since March 31, 2014 ― Reduced net debt to adjusted EBITDA from 6.1x to (0.6x) since March 31, 20143 ― Cash balance as of August 29, 2016 of $2.4bn or $19 per share ― Increased capacity for future opportunities

  • Reinvest proceeds opportunistically

― Identify new investments with a strong growth profile and attractive risk adjusted returns ― Repurchased 4.4mm shares totaling approximately $113mm

Rationalize the portfolio, improve operations and maximize shareholder value

STRATEGIC PRIORITIES

1 $4.1bn of total dispositions since taking ownership responsibility in 2014 includes the sale of SIR shares. 2 As of August 29, 2016. 3 Net Debt is calculated as total debt minus cash and cash equivalents; Annualized Adjusted EBITDA is defined and a reconciliation to net income is included in the company’s Second

Quarter 2016 Supplemental Operating and Financial Data, which is available on the Investor Relations section of www.eqcre.com.

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September 2016

  • 9 properties totaling approximately 4 MSF are in various stages of the sale process

Sales completed total $1.1bn year-to-date, and $4.1bn since taking ownership responsibility in 20141,2

DISPOSITION ACTIVITY TO DATE

2014

  • $215.9mm gross sales price
  • 14 properties, 2.8 MSF
  • $704.8mm Select Income REIT

shares

2015

  • $2.0bn gross sales price
  • 91 properties, 18.9 MSF

2016 YTD1

  • $1.1bn gross sales price
  • 27 properties, 7.2 MSF

$4.1bn of sales1,2

1 As of August, 29 2016.

2 Dispositions since taking ownership responsibility in 2014 total $4.062bn and includes the sale of Select Income REIT (SIR) shares.

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September 2016

Sales have been at a weighted average cap rate in the low 7% range3

DISPOSITION ACTIVITY

1 PSF total excludes Vineyard sales price. 2 Proceeds after credit for contractual lease costs were $210.8mm. 3 Through August 29, 2016.

Period Portfolio City State SF (000's)

  • No. of

Properties

  • No. of

Buildings Type Leased % Sale Price (000's) PSF1 Cap Rate Range 2015 Subtotal 18,939 91 135 80.1% $1,999,413 $106 Low- to- Mid 7% 1Q 2016 Executive Park Brookhaven GA 427 1 9 Office 72.8% $50,865 $119 High 1% 3330 N Washington Boulevard Arlington VA 56 1 1 Office 15.3% $11,250 $202 N/A 111 East Kilbourn Avenue Milwaukee WI 374 1 1 Office 81.1% $60,500 $162 High 5% 2Q 2016 633 Ahua Street Honolulu HI 93 1 1 Self Storage 81.5% $29,000 $311 High 3% 1525 Locust Street Philadelphia PA 98 1 1 Office 95.4% $17,700 $181 Low 7% Rio Grande and San Antonio Street Austin TX 116 2 2 Office 89.9% $32,600 $282 Low 5% Lakewood on the Park Austin TX 181 1 2 Office 84.1% $37,100 $205 Mid 4% Vineyards Gonzalez CA 1 7 Leased Land N/A $48,450 N/A Low 6% 9110 E Nichols Avenue Centennial CO 144 1 1 Office 99.8% $17,200 $119 Mid 8% Carmike Cinemas Various Var. 552 6 6 Theaters 100.0% $109,100 $198 High 7% 3Q 20163 111 River Street2 Hoboken NJ 566 1 1 Office 100.0% $235,000 $415 Mid 6% South Carolina Industrial Portfolio Various SC 804 3 3 Industrial 100.0% $30,000 $37 Mid 8% Sky Park Centre San Diego CA 63 1 2 Office 100.0% $13,700 $216 Mid 8% Raintree Industrial Park Solon OH 563 1 12 Industrial 81.2% $11,500 $20 Low 10% 8701 Mopac Austin TX 122 1 1 Office 79.1% $21,500 $176 Low 6% Midwest Portfolio Various Var. 3,064 4 6 Office 86.5% $416,900 $136 Low 8% 2016 Subtotal 7,223 27 56 88.3% $1,142,365 $151 High 6% Total 26,161 118 191 82.3% $3,141,778 $118 Low 7%

2016 Dispositions

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September 2016

  • Average property size increased 60%1; ARR per foot increased 16%1,2
  • Exited 88 cities, 16 states, and Australia

Streamlined portfolio of larger assets concentrated in fewer markets

PORTFOLIO STATISTICS

1 Average property size and ARR comparison is based on data as of March 31, 2015 and June 30, 2016.

2 Annualized rental revenue (ARR) is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2016, plus estimated recurring expense

reimbursements; includes triple net lease rents and excludes lease value amortization, straight line rent adjustments, abated (“free”) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings outlined above for the most recent month during the quarter reported, adding abated rent, and multiplying the sum by 12 to provide an estimation of near-term potentially-recurring revenues. 1Q 2015 ARR included revenue from straight line rent adjustments and excluded revenue during free rent periods.

3 Current portfolio as of August 29, 2016; Percent leased and ARR data as of June 30, 2016, excluding properties sold through August 29, 2016. Variance in square feet is due to

remeasurements.

Portfolio/Property Name Properties Buildings Square Feet (000's) Average Property Size (000's) % Leased Annualized Rental Revenue (ARR) (000's)2 ARR per Leased SF2 Portfolio as of March 31, 2015 154 259 42,752 278 85.9% $774,422 $21.09 Portfolio as of December 31, 2015 65 127 23,952 368 91.4% $490,069 $22.38 2016 Dispositions 27 56 7,223 509 88.3% $128,500 $19.68 Current Portfolio3 38 71 16,862 444 91.4% $375,585 $24.37

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September 2016

  • Manageable lease expiration schedule
  • Diversified tenant base with no single

tenant representing more than 4.4% of ARR3

LEASE EXPIRATION & TOP TENANT OVERVIEW

Lease Expiration Schedule (% of Leased Square Feet)1

1 Lease expiration schedule and Largest 15 Tenants exclude properties sold through August 29, 2016; data as of June 30, 2016. 2 Square footage is pursuant to existing leases as of June 30, 2016 and includes (i) space being fit out for occupancy and (ii) space which is leased but is not occupied or is being offered for sublease. 3 Annualized rental revenue (ARR) is annualized contractual rents from our tenants pursuant to leases which have commenced as of June 30, 2016, plus estimated recurring expense reimbursements; includes triple

net lease rents and excludes lease value amortization, straight line rent adjustments, abated (“free”) rent periods and parking revenue. We calculate annualized rental revenue by aggregating the recurring billings

  • utlined 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. 1Q 2015 ARR

included revenue from straight line rent adjustments and excluded revenue during free rent periods.

1.0% 8.0% 9.0% 9.0% 17.0% 12.0% 6.0% 12.0% 3.0% 5.0% 18.0%

Largest 15 Tenants 1 Tenant Square Feet (000s)2 % of Total SF2 % of Annualized Rental Revenue (ARR)3 Weighted Avg Remaining Lease Term (years) Expedia, Inc. 427 2.8% 4.4% 3.4 Office Depot, Inc. 640 4.2% 3.8% 7.3 PNC Financial Services Group 368 2.4% 2.7% 4.9 Groupon, Inc. 376 2.4% 2.7% 9.6 Flextronics International Ltd. 1,051 6.8% 2.5% 3.5 Ballard Spahr LLP 217 1.4% 1.8% 13.6 RE/MAX Holdings, Inc. 248 1.6% 1.7% 11.8 Towers Watson & Co 274 1.8% 1.6% 3.5 Exelon Corporation 296 1.9% 1.6% 1.9 University of Pennsylvania Health System 267 1.7% 1.6% 9.3 Georgetown University 240 1.6% 1.4% 3.2

  • Wm. Wrigley Jr. Company

150 1.0% 1.3% 5.6 West Corporation 336 2.2% 1.2% 12.6 Truven Health Analytics 187 1.2% 1.1% 0.7 M&T Bank Corporation 218 1.4% 1.1% 2.3 Total / Weighted Average 5,295 34.4% 30.5% 6.0

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September 2016

6.1x 5.1x 4.6x 4.3x 4.1x 1.6x 0.6x (0.4x) (0.7x) (0.6x)

$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000

Cash Balance (millions)

Net Debt to Annualized Adjusted EBITDA2

Net Debt to Annualized Adjusted EBITDA Cash Balance

Over $3bn of balance sheet capacity between cash and undrawn revolver1

BALANCE SHEET MANAGEMENT

1 As of August 29, 2016. 2 Net Debt is calculated as total debt minus cash and cash equivalents; Annualized Adjusted EBITDA is defined and a reconciliation to net income is included in the company’s

Second Quarter 2016 Supplemental Operating and Financial Data, which is available on the Investor Relations section of www.eqcre.com.

$2.4bn1

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September 2016

  • $460mm of debt with a weighted average interest rate of 6.0% becomes prepayable at par in December

2016

  • $425mm of debt with a weighted average interest rate of 6.3% becomes prepayable at par in 2017
  • $400mm of floating rate term loans are currently open at par

$1.3bn of debt is prepayable at par through 2017

REPAYMENT OPPORTUNITIES

Note: Dollars in thousands (000s)

1 Interest is payable at a rate equal to LIBOR plus 2.625% but has been fixed by a cash flow hedge, which sets the rate at approximately 5.66% until December 1, 2016.

Debt 2Q16 Balance Interest Rate Open At Par Maturity Parkshore Plaza, Folsom, CA 41,275 $ 5.67% Dec-16 May-17 1735 Market, Philadelphia, PA 1 168,616 5.66% Dec-16 Dec-19 6.25% Unsecured Notes, due 2017 250,000 6.25% Dec-16 Jun-17 6.65% Unsecured Notes, due 2018 250,000 6.65% Jul-17 Jan-18 5.75% Unsecured Notes, due 2042 175,000 5.75% Aug-17 Aug-42 Term Loan (Libor + 140 bps) 200,000 1.87% Open Jan-20 Term Loan (Libor + 180 bps) 200,000 2.27% Open Jan-22 Total / Weighted Average 1,284,891 $ 4.86%

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September 2016

  • Continue executing on disposition strategy to rationalize and upgrade the portfolio
  • Foster entrepreneurial approach to leasing and ownership
  • Preserve balance sheet strength
  • Evaluate opportunity to repay up to $1.3bn of debt at par through 2017

― Repaid $416mm of liabilities and preferred equity to date in 2016 with a weighted average coupon

  • f 6.9%
  • Remain disciplined with capital allocation; evaluating all options including acquisitions, share

repurchases, debt repayment and distributions

  • Focus on long-term value creation for shareholders

Rationalize the portfolio, improve operations and maximize shareholder value

PRIORITIES