Q2 2023 Equity Commonwealth Earnings Call
Participants
David S. Weinberg; Executive VP & COO; Equity Commonwealth
William H. Griffiths; Executive VP, CFO & Treasurer; Equity Commonwealth
Unidentified Analyst
Presentation
Operator
Good morning, and thanks for joining this call to discuss Equity Commonwealth's results for the quarter ending June 3rd, 2023 and provide an update on the company. (Operator Instructions). As a reminder, this conference is being recorded. Please be advised that certain matters discussed during this conference call may be constitute forward-looking statements within the meaning of Federal Security laws.
Please refer to the session highlight forward-looking statements. In the press release issued yesterday as well as the section titled Risk Factors in the company's annual report on Form 10-K and partly reports on Form 10-Q for subsequent quarter for a discussion of factors that could cause the company's actual results to materially differ from any forward-looking statements.
The company assumes no obligation to update or supplement any forward-looking statements made today. The company posts important information on its website at www.eqcre.com, including information that may be material. The portion of today's remarks on the company's quarterly also include certain non-GAAP financial measures.
Please refer to yesterday's press release and supplemental containing the company's results for a reconciliation of these non-GAAP measure to the company's GAAP financial results. On the call today are David Helfand, Chair of Board President and CEO; Dave Weinberg, COO; and Bill Griffiths, CFO. With that, I would turn the call over to David Weinberg. Please go ahead.
David S. Weinberg
Good morning, everyone. Thanks for joining us. Today, I'll review the company's results for the quarter as well as provide an update on the capital markets and our investment activities. For the quarter, funds from operations were $0.16 per share compared to $0.05 per share in the second quarter of 2022.
The growth in FFO was largely the result of a $0.19 per share increase in interest and other income, partially offset by a $0.05 per share increase in G&A related to compensation expense due to Sam Zell's passing and $0.01 per share each from a decrease in same-property NOI and an increase in income tax expense. Normalized FFO was $0.22 per share compared to $0.04 per share a year ago.
The growth in normalized FFO was largely the result of a $0.19 per share increase in interest and other income partially offset by a $0.01 per share decrease in same-property NOI and a $0.01 per share increase in income tax expense. Same property NOI decreased 14.8% and same-property cash NOI was 9.4% lower compared to last year, both primarily due to an increase of pre-leasing demolition costs and a decrease in average commenced occupancy for this quarter.
At our properties in the quarter, we signed 68,000 square feet of new leases and renewals. Rent on those leases were down 0.7% on a cash basis and up 15.3% on a GAAP basis. As of June 30, lease occupancy was 82%, and commenced occupancy was 78.2%. In terms of leasing, we continue to see a range of deals with some tenants giving back space, some looking for short-term extensions and others more comfortable committing to term. It is a (inaudible) leasing environment, and we are more actively preparing spaces for lease in addition to been more aggressive on terms.
Turning to the balance sheet. We have approximately $2.2 billion of cash or $19 per share and no debt. The interest rate we earn on our cash has increased as the Fed has moved rates, and we are currently earning roughly 5.25% compared to 1.6% a year ago. We continue to actively manage our cash balances among our banks to minimize risk and maximize yield in daily liquidity. With the Fed's continued rate increases over the past year, our interest income has grown from $6 million in the second quarter 2022 to $27.4 million in the second quarter of 2023.
Regarding share buybacks, we have not repurchased any shares year-to-date. Since we began buying back stock in 2015, we've repurchased a total of 22.4 million shares for an aggregate of $595 million at an average dividend adjusted price of $17.48. We renewed our authorization as of June 30 and currently have $150 million of capacity.
Turning to the capital markets. Things continue to be slow and our pipeline is modest. Transaction volumes are down across all asset classes with just $35 billion in total investment sales for the second quarter or nearly 70% lower on an annualized basis. With so little trading, there has been limited price discovery and assets are difficult to value. To date, there has not been a catalyst creating actionable investment opportunities. Owners do not want to transact at today's pricing and lenders are often willing to work with the borrowers.
In terms of potential investments, we continue to evaluate a wide range of asset classes. We still like industrial and residential with operating conditions remaining relatively strong, though decelerating. For other asset classes, fundamentals range from decent to challenging and the lack of debt availability is a significant issue.
Against this backdrop, it's difficult to know where we might find a compelling opportunity to invest. A prolonged period of this challenging credit environment may create such an opportunity or perhaps it's a large private real estate company that believes a deal with us is the best way to access the public markets. It could also be a business with a broken balance sheet or one that needs meaningful growth capital.
We remain hopeful that such scenarios or others will be a catalyst for a transaction. In the meantime, we will continue to be patient. If we do not find an opportunity during this cycle, however long that might last, we will likely sell the remaining properties and return the capital. With that, David, Bill and I are happy to take your questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from Craig Mailman with Citi.
Unidentified Analyst
It's actually (inaudible) on for Craig. I know in your remarks, you mentioned that current deal pipeline is slow and transaction have been down in the first half. But just -- and kind of relative to the first half the volume of transaction you're looking about changed at all? Or how are you thinking about kind of underwriting different return hurdles for different asset classes?
David S. Weinberg
Good question. It's David Weinberg. I'd say -- our conversations have slowed down a little bit relative to perhaps first quarter, maybe not unusual, it is July. So things tend to be slow anyway. I'd also say many of our conversations earlier in the year were preliminary with groups that are perhaps kicking the can trying to see what their options may be. And it's going to take more time to play out to see whether those translate into actionable investment opportunities.
In terms of just thinking about pricing, that really hasn't changed. We recognize it's a higher interest rate environment. We also recognize where the public comps depending on the sector are trading. All that's baked into our pricing. But I want to kind of restate what we've said on prior calls. We're looking across sectors, but it often begins with the story and then we figure out what price makes the most sense.
And the story is often why that do (inaudible) us and then it evolves into kind of what the base is, what the yields are, what the all-in return looks like. And that's how we think about investments.
Unidentified Analyst
And then on the last call, you mentioned looking at industrial and single-family rentals as well as maybe taking a look at office. We saw a large industrial transaction happened for the largest deal. Did you take a look at that? Or have you talked to any private equity sellers that are kind of looking to sell industrial product
David S. Weinberg
So I don't want to comment on specific deals we looked at. But I would say, we have looked at some large industrial portfolios, but for different reasons, they did not translate into what we described as an actionable opportunity.
Unidentified Analyst
Okay. Great. And then just touching on office, is that something you're still interested in, given kind of the dislocation and the lack of [debt] availability.
David S. Weinberg
I'd say that varies day to day. I'd say rather than describing is interested in office, right now, we're interested in learning more about the opportunities with respect to office, still early. Fundamentals continue to weaken, and we have yet to find large owners with really high-quality portfolios that one, either have equity in them or 2 are willing to transact what we think pricing should be today.
Unidentified Analyst
Great. And then I guess just one more on maintaining REIT status. Is there any kind of additional restructuring you would need to do or a special dividend that you would have to kind of maintain that REIT status?
William H. Griffiths
Sure. It's Bill. Last year, as you know, we did do an internal restructuring to generate some gain to qualify for this year. We expect to qualify again by completing a similar restructuring. And then looking forward, we have some options for '24 that we are currently evaluating. As far as the dividend goes, we don't -- it depends on any sort of future transaction, but the dividend that we paid in March will cover everything that we expect to do so far this year.
Operator
(Operator Instructions) There are no further questions. At this time, I would like to turn the floor back over to David Weinberg for closing comments. Please go ahead.
David S. Weinberg
Thank you again for joining us today, and we look forward to next time.
Operator
This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
