Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OBJECTIVE
The objective of this section of this Annual Report on Form 10-K is to provide a discussion and analysis, from management’s perspective, of the material information necessary to assess our financial condition, results of operations, liquidity and cash flows for the year ended September 30, 2025. We have included an overview to identify what we believe are the more important items that affected our 2025 financial results, including both our business activities as well as events outside of our control. In addition to the overview, we encourage you to read the entire discussion in this section of our material financial data together with our consolidated financial statements and the accompanying notes that are included in Part IV, Item 15 of this Annual Report on Form 10-K. The full discussion analyzes in detail our financial condition, results of operations, liquidity and cash flows, including comparisons of our 2025 and 2024 financial results.
OVERVIEW
EQC was formed in 1986 under Maryland law. Prior to its dissolution on June 13, 2025, EQC was an internally managed and self-advised REIT operating as an UPREIT, conducting substantially all of its activities through the Operating Trust, which was also dissolved on June 13, 2025. Prior to its dissolution on June 13, 2025, the Company beneficially owned 99.86% of the outstanding OP Units.
In 2014, EQC’s shareholders voted to replace EQC’s then-existing board of trustees. EQC’s new Board appointed a new team of executive officers and internalized management. The Board and management team then undertook a comprehensive review of the Company, its legal and capital structures and its portfolio of properties. EQC executed a strategy that focused on disposing of a significant portion of the Company’s assets to reshape its portfolio and generate liquidity to fund future investments in high-quality assets or businesses to create a foundation for long-term growth to maximize shareholder value.
From 2014 to the onset of the COVID-19 pandemic in early 2020, the Company completed over $7.6 billion of dispositions. At the same time, and through the middle of 2024, EQC evaluated over 100 potential investment opportunities to create long-term value for shareholders. These investment opportunities spanned a wide range of property sectors, including office, retail, single-family rental, lodging, life sciences, industrial, manufactured housing, multi-family rentals and self-storage and to a lesser extent healthcare, data centers, cell towers and infrastructure. Despite the Company’s efforts, it was unable to consummate a transaction in line with its strategy.
While evaluating potential investment opportunities in an effort to create long-term value for its shareholders, the Company concurrently took steps to facilitate the potential wind-down of its business. On July 30, 2024, after being unable to consummate a transaction in line with the Company’s strategy, the Company’s Board: (i) determined that it was advisable and in the best interests of the Company’s shareholders to proceed with the wind-down of its operations and the liquidation of its assets in order to maximize shareholder value, and (ii) directed the Company’s management team to prepare proxy materials seeking shareholder approval of a plan of sale and dissolution.
On October 2, 2024, the Company filed the Definitive Proxy with the SEC related to a special meeting of shareholders for the following purposes: (i) to consider and vote upon the Plan of Sale, including the wind-down and complete liquidation of the Company, and the dissolution and termination of the Company, including the establishment of a Liquidating Entity and (ii) on an advisory, non-binding basis, to consider and vote upon the Executive Compensation Proposal. The Plan of Sale, which the Board determined was in the best interests of the Company and its shareholders, authorized the Company to sell its remaining properties, wind-down the Company’s affairs and distribute the net proceeds to shareholders. At the special shareholder meeting held on November 12, 2024, the Company’s shareholders approved both proposals with: (i) 85.5% of outstanding shares, and 99% of votes cast, in favor of the Plan of Sale proposal (two-thirds of outstanding shares required for approval), and (ii) 86.7% of votes cast in favor of the Executive Compensation Proposal (majority of votes cast required for approval). Following the shareholders’ approval of the Plan of Sale, the Company’s efforts were focused on, winding-down the Company’s affairs and distributing the net proceeds to shareholders.
On June 13, 2025 (the “Effective Date”), as part of the Plan of Sale, the Company transferred its remaining assets and liabilities to EQC LT, a newly-created Maryland common law trust, for the benefit of the common shareholders of the Company. In conjunction with the transfer, EQC LT distributed all of its units of beneficial interests to EQC’s common shareholders on a one-for-one basis, with each common shareholder receiving one unit in EQC LT (the “Units”) for each EQC common share then held of record. All outstanding EQC common shares were then cancelled, and the Company has been dissolved and terminated.
On September 19, 2025, the trustees of EQC LT approved the termination of EQC LT following the payment of all its liabilities and the disposal of all its assets. After liquidating the assets of EQC and EQC LT, and paying all remaining liabilities, costs and expenses, the trustees of EQC LT determined the amount of remaining funds available did not warrant an additional cash distribution to EQC LT unitholders. The remaining funds totaling approximately $150,000 were donated to ten charities selected by the trustees of EQC LT. As of September 30, 2025, after paying all of its remaining liabilities and disposing of all of its assets, the Liquidating Trust canceled all of its outstanding Units and dissolved.
Since 2014, the Company accomplished the following (i) disposed of 168 properties and three land parcels totaling 45.8 million square feet for an aggregate gross sales price of $7.2 billion, as well as $704.8 million of common shares of Select Income REIT, (ii) retired $3.4 billion of debt and preferred shares, (iii) repurchased $652.1 million of EQC common shares, and (iv) paid $4.0 billion in distributions to EQC common shareholders.
RESULTS OF OPERATIONS
In light of the adoption of liquidation basis accounting as of November 1, 2024, the results of operations for the current year are not comparable to the prior year. As of September 30, 2025, we had no remaining properties. During the year ended December 31, 2024, we sold 1250 H Street, NW in Washington, D.C., and 206 East 9th Street and Bridgepoint Square in Austin, Texas. On February 25, 2025, we sold 1225 Seventeenth Street in Denver, Colorado.
LIQUIDITY AND CAPITAL RESOURCES
Our Operating Liquidity and Resources
On November 12, 2024, the Company held a special meeting of shareholders (the “Special Meeting”). At the Special Meeting, the Company’s shareholders approved the Plan of Sale authorizing the Company to sell its remaining properties, wind-down the Company’s affairs and distribute the net proceeds to shareholders. As of September 30, 2025, we have no assets and no debt outstanding.
Net cash flows provided by (used in) operating, investing and financing activities were $99.1 million, $13.9 million and $(11.1) million, respectively, for the ten months ended October 31, 2024.
Our Investment and Financing Liquidity and Resources
On November 15, 2024, the Company announced that its Board authorized an initial cash liquidating distribution of $19.00 per common share which was paid on December 6, 2024 to shareholders of record as of November 25, 2024. On December 6, 2024, EQC paid this distribution to such shareholders in the aggregate amount of $2.0 billion. On April 1, 2025, the Company announced that its Board authorized the Company’s final cash liquidating distribution of $1.60 per common share to be paid on April 22, 2025 to shareholders of record as of April 11, 2025. On April 22, 2025, EQC paid this distribution to such shareholders in the aggregate amount of $172.4 million.
During the year ended December 31, 2024, EQC paid an aggregate of $8.0 million of quarterly distributions on its series D preferred shares and a $123.3 million liquidating distribution on December 3, 2024. After the payment of this liquidating distribution, the Series D Preferred Shares had no further right or claim to any of the remaining assets of the Company.
On June 18, 2024, EQC’s Board authorized the repurchase of up to $150.0 million of outstanding common shares under EQC’s share repurchase program from July 1, 2024 through June 30, 2025. EQC did not repurchase any common shares under its share repurchase program during the years ended December 31, 2024 and September 30, 2025. The $150.0 million of remaining availability under the Company’s share repurchase program expired on June 30, 2025.
During the year ended December 31, 2024, the Company sold 1250 H Street, NW in Washington, D.C., and 206 East 9th Street and Bridgepoint Square in Austin, Texas. On February 25, 2025, the Company sold 1225 Seventeenth Street in Denver, Colorado and has no remaining properties.
NON-GAAP MEASURES
Due to the adoption of the Plan of Sale, we are no longer reporting funds from operations, normalized funds from operations and net operating income, as we no longer consider these to be key performance measures.
CRITICAL ACCOUNTING POLICIES
Below is a discussion of the accounting policies that management believes are or will be critical during our liquidation. We consider these policies critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. The accounting policies and practices related to real estate properties discussed below are applicable to any real estate properties owned for the then-applicable period.
Subsequent to the adoption of the liquidation basis of accounting, we are required to estimate all costs and income we expect to incur and earn through the end of liquidation, including the estimated amount of cash we expect to collect through the disposal of our assets and the estimated costs to dispose of our assets.
Pursuant to our shareholders’ approval of the Plan of Sale on November 12, 2024, we adopted the liquidation basis of accounting as of and for the periods subsequent to November 1, 2024 (as approval of the Plan of Sale by our shareholders became imminent in early November 2024 based on the results of our solicitation of proxies from our shareholders for their approval of the Plan of Sale). Accordingly, on November 1, 2024, assets were adjusted to their estimated net realizable value, or liquidation value, which represents the estimated amount of cash or other consideration that we expected to realize through the disposal of our assets. The liquidation values of our real estate properties are presented on a net realizable value basis. Liabilities are carried at their contractual amounts due or estimated settlement amounts.
We accrue costs and income that we expect to incur and earn through the completion of our liquidation, including the estimated amount of cash or other consideration that we expected to receive through the date of the disposal of our assets and the estimated costs to dispose of our assets, to the extent we have a reasonable basis for estimation. These amounts are classified as a liability for estimated costs in excess of estimated receipts during liquidation on the consolidated statement of net assets. Actual costs and income may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. See Note 2, “Plan of Sale” and Note 4, “Liabilities for Estimated Costs in Excess of Estimated Receipts During Liquidation” in our consolidated financial statements for further discussion. Actual costs incurred but unpaid prior to our adoption of the liquidation basis of accounting on November 1, 2024, are included in accounts payable and accrued expenses and distributions payable on the consolidated statement of net assets.
Our critical accounting policies are those that will have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and estimates are consistently applied and produce financial information that fairly presents our results of operations. Our most critical accounting policies involve our investments in real property. These policies affect our assessment of the carrying values and impairments of long lived assets.
Real Estate Properties
Liquidation Basis of Accounting
As of November 1, 2024, the Company’s real estate was adjusted to its estimated net realizable value, or liquidation value, to reflect the change to the liquidation basis of accounting. The liquidation value represents the estimated amount of cash or other consideration that the Company expected to realize through the disposal of its assets as it carries out the Plan of Sale. The Company estimated the liquidation value of its real estate based on a contractual purchase price for the property. The liquidation value of the Company’s real estate is presented on an undiscounted basis and real estate is no longer depreciated. Subsequent to November 1, 2024, all changes in the estimated liquidation value of the real estate are reflected as a change to the Company’s net assets in liquidation.
RELATED PERSON TRANSACTIONS
For information about our related person transactions, see Note 14 of the Notes to Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K, which is incorporated herein by reference.
