Equity Commonwealth (NYSE:EQC) Q4 2019 Earnings Conference Call - Final Transcript
Feb 13, 2020 • 10:00 am ET
Greetings, and welcome to Equity Commonwealth Fourth Quarter 2019 Earnings Conference Call.
Please note, this conference is being recorded. I would now like to turn the conference over to your host, Sarah Byrnes, Vice President, Investor Relations. Thank you. You may begin.
Thank you, Gavin. Good morning and thank you for joining us to discuss Equity Commonwealth's results for the quarter and year ended December 31, 2019. Our speakers today are David Helfand, President and CEO; David Weinberg, COO; and Adam Markman, CFO.
Please be advised that certain matters discussed during the conference call may constitute forward-looking statements within the meaning of federal securities laws. We refer you to the section titled Forward-looking Statements in yesterday's press release, as well as to the section titled Risk Factors in our most recent Annual Report on Form 10-K for a discussion of factors that could cause 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. We also posted important information on our website at www.eqcre.com including information that may be material. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's press release and supplemental containing our fourth quarter 2019 results for a reconciliation of these non-GAAP performance measures to our GAAP financial results.
With that, I will turn the call over to David Helfand.
Thanks, Sarah. Good morning and thank you for joining us. I'll begin with brief comments on market conditions, review our 2019 results, provide an update on the Company's current activities. US economy grew 2.1% in the fourth quarter. For the full year 2019 GDP rose 2.3% compared to 2.9% a year earlier. 145,000 new jobs were added in December, leaving the unemployment rate unchanged at 3.5%, unemployment rate remains at a 50-year low. The RMS had its best year since 2014, up 26% but still underperformed the broader market as the S&P 500 gained 32% and the NASDAQ was up 35%. With respect to interest rates, the 10-year treasury yield is roughly 1.6%, down 100 basis points from the end of 2018. The short end of the curve, one-month LIBOR is 1.6% as well, down over 80 basis points from year-end 2018.
Turning to the mortgage market, the supply of debt capital remains inexpensive and available from diverse sources including CMBS, banks, life companies and debt funds. Borrowing costs for 10-year fixed-rate loans decreased 100 basis points to 125 basis points from a year ago, reflecting some spread compression, all-in rates for a moderately levered office property are plus or minus 3%. The US office market in 2019 added roughly 50 million square feet of new supply to existing inventory. Positive net absorption resulted in the vacancy rate falling 50 basis points to 12.1%, the lowest since 2007. New supply continues to run above long-term trend. While the sales volume totaled $115 billion in 2019, a modest increase from a year earlier, driven by higher transaction volumes in tech-focused markets.