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Business Wire 13-Mar-2024 8:00 AM
Notes that the Company Currently Has More than 20% Upside to Consensus NAV, is Trading Below the Value of its $2.2 Billion in Cash and Has Materially Underperformed the REIT Index Over the Trailing 1, 3, 5 and 10 Years
Believes that the Current Board Has Allowed G&A Costs and Executive Compensation to Become Disproportionately Excessive, Spending $37 Million Last Year to Manage Just Four Properties
Land & Buildings Stands Ready to Take Any Actions Necessary to Maximize Value for Equity Commonwealth Shareholders
Today, Land & Buildings Investment Management, LLC (together with its affiliates, "Land & Buildings"), a 3% shareholder of Equity Commonwealth (NYSE:EQC) ("EQC" or the "Company"), released a letter it recently sent to the Company's Board of Directors (the "Board").
Land & Buildings Founder and Chief Investment Officer Jonathan Litt stated:
"For some time, it has been our view that given the makeup of EQC's real estate portfolio, the Company's more than $2 billion in cash representing over 85% of assets and the dynamics of the current public and private real estate markets, the best pathway for shareholders of Equity Commonwealth would be the liquidation of its four remaining properties and the return of its cash to shareholders. In fact, on the Company's most recent earnings call, management stated that if "transformative investments" for Equity Commonwealth could not be found soon, it would need to look "longer and harder at perhaps selling the four remaining properties and liquidating the Company."1 Equity Commonwealth's executives have been making similar promises for years while shareholders continue to suffer. We believe the evidence is overwhelming that the time for action is now.
We initially expressed these views privately to the Board. Unfortunately, in our engagement with Chair, President and CEO David Helfand, he repeated the same refrain he has for years: he will liquidate the Company if he cannot find an attractive investment opportunity. It appears he believes that continuing to run up exorbitant G&A costs – primarily spent on executive compensation – is the better choice than an immediate liquidation. However, we believe 10 years is long enough.
A decade ago, the intervention of shareholder advocates, including the legendary Sam Zell, was needed to reset the direction of Equity Commonwealth's predecessor entity. A new round of shareholder advocacy is required now. If the Board continues to take its current stance, we are committed to exercising our rights as shareholders to send a clear message about the need for immediate action that is in the best interests of shareholders, not management."
The full text of the letter to the Board is below:
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March 7, 2024
Equity Commonwealth
Two North Riverside Plaza Suite 2000 Chicago, IL 60606 Attention: Board of Directors
Dear Equity Commonwealth Board of Directors,
We are nearing the 10-year anniversary of Sam Zell's and Keith Meister's takeover of CommonWealth REIT from Barry and Adam Portnoy. We believe that this event, and the subsequent reorganization of the company into Equity Commonwealth ("EQC" or the "Company"), represents one of the greatest corporate governance victories in the recent history of the real estate sector.
However, we believe continuing the status quo at EQC risks squandering this success. Further, recent actions by the Company necessitate a course correction. It is long overdue for Equity Commonwealth to undergo a complete liquidation of its remaining assets and return the cash to shareholders.
Based on the foregoing, we believe Equity Commonwealth should immediately announce a complete liquidation of its remaining assets and return the cash to shareholders.
While Land & Buildings hopes the Board will take immediate action, we will not hesitate to do whatever is necessary to maximize value for all shareholders of the Company.
Sincerely,
Jonathan Litt Founder and CIO Land & Buildings
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1 COO David Weinberg, EQC's Q4 2023 Earnings Call (February 13, 2024).
View source version on businesswire.com: https://www.businesswire.com/news/home/20240313833721/en/