Another Activist Investor Grows Stake In Equity Commonwealth, Calls For Liquidation
Activist investor Indaba Capital Management has amassed a stake in office REIT Equity Commonwealth and is now joining others in pressuring the board to liquidate the company.
Indaba Capital Managing Partner Derek Schrier wrote in a letter to Equity Commonwealth's board that its leaders have mismanaged the firm, resulting in an asset value below its available cash and pursuit of an acquisition when its sole focus should be liquidation.
“Despite the Company’s dispositions and distributions over the past decade, the fact is the Company’s total shareholder returns have been extremely disappointing,” Schrier wrote. “It is time for the Board and management to carefully reflect on what is best for shareholders, not what is best for you as long-serving directors and highly paid executives.”
Equity Commonwealth's executives have said on recent earnings calls that they are exploring a “transformative” acquisition, with an end-of-year deadline to decide between an acquisition and liquidation.
Schrier, whose firm has built a 3% stake in Equity Commonwealth, claims that the “arbitrary” deadline forces the REIT’s management to make a multibillion-dollar deal in just a few months, at the risk of losing their jobs, thus creating hasty decision-making and a conflict of interest.
Equity Commonwealth said it had roughly $2.2B of cash on hand at the end of the first quarter. Schrier said the REIT's low market value, which as of Tuesday sits at $2.1B, shows investors are concerned about the possibility of an acquisition and demonstrates a lack of confidence in the company's leadership to strike a good deal.
Equity Commonwealth didn't respond to Bisnow's request for comment.
The Chicago-based REIT owns four properties totaling 1.5M SF across Texas, Colorado and Washington, D.C., according to its website. Its board was helmed by another prominent activist investor, Sam Zell, until his death last year.
The company has been stripping down its portfolio since Zell and CEO and Chairman David Helfand took over in 2014. Their ascension was the result of a prior shareholder revolt led by Related Cos. and Keith Meister's Corvex Management.
Zell similarly argued that former Equity Commonwealth President Adam Portnoy and founder Barry Portnoy’s management led to conflicts of interest and underperformance, Bloomberg reported at the time.
Over the course of his life, Zell built a multibillion-dollar fortune and became known as “the gravedancer” due to his reputation for acquiring dying assets and managing to revive them. He was also the chairman of Equity Residential and Equity LifeStyle Properties when he died.
Indaba is the second activist investor to go after Equity Commonwealth this year. In March, Jonathan Litt also called for the company to liquidate and return the cash to its shareholders. Litt’s firm, Land & Buildings Investment Management, also has a 3% stake in the REIT.
