Author Topic: EQC - Equity Commonwealth  (Read 36531 times)

thepupil

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Re: EQC - Equity Commonwealth
« Reply #40 on: March 23, 2016, 01:06:50 PM »
Quote
Equity Commonwealth has decided to put Centre Square up for sale in what could be one of the largest deals to hit the downtown office market this year.

The 1.8-million-square-foot office complex could sell for as much as $350 million to $400 million, according to sources familiar with the matter.

Centre Square is comprised of an east and west office tower.
 
Centre Square is comprised of an east and west office tower.
     
Transactions at the upper echelon seldom happen in Philadelphia though they arenít unheard of. For example, Brandywine Realty Trust in 2013 bought One and Two Commerce Square in Center City for $331.8 million, or $175 a square foot. In another Brandywine deal, the real estate investment trust is set to sell the former and redeveloped Post Office building across from 30th Street Station for $354 million. In 2014, Comcast Corp. reportedly paid upwards of $600 million for a significant interest in its 58-story, 1.25 million-square-foot headquarters.

This is one of four office properties Equity Commonwealth owns in Center City. The Chicago real estate company also owns 1525 Locust, which it put up for sale in November, as well as Mellon Bank Center and 1600 Market St. It's expected once Mellon Bank is fully leased up, it, too, will be put up for sale.

The Chicago company has launched a program to sell assets it owns across the country and is targeting $2 billion to $3 billion in sales over the next couple of years.

Centre Square is fully leased to a bevy of tenants including the University of Pennsylvania Health System, Radian Group Inc., Public Health Management Corp. and Obermayer Rebman Maxwell & Hippel, among others. It has a parking garage, has direct access to the subway concourse and is in the heart of the Central Business District. It is being marketed by Robert Fahey of CBRE Inc.

1500 Market reportedly up far sale; this is one of EQC's most important  buildings; the largest by square feet, 7.5% of gross book value, 2nd to 600 West Chicago in terms of annualized rental revenue. $290MM of gross book, $350-$400MM would be great. At $375MM that would be 1.3X gross book.

Since the 19% Philly concentration has been a minor concern for me, I view this positively.



CorpRaider

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Re: EQC - Equity Commonwealth
« Reply #41 on: April 26, 2016, 02:02:17 PM »
Under K on leasehold interest in 111 River Street in Hoboken for $235MM.  Were they carrying that at $114MM net (136MM gross)?  Like $12MM in annual rents. 

http://ir.eqcre.com/file.aspx?IID=102958&FID=34022175
« Last Edit: April 26, 2016, 02:24:44 PM by CorpRaider »

thepupil

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Re: EQC - Equity Commonwealth
« Reply #42 on: April 27, 2016, 06:06:49 AM »
correct on the carrying amounts.

annual rents are $23MM, estimated $13MM of NOI at the company wide NOI margin, which would make this about a 5% cap rate (maybe NOI is actually higher and it is a higher cap rate, but whatever it is, this feels like a very nice price at 172% of gross book. 

Sell at > gross book and low cap rates, retire higher cost debt and buy back stock at about 1X gross book, upgrade portfolio quality over time, be ready for distress w/ a war chest of cash and no net debt. Simple formula. Surprised stock isn't a little higher, though the corporate s,g,and a is a little high.

« Last Edit: April 27, 2016, 06:13:55 AM by thepupil »

CorpRaider

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Re: EQC - Equity Commonwealth
« Reply #43 on: April 27, 2016, 11:27:16 AM »
Positive hit from Englander on Barrons website today as well (basically just quoting an analyst who says the NAV is $33). 

You know I think I would pay some premium to book even if they reduced this to 100% cash if they maintained the equity legacy management team and the infrastructure to scale back up again when the graves are ripe for dancing.
« Last Edit: April 27, 2016, 12:33:58 PM by CorpRaider »

thepupil

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Re: EQC - Equity Commonwealth
« Reply #44 on: August 29, 2016, 08:52:31 AM »
http://seekingalpha.com/pr/16588838-equity-commonwealth-completes-416_9-million-midwest-portfolio-sale

Sold another ~$400mm proceeds of buildings. The properties had $484mm of gross book value so this will gross equity (before depreciation).

As of now you have about $2.4B of essentially unencumbered cash and ~$1.4B of equity (using gross book) in 50% levered properties and a $3.9B market cap.

It's no longer discounted significantly, and is becoming more and more of a cash box for future distressed opportunities.

I've trimmed back and hold a small position.

« Last Edit: August 29, 2016, 09:00:09 AM by thepupil »

thepupil

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Re: EQC - Equity Commonwealth
« Reply #45 on: September 12, 2016, 05:49:22 AM »
New presentation out showing all the progress they've made over the years and how much excess capital they have.

http://ir.eqcre.com/Cache/1500091187.PDF?Y=&O=PDF&D=&fid=1500091187&T=&iid=102958

thepupil

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Re: EQC - Equity Commonwealth
« Reply #46 on: July 25, 2017, 08:12:13 AM »
quick update on EQC. EQC continues to liquidate and build a war chest.

Q2 cash was $1.967B + $0.278B of marketable securities* = $2.24b of liquid as of Q2 end

+ they sold 1500 market (their 2nd biggest building) for $326mm after quarter end
- $250mm of debt pay off after quarter end

$2.3B of cash and securities

123mm shares @ 31.5 = $3.8+$0.1B preferred

so for $3.9B you get $2.3B of cash/securities  and $1.45B of 37% LTV levered real estate ($2.3B gross book - $850mm remaining of debt).

In per share terms it's
$18.8 per share of cash
$11.8 per share of levered real estate
$30.6 per share

the $11.8 per share of levered real estate generates 0.88 per share in annualized FFO = 7.4% FFO yield. However, due to heightened re-investment and re-leasing costs in the properties there is not much free cash being generated.

this is an incredibly boring stock that is more or less fairly valued that is likely to underperform to the upside given the cash anchor, but should be on people's radar for the following reasons

1) absolute fortress balance sheet / cash in Zell/Equity's hands optionality
2) see number 1, makes it super easy to buy on the dips because a small move in stock price really cheapens the implied price paid for the real estate.

*this is interesting, it could be nothing and just cash plus stuff or it could be stock of a potential acquiree
« Last Edit: July 25, 2017, 08:26:33 AM by thepupil »

CorpRaider

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Re: EQC - Equity Commonwealth
« Reply #47 on: July 27, 2017, 02:58:01 PM »
Thanks for sharing your thoughts, I was right at $30 when I was assing around with the figures post release.  Also noted zero buybacks during quarter despite upped authorization and obviously cash lying around.  Seems like they have been buyers around $28 if memory serves.  I was trying to look at the EV per remaining 11.5MM S.F. just as a sort of touchstone in case they decide to liquidate, which it sounds like they might.  Seemed kind of high to me, but the I realized I have no idea what is reasonable for the remaining properties, which seem to be getting fairly high grade/trophy-ish.

I did like the 10-K which I read a month or so back.  The discussion of buying good assets in good markets below replacement value seemed really logical, especially if you know you are good at managing/leasing.
« Last Edit: July 27, 2017, 02:59:38 PM by CorpRaider »

TBW

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Re: EQC - Equity Commonwealth
« Reply #48 on: July 27, 2017, 04:56:21 PM »
I took a closer look at this.  Really interesting situation.  I just read the book about Sam Zell 'Am I being too Subtle'.  Its a decent read.  EQC is doing exactly what Zell preaches in the book and what he did in the 80s.  Sell and wait to buy below replacement costs.

I, like thepupil, don't know what price you are suppose to pay for something like this.  Management costs are 37.5mil per year, roughly 1%.  Combine that with a time value of money discount and it's hard to see the value here.  If we hit a risk off mkt I would think this goes lower given those two factors.

At some point this could be a fantastic buy, but not sure I would pay more than mid to low 20s for it now.  Interesting one to follow.

thepupil

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Re: EQC - Equity Commonwealth
« Reply #49 on: July 27, 2017, 05:20:42 PM »
All of our marketable securities are classified as available-for-sale and consist of United States Treasury notes, which mature in 2019, and common stock.

That's the most interesting part of the q. There were no repurchases this q so that means EQC bought another company's stock...I think.
« Last Edit: July 27, 2017, 05:48:28 PM by thepupil »