Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: thepupil on December 16, 2013, 09:14:53 PM

Title: EQC - Equity Commonwealth
Post by: thepupil on December 16, 2013, 09:14:53 PM
Anyone else looking at CWH?

It is an externally managed REIT undergoing a proxy fight with Corvex (Icahn protege Keith Meister) and Related (big real estate company)

It's not overly complicated. At 1X book value, 10X last quarter's annualized normalized funds from operations (adding back litigation expense) and a substantial discount to Corvex/Related's estimate of NAV ($40 before a majorly diluted offering executed by the parasitic Portnoys, now about $32), I think the shares at 22.80 are quite compelling.

 There is no tenant that makes up more than 2%, lease roll over is fine, the activists are very likely to win (management is truly awful!) and get enough shareholders to remove the entire board and there is a lot of S,G,+A/ fee bloat that can be easily cut to increase FFO. The balance sheet is in fine shape. While the equity offering earlier this year destroyed a ton of value and has to be a case study in shareholder unfriendly behavior, it was used to pay down high cost debt and delevered the company, as did a recent offering of shares in an affiliate.

It isn't amazing real estate or anything but with the index at 16X FFO and a this at 12.7X on current operations and 10X when backing out non-ongoing expenses, there is a big gap to narrow here.

The assets are
Core + interest in SIR + non-core (recently put up for sale and written down substantially). The interest in SIR and non-core are more or less unencumbered and can be converted to cash to be redeployed elsewhere (share repo, acquisitions etc.). Obviously you want that to happen under the guidance of someone other than the Portnoys given their track record.

Last quarter, CWH did 0.45/share in funds from operations and 0.57 when adding back litigation expense. If we assume 2.28 normalized FFO per share and the activists can win and move toward an 80% FFO payout ratio and a 6% yield, you get to $30/share in a 12-24 months which is 33% plus dividends. Corvex/Related have offered to buy the company at $24.50, but a removal of the board changes in management and operations is preferable.

The exact path will not be that simple, because the Portnoys are still in control of the company and may still pull some rabbits out of their hat or destroy value further, but it looks like a 75 cent dollar with a clear catalyst on the horizon.

Corvex/Related Site
http://www.shareholdersforcommonwealth.com/

SEC filings w/ all the proxies
https://www.bamsec.com/companies/803649/commonwealth-reit

Original pre-dilutive offering presentation:
http://www.sec.gov/Archives/edgar/data/803649/000119312513075277/d491275dex993.htm

WSJ summary of where we are today:
http://blogs.wsj.com/moneybeat/2013/11/21/dealpolitik-commonwealth-reit-trustees-hold-on-to-their-offices-by-a-thread/



Title: Re: CWH - Commonwealth REIT
Post by: thepupil on December 17, 2013, 07:46:59 AM
http://www.benzinga.com/analyst-ratings/analyst-color/13/12/4160930/update-stifel-upgrades-commonwealth-reit-on-review-of-ex

a bit surprised by the analyst's cap rates and valuations which suggests lower upside than my simplistic analyses, the activists own appraisals, etc.

But note the valuation sensitivity to cap rate 9.3% is 17.00/share while 7.8% is 25.00. A difference of 1.5% is the difference between down 25% and up 9%. As you go to lower cap rates and divvy yields the sensitivity in valuation only increases, which is how you can get to higher upside.

 Also those quoting higher upside are assuming that a public portfolio of 200+ buildings will trade at a slight premium to private market value (by trading on divvy yield to equity rather than NAV), which  in my opinion is reasonable, under current market conditions, which can change, of course.

Still at the current price, it looks like you are buying a levered portfolio of mediocre real estate at an 8+% cap rate where the liabilities costs much less than 8% so the yield on the equity is higher and much higher than on the REIT index (which is dominated by bigger, higher quality companies)

I debate with myself as to whether this is more of a relative value trade than being absolutely cheap, but I think that the chance of activists winning is very high and i'm comfy with the downside, but I can see the argument that the cap rate on the whole enterprise value would not be high enough (the company is not cheap enough).

Anyone else interested?
Title: Re: CWH - Commonwealth REIT
Post by: frommi on December 17, 2013, 08:05:26 AM
I prefer ARCP because it trades at nearly the same FFO with guidance for next year it is at an P/FFO of around 11. But the management is much better and is paid only with stocks and they are still buying more, so they seem to be very bullish. With 40% upside to a P/FFO multiple of 15 and a dividend yield of 7-8% this looks like a >15% CAGR in the next 4-5 years.

So why take the stock with problems when you can get it without the troubles? (The only positive thing is the P/NAV but that shouldn`t really matter as long as the business is running normal.)
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on December 17, 2013, 08:27:23 AM
Thanks for the feedback! I've looked at ARCP but could never quite fully understand all the moving parts with the recent mergers and capital markets transactions.

I won't argue with you on management. CWH's management took 30% of the market cap in fees over 5 years!!! CWH's assets are simpler to understand in my opinion and ARCP is more of a "issue equity at a high price, buy assets at a lower price private/public multiple arb play" right? Am i wrong to characterize it that way?

I'm more comfortable with paying the same multiple and at a discount to NAV for what I think is an easier to analyze company, but ARCP definitely looks interesting. I don't mind the management problems because I think they will get kicked out, but there is a risk that they won't. 

Different strokes, different folks. Without a sudden violent rise in long term rates or a drastic selloff in REITs, I think we'll both make good money.
Title: Re: CWH - Commonwealth REIT
Post by: bmichaud on December 17, 2013, 08:31:24 AM
Quote
I've looked at ARCP but could never quite fully understand all the moving parts with the recent mergers and capital markets transactions.


This is exactly why the ARCP opportunity exists! It's very confusing and there is a decent amount of debt outstanding. But....

Management is very high quality (and buying a lot of shares themselves) and they are maniacally focused on high quality tenants in buildings that can be easily converted to another business (i.e. they avoid buildings such as Circuit City and Best Buy b/c they are difficult to repurpose).
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on December 17, 2013, 09:40:41 AM
Quote
I've looked at ARCP but could never quite fully understand all the moving parts with the recent mergers and capital markets transactions.


This is exactly why the ARCP opportunity exists! It's very confusing and there is a decent amount of debt outstanding. But....

Management is very high quality (and buying a lot of shares themselves) and they are maniacally focused on high quality tenants in buildings that can be easily converted to another business (i.e. they avoid buildings such as Circuit City and Best Buy b/c they are difficult to repurpose).

I don't disagree with you. I just couldn't figure it all out the first time around. Will have another look.
Title: Re: CWH - Commonwealth REIT
Post by: CorpRaider on December 17, 2013, 02:44:11 PM
I looked at it a little pupil.  Management are scumbags for sure.  My recollection is i liked it at the price before the pop on the activists and was supposed to go back and look at it if it sold off down to that level after the hot money lost interest, but of course my ADD took over.  I am apt to let perfect be the enemy of good though.  hah!
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on January 06, 2014, 07:26:33 AM
Commonwealth's management has taken significant changes and invited the activist (Keith Meister) to the board in a desperate attempt to save themselves. Overall, too little, too late and i hope they get thrown out completely, but there is some progress being made here.


http://seekingalpha.com/pr/8564131-CommonWealth-REIT-Adds-Independent-Trustees-Ann-Logan-and-Ronald-Artinian-to-the-Board

http://seekingalpha.com/pr/8530351-Corvex-And-Related-Comment-On-Commonwealth-REITs-Recent-Misleading-Actions

http://seekingalpha.com/pr/8526451-CommonWealth-REIT-Implements-Governance-Changes-and-Simplifies-Path-for-Shareholder-Action-at-2014-Annual-Meeting
Title: Re: CWH - Commonwealth REIT
Post by: Myth465 on January 07, 2014, 02:54:05 PM
Seems like an interesting idea. May buy leaps after the take over.
Amazing how much value an entrenched management can destroy. This was a still prior to the equity offering.

If I were the team looking to take over, I would rinse and repeat this at the other reits managed by RMR.
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on January 30, 2014, 06:59:15 AM
http://www.shareholdersforcommonwealth.com/presentations/
http://finance.yahoo.com/news/corvex-related-release-detailed-presentation-143000905.html

Ballots are in the mail and the market is starting to get a little more excited (either pricing in a greater probability of win or a higher NAV) with the stock up a bit.
Title: Re: CWH - Commonwealth REIT
Post by: matts on January 30, 2014, 04:57:36 PM
Whats the record date for shareholders eligible to vote? I'm having trouble finding it.

Title: Re: CWH - Commonwealth REIT
Post by: thepupil on February 04, 2014, 05:37:51 AM
I'm not sure about the record date or how it works exactly. I know that I have received the materials and will mail them in ASAP, as have a few friends. I have not opened mine yet but I am told that you cannot vote online and that you have to mail it in by taking it to a UPS drop off point. I hope this doesn't hinder people from voting. We need 70% to get rid of the board entirely and non-votes are effectively votes to keep the Portnoys in power.


Edit: One thing that does worry me a little bit is if the Portnoys can use the RMR empire to have REITs they control buy shares of CWH to try to swing the balance in their favor. I'm not sure how/if that would be disclosed, but I just fear these guys are going to do everything in their power to keep the fee gravy train rolling.
Title: Re: CWH - Commonwealth REIT
Post by: matts on February 04, 2014, 05:59:48 AM
Well if you already received the proxy then the record date was set earlier. So anyone buying shares now will not have a vote. The seller will, as they were the owner on the record date.

I don't believe other rmr reits hold material amounts of CWH, Corvex would have surely pointed that out, and I haven't seen it anywhere.

The thing I like about activism, is that even if it's "unsuccessful" it usually scares management enough to make some positive changes. The fee agreement is already more fair than in the past. Still not fair, but an improvement.



Title: Re: CWH - Commonwealth REIT
Post by: matts on February 11, 2014, 01:28:41 PM
http://www.bloomberg.com/news/2014-02-11/billionaire-zell-joins-commonwealth-reit-dissident-board-slate.html

"CommonWealth yesterday set Feb. 18 as the record date for shareholders entitled to vote to remove the board."

I was wrong, you can still by the shares and vote. And I think Sam Zell being on board is a very positive sign. He is a veteran of real estate turnarounds.

Title: Re: CWH - Commonwealth REIT
Post by: thepupil on February 14, 2014, 03:45:08 PM
Stock up about 20% since posting. While I think everything will work out, the risk/reward is incrementally worse as people have started to price in a win for the activist and preemptively close the valuation gap.

 I've mailed in my gold card and impatiently await the Defenestration of Portnoy.

Recent developments
-aforementioned setting of record date
-Sam Zell will be chairman should activists win
-this wonderful bit of activist advertising

http://www.shareholdersforcommonwealth.com/wp-content/uploads/2014/02/ZellvsCWHPerformance.pdf

Now we sit and wait and hope this thing trades to the activists' estimate of NAV upon a win. I've hedged the disaster scenario that the portnoy's win as it is somewhat cheap to do so with the stock up a fair bit.

Edit: Sidenote, the Portnoy's are running out of time to do something with SIR. If the activists are successful in gaining control of CWH, they'll effectively control SIR as well and can once again create value by kicking out the parasites. It may be interesting (assuming it doesn't rally too much) to buy SIR if/when CWH board is thrown out as Myth alluded to earlier in the thread.
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on February 28, 2014, 07:06:43 AM
Notes from the past week or so

http://online.wsj.com/article/SB10001424052702304834704579405190503483658.html

Not much new in the below WSJ article but it does have a quote from
Delaware (big LO insititutional money manager owns 8%) saying he's
siding with Corvex/Related and it says that Vanguard (largest
shareholder) sided with the Corvex Related last time and Blackrock
abstained  The Delaware news is good news!

 The passive index guys have the capacity to screw up the campaign. Also a recent
VIC pitch on the preferred theorized that Vanguard was more
pro-portnoy since the portnoys waived their poison pill to allow
Vanguard to buy more.

So the way i see it, we have 35% (1/2 of the 70% we need) in the bag
(definites +actives), 19% passives whose vote is critical (get those
and you're almost 80% there), and then i think we'll easily get the
vast majority of smaller shareholders since we got 70% last time and
they are highly unlikely to be convinced the changes are sufficient.
Also I haven't ever seen a single positive thing written about the
Portnoys in media or on message boards/seeking alpha. Longtime retail
shareholders hate these guys and I think they will take the effort to
mail in their cards.


Definitely on our side (17.5%)
Corvex/related                 9.5%
Delaware/Macquarie        8.1%

Hedge Funds/Active MF's incredibly likely to be on our side (17% ish)
Perry                             5.0%
Owl Creek                      3.7%
AQR                              2.9%
Marcato                         2.4%
Highfields                       2.4%

The passives that need to put us over the hump
Vanguard 12.3%
Blackrock 6.7%


Quotes from WSJ:

"Clearly these changes were reactionary to the pressure they were
under," said Ian Ferry, a portfolio manager at Delaware Investments, a
mutual-fund manager that owns 8.13% of CommonWealth's stock and is
siding with the dissidents.

The outcome of the vote hinges largely on a few shareholders. The
Vanguard Group Inc., owns more than 12% of CommonWealth's stock, while
affiliates of BlackRock Inc., own about 7%. Vanguard sided with the
dissidents in last year's vote; BlackRock abstained. Both firms
declined to comment.


Also Earnings yesterday:

arnings out today, conference call later....only thing that is important is that the Portnoys diluted shareholders and destroyed value in 2013. FFO / share down significantly.

Normalized FFO available for CommonWealth REIT common shareholders for the year ended December 31, 2013 was $300.6 million, or $2.67 per share basic and diluted, compared to Normalized FFO available for CommonWealth REIT common shareholders for the year ended December 31, 2012 of $283.8 million, or $3.39 per share basic and diluted.

Sam Zell CNBC interview this morning
first of all, this particular situation, the commonwealth situation, is a situation where a structural impediment results in shareholders having almost no voice. by virtue of an externally managed structure of which there are very few equity reits. all of the rest of them are self-managed and avoid conflicts that exist when an outside manager manages assets he doesn't own. and as far as our backing is concerned, this started badly a year ago. they felt strongly that this was both an undervalued situation and a situation where shareholders were being deprived of their right to vote and be represented. they came to me and said our interests are economic. we want to build out of this a great new company. are you interested? i said, if you are successful, we would be prepared to take over the company and set up management operation very similar to what we did with the lp. so looking back at the last ten years or whatever, sam, you sold -- you didn't know why you were selling. it just seemed like a good time because of what people were offering you. we've had you on since then and things have come back down to where they are attractive again in your view. where are we right now with an improving economy? you're interested in this deal. is there inhe is there inherent value in real estate everywhere? the stuff that you sold, is it back to where it was when you sold it at this point? no. i don't think that the office market is even close to where it was in '07. in this particular situation, i believe that you have roughly a $7 billion collection of assets. that have been misaligned or misstrategically run, because effectively, the incentive to the manager was keep buying assets because you get paid on number of assets under your control, not on the performance. all you have to do is look at the chart of eqr, eop and, over the last 15 years, they're in a serious uptrend. commonwealth is dead as a dead
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on March 18, 2014, 02:29:38 PM
http://finance.yahoo.com/news/holders-over-81-outstanding-shares-210100474.html

Holders of Over 81% of the Outstanding Shares of CommonWealth REIT Approve Removal of Entire Board of Trustees

Now the hard part: installing new management and restructuring the assets and company to maximize value. It's not a slam dunk from here, but so far so good.
Title: Re: CWH - Commonwealth REIT
Post by: Myth465 on March 18, 2014, 03:46:48 PM
Really annoyed I waited.
Those leaps would have been very profitable....
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on March 27, 2014, 03:21:44 PM
How hilarious is this?

0.02% of shares voted against removal of  Portnoys. I bet those 25 odd thousand are the two Portnoys themselves.

25,000/118.4MM



                             Consent to Remove    Against Removal        Abstain
    Ronald J. Artinian            96,519,999           2,616,865           183,567
     William A. Lamkin            99,073,207            63,657             183,567
         Ann Logan                96,517,303           2,619,561           183,567
      Joseph L. Morea             96,534,228           2,602,636           183,567
      Adam D. Portnoy             99,111,573            25,291             183,567
     Barry M. Portnoy             99,111,802            25,187             183,442
Frederick N. Zeytoonjian         99,076,194            60,670             183,567
Any other person or persons
elected or appointed to the
    Board prior to the
   effective time of the
         proposal                 99,121,487            15,502             183,442
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on July 09, 2014, 01:34:07 PM
CWH just monetized their stake in SIR (a shame for shareholders of SIR) but it gives CWH 20% of market cap in cash. REIT with NAV in low to mid 30's with 20% of market cap in cash chaired by Sam Zell and run by a new blue chip managment team. Not a 50 cent dollar, but not a terrible place to be in my opinion.



CommonWealth sells Select Income stake to Government Properties

    Now under new management, CommonWealth REIT (CWH) sells its 22M shares of Select Income REIT (SIR) to Government Properties Income Trust (GOV) and Reit Management & Research (the Portnoys' management company) for $705M.    GOV made the bulk of the purchase with 21.5M shares and RMR purchased the other 500K. Both GOV and SIR continue to be managed by RMR.
    Source: Press Release
    CWH +6.1%, SIR -1.6% AH
Title: Re: CWH - Commonwealth REIT
Post by: CorpRaider on December 18, 2014, 02:10:14 PM
Back below the $24.50 at which Meister offered to take it out.  BTW it has performed a lot better than ARCP.  haha.  I listened to last quarter, they are still digging into the assets but I like the cut of their jib and the comments about looking to be sellers in this market.  I see some grave dancing down the line.
Title: Re: CWH - Commonwealth REIT
Post by: thepupil on December 18, 2014, 02:58:37 PM
yep, sitting here right at GAAP common equity with $1B (1/3 of market cap) of accumulated depreciation, very little asset level and corporate leverage, a big cash pile with which they are retiring any higher cost debt, some additional asset sales likely (Australia) etc; there are lots of things to like.

Overall it's a good way to buy some buildings. The REIT index is up 23% this year and is  made up of fully optimized pure play things with reasonably levered balance sheets that trade at nosebleed valuations.

The hodge podge of randomness known as Equity Commonwealth is up a meager 4%, has an inefficient, spring-loaded and ready to buy if/when shit hits the fan balance sheet, has no strategic focus, a new management team, and all kinds of other things that make it a fish out of water. It's a better place to be.
Title: Re: CWH - Commonwealth REIT
Post by: CorpRaider on February 19, 2015, 03:14:01 PM
I wonder if we should start a new thread or if you can rename this one to EQC, pupil? 

Anyhow, I just listened to the CC.  It was pretty interesting.  Sam Zell was on there and was very engaged (I don't remember him being on the prior calls).  They are targeting 2-3 billion in asset dispositions.  Sounds like they're going to try and really build the war chest for future grave dancing.  They're going to keep letting for CBRE handle the property management for the time being.

Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 08, 2015, 04:45:41 AM
http://ir.eqcre.com/Cache/1500072719.PDF?Y=&O=PDF&D=&fid=1500072719&T=&iid=102958

http://www.businesswire.com/news/home/20150608005466/en/Equity-Commonwealth-Completes-Portfolio-Sales-Totaling-793#.VXV_qutH0b0

sold big portfolio of smaller assets in smaller markets, gross book of $794MM, net book of $660MM, sales price of $793MM

So they got 1X gross book for their portfolio of properties in smaller markets. EQQ has net common equity of about $3B and $1B of cumulative depreciation, so gross common equity of $4B, so if you get closer to 1X gross book (where they are selling their lower quality properties you get 20% upside from here on the re-rate + value growth sam zell optionality from there

Also good that the portfolio gets better and easier to understand with these sales. They've cut their building count in half and only reduced square footage  and rent by 20% and 16%.

I'd characterize the portfolio sales as roughly in line with expectations, good, but not great, stock isn't as interesting as it was when it was 15% ago but I'd say you still have well managed low risk optionality here, particularly given the plan to continue to reduce debt and sell more assets.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 19, 2015, 11:39:57 AM
http://finance.yahoo.com/news/edited-transcript-eqc-presentation-10-155237388.html

Good Transcript. I like the word "mergable"

Quote
People have worked very hard and it's really a unique opportunity for all of us to be a part of something that has a chance to take a pool of assets to reallocate them, create cash with them and then our hope is to find an opportunity to drive long-term value in an opportunistic way going forward with a remake of the entire portfolio to the extent an opportunity presents itself and it's not clear that it will and I think we've been clear with people that if there is no opportunity to deploy capital in a way that we think creates long-term value, we'll continue to sell assets and potentially merge out what is a much smaller more desirable pool of assets so we have been selling assets that are less desirable. We have a very attractive portfolio of assets principally Philly, Chicago, Austin, Denver and Seattle, Bellevue, and really what we do will be dictated by the opportunity.


Quote
here are kind of two portfolios within this portfolio, right, there's a core portfolio of 30 or 50 assets that look and smell and taste like the assets that our peers own. We don't think that the REIT community will have a hard time valuing that, right, when we cut away all of the stuff that doesn't belong, then that will be something that's the mergeable portfolio that David described earlier what's hard is everything else, right? And everything else is what's in this $2 to $3 billion of dispositions that we've talked about. It gets a whole heck of a lot less hard when we turn it into cash. Then there's no debate, we know what that's worth and we know what this left-over portfolio is worth.


Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on June 19, 2015, 12:27:35 PM
Just read it.  Sounds good!
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 25, 2015, 05:40:16 AM
http://finance.yahoo.com/news/equity-commonwealth-agrees-sell-illinois-113500614.html

Selling Illinois Center for $376M. property is the second largest.

the sale price represents 113% of gross book value and 122% of net book value. 111 East wacker has a $142MM loan on it at 6.29% due 7/2016 so $166MM of equity will become $234MM of straight cash homie.

They continue to build a massive war chest and de-lever. Although this was hinted at in earlier press releases, I was/am a bit surprised they sold this one. since it is the type of asset they say they want to own for the long term (big, major city, CBD)
Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on June 25, 2015, 06:04:12 AM
That's exactly what I was going to say:  I thought this was the sort of property they were going to focus the remaining portfolio around.

I sort of hope they don't decide to liquidate the trust and cashier us as 1.3 or 1.4x book.  Although, that would be better than a sharp stick in the eye.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 25, 2015, 06:39:58 AM
Given this building is 73% leased, they must have just decided that it was a better proposition to sell it than to try to lease it up. This also gives them a little breathing room in terms of selling other worse assets at disappointing prices.

I'm adding a little bit here as I feel the story keeps getting de-risked with every sale at or above gross book value. The cash is really starting to pile up. They'll now have more than they need to retire all debt that comes due in 2015 and 2016 and they are the least levered company in their space. Once the rest of non-core is sold, they won't have any debt whatsoever. At some point, they'll have to start buying back stock or buying assets. 

The end goal looks to be more and more a sale of the company or to try to get the stock price up to where they can raise more capital and become a scale REIT.




Quote
John Bejjani - Green Street Advisors.

Good morning, everyone. David, I know, you said you can’t discuss too much about the properties that are under contract or what’s being marketed, but can you give us a general sense of maybe the market mix or leasing profile or anything even in general terms?
David Helfand - CEO

Well, I think what we can’t say is that we prioritize some of our smaller assets and more tertiary markets, but there is also a mix of other things in there, and given the breadth of the disposition going on, it’s really hard to characterize them in short form.
John Bejjani - Green Street Advisors.

Okay. And then I guess as you guys are thinking about exiting markets and just selling assets, I have seen a report that Illinois Center is being – that Illinois Center is on the market. Theoretically if this is true, does that necessarily suggest an exit from Chicago or would you also even in markets where you have scale look to sell certain assets if they just don’t make sense to put capital into?
David Weinberg - COO

This is David Weinberg. I would not conclude because a certain asset is on the market that we’re necessarily exiting the market. We look at each asset individually taking into account that asset’s profile. So just because there are certain assets that we may or may not sell over time, it does not as I said earlier, lead to any broad conclusions with respect to where – whether we will be in that market long-term.
Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on June 25, 2015, 07:54:19 AM
Ahh, yes.  I forgot about that.  They will probably just say they are continuing to be "opportunistic" and got a nice offer for the property, especially when factoring projected expenses to get it leased back up.  If they work down to a nice bite-sized REIT type portfolio paired with a lot of cash, it seems like they will have the option to sell the portfolio if the market gets really hot or deploy the cash if things/values go south. 

I'm excited by that prospect, but I'm not often invited into real estate deals with Sam Zell and Related. 
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 29, 2015, 09:07:19 AM
seeing reports sale of Aussie assets. They have $220MM USD gross book value and $206MM USD net book value. It looks like they will get about $230MM USD ($300MM AUD).  This will get rid of 8 buildings and 1.7MM square feet and get rid of the oddball australia exposure in the portfolio. They are wasting no time in dispensing of the non-core


http://www.fairfieldchampion.com.au/story/3178337/propertlylink-snaps-up-303-millon-in-assets/?cs=9

Title: Re: EQC - Equity Commonwealth
Post by: thepupil on June 29, 2015, 09:27:58 AM
As of end of Q1, EQC had $2.597B of debt & preferred and $421MM of cash.

They paid down $138MM of unsecured bonds so that gets you to $2.459 and $283MM cash.

They then sold the two big portfolios which added $376MM of cash and $320MM of cash and got rid of $88MM of asset level debt so that gets you to $979MM of cash and $2.371 of debt + preferred.

They then sold Illinois center for $376MM and it had a $142MM loan on it so cash goes to $1.213B and debt goes to $2.229B.

They then just sold the australia portfolio for $230MM so cash should now be around $1.4B.

I may have missed something, but I think EQC now only $829MM of net debt and about 40% of its market cap in cash and about 10% of its market cap in un drawn credit revolver.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on July 13, 2015, 05:52:14 AM
http://online.barrons.com/articles/sam-zells-equity-commonwealth-is-a-bargain-1436596025?mod=BOL_hp_mag

Barron's article; nothing new.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on August 05, 2015, 08:02:05 PM
Updated for Illinois Center Sale and info from earnings

Capital Structure

http://ir.eqcre.com/Cache/1500074572.PDF?Y=&O=PDF&D=&fid=1500074572&T=&iid=102958

0 Drawn / $750MM Revolver
$400MM of Term Loans due 2020 and 2022 @ L +140 and L+180
$1,064MM Unsecured @ 6.17%, pretty much $250MM matures / year from 2016 on
$365MM of mortgage debt @ around 5%
$400MM of preferred @ 6.5% and 7.25%

$2,229 Debt and preferred
$3,536 Market Cap

$5,765 Total Capitalization

So for $5.7B you get $1.5B of cash in the hands of Sam Zell and crew and $4.2B of gross book value of properties.

The most recent supplemental shows that the remaining properties (after Illinois Center sale) throw off $590MM of annualized revenue. At a 56% cash NOI margin (what they did last q) that's $330MM of NOI which at an 8% cap is $4.1B and at a 6% cap is $5.5B.

So the current stock price implies that the remaining buildings are closer to an 8% cap, which considering that EQC has been unloading their low quality stuff in the mid 7's seems off.

It's not incredibly cheap, but it's easy to conclude the assets very nicely cover the stock price, the leverage is basically gone, and there's lots of opportunities to refi or simply pay down higher cost (6+%) debt, and optionality in the event they could make a distressed acquisition or merge or sell the company entirely.

I hope they address why there is no repurchase authorization on the call tomorrow.

EDIT:
Of course, another way to look at it is the existing estate of properties likely satisfies all covenants and fully supports the debt so that you are really buying $2B of equity ($4.2B-$2.2B debt and preferred) in real estate and $1.5B in cash for $3.5B and any upside / downside from delta in sales below / above the implied 7.8% cap rate goes to the $2B in real estate equity.

It's really saying the same thing a different way, but it shows that 40% of what you are buying is cash in arguably good hands and the other 60% is moderately levered (52% levered even if you think the properties are worth only $4.2B) decent RE at a 7.8% cap rate.

Really not much more to say than that.

It's a pretty simple story.

Title: Re: EQC - Equity Commonwealth
Post by: thepupil on August 24, 2015, 06:30:32 PM
TOO SMALL!!!



Equity Commonwealth Announces $100 Million Share Repurchase Program
Mon August 24, 2015 7:11 PM|Business Wire  | About: EQC   
CHICAGO--(BUSINESS WIRE)-- Equity Commonwealth (EQC) announced today that its Board of Trustees has authorized the repurchase of up to $100 million of its outstanding common shares over the next 12 months.

Purchases made pursuant to the program will be made from time to time in the open market, in privately negotiated transactions or in other manners as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time.
Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on August 26, 2015, 06:21:29 AM
Yeah I was going mock the impressive size.  I mean its just an authorization, put a big number in there.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on September 14, 2015, 04:03:43 PM
http://seekingalpha.com/pr/14670096-equity-commonwealth-completes-three-additional-sales-for-261-million-total-dispositions-of-1_7-billion-year-to-date

Nice....love how they authorized a small buyback and executed almost all of it in less than a month, buying back 2.6% of shares.

The sales look good.

The upstate NY portfolio are small assets (numbered 90-99 in the supplemental). These have gross book of $119MM and net book of $112MM. They are selling for $105MM. 88% of gross and 93% of net book. Will reduce their building count by another 10 buildings. -$14MM hit to gross book

185 Asylum street getting sold for $113.3MM compared to gross of $78MM and net of $73MM, 144% of  gross book and 154% of net book! +$35MM increase to gross book

16th and Race getting sold for $43MM compared to $36MM gross and $43MM net, +$7MM

All in all we have another $233MM of gross book converted into $261MM of cash (minus broker commissions and other cost of selling).

The building count keeps dropping and the portfolio is getting cleaned up. Sales of the lower quality buildings have been executed in an orderly fashion and they appear to be receiving decent prices.
They are now buying back stock at a rapid rate and there is virtually no net debt. So far so good. 

EDIT: new presentation attached

EDIT: The one concerning thing is the very low print of $72/foot for the vacant One Franklin Plaza (16th and Race), former GlaxoSmithKline offices in Philly. They've been trying to sell this forever. EQC's largest concentration is in Philly (3.9MM square feet between 1500 market,1735 Market, and 1600 Market,1525 Locust). These have gross book of $551MM ($141 / sq. foot). They are nicely occupied and not vacant, but it shows you what can happen when shit hits the fan.

EDIT: If you update my basic calculation for share repo's and asset sales to cash and resulting decrease in annualized revenue, it's $5.53B EV for $1.6B of cash and buildings throwing off $302MM NOI ($542MM @ 56% NOI margin), implying a 7.7% cap rate.


http://www.bizjournals.com/philadelphia/blog/real-estate/2013/11/a-vacant-one-franklin-plaza-comes-up.html

Title: Re: EQC - Equity Commonwealth
Post by: thepupil on November 04, 2015, 01:46:27 PM
http://finance.yahoo.com/news/equity-commonwealth-reports-third-quarter-211500409.html

They are not kidding around with the asset sales. Looks like they got decent, but not spectacular prices for the buildings they sold in October, 15% below gross book.

Cleaning up the portfolio nicely and VERY cash rich. Same story as before.
Title: Re: EQC - Equity Commonwealth
Post by: Peregrino on November 09, 2015, 04:28:29 PM
I would argue that the risk/reward balance has shifted unfavorably post this most recent set of asset sales. 

Pre-Q3 call, I had agreed with you that the portfolio was trading at too wide a discount ie, you could buy a portfolio worth between a 5.7 and a 6.5% cap rate for over 8%, or put differently you paid fair value for the properties and got the cash for free. 

But now - unless they paid off some debt along with the sales - you are getting a portfolio worth between a 5.7 and a 6.7% cap rate for ~7.5% net of cash, so the spread between the two values has narrowed considerably. 

Looked at differently, the remaining properties are worth about $20/share at a 6.25% cap rate and 56% NOI margin on $519MM of revenues and you're getting $14/share of cash.  So at a price of $27/share, your ratio of up/downside is about equal (downside PT of $20/share from $27 today if the cash is squandered or cap rates start to back up, and PT of $34 of on the upside).

To get to a minimum ratio of upside to downside of 3x, you need to believe that the remaining properties should trade lower than a 5.75% cap rate and I just don't see that being realistic.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on November 09, 2015, 05:28:02 PM
Welcome Peregrino and thank you for your thoughts.

I have trimmed recently at prices between $27-29 and mid $30's is kind of where I'd think about exiting completely. My first shares were purchased below $23 and average cost is $24. I'm basically a "size back up"  at $25, a trim at $28-$29 and a seller in the mid $30's.

I don't disagree with anything you are saying about fair value except for maybe your downside feels a touch too punitive. $20 / share would be $2.5B. they have no net debt and $3.9B of gross book in real estate. I don't think they'll squander the cash. They will pay off the high cost debt and have been pretty deliberate about not overpaying for acquisitions... I'm not saying it isn't possible but  just not consistent with what we know of Zell and team and not consistent with what's happening so far.

As for  requiring 3:1 upside to downside...I agree it does not fit that criteria if your downside case is $20. I don't agree with $20, but that's what make a market.

I personally just think about the investment like this "in today's  real estate market this is probably worth low to mid $30's and there is no net debt so if the real estate market takes a turn I'm not going to lose my shirt" (and have excess capital and low leverage in the hands of a good team/dealmaker). There are sexier and more complex stories out there but this works for me. Could it be cheaper? yes.

 I trust the capital allocators at the helm to issue stock or converts if the stock gets too expensive and I trust them to buy back stock if it gets too cheap (which they've demonstrated they are willing  and capable of doing), so I'll probably be less enthusiastic about selling as it approaches fair value than I normally would be.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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 aren’t 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.

Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider 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
Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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.

Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider 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.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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.

Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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
Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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
Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider 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.
Title: Re: EQC - Equity Commonwealth
Post by: TBW 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.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil 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.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on October 05, 2017, 07:53:22 AM
Quote
Item 7.01 Regulation FD Disclosure

Equity Commonwealth (the “Company”) currently has seven properties totaling 4.7 million square feet in various stages of the sale process. This includes the preliminary evaluation of the sales of 600 West Chicago Avenue in Chicago, Illinois and 1600 Market Street in Philadelphia, Pennsylvania. There is no assurance that any transactions will be completed.
The information disclosed in this Item 7.01 is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. In addition, the information in this Item 7.01disclosure shall not be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing


EQC quietly dropping a reg FD 8-K with no press release that they are exploring selling their 1st and 5th largest building and 40% of the remaining square footage.

Pretty surprised to see that they'd sell their flagship (600 West Chicago Avenue). Selling that building would make this even more of an opportunity fund and liquidation rather than a company with earning assets (aren't there REIT rules about what % can be liquidated in a given year?).

Those 2 buildings are 1/4 of annualized rent.

Title: Re: EQC - Equity Commonwealth
Post by: thepupil on November 13, 2017, 03:07:03 PM
Quote
After selling off nearly $5 billion in property, Sam Zell's office company may have found a deal that will make the company bigger—a lot bigger.

Equity Commonwealth, a Chicago-based landlord whose chairman is Zell, has approached Forest City Realty Trust to discuss a possible merger, according to Reuters. A tie-up would create a company worth more than $10 billion, with a portfolio of office and apartment buildings across the country.



Cleveland-based Forest City is considering an all-stock merger with Equity Commonwealth as part of a process to explore strategic alternatives, including a sale of the company, Reuters reported. Equity Commonwealth, meanwhile, has been on the prowl for a big, transformational deal after amassing a war chest through the sale of dozens of office buildings. The real estate investment trust isn't limiting its hunt to the office market.

Equity Commonwealth and Forest City executives did not immediately return phone calls.


Equity Commonwealth is pursuing a big acquisition about a decade after Zell's most famous real estate deal, the $39 billion sale of Equity Office Properties Trust, where he also was chairman. The company's timing was good: The real estate market and economy crashed about a year later.

Zell got back into the office market in a big way about three years ago when he and his longtime associate David Helfand teamed up with an investor group to take over Equity Commonwealth, then known as Commonwealth REIT. They changed the company's name and moved its headquarters from Newton, Mass. to the same Chicago office building where Zell's two other REITs, Equity Residential and Equity LifeStyle Properties, are based.

SHRINKING​ FIRM

The company has been shrinking since then, capitalizing on the strong office market by selling buildings to investors willing to pay up. Equity Commonwealth recently put its last two Chicago properties, the Groupon headquarters building at 600 W. Chicago Ave. and Triangle Plaza near O'Hare International Airport, up for sale. The REIT currently owns 20 properties totaling 11 million square feet and has a market capitalization of $3.8 billion.

Equity Commonwealth will sell off its entire portfolio if it can't find a good place to invest the cash from the sales. But that's not its preferred option.

"We have confidence in the team we've put together here. We have capacity," Helfand, the REIT's president and CEO, said on a recent conference call with analysts, according to a transcript. "The piece we can't control necessarily is the market and our ability to find a deal. But we are working hard, looking at a number of things and hopeful that we could find a deal that we think we can create value and drive opportunity and apply the team and the capital to it."

Equity Commonwealth shares were little changed in midday trading, at $30.43. Including dividends, the shares have returned 20.4 percent since Zell and Helfand took charge of the company in 2014, vs. 22.1 percent for the Bloomberg REIT Office Property Index.

Forest City is a bigger company, with a market capitalization of $6.7 billion. The REIT has been reshaping its portfolio, exiting hotel and retail markets and selling off military housing. It recently announced a deal to sell stakes in 10 regional malls around the country.

Forest City aims to focus on just two property types—office and apartments—down from 11 in 2011. Under pressure from an activist investor, the REIT in September said it planned to review its strategic options, including a possible sale of the company.

Forest City may be best known in Chicago for its involvement in the massive Central Station development in the South Loop. The REIT's current local investments include apartment and senior housing buildings in the South Loop, and the Pavilion, an 1,114-unit multifamily complex near O'Hare International Airport. Forest City also owned the Illinois Science & Technology Park in Skokie, selling it in January for $77 million.

Rumors of merger with FCE. This merger (if it happens) makes a ton of sense, in my opinion.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on December 17, 2017, 01:49:24 PM
Quote
As Sterling Bay vies to bring Amazon's second headquarters to a new campus it's planning for Chicago's North Side, it's closing in on a deal to buy a more established office hub downtown.

The developer is finalizing an agreement to buy the former Montgomery Ward catalog building at 600 W. Chicago Ave. from Chicago-based Equity Commonwealth, according to sources close to negotiations.

The deal has not been completed, but Sterling Bay is believed to have edged out other potential buyers including New York-based investor Blackstone Group to acquire the 1.65 million-square-foot building along the Chicago River for more than $500 million, a source said.

That price would be far more than the $390 million that Equity Commonwealth, the Chicago-based real estate investment trust run by real estate magnate Sam Zell, paid for the building in 2011.

The deal would be in line with the recent strategies for both the buyer and seller: Sterling Bay's continued expansion and Zell's exit from the Chicago office market.

In 600 W. Chicago, Sterling Bay would be taking over a stabilized, high-profile building 95 percent leased to companies including Groupon, Echo Global Logistics, Wm. Wrigley Jr. and venture fund Lightbank, among others.

It's a signal that the fast-growing developer is putting more of its chips on well-established trophy buildings rather than the office redevelopments on which it has built its reputation. Sterling Bay is also finalizing one of its largest acquisitions to date with a $680 million purchase of Prudential Plaza.

Buying such income-generating properties could provide reliable revenue streams for Sterling Bay as it works on putting the land and other pieces together for Lincoln Yards, the 30-acre mixed-use campus it is planning along the North Branch of the Chicago River. That project on the former Finkl steel site is one of 10 sites the city of Chicago submitted to Amazon as a potential destination for its proposed $5 billion second headquarters.

For Zell, selling 600 W. Chicago would add to the enormous war chest his Equity Commonwealth REIT has built from unloading properties in recent years.

Since he took over as chairman in 2014, the REIT has amassed close to $2 billion in cash primarily from selling off scores of properties, leading to rampant speculation about the timing and nature of its next move. The company has whittled its portfolio down to 20 properties as of the end of the third quarter from 156 it held three years ago.

Once it finalizes the sale of 600 W. Chicago, its lone remaining property in the city will be the Triangle Plaza complex near O'Hare Airport, which it's also planning to put on the market.

Spokeswomen for Sterling Bay and Equity Commonwealth could not be reached.

Selling Groupon's headquarters comes with the area around the building poised for a radical overhaul.

Across the river, a joint venture of developer John O'Donnell and Tribune Media recently unveiled plans to build a mixed-use complex including three office buildings and a 310-unit residential tower.

Those would fit into a larger development Tribune Media has planned for its 30-acre riverside parcel between Grand and Chicago avenues, where it has proposed the River District, a sprawling mixed-use plan featuring more than a dozen new buildings and 9 million square feet of commercial and residential space. That site, though also included in the city's Amazon bid, still has many major hurdles to clear before it could become reality.

https://www.chicagobusiness.com/realestate/20171212/CRED03/171219974/sam-zell-selling-groupon-headquarters-to-sterling-bay

This should take cash per share from ~$20 --> $24-$25 and gross levered (~51% LTV) real estate per share to $6-$7.

this is more and more becoming a Sam Zell SPAC, but it isn't really at a discount. Even if you thought everything else was worth 1.3x gross book that would only add ~$3 / share to NAV and get you to like $33/$34. So it's more or less trading at NAV, unless you are super bearish/bullish of CRE.

A stock for stock merger with FCE would be good for both in that it'd de-lever FCE immediately by about 3x, re-lever EQC and give the Equity team a big asset base to work with.
Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on December 18, 2017, 03:30:15 PM
Thanks.  Agree.  Very meh around $30.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on January 26, 2018, 11:09:08 AM
this is a a bit like updating the speed at which the paint is drying, but EQC announced the sale of two big buildings: the groupon builidng (600 west chicago) and 1600 Market in Philly. In both cases, EQC spent lots of money and time improving the tenant roster and the lease profile and sold the buildings for substantial premiums to gross book value.

I calculate gross cash per share to be $26.30 and net cash to be $18.50.

If we put all the debt against the remaining buildings, they'd be about 68% LTV which is too high.

50% LTV gets you to $5.72 per share in levered buildings and $24.2 in net cash.

The price has fallen such that this trades at 99% of NAV. Note that I do not do a detailed building by building NAV, but rather use gross book as a proxy which has been right enough thus far.

To repeat, EQC represents a SPAC like security with low absolute downside and optionality to some sort of deal. Risks of underperformance and opportunity costs are high, but risk of permanent impairment of capital is low.

EDIT: With the redemption of the 5 3/4% of 2042 (which were callable), that brings the buildings LTV to 50%. So $24.2 (81% of market cap) in cash and $5.72 (19% of market cap) in 50% LTV buildings.


Title: Re: EQC - Equity Commonwealth
Post by: CorpRaider on May 09, 2018, 05:22:56 AM
Did you listen to the call yet?  Seems like the speculation that some of the securities on the balance sheet were in another REIT with whom they were negotiating a potential transaction was correct.  They were buyers of EQC stock during the quarter at average price of ~29.60, if memory serves.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on May 09, 2018, 06:27:56 AM
The fact pattern stated in the call, along with the rumor of a potential merger w/ Forest City, fits that they were buyers of FCE in 1Q 2017. FCE averaged $22 and hit as low as $20.4. It ended the year at $24.1 and then averaged $22.2 in Q1.

So my guess is, they bought some FCE in Q1 2017 as it dropped, and then exited in Q1 2018 when they wouldn't be moving forward with a sale upon conclusion of strategic review.

FCE announced they had a lot of bidders  and the winner was in the $25-$26 range with some contingincies. Brookfield was also a rumoured buyer and I'm sure BX was in the mix.

Just speculation on my part based on rumor and FCE stock moves in line with how the position moved on EQC's balance sheet.

As I said earlier, I wish that merger happened (since I own both and believe this would've been good for both). I view EQC's rumoured interest and the winning bidder being @ $25 (as well as the company's continued simplification/de-leveraging) as decent qualification for a small slug of FCE in my real estate basket.
Title: Re: EQC - Equity Commonwealth
Post by: thepupil on January 30, 2019, 01:56:16 PM
Quote
CHICAGO--(BUSINESS WIRE)-- Equity Commonwealth (EQC) announced today it is under contract to sell 1735 Market Street, a 1.3 million square foot office property, in Philadelphia, Pennsylvania, for a gross sale price of $451.6 million. Proceeds after credits for capital costs, contractual lease costs, and rent abatements are expected to be approximately $435.6 million.

Pursuant to the sale agreement, including the buyer’s extension right, the closing is expected to occur on or before March 27, 2019, unless another date is mutually agreed by the parties. This transaction is subject to various customary closing conditions, and there is no certainty that this transaction will close.

During the quarter ended December 31, 2018, the company sold 97 Newberry, a 289,000 square foot industrial property, in East Windsor, Connecticut, for a gross sale price of $7.1 million.

About Equity Commonwealth

Equity Commonwealth is a Chicago based, internally managed and self-advised real estate investment trust (REIT) with commercial office properties throughout the United States. As of December 31, 2018, EQC’s portfolio comprised 10 properties and 5.1 million square feet.

Regulation FD Disclosures

We intend to use any of the following to comply with our disclosure obligations under Regulation FD: press releases, SEC filings, public conference calls, or our website. We routinely post important information on our website at www.eqcre.com, including information that may be deemed to be material. We encourage investors and others interested in the company to monitor these distribution channels for material disclosures.

Forward-Looking Statements

Some of the statements contained in this press release constitute forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding consummating asset sales. Any forward-looking statements contained in this press release are intended to be made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

The forward-looking statements contained in this press release reflect the company’s current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause the company’s actual results to differ significantly from those expressed in any forward-looking statement. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all).

While forward-looking statements reflect the company’s good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could cause the company’s future results to differ materially from any forward-looking statements, see the section entitled “Risk Factors” in the company’s most recent Annual Report on Form 10-K and in the company’s Quarterly Reports on Form 10-Q for subsequent quarters.

https://cts.businesswire.com/ct/CT?id=bwnews&sty=20190130005766r1&sid=acqr7&distro=nx&lang=en

View source version on businesswire.com: https://www.businesswire.com/news/home/20190130005766/en/

Sarah Byrnes, Investor Relations
(312) 646-2801
www.eqcre.com

Source: Equity Commonwealth

Copyright Business Wire 201

Another major de-risking event. Equity Commonwealth sells its largest building and last building in Philly for $430 million. Gross book of $327 million, net book of $194 million.

REIT rules will require the gain (from their tax basis, not the GAAP book or undepreciated book) to be distributed as a dividend since EQC ran out of NOL's, probably will be like 3-5% or so of market cap.

Here's a recent VIC thesis that gets to NAV of $34.5 - $36 w/ some optionality. Seems like he was plugging in the rumoured $500mm for Philly building, so maybe chop off 50 cents.

https://www.valueinvestorsclub.com/idea/EQUITY_COMMONWEALTH/1215679567

it hasn't been exciting for a while but just updating on the sale of the biggest asset.

Been about 5 yrs from beginning of thread
5 yr: 7.2% / year versus REIT index (8.6%) and S&P (8.5%)
3 yr: 5.5% / year versus REIT index (4.3%) and S&P (9.3%)
1 yr: 6.7% / year versys REIT indec (-4.6%) and S&P (-4.4%)

Overall, I think this has been a safe way to make an okay rate of return, but has been longer in duration than expected. If one cash-adjusted (risk adjusted) the above, the results would be far better. As non-volatile as the stock has been, it has offered great trading opportunities with the huge portion of the market cap that is cash (like when the VIC article was written). In the end though, it hasn't killed it.



Title: Re: EQC - Equity Commonwealth
Post by: thepupil on September 24, 2019, 01:32:36 PM
sold this a while back.

Just updating for the recent distribution.

world's most boring stock. thread started almost 6 years ago at $23, has since paid out an updated $6 of divvies and will have a pro-forma stock price of $30 with NAV a couple bucks higher.



Equity Commonwealth Declares Special Cash Distribution of $3.50 Per Common Share
Business Wire
CHICAGO -- September 24, 2019
Equity Commonwealth (NYSE: EQC) announced today that its Board of Trustees has declared a special, one-time cash distribution of $3.50 per common share which will be paid on October 23, 2019 to shareholders of record on October 7, 2019.
The company currently expects the tax character of the distribution on the common shares during 2019 to be approximately half ordinary income and approximately half capital gain dividend. The company cannot provide any assurances that its current expectations will prove to be accurate. The actual tax characterization will be based on the company’s results of operations for the full year 2019. The company currently expects to announce the tax characterization of the 2019 distribution with its normal tax reporting in January 2020.