Equity Commonwealth REIT is Being Pushed to Liquidate Assets by Another Investor

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Equity Commonwealth faces pressure from activist investors Jonathan Litt and Indaba Capital Management to liquidate its assets amid criticisms of poor decision-making and controversial acquisition strategies. Plus, geothermal heat pumps are becoming increasingly popular for decarbonizing buildings, with major projects in New York City and supportive state and federal incentives driving rapid adoption.

Now let’s dig in!

Equity Commonwealth REIT Is Being Pushed To Liquidate Assets by Another Investor

If you enjoy corporate drama (as I reluctantly admit I do), you might already be aware of the Equity Commonwealth saga. Earlier this year, the office REIT came under fire from the notorious activist investor Jonathan Litt. Litt’s investment company, Land and Buildings, issued a public statement advising Equity Commonwealth to liquidate its assets and repay investors, citing a history of poor decision-making. Litt argued that, due to management fees, the portfolio’s real estate assets and cash on hand were technically worth more than the public REIT’s market cap.

Despite this high-profile criticism, Equity Commonwealth continues to operate and is currently seeking a “transformative” acquisition. But, another investor, Indaba Capital Management, has now written an open letter to the company’s board, asking Equity Commonwealth to “pursue a liquidation to maximize shareholder value.”

According to Indaba, one issue is that Equity Commonwealth’s bylaws do not require shareholder approval for a non-dilutive material acquisition. Since Equity Commonwealth does not plan on issuing more stock for any acquisition, there would be no dilution and, therefore, no need for a shareholder vote. However, any large acquisition the company makes would deplete its cash reserves and likely result in new debt. Indaba criticizes the board’s “arbitrary” year-end deadline for the acquisition, stating that it “effectively compromises the company’s leverage as a discerning purchaser.”

There might still be hope for a non-litigious end to this proxy battle. Indaba Capital’s letter concluded with a statement that was both an olive branch and a threat: “Our preference is to collaborate with you on a value-enhancing outcome, although we are prepared to use the tools at our disposal to publicly oppose anti-shareholder actions.”

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