Sam Zell has been pretty busy since he took over Equity Commonwealth 3 months ago, and it looks like there is more housekeeping to do. After making $200 million worth of property sales, selling shares in a portion of the company that had been spun off and moving its headquarters, it looks like there is going to be a major shake-up among the company’s leading executives. Zell and David Helfand must re-organize Equity Commonwealth after several executives were forced out because of mismanagement and poor strategies. The criticism is that the executives were in charge of a segment that had 100 properties in the suburbs and in areas with lower rents.
“There will be significant–I hesitate to use the word ‘radical’–but very significant changes to the portfolio in coming quarters, ” said Ian Goltra of Forward Management LLC. Related Cos and Corvex Management got the necessary majority of shareholder votes to oust the previous board and place Zell as President and Helfand as CEO of the company, which was then renamed to Equity Commonwealth from Commonwealth REIT. The complaints before the two took over were concerning expensive acquisitions and not high enough sale prices for properties. Zell and Helfand have the prodigious task of fixing the portfolio of properties, holding on to some valuable locations and revamping and selling others.
Rents are high for office buildings and now may be an opportune time to sell some properties. John Guinee, analyst of Stifel Nicolaus, recommends buying shares of Equity Commonwealth, and notes that many of its properties are class B. He said, “The investment sale market for B and C quality product is as aggressive as it has been in the last 1o years, which results in excellent proceeds in selling stuff that you couldn’t give away four years ago.”