In a significant decision that marks the end of an era, Equity Commonwealth, the Chicago-based real estate investment trust, has revealed its plans to liquidate all of its assets and shut down. The announcement comes in response to mounting pressure from activist investors who have been urging the company to return capital to its shareholders, as reported by Crain's.

Under the leadership of the late Sam Zell, Equity Commonwealth had spent years accumulating cash reserves, aiming to find a transformative opportunity that would propel the company to new heights. However, despite actively pursuing various potential deals, the firm struggled to secure a compelling transaction, leading its board of trustees to determine that it is in the best interest of shareholders to proceed with the wind-down of operations and the liquidation of assets.

Equity Commonwealth CEO David Helfand discussed the decision during a recent conference call with analysts, stating, "After working through our pipeline, we have been unable to consummate a compelling transaction. As a result, our board of trustees has determined that it's advisable and in the best interest of our shareholders to proceed with the wind-down of our operations and the liquidation of our assets in order to maximize value for shareholders."

The real estate investment trust had already divested most of its office properties even before the onset of the COVID-19 pandemic, amassing a significant cash pile specifically earmarked for real estate acquisitions. While there were hopes for a transformative deal in 2021 when Zell's firm attempted a $3.4 billion takeover bid of Monmouth Real Estate Investment, Equity Commonwealth ultimately lost out to Starwood Capital Group.

The unexpected passing of Sam Zell earlier this year further complicated the company's strategic direction, leaving Equity Commonwealth without his crucial guidance. As frustrations grew among shareholders, particularly San Francisco's Indaba Capital Management and Stamford, Connecticut's Land & Buildings, which collectively own approximately 6 percent of the company, calls for liquidation intensified.

Amidst extended immobilization of capital and concerns over high executive expenses, the activist investors vociferously amplified their demands for asset liquidation. Equity Commonwealth currently holds nearly $2.2 billion in cash, according to regulatory filings.

Presently, the company still has four properties remaining in its portfolio. Of these, three are already in the process of being sold: two located in Austin and one in Washington, D.C. Additionally, a fourth property in Denver is being actively marketed.

Equity Commonwealth aims to distribute the proceeds from these sales to its shareholders by June of next year. A preliminary proxy recommending the liquidation plan is expected to be released by mid-September.

The move towards liquidation has garnered positive feedback from certain shareholders, including New York-based investment firm Irenic Capital Management. In a statement, they commend Equity Commonwealth's Board and management team for making the difficult yet correct decision to recommend asset liquidation, expressing their satisfaction with the outcome.

As Equity Commonwealth embarks on this transformational journey, the industry watches closely to see how the company's assets will be liquidated and what its closure will mean for the real estate investment market.

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