Equity Commonwealth (NYSE: EQC) today announced that its
Chairman of the Board, Sam Zell, and Chief Executive Officer, David
Helfand, sent the following letter to the shareholders of Monmouth
Real Estate Investment Corporation (NYSE: MNR) reiterating the
merits of the pending transaction.
Dear Monmouth Shareholders:
For more than 50 years, the Equity group
of companies has had the opportunity and great responsibility of
managing our capital and our investors’ capital across a variety of
businesses and asset classes. We have maintained a disciplined and
prudent approach to investing, with the goal being to create and
deliver long- term value to our shareholders.
In early 2014, during the proxy battle for
control of Equity Commonwealth (“EQC”), at the time named
CommonWealth REIT, we went to see the ISS Special Situations team.
In that meeting, we laid out a plan for what we would do if we were
successful gaining responsibility for the company. Following ISS
and shareholder support, we put in place a leading corporate
governance structure and began implementing our strategic plan
focused on creating value for our shareholders. In the seven years
since we took responsibility, we have completed the sale of $7.6
billion of assets, repaying $3.3 billion of debt and returning $1.4
billion of capital to shareholders through dividends and share
buybacks. Today, we have $3 billion of cash and no outstanding
debt. Our execution has resulted in outperformance for EQC compared
to its office REIT peers by over 2x.1
We have spent the last few years reviewing
numerous opportunities across a range of sectors in the real estate
industry. When we started, we were looking for bargains. Over time,
with the tremendous amount of capital looking for a home and no
bargains to be found, we shifted our focus to something we have
been doing for decades - base building. The Equity group of
companies has built a base in each of the residential, manufactured
housing and office sectors, and we are now looking to do so in the
industrial sector. We believe we have found the right partner with
whom to do that in Monmouth Real Estate Investment Corporation
(“Monmouth”). With our combined portfolios, along with the EQC
management team and balance sheet, we have the opportunity to
create significant long-term value through this transformational
merger with Monmouth. Our approach with the Monmouth transaction is
to increase value for shareholders by repositioning the portfolio
and making accretive acquisitions in the industrial sector,
utilizing our cash and unencumbered balance sheet.
Based on our revised offer, Monmouth
shareholders will have the option to elect to receive, for each
Monmouth common share, either (i) $19.00 of cash or (ii) 0.713
shares of EQC stock. Pursuant to the terms of the Merger Agreement,
the aggregate cash consideration will be $641 million and the
transaction will result in the issuance of 46.2 million EQC common
shares. We incorporated a cash election option to provide
shareholders with greater value certainty, while enabling
shareholders to retain the potential future upside from the
execution of our business plan.
Based on our revised offer, Monmouth
shareholders will receive more in current value than Starwood’s
taxable cash offer and benefit from the upside from our strategic
combination. Using a hypothetical basis of $15.00 per share, a
Monmouth shareholder’s estimated net cash proceeds, under
Starwood’s offer, would be approximately $18.36 per share, a 0.5%
discount to the current value of a stock election based on EQC’s
closing price on August 24, 2021.2
We strongly believe there are significant
merits of a combination of EQC and Monmouth for the following
reasons:
- Industrial fundamentals have never been stronger – more
e-commerce means more warehouses; it is not the right time to
sell The pandemic has accelerated the pace of adoption of
e-commerce and next-day delivery resulting in increased demand for
industrial properties. While supply for these properties has
increased, it has not kept pace with growing demand. We don’t view
this imbalance as momentary – we are in the midst of a long-term
secular shift in the logistics networks across the U.S. The recent
growth and performance reported by industrial REITs are a testament
to these outstanding supply-demand fundamentals.
- We offer a unique opportunity to be part of a
well-capitalized public industrial platform We are an
unconventional REIT in a unique position, with no debt and
approximately $3 billion in cash. We expect our cash balance to be
approximately $2.5 billion after closing the transaction and the
disposition of our office properties. We are offering MNR
shareholders the opportunity to partner with us in a tax efficient
manner by offering the option to receive EQC shares, as we build a
leading industrial platform. Equity Commonwealth plans to leverage
the Monmouth team’s industrial experience and contacts to manage
Monmouth’s single-tenant net leased portfolio. We have been working
together with the Monmouth team since early-May, and we do not
anticipate any challenges or transition issues, particularly in
light of the nature of this portfolio where the tenants have
responsibility for most of the day-to-day operations. Each of us,
Sam and David, has industrial real estate experience, including
with Equity Office Properties, one of our public REITs discussed
below, where we owned and managed over 12 million square feet of
industrial assets through our acquisition of another public REIT in
2001. In addition, EQC owned and managed approximately 6.4 million
square feet of industrial properties that we sold while executing
our repositioning strategy. When it comes to future investments,
Equity Commonwealth has existing relationships with many of the
leading industrial real estate brokers across the country. David
Weinberg, EQC’s EVP and Chief Operating Officer, has in the past
completed industrial transactions with some of the top brokers at
CBRE, Eastdil Secured and JLL. We are currently engaged with these
brokers looking for investment opportunities. In addition, we look
forward to continuing the existing merchant builder relationships
the Monmouth team has forged over the years. We do not plan to have
a significant development footprint to start, though like we have
run our other real estate companies, we may use partnerships to
build that capability over time. We are confident that as we grow
and emerge as a leading industrial owner, we will be able to
recruit top talent in the industrial sector, as needed.
- Our track record speaks for itself We are not simply
asking you to trust us, but rather to rely on the empirical data.
The Equity group of companies has spent decades building strong
stable businesses for shareholders. We have done so successfully
with each of the public REITs we’ve sponsored - Equity Office
Properties, Equity Lifestyle Properties (NYSE: ELS), and Equity
Residential (NYSE: EQR). In each instance, these businesses allowed
us to create and grow platforms and outperform our peers. We are
confident that at EQC we have the right team and balance sheet to
create similar long-term value for our shareholders.
We invite you to join us as we build an
industrial business. We are incredibly excited about a combination
with Monmouth and believe that partnering to build a best-in-class
industrial real estate company represents the most compelling
opportunity for long-term value creation for all of us.
Sincerely,
Sam Zell
David Helfand
Chairman
President & CEO
EQUITY COMMONWEALTH
EQUITY COMMONWEALTH
______________________________
1 Source, Bloomberg. Total Returns from
January 2, 2014 to August 24, 2021. Office REITs include BDN, BXP,
CLI, CUZ, CXP, DEI, ESRT, HIW, HPP, JBGS, KRC, OFC, OPI, PGRE, PDM,
SLG, VNO, WRE.
2 The estimated net proceeds of $18.36 per
share assumes shares are owned for a minimum of one year and a 20%
federal capital gains tax is due. This example does not consider
additional taxes that may be due or a higher tax rate if shares are
owned over a shorter time period. Shareholders should consult with
their tax advisor before making any determination on potential
proceeds from Starwood’s cash offer.
About Equity Commonwealth
Equity Commonwealth (NYSE: EQC) is a Chicago based, internally
managed and self-advised real estate investment trust (REIT) with
commercial office properties in the United States. EQC’s portfolio
is comprised of 4 properties totaling 1.5 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.
No Offer or Solicitation
This communication is not intended to and does not constitute an
offer to sell or the solicitation of an offer to buy, sell or
solicit any securities or any proxy, vote or approval in any
jurisdiction pursuant to or in connection with the proposed merger
or otherwise, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be deemed to be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.
Additional Information and Where to Find It
In connection with the proposed merger, EQC has filed a
registration statement on Form S-4 with the SEC, which became
effective on July 23, 2021 to register the EQC common shares to be
issued pursuant to the merger. The registration statement includes
a joint proxy statement/prospectus which was filed by EQC and
Monmouth with the SEC and has been sent to the common shareholders
of EQC seeking their approval of the share issuance and to the
common shareholders of Monmouth seeking their approval of the
proposed merger (as amended or supplemented, the “joint proxy
statement/prospectus”). EQC and Monmouth have filed with the SEC,
and have sent to their respective common shareholders, an amendment
to the joint proxy statement/prospectus describing the amended
terms of the merger. EQC and Monmouth may also file other documents
regarding the proposed merger and share issuance with the SEC.
BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS AND
SECURITY HOLDERS ARE URGED TO CAREFULLY READ THE ENTIRE
REGISTRATION STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS,
AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER AND SHARE ISSUANCE. Investors and security holders
may obtain free copies of the registration statement and joint
proxy statement/prospectus and other documents filed with the SEC
by EQC or Monmouth through the website maintained by the SEC at
www.sec.gov. In addition, investors and security holders may obtain
free copies of the registration statement and the joint proxy
statement/prospectus and other documents filed with the SEC by EQC
on EQC’s website at ir.eqcre.com and may obtain free copies of the
joint proxy statement/prospectus and other documents filed with the
SEC by Monmouth on Monmouth’s website at www.mreic.reit.
Participants in the Solicitation
Equity Commonwealth and Monmouth and certain of their respective
directors and executive officers and other employees may be deemed
to be participants in the solicitation of proxies in connection
with the proposed merger under the rules of the SEC. Investors may
obtain information regarding the names, affiliations and interests
of directors and executive officers of Equity Commonwealth in
Equity Commonwealth’s proxy statement for its 2021 annual meeting
of shareholders, which was filed with the SEC on April 27, 2021, as
well as in its other filings with the SEC. Information about
Monmouth’s directors and executive officers is available in
Monmouth’s Annual Report on Form 10-K for Monmouth’s fiscal year
ended September 30, 2020, filed with the SEC on November 23, 2020,
and in other documents filed by Monmouth with the SEC. Other
information regarding participants in the proxy solicitation and a
description of their direct and indirect interests, by security
holdings or otherwise, is included in the registration statement on
Form S-4, the joint proxy statement / prospectus and other relevant
materials filed with the SEC by EQC or Monmouth regarding the
proposed merger and share issuance. You may obtain free copies of
these documents at the SEC’s website at www.sec.gov. Copies of
documents filed with the SEC will also be available free of charge
from Equity Commonwealth and Monmouth using the sources indicated
below.
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 the merger, asset sales and other
transactions described herein and the timing thereof. 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, as amended.
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,” “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 Equity Commonwealth’s and Monmouth’s current views about
future events and are subject to numerous known and unknown risks,
uncertainties, assumptions and changes in circumstances regarding
Equity Commonwealth and Monmouth that may cause actual results to
differ significantly from those expressed in any forward-looking
statement, including, without limitation, (i) inability to complete
the proposed merger because, among other reasons, one or more
conditions to the closing of the proposed merger may not be
satisfied or waived; (ii) uncertainty as to the timing of
completion of the proposed merger; (iii) potential adverse effects
or changes to relationships with Equity Commonwealth’s or
Monmouth’s respective tenants, employees, service providers or
other parties resulting from the announcement or completion of the
proposed merger; (iv) the outcome of any legal proceedings that may
be instituted against the parties and others related to the merger
agreement; (v) possible disruptions from the proposed merger that
could harm Equity Commonwealth’s or Monmouth’s respective business,
including current plans and operations; (vi) unexpected costs,
charges or expenses resulting from the proposed merger; (vii)
uncertainty of the expected financial performance of Equity
Commonwealth following completion of the proposed merger, including
the possibility that the benefits anticipated from the proposed
merger will not be realized or will not be realized within the
expected time period; (viii) legislative, regulatory and economic
developments; and (ix) unpredictability and severity of
catastrophic events, including, but not limited to, acts of
terrorism, outbreak of war or hostilities and epidemics and
pandemics, including COVID-19, as well as Equity Commonwealth’s or
Monmouth’s management’s response to any of the aforementioned
factors. These factors should not be construed as exhaustive and
should be read in conjunction with other risk factors and
cautionary statements that are included in Equity Commonwealth’s
and Monmouth’s SEC filings. Equity Commonwealth and Monmouth 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 good faith beliefs,
they are not guarantees of future performance. Equity Commonwealth
and Monmouth 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20210825005843/en/
Investor Contact Sarah Byrnes Equity Commonwealth (312)
646-2801 ir@eqcre.com
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