Zell-led firm still searching for deals, without targeting solely distress

Equity Commonwealth has $2.6B in cash waiting to be deployed

Equity Commonwealth's Sam Zell (Getty; Illustration by The Real Deal)

TRD Staff

Feb 10, 2023, 12:50 PM

Global investor Sam Zell has made a name for himself buying and transforming distressed and troubled properties, though he doesn’t have any projects on the horizon.

The leader of Chicago-based Equity Commonwealth said the firm has $2.6 billion set aside to finance a new project, the REIT just doesn’t have one, Crain’s reported.

And it’s not because the company is waiting for distress to play out so it can pounce at the bottom of the market, despite Zell’s penchant for following that playbook.

“We haven’t been and aren’t looking for some screamer of a deal that we can drive out of the park,” David Helfand, the REIT’s president and CEO, told the outlet. “What we’ve been looking for is the foundation for a long-term business with attractive fundamentals that can grow consistently.”

Zell, who leads the firm, has been given the nickname the Grave Dancer due to his tendency to snatch up properties on their deathbeds. So why isn’t Equity Commonwealth working on such a deal? A lack of available and desirable distressed properties could be a contributing factor.

In addition, the firm tends to focus on large portfolios of real estate or all of a company’s holdings, versus single properties, which limits the pool of potential targets. David Weinberg, Equity Commonwealth’s executive vice president and chief operating officer, told the outlet that industrial real estate and the single-family market are performing the best and those aren’t the firm’s or Zell’s specialty.

“We’re not looking to steal real estate from a distressed seller,” Weinberg said. “We just want to get good real estate at a fair price.”

Equity Commonwealth is an office landlord group that Zell and Helfand took over in 2014. Under their leadership, the REIT sold all but four of its office buildings — retaining properties in Washington, Denver and Austin — and generated the $2.6 billion in cash assets the company has for future acquisitions.

“Obviously, we’ve gotten busier,” Helfand previously told analysts. “And the dislocation hopefully generates an opportunity for us to do what we were trying to do, which is buy a good business at a fair price.”

Zell has been steering the firm away from the office market in light of its high vacancies and “the challenges in that space and uncertainty going forward,” Weinberg said.

— Victoria Pruitt