Liquidity in a Credit Drought: Equity Residential (EQR)
In March 2009, Equity Residential was contemplating selling its Los Angeles real estate portfolio for $1.5 billion. While the sale would generate liquidity to repay debt at a time when it might have been expensive or impossible to refinance, EQR's executives wanted to explore other options. Selling assets might be dilutive from a balance sheet and earnings perspective, and Los Angeles represented one of the company's core markets. EQR could tap government-sponsored enterprise financing or issue equity, although the Dow Jones Industrial Average had recently hit a 12-year low. In this case students evaluate and create rationales for each option after examining valuations for the company's assets, its debt service and dividends, and the health of the equity and debt markets.
Case id: 101704
Supplemental Material: Teaching Note