NEW YORK CITY—Corvex Management LP, whichearlier this year succeeded in removing the entire board of whatwas then known as CommonWealth REIT, has turnedits attention from office properties to cellphone towers. In aletter to shareholders in Crown Castle InternationalCorp., the Houston-based wireless infrastructureowner/operator, Corvex's Keith Meister said CCIshould put off its possible $6-billion acquisition ofVerizon's tower network until it changes itscapital allocation plan to improve shareholder value.

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"We are optimistic that many of you share our view that CrownCastle is a great business with exceptional growth opportunities inthe years ahead,” Meister, managing partner at Corvex, wrote in aletter made public Tuesday. “However, we also believe many of youshare our frustration over the company's stock priceunderperformance relative to peers and the market over the past 18months, and the company's persistent market discount relative toits peers and its own intrinsic value.” Corvex-managed funds ownapproximately 12.6 million shares, worth about $1 billion, of thestock in CCI, which converted to REIT status earlier this year.

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Meister's letter says the capital allocation plan that Corvexproposes could result in CCI stock trading at more than $100 pershare. “Based on our analysis, we see a near-term opportunityfor Crown Castle to drive a 27% re-rating in its equity, and thepotential for over 60% upside in 15 months,” according to theletter. The letter proposes that CCI should increase eitherits dividend payout ratio or leverage ratio

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Once its equity currency has strengthened, CCI can “aggressivelypursue a Verizon towers transaction, creating even greaterlong-term value for shareholders,” Meister wrote. “However, ifthe company does not have the right cost of capital, it should notbe pursuing acquisitions or issuing equity, whether for Verizon'stowers or any other transaction.” He added, however, “Let's beclear, we want Crown Castle to correct its capital allocation plan,reduce its cost of capital and then bid for the Verizontowers.”

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CCI on Tuesday acknowledged receipt of the Corvex letter. “Wecontinually review our capital allocation strategy and consider allinput from our shareholders as we aim to create long-termshareholder value,” says Ben Moreland, the REIT'spresident and CEO. CCI plans to address its capital allocationpolicy, including dividends, on its third-quarter earnings callscheduled for Oct. 31.

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Over the course of a year, Corvex, in partnership with fellowCWH shareholder Related Fund Management, waged anultimately successful campaign to remove the board of the Newton,MA-based REIT on grounds that its policies undermined shareholdervalue. The REIT is now known as Equity CommonWealthREIT and is based in Chicago, with SamZell serving as board chairman.

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Paul Bubny

Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.