Blau, Meister Want CWH Board Ousted

NEWTON, MA-Seeking the removal of the entire board of locally based CommonWealth REIT, Related Fund Management's Jeff Blau and Corvex Management LP's Keith Meister sent a letter to CWH shareholders Thursday that called for replacing the REIT's external manager structure as well as ousting the board. In response, CWH late Thursday afternoon urged shareholders not to take any action, saying that the April 22 record date proposed by Related and Corvex is not valid and that the two companies are not entitled to seek consent from fellow shareholders. The two companies are among CWH's largest shareholders, controlling a combined 9.2% of its stock.

“We believe that Corvex/Related's attempted consent solicitation is part of an effort to seize control of your company for their own benefit or, alternatively, to realize a quick profit by forcing a sale of CommonWealth before the full benefits of CommonWealth's current business plan are realized,” CWH's board wrote in a letter to shareholders. For their part, Blau and Meister maintained that CWH founder Barry Portnoy and president Adam Portnoy, who also own the REIT's external manager, Reit Management & Research LLC, “have in our view managed CommonWealth in a way which has enriched themselves rather than representing the interests of shareholders.”

Specifically, Blau and Meister wrote to shareholders, “the flawed RMR structure reduces the company's cash flow, impairs CommonWealth's valuation multiple (40%+ discount to peers historically), destroys investor confidence and has resulted in a track record of underperformance. In fact, CommonWealth is one of the few remaining externally managed equity REITs in the public markets. Green Street Advisors, a leading real estate and REIT research firm, refers to this structure as a 'dinosaur' that 'stands out like a sore thumb.'”

In a release, CWH says its board believes that “Corvex/Related's attempt to set a false record date is part of their continued public posturing in an effort to force CWH to enter negotiations for a sale to Corvex/Related at a price which they admit is well below CWH's true value. CWH continues to believe that the interests of all its shareholders will be best served by the continued implementation of CWH's business plan to focus upon the ownership and operation of high quality urban, or CBD, office properties, to divest its non-core suburban properties and other assets, and to repay debt.”