Related, Corvex Say They Have Votes to Oust CWH Board

NEW YORK CITY—Holders of more than 81% of CommonWealth REIT's common shares have voted to oust the Newton, MA-based office REIT's board, Corvex Management LP and Related Fund Management LLC said late Tuesday afternoon. The two locally based companies, which collectively own 9.6% of CWH's stock, had sought first to buy the REIT and then to remove its board since March of last year.

CWH has five business days, or until March 25, to have the shareholders' written consents inspected and the results of the new solicitation declared. A two-thirds majority was required to remove the board, and Corvex and Related had until Thursday to obtain that majority.

A CWH spokesman did not respond to GlobeSt.com's requests for comment by early Tuesday evening. However, on Wednesday morning the REIT acknowledged receiving documents from Corvex and Related "that they claim are written consents reaching the 66.7% threshold required to remove the entire CWH board of trustees, without cause."

In a joint statement, Keith Meister, managing partner of Corvex, and Jeff T. Blau, CEO of Related Fund Management, said Tuesday that CWH's shareholders “have exercised their rights and we look forward to working with the trustees in the coming days to arrange for an orderly transition process that best protects the interests of all shareholders. We will immediately reach out to the trustees to begin these discussions.”

The New York Times reported Tuesday afternoon that the voting results set in motion “a process that will almost certainly result in the ouster” of the father-and-son team of Barry Portnoy and Adam Portnoy, who control CWH as well as REIT Management and Research LLC, which externally manages CWH. RMR also manages a handful of other REITs for which the Portnoys are managing trustees.

In a presentation to CWH investors, Related and Corvex maintained that “change is desperately needed at CWH.” Because RMR has historically received “virtually all of its remuneration through lucrative fee streams rather than an ownership interest in the company,” Related and Corvex maintained that the external manager was “highly incentivized to manage the company in a way that maximizes such fee income by continuously growing the size of the company, rather than in a manner that creates value for shareholders.”

For their part, the Portnoys maintained that the Related/Corvex business plan for the REIT was “short-term oriented, reckless and not credible,” and that the two companies apparently intended “to sell the company's best performing, stabilized assets and increase debt leverage. This business plan would put at risk CWH's dividend and investment grade debt ratings, two criteria that REIT investors typically value highly.” Further, they maintained that RMR was managing CWH “for the benefit of all shareholders.”

Last March, Related and Corvex made an unsolicited bid to buy CWH for $24.50 per share, or about $2.9 billion. When the REIT rejected the offer, the two activist shareholders sought removal of its board. An arbitration panel last year declared the results of the two companies' previous consent solicitation invalid, but ruled that they could make another attempt.

Related and Corvex have proposed a board that would be led by Sam Zell and David Helfland, co-president of Zell's Equity Group Investments. The two have agreed to serve as CWH's chairman and CEO, respectively, if a new board is selected.