CWH Confirms Ouster of Board

NEWTON, MA—The entire board of trustees at CommonWealth REIT is out following a vote by shareholders. The locally based office REIT confirmed Tuesday that a consent solicitation by Related Fund Management LLC and Corvex Management LP reached the required 66.7% threshold of CWH's common shares to remove the entire board.

Related and Corvex, which control a combined 9.6% of CWH's stock and had made an earlier attempt to oust the board, said last week that they had votes by holders of more than 81% of shares in CWH. The two shareholders have proposed a new slate of trustees chaired by Sam Zell, with David Helfland, co-president of Zell's Equity Group Investments, taking the role of CWH's new CEO.

Next, CWH's officers, including president Adam Portnoy, will call a special meeting of shareholders to elect a new board. The REIT expects to hold the special meeting on or before May 23; shareholders may now nominate individuals to serve as trustees.

Tuesday's announcement from CWH caps a year-long initiative by Related and Corvex, who sought first to buy the REIT and then, after their unsolicited $2.9-billion offer was turned down, to oust the board. The two companies have maintained that governance under CWH's existing board and management led to “value destruction.” 

In renewing their push for a board ouster this past December, Related and Corvex cited the close relationship between CWH and REIT Management and Research, which is owned by the father-and-son team of Barry and Adam Portnoy, who also serve as managing trustees for CWH and its four subsidiaries. Between 2007 and 2012, Related and Corvex said in SEC documents last year, “the fees paid by CommonWealth to the Portnoy-owned RMR increased 29.5%, while, at the same time, shareholders suffered a 67.5% drop in share price.”

For its part, CWH maintained that the Related/Corvex business plan for the company was “short-term oriented, reckless and not credible.” The company asserted that Related and Corvex's campaign to remove its trustees represented “another attempt to seize control of the company for short-term gains.”