CommonWealth REIT Amends Management Agreement with RMR
19 Dezembro 2013 - 7:01PM
Business Wire
Implements Changes Announced Earlier this Year
to Further Align Interests of Management with Shareholders While
Maintaining Low Cost Structure
New Incentive Fee Based on Three Year Total
Return per Share Relative to Performance of Other Office REITs
Eliminates Related Party Purchase Rights for
Property Sales
CommonWealth REIT (NYSE: CWH) today announced that it has
amended its business management agreement with Reit Management
& Research LLC, or RMR, effective January 1, 2014.
The CWH Independent Trustees issued the following statement
regarding today’s announcement:
“We want to thank all of CWH’s shareholders who provided
suggestions during the past few months as we worked toward revising
our business management agreement with RMR. With the assistance of
an independent compensation consultant engaged by the Independent
Trustees, we have incorporated many shareholder suggestions. We
believe the revised business management agreement further aligns
the interests of management with CWH’s shareholders, while at the
same time allowing CWH’s shareholders to continue receiving high
quality management services at below average costs.”
The amended agreement implements the previously announced plan
to change the business management agreement, as follows:
New Base Management Fee:
- The new calculation of the base
management fee will be based on approximately 0.5% multiplied by
the lower of: (i) the historical cost
of CWH’s real estate assets or (ii) CWH’s total market
capitalization. The comparatively low level of general and
administrative, or G&A, expenses that CWH has historically
enjoyed will continue, but with this change it is possible that
G&A expenses may further decline if the market value of CWH’s
common shares declines.
- 10% of the base fee will be paid in
CWH’s common shares. As a result, management’s share ownership is
expected to increase over time.
New Incentive Fee:
- The new incentive fee will be
calculated based on total return per share (dividends and share
price changes) realized by CWH’s shareholders in comparison to the
total return of the SNL U.S. REIT Office Index, or the Benchmark.
The incentive fee formula will be based on the amount of
outperformance, if any, realized by CWH’s shareholders during the
measurement periods compared to the Benchmark, multiplied by a 12%
participation rate. For example, if CWH’s shareholders’ total
return is 10% during the measurement period and the Benchmark’s
total return is 5% during that same period, the incentive fee will
be 12% of the 5% of total outperformance realized by CWH’s
shareholders.
- The measurement period for the new
incentive fee will be a rolling, cumulative three year period
starting January 1, 2014. In other words, the incentive fee payable
at the end of 2016 will be based upon the outperformance realized
by CWH’s shareholders compared to the Benchmark cumulatively during
2014, 2015 and 2016; the incentive fee payable at the end of the
2017 would be based upon the cumulative outperformance realized in
2015, 2016 and 2017; etc.
- No incentive fee will be payable by CWH
in the event the total return realized during any measurement
period is negative, even if the total return realized by CWH’s
shareholders exceeds the Benchmark. Also, the incentive fee formula
includes a “high performance modifier” so that, within specific
parameters, if the total return realized by CWH’s shareholders over
a three year period exceeds 36% an adjusted incentive fee may be
paid.
- The incentive fee will be paid in CWH’s
common shares. The annual payment of the incentive fee will be
limited, or capped, at 1.5% of the number of CWH’s common shares
outstanding at the end of each measurement period. Common shares
issued for payment of the incentive fees will vest over a
multi-year period and the shares will be subject to “claw back” in
the event of subsequent financial restatements. Also, because it
will take three years for the new incentive fee formula to become
fully effective, a one year interim fee may be paid at the end of
2014 and a two year cumulative interim fee may be paid at the end
of 2015 based on outperforming the pro-rata hurdles in each of
those periods.
The previous incentive fee arrangement was based on a percentage
of annual increases in funds from operations, or FFO, per share.
The new incentive fee formula is intended to more directly align
the fee paid with the total return realized by shareholders
relative to CWH’s office REIT peers.
The new incentive fee formula was established by the CWH Board
of Trustees’ Compensation Committee (which is comprised solely of
Independent Trustees) and it was developed by that Committee in
consultation with FTI Consulting, Inc., an independent compensation
consultant selected by the Committee.
Other Management Contract
Terms:
In addition to the new fee formulas described above, the amended
business management agreement eliminates the historical “right of
first offer” for property dispositions among CWH and other REITs
managed by RMR.
The amended business management agreement continues to require
RMR to provide all personnel and substantially all corporate office
functions typically included in G&A expenses, except certain
third party services and expenses such as outside counsel and
accountants as well as the fees and expenses of the Independent
Trustees.
CommonWealth REIT is a real estate investment trust that
primarily owns office properties located throughout the United
States. CWH is headquartered in Newton, MA.
WARNING REGARDING
FORWARD LOOKING STATEMENTS
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
AND OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE
BASED UPON CWH’S AND ITS INDEPENDENT TRUSTEES’ PRESENT BELIEFS AND
EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT
OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS WHICH ARE BEYOND
CWH’S AND THE INDEPENDENT TRUSTEES’ CONTROL. FOR EXAMPLE: THIS
PRESS RELEASE REFERS TO THE COMPARATIVELY LOW LEVEL OF G&A
EXPENSES WHICH CWH HAS HISTORICALLY EXPERIENCED AND STATES THAT CWH
MAY CONTINUE TO RECEIVE HIGH QUALITY MANAGEMENT SERVICES AT BELOW
AVERAGE COSTS. THE COMPARATIVE AND AVERAGE COSTS OF MANAGEMENT
COSTS AND G&A EXPENSES MAY BE CALCULATED IN DIFFERENT WAYS: BY
AMOUNTS, AS A PERCENTAGE OF ASSETS, AS A PERCENTAGE OF REVENUES AND
OTHERWISE. CWH AND ITS INDEPENDENT TRUSTEES BELIEVE THAT THEIR
CALCULATIONS OF SUCH COSTS AND EXPENSES ARE APPROPRIATE. HOWEVER,
IT IS POSSIBLE THAT OTHERS MAY DISPUTE THESE CALCULATIONS TO ARGUE
THAT SUCH COSTS AND EXPENSE ARE NOT AT A LOW LEVEL OR BELOW
AVERAGE.
FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS
RELEASE OR THEIR IMPLICATIONS.
ADDITIONAL INFORMATION
REGARDING THE CONSENT SOLICITATION
CWH, its Trustees and certain of its executive officers, and RMR
and certain of its directors, officers and employees may be deemed
to be participants in the solicitation of consent revocations from
shareholders in connection with the solicitation being conducted by
Corvex Management LP and Related Fund Management, LLC, together
Corvex/Related. On December 6, 2013, CWH filed a preliminary
consent revocation statement with the Securities and Exchange
Commission, or the SEC, in response to the Corvex/Related
solicitation. CWH will furnish a definitive consent revocation
statement to its shareholders, together with a WHITE consent
revocation card when available. SHAREHOLDERS ARE URGED TO READ THE
CONSENT REVOCATION STATEMENT AND ANY AMENDMENTS OR SUPPLEMENTS
THERETO AND ANY OTHER RELEVANT DOCUMENTS THAT CWH WILL FILE WITH
THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION. Additional information regarding the
identity of the potential participants and their direct or indirect
interests, by share holdings or otherwise, is set forth in the
preliminary consent revocation statement and other materials to be
filed by CWH with the SEC in connection with the solicitation of
revocations of consents.
Shareholders may obtain free of charge copies of the consent
revocation statement and any other documents (when available) filed
by CWH with the SEC in connection with the Corvex/Related
solicitation at the SEC’s website (http://sec.gov), at CWH’s
website (http://cwhreit.com) or by requesting these materials from
Timothy Bonang, by phone at (617) 796-8222, or by mail at Two
Newton Place, 255 Washington Street, Newton, MA 02458 or by
requesting materials from the firm assisting the CWH in the
solicitation of consent revocations, Morrow & Co., LLC, toll
free at (800) 276-3011 (banks and brokers call collect at (203)
658-9400).
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the New York
Stock Exchange.
No shareholder, Trustee or officer is
personally liable for any act or obligation of the Trust.
For CommonWealth REITMedia Contacts:Joele Frank Wilkinson
Brimmer KatcherAndrew Siegel/Jonathan Keener212-355-4449orInvestor
Contact:Timothy A. Bonang, 617-796-8222Vice President, Investor
Relationswww.cwhreit.com
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