NEW YORK, Jan. 21, 2014 /PRNewswire/ -- Corvex
Management LP and Related Fund Management, LLC, whose separately
managed investment funds collectively own approximately 9.6% of the
outstanding shares of CommonWealth REIT (NYSE:CWH), today sent a
letter to the Trustees of CommonWealth REIT, demanding that they
implement immediate, meaningful governance reforms that give
shareholders the unequivocal ability to choose who should manage
their company.
The full text of the letter follows:
January 21,
2014
Ronald J. Artinian
William A. Lamkin
Ann Logan
Joseph L. Morea
Frederick N. Zeytoonjian
c/o CommonWealth REIT
Two Newton Place
255 Washington Street
Newton, MA 02458-1634
Dear Trustees:
We write in response to the series of public announcements you
have recently made in an attempt to convince shareholders that the
Portnoys and their beholden Trustees – after 28 years of carefully
calculated efforts to take control of CommonWealth away from its
shareholders – have suddenly had an epiphany and realized the
virtues of good corporate governance. Your recent
announcements come after tens of millions of dollars of
shareholders' money have been wasted by you over the last year on
appalling tactics aimed at denying shareholders the right to elect
their trustees, a right that is plainly written in the Company's
charter.
We believe that your recent statements expressing concern about
shareholder interests are disingenuous, given the lengths to which
you have gone to silence shareholders over the last 12 months,
coupled with CommonWealth's long-term track record of
"worst-in-class" corporate governance. In fact, we believe
your recently announced governance changes are merely
window-dressing aimed at confusing shareholders and ultimately
preserving a system in which shareholders will be forced to
continue paying the Portnoys fees even after CommonWealth takes its
28-year tradition of underperformance into its 29th year
and beyond.
As shareholders get close to having the opportunity to elect a
new independent Board, they deserve clarity surrounding the
governance of their company. Therefore, we request that you
publicly respond to the following questions:
- Will CommonWealth immediately eliminate the requirement in
its bylaws that at least two trustees be at all times "managing
trustees"? Maintaining this requirement may force
shareholders at the 2014 annual meeting to elect a trustee
affiliated with RMR – the company owned entirely by Barry and Adam Portnoy, that has no equity in
CommonWealth and which received over $75
million in fees from CommonWealth in 2012 – or otherwise
give you an excuse to keep two Portnoys on the Board even if
shareholders object to it. Further, we remind you that from
2007 through 2012, CommonWealth's share price declined 67.5%, while
fees paid to RMR increased 29.5%. We privately asked this
crucial question over a month ago, but you have so far failed to
respond.
- Will you publicly disclose today the text of your proposed
amendment to CommonWealth's charter to be put up for a vote at the
2014 shareholder meeting, and commit that the amendment will
require that no less than two-thirds of the board will be up for
nomination and election at the 2015 shareholder meeting?
- Will you amend CommonWealth's charter to ensure that the
board cannot again opt back into Section 3-803 of the Maryland
General Corporation Law, which allows you to unilaterally create a
staggered board without a shareholder vote? In various
public statements you have indicated your willingness to de-stagger
the board and that at this time you have opted out of
Section 3-803. Without so amending CWH's charter to
permanently opt out of Section 3-803, the promise to de-stagger the
board today is illusory.
- Will you amend CommonWealth's governing documents to commit
that if Mr. Barry Portnoy is not
elected as a trustee at the 2014 shareholder meeting, CommonWealth
will adhere to the view that shareholders should decide who
represents them, not the Portnoys? Doing so would avoid a
repeat of the affront to shareholders you committed when you
re-appointed Trustee Joe Morea to
the board immediately after he received the vote of only 14% of the
outstanding shares at the 2013 annual meeting.
- Will you amend CommonWealth's charter and bylaws to ensure
the new provisions you recently adopted, which provide a less
offensive annual meeting and nomination process, can only be
reversed with a shareholder vote? Absent such amendment,
your new provisions could be unilaterally reversed by the Portnoys
whenever they again feel their empire under siege. Or should
shareholders just wait and see whether you decide to re-introduce
later this year the requirement that trustee nominations must be
made by a shareholder who has held 3% of the stock for at least
three years in certificated form?
- Will you amend CommonWealth's charter and bylaws to commit
that any future consent solicitation will conform to the same
procedural guidelines prescribed by the Arbitration Panel for our
new consent solicitation? Or should shareholders simply
assume that you will never again attempt to eviscerate the right
granted to them in the charter when you next disagree with your
shareholders? We remind you that you have previously stated
that the charter's provision that the board "may" declare a record
date for a consent solicitation means that the board may decide
never to set a record date for a consent solicitation.
- Will you post online the entire unredacted transcript of the
October 2013 hearing before the
Arbitration Panel? Shareholders have a right to read
CommonWealth management's testimony about, among other things,
their fiduciary duties to RMR (vis-a-vis CommonWealth
shareholders), and the manner in which the management agreement
between RMR and CommonWealth has been negotiated in the past.
It is inconceivable that trustees of a public company would seek to
keep these facts from the shareholders they were elected to serve
and to whom they owe a fiduciary duty.
- Will you properly discharge your fiduciary duties and work
with us and the Arbitration Panel to agree on a path to
transitioning to a new Board in a way that addresses your professed
concerns on the subject? Apparently, your best argument
to defend yourselves and the Portnoys after 28 years of
mismanagement and underperformance is that if our consent
solicitation is successful and shareholders get to elect their own
representatives, a parade of horrors will befall the Company
because of the amount of time it will take to elect a new
Board. Therefore, you argue, shareholders must simply resign
themselves to be held hostage to RMR and the Portnoys.
It could not be more clear to us that there are very
simple mechanisms, all under your control, to make sure that there
is no period of time between the removal of the Trustees and
election of a new Board, including allowing us and other
shareholders to solicit written consents to elect a new board
simultaneously with the removal of the current board. We will
be contacting you separately to coordinate the best approach, and
we and other shareholders expect your full cooperation in light of
your public statements.
We kindly ask for a response by no later than 5:00 p.m. ET on January
22, 2014.
Sincerely yours,
Keith
Meister Jeff
T. Blau
Corvex Management
LP
Related Fund Management, LLC
cc Barry M. Portnoy
Adam D. Portnoy
Additional Information Regarding the Solicitation
Corvex Management LP and Related Fund Management, LLC have filed
a preliminary solicitation statement with the Securities and
Exchange Commission (the "SEC") to (1) solicit consents to
remove the entire board of trustees of CommonWealth REIT (the
"Removal Proposal"), and (2) elect five new trustees at a
special meeting of shareholders that must be promptly called in the
event that the Removal Proposal is successful. Investors
and security holders are urged to read the preliminary solicitation
statement in its entirety, and the definitive solicitation
statement and other relevant documents when they become available,
because they will contain important information regarding the
solicitation. The preliminary and definitive solicitation
statement and all other relevant documents will be available, free
of charge, on the SEC's website at www.sec.gov.
The following persons are participants in connection with the
solicitation of CommonWealth REIT shareholders: Corvex Management
LP, Keith Meister, Related Fund
Management, LLC, Related Real Estate Recovery Fund GP-A, LLC,
Related Real Estate Recovery Fund GP, L.P., Related Real Estate
Recovery Fund, L.P., RRERF Acquisition, LLC, Jeff T. Blau, Richard
O'Toole, David R. Johnson,
James Corl, Edward Glickman, Peter
Linneman, Jim Lozier and
Kenneth Shea. Information regarding
the participants in the solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
to the extent applicable, is available in the preliminary
solicitation statement filed on January 16,
2014 with the SEC.
About Corvex Management LP
Corvex Management LP is an investment firm headquartered in
New York, New York that engages in
value-based investing across the capital structure in situations
with identifiable catalysts. Corvex was founded in March 2011 and follows an opportunistic approach
to investing with a specific focus on equity investments, special
situations and distressed securities largely in North America.
About Related Fund Management LLC
Related Fund Management, LLC is an affiliate of Related
Companies, one of the most prominent privately-owned real estate
firms in the United States. Formed
40 years ago, Related is a fully integrated, highly diversified
industry leader with experience in virtually every aspect of
development, acquisitions, management, finance, marketing and
sales. Related's existing portfolio of real estate assets, valued
at over $15 billion, is made up of
best-in-class mixed-use, residential, retail, office and affordable
properties. For more information about Related Companies please
visit www.related.com.
For further information, contact:
Rupal Doshi
Corvex
(212) 474-6750
rdoshi@corvexcap.com
Joanna Rose
Related
(212) 801-3902
jrose@related.com
INVESTORS:
Edward McCarthy / Richard Grubaugh
D.F. King & Co., Inc.
(212) 269-5550
SOURCE Related Fund Management, LLC