Related/Corvex’s Business Plan for CWH is
Reckless and Not Credible Given The Related Companies’ Track Record
of Destroying Shareholder Value in Publicly Owned Real Estate
Companies
Related/Corvex Acknowledge that Their
Proposal to Remove the Entire CWH Board by Written Consent, and
Without Cause, May Harm Shareholders’ Interests
Related/Corvex’s Handpicked Slate of
Trustees are Not “Truly Independent”
CommonWealth REIT (NYSE:CWH) today responded to recent actions
by Related Fund Management, LLC and Corvex Management LP’s
(together, “Related/Corvex”) in their effort to take control of
CWH.
Within the last week, Related/Corvex have published their
business plan for CWH. In summary, the Related/Corvex business plan
appears to be to operate CWH like a real estate opportunity fund,
including: (1) selling CWH’s best performing, stabilized assets,
(2) increasing leverage, (3) investing in CWH’s most challenged
assets, and (4) buying back CWH common shares. This business plan
will not produce consistent and growing cash flow. Rather, it will
put at risk CWH’s common share dividend and CWH’s investment grade
debt ratings, and it is not a business plan which creates
shareholder value for a publicly owned REIT.
The Related/Corvex business plan for CWH is also not credible
because of The Related Companies’ abysmal track record of operating
publicly owned real estate companies. When The Related Companies
have controlled publicly owned real estate companies in the past,
The Related Companies have done well, but public shareholders have
not. For example, when the principals of The Related Companies
controlled American Mortgage Acceptance Company, or AMAC, and
Centerline Holding Company (f/k/a Charter Municipal Mortgage
Acceptance Co., or “CharterMac”), it ended very badly for
shareholders with a bankruptcy and de-listing from the New York
Stock Exchange (“NYSE”), respectively.
In a letter to the CWH Board, Related/Corvex recently
acknowledged that their efforts to remove the entire CWH Board by
written consent, and without cause, may result in harm to CWH and
its shareholders, triggering debt defaults, rating agency
downgrades, and violating NYSE and Securities and Exchange
Commission (“SEC”) rules for public companies. Rather than
accepting the invitation to Keith Meister of Corvex to join the CWH
Board and working constructively for the benefit of all CWH
shareholders, Related/Corvex have proposed that the Board either
(1) disenfranchise other shareholders or (2) ignore the mandate of
shareholders. The CWH Board rejected both of these proposals
because they will deprive shareholders of their rights under CWH’s
Declaration of Trust and violate rules established by the
Arbitration Panel. The letter to Related/Corvex from the CWH Board
rejecting their proposals dated February 3, 2014 and the letter to
the CWH Board from Related/Corvex dated January 21, 2014 are both
attached to this press release below.
Recently, Related/Corvex also publicly identified their
handpicked slate of five individuals to serve as trustees for CWH.
Contrary to their claim that these nominees are “truly
independent”, a majority of these nominees have historical and
continuing strong ties to Related/Corvex, including being paid
consultants to and investors in The Related Companies or its
affiliates. CWH believes that the close ties of these nominees to
Related/Corvex and the recent attempt to disenfranchise other
shareholders clearly reveal Related/Corvex’s continued efforts to
take control of CWH for their own benefit.
Adam Portnoy, Managing Trustee and President of CWH, made the
following statement concerning Related/Corvex’s recent actions:
“We believe it is important for shareholders
to know that, despite their claims to be acting in the best
interests of all shareholders, Related/Corvex’s recent actions only
reinforce that they are using the veil of corporate governance to
pursue control of CWH for their own benefit. We believe that
Related/Corvex’s handpicked slate of trustees will work on behalf
of Related/Corvex rather than all CWH shareholders. We also believe
that Related’s business plan for CWH is not in the best interests
of shareholders and that shareholders are likely to experience
substantial losses if Related/Corvex gain control of CWH, similar
to what has happened when The Related Companies controlled other
publicly owned real estate companies.”
“We look forward to meeting with shareholders
over the coming weeks to discuss how CWH’s Board and management are
engaged on a path to deliver superior results for CWH shareholders.
We also look forward to correcting the many mischaracterizations
Related/Corvex have made about CWH, its Board and its manager.”
Response Letter Sent to Related/Corvex from
CWH Board dated February 3, 2014
February 3, 2014
Mr. Jeff T. BlauRelated Fund Management LLC60 Columbus CircleNew
York, NY 10023
Mr. Keith MeisterCorvex Management LP712 Fifth Avenue, 23rd
floorNew York, NY 10019
Dear Messrs. Blau and Meister:
The Board has reviewed your letter of January 21, 2014 which
acknowledges the disruptions to CommonWealth’s business that may
result from the Related/Corvex consent solicitation. The Board
agrees that your attempt to take control of CommonWealth by
removing the entire Board by written consent, without cause, may
harm shareholders’ interests. However, the Board believes that
neither of the suggestions in your letter present appropriate or
effective mitigation options.
The Board cannot agree to allow Related/Corvex to pursue
election of your handpicked slate by written consent. The
CommonWealth Declaration of Trust provides that, if all existing
Trustees are removed, new trustees are to be elected at a special
meeting of shareholders at which other shareholders would have the
opportunity to make nominations. Your suggestion that
Related/Corvex should be permitted to elect its handpicked slate of
trustees by written consent simultaneously with the removal consent
solicitation would circumvent the meeting/nomination process,
ensure your handpicked slate runs unopposed and disenfranchise
other CommonWealth shareholders who may wish to nominate other
candidates but want to know the results of your written consent
removal campaign before investing the time and money to solicit
proxies. You previously asked the Arbitration Panel to permit the
simultaneous solicitation of written consents for the removal of
existing trustees and the election of new trustees and this request
was denied, undoubtedly because it would both violate the
Declaration of Trust and disenfranchise other shareholders.
Your alternative proposal, which suggested that the existing
Board may remain in office in the event the required consents for
their removal are achieved, is also flawed. As you argued, and the
Arbitration Panel agreed, the CommonWealth Declaration of Trust
provides that, in the event the removal consent solicitation
succeeds, the Board will be without further authority and
CommonWealth’s officers shall call a special meeting of
shareholders to elect new trustees. The Board understands that you
have offered to agree that the Board remain in office. However, the
Board does not understand how your agreement (in contravention of
the Declaration of Trust, the Panel’s order and the shareholders’
mandate) would give the former Trustees authority to continue to
act as Trustees or protect the former Trustees from third party
claims. Any agreement from Related/Corvex, or even an order from
the Panel, to ignore the requirements of CommonWealth’s governing
documents and contractual obligations would not be binding upon
third parties (such as CommonWealth’s lenders, tenants, business
partners, preferred shareholders, other common shareholders, the
Rating Agencies, the NYSE or the SEC), unless those parties also
agree to forbear their rights or somehow become parties subject to
the Arbitration Panel proceedings.
The Board intends to take all appropriate action to mitigate any
resulting harm to CommonWealth and its shareholders in the unlikely
event that your efforts to remove the entire Board, without cause,
were to succeed, and RMR intends to continue to conduct the day to
day business of CommonWealth pursuant to its contractual
obligations. The Board has requested that I remind you that it is
your chosen strategy --- to remove the entire Board, without cause,
by written consent --- that creates the possibility for third party
actions and other problems which you now appear to recognize. The
Board again suggests that Related put aside its pursuit of control
and you consider a more conventional strategy to effect change in a
publicly owned company by Mr. Meister accepting the outstanding
invitation to join the Board.
On behalf of the entire Board ofCommonWealth
REIT
Jennifer B. ClarkSecretary
Letter Sent to CWH Board from Related/Corvex
dated January 21, 2014
Corvex Management LP712 Fifth Avenue, 23rd FloorNew York, New
York 10019
Related Fund Management, LLC60 Columbus CircleNew York, New York
10023
January 21, 2014
Ronald J. ArtinianWilliam A. LamkinAnn LoganJoseph L.
MoreaFrederick N. Zeytoonjianc/o CommonWealth REITTwo Newton
Place255 Washington StreetNewton, MA 02458-1634
Dear Trustees:
Your revocation statement on file with the U.S. Securities and
Exchange Commission claims that if the removal action proposed by
Corvex/Related succeeds, CommonWealth may, among other things, be
in violation of federal securities laws and the listing
requirements of the NYSE. Adam Portnoy has also publicly suggested
that shareholders should not support the Corvex/Related consent
solicitation because, if successful, the CommonWealth board will be
vacant for a prolonged period of time, causing damage to
shareholder interests.
Below, we propose two obvious ways to address your purported
"concerns" so that you may properly discharge your fiduciary duties
via a peaceful transition of authority in the event you are all
removed from office. We are ready to submit a joint application to
the Arbitration Panel as early as tomorrow to address your
"concerns" in a constructive manner that does not frustrate the
consent solicitation process.
- You can agree not to challenge our
ability to run a consent solicitation where we simultaneously seek
consents for the removal of the existing board, and election of the
new board. Both steps would then happen simultaneously and there
would not be any gap of time between removal of the board and
election of a new one. As you know, there is ample precedent for
this approach, and we believe there is nothing in your corporate
documents that prevents such simultaneous consent.
- Alternatively, we are prepared to agree
that the existing trustees will remain in office until the special
meeting to elect a new board. That is, we would agree that the
certification required under Section 2.7 of CommonWealth's
declaration of trust need not be executed until the time of the
special meeting, such that at no time will CommonWealth not have a
board of trustees.
We look forward to hearing from you.
Sincerely yours,
Keith MeisterCoryex Management LP
Jeff T. BlauRelated Fund Management, LLC
cc Barry M. PortnoyAdam D. Portnoy
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 PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT
GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS,
INCLUDING SOME REASONS BEYOND CWH’S CONTROL. 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
Reit Management & Research LLC 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 Related/Corvex. On January
29, 2014, CWH filed a definitive consent revocation statement with
the SEC in response to the Related/Corvex solicitation and has
mailed the definitive consent revocation statement and form of
WHITE consent revocation card
to each shareholder entitled to deliver a written revocation in
connection with the consent solicitation. SHAREHOLDERS ARE URGED TO
READ THE CONSENT REVOCATION STATEMENT FILED WITH THE SEC, AND ANY
AMENDMENTS OR SUPPLEMENTS THERETO AND ANY OTHER RELEVANT DOCUMENTS
THAT CWH MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE
THEY 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 definitive consent revocation statement filed by
CWH with the SEC in connection with the solicitation of revocations
of consents.
Shareholders may obtain free of charge copies of the definitive
consent revocation statement and any other documents filed by CWH
with the SEC in connection with the Related/Corvex 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 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).
Media Contacts:Joele Frank Wilkinson Brimmer KatcherAndrew
Siegel/Jonathan Keehner212-355-4449orInvestor Contacts:CommonWealth
REITTimothy Bonang, Vice President, Investor RelationsJason
Fredette, Director, Investor
Relations617-796-8222www.cwhreit.com
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