Board Sends Letter to Shareholders Urging
Them to Oppose Related/Corvex’s
Attempt to Take Over the Company Without
Paying Shareholders
Recommends that Shareholders Sign, Date and
Mail the White Consent Revocation Card
Today
CommonWealth REIT (NYSE: CWH) today announced that it has made
available to shareholders an investor presentation on the Company’s
website at www.cwhreit.com. The presentation will also be filed
with the U.S. Securities and Exchange Commission (“SEC) and will be
available on the SEC’s website at www.sec.gov.
The Company also announced that it has mailed a letter to
shareholders asking them to support the Board in its continued
execution of the Company’s strategic business plan, which is
producing results as evidenced by CWH’s strong fourth quarter
performance, and opposed the ongoing efforts of Related Fund
Management, LLC and Corvex Management LP (“Related/Corvex”) to take
control of the Company without paying shareholders.
Adam Portnoy, Managing Trustee and President of CWH, made the
following statement regarding today’s announcement:
“The Board and management remain committed to
executing our business strategy, which is yielding benefits for all
CWH shareholders, as evidenced by our fourth quarter results that
exceeded expectations on almost every financial and operating
metric.
“In contrast, we believe the scheme proposed
by Related/Corvex is reckless and not in the best interests of
shareholders. Related/Corvex have been relentlessly pursuing their
hostile campaign to remove the entire CWH Board, without cause, and
install their hand-picked replacement slate in order to take
control of CWH without paying shareholders. Shareholders should
carefully consider Related’s abysmal track record of controlling
publicly owned real estate companies and take into account the
considerable shareholder value destruction that could ensue if the
entire CWH Board is removed without cause, including possible
rating agencies downgrades and loan defaults and possible actions
by lenders.
“CWH shareholders are reminded that their
vote is important, no matter how many or how few shares they own.
We urge all shareholders to protect their investment by using the
WHITE consent revocation card.
Please do not return or otherwise vote any gold consent card sent
to you by Related/Corvex, as we believe their effort to remove the
entire CWH Board could destroy shareholder value.”
The full text of the letter follows:
March 3, 2014
To the shareholders of CommonWealth REIT:
Protect the value of your investment. Please sign,
date and return the enclosed WHITE
consent revocation card today.
Enclosed with this letter is a presentation which explains some
of the reasons why we believe you should oppose the consent
solicitation by Related Fund Management, LLC and Corvex Management
LP (“Related/Corvex”) to remove the entire Board of CommonWealth
REIT (“CWH”) without cause. We believe you should support the Board
for the following reasons:
- CWH’s current
business plan is delivering value for shareholders. CWH’s
Board and management are implementing a plan to transition CWH from
a REIT which primarily owned suburban office and industrial
properties into a REIT that owns high value office buildings in
urban central business districts. Between 2008 and 2012, CWH
acquired $3.7 billion of properties, principally city center office
towers at bargain prices. Simultaneously and continuing to this
time, CWH has been selling its older, suburban office and
industrial properties. CWH recently announced fourth quarter
results that exceeded expectations on almost every financial and
operating metric, with improving normalized FFO per share, leasing
activity and same property results. Now that the business plan is
beginning to yield long term benefits for all shareholders, we
believe that Related/Corvex are attempting to seize control of CWH
for short term profits.
- The
Related/Corvex plan for CWH is reckless, short term oriented and
not credible. The Related/Corvex proposal appears to be to
sell CWH’s best performing properties, take on as much debt as
possible and then use the sale and debt proceeds to buy back
shares. This plan will put at risk CWH’s dividends and investment
grade debt ratings and is not likely to create the stable and
growing cash flows which most REIT investors are seeking.
- Related/Corvex
are trying to seize control of CWH without paying anything to
shareholders. In February 2013, Related/Corvex publicly
announced that they were interested in purchasing all of CWH’s
shares at a premium. However, when the CWH Board pressed
Related/Corvex for the details of an offer, Related/Corvex changed
tactics. Instead of presenting a fully financed offer that would
have been actionable by the Board and shareholders, Related/Corvex
began their campaign to seize control of CWH by means of a written
consent to remove the entire CWH Board, without cause, and install
their hand-picked replacement board in order to take control of CWH
without paying shareholders. Related has an abysmal track record of
controlling publicly traded real estate companies. The only two
times when the Related Companies have ever controlled publicly
owned real estate companies, their stewardship caused shareholders
to suffer substantial losses while Related benefitted:
American Mortgage
Acceptance Company (“AMAC”). Jeff Blau, the CEO of the
Related Companies, previously served simultaneously as an officer
of the Related Companies and as Chairman and CEO of AMAC. During
this time, he caused AMAC to make large subordinated loans to
Related’s affiliates. These loans soon defaulted and AMAC filed for
bankruptcy a short time later, and all public shareholder value was
lost.
Centerline Holding
Company (f/k/a “CharterMac”). While Steven Ross, the
Chairman of the Related Companies, served on the board of
CharterMac and shortly before Jeff Blau joined that board, Ross and
Blau caused CharterMac to agree to pay the Related Companies or its
affiliates about $340 million to internalize management. Shortly
thereafter, CharterMac suffered a spiral of operating losses, a 98%
negative total return for public shareholders and CharterMac’s
shares were de-listed from the NYSE.
- Removing the
entire CWH Board by written consent, without cause, may destroy
shareholder value. The removal of the entire Board would
constitute an “event of default” under CWH’s bank loan agreements
giving lenders the right to accelerate debt maturities. It would
also constitute a “fundamental change” under the terms of CWH’s
outstanding Series D convertible preferred securities triggering
the right of holders to convert their preferred shares into common
shares at a conversion rate which will be dilutive to common
shareholders. If the Related/Corvex solicitation succeeds, CWH
would be out of compliance with applicable NYSE and SEC
requirements until a new Board is elected at a shareholders’
meeting convened for that purpose in about 60-90 days. Also,
competitor landlords and some tenants may try to take advantage of
uncertainties affecting CWH’s business if the Related/Corvex
consent solicitation succeeds. CWH’s management will do whatever it
can to mitigate these risks; but, if the Related/Corvex consent
solicitation succeeds, we believe rating agencies downgrades are
likely, and the risk of actions by lenders and others may be
material due to the reckless and short term oriented scheme put
forward by Related/Corvex and Related’s abysmal track record of
running public real estate companies.
- The CWH Board and
management are fully committed to enhanced corporate governance and
the alignment of interests with shareholders. The Board has
taken significant actions in response to shareholder suggestions to
move CWH to “best in class” in corporate governance and to enhance
the alignment of the Board’s and management’s interests with those
of shareholders’, including: increasing the Board’s size and
strengthening its independence; committing to create a Board
position of Lead Independent Trustee once the expansion of the
Board is complete; requiring Trustee ownership of approximately
$500,000 of CWH shares; and changing management compensation so
that a significant amount will be determined based upon
shareholders’ total return over a three year period and will be
paid in restricted shares that vest over a multi-year period. The
Board has even extended an offer of Board representation to Keith
Meister of Corvex to end the expense and distraction caused by the
Related/Corvex hostile takeover efforts; but this offer was
rejected, apparently because it would not have afforded
Related/Corvex immediate and complete control of CWH for their own
benefit.
Thank you for taking the time to read this letter and the
enclosed presentation.
Please SIGN, DATE and RETURN the WHITE consent revocation card enclosed with this
letter. Please discard the Related/Corvex gold card.
Sincerely,
The CommonWealth REITBoard of Trustees
Ronald ArtinianWilliam LamkinAnn LoganJoseph MoreaAdam
PortnoyBarry PortnoyFrederick Zeytoonjian
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 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.
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 DEFINITIVE 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).
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.
Media:Joele Frank Wilkinson Brimmer KatcherAndrew
Siegel/Jonathan Keehner, 212-355-4449orInvestor:CommonWealth
REITTimothy Bonang, 617-796-8222Vice President, Investor
RelationsorJason Fredette, 617-796-8222Director, Investor
Relationswww.cwhreit.com
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