Recommends Shareholders Support the CWH
Board and Management By Voting the WHITE Consent Revocation Card Today
CommonWealth REIT (NYSE:CWH) today mailed the following letter
to its shareholders:
March 12, 2014
To the Shareholders of CommonWealth REIT:
Protect the value of your investment in CommonWealth
REIT: sign, date and return the WHITE consent revocation card enclosed with this
letter.
Related Fund Management, LLC and Corvex Management LP (together
“Related/Corvex”) have recently sent you several letters claiming
to be champions of shareholders rights. Don’t
be fooled. Related/Corvex’s real purpose is to seize control
of your company without paying for it, and their reckless actions
could destroy the value of your investment.
Related/Corvex are soliciting written consents to remove the
entire CommonWealth Board without cause. Removal of the entire board of a public company without
the simultaneous election of a new board is unprecedented – for
good reason. When Related/Corvex solicited consents last
spring, we and many shareholders knew it was a non-binding
referendum, and the arbitration panel has so ruled. However, if the
current solicitation succeeds, it may have serious adverse
consequences for your investment in CommonWealth, including the
following:
- The removal of the entire Board would
constitute an event of default under the standard terms of
CommonWealth’s bank loan agreements. This event of default would
allow the bank creditors to accelerate their loans and cancel their
commitments to make future loans. CommonWealth has $735 million of
bank loans outstanding at this time.1
- Under applicable law, only the
CommonWealth Board may declare dividends. If the Related/Corvex
consent solicitation succeeds, there would be no CommonWealth Board
and dividends to CommonWealth’s preferred and common shareholders
would be suspended, at least until a new Board may be elected.
- If the Related/Corvex consent
solicitation succeeds, we believe Moody’s and S&P would likely
downgrade CommonWealth’s investment grade ratings because of the
uncertainty about CommonWealth’s future financial management,
because of Related/Corvex’s announced plan to increase debt, and
because of Related’s track record of mismanagement of publicly
owned real estate companies. Rating Agencies’ downgrades of
CommonWealth’s debt would immediately raise the interest cost of
CommonWealth’s floating rate debts, and ratings downgrades would
make it more difficult and more expensive for CommonWealth to raise
future capital, including the capital necessary to cure any
defaults which Related/Corvex’s actions cause.
- According to the terms of
CommonWealth’s Series D preferred shares, the removal of the entire
CommonWealth Board without cause as proposed by Related/Corvex
would be a fundamental change that permits CommonWealth’s series D
preferred shares to be converted into common shares at an exchange
ratio which would dilute existing common shares.
- Equally important as these financial
defaults, if the Related/Corvex consent solicitation succeeds, we
believe CommonWealth’s day to day business would suffer. In 2013,
CommonWealth executed over 370 leases for approximately 5.2 million
square feet of leasable space, and CommonWealth is on a similar
pace for 2014. While CommonWealth is without a Board, we fully
expect that competing landlords and some tenants would attempt to
exploit the uncertainties which would result from removal of the
entire Board at the expense of CommonWealth and its
shareholders.
The CommonWealth Board and management have made good faith
efforts to engage with all shareholders, including
Related/Corvex.
Related/Corvex first expressed interest in CommonWealth in
February 2013. At that time, Related/Corvex publicly stated a
desire to buy all of CommonWealth’s common shares at prices of $25
to $27 per share. However, when the Board pressed Related/Corvex to
present an offer that would be actionable by shareholders,
Related/Corvex instead withdrew their purported “offer” and began a
hostile takeover campaign to seize control of CommonWealth without
paying shareholders.
When other shareholders expressed support for certain governance
changes highlighted by Related/Corvex’s campaign, the CommonWealth
Board and management began a serious engagement effort by meeting
with shareholders and adopting meaningful governance changes,
including expanding the existing Board by appointing two highly
qualified and truly independent trustees, committing to declassify
the election cycle for Board members and eliminating the
shareholders rights plan, among other governance enhancements. The
CommonWealth Board even offered a Board seat to Keith Meister of
Corvex.
It also should be noted that Related/Corvex and all other
shareholders who have owned at least $2,000 worth of CommonWealth
shares for one year may nominate new trustees for election at the
Annual Meeting of Shareholders scheduled for June 13, 2014. In
fact, the window for shareholders to make nominations is currently
open until March 24, 2014. We believe shareholder action at the
June 13, 2014 Annual Meeting of Shareholders offers a far better
and less disruptive path for shareholder action than the removal of
the entire Board without cause, as proposed by Related/Corvex.
All of the alternatives proposed by the CommonWealth Board have
been rejected by Related/Corvex. Now, in their relentless pursuit
of 100% control of CommonWealth for their own purposes and without
regard to the adverse consequences outlined above, Related/Corvex
are soliciting written consents to remove the entire Board and
install a hand-picked slate of new trustees who we believe, if
elected, would advance Related/Corvex’s short term oriented plan.
One of these potential candidates – Sam Zell – received
in-the-money options valued at more than $17 million from
Related/Corvex to lend his name to the Related/Corvex cause; yet,
Related/Corvex want you to believe that he is “independent.”
CommonWealth’s Board and management are taking actions to
protect shareholders and executing on a business plan to create
real long term value for all of CommonWealth’s shareholders. In
contrast, we believe Related/Corvex are pursuing a reckless course
of action that may destroy the value of your shares. Frankly, the
fact that Related/Corvex are pursuing such a reckless action
implies, in our view, that they are willing to sacrifice
significant shareholder value just to take control for their own
benefit.
Don’t let Related/Corvex destroy CommonWealth and the value
of your investment. Please sign, date and return the
WHITE consent revocation card enclosed
with this letter. Please discard any gold consent cards you may
receive from Related/Corvex. Even if you have already sent in a
card, it is not too late to change your vote – only the last dated
card counts.
Sincerely,
The CommonWealth Boardof Trustees
Ronald ArtinianWilliam Lamkin Ann 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).
1 Related/Corvex have argued that they will offer to buy 51% of
CommonWealth’s outstanding bank loans to prevent a default of these
loans. In fact, it takes a two-thirds vote of the committed amounts
of these loans (i.e., $1.25 billion),
not 51% of the outstanding amount (i.e., $735 million) to waive defaults. Moreover,
it is hard to understand why a lender would take 51% when immediate
payment of 100% is due, even if, in fact, Related/Corvex made the
offer they have stated.
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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