CommonWealth REIT Responds to the Related/Corvex Group
NEWTON, Mass. -- January 22, 2014
CommonWealth REIT (NYSE: CWH) today sent the following letter to the
Related/Corvex group in response to its letter dated January 21, 2014.
January 22, 2014
Mr. Jeff T. Blau
Related Fund Management, LLC
60 Columbus Circle
New York, NY 10023
Mr. Keith Meister
Corvex Management LP
712 Fifth Avenue, 23^rd Floor
New York, NY 10019
Dear Messrs. Blau and Meister:
The Independent Trustees and the entire Board have reviewed your letter dated
January 21, 2014, which was published publicly before it was sent to us.
First, the Board disagrees with the fundamental premise of your letter, which
is that your interests are aligned with, or even similar to, those of other
CWH shareholders. As your actions continue to make clear, Related (with the
assistance of Corvex) is engaged in a hostile takeover attempt of CWH for its
own benefit, while endeavoring to hide behind the veil of corporate
Before responding to the specifics of your letter, the Board would like to
remind you that it has made real and significant changes to CWH’s governance
and management compensation in response to specific suggestions received from
shareholders, including you, during the last several months.
1. Board Composition: The Board has added two highly qualified, new
Independent Trustees that were identified by the search firm Korn / Ferry
International. Neither of these new Independent Trustees have any prior
relationships with CWH, CWH’s Board or CWH’s manager. The Board also recently
offered an eighth Board seat to Keith Meister of Corvex, which would have
brought an end to the public disputes between CWH and the Related/Corvex group
as well as increased the ratio of Independent Trustees to total Trustees on
the CWH Board from the current 71% to 75%. Because Mr. Meister has failed to
accept this offer, the Nominating and Governance Committee (comprised solely
of Independent Trustees) continues to work with Korn / Ferry International to
identify additional Independent Trustee candidates for CWH.
2. Board Structure & Guidelines: The Board is committed to declassifying the
Board, starting at the 2014 annual shareholders meeting, regardless of whether
the disputes between CWH and the Related/Corvex group have been resolved.
Assuming this amendment to the CWH Declaration of Trust is approved by
shareholders, one-third of Trustees will be elected in 2014, two-thirds will
be elected in 2015 and the entire Board will be subject to annual elections
beginning in 2016. The Board also established guidelines regarding minimum
share ownership by Trustees of approximately $500,000 worth of CWH common
3. Simplified Path for Shareholder Action at Annual Meetings: The Board has
amended CWH’s Bylaws to make it easier for shareholders to make Trustee
nominations and proposals at CWH’s annual shareholders’ meetings, including
lowering the share ownership requirements to $2,000 worth of common stock for
one year and simplifying the so-called “informational requirements”. These
changes are already in place and applicable for CWH’s 2014 annual
shareholders’ meeting. The Board has also resolved to submit to a shareholder
vote at the 2014 annual shareholders’ meeting an amendment to CWH’s
Declaration of Trust to change the voting standard in contested Trustee
elections from a majority of shares outstanding to a “plurality” voting
4. Board Leadership: The Independent Trustees are committed to designating a
Lead Independent Trustee with clear and robust responsibilities. The selection
of this individual and the specific responsibilities will be decided solely by
the Independent Trustees once the Board is comprised of not less than 75% of
Independent Trustees, which is currently anticipated to occur before the 2014
annual shareholders’ meeting.
5. Shareholder Rights Plan: The Board is committed to terminating, or letting
expire, the current shareholder rights plan, which is currently scheduled to
expire on October 17, 2014, upon the resolution of the disputes between CWH
and the Related/Corvex group. The Board has already eliminated the “dead hand”
provision of the shareholder rights plan which had prevented the redemption of
rights by a successor Board.
6. Management Compensation: The Board has substantially restructured the
management arrangement between CWH and its manager to further align the
interests of management with shareholders while continuing to maintain CWH’s
low overhead cost structure.
As CWH shareholders have recognized, the changes above are meaningful, the
Board’s commitment to continue implementing governance enhancements is
resolute and there is no intention to reverse course.
As you are undoubtedly aware, the Board has already substantially addressed
all of the Related/Corvex group’s original recommendations for change at CWH.
Below is a summary comparison of recommendations you have previously made and
the Board’s actions to date:
Related and Corvex CWH Board Action
Added two highly qualified
1) Appoint three additional Independent Trustees and offered a
Trustees. third Board seat to Keith Meister of
Made substantial changes to CWH’s
2) Replace CWH’s Declaration Bylaws and recommending shareholders
of Trust and Bylaws. approve important changes to CWH’s
Declaration of Trust.
Ceased all related party asset sales
3) Cease all related party and eliminated right of first offer
asset sales. provision in the management
Recapitalized balance sheet,
4) Improve capital allocation. maintained investment grade debt
ratings and accelerated sale of
Amended compensation arrangements
with CWH’s manager to further align
5) Internalize management. management’s interests with
shareholders, while maintaining CWH’s
low overhead cost structure.
Given that the Board has implemented substantially all of your original
recommendations and Mr. Meister has, thus far, failed to accept the invitation
to join the CWH Board, the Board believes (and many shareholders now
recognize) that there is likely nothing the Board could do to satisfy you
because your true intentions are for Related to take control of CWH for its
We believe that your disingenuousness has been clear since you tried to
mislead shareholders into thinking you were prepared to acquire CWH in
February and March 2013. You also continue to vilify Messrs. Barry and Adam
Portnoy in an effort to divide them from the Independent Trustees and other
CWH shareholders. All of the Board’s relationships are publicly disclosed; the
same may not be said for you and your purported “independent” trustee
nominees. The Board remains confident that CWH’s shareholders will see through
your misleading tactics.
As the Board has repeatedly told you, the CWH Board and management continue to
engage with all shareholders on a range of issues, including those raised in
your letter, and continue to respond to suggestions and concerns. To be even
more specific, the Board is open to discussing all of the items outlined in
your letter with shareholders, but it will not be publicly coerced into
hastily acting in a fashion inconsistent with shareholders’ interests in order
to facilitate Related’s hostile takeover attempt of CWH.
Notwithstanding your motives, in a continued effort to settle the disputes
between CWH and the Related/Corvex group as well as to end the distraction and
costs associated with these disputes, the Board reiterates its invitation to
Keith Meister to join the CWH Board. There can be no better view into the way
the Board operates and no better way to effect any desired change than to
accept a seat on the CWH Board. Joining the Board now will also allow Mr.
Meister to have meaningful input into decisions regarding CWH’s 2014 annual
shareholders’ meeting. As with the Board’s previous invitation, the only
condition to this offer is that Mr. Meister enter a customary “stand-still”
agreement to cease hostile activities against CWH and its Board while he
remains a Trustee of CWH.
The Board urges Mr. Meister to reconsider the offer to join the Board in the
hope that he will, at last, put aside Related’s desire to take control of CWH
for its own benefit and work constructively with the entire Board for the
benefit of all CWH shareholders.
On behalf of the entire
CWH Board of Trustees,
CommonWealth REIT is a real estate investment trust that primarily owns office
properties located throughout the United States. CWH is headquartered in
^(1)See the Related/Corvex group presentation to CWH shareholders dated
February 26, 2013 titled “Restoring Health to Commonwealth”, pages 39 – 50.
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 BOARD’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
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
Fund Management, LLC and Corvex Management LP (together, “Related/Corvex”). On
January 21, 2014, CWH filed a revised preliminary consent revocation statement
with the Securities and Exchange Commission, or SEC, in response to the
Related/Corvex 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 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 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 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.
Joele Frank, Wilkinson Brimmer Katcher
Andrew Siegel / Jonathan Keehner
Timothy Bonang, 617-796-8222
Vice President, Investor Relations
Jason Fredette, 617-796-8222
Director, Investor Relations
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