CommonWealth REIT (CWH) asked Keith Meister of Corvex Management LP to join its board in an effort to settle a dispute between the investor and the real estate investment trust.
If Meister joined the board, he would have to stop all “hostile activities” against CommonWealth and the board, according to a CommonWealth statement today.
Corvex and Related Cos., which have a combined stake of 9.6 percent in CommonWealth, have been seeking to oust the office landlord’s board since last year, arguing the ownership of an external management firm, REIT Management & Research LLC, by CommonWealth President Adam Portnoy and his father Barry, a company founder, has led to conflicts of interest and underperformance at the REIT. Both Portnoys sit on the REIT’s board and are owners of the external management company.
“You operate an activist hedge fund with a goal of making money for your investors by becoming actively involved in the management of the public companies in which you invest,” according to a letter to Meister attached to the statement. “These goals are complementary, not adversarial.”
The REIT in September announced changes to improve its corporate governance after conversations with investors who said they wanted RMR’s financial incentives to be more aligned with shareholders. The changes to the management agreement were made last month, according to the Newton, Massachusetts-based company.
CommonWealth has denied Corvex and Related’s claims of conflicts of interest and has said it is focusing on buying office buildings in U.S. downtowns and selling suburban properties to boost shareholder value.
An e-mail and voice-message left before business hours for Joanna Rose, a spokeswoman for the investors, wasn’t immediately returned.
Meister’s addition to the board would settle a situation that has become a distraction for the company and would help improve its business, Adam Portnoy said.
“What’s been more discouraging for the company has been the disruption to the business,” Adam Portnoy said in a telephone interview. “We work very hard at convincing tenants it’s not an issue.”
CommonWealth also said it has appointed Ann Logan and Ronald Artinian to its board as independent trustees. Logan formerly served as a director at PHH Corp. and worked at Fannie Mae, where she was in charge of its single-family mortgage business between 1998 and 2000.
Artinian has been a board member of the Reserve Funds, a group of mutual funds, since 2006.
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