CommonWealth REIT (CWH) named billionaire Sam Zell chairman of its newly elected board, marking the completion of a 15-month effort by Corvex Management LP and Related Cos. to overthrow management and install new trustees.
The seven-member board also chose David Helfand, co-president of Zell’s Equity Group International, to become chief executive officer, CommonWealth said in a statement today. The board accepted the resignations of the real estate investment trust’s previous executive officers.
“With our team in place, we can get to work executing on our goal to create long-term value for our shareholders,” Zell said in the statement.
Office landlord CommonWealth has been operating without a board since March, after shareholders voted to oust trustees led by Barry Portnoy and his son Adam, who had been president. Corvex and Related, which together hold 8.8 percent of the REIT’s stock, claimed that the Portnoys’ ownership of a management company that ran the firm resulted in conflicts of interest and underperformance.
The board was elected by about 85 percent of the shares outstanding, Corvex and Related, both based in New York, said in a separate statement today. Zell and Helfand will be joined on the board by Peter Linneman, James Corl, Edward Glickman, Jim Lozier and Kenneth Shea.
“Today is a historic milestone for CommonWealth and the REIT industry, and a tremendous victory for shareholder rights,” Corvex founder Keith Meister and Related CEO Jeff Blau said in their statement. “We remain confident that the highly qualified and experienced board elected today will work expeditiously and successfully to usher in a new era of accountability.”
The new board is considering changing the company’s name and ticker symbol, said Allen Samuel, a CommonWealth spokesman. The corporate headquarters will move to Chicago, Zell’s base of operations, from Newton, Massachusetts, Samuel said.
The dissident group had argued the Portnoys had been more concerned with collecting fees for their firm, REIT Management & Research LLC, which managed Commonwealth, than operating the company for the benefit of all stockholders, because the father and son didn’t own many shares themselves.
CommonWealth, under Portnoy management, denied Corvex and Related’s claims of conflicts of interest and said it was focused on buying office buildings in U.S. downtowns and selling suburban properties to boost shareholder value.
RMR will continue to manage CommonWealth’s properties for now, Samuel said. Property management will be brought gradually in-house under the new corporate structure, he said. Samuel said he couldn’t say how long that would take.
“We’re just kicking off a transition,” he said in a telephone interview. “It’s early in the process.”
Zell, 72, is chairman of public companies including Chicago-based Equity Residential (EQR), the largest U.S. apartment REIT, and Equity Lifestyle Properties Inc., an owner of manufactured-home communities. The billionaire, nicknamed “the grave dancer” for buying distressed properties left for dead in the 1990s, sold his Equity Office Properties Trust in 2007 for $39 billion as the commercial real estate market was peaking.
An entity affiliated with Zell and Helfand will have an option to acquire as many as 4 million CommonWealth shares, Corvex and Related said in February.
The CommonWealth “slate appears well-qualified to oversee this REIT, given Zell’s long and successful experience in creating and managing REITs,” analysts from Institutional Shareholder Services wrote in a May 12 report. The candidates “include some luminary names in real estate investing.”
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