March 25 (Bloomberg) -- CommonWealth REIT, the target of an investor campaign to overthrow the board, said all of its trustees have been removed after the required two-thirds of shareholders voted in favor of an ouster.
A special meeting to elect a new board will be held on or before May 23, according to a statement today by the Newton, Massachusetts-based real estate investment trust. Shareholders who have owned at least $2,000 worth of stock for at least one year may nominate trustees.
The board removal marks a victory for Corvex Management LP and Related Cos., which together own 9.6 percent of the REIT’s shares and have been seeking to oust management for a year. The New York-based firms argued that the ownership of an external management firm by CommonWealth President Adam Portnoy and his father, Barry, a company founder, led to conflicts of interest and underperformance. Both Portnoys have been directors of CommonWealth, which pays fees to the management company.
Corvex and Related said last week they had votes to remove the board from stockholders representing 81 percent of shares.
The activists have proposed a new slate of board candidates led by billionaire investor Sam Zell and David Helfand, co-president of Zell’s Equity Group Investments. Zell and Helfand have agreed to serve as the REIT’s chairman and chief executive officer, respectively, if they are chosen for the new board.
An entity affiliated with Zell and Helfand will have an option to acquire as many as 4 million CommonWealth shares, Corvex and Related said last month.
The dissident group has argued the Portnoys have been more concerned about collecting fees for their firm, REIT Management & Research LLC, than operating CommonWealth for the benefit of all stockholders because the father and son don’t own many shares themselves.
CommonWealth has denied Corvex and Related’s claims of conflicts of interest and said it is focused on buying office buildings in U.S. downtowns and selling suburban properties to boost shareholder value.
The company in September announced changes to its corporate governance after conversations with investors who said they wanted RMR’s financial incentives to be more aligned with shareholders. The changes were made in December, according to the REIT.
In the five years ended Feb. 25, 2013, the day before Corvex and Related made their first public filings on CommonWealth, the stock fell 45 percent, compared with an 11 percent advance in the Bloomberg REIT Index. The shares have since surged 69 percent, closing yesterday at $26.75.
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