Zell Turns Activist to Reshape Commonwealth REIT

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March 18 (Bloomberg) -- Jesse Keenan of Columbia University Center for Urban Real Estate and Bloomberg’s Kara Wetzel discuss activist investor action by Sam Zell and Jeff Blau to reshape the Commonwealth REIT on Bloomberg Television’s “In The Loop.”

Research director at the center for urban real estate.

Jesse, let me start with you.

I keep hearing that externally managed reit's are not common, and most that are belong to the portnoy's. it is common to have that externally managed and it is certainly very uncomfortable -- uncommon because there are certain irs reits as a vehicle within an election.

There are a variety of policies that determine or speak to the necessity rather to have the central management, and i think there is certainly an affiliation that qualifies along those lines, but it is unusual and there are certainly potential conflicts that arise with external managers.

And that is certainly what sam zell and the other players here, really the ones that began all of this in the first place before bringing on sam zell.

Let me play for you what jeff said last week.

We called him back and said why don't you join our team or be our proposed chairman if we were to win the fight and he called back and said that he was actually very busy, but this is so important to him, proper governance and his role as a leader in the reits industry, he has to do this as he views as an obligation to make change and fix the governance practices occurring.

These are all property titans.

Is it unusual to see them work together like this.

It is unusual on a broad scale, especially with a big name like related which is not known to do activist work.

It is rare.

The money at stake for sam zell is only about $90 million.

He has the right to buy stakes.

He says it is not about the money, but corporate governance.

He says he feels the entire industry is a reflection of him.

Would that be accurate?

I think it is.

He has led as a benchmark for transparency and large real estate investment trusts and it highlights tension with maryland law specific to real estate trust and some of the ability and minority stakeholders to participate in the election of directors and the legal issues that have framed the case for the past year.

Kara wetzel, what about the changes commonwealth has put in place, saying they would declassify the board with the entire board standing up for reelection and they said that movies downgraded commonwealth and the reason why they would want to downgrade is uncertainty generated by people like jeff blau and sam zell.

They are trying to shift toward downtown offices with higher occupancy and higher rent, and they think that will help.

I have also tried to tie some of this with share holders.

What about the portfolio, is that high-quality property?

It is standard poverty.

I know the mellon bank center in philadelphia.

That is my hometown.

They have operates all over the country and in australia as well?

A few properties in australia.

I want to read wes sam zell said he would do with the properties.

He said first of all we would internalize management and get rid of bylaws that disenfranchise shareholders.

Just like equity residential, we have no poison pills or limitations.

Thecwh portfolio is haphazard, has no strategy to it.

We were correct at and we have done this before.

Part of the argument is commonwealth says it has been a tough argument and -- tough market and they have been punished for it.

They could see only slight markets that are doing well like perhaps since -- san francisco and new york.

But their fees, relative to stock performance compared to other reits just does not hold water.

It does not hold water.

Would you say sam zell has been transparent in his own reits,

This text has been automatically generated. It may not be 100% accurate.

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