CommonWealth Investors Say Shareholders Back Board OusterBrian Louis
Corvex Management LP and Related Cos., the investors who want to replace CommonWealth REIT’s board, said that holders of more than 70 percent of the company’s shares gave their consent to oust the trustees.
Corvex, founded by activist investor Keith Meister, and Related, a New York-based property developer, are soliciting votes to remove the trustees, claiming that an overlap in board membership and the ownership of an external management firm has led to conflicts of interest and mismanagement. The investors own about 9.6 percent of the real estate investment trust’s shares, according to data compiled by Bloomberg.
The dispute between the investors and Newton, Massachusetts-based CommonWealth is in arbitration. The REIT has said the solicitation isn’t valid under its bylaws, and urged stockholders on June 17 to take no action on it.
“I was pretty sure they were going to get to 70 percent,” John Guinee, an analyst at Stifel Nicolaus & Co. in Baltimore, said in a telephone interview. “This is still in arbitration, which is a three-to-10-month process.”
Corvex and Related, in a statement today, called on CommonWealth to hold a special meeting of shareholders to elect new trustees.
“This is a tremendous victory for all CommonWealth shareholders and reflects overwhelming support for immediate change,” Meister and Jeff Blau, CEO of Related, said in the statement. “We encourage the remaining officers and former trustees to stop their efforts to disregard the clear mandate from holders of over 70 percent of CommonWealth’s shares and put an end to the unrelenting waste of company resources to advance the Portnoys’ personal agenda.”
CommonWealth’s president, Adam Portnoy, and his father, Barry, a company founder, sit on its five-member board and are owners of the external management company, Reit Management & Research LLC.
“Today’s announcement by Corvex/Related is yet another attempt to mislead and confuse CommonWealth shareholders,” Tim Bonang, a CommonWealth spokesman, said in a statement. “The validity of the Corvex/Related consent solicitation depends upon an arbitration panel making a number of findings, including that certain of CommonWealth’s bylaws are invalid.”
CommonWealth shares rose 4.5 percent to $22.88 at 2:39 p.m. in New York before trading was halted. The halt wasn’t lifted before the end of regular trading.
Proxy-advisory companies Institutional Shareholder Services Inc. and Glass Lewis & Co. have recommended that CommonWealth shareholders vote to remove the entire board.
“The effectiveness of the current solicitation remains subject to, among other things, the ongoing arbitration proceedings,” Glass Lewis said in a June 17 report. It made its recommendation “in recognition of the possibility that the current solicitation may be indefinitely delayed, rescheduled or declared invalid.”