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Luxor Capital Group Announces Its Disapproval Of CommonWealth REIT's Recently Announced 27 Million Share Issuance

Stocks in this article: CWH

NEW YORK, Feb. 26, 2013 /PRNewswire/ -- Luxor Capital Group, LP, a New York based investment manager ("Luxor"), beneficially owns and controls in excess of 6.7 million common shares of CommonWealth REIT (NYSE: CWH), or approximately 8.0% of the common shares outstanding.  Luxor is releasing the following open letter to the Independent Trustees of CWH:

To the Independent Members of the Board of Trustees:

We write to express our strong support for the 13D filing made on February 26, 2013 by Corvex Management, LP ("Corvex") and Related Fund Management ("Related").  We concur with the authors that there exists a substantial discount between the fair market, net asset value of CommonWealth REIT ("CWH" or the "Company") and the current trading price of the Company's listed stock.  This valuation gap exists, in our opinion, due to conflicted management and persistently poor asset allocation decisions by the Board of Trustees, none greater than the recently-proposed 27 million common share offering (the "Offering").  We believe the destruction of shareholder wealth over a period of years is a direct result of an asset aggregating strategy that is the product of competing incentives between shareholders and the external manager, REIT Management and Research LLC ("RMR").  We join Corvex and Related in demanding you cancel the ill-advised Offering and debt repurchase, and we demand you exercise your fiduciary duty to all shareholders and form an Independent Special Committee with an Independent Financial Advisor and Independent Counsel in order to explore the full range of strategic alternatives.

Luxor Capital Group and its affiliates collectively control in excess of 6.7 million shares of CWH, representing greater than 8% of the current common shares outstanding.  We would have liked to address our concerns regarding the RMR and CWH conflicts directly with you in a private, less hostile forum, but our request to meet with the Independent Trustees was denied on December 28, 2012 by the Company.  We would have preferred to discuss our concerns regarding the Offering with management, but we were denied access to meetings by the underwriters of the proposed Offering at the behest of the Company.  We are one of your three largest shareholders, yet management saw to it that we were excluded from a group lunch for the Offering.  It seems to us that any shareholder with the opinion that a series of strategic decisions have benefitted RMR to the detriment of CWH is deliberately and actively ignored.

You have now publicly heard that at least 18% of your shareholders do not support the Offering, and we believe that the number opposing it is actually much higher.  There is publicly-disclosed interest from credible counterparties to acquire the Company.  We implore you to heed the advice of the owners of CWH and cancel this unnecessary and highly dilutive Offering and immediately form an Independent Committee.  In the event you fail to cancel the Offering and pursue an independent strategic review, we reserve our right to hire our own Independent Advisor, share the results of that review with all shareholders and, if you will not heed the voice of the largest owners of the Company, pursue legal actions against you and the Non-Independent Trustees. 

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