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Luxor Capital Group Announces Its Disapproval Of CommonWealth REIT Decision To Move Forward With Its Offering

Stocks in this article: CWH

NEW YORK, March 1, 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 Trustees of CWH:

To the Board of Trustees:

On February 27, 2013, CommonWealth REIT ("CWH" or the "Company") announced that it had priced 30,000,000 shares of Common Stock in a public offering (the "Offering") at $19.00 per share.  On February 28, 2013, the Issuer announced the underwriters had exercised the overallotment option on 4,500,000 shares, and on March 1, 2013, the Issuer announced that it had increased its maximum tender offer amount with respect to outstanding debt to $650,000,000.  In response to these decisions by you, we are actively exploring litigation to recoup the value destroyed by the Offering and are willing to use any and all appropriate legal means to prevent further destruction of shareholder value.

We find it unconscionable that the Board of Trustees would vote to issue shares significantly below-market in light of the offer on the table from a credible buyer at a significant premium.  We agree with CNBC's assessment of the transaction, which they described as "a real-life poison pill" and their mocking assessment of your decision to pursue the Offering in light of the bid- "amazing- amazing that they did this".[1]

We demand the following steps be immediately taken by the Board of Trustees:

  1. Form an Independent Committee with Independent Counsel and an Independent Financial Advisor to immediately pursue strategic alternatives;
  2. Cease all asset acquisition and disposition activity until the conclusion of the independent strategic review;
  3. Cease all equity offerings in CWH or indirectly through its majority owned subsidiary, Select Income REIT; 
  4. Do not seek to amend, in any way more favorable to REIT Management and Research LLC ("RMR"), the existing management agreement between CWH and RMR; and
  5. Authorize, if you have not already done so, the Independent Trustees to retain their own independent counsel.  Given the internal conflicts of interest we currently perceive at the Board level, we believe that CWH counsel cannot adequately represent the Independent Trustees and therefore that the Independent Trustees cannot adequately represent shareholders.

Luxor Capital Group, LP

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