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CommonWealth REIT Files Investor Presentation Comparing CWH’s Value Creating, Long Term Strategy With Related/Corvex’s Short Term Scheme

Stocks in this article: CWH

CommonWealth REIT (NYSE:CWH) today announced that it has made available to shareholders an investor presentation on the Company’s website at www.cwhreit.com. The presentation will also be filed with the U.S. Securities and Exchange Commission (“SEC”) and will be available on the SEC’s website at www.sec.gov.

The presentation outlines the clear differences between the business plan being successfully executed by the CWH Board and management and the scheme for CWH proposed by Related Fund Management, LLC and Corvex Management LP (“Related/Corvex”). The CWH Board and management are focused on delivering superior results for all shareholders, as evidenced by CWH’s recently announced fourth quarter results that exceeded expectations on most financial and operating metrics. In contrast, Related/Corvex are attempting to take control of CWH without paying shareholders anything for that control. We also believe the Related/Corvex scheme would place CWH’s common stock dividend and investment grade debt ratings at risk. The CWH Board and management believe that the continued execution of the Company’s business strategy is in shareholders’ best interests for the following reasons:

  • The CWH Board and management team remain focused on creating long term value for all CWH shareholders. The successful repositioning of CWH’s portfolio to high quality central business district (CBD) office properties is nearly complete. This strategy is generating significant shareholder value and the successful execution of the business plan has resulted in operating outperformance compared to CWH’s peers.
  • CWH’s recent results prove that the Board and management team’s business plan is working. CWH recently announced fourth quarter results that exceeded expectations on most financial and operating metrics, with improving Normalized FFO per share, leasing activity and same property results.
  • Now that the CWH business plan is generating real value for shareholders, we believe Related/Corvex are attempting to take control of CWH for short term profits and without paying anything to shareholders. The portfolio repositioning that began several years ago is expected to be completed in 2014, at which time approximately two-thirds of CWH’s cash flows will come from high quality CBD office properties. Because of the actions taken by the Board and management during the last several years, we believe CWH is better positioned than many of its peers to benefit from improvements to the economy and the office market in 2014 and 2015.
  • We believe Related/Corvex’s scheme for CWH is focused on the short term at the expense of long term shareholder value. Related/Corvex's proposal for CWH appears to be centered around selling the Company’s best performing assets, increasing debt leverage, investing in CWH’s most challenged assets and buying back stock. We believe this would put at risk CWH’s common stock dividend and investment grade debt ratings, two criteria typically valued by REIT investors. Shareholders also should keep in mind that Related/Corvex do not disclose the assumptions underlying their financial analysis and projections, which they admit are “subject to significant risk and contingencies.”
  • Sam Zell was recently recruited to join the Related/Corvex campaign with a $17 million signing bonus. Sam Zell also bought and sold 192,158 CWH common shares just prior to joining the Related/Corvex campaign and, in our view, the reasons and timing for these trades have not been adequately disclosed. We believe Sam Zell’s actions raise serious questions about his motivations for joining Related/Corvex.
  • Related/Corvex’s proposal is not credible because of Related’s abysmal track record of controlling publicly traded real estate companies. Both times Related has controlled publicly traded real estate companies, Related has benefited while shareholders have suffered major losses.

Adam Portnoy, Managing Trustee and President of CWH, made the following statement regarding today’s announcement:

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