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CommonWealth REIT Comments On Recent Downgrade Warning By Moody’s

CommonWealth REIT (NYSE:CWH) today noted that on March 7, 2014, Moody’s Investors Service announced that it was placing CWH’s investment grade ratings “on review for downgrade,” which would affect approximately $2 billion of CWH securities. In a press release regarding CWH, Moody’s stated:

“Moody’s Investors Service placed the ratings of CommonWealth REIT on review for downgrade reflecting the potential for significant shifts in financial and strategic policies as a result of the activist shareholders’ efforts to displace the current Board of Directors and management…..If the activist shareholders are successful, Moody’s will focus on potential for increased leverage, secured debt and/or core asset sales, as well as execution risk associated with transitioning the operations of a large, nationally diverse real estate portfolio to a new management team and infrastructure.”

CWH believes Moody’s action confirms that there are significant risks for CWH shareholders if Related Fund Management, LLC and Corvex Management LP (“Related/Corvex”) are successful in removing the entire CWH Board without cause. It appears that Related/Corvex’s plan for CWH is to sell CWH’s best performing assets, increase leverage and buyback stock.

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

“The CWH Board is disappointed, but not surprised, by Moody’s decision to place CWH on review for downgrade because of Related/Corvex’s short term scheme for CWH. Moody’s announcement validates our long held belief that the Related/Corvex plan for CWH is nothing more than a financial engineering scheme designed to increase CWH’s share price in the short term at the expense of long term shareholder value. In addition to clearly putting CWH’s investment grade debt ratings at risk, the scheme proposed by Related/Corvex will also likely put CWH’s dividends at risk.

“We also believe that Related/Corvex’s effort to remove the entire Board by written consent, and without cause, creates serious and unnecessary risks to CWH’s business. The far better and less disruptive course is for shareholders to participate in the CWH annual shareholders’ meeting on June 13, 2014. The fact that Related/Corvex are willing to proceed in this reckless manner demonstrates that their goal is to seize immediate control of CWH at any cost, and has little or nothing to do with corporate governance or the best interests of all other shareholders.”

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