March 3, 2014To the shareholders of CommonWealth REIT: Protect the value of your investment. Please sign, date and return the enclosed WHITE consent revocation card today. Enclosed with this letter is a presentation which explains some of the reasons why we believe you should oppose the consent solicitation by Related Fund Management, LLC and Corvex Management LP (“Related/Corvex”) to remove the entire Board of CommonWealth REIT (“CWH”) without cause. We believe you should support the Board for the following reasons:
- CWH’s current business plan is delivering value for shareholders. CWH’s Board and management are implementing a plan to transition CWH from a REIT which primarily owned suburban office and industrial properties into a REIT that owns high value office buildings in urban central business districts. Between 2008 and 2012, CWH acquired $3.7 billion of properties, principally city center office towers at bargain prices. Simultaneously and continuing to this time, CWH has been selling its older, suburban office and industrial properties. CWH recently announced fourth quarter results that exceeded expectations on almost every financial and operating metric, with improving normalized FFO per share, leasing activity and same property results. Now that the business plan is beginning to yield long term benefits for all shareholders, we believe that Related/Corvex are attempting to seize control of CWH for short term profits.
- The Related/Corvex plan for CWH is reckless, short term oriented and not credible. The Related/Corvex proposal appears to be to sell CWH’s best performing properties, take on as much debt as possible and then use the sale and debt proceeds to buy back shares. This plan will put at risk CWH’s dividends and investment grade debt ratings and is not likely to create the stable and growing cash flows which most REIT investors are seeking.
- Related/Corvex are trying to seize control of CWH without paying anything to shareholders. In February 2013, Related/Corvex publicly announced that they were interested in purchasing all of CWH’s shares at a premium. However, when the CWH Board pressed Related/Corvex for the details of an offer, Related/Corvex changed tactics. Instead of presenting a fully financed offer that would have been actionable by the Board and shareholders, Related/Corvex began their campaign to seize control of CWH by means of a written consent to remove the entire CWH Board, without cause, and install their hand-picked replacement board in order to take control of CWH without paying shareholders. Related has an abysmal track record of controlling publicly traded real estate companies. The only two times when the Related Companies have ever controlled publicly owned real estate companies, their stewardship caused shareholders to suffer substantial losses while Related benefitted:
- Removing the entire CWH Board by written consent, without cause, may destroy shareholder value. The removal of the entire Board would constitute an “event of default” under CWH’s bank loan agreements giving lenders the right to accelerate debt maturities. It would also constitute a “fundamental change” under the terms of CWH’s outstanding Series D convertible preferred securities triggering the right of holders to convert their preferred shares into common shares at a conversion rate which will be dilutive to common shareholders. If the Related/Corvex solicitation succeeds, CWH would be out of compliance with applicable NYSE and SEC requirements until a new Board is elected at a shareholders’ meeting convened for that purpose in about 60-90 days. Also, competitor landlords and some tenants may try to take advantage of uncertainties affecting CWH’s business if the Related/Corvex consent solicitation succeeds. CWH’s management will do whatever it can to mitigate these risks; but, if the Related/Corvex consent solicitation succeeds, we believe rating agencies downgrades are likely, and the risk of actions by lenders and others may be material due to the reckless and short term oriented scheme put forward by Related/Corvex and Related’s abysmal track record of running public real estate companies.
- The CWH Board and management are fully committed to enhanced corporate governance and the alignment of interests with shareholders. The Board has taken significant actions in response to shareholder suggestions to move CWH to “best in class” in corporate governance and to enhance the alignment of the Board’s and management’s interests with those of shareholders’, including: increasing the Board’s size and strengthening its independence; committing to create a Board position of Lead Independent Trustee once the expansion of the Board is complete; requiring Trustee ownership of approximately $500,000 of CWH shares; and changing management compensation so that a significant amount will be determined based upon shareholders’ total return over a three year period and will be paid in restricted shares that vest over a multi-year period. The Board has even extended an offer of Board representation to Keith Meister of Corvex to end the expense and distraction caused by the Related/Corvex hostile takeover efforts; but this offer was rejected, apparently because it would not have afforded Related/Corvex immediate and complete control of CWH for their own benefit.
Please SIGN, DATE and RETURN the WHITE consent revocation card enclosed with this letter. Please discard the Related/Corvex gold card.Sincerely, The CommonWealth REITBoard of Trustees Ronald ArtinianWilliam LamkinAnn LoganJoseph MoreaAdam PortnoyBarry PortnoyFrederick Zeytoonjian CommonWealth REIT is a real estate investment trust that primarily owns office properties located throughout the United States. CWH is headquartered in Newton, MA. WARNING REGARDING FORWARD LOOKING STATEMENTS THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON CWH'S PRESENT BELIEFS AND EXPECTATIONS, BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FOR VARIOUS REASONS, INCLUDING SOME REASONS BEYOND CWH’S CONTROL. ADDITIONAL INFORMATION REGARDING THE CONSENT SOLICITATION CWH, its Trustees and certain of its executive officers, and Reit Management & Research LLC and certain of its directors, officers and employees may be deemed to be participants in the solicitation of consent revocations from shareholders in connection with the solicitation being conducted by Related/Corvex. On January 29, 2014, CWH filed a definitive consent revocation statement with the SEC in response to the Related/Corvex solicitation and has mailed the definitive consent revocation statement and form of WHITE consent revocation card to each shareholder entitled to deliver a written revocation in connection with the consent solicitation. SHAREHOLDERS ARE URGED TO READ THE DEFINITIVE CONSENT REVOCATION STATEMENT FILED WITH THE SEC, AND ANY AMENDMENTS OR SUPPLEMENTS THERETO AND ANY OTHER RELEVANT DOCUMENTS THAT CWH MAY FILE WITH THE SEC WHEN THEY BECOME AVAILABLE, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Additional information regarding the identity of the potential participants and their direct or indirect interests, by share holdings or otherwise, is set forth in the definitive consent revocation statement filed by CWH with the SEC in connection with the solicitation of revocations of consents.
Shareholders may obtain free of charge copies of the definitive consent revocation statement and any other documents filed by CWH with the SEC in connection with the Related/Corvex solicitation at the SEC’s website (http://sec.gov), at CWH’s website (http://cwhreit.com) or by requesting these materials from Timothy Bonang, by phone at (617) 796-8222, or by mail at Two Newton Place, 255 Washington Street, Newton, MA 02458 or by requesting materials from the firm assisting CWH in the solicitation of consent revocations, Morrow & Co., LLC, toll free at (800) 276-3011 (banks and brokers call collect at (203) 658-9400).A Maryland Real Estate Investment Trust with transferable shares of beneficial interest listed on the New York Stock Exchange. No shareholder, Trustee or officer is personally liable for any act or obligation of the Trust.