Corvex And Related Announce 9.8% Stake in CommonWealth REIT; Say it Could Reach $50/Share in 2 Years
Corvex Management, LP ("Corvex") and Related Fund Management, LLC ("Related") announced today that investment funds managed by them collectively own approximately 9.8% of the outstanding common shares of CommonWealth REIT (NYSE: CWH). Corvex and Related believe that CWH's portfolio of real estate assets trade at a substantial discount to fair value due to a misalignment of incentives between the Company and its external advisor, REIT Management & Research LLC and track record of underperformance.
Corvex and Related have released an open letter to the Company's Board of Trustees demanding that the Company immediately cease a value destroying equity offering and debt repurchase, and enter into discussions with Corvex and Related regarding maximizing long-term value for all CWH shareholders. They have also publicly filed a Schedule 13D, including a detailed presentation outlining a clear path to value creation for CWH. Based on a comprehensive property-by-property valuation analysis, Corvex and Related believe that CWH's NAV was approximately $40 per share as of February 25, 2013, which is generally consistent with CWH's book value of approximately $37 per share, as opposed to the closing price of $15.85 on February 25, 2013. Corvex and Related believe that if the Company implemented, among other changes, an internal management structure, basic operating performance enhancements and a more shareholder-friendly capital allocation policy, CWH could achieve a target price of more than $50 per share over a two year period.
If the Board fails to adequately respond, Corvex and Related are prepared to seek the removal of the Board so that it may be replaced with five truly independent trustees. Corvex and Related would also be prepared to acquire all the outstanding shares at a significant premium to the current market value. Accordingly, they demand that the Company not proceed with this dilutive share issuance.
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