CommonWealth REIT Rejects Conditional Offer by Corvex/Related, Adopts Provisions of Maryland Unsolicited Takeovers Act

CommonWealth REIT (NYSE: CWH) today responded to various activities by CorvexManagement LP (“Corvex”) and Related Fund Management, LLC (“Related” andtogether with Corvex, “Corvex/Related”), as follows:Conditional offer to purchase CWH shares by Corvex/Related:In a letter dated March 28, 2013, Corvex/Related made a conditional offer topurchase all of the shares of CWH for $24.50/share, without disclosing anyspecific financing plan. The Corvex/Related letter requested a meeting withCWH that occurred on April 9, 2013. After considering the information providedby Corvex/Related, CWH's Board of Trustees unanimously determined not topursue discussions with Corvex/Related about their conditional, not fullyfinanced, offer. After carefully considering alternatives, and with the adviceand assistance of financial and legal advisors, the CWH Board unanimouslydetermined that the interests of CWH and its shareholders will be best servedby continued implementation of CWH's current business plan to (i) concentrateinvestments in CBD office properties, (ii) divest non-core properties andother assets, and (iii) reduce debt, and not to pursue a sale of CWH at thistime.When announcing its decision not to pursue a sale of CWH, the CWH Board notedthat the conditional offer from Corvex/Related appears to be part of a plan byCorvex/Related to seize control of CWH for their own benefit, or,alternatively, to realize a quick profit by forcing a sale of CWH before thefull benefits of CWH's current business plan are realized. During the past fewyears, CWH has sold approximately $1.5 billion of primarily suburban officeand industrial properties and re-invested proceeds into high quality CBDoffice properties with strong long term growth prospects. Now, as thismulti-year business plan is starting to demonstrate success, Corvex/Relatedseem intent upon realizing these benefits for themselves or forcing a salebefore the benefits of the business plan can be fully realized by allshareholders. In fact, simultaneously with presenting their conditional offer,Corvex/Related have threatened to begin a shareholder consent solicitation toremove the entire CWH Board if the Board does not agree to sell CWH to them orto a third party.The Maryland Unsolicited Takeovers Act:At a CWH Board of Trustees meeting on April 12, 2013, CWH elected to classifyits Board pursuant to the Maryland Unsolicited Takeovers Act (the “UnsolicitedTakeovers Act”). CWH believes that after this election, members of its Boardmay be removed only “for cause”. Accordingly, CWH believes the recent consentsolicitation filed by Corvex/Related with the Securities and ExchangeCommission (the “SEC”) which seeks removal of all of CWH's trustees “withoutcause” is invalid and will have no force or effect.The Unsolicited Takeovers Act was enacted in 1999. Among other provisions, theUnsolicited Takeovers Act authorized the board of a Maryland REIT to elect toopt into various protections from an unsolicited takeover attempt, including aconsent contest. The Unsolicited Takeovers Act provides that “notwithstandingany provision in the charter or the bylaws” the board of a Maryland REIT mayelect to receive the protection of the Unsolicited Takeovers Act with thecreation of a classified board. CWH believes that this unsolicited takeoverprotection intended to be accorded Maryland REITs would be illusory if theentire classified board created by an Unsolicited Takeovers Act election couldbe removed “without cause”.CWH historically has had a classified Board; however, the historical CWHclassified Board was created by the CWH Declaration of Trust which was adoptedin 1986 and provided that its Trustees may be removed “with or without cause”.The historical CWH classified Board existed under its 1986 Declaration ofTrust and not as a result of an election under the Unsolicited Takeovers Actwhich did not exist until 1999. Accordingly, CWH believes that its election toadopt a classified board under the Unsolicited Takeovers Act overrides thehistorical provisions of the CWH Declaration of Trust.To avoid a possible dispute about the application of the 1999 UnsolicitedTakeovers Act to CWH's 1986 Declaration of Trust, members of the Marylandlegislature were recently asked to pass a clarifying amendment to theUnsolicited Takeovers Act. The legislators were fully informed that thisclarifying amendment could impact the takeover activities which Corvex/Relatedwere then threatening against CWH. A hearing was held on this clarifyingamendment on April 5, 2013, and testimony was presented about the history ofthe Unsolicited Takeovers Act which confirmed CWH's understanding of that law;however, the Maryland Legislature failed to act on this matter before the 2013legislative session ended on April 8, 2013. Although the Maryland Legislaturedid not act, CWH believes its election to receive the protections accorded bythe Unsolicited Takeovers Act and particularly the language of the UnsolicitedTakeovers Act --- “notwithstanding any provision in the charter or bylaws” ---means that members of CWH's Board may only be removed “for cause”, and that nosuch cause exists.The attempted Consent Solicitation and other activities by Corvex/Related:According to SEC filings by Corvex/Related, they first acquired shares of CWHon January 16, 2013. On February 26, 2013, Corvex/Related disclosed theirownership in SEC filings which also included materials which purported tovalue CWH at between $40.00 and $55.00 per share (i.e., considerably more thanthe $24.50/share recently “offered” by Corvex/Related). On March 1, 2013,Corvex/Related brought litigation in the Federal District Court for theDistrict of Massachusetts to enjoin the closing of a long planned CWH equityoffering and alleging various violations of the federal securities laws. OnMarch 4, 2013, the injunction requested by Corvex/Related was denied after acourt finding of little likelihood of success on the merits of theCorvex/Related allegations, and the case has since been stayed pendingarbitration.Almost simultaneously with their federal court case in Massachusetts,Corvex/Related began a separate litigation in a Maryland state court. In thisMaryland case, Corvex/Related made many of the same allegations as in theMassachusetts case and they sought an emergency injunction to stay theappointment of arbitrators and an emergency determination to invalidatecertain CWH Bylaws that require a shareholder seeking to remove Trustees tohave owned at least 3% of CWH's shares for at least three years. On March 18,2013, the Maryland court denied Corvex/Related any emergency relief. Sincethen, the Maryland court has set a briefing schedule for the questions of (i)whether the disputes between Corvex/Related and CWH should be referred toarbitration, and (ii) whether the CWH Bylaw ownership requirements beingchallenged by Corvex/Related are valid. A hearing on these matters has beenscheduled for May 3, 2013.Despite the fact that the Maryland court has not yet ruled on whether or notCorvex/Related are eligible to initiate a consent solicitation to remove allof CWH's Trustees, Corvex/Related filed a definitive consent solicitationstatement with the SEC and appear to be taking actions to mail to CWHshareholders seeking consents in the near future. No record date has been setfor determining shareholders entitled to join the consent solicitationproposed by Corvex/Related. No court or arbitration panel has ruled thatCorvex/Related are eligible to seek such consent. In the event Corvex/Relatedsolicit for such consents, CWH shareholders are urged to take no action ontheir request. If and when it becomes appropriate to do so, CWH willdistribute a consent revocation statement which discloses facts relevant tothese matters.Other Matters:CWH has engaged BofA Merrill Lynch as financial advisor and to assist it inresponding to the activities by Corvex/Related. Skadden Arps Slate Meagher &Flom LLP and Saul Ewing LLP are serving as legal counsel. WARNING REGARDING FORWARD LOOKING STATEMENTSTHIS PRESS RELEASE CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE MEANING OFTHE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER SECURITIESLAWS. THESE FORWARD LOOKING STATEMENTS ARE BASED UPON CWH'S CURRENT BELIEFSAND EXPECTATIONS BUT THEY ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR FORVARIOUS REASONS, INCLUDING SOME REASONS BEYOND CWH'S CONTROL. FOR EXAMPLE: * THIS PRESS RELEASE STATES THAT CWH'S BOARD HAS DETERMINED THAT THE INTERESTS OF CWH AND ITS SHAREHOLDERS WOULD BE BEST SERVED BY CONTINUED IMPLEMENTATION OF CWH'S CURRENT BUSINESS PLAN AND NOT TO PURSUE A SALE OF CWH AT THIS TIME. THE IMPLICATION OF THIS STATEMENT MAY BE THAT CWH WILL SUCCESSFULLY IMPLEMENT ITS BUSINESS PLAN AND THAT, AS A RESULT, CWH AND ITS SHAREHOLDERS WILL REALIZE GREATER VALUE THAN PURSUING A SALE AT THIS TIME. MANY ELEMENTS OF CWH'S BUSINESS PLAN REQUIRE THE PARTICIPATION OF THIRD PARTIES WHO ARE BEYOND CWH'S CONTROL: DIVESTING NON-CORE PROPERTIES AND OTHER ASSETS REQUIRES FINDING BUYERS FOR THESE PROPERTIES AND ASSETS AT ACCEPTABLE PRICES; CONCENTRATING INVESTMENTS IN CBD OFFICE PROPERTIES MAY REQUIRE THAT CWH LOCATE ADDITIONAL CBD PROPERTIES WHICH ARE AVAILABLE FOR SALE AT REASONABLE PRICES; ETC. ALSO, MARKET CONDITIONS BEYOND CWH'S CONTROL AND UNRELATED TO CWH'S ACTIVITIES MAY ADVERSELY AFFECT THE VALUE CWH AND ITS SHAREHOLDERS MAY REALIZE IN THE FUTURE. THE DECISION OF CWH'S BOARD TO CONTINUE ITS BUSINESS PLAN AND NOT TO PURSUE A SALE IS BASED UPON THE BUSINESS JUDGMENT OF CWH'S BOARD, BUT BUSINESS JUDGMENTS MAY BE MISTAKEN. * THIS PRESS RELEASE STATES THAT CWH BELIEVES ITS ELECTION TO ADOPT A CLASSIFIED BOARD UNDER THE MARYLAND UNSOLICITED TAKEOVERS ACT OVERRIDES THE HISTORICAL PROVISIONS OF CWH'S DECLARATION OF TRUST SO THAT CWH'S TRUSTEES MAY ONLY BE REMOVED FOR CAUSE AND NOT WITHOUT CAUSE. CWH'S LEGAL CONCLUSIONS REGARDING THE EFFECT OF ITS ELECTION TO BE SUBJECT TO THE UNSOLICITED TAKEOVERS ACT MAY BE CHALLENGED IN LITIGATION. THE RESULTS OF LITIGATION ARE DIFFICULT TO PREDICT AND CWH CAN PROVIDE NO ASSURANCE THAT ITS LEGAL CONCLUSIONS WILL BE UPHELD. * THIS PRESS RELEASE STATES THAT NO RECORD DATE HAS BEEN SET FOR DETERMINING SHAREHOLDERS ENTITLED TO JOIN THE CONSENT SOLICITATION PROPOSED BY CORVEX/RELATED AND THAT NO COURT OR ARBITRATION PANEL HAS RULED THAT CORVEX/RELATED ARE ELIGIBLE TO SOLICIT FOR SUCH CONSENTS. AS NOTED IN THIS PRESS RELEASE, THE ISSUE OF WHETHER CORVEX/RELATED ARE ELIGIBLE TO SOLICIT CONSENTS TO REMOVE ALL OF CWH'S TRUSTEES HAS BEEN SET FOR HEARING IN THE MARYLAND STATE COURT. VARIOUS STATEMENTS IN THIS PRESS RELEASE MAY IMPLY THAT CORVEX/RELATED WILL BE INELIGIBLE TO SOLICIT CONSENTS FOR THE REMOVAL OF ALL OF CWH'S TRUSTEES. HOWEVER, CWH CANNOT GUARANTEE THE OUTCOME OF ANY COURT PROCEEDING.FOR THESE REASONS, AMONG OTHERS, INVESTORS ARE CAUTIONED NOT TO PLACE UNDUERELIANCE UPON FORWARD LOOKING STATEMENTS IN THIS PRESS RELEASE. EXCEPT AS MAYBE REQUIRED BY APPLICABLE LAW, CWH DOES NOT INTEND TO UPDATE THE FORWARDLOOKING STATEMENTS IN THIS PRESS RELEASE AS A RESULT OF NEW INFORMATION WHICHMAY COME TO ITS ATTENTION.