CommonWealth REIT Offers Response Following Recent Related/Corvex Actions

CommonWealth REIT (NYSE: CWH) today responded to recent actions by Related FundManagement, LLC and Corvex Management LP's (together, “Related/Corvex”) intheir effort to take control of CWH.Within the last week, Related/Corvex have published their business plan forCWH. In summary, the Related/Corvex business plan appears to be to operate CWHlike a real estate opportunity fund, including: (1) selling CWH's bestperforming, stabilized assets, (2) increasing leverage, (3) investing in CWH'smost challenged assets, and (4) buying back CWH common shares. This businessplan will not produce consistent and growing cash flow. Rather, it will put atrisk CWH's common share dividend and CWH's investment grade debt ratings, andit is not a business plan which creates shareholder value for a publicly ownedREIT.The Related/Corvex business plan for CWH is also not credible because of TheRelated Companies' abysmal track record of operating publicly owned realestate companies. When The Related Companies have controlled publicly ownedreal estate companies in the past, The Related Companies have done well, butpublic shareholders have not. For example, when the principals of The RelatedCompanies controlled American Mortgage Acceptance Company, or AMAC, andCenterline Holding Company (f/k/a Charter Municipal Mortgage Acceptance Co.,or “CharterMac”), it ended very badly for shareholders with a bankruptcy andde-listing from the New York Stock Exchange (“NYSE”), respectively.In a letter to the CWH Board, Related/Corvex recently acknowledged that theirefforts to remove the entire CWH Board by written consent, and without cause,may result in harm to CWH and its shareholders, triggering debt defaults,rating agency downgrades, and violating NYSE and Securities and ExchangeCommission (“SEC”) rules for public companies. Rather than accepting theinvitation to Keith Meister of Corvex to join the CWH Board and workingconstructively for the benefit of all CWH shareholders, Related/Corvex haveproposed that the Board either (1) disenfranchise other shareholders or (2)ignore the mandate of shareholders. The CWH Board rejected both of theseproposals because they will deprive shareholders of their rights under CWH'sDeclaration of Trust and violate rules established by the Arbitration Panel.The letter to Related/Corvex from the CWH Board rejecting their proposalsdated February 3, 2014 and the letter to the CWH Board from Related/Corvexdated January 21, 2014 are both attached to this press release below.Recently, Related/Corvex also publicly identified their handpicked slate offive individuals to serve as trustees for CWH. Contrary to their claim thatthese nominees are “truly independent”, a majority of these nominees havehistorical and continuing strong ties to Related/Corvex, including being paidconsultants to and investors in The Related Companies or its affiliates. CWHbelieves that the close ties of these nominees to Related/Corvex and therecent attempt to disenfranchise other shareholders clearly revealRelated/Corvex's continued efforts to take control of CWH for their ownbenefit.Adam Portnoy, Managing Trustee and President of CWH, made the followingstatement concerning Related/Corvex's recent actions:“We believe it is important for shareholders to know that, despite theirclaims to be acting in the best interests of all shareholders,Related/Corvex's recent actions only reinforce that they are using the veil ofcorporate governance to pursue control of CWH for their own benefit. Webelieve that Related/Corvex's handpicked slate of trustees will work on behalfof Related/Corvex rather than all CWH shareholders. We also believe thatRelated's business plan for CWH is not in the best interests of shareholdersand that shareholders are likely to experience substantial losses ifRelated/Corvex gain control of CWH, similar to what has happened when TheRelated Companies controlled other publicly owned real estate companies.”“We look forward to meeting with shareholders over the coming weeks to discusshow CWH's Board and management are engaged on a path to deliver superiorresults for CWH shareholders. We also look forward to correcting the manymischaracterizations Related/Corvex have made about CWH, its Board and itsmanager.” Response Letter Sent to Related/Corvex from CWH Board dated February 3, 2014 February 3, 2014Mr. Jeff T. BlauRelated Fund Management LLC60 Columbus CircleNew York, NY 10023Mr. Keith MeisterCorvex Management LP712 Fifth Avenue, 23^rd floorNew York, NY 10019Dear Messrs. Blau and Meister:The Board has reviewed your letter of January 21, 2014 which acknowledges thedisruptions to CommonWealth's business that may result from the Related/Corvexconsent solicitation. The Board agrees that your attempt to take control ofCommonWealth by removing the entire Board by written consent, without cause,may harm shareholders' interests. However, the Board believes that neither ofthe suggestions in your letter present appropriate or effective mitigationoptions.The Board cannot agree to allow Related/Corvex to pursue election of yourhandpicked slate by written consent. The CommonWealth Declaration of Trustprovides that, if all existing Trustees are removed, new trustees are to beelected at a special meeting of shareholders at which other shareholders wouldhave the opportunity to make nominations. Your suggestion that Related/Corvexshould be permitted to elect its handpicked slate of trustees by writtenconsent simultaneously with the removal consent solicitation would circumventthe meeting/nomination process, ensure your handpicked slate runs unopposedand disenfranchise other CommonWealth shareholders who may wish to nominateother candidates but want to know the results of your written consent removalcampaign before investing the time and money to solicit proxies. Youpreviously asked the Arbitration Panel to permit the simultaneous solicitationof written consents for the removal of existing trustees and the election ofnew trustees and this request was denied, undoubtedly because it would bothviolate the Declaration of Trust and disenfranchise other shareholders.Your alternative proposal, which suggested that the existing Board may remainin office in the event the required consents for their removal are achieved,is also flawed. As you argued, and the Arbitration Panel agreed, theCommonWealth Declaration of Trust provides that, in the event the removalconsent solicitation succeeds, the Board will be without further authority andCommonWealth's officers shall call a special meeting of shareholders to electnew trustees. The Board understands that you have offered to agree that theBoard remain in office. However, the Board does not understand how youragreement (in contravention of the Declaration of Trust, the Panel's order andthe shareholders' mandate) would give the former Trustees authority tocontinue to act as Trustees or protect the former Trustees from third partyclaims. Any agreement from Related/Corvex, or even an order from the Panel, toignore the requirements of CommonWealth's governing documents and contractualobligations would not be binding upon third parties (such as CommonWealth'slenders, tenants, business partners, preferred shareholders, other commonshareholders, the Rating Agencies, the NYSE or the SEC), unless those partiesalso agree to forbear their rights or somehow become parties subject to theArbitration Panel proceedings.The Board intends to take all appropriate action to mitigate any resultingharm to CommonWealth and its shareholders in the unlikely event that yourefforts to remove the entire Board, without cause, were to succeed, and RMRintends to continue to conduct the day to day business of CommonWealthpursuant to its contractual obligations. The Board has requested that I remindyou that it is your chosen strategy --- to remove the entire Board, withoutcause, by written consent --- that creates the possibility for third partyactions and other problems which you now appear to recognize. The Board againsuggests that Related put aside its pursuit of control and you consider a moreconventional strategy to effect change in a publicly owned company by Mr.Meister accepting the outstanding invitation to join the Board.On behalf of the entire Board ofCommonWealth REITJennifer B. ClarkSecretary Letter Sent to CWH Board from Related/Corvex dated January 21, 2014Corvex Management LP712 Fifth Avenue, 23rd FloorNew York, New York 10019Related Fund Management, LLC60 Columbus CircleNew York, New York 10023January 21, 2014Ronald J. ArtinianWilliam A. LamkinAnn LoganJoseph L. MoreaFrederick N. Zeytoonjianc/o CommonWealth REITTwo Newton Place255 Washington StreetNewton, MA 02458-1634Dear Trustees:Your revocation statement on file with the U.S. Securities and ExchangeCommission claims that if the removal action proposed by Corvex/Relatedsucceeds, CommonWealth may, among other things, be in violation of federalsecurities laws and the listing requirements of the NYSE. Adam Portnoy hasalso publicly suggested that shareholders should not support theCorvex/Related consent solicitation because, if successful, the CommonWealthboard will be vacant for a prolonged period of time, causing damage toshareholder interests.Below, we propose two obvious ways to address your purported "concerns" sothat you may properly discharge your fiduciary duties via a peacefultransition of authority in the event you are all removed from office. We areready to submit a joint application to the Arbitration Panel as early astomorrow to address your "concerns" in a constructive manner that does notfrustrate the consent solicitation process. * You can agree not to challenge our ability to run a consent solicitation where we simultaneously seek consents for the removal of the existing board, and election of the new board. Both steps would then happen simultaneously and there would not be any gap of time between removal of the board and election of a new one. As you know, there is ample precedent for this approach, and we believe there is nothing in your corporate documents that prevents such simultaneous consent. * Alternatively, we are prepared to agree that the existing trustees will remain in office until the special meeting to elect a new board. That is, we would agree that the certification required under Section 2.7 of CommonWealth's declaration of trust need not be executed until the time of the special meeting, such that at no time will CommonWealth not have a board of trustees.We look forward to hearing from you.Sincerely yours,Keith MeisterCorvex Management LPJeff T. BlauRelated Fund Management, LLCcc Barry M. PortnoyAdam D. Portnoy