* Investors demand CommonWealth cease equity offering
* Investors may seek removal of board if demands not met
* Stock hits 18-month high
Feb 26 (Reuters) - CommonWealth REIT shares surged more than 50 percent after Corvex Management and Related Fund Management disclosed a near 10 percent stake and said they were prepared to acquire the operator of office buildings if management does not take steps to boost shareholder value.
Hedge fund Corvex and Related Fund, an affiliate of privately-owned real estate firm Related Cos, asked that CommonWealth call off its offering of 27 million shares and debt repurchase and enter into discussions with them to maximize shareholder value.
The firms said CommonWealth's portfolio of real estate assets trade at a substantial discount to fair value due to a misalignment of incentives between the real estate trust and its external adviser, REIT Management & Research LLC.
REIT Management is a real estate management company that manages public investments in real estate. In addition to managing CommonWealth's investments, it also manages investments for Hospitality Properties Trust, Senior Housing Properties Trust and other publicly traded REITs.
According to a presentation by Corvex and Related, CommonWealth paid $209 million of management fees to REIT Management over the last 3 years, during which time its market value declined by $647 million.
CommonWealth was valued by the market at $1.33 billion as of Monday.
Corvex was founded by Keith Meister, one of activist investor Carl Icahn's longtime associates. Related Cos, founded by billionaire developer Stephen Ross, is best known for developing the Time Warner Center. It is also the largest owner of luxury residential rental properties in New York.
The firms, which said they were prepared to seek a removal of CommonWealth's board if they did not receive an adequate response, reported a combined 9.75 percent stake in CommonWealth on Tuesday.
CommonWealth REIT's primary business is the ownership and operation of real estate, including office and industrial buildings and leased industrial land.
Corvex and Related said that if the company implemented some changes in the internal management structure, basic operating performance enhancements and a more shareholder-friendly capital allocation policy, CommonWealth could achieve a target price of more than $50 per share over a two-year period.
Shares of CommonWealth were trading at $23.50 afternoon on the New York Stock Exchange. They earlier hit a high of $24.39, their highest in 18 months.