* Investors demand CommonWealth cease equity offering
* Investors may seek removal of board if demands not met
* Stock hits 18-month high
Feb 26 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
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
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
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.