Richard Perry, chief executive officer of Perry Capital joined Keith Meister, managing partner of Corvex Management in a fight to reform CommonWealth REIT (NYSE:CWH), a real estate investment trust company that owns approximately 55 million square feet of offices and buildings across the United States.
The hedge fund acquired 5.49 percent stake or 6,500,000 shares of CommonWealth REIT (NYSE:CWH) based on its latest 13D filing with the Securities and Exchange Commission (SEC).
Perry indicated its support to the initiative of Corvex Management and Related Companies to unlock CommonWealth REIT (NYSE:CWH)’s shareholders value and believes that the objective will be achieved if the real estate investment trust company has proper corporate governance.
In his letter to the board of directors of CommonWealth REIT (NYSE:CWH), Perry emphasized that his firm has 25 years of history working constructively with boards and management teams, but it deviates from it when an abuse of shareholder rights and deeply misaligned incentives are happening. According to him, the CommonWealth REIT’s board crossed that line.
Perry pointed out that there is a conflict between the personal interest of Commonwealth REIT (NYSE:CWH)’s management and the interest of the shareholders because its entire operation is outsourced to Reit Management & Research (RMR). CommonWealth REIT’s president and managing trustee, Adam Portnoy and his son Barry, who owns RMR. “The vast majority of their compensation is derived from growing RMR’s assets under management as opposed to generating CWH shareholder returns,” said Perry.
According to him, the conflict of interest led to “flawed strategic decisions, poor operating performance, and appalling corporate governance at CWH.”
He also stated that the board of the CommonWealth REIT tried to silence and disenfranchise its shareholders by amending bylaws and Maryland law. Perry also cited that the company has a history of ignoring the will of shareholders, and conflicted decision making.
Perry said his firm plans to provide written consent to Corvex Management and Related Companies to remove all the trustees of the real estate investment trust company. The two entities submitted a conditional offer to acquire CommonWealth REIT (NYSE:CWH) for $24.50 per share, which was rejected by its board of directors. According to the board, the proposal is harmful to the interest of the company and its shareholders.