Corvex Management LP and Related Fund Management, separately managed investment management firms which collectively own a 9.6 percent stake in shares of CommonWealth REIT (NYSE:CWH), issued a statement expressing their commitment to buy 51% of the outstanding debt of the real estate investment trust company under its credit agreements.
Commonwealth Accused of Scare Tactic Campaigns
“We would have expected that CommonWealth’s Board, in accordance with its fiduciary duties, engage with us and CommonWealth’s lenders in a discussion to secure appropriate advance waivers or appropriate refinancing, in the event shareholders elect to remove the entire Board of trustees,” according to the firms.
Yarra Square Partners returned 19.5% net in 2020, outperforming its benchmark, the S&P 500, which returned 18.4% throughout the year. According to a copy of the firm's fourth-quarter and full-year letter to investors, which ValueWalk has been able to review, 2020 was a year of two halves for the investment manager. Q1 2021 hedge fund Read More
However, they observed that the management and advisors are using “poison puts” in their documents as a scare tactic campaign to intimidate shareholders.
Corvex and Related stated that they are making a commitment to purchase a majority of the debt of the company to “put an end to the scare tactic campaign” of CommonWealth REIT (NYSE:CWH) and to “alleviate any shareholder concern” once they succeed in removing the entire board of trustees of the company.
CommonWealth REIT (NYSE:CWH) has $630 million outstanding debt under its revolving credit agreement and term loan agreement.
In addition, Corvex & Related shared that their immediate offer should prevent any loan acceleration. The investors said, “Since no such acceleration will occur, cross-acceleration provisions included in other CommonWealth debt obligations will not be triggered and should be of no concern to shareholders.”
Keith Meister, managing partner of Corvex Management stated that his firm together with Related anticipated a fight with the management of CommonWealth REIT (NYSE:CWH) before they bought their first share in the company. The firms initially submitted a conditional offer to take over the real estate investment trust company, but its board of directors rejected it citing that it is harmful to the interest of the company and shareholders.
Board of Directors May Have Conflicts of Interest
Corvex & Related are pushing for the ouster of entire board of directors of CommonWealth REIT (NYSE:CWH). According to shareholders, the real estate investment trust company has poor governance rules, the board is not fully independent, and its management structure has conflict of interest. They also pointed out that the stock of the company is undervalued.
The investors reiterated in their latest statement that the removal of the entire board of trustees of CommonWealth REIT (NYSE:CWH) is the only way to make a meaningful change and they hope that their commitment will stop the board from threatening shareholders.
