As Corvex’s Keith Meister & Related’s Jef Blau Drive Home Major Activist Shareholder Victoryץ
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Two months ago Keith Meister’s activist hedge fund Corvex Management and Related Fund Management, led by Jeff Blau who is also the CEO of its sponsor The Related Companies, announced that they had presented consents from holders of over 81% of the outstanding shares approving their proxy consent solicitation proposal to remove the entire Board of Trustees of CommonWealth Realty Trust.
CommonWealth Realty Trust is a publicly listed real estate investment trust, or REIT, listed on the New York Stock Exchange and incorporated in the State of Maryland. The Corvex and Related victory came however only after a protracted activist shareholder battle that began in February of last year, when Corvex and Related announced they had become significant shareholders, with almost a 10% holding in the company, and commenced agitation for change at the REIT.
As a key element in winning the proxy battle the dissident shareholders a few months ago brought in the heavy artillery, in the form of Chicago billionaire Sam Zell as their proposed new Chairman for the Trust, and his partner David Helfand who was also tapped to become CEO to run the place.
A few days later, on March 25th CommonWealth basically threw in the towel, confirming the Board of Trustees, under the leadership of Barry and Adam Portnoy, had indeed been overthrown and then initiated the formal process for a second vote that would vote in a new slate of Trustees.
For a real estate investment trust the Board of Trustees plays the same formal governance role as the Board of Directors in a conventional limited liability company.
Finally yesterday, on May 23rd CommonWealth announced that the company’s shareholders has now voted in the entire slate of new Trustees proposed by Corvex and Related, at a Special Meeting of shareholders held in Boston for the purpose.
The seven new Trustees are Samuel Zell, James Corl, Edward Glickman, David Helfand, Peter Linneman, Jim Lozier and Kenneth Shea.
The first acts of the new Board of Trustees were to immediately elect Sam Zell as the company’s Chairman of the Board and David Helfand as the new Chief Executive Officer, acting Chief Financial Officer, President and acting Treasurer. It also elected two other senior executives sourced from Sam Zell’s Equity Investments Group – David Weinberg as the trust’s new Executive Vice President and Chief Operating Officer; and Orrin Shifrin as the new Executive Vice President, General Counsel and Secretary.
The new Board of Trustees accepted the resignations of all the company’s previous executive officers in a clean sweep, not just those of Barry and Adam Portnoy, indicating that Sam Zell and David Helfand are clearly ready to hit the ground running ti implement its clear mandate for change.
Sam Zell said, ”We are appreciative of the overwhelming support of CommonWealth’s shareholders who voted to endorse the vision and experience of this new board and management team, ” adding, “With our team in place, we can get to work executing on our goal to create long-term value for our shareholders.”
CommonWealth REIT has now rescheduled its annual meeting of shareholders from June 13, 2014, to June 30, 2014, in order to comply with a requirement in the company’s Declaration of Trust that the annual meeting be held no later than that date. Once called to order, the trust intends to immediately adjourn for one month, until Thursday, July 31, 2014, to give all the trust’s shareholders plenty of time to consider the proposals to be voted upon at the annual meeting, in the normal course of business.
Now the battle for CommonWealth is over the new guys who have taken over the management all have a lot of work to do. This will presumably include firing the outside management company controlled by Barry and Adam Portnoy, which has raked in very large management fees hitherto.
CommonWealth REIT has a market capitalisation currently of around US$3 billion, having risen about 50% over several months since the activist campaign was launched, as investor expectations rose that it would become successful..
Clearly many investors must be hoping Sam Zell can exert the same magic as he did with another REIT he managed, Equity Office, which he ended up selling in February 2007 for the record sum for its equity, of US$23 billion, to the Blackstone Group plus another about US$16 billion of assumed debt for a total enterprise value then of US$39 billion. this was of course something of a prescient deal coming as it did just before the systemic crash in financial, business and of course real estate markets that ensued.
As for Keith Meister of Corvex and Jeff Blau the CEO of The Related Companies, now it will be on to the next challenge having brought this campaign to a successful conclusion. The Related Companies certainly have plenty to do developing their enormous new Hudson Yards real estate project on the Far West Side of New York. Keith Meister is for his part doubtless looking at lots of data screens to pick up his next activist target.
The new Board of Trustees was elected by about 85 percent of the shares outstanding as of the record date. Commenting on their victory Keith Meister of Corvex and CEO of Related Jeff Blau said “Today is a historic milestone for CommonWealth and the REIT industry, and a tremendous victory for shareholder rights, ” adding, “We remain confident that the highly qualified and experienced board elected today will work expeditiously and successfully to usher in a new era of accountability.”
The two activists then concluded, “From the very beginning, our sole focus was allowing all shareholders to exercise their rights, offering the ability to effect change and restore shareholder value. We are extremely gratified by the strong and broad support we consistently received from retail and institutional shareholders. We remain confident that the highly qualified and experienced board elected today will work expeditiously and successfully to usher in a new era of accountability that fosters the incentives critical in building a successful company focused on the long-term creation of shareholder value.”