Corvex Management DFAN14A Additional proxy materials by non-management

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  ¨                             Filed by a Party other than the Registrant  x

Check the appropriate box:

¨ Preliminary Proxy Statement

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨ Definitive Proxy Statement

x Definitive Additional Materials

¨ Soliciting Material Pursuant to §240.14a-12

COMMONWEALTH REIT

(Name of the Registrant as Specified In Its Charter)

CORVEX MANAGEMENT LP

KEITH MEISTER

RELATED FUND MANAGEMENT, LLC

RELATED REAL ESTATE RECOVERY FUND GP-A, LLC

RELATED REAL ESTATE RECOVERY FUND GP, L.P.

RELATED REAL ESTATE RECOVERY FUND, L.P.

RRERF ACQUISITION, LLC

JEFF T. BLAU

RICHARD O’TOOLE

DAVID R. JOHNSON

JAMES CORL

EDWARD GLICKMAN

PETER LINNEMAN

JIM LOZIER

KENNETH SHEA

EGI-CW HOLDINGS, L.L.C.

DAVID HELFAND

SAMUEL ZELL

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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The Case for Change Now at CWH

Updated Presentation to CWH Shareholders

February 13, 2014

2

Disclaimer

This presentation does not constitute either an offer to sell or a solicitation of an offer to buy any interest in any fund associated with Corvex

Management LP (“Corvex”) or Related Fund Management, LLC (“Related”).  Any such offer would only be made at the time a qualified offeree

receives a confidential offering memorandum and related subscription documentation. 

The information in this presentation is based on publicly available information about CommonWealth REIT (the “Company”). This document

includes certain forward-looking statements, estimates and projections prepared with respect to, among other things, general economic and

market conditions, changes in management, changes in the composition of the Company’s Board of Trustees, actions of the Company and its

subsidiaries or competitors, and the ability to implement business strategies and plans and pursue business opportunities.  Such forward-looking

statements, estimates, and projections reflect various assumptions concerning anticipated results that are inherently subject to significant

uncertainties and contingencies and have been included solely for illustrative purposes, including those risks and uncertainties detailed in the

continuous disclosure and other filings of the Company, copies of which are available on the U.S. Securities and Exchange Commission website

at www.sec.gov/edgar.  No representations, express or implied, are made as to the accuracy or completeness of such forward-looking

statements, estimates or projections or with respect to any other materials herein.  Corvex and Related may buy, sell, cover or otherwise change

the form of their investment in the Company for any reason at any time, without notice, and there can be no assurances that they will take any of

the actions described in this document.  Corvex and Related disclaim any duty to provide any updates or changes to the analyses contained in

this document, except as may be required by law.  Shareholders and others should conduct their own independent investigation and analysis of

the Company.  Except where otherwise indicated, the information in this document speaks only as of the date set forth on the cover page. 

Permission to quote third party reports in this presentation has been neither sought nor obtained.

Additional Information Regarding the Solicitation 

Corvex Management LP and Related Fund Management, LLC have filed a definitive solicitation statement with the Securities and

Exchange Commission (the “SEC”) to (1) solicit consents to remove the entire board of trustees of CommonWealth REIT (the “Removal

Proposal”), and (2) elect a slate of new trustees at a special meeting of shareholders that must be promptly called in the event that the

Removal Proposal is successful. Investors and security holders are urged to read the definitive solicitation statementand other

relevant documents because they contain important information regarding the solicitation.

other

relevant

documents

are

available,

free

of

charge,

on

the

SEC’s

website

at

www.sec.gov.

The

definitive

solicitation

statement

and

all

The following persons are participants in connection with the solicitation of CommonWealth REIT shareholders: Corvex Management LP, Keith

Meister, Related Fund Management, LLC, Related Real Estate Recovery Fund GP-A, LLC, Related Real Estate Recovery Fund GP, L.P., Related

Real Estate Recovery Fund, L.P., RRERF Acquisition, LLC, Jeff T. Blau, Richard O’Toole, David R. Johnson, James Corl, Edward Glickman, Peter

Linneman, Jim Lozier, Kenneth Shea, EGI-CW Holdings, L.L.C., David Helfand and Samuel Zell. Information regarding the participants in the

solicitation and a description of their direct and indirect interests, by security holdings or otherwise, to the extent applicable, is available in the

definitive solicitation statement filed with the SEC on January 28, 2014 and Supplement No. 1 thereto filed on February 13, 2014.

3

Table of Contents

Executive Summary

Appendix

I.

History of Underperformance

II.

History of “Worst-In-Class”

Corporate Governance

III.

The Portnoys’

Reversible Governance Alterations In

Context

IV.

Corvex/Related Turnaround and Governance Plan

V.

Highly Qualified Nominees

VI.

Valuation Update

4

Executive Summary

Introduction

The Arbitration Panel's ruling in late 2013 established a clear process to facilitate this

consent solicitation

CommonWealth stands on the brink of a new phase in its history in which

shareholders can choose who will manage their company, unlock substantial value,

and leave behind a history as an underperforming, controlled company rife with

conflicts of interest

Corvex and Related will request a record date by February 16; CommonWealth must

establish the record date to be within 10 business days of the record date request and on

February 10 “conditionally” set the record date for February 18; the consent solicitation

must be concluded within 30 calendar days of the record date

Corvex and Related are undertaking this consent solicitation to remove the entire Board

of Trustees of CommonWealth REIT (“CommonWealth,” “CWH” or the “Company”) after

a hard-fought battle for shareholders to hold this vote, and to subsequently elect a

highly qualified new Board of Trustees led by Sam Zell

5

Executive Summary

The Case for Removal:  Abysmal Performance

While

the

stock

price

plummeted

68%

during

2007-2013

(1)

,

annual

fees

paid

to

RMR,

the

external

manager

wholly-owned

by

Barry

and

Adam

Portnoy,

increased

40%

(2)

,

as

the

fees

are linked primarily to the size of the Company rather than to profitability for shareholders

Over

the

1

year,

2

years,

3

years,

5

years,

and

10

years

ended

February

25,

2013

(3)

,

the stock

price declined -17%, -45%, -43%, -45%, and -53%, respectively

The

Portnoys

effectively

control

CWH

despite

owning

virtually

no

stock,

with

the

fees

they

pay

themselves through RMR being their only meaningful economic interest in the Company

As a result,

with

no

ability

for

shareholders

to

hold

management

accountable,

we

believe

the

Portnoys have had nothing to fear and underperformance has thrived

CWH’s performance record is abysmal by almost any metric over any relevant

time period, in our view, but all the while the Portnoys have continued with

impunity to line their pockets

Shareholders can now take back CommonWealth, choose a new, truly

independent Board, and unlock the substantial value trapped within the

Portnoys’

conflicted external management structure

(1)

Assumes 2013 share price as of 2/25/2013, last trading day before Corvex and Related filed their initial 13-D.

(2)

RMR fees paid per CWH public filings include Select Income REIT (SIR).  YTD 9/30/13 figures annualized to arrive at full year 2013 estimate.

(3)

Last trading day before Corvex and Related filed their initial 13-D.

6

Executive Summary

The Case for Removal:  Corporate Governance Malfeasance

Having deliberately manufactured a highly lucrative and insulated situation for themselves

over 28 years, it is not surprising the Portnoys would harbor a deep commitment to retaining

control

However, the actions taken over the past year to silence shareholders were unconscionable,

in our view, and included, among many others, illegal bylaw amendments (later invalidated)

and a secret attempt to manipulate Maryland lawmakers into changing the Maryland

Unsolicited Takeover Act

Independent governance advisory firms such as ISS and Glass Lewis have long issued

negative opinions on CWH’s governance practices and recommended against re-election of

certain Trustees

Conveniently coinciding with a solicitation to allow shareholders to take back their company,

the Portnoys are now trumpeting highly misleading governance alterations, that can be

unilaterally reversed at any time, and shamelessly asking shareholders to believe that they

have experienced an “epiphany”

We believe the Board’s actions over the past year alone, coupled with serial

underperformance and atrocious corporate governance practices, warrant

removal

Shareholders should not allow a few conveniently timed, reversible governance

alterations to erase 28 years of poor governance, let alone the inexcusable

actions of the past year

7

Executive Summary

What Are Shareholders Voting On?

•

The consent solicitation before shareholders is not a vote on a revised set of

bylaws, a charter amendment or some other apparatus of governance with

which

the

Portnoys

would

like

to

distract

shareholders,

but

a

referendum

on

whether

or

not

the

individuals

sitting

on

the

current

Board

are

fit

to

lead

this

company

•

The consent solicitation also creates an opportunity to elect a highly

qualified new

board that will be committed

to

good

governance, focused

on

unlocking

the substantial value embedded in CommonWealth for all

shareholders,

and

led

by

Sam

Zell,

who

created

three

of

the

most

successful

REITs in history: Equity Office Properties Trust, Equity Residential, and

Equity LifeStyle Properties

8

Executive Summary

A Vote on Leadership

There

are

gaping

loopholes

in

the

Portnoys’

recent

and

illusory

governance

alterations,

not

the

least

of

which

is

that

they

are

all

unilaterally

reversible

by

the

Board

But the obvious flaw in the governance modifications is that they require shareholders to trust

the same individuals who deliberately harmed shareholder rights over the past year with

actions such as:

–

Passing illegal bylaw amendments to eviscerate the ability to hold any consent solicitation, a right

plainly granted by the Declaration of Trust since 1986

–

Secretly attempting to manipulate state lawmakers into changing the Maryland Unsolicited Takeover

Act to eliminate the right to hold this consent solicitation

–

Refusing

to

eliminate

bylaws

that

require

2

Trustees

be

employed

by

RMR,

the

manager

owned

100%

by the Portnoys

In effect, the Portnoys are asking to be judged solely on the misleading modifications of the

past two months, rather than their 28-year history of poor governance, not to mention the

inexcusable actions of the past year

When a board deliberately harms shareholder rights through unconscionable

tactics to protect their own interests, accepting flawed governance alterations

while

leaving

the

same

board

in

place

simply

invites

more

of

the

same

We believe that given a choice between the Portnoys and their record of value

destruction and Sam Zell’s record of value creation for shareholders, the choice

is clear

9

Executive Summary

CWH Valuation Upside:  NAV of Approximately $35 Per Share

We believe removal of the conflicted and underperforming Trustees will unlock

substantial

value

for

shareholders,

and

estimate

current

NAV

(1)

to

be

approximately $35 per share in such a scenario, 36% higher than the closing

price on February 10, 2014, and 51% higher than January 28, 2014, the date we

filed definitive solicitation materials with the SEC

Extensive due diligence has confirmed poor property and asset management practices,

validating the flaws of conflicted external management

We

believe

there

would

be

substantial

“low-hanging

fruit”

easily

within

the

grasp

of

a

properly incentivized management team

–

While we continue to estimate 24-36 months for NOI to reach stabilization, we

believe

measurable

progress

can

begin

soon

after

installation

of

new

management

with progress reports communicated to shareholders on a regular basis

Once CWH joins the ranks of other public REITs with institutional quality management, and

benefits from internalized management, operational turnaround, and improved capital

allocation, we believe CWH could trade at approximately $40 per share at 12/31/15

(1)

Represents estimate of private market value of all properties owned by CWH as disclosed in 9/30/13 10-Q filing, adjusted for recent asset sales reported in the media.

We believe installing a new independent Board and an effective management

team

will

make

CWH

“investable”

for

previously

untapped

REIT

investors

in

the

public markets, and remove the downside risk that the current conflicted

management structure will persist

10

Executive Summary

NAV Highlights

Estimated NAV is supported by extensive and continuing due diligence

Corvex/Related, with the assistance of Jim Lozier

(1)

, conducted independent site visits to

85% of the properties, by value, and leveraged Related’s already extensive network of

market contacts with that of Mr. Lozier, the co-founder and former CEO of Archon Group

L.P., a subsidiary of Goldman Sachs with 8,500 employees at the time of Mr. Lozier’s

departure in 2012

Stabilized NOI and private market cap rates are estimates based on a hyper-local,

property-by-property build-up, supported by discussions with hundreds of local market

participants in all of CWH’s relevant markets, including investment sales and leasing

brokers, tenants, owner/operators, and property managers

Estimates

of

private

market

cap

rates

are

further

supported

by

a

peer

analysis

of

comparable public REITs

Top

20

assets

by

value

represent

57%

of

the

total

portfolio,

and

the

Top

50

assets

by

value represent 79%

(1)

Mr. Lozier has been retained by Corvex/Related as a consultant.

11

Executive Summary

Sam Zell and David Helfand Join Corvex/Related’s Slate of Nominees

Mr. Zell is willing to serve as Chairman of the Board, if so appointed by the new Board

–

Mr. Zell is the current Chairman of Equity Residential, Equity LifeStyle Properties,

Covanta Holding Corporation and Anixter International Inc. and the former Chairman of

Equity

Office

Properties

Trust

(formerly

the

largest

REIT

in

the

U.S.)

Mr. Helfand is willing to serve as CommonWealth’s CEO, if so appointed by the new Board

–

Mr. Helfand is Co-President of EGI and has previously served as Executive Vice

President and Chief Investment Officer of Equity Office Properties Trust and President

and CEO of Equity LifeStyle Properties

Mr. Zell and Mr. Helfand bring exceptional investment, real estate and public company

credentials

to

an

already

highly

qualified

slate

of

nominees

(1)

In addition, Mr. Zell and Mr. Helfand plan to bring to the Company their highly qualified and

experienced management team to execute on a value-driven strategy

Mr. Zell has demonstrated a long-standing commitment to good corporate governance:

Corvex and Related announce the addition of Sam Zell and David Helfand of

Equity Group Investments (“EGI”) to our previously announced slate of highly

qualified nominees for election to the Board of CommonWealth

(1)

Detailed biographies are included in the Appendix

“One of our core operating principals is the alignment of interests between company

leadership and shareholders.  We are concerned about any attempts to preclude

shareholder rights, and our companies are free of such impediments.”

-Sam Zell, Corvex/Related Press Release, February 11, 2014

12

Executive Summary

Corvex/Related’s Turnaround and Governance Plan To Maximize Value

The

fair

and

unfettered

election

of

a

new

Board

consisting

of

truly

independent

Trustees

–

After consultation with fellow shareholders, we have proposed a slate of highly qualified

nominees for election to the Board at the Special Meeting to be held if the current Board is

removed:  Sam Zell, David Helfand, James Corl, Edward Glickman, Peter Linneman, Jim

Lozier and Kenneth Shea

Best-in-Class corporate governance to finally impose accountability

–

Amend

existing

Declaration

of

Trust

and

bylaws

to

conform

to

ISS

and

Glass

Lewis

best

practices

–

Eliminate

the

requirement

that

at

least

2

Trustees

be

affiliated

with

RMR

–

Permanently opt out of MUTA

Internalize management and align management compensation with shareholder returns

“Right

the

ship”

with

basic

operating

strategies

not

currently

being

employed

by

existing

conflicted

management structure

–

We believe proper staffing levels and reinvestment in CWH’s existing portfolio can harvest a

substantial amount of “low hanging fruit”

No

poison

pill

-

Adoption

of

a

policy

against

new

pills

without

shareholder

approval

Cease

all

acquisition

activity

and

dilutive

capital

raises

until

stock

price

exceeds

its

NAV

Cease all related party transactions not approved by a vote of disinterested shareholders

Corvex/Related continue to propose the following Turnaround & Governance Plan:

While dramatically different from CWH’s existing plan, these reforms are in our view

self-evident to every informed investor and will make CWH look like virtually every

other

member

of

the

S&P

500

Our Nominees have the qualifications to close the valuation gap by guiding the

Company to a share price which more accurately reflects

its value and prospects

13

Executive Summary

Our Nominees

Each nominee brings critical perspectives and skills that will be important to CommonWealth’s

future growth and success in unlocking value for shareholders

They have ready-to-implement strategic ideas designed to improve performance and are prepared

to hit the ground running to oversee immediate improvements

Their collective experience includes, but is not limited to:

–

Exceptional track record for creating substantial value for public company shareholders

–

Superior investment and capital allocation acumen

–

Corporate strategic analysis for large real estate owner/operators

–

Extensive public REIT operations and financial reporting

–

Intensive asset management and property management operations

–

Leading Wall Street valuation techniques for public REITs

–

Raising capital in the public markets

–

Implementing best practices corporate governance

Biographies of our nominees are included in the Appendix

Our

truly

independent

slate of

nominees

is

highly

qualified

with

wide-ranging

and

relevant public company, real estate, finance and corporate governance experience

14

Executive Summary

A Clear Case For Change

Underperformance

as

undisputedly

poor

as

it

is

at

CWH

is

rare

Historical

governance

policies

as

egregious

as

they

are

at

CWH

are

rare

How often do ISS and Glass Lewis and holders of more than 70% of

the outstanding shares

support removal of an entire Board?

Entrenchment

tactics

as

appalling

as

they

are

at

CWH

are

rare

The Portnoys ignored the shareholder right to vote enshrined in the Company’s charter for 28

years, and forced us to litigate for months to have the right confirmed by the Panel

And the replacement for Barry Portnoy we have proposed is Sam Zell, who is recognized as

a founding father of today’s public real estate industry after creating three of the most

successful REITs in history

The case for removal could not be easier to make than it is at CWH:

For

the

first

time

since

the

Portnoys

began

erecting

barriers

to

a

free

and

fair

consent solicitation almost one year ago, shareholders of CommonWealth now

have an unobstructed path to deciding their own fate

15

Executive Summary

Timeline and Path

The

Arbitration

Panel

ruling

on

November

18,

2013

cleared

a

path

to

an

open

and fair consent solicitation process

Seize

the

Moment:

The

Time

to

Make

Real

Change

at

CommonWealth

is

Now

Despite taking every action imaginable to deny shareholders a vote, the Portnoys now have

no choice but to face their shareholders in a clear process established by the Panel

The Panel struck down all of the illegal bylaws passed by the current Board:

The Panel expressly prohibited any action intended to impede or frustrate the new solicitation

The

Panel

also

declared

it

would

remain

available

to

resolve

any

issues

or

disputes

"There is no question that CWH's Bylaws…erect a complex wall of procedural hurdles

to any consent solicitation."

-

Arbitration Panel, November 18, 2013

After nearly two weeks of live testimony and reviewing hundreds of exhibits, we believe the

Panel plainly agreed with our view that the Portnoys are highly incentivized to and capable of

continuing their campaign of shareholder disenfranchisement

16

Executive Summary

Timeline and Path (cont.)

The

Panel

set

forth

the

following

procedures

for

the

new

consent

solicitation:

Request for a record date must be submitted by February 16, 2014

CWH must establish a record date that falls within 10 business days of the record date

request

–

On February 10, 2014, CWH announced that it has set a “conditional”

record date of

February 18, 2014

Consent solicitation must be concluded within 30 calendar days of the record date

The Company will have 5 business days to certify the results of the solicitation

If the consent solicitation to remove all the Trustees is successful, the officers of CWH

must promptly call a special meeting of shareholders to elect new Trustees to the Board

The

date

of

the

special

meeting

must

be

within

10

to

60

calendar

days

of

the

date

of

notice of such meeting

17

Executive Summary

Voting Instructions

The Time to Act is Now

Please

Sign,

Date

and

Return

the

GOLD

Consent

Card

Today

A Non-vote is a Vote for the Portnoys

Place

your

vote

now

to

remove

the

entire

Board

of

Trustees

Without complete removal, the remaining Trustees would be able to unilaterally reinstate a

removed Trustee –

as they did just last year –

or fill vacancies on the Board without input

from

the

true

owners

of

the

company

–

the

shareholders

Please

note

that

internet

voting

is

NOT

available

-

Shareholders

must

sign,

date

and

return the GOLD Consent Card in the pre-paid return envelopes provided

If you need assistance in executing your GOLD consent card or placing your vote, please

call:

–

Ed McCarthy (212-493-6952) or Rick Grubaugh (212-493-6950)

18

Appendix

Table of Contents:

History of Underperformance

History of “Worst-In-Class” Corporate Governance

The Portnoys’ Reversible Governance Alterations

In Context

Corvex/Related Turnaround and Governance Plan

Highly Qualified Nominees

Valuation Update

19

I. History of Underperformance

20

History of Underperformance

The Fundamental Cause of Underperformance

We continue to believe that the fundamental cause of underperformance at

CWH is the absence of accountability, and more specifically the inability of

shareholders to choose their own manager

Ironically,

the

severe

conflicts

in

the

external

management

structure

demand

rigorous

accountability

and

superior

governance,

but

in

our

view

none

exists

In a structure where the manager is incentivized to act without regard to

shareholder interests and still avoid being terminated, severe underperformance

is inevitable, as evidenced by the years of data establishing CWH

underperformance

The severe conflict of interest at CWH has been well-documented: the Portnoys effectively

control CWH despite owning virtually no stock

How

can

there

be

accountability

when

an

“employee”

controls

its

own

“employer”? 

RMR, a Delaware private company, is owned by Barry Portnoy and his son Adam Portnoy

All

executive officers of CWH are also officers of RMR

Given

these

inherent

and

widely

recognized

problems,

CWH

and

the

other

Portnoy

REITs

are

among the last remaining publicly-traded externally-managed equity REITs today

As

a

result,

RMR

is

held

accountable

by

no

one

and,

in

our

view,

enjoys

complete

immunity from shareholders

21

History of Underperformance

By Any Metric Over Any Relevant Time Period…

In our view, there is absolutely no way to slice and dice the data in favor of the

Portnoys

–

their

performance

has

been

horrible

The

Portnoys’

performance

record

at

CWH

is

abysmal

by

almost

any

metric

over any relevant time period, in our view:

Stock price

performance

-17%, -45%, -43%, -45%, and -53% CWH stock price decline over the 1 year, 2 years, 3 years, 5

years,

and

10

years

ended

2/25/13,

respectively

(1)

Valuation

Unaffected

valuation

approximately

35%

below

peers

(2)

on

an

unlevered

cap

rate

basis

(3)

54%, 47%, and 46% discount to peers on a price / forward FFO multiple basis for 1 year, 3 years,

and

5

years,

respectively

(1)

Cost structure

6%,

10%,

8%,

and

9%

below

its

peers

(2)

on

an

NOI

margin

basis

for

YTD

9/30/2013,

YTD

9/30/2012,

2011,

and

2010,

respectively

(1)

Acquisitions and

return on investment

$2.9

billion

of

net

acquisitions

and

CapEx

since

2007

(over

2x

CWH’s

market

cap

(3)

),

while

CWH

book value per share is essentially flat

CAD / share growth

-23% cash available for distribution per share (CAD / share) growth from 2010 to 2012, the worst

performance of its peers

(1)

Data calculated through February 25, 2013, the day prior to Related and Corvex’s first public filing.

(2)

Select peers include Piedmont Office Realty (PDM), Highwoods Properties (HIW), Cousins Properties (CUZ), Brandywine Realty (BDN), and Parkway Properties

(PKY).  Excludes Mack-Cali (CLI), approximately 80% of whose office markets are either in secular decline or experiencing significant distress. CLI is also in the

process of transitioning into the multi-family sector, creating uncertainty with respect to its public market valuation. Peers for NOI margin analysis exclude PDM due to

lack of sufficient disclosure.

(3)

Based on a closing price of $15.85 on February 25, 2013, the day prior to Corvex and Related’s first public filing.

Source: Company filings and FactSet

22

History of Underperformance

Valuation Discount

CWH has historically traded at a significant discount to its peers on all key

measures

(1)

Note:

Share

price

and

estimates

updated

as

of

2/25/2013,

the

day

before

Related

and

Corvex's

13-D

filing.

Financial

information

as

of

Q4

2012.

Implied nominal cap rate is calculated as GAAP LTM NOI / TEV.

Peer set excludes Mack-Cali (CLI), 80% of whose office markets are either in secular decline or experiencing significant distress. CLI is also in the process of transitioning

into the multi-family sector, creating uncertainty with respect to its public market valuation.

(1)

CWH implied cap rate based on CWH stand-alone TEV of $4,914 million and Related and Corvex estimates of comparable, stabilized  NOI of $528 million

Source: Company filings and FactSet

As a point of reference, CWH traded approximately 35% below peers on an unlevered cap

rate basis on February 25, 2013, the day before Related and Corvex’s initial 13-D filing

($ in millions, except per share values and TEV / sq. ft.)

Enterprise

Implied

G&A /

2/25/2013

Equity

value

nominal

TEV /

equity

Net debt /

P / FFO

TEV / EBITDA

Div

Ticker

Company

price

mkt cap

(TEV)

cap rate

Sq. Ft.

mkt cap

TEV

2013E

2014E

2013E

2014E

yield

CWH

CommonWealth REIT

$15.85

$1,338

$4,914

10.7%

$105

3.9%

76%

5.4x

5.5x

12.0x

12.3x

6.3%

HIW

Highwoods Properties, Inc.

$35.35

$2,983

$4,999

6.6%

$144

1.3%

40%

13.1x

12.7x

15.6x

14.8x

4.8%

BDN

Brandywine Realty Trust

$12.96

$1,885

$4,689

7.1%

$176

1.3%

58%

9.0x

8.6x

14.1x

13.8x

4.6%

PDM

Piedmont Office Realty Trust, Inc.

$19.66

$3,294

$4,699

8.7%

$229

1.5%

30%

14.0x

13.5x

15.8x

15.1x

4.1%

PKY

Parkway Properties, Inc.

$16.39

$920

$2,096

6.0%

$177

2.3%

37%

13.3x

12.4x

14.2x

13.7x

2.7%

CUZ

Cousins Properties Incorporated

$9.38

$977

$1,586

7.0%

$134

2.4%

26%

18.2x

16.6x

18.9x

17.3x

1.9%

High

$3,294

$4,999

8.7%

$229

2.4%

58%

18.2x

16.6x

18.9x

17.3x

4.8%

Mean

2,012

3,613

7.1%

172

1.8%

38%

13.5x

12.8x

15.7x

14.9x

3.6%

Median

1,885

4,689

7.0%

176

1.5%

37%

13.3x

12.7x

15.6x

14.8x

4.1%

Low

920

1,586

6.0%

134

1.3%

26%

9.0x

8.6x

14.1x

13.7x

1.9%

23

History of Underperformance

RMR Fees vs. CWH Shareholder Returns

(1)

RMR fees paid per CWH public filings include SIR.

(2)

Annualized YTD 9/30/2013 RMR fees include Q3 RMR fees paid by SIR to make the figure comparable to historically disclosed figures.

(3)

Share price and market capitalization figures are as of 2/25/2013, the day prior to Related and Corvex’s initial 13-D filing.

(2)

RMR

extracted

approximately

36%

of

CWH’s

unaffected

market

capitalization

(3)

during 2007 -

2013, as CWH share price continued to plummet

(2)

2007

2008

2009

2010

2011

2012

Annualized

2013

2007-

2013

Cumulative

Fees Paid Out to RMR

(1)

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$83.5

$478.0

RMR Fees % Growth

--

5.9%

(0.9%)

(0.6%)

11.7%

11.2%

8.0%

39.8%

RMR Fees as % of:

CWH Market Cap

(3)

4.5%

4.7%

4.7%

4.6%

5.2%

5.8%

6.2%

35.7%

CWH Market Cap, Cumulative

4.5%

9.2%

13.9%

18.5%

23.7%

29.5%

35.7%

35.7%

CWH Cumulative Stock Price Return

(37.4%)

(74.7%)

(46.0%)

(48.4%)

(66.3%)

(67.9%)

(67.9%)

(67.9%)

24

History of Underperformance

RMR Fees vs. CWH Shareholder Returns (cont’d)

(1)

2007

to

2013

RMR

cumulative

fee

growth

%

is

based

on

annualized

YTD

9/30/2013

fees

as

reported

in

Company

filings,

which

include

SIR.

(2)

Stock price monthly through February 25, 2013, the day prior to Related and Corvex’s first public filing.

(3)

Includes Q3 2013 RMR fees paid by SIR in order to make the figure comparable to previously reported figures.

Sources: Company filings, SNL

Annual fees

paid

to

RMR

climbed

40%

from

2007

to

2013

(1)

,

while

the

share

price

declined 68%

(2)

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

$40.00

$45.00

$50.00

$55.00

1/31/2007

1/31/2008

1/31/2009

1/31/2010

1/31/2011

1/31/2012

1/31/2013

(2)

(3)

CWH stock price

Cumulative fees paid out to RMR

25

History of Underperformance

Total Returns –

1 year

CWH

has

underperformed

its

peers

over

the

1

year

ending

2/25/2013

(1)

HIW: 15.5%

PDM: 15.3%

CWH: (9.4%)

PKY: 65.5%

CUZ: 28.2%

BDN: 25.2%

RMZ: 10.6%

Note: Total returns include dividends

(1)

The last trading the day prior to Related and Corvex’s first public filing.

Source: SNL

(25.0%)

0.0%

25.0%

50.0%

75.0%

2/24/2012

4/9/2012

5/25/2012

7/10/2012

8/25/2012

10/10/2012

11/25/2012

1/10/2013

2/25/2013

PKY

BDN

HIW

PDM

CUZ

CWH

RMZ

26

History of Underperformance

Total Returns –

3 years

CWH

has

underperformed

its

peers

over

the

last

3

years

ending

2/25/2013

(1)

HIW: 42.1%

PDM: 39.1%

CWH: (26.6%)

PKY: 6.9%

CUZ: 42.5%

BDN: 35.8%

RMZ: 52.5%

Note: Total returns include dividends

(1)

The last trading the day prior to Related and Corvex’s first public filing.

Source: SNL

(60.0%)

(40.0%)

(20.0%)

0.0%

20.0%

40.0%

60.0%

80.0%

2/25/2010

7/12/2010

11/26/2010

4/12/2011

8/27/2011

1/11/2012

5/27/2012

10/11/2012

2/25/2013

PKY

BDN

HIW

PDM

CUZ

CWH

RMZ

1 year

3 year

PKY

65.5%

6.9%

BDN

25.2%

35.8%

HIW

15.5%

42.1%

PDM

15.3%

39.1%

CUZ

28.2%

42.5%

Average

30.0%

33.3%

RMZ

10.6%

52.5%

CWH

(9.4%)

(26.6%)

: CWH -

Avg.

39.3%

59.9%

27

History of Underperformance

FFO Multiples

CWH traded at the lowest price to FFO multiple of its peers prior to our 13-D filing

PDM: 14.0x

CWH: 5.4x

HIW: 13.1x

CUZ: 18.2x

BDN: 9.0x

Source: Factset

PKY: 13.3x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

2/25/2008

10/10/2008

5/26/2009

1/10/2010

8/26/2010

4/11/2011

11/26/2011

7/11/2012

2/25/2013

PKY

BDN

HIW

PDM

CUZ

CWH

1 year

3 year

5 year

PKY

5.8x

5.2x

5.5x

BDN

8.6x

7.5x

6.3x

HIW

12.9x

12.7x

12.1x

PDM

11.2x

11.3x

N/A

CUZ

15.5x

16.2x

16.2x

Average

10.8x

10.6x

10.0x

CWH

5.0x

5.6x

5.4x

CWH -

Avg.

(54.2%)

(46.6%)

(45.8%)

28

History of Underperformance

Operating Performance

Key financial metrics deteriorate, while fees paid to RMR continue to climb

(1)

YTD 9/30/2013 figures include SIR. Growth rates based on YTD 9/30/2012. Excludes 2013 share price performance due to the share price impact of the 13-D filing.

(2)

Share price performance assumes stock is held since January 1st of the specified year through February 25th, 2013.

Source: Company filings and SNL

Value

accruing to

RMR, not

shareholders

($ in millions)

For the Fiscal Year Ending December 31,

YTD

2010

2011

2012

9/30/2013

(1)

Share Price Performance (if held since)

(2)

(38.2%)

(39.0%)

(6.9%)

N/A

SF Owned per Share (% growth)

(15.9%)

(5.2%)

(0.6%)

(32.7%)

NOI per Share (% growth)

(19.1%)

(4.2%)

16.1%

(28.0%)

EBITDA per Share (% growth)

(22.1%)

(4.7%)

(27.2%)

(20.1%)

FFO per Share (% growth)

(13.8%)

(9.9%)

0.0%

(19.1%)

CAD per Share (% growth)

(23.7%)

(27.7%)

(17.3%)

(15.6%)

Fees Paid to RMR

$62.2

$69.5

$77.3

$62.6

% growth

(0.6%)

11.7%

11.2%

10.6%

CWH trails its core office REIT peers by 234 bps and 359 bps on same store rental growth and

NOI growth, respectively

We believe YTD 2013 results below overstate CWH’s performance, as the Company has

placed 112 buildings (47 properties) into discontinuing operations beginning in Q4 2012

Despite its greater scale, CWH’s cost structure results in the lowest same store NOI margins of

its peers

CWH’s total rental and NOI growth is dependent upon its outsized acquisition activity

29

History of Underperformance

Same Store Underperformance

CWH underperforms its peers on a same store basis

Note: Analysis excludes PDM, which does not disclose same store rent. Average does not include CWH.

1)

CUZ figures represent consolidated portfolio.

Source: Company filings

9

months

ended

9/30/2013

rent

growth

(1)

9

months

ended

9/30/2013

NOI

growth

(1)

9

months

ended

9/30/2013

NOI

margin

(1)

Avg.: 2.0%

4.5%

2.7%

1.3%

(0.4%)

(0.6%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

CUZ

BDN

HIW

CWH

PKY

5.1%

3.3%

(0.4%)

(2.3%)

(3.0%)

(4.0%)

(3.0%)

0.0%

4.0%

CUZ

BDN

HIW

CWH

PKY

Avg.:

1.3%

(2.0%)

(1.0%)

1.0%

2.0%

3.0%

5.0%

6.0%

71.2%

65.7%

59.6%

58.1%

56.4%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

BDN

HIW

PKY

CUZ

CWH

Avg.:

62.2%

As a result, we also show on the following pages, results from 2010 through

9/30/2012

30

History of Underperformance

Same Store Underperformance (cont’d)

CWH has consistently underperformed its peers on a same store basis historically

Note: Analysis excludes PDM, which does not disclose same store rent. CUZ data represents office portfolio only.

(1)

CommonWealth excluded 97 underperforming buildings as discontinued properties in its same store financials ending 12/31/2012. 9 months ended 9/30/2012 is shown as a more representative

reflection of company performance. Excludes SIR figures.

(2)

Includes revenue and NOI from SIR due to the public data insufficiency.

Source: Company filings

2011 rent growth

(2)

2011 NOI growth

(2)

2011 NOI margin

(2)

9 months ended 9/30/2012 rent growth

(1)

9 months ended 9/30/2012 NOI growth

(1)

9 months ended 9/30/2012 NOI margin

(1)

2010 rent growth

(2)

2010 NOI growth

(2)

2010 NOI margin

(2)

31

History of Underperformance

Acquisition Activity

(1)

Market cap as of 2/25/2013, the day prior to Related and Corvex’s initial 13-D filing.

(2)

In Q3 2013, CUZ acquired Greenway Plaza, a 10-building, 4.3 million square foot office complex in Houston, Texas, and 777 Main, a 980,000 square foot Class A office

building in the central business district of Fort Worth, Texas. The aggregate purchase price for the acquisition was $1.1 billion, before other closing costs.

(3)

Includes net sale proceeds from consolidated joint venture.

(4)

Weighted by market cap.

(5)

YTD 9/30/2013 not comparable due to deconsolidation of SIR during 2013.

Source: Company filings and Factset

Net acquistions / CapEx as % of Market Cap

2007

2008

2009

2010

2011

2012

YTD 9/30/2013

Cumulative

Parkway Properties Inc. (PKY)

5.4%

22.4%

1.9%

7.4%

36.2%

64.2%

17.1%

154.6%

Highwoods Properties Inc. (HIW)

4.8%

4.7%

2.1%

3.0%

5.5%

8.1%

13.1%

41.2%

Cousins

Properties

Inc.

(CUZ)

(2)

25.2%

11.7%

4.3%

(7.0%)

3.9%

(17.2%)

136.2%

157.1%

Piedmont Office Realty Trust Inc. (PDM)

(3)

1.4%

3.7%

1.1%

1.9%

(2.3%)

0.4%

6.1%

12.4%

Brandywine Realty Trust (BDN)

(6.2%)

(11.9%)

5.6%

9.6%

0.8%

0.3%

(2.7%)

(4.3%)

Average

(4)

3.7%

3.6%

2.6%

3.3%

4.7%

6.8%

20.2%

44.9%

CWH

31.0%

6.1%

33.5%

27.6%

45.2%

56.3%

14.7%

214.3%

Net Acquisitions and CapEx

$419

$83

$453

$369

$604

$753

$197

(5)

$2,878

CWH share price

$30.92

$13.48

$25.88

$25.76

$16.64

$15.84

$15.85

Book value per share

36.11

34.68

35.66

37.53

33.24

36.82

N/A

CWH price / FFO multiple

6.8x

3.1x

6.0x

6.9x

4.9x

4.7x

5.4x

CWH

spent

$2.9

billion

on

acquisitions

during

2007

–

YTD

9/30/2013,

even

as

the

stock

has

underperformed,

but book value per share remains flat, suggesting minimal return on investment

RMR’s

fee

income

has

grown

due

to

being

linked

primarily

to

the

size

of

the

company

PKY

has

also

been

acquisitive,

but

is

internally

managed

and

has

made

accretive

capital

allocation

decisions,

leading to 42% stock price appreciation from 2011 to 2012

Its peers acquired assets at approximately one-fifth of CWH’s rate over the same period

(1)

CWH has grown primarily through asset acquisitions, which we believe benefits RMR – and

therefore the Portnoys personally – but not shareholders

32

History of Underperformance

Management and Board Ownership

CWH Trustees and senior management have no meaningful ownership of CWH

shares

CWH’s insiders currently hold a 0.34% stake in the company

The ownership level is approximately one-tenth the insider ownership of the comp set

We believe management is not aligned with shareholders

Peer Director and Executive Officer Ownership

(1)

Average does not include CWH

CWH Insider Holdings

Position

% of S/O

Trustees and Executive Officers:

Barry M. Portnoy

252,903

0.21%

Adam D. Portnoy

53,584

0.05%

John C. Popeo 

41,000

0.03%

David M. Lepore

33,750

0.03%

Frederick N. Zeytoonjian

12,967

0.01%

William A. Lamkin

10,812

0.01%

Joseph L. Morea

4,000

0.00%

Ronald J. Artinian

3,000

0.00%

Ann Logan

2,000

0.00%

Total CWH Trustee and Executive Officer

Ownership

414,016

0.34%

Source: Company filings, CWH holdings per proxy filed 01/29/2014 and subsequent filings, SNL

33

II. History of “Worst-In-Class”

Corporate

Governance

34

History of “Worst-In-Class”

Corporate Governance

The Portnoys’

Actions Speak Louder Than Our Words Ever Could

Imposed illegal bylaw amendments to prevent any consent solicitation, a right plainly granted

by the Declaration of Trust since 1986

Secretly attempted to manipulate state lawmakers into changing the Maryland Unsolicited

Takeover

Act

via

an

11

hour

amendment

to

eliminate

the

right

to

hold

this

consent

solicitation

Effected a massively dilutive equity offering priced at less than 50% of book value, increasing

share count by 41%

Opted into a provision of the Maryland Unsolicited Takeover Act in a misleading attempt, later

declared invalid, to try to eliminate the right to remove Trustees without cause

Reinstated Trustee Joseph Morea after a nearly 4-1 vote against his re-election at the 2013

annual meeting, and charged him with spearheading corporate governance

Spent

nearly

$30

million

of

shareholders’

money

on

a

year-long

litigation

process

in

a

brazen

campaign to systematically disenfranchise shareholders

Should

two

months

of

reversible

governance

alterations

erase

the

inexcusable

actions of this Board or 28 years of poor governance and performance?

The

Portnoys’

unconscionable

actions

over

the

past

year

say

more

about

their

intentions than their promises ever will

Over the past year, the Board deliberately:

th

“Perhaps most importantly, however, the history of this company under the current Board and

external management team strongly suggests the risk of doing nothing is significantly greater than

any risk from removing the entire Board at once.”

35

History of “Worst-In-Class”

Corporate Governance

Independent Parties Agreed With Us

Consistently poor corporate governance has not gone unnoticed by

independent, highly-respected parties

ISS annual reports consistently reported Shareholder Rights were of “High Concern”

“In lieu of further subjugation of shareholder rights, we believe the Dissident’s consent

solicitation offers the much more attractive prospect of meaningful change for CWH and

its owners.”

–

Glass Lewis report, June 17, 2013

ISS has issued highly critical reviews of CWH’s corporate governance policies

In

2013

CWH

received

the

worst

possible

score,

a

10,

for

Shareholder

Rights

A score of 1 indicates lower governance risk while a 10 indicates higher governance risk

ISS and Glass Lewis already supported removing the entire board in June 2013

–

ISS report, June 13, 2013

The Arbitration Panel struck down the illegal bylaws that stripped shareholders

of their right to vote through a consent solicitation

“There is no question that CWH’s Bylaws…erect a complex wall of procedural hurdles 

to

any

consent

solicitation.”

–

Arbitration

Panel,

November

18,

2013

36

History of “Worst-In-Class”

Corporate Governance

Widespread

Disapproval

of

the

Portnoys’

Governance

Over the years, prominent and diverse parties have stood up against the

Portnoys, the conflicted management structures at their various entities, and

their actions against shareholder rights

How

can

such

a

diverse

group

all

be

wrong

about

the

Portnoys

and

their

true

intentions?

Delaware County Employees Retirement Fund has sued the Trustees of CWH twice in the last year regarding

breach of fiduciary duty and improper use of shareholder funds to defend the Portnoys in litigation

Six pension

funds

(CalPERS,

CalSTRS,

Public

Employees’

Retirement

Association

of

Colorado,

Florida

State

Board of Administration, North Carolina Retirement Systems and Ohio Public Employees Retirement System)

have urged Hospitality Properties Trust, another RMR-managed REIT, to de-classify its Board

–

CalPERS

has

pushed

for

the

annual

election

of

all

trustees

every

year

from

2009-2013

Green Street Advisors, the preeminent independent investment research company focused on REITs, issued

a report on March 1, 2013 on the RMR-controlled REITs and labeled them “Uninvestable”

Perry Corp., a 5+ percent holder of the shares of CWH, publicly called for the Board to be replaced in its

entirety in a letter dated April 30, 2013

In 2008, Locksmith Capital Management sought to allow shareholders to elect two independent nominees to

the Board of TravelCenters of America, a Portnoy-managed public company, and vote to declassify the

Board, noting at the time: “Instead of allowing shareholders an opportunity to vote for our nominees and

shareholder proposals, they invoked meaningless technicalities in order to create a Soviet style election and

entrench the current Board of Directors. This Board has no shame.”

Council of Institutional Investors, a leading voice for effective corporate governance and strong shareowner

rights has consistently expressed concern regarding CWH and other Portnoy REITs

37

History of “Worst-In-Class”

Corporate Governance

The Arbitration Panel Has Spoken

The Arbitration Panel ruling on November 18, 2013, cleared a path to a free and

fair consent solicitation process

After nearly two weeks of live testimony and reviewing hundreds of exhibits, we

believe

the

Panel

plainly

agreed

with

our

view

that

the

Portnoys

are

highly

incentivized and capable of continuing their campaign of shareholder

disenfranchisement

The Panel struck down illegal bylaws passed by the current Board

The Panel expressly prohibited any action intended to impede or frustrate the new solicitation

The Panel declared it would remain available to resolve any issues or disputes

The

Panel

ruled

that

Corvex/Related

had

satisfied

onerous

“red

tape”

bylaw

requirements

The Panel determined that opting into Section 3-803 of the Maryland Unsolicited Takeovers

Act

(“MUTA”)

does

not

revoke

the

right

of

shareholders

to

remove

Trustees

without

cause,

as

misleadingly claimed by the Portnoys

Ruling

INVALID AS A MATTER OF LAW

INVALID AS A MATTER OF LAW

INVALID AS A MATTER OF LAW

INVALID AS A MATTER OF LAW

INVALID AS A MATTER OF LAW

Contested Bylaws

3%/3yr holding requirement to request a record date

All shares must be held in certificated form to request a

record date

30 day period to respond to a record date request

60 day period to set a record date

90 day period to certify the results of the consent solicitation

38

History of “Worst-In-Class”

Corporate Governance

“The

Portnoys

Receive

an

F”

–

New

York

Times

“The deal world remained muted this year in terms of big transactions and activity.

…Despite the relative doldrums, there were still some highlights and lowlights. Here

are some of them…

“Despite Doldrums in Deal Activity, A Few Highlights This Year,”

New York Times,

December 17, 2013

The father and son duo who head CommonWealth — Barry and Adam Portnoy —

and CommonWealth’s counsel at Skadden Arps showed little regard for

shareholder rights, doing everything in their power to prevent Corvex Management

and the Related Companies from removing the Portnoys. The Portnoys banked on

CommonWealth’s unique requirement that shareholders arbitrate all disputes with

the company to stymie the two hedge funds. It didn’t work, and the arbitration panel

ruled against CommonWealth, clearing the way for the funds to begin a campaign

to unseat them. The Portnoys receive an F.”

39

III. The Portnoys’

Reversible Governance

Alterations In Context

40

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys' Governance Alterations Are Illusory

The Portnoys’

“Check-the-Box”

governance alterations create the illusion of

reform,

but

bring

zero

incremental

accountability

and

therefore

offer

no

guaranteed

ability

for

shareholders

to

choose

who

runs

their

company

When a board deliberately harms shareholder rights through unconscionable

tactics to protect their own interests, accepting flawed governance alterations

while

leaving

the

same

board

in

place

simply

invites

more

of

the

same

All of

the

Portnoys'

alterations

are

ineffective,

and

most

importantly

all

are

unilaterally

reversible

through

the

extraordinary

powers

of

the

Portnoys

and

their

hand-picked

Trustees:

–

Require

two

RMR

employees

to

always

be

on

the

Board,

even

though

RMR

owns

no

equity

in

CWH

and

in

our

opinion

has

incentives

diametrically

opposed

to

those

of

shareholders

–

Unilaterally amend the bylaws (while shareholders cannot) to effectively cripple shareholder action

–

Unilaterally stagger the Board under MUTA, without shareholder approval

–

Reinstate hand-picked Trustees who fail to be re-elected by shareholders

Further, there is no way to repeal the "Silent Bylaw”:  Shareholders must spend exorbitant

sums in litigation to strike down illegal, unilaterally-passed bylaw amendments simply to

exercise their fundamental right to vote

But the obvious flaw in the alterations is that they require shareholders to trust the same

individuals who deliberately harmed shareholder rights over the past year with actions that we

believe suggest total disdain for shareholder rights

41

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

On

the

following

pages,

we

review

and

highlight

the

flaws

of

the

Portnoys’

“Check-the-Box”

governance alterations from December 26, 2013

Questions shareholders should ask themselves while conducting such a review

After

the

countless

tactics

employed

over

the

past

year,

would

the

Portnoys

really

now

implement

meaningful

corporate

governance

enhancements

and

subject

themselves

to

true

accountability

knowing

full

well

they

have

severely

underperformed

for

years?

Would

they

really

put

at

risk

their

invaluable

“Perpetual

Fee Stream”?

How

can

the

Portnoys

possibly

justify

reappointing

Joseph

Morea

to

the

Board

after

he

received

the

vote

of

only

14%

of

the

outstanding

shares

and

how

can

he

be

in

charge

of

“spearheading”

purported

governance

reforms?

What

impact

might

losing

the

consent

solicitation

have

on

the

Portnoys’

other,

much

larger

and

more

lucrative

externally

managed

REITs?

Did

the

Portnoys

purposefully

enact

only

reversible

governance

changes

just

to

win

votes

from

some

shareholders

and

remain

in

power

with

zero

real

improvement

in

corporate

governance

or

accountability?

Until

CommonWealth’s

long-suffering

shareholders

have

the

unambiguous

ability

to

choose who

manages their company, history will repeat itself, as the Portnoys delay their day of judgment

through an illusory game of governance restructuring and legal maneuvering, all the while paying

themselves huge fees for underperformance

42

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Annual Elections

•

Bylaws still require two Managing Trustees to be

employees of  RMR, making the promise of having

2/3 of the Board up for annual elections in 2015

highly misleading

•

We publicly asked the Board to clarify this

obvious contradiction but they have refused

to respond

•

Section 3-803 of the Maryland Unsolicited Takeover

Act allows Portnoys to unilaterally re-classify CWH

Board at any time regardless of contrary provisions

in governing documents, without a shareholder vote

•

CWH has not permanently opted out of

Section 3-803

•

Charter amendment to de-classify Board requires a

vote of holders of 75% of outstanding shares at

2014 annual meeting

•

Last year’s quorum was only 67%

•

Can shareholders expect the Portnoys and

CWH to “rock the vote”

at the 2014 meeting

to de-classify Board, or could they allow the

proposal to languish?

Portnoys’

Window Dressing

Propose

declassification

of

Board

at

the

2014

annual

meeting

43

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

The Board that appointed the two new

“independent”

Trustees is the same one that

has unconditionally supported the Portnoys

and re-appointed Joe Morea after he was voted

out of office at the 2013 annual meeting

•

Why would the new Trustees be any more

“independent”

than Joe Morea, William Lamkin

and Frederick Zeytoonjian?

•

Are shareholders expected to believe

that this time it is different because the

new appointees were found by a

headhunter hired by CWH?

•

Neither

of

the

two

new

“independent”

Trustees

will be up for election at the 2014 annual

meeting –

they were conveniently added to the

classes up for election in 2015 and 2016

•

In fact, Mr. Morea himself also will not be up for

election

in

2014

–

shareholders

cannot

hold

him accountable until 2016

Portnoys’

Window Dressing

Board Composition

•

Size of the Board to be increased

such that the ratio of Independent

Trustees compared to total Trustees

will increase from the current 71% to

at least 75%

•

Added Ronald J. Artinian and Ann

Logan as “independent”

Trustees

•

Lead Independent Trustee will be

designated after appointment of

another Trustee. Expected after 2014

annual meeting

•

Added share ownership guidelines

44

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

Red

Tape

Bylaws

can

be

amended

at

any

time

by

the

Board without shareholder approval, as they were last

year to prevent ability to hold a consent solicitation; in

fact, shareholders don’t have the right to amend or

modify bylaws at all

•

Shareholders are expected to assume that Bylaws will

not be again amended whenever convenient to the

Portnoys

`

•

In fact, the Portnoys have proven that they will use the

Red

Tape

bylaws

–

even

the

most

innocuous

ones

–

to

silence shareholders

Portnoys’

Window Dressing

Red Tape Bylaws

Bylaws amended to have a seemingly less

offensive process of trustee nominations at

annual meeting

•

Nothing stops Board from re-inserting the 3%/3-

year bylaw for Trustee nominations before the

2015 annual meeting

•

In fact, Select Income REIT (“SIR”)–another RMR-

managed REIT 44% of whose shares are owned

by CWH

–

re-inserted

an

arbitration

clause

in

its

bylaws

within

months

after

clearing

SEC

comments

and

going

public

(SEC

had

challenged the clause during SIR’s IPO process)

•

We had to prove to the Portnoys in arbitration that

our  record date request had been sent via

registered mail return receipt requested (which it

was, in addition to e-mail, hand delivery and FedEx),

in order to be counted as a “valid”

request

45

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

Company will continue to have a poison pill

built into its charter and bylaws that prohibit

stock acquisitions over 9.8 percent

•

Still no response to our letter request for

a waiver despite resolution of disputes

by the Arbitration Panel

•

As

“look

through”

entities

for

tax

purposes, REIT status concerns

regarding the 9.8% limitation are not an

issue with respect to Corvex and

Related

•

Company can always unilaterally add back in

the “dead hand”

provisions or implement a new

poison pill overnight without shareholder

approval

Portnoys’

Window Dressing

•

Expiration of poison pill to be

accelerated from October 17, 2014 to

a date soon after resolution of the

pending disputes with Corvex/Related

•

“Dead-hand”

provisions eliminated

Poison Pill

46

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

CWH still externally advised by a conflicted outside

party not subject to accountability by CWH’s

shareholders and that owns virtually no stock in

CWH

•

Continues to primarily incentivize RMR to grow

assets at the expense of shareholders when the

company resumes its history of serial equity

issuance

•

Incentive Fee benchmarks subject to change as the

RMR

contract

is

negotiated

by

the

Board

with

assistance

from

RMR

and

without

independent

outside advisors

•

Stock component is not meaningful

Portnoys’

Window Dressing

•

Beginning in 2014, base business

management fee to be based on the

lower of: (i) gross historical cost of real

estate assets or (ii) CWH’s total market

capitalization

•

10% of base business management fees

will be paid in stock

•

Annual incentive fees will be based upon

total returns realized by shareholders

(i.e., appreciation plus dividends) in

excess of benchmark

RMR Management Agreement

(1)

Adjusted for reverse stock splits.

•

During 2003-13, CWH issued 88.5 million

shares

(1)

or

~$2.5

billion

of

equity,

averaging

9.1 million shares/yr or 11.1 million/yr,

excluding the financial crisis years of 2008-09

47

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys' True Intentions Revealed

On January 21, 2014, we sent the Board a public letter, providing them an

opportunity to address the gaping loopholes in their governance alterations

and commit to permanent, true governance reform

The Board’s response?  Silence.

Coupled with the unconscionable actions taken over the last year,

what else do you need to know?

We asked if the Portnoy Board will:

–

Eliminate

the

requirement

that

at

least

2

Trustees

be

affiliated

with

RMR?

–

Amend the charter to ensure that the Board cannot opt back into Section 3-803 of the Maryland

General Corporation Law which allows them to unilaterally re-stagger the Board?

–

Amend governance documents to commit that if Barry Portnoy is not elected as a Trustee at the 2014

Annual Meeting, he cannot be unilaterally reinstated as Joseph Morea was after receiving the vote of

only 14% of the outstanding shares?

–

Amend the charter and bylaws to ensure the new provisions that make the annual meeting and

nomination process less offensive reversible only with a shareholder vote?

–

Amend the charter and bylaws to replicate the Arbitration Panel’s procedural guidelines for any future

consent solicitation?

–

Post online the entire un-redacted transcript of the October 2013 hearing before the Arbitration Panel

so that shareholders can understand management’s testimony about, among other things, their

fiduciary

duties

to

RMR

vs.

shareholders

and

how

the

RMR

contract

is

“negotiated”

every

year?

–

Work with Corvex/Related and the Arbitration Panel to implement obvious solutions that address the

Board’s professed concerns regarding the transition to a new Board?

48

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys’

Actions Explained

RMR’s business model, in our view, is founded on creating and preserving the conflict of

interest

at

its

externally

managed

REITs

in

order

to

manufacture

“Perpetual

Fee

Streams”,

regardless of the impact on CWH’s share price

We

believe

the

Portnoys

view

control

of

CWH

as

binary

–

either

they

have

dominant

control

over

the

fee

stream

built

over

28

years,

or

they

do

not

In

our

opinion,

the

profits

from

RMR’s

“Perpetual

Fee

Streams”

could

be

valued

at

~20x

cash

flow (but for the ability of the Board to terminate RMR management contracts), given the

highly

recurring

and

practically

infinite,

growing

nature

of

the

cash

flow

streams

under

the

protection of the “Accountability Vacuum”

We

believe

the

staggering

value

of

“Perpetual

Fee

Streams”

are

a

powerful

motivator for dodging accountability, leading the Portnoys to always choose

“Check-The-Box”

governance revisions over real reform

We believe the Portnoys harbor an extraordinarily deep commitment to

protecting their “Perpetual Fee Streams”

and will attempt to mislead

shareholders with “Check-the-Box”

reform rather than true accountability

49

IV. Corvex/Related’s Turnaround and

Governance Plan

50

Corvex/Related’s Turnaround and Governance Plan

Corvex/Related’s Plan To Maximize Value

The fair and unfettered election of a new Board consisting of truly independent Trustees

–

After consultation with fellow shareholders, we have proposed a slate of highly qualified

nominees for election to the Board at the Special Meeting to be held if the current Board is

removed:  Sam Zell, David Helfand, James Corl, Edward Glickman, Peter Linneman, Jim

Lozier and Kenneth Shea

Best-in-Class corporate governance to finally impose accountability

–

Amend

existing

Declaration

of

Trust

and

bylaws

to

conform

to

ISS

and

Glass

Lewis

best

practices

–

Eliminate

the

requirement

that

at

least

2

Trustees

be

affiliated

with

RMR

–

Permanently opt out of MUTA

Internalize management and align management compensation with shareholder returns

“Right

the

ship”

with

basic

operating

strategies

not

currently

being

employed

by

existing

conflicted

management structure

–

We believe proper staffing levels and reinvestment in CWH’s existing portfolio can harvest a

substantial amount of “low hanging fruit”

No

poison

pill

-

Adoption

of

a

policy

against

new

pills

without

shareholder

approval

Cease

all

acquisition

activity

and

dilutive

capital

raises

until

stock

price

exceeds

its

NAV

Cease all related party transactions not approved by a vote of disinterested shareholders

Corvex/Related continue to propose the following Turnaround & Governance Plan:

While dramatically different from CWH’s existing plan, these reforms are in our view

self-evident to every informed investor and will make CWH look like virtually every

other member of the S&P 500

51

Corvex/Related’s Turnaround and Governance Plan

A Simple Blueprint for Change

CommonWealth can then elect a Board of Trustees that:

–

Is truly independent (per ISS’s definition)

–

Implements and can describe to shareholders the procedures designed to ensure its

independent Trustees can continue to operate independently

–

Is accountable to shareholders

–

Hires its own independent advisors when necessary

–

Systematically sets performance goals for the management team, measures its

performance, and holds it accountable for its failures

–

Objectively

benchmarks

its

corporate

governance

policies

against

peers

–

Challenges management’s thinking on material strategic issues when appropriate

Once shareholders take back control of CommonWealth and can choose who

should manage their company, the conflict of interest between manager and

owner will be eliminated

In short, shareholders can elect an experienced, independent Board charged

with being their advocate

52

Corvex/Related’s Turnaround and Governance Plan

Sam Zell and David Helfand Join Corvex/Related’s Slate of Nominees

Mr. Zell is willing to serve as Chairman of the Board, if so appointed by the new Board

–

Mr. Zell is the current Chairman of Equity Residential, Equity LifeStyle Properties,

Covanta Holding Corporation and Anixter International Inc. and the former Chairman of

Equity

Office

Properties

Trust

(formerly

the

largest

REIT

in

the

U.S.)

Mr. Helfand is willing to serve as CommonWealth’s CEO, if so appointed by the new Board

–

Mr. Helfand is Co-President of EGI and has previously served as Executive Vice

President and Chief Investment Officer of Equity Office Properties Trust and President

and CEO of Equity LifeStyle Properties

Mr. Zell and Mr. Helfand bring exceptional investment, real estate and public company

credentials

to

an

already

highly

qualified

slate

of

nominees

(1)

In addition, Mr. Zell and Mr. Helfand plan to bring to the Company their highly qualified and

experienced management team to execute on a value-driven strategy

Mr. Zell has demonstrated a long-standing commitment to good corporate governance:

Corvex and Related announce the addition of Sam Zell and David Helfand of

Equity Group Investments (“EGI”) to our previously announced slate of highly

qualified nominees for election to the Board of CommonWealth

(1)

Detailed biographies are included in the Appendix

“One of our core operating principals is the alignment of interests between company

leadership and shareholders.  We are concerned about any attempts to preclude

shareholder rights, and our companies are free of such impediments.”

-Sam Zell, Corvex/Related Press Release, February 11, 2014

53

Corvex/Related’s Turnaround and Governance Plan

Sam Zell and Corvex/Related Share A Common View

“We are fully supportive of Corvex and Related’s efforts to maximize value at CommonWealth for all

shareholders. We see an attractive opportunity at CommonWealth uniquely suited to our

expertise in leading public real estate companies and in turning around underperforming assets. We

created three of the most successful REITs in the U.S., including Equity Office, which at the time of its

$39 billion sale in 2007, owned nearly 100 million square feet of space in over 500 office buildings

across the country.

“One of our core operating principals is the alignment of interests between company leadership and

shareholders.  We are concerned about any attempts to preclude shareholder rights, and our companies

are free of such impediments. We believe the shareholders of our REITs have clearly benefited from

having an accountable, properly aligned board overseeing an effective, internalized management team

with the sole goal of increasing shareholder value.”

-Sam Zell, Corvex/Related Press Release, February 11, 2014

54

Corvex/Related’s Turnaround and Governance Plan

Sam Zell’s Unrivaled Track Record for Value Creation

We

believe

Sam

Zell’s

chairmanship

of

these

REITs

has

unquestionably

maximized

value

for

shareholders

These REITs clearly demonstrate, in our view, the value to shareholders of having an

accountable, properly aligned board overseeing an effective, internalized management team

with the sole goal of increasing shareholder value

In stark contrast, CWH has been operated by an underperforming, external manager focused

on increasing its fee stream at the expense of shareholders, while erecting barriers to

shareholder action

Not surprisingly, the long-suffering shareholders of CWH have had the opposite experience of

Mr. Zell’s shareholders, as clearly depicted on the following page…

Sam Zell is recognized as a founding father of today’s public real estate

industry after creating three of the most successful REITs in history:

Equity Office Properties Trust, Equity Residential, and Equity LifeStyle

Properties

55

Corvex/Related’s Turnaround and Governance Plan

Sam Zell’s Unrivaled Track Record for Value Creation (cont.)

(1)

(2)

($100)

$0

$100

$200

$300

$400

$500

$600

$700

$800

1997

2000

2003

2006

2012

(100%)

0%

100%

200%

300%

400%

500%

600%

700%

800%

Total Return Performance – Zell-Chaired REITs vs. CWH vs. RMR Fees

CWH

EOP

EQR

ELS

Cumulative RMR

Fees

(1)

Total returns through February 25, 2013, the day prior to Related and Corvex’s initial 13-D filing.

(2)

2013 RMR fees reflected annualized YTD 9/30/2013 figures.  Q3 2013 RMR fees include fees paid by SIR to make the figure comparable to historically disclosed figures.

Sources: Company filings, SNL

Cumulative total returns

Zell-Chaired REITs

CWH

Variance

Timeframe

EOP

368%

103%

(265%)

7/7/1997 - 2/9/2007

EQR

422%

7%

(415%)

7/7/1997 - 2/25/2013

ELS

574%

7%

(567%)

7/7/1997 - 2/25/2013

Cumulative RMR fees

since 1997: $791

(2)

EOP:

368%

EQR:

422%

ELS:

574%

CWH: 7%

2009

56

Corvex/Related’s Turnaround and Governance Plan

Peaceful Transition of Authority –

“Plan A”

To eliminate the already miniscule risks, the Board members could implement the following

to protect CommonWealth and its shareholders:

While we wholeheartedly dismiss the scare tactics employed by the Portnoys –

that

a

removal

of

Trustees

will

cause

the

business

material

harm

–

we

point

out

that ironically the sitting Board members could easily preclude any of their

imagined disruptions from occurring by acting responsibly in advance of a

consent solicitation

We have asked the Board to work with Corvex/Related and the Arbitration Panel

to implement obvious solutions that address the Board’s professed “concerns”,

but the Board refuses to respond

Agree to allow for the election of replacement Trustees concurrently with the removal of

existing Trustees

We also point out that the Arbitration Panel will remain available for resolving disputes

even

after

the

removal

of

the

Trustees

and

during

the

transition

to

a

newly

elected

Board

Request waivers under existing financing agreements regarding a change in control or arrange

for replacement facilities

RMR could remove language or simply agree not to immediately terminate its management of the

assets in the event of a change in control

57

Corvex/Related’s Turnaround and Governance Plan

Disruptive Transition of Authority –

“Plan B”

In the event the Trustees are not cooperative in transitioning authority, Related

and Corvex have a plan to protect the Company

Shareholders should not be coerced into voting for the current Board out of fear

that

the

existing

Trustees

will

“burn

down

the

house”

on

the

way

out

the

door

David Helfand, a 25-year industry veteran, possesses substantial executive experience

managing

large

portfolios

of

commercial

real

estate

in

a

variety

of

contexts

Mr. Helfand has served CEO, CIO and President roles for companies, including Equity LifeStyle

Properties, American Residential Communities, Helix Funds, and Equity Office Properties Trust

Mr.

Helfand

has

led

more

than

$14

billion

in

investment

activity

over

the

past

15

years

Jim

Lozier,

a

30+

year

industry

veteran,

is

available

to

assist

in

CWH’s

transition

(1)

Mr. Lozier served as co-founder and CEO of the Archon Group L.P., a subsidiary of Goldman Sachs,

from its formation in 1996 until 2012, during which time, the company grew from 320 employees to

8,500 employees managing 36,000 assets with a gross value of approximately $59 billion

Archon’s

core

competencies

include

the

ability

to

quickly

integrate

new

properties

into

its

operating

platform, regardless of the condition of the property or the difficulty of transitioning such properties

CBRE, one of the world’s largest integrated real estate services firms, has agreed to provide

interim

property

management

services

(2)

Successfully managed transition of leasing/management services for 1.2 billion sq. ft. of commercial

properties in the U.S. over the last nine years, including transitions done under significant time pressure

Related and Corvex have agreed to purchase up to 51% of the bank

debt in order to prevent

acceleration of the Company’s debt

(1)

Mr. Lozier is providing consulting services to Related in connection with Related’s investment in CWH.

(2)

CBRE will perform management and leasing services on customary terms to be agreed to in the event CWH’s management agreement with RMR is terminated.

58

Corvex/Related’s Turnaround and Governance Plan

About Related

Founded in 1972 by Stephen Ross, Related is amongst the most prolific and respected real

estate developers, operators and investors in the nation

Owns and operates a portfolio valued at over $15 billion including 5 million square feet of

commercial space and over 40,000 apartment units

Over 2,000 employees located in Boston, Chicago, Dallas, Los Angeles, Miami, New York, San

Francisco, Shanghai, Abu Dhabi and Sao Paulo

Experience with portfolios of assets in distressed or hostile situations, including:

-

Several assets representing hundreds of millions of dollars in value in contested

foreclosure or adversarial bankruptcy proceeding, including acting as agent for court

appointed receivers between 2010-2012

-

Portfolio of 32 REO properties comprised of 10,000 multifamily units on behalf of GSE

Founded over 40 years ago, Related operates a real estate portfolio valued at

over $15 billion today including residential, office, mixed-use, and affordable

properties

59

Corvex/Related’s Turnaround and Governance Plan

About Corvex

Value-based

investing

across

the

capital

structure

in

situations

with

clearly

identifiable catalysts

Follows an opportunistic approach to investing with a specific focus on equity investments,

special situations and distressed securities largely in North America.

Active investing to create asymmetric risk/reward opportunities

Public markets view for fundamental and event-driven investing

Successfully engages with management teams of invested companies

60

Corvex/Related’s Turnaround and Governance Plan

Jim Lozier

Mr. Lozier served as co-founder and CEO of the Archon Group L.P., a subsidiary of Goldman

Sachs, from its formation in 1996 until 2012

Archon is an international real estate services and advisory company based in Dallas, TX

During Mr. Lozier’s tenure at Archon, the company grew from 320 employees to 8,500

employees managing 36,000 assets with a gross value of approximately $59 billion

Archon underwrote, acquired and asset managed real estate and real estate debt for

Goldman Sachs with a concentration in office, multi-family and limited service hospitality

Prior to the formation of Archon, Mr. Lozier was an employee of the J.E. Robert Company and had

been

responsible

for

managing

the

GS

/

JER

joint

venture

for

two

years.

Mr.

Lozier

directed

the

acquisition

efforts

of

the

joint

venture

between

GS

and

JER

from

1991-1995

Mr. Lozier will remain available to assist in CommonWealth’s transition upon

removal of the current Board

61

V. Highly Qualified Nominees

62

Highly Qualified Nominees

Truly Independent Slate

Mr.

Zell

maintains

substantial

interests

in

and

serves

as

Chairman

of

four

public

companies,

two

of

which

are

REITs

—

Equity

Residential (NYSE: EQR), the largest multifamily REIT, and Equity LifeStyle Properties (NYSE: ELS), the largest

manufactured

home

community

REIT.

He

is

also

Chairman

of

Covanta

Holding

Corporation

(NYSE:

CVA),

an

international

leader in converting waste to energy, and Anixter International (NYSE: AXE), a global supplier of communications and security

products.

Mr. Zell also serves as Chairman of two private investment firms, Equity Group Investments, which he founded over 40 years

ago, and Equity International. While EGI’s roots are in real estate, the firm’s investments today span industries and continents,

and include interests in real estate, energy, logistics, transportation, media, and health care, among others. Equity

International, which Mr. Zell founded in 1999, is a private investment firm focused on building real estate-related businesses in

international emerging markets.

Mr. Zell is a member of the President’s Advisory Board at the University of Michigan, and with the combined efforts of

the University of Michigan Business School, established the Zell/Lurie Entrepreneurial Center. He is also a long-

standing supporter of the University of Pennsylvania Wharton Real Estate Center, and has endowed the Samuel

Zell/Robert Lurie Real Estate Center at Wharton. Mr. Zell also endowed the Northwestern University Center for Risk

Management. Mr. Zell holds a BA and a JD from the University of Michigan.

Chairman, Founder, Equity Group Investments (“EGI”)

Chairman, Equity Residential, Equity LifeStyle Properties, Covanta Holding Corporation, Anixter International Inc.

Chairman, Founder, Equity International 

Sam Zell – Candidate for Chairman of CommonWealth

63

Highly Qualified Nominees

Truly Independent Slate (cont.)

Co-President, Equity Group Investments (“EGI”)

Mr. Helfand is currently Co-President of EGI where he oversees all aspects of the firm. He began working with Sam Zell

more than 25 years ago, and has worked with him in a variety of capacities since then.

Prior to rejoining EGI in 2012, Mr. Helfand was Founder and President of Helix Funds, where he oversaw the acquisition,

management and disposition of more than $2.2 billion of real estate assets. While at Helix, he also served as Chief Executive

Officer for American Residential Communities, a Helix portfolio company.

Before founding Helix, Mr. Helfand served as Executive Vice President and Chief Investment Officer for Equity Office

Properties Trust, the largest REIT in the U.S. at the time, where he led approximately $12 billion of mergers and acquisitions

activity. Prior to Equity Office, Mr. Helfand served as a Managing Director and participated in the formation of Equity

International. He also held the role of President and Chief Executive Officer at Equity LifeStyle Properties, and served as

Chairman of the board’s audit committee. His earlier career included investment activity in a variety of asset classes,

including retail, office, parking and multifamily.

Mr.

Helfand

holds

an

MBA

from

the

University

of

Chicago

Graduate

School

of

Business,

and

a

BA

from

Northwestern

University. He serves as a member of the Board of Trustees and Executive Committee of National Louis University, as a

Director of the Ann & Robert H. Lurie Children’s Hospital of Chicago, on the Executive Committee of the Zell/Lurie Real

Estate Center at the Wharton School, and on the Board of Visitors at the Weinberg College of Arts and Sciences at

Northwestern University.

David Helfand – Candidate for CEO of CommonWealth

64

Highly Qualified Nominees

Truly Independent Slate (cont.)

James

Corl

Managing Director and Head of Real Estate, Siguler Guff & Company

James Corl has been a Managing Director at Siguler Guff & Company since 2009, and is the Head of Real Estate. Mr. Corl oversees the

Firm’s real estate investment activities, setting investment strategy, designing and constructing the portfolio, identifying potential

investments, and negotiating investment terms and conditions. Prior to joining Siguler Guff, Mr. Corl spent 13 years in the REIT

investment industry, most recently as Chief Investment Officer for all of the real estate activities of Cohen & Steers, Inc., a leading investor

in

global

real

estate

securities.

While

at

Cohen

&

Steers,

Inc.,

Mr.

Corl

was

directly

responsible

for

over

$30

billion

of

client

assets

invested in mutual funds and institutional separate accounts around the world. As an Associate with the Real Estate Investment Banking

group at Credit Suisse First Boston, Mr. Corl was involved in acquiring portfolios of non-performing loans and distressed real estate

assets for CSFB’s Praedium Real Estate Recovery Fund, as well as restructuring troubled real estate companies as publicly traded

REITs.

Edward Glickman

Executive Director, Center for Real Estate Finance Research, New York University Stern School of Business

Clinical Professor of Finance, New York University Stern School of Business

Executive Chairman, FG Asset Management US

Senior Advisor, Econsult Solutions, Inc.

Edward

Glickman

is

the

Executive

Director

of

the

Center

for

Real

Estate

Finance

Research

and

Clinical

Professor

of

Finance

at

New

York

University

Stern

School

of

Business,

and

has

been

a

Professor

at

the

Stern

School

of

Business

since

2006.

Mr.

Glickman

is

also

currently

the

Executive

Chairman

of

FG

Asset

Management

US,

an

alternative

asset

manager

serving

Korean

investors,

and

is

a

Senior

Advisor

for

Econsult Solutions, Inc., an econometric consulting firm. From 2004 to 2012 Mr. Glickman served as President and Chief Operating

Officer

of

the

Pennsylvania

Real

Estate

Investment

Trust,

where

he

oversaw

all

operating

functions

and

was

a

member

of

its

Board

of

Trustees. Mr. Glickman has more than 30 years of experience in the real estate and financial services industry having been previously

employed by The Rubin Organization, Presidential Realty Corporation, Shearson Lehman Brothers and Smith Barney. Mr. Glickman is a

Fellow of the Royal Institute of Chartered Surveyors, a Certified Treasury Professional and a Registered Securities Principal.

65

Highly Qualified Nominees

Truly Independent Slate (cont.)

Peter Linneman

Emeritus Albert Sussman Professor of Real Estate, University of Pennsylvania, Wharton School of Business

Principal, Linneman Associates

Principal, American Land Funds

From 1979 to 2011, Dr. Linneman was a Professor of Real Estate, Finance and Public Policy at the University of Pennsylvania, Wharton

School of Business and is currently an Emeritus Albert Sussman Professor of Real Estate there. Dr. Linneman is currently a principal of

Linneman Associates, a real estate advisory firm, and a principal of American Land Funds, a private real estate acquisition fund. For more

than

35

years

he

has

advised

leading

corporations

and

served

on

over

20

public

and

private

boards,

including

serving

as

Chairman

of

Rockefeller Center Properties, where he led the successful restructuring and sale of Rockefeller Center in the mid-1990s. Dr. Linneman

has won accolades from around the world, including PREA’s prestigious Graaskamp Award for Real Estate Research, Wharton’s Zell-

Lurie Real Estate Center’s Lifetime Achievement Award, Realty Stock Magazine’s Special Achievement Award, and has been named

“One

of

the

25

Most

Influential

People

in

Real

Estate”

by

Realtor

Magazine

and

was

included

in

The

New

York

Observer’s

“100

Most

Powerful People in New York Real Estate.”

Jim Lozier

Co-founder and former CEO, Archon Group L.P.

Jim Lozier served as co-founder and CEO of Archon Group L.P. from its formation in 1996 until 2012. Archon, a wholly owned subsidiary

of Goldman Sachs, is a diversified international real estate services and advisory company that under Mr. Lozier’s leadership managed

36,000 assets with a gross value of approximately $59 billion and over 8,500 employees in offices located in Washington D.C., Los

Angeles,

Dallas,

Boston,

Asia

and

Europe.

Prior

to

the

formation

of

Archon,

Mr.

Lozier

was

an

employee

of

the

J.E.

Robert

Company

and

was

responsible

for

managing

the

Goldman

Sachs/J.E.

Robert

joint

venture

for

two

years.

Mr.

Lozier

directed

the

acquisition

efforts

of

the

joint venture between GS and JER from 1991-1995. Jim has served on the Board of Directors of Dallas CASA (Court Appointed Special

Advocates for Children) since 1999, and currently is on the Executive Committee and is heading CASA’s capital campaign.

66

Highly Qualified Nominees

Truly Independent Slate (cont.)

Kenneth Shea

President, Coastal Capital Management LLC

Kenneth

Shea

is

the

President

of

Coastal

Capital

Management

LLC,

an

affiliate

of

Coastal

Development,

LLC,

a

New

York-based

privately-held developer of resort destinations, luxury hotels and casino gaming facilities. Prior to joining Coastal in September 2009, from

July 2008 to August 2009, Mr. Shea was a Managing Director for Icahn Capital LP, where Mr. Shea had responsibility for principal

investments in the gaming and leisure industries. From 1996 to 2008, Mr. Shea was employed by Bear, Stearns & Co., Inc., where he was

a Senior Managing Director and global head of the Gaming and Leisure investment banking department. At Bear, Stearns, Mr. Shea

played an active role on over $55 billion of M&A and capital raising transactions for many of the leading public companies in the gaming

and leisure sector including Harrah’s Entertainment, Inc., Station Casinos Inc., Penn National Gaming Inc., Las Vegas Sands Corp., Wynn

Resorts Ltd., and Carnival Corp. Mr. Shea currently serves on the board of directors of CVR Refining, LP.

67

VI. Valuation Update

68

Valuation Update

Intensive Due Diligence Continues…

Based

on

repeated

feedback

from

tenants,

brokers

and

owner/operators

across

CWH’s

markets regarding their experience with RMR, we believe:

Many

leasing

brokers

representing

tenants

across

CWH’s

markets

steer

tenants

away

from RMR-managed properties because of a lack of attention from RMR personnel

RMR often fails to execute simple asset and property management functions, such as

responding to tenant work requests, and challenging real estate tax assessments

“Blake Schreck, president and economic development director for the Lenexa Chamber of

Commerce, didn't sound unhappy about Southlake Technology Park changing hands. He

echoed multiple local commercial real estate brokers, who indicated that CommonWealth's

slow response to requests for lease proposals from prospective tenants had likely cost the

933,0000-square-foot office park deals and contributed to its 48 percent occupancy rate.”

Over the past six months, representatives from Corvex and/or Related have

independently performed detailed site visits on approximately 85% of the

portfolio

Kansas City Business Journal, October 23, 2013

69

Valuation Update

Where Are The Employees?

RMR employees service assets for CWH in addition to other RMR-managed public REITs

(SIR,

GOV,

HPT,

SNH)

as

well

as

the

Portnoys’

privately

owned

real

estate,

all

of

which

encompass office, retail, hospitality, senior housing, land and other property types

It appears that the leasing staff is too small, resources are spread too thin, and a true asset

management department is non-existent

The majority of, if not all, leases from CWH, SIR, HPT, SNH and GOV are processed

through the CWH’s headquarters office for review, approval and negotiation

There appears to be little delegation to local RMR representatives, creating a substantial

bottleneck that leads to very slow response times

It appears that staffing is maintained at deficient levels in order to maximize profit margins for

RMR at the expense of CWH shareholders

Clearly, assets that are suffering from such poor management should only be sold after first

maximizing value for CWH shareholders

Opportunistic funds with expensive capital (such as Oaktree Capital and Garrison

Investment

Group)

were

among

the

largest

buyers

of

assets

in

the

last

round

of

CWH

dispositions

We believe there are too few employees spread over too many assets and

product types:

70

Valuation Update

Significant Operational Upside

We are confident that misaligned incentives at the corporate level have translated into

underperforming run rate NOI

In our opinion, properties can achieve our estimate of stabilized NOI within 24-36 months of

installing an effective management team whose incentives are aligned with shareholders

Furthermore, we believe that measurable progress can begin within several months of

initiating a repositioning program with progress reports communicated to shareholders in real

time

The cost to shareholders of a severely conflicted external management

structure was self-evident during our work in the field

Valuation Update

NAV Components

Implied cap rates of CWH’s public peers

Analysis of private market transactions in

local markets

CWH management’s own published valuation

of key assets

Cap rate surveys published by national

brokerage firms

71

Source: Company filings, media reports.

Properties classified as “Held for Sale”

are per CWH’s SEC filings,

adjusted for subsequent asset sales reported in the media.

In-Place Cash NOI based on annualized YTD 9/30/13 results,

adjusted for subsequent asset sales reported in the media.

Estimate based upon Related’s expertise and knowledge of the real

estate market and having considered factors such as size and

location of CWH’s real estate portfolio as well as estimates from and

discussions with CBRE regarding the potential extension of

management services for CWH.

Represents the stabilization improvement implied by the difference

between As-Stabilized NOI and In-Place NOI after Property

Management Fee savings.  As-Stabilized NOI is derived through an

extensive bottoms-up real estate analysis on a property-by-property

basis.

(1)

(2)

(3)

(4)

Related performed a bottoms-up real estate

analysis on a property-by-property basis

We believe our estimate of Stabilized Cash NOI is

supported by our extensive field due diligence

We find support for cap rate assumptions and price

per foot valuations from:

NAV Methodology

(In millions, except PSF and per share amounts)

Continuing

Held for

Operations

Sale

(1)

Total

$428

$42

$470

8

2

10

28

20

48

As-Stabilized Cash NOI

$465

$63

$528

Cap Rate

7.3%

8.7%

7.5%

As-Stabilized Value

$6,346

$731

$7,077

Plus: Australia Assets Held at Book Value

95

0

95

Plus: Potential Development Assets

34

0

34

Concluded Value

$6,475

$731

$7,205

Less: Stabilization Costs

(170)

(82)

(252)

Concluded Value

$6,305

$649

$6,953

$PSF

$168

$76

$151

NAV Calculation

PF 9/30/13

Concluded Value

$6,953

Stake in SIR (as of 2/10/14)

602

Cash

360

Other Current Assets, Net

54

Total Asset Value

$7,970

Less:

Unsecured Revolving Credit Facility

($334)

Unsecured Term Loan

(500)

Unsecured Notes

(1,361)

Mortgage Notes Payable

(920)

Series D Preferred Stock

(380)

Series E Preferred Stock

(275)

Total Debt + Preferred stock

($3,769)

Net Asset Value

$4,200

Shares Outstanding

118

NAV / Share

$35.48

(2)

(3)

(4)

In-Place Cash NOI 

Plus: Property Management Fee Savings  

Plus: Stabilization Improvement, Implied  

Valuation Update

2-Year Forward Share Price Analysis

The illustrative roll-forward analysis below demonstrates the potential to drive substantial

value creation through thoughtful capital allocation strategies

CWH

could

close

the

gap

between

its

stock

price

and

NAV

by

using

excess

cash

flow

and/or

proceeds

from

non-core

asset

sales to buy back stock at prices below NAV

Analysis

assumes

stabilized

NOI

remains

flat,

ie,

no

market

growth

in

the

office

sector

72

2013E

2014E

2015E

Estimated CAD (Wall Street Consensus)

$150.0

$483.0

Business Mgmt. Fees Savings

$11.0

Cap Rate Assumed

7.50%

Property Mgmt. Fees Savings

10.0

Implied CWH TEV

$6,440.0

Incremental CAD

$21.0

CWH Pro forma Net Debt (Net of SIR, Cash, other assets)

1,973.3

Annualization Adjustment-Q1 '13 Bond Tender

10.2

Preferred Equity

655.0

Adjusted CAD

$181.2

$181.2

$181.2

Implied CWH Equity Value

$3,811.7

Adj CAD reflects abnormally high g&a in starting CAD figure

Implied CWH Share Price, 12/31/15

2.5%

$40.13

Current Quarterly Dividend

$0.25

$0.25

% Change to Stock Price at 2/10/14

56.3%

Avg. Shares Outstanding

111.9

100.3

Memo: Shares Outstanding

95.0

Annual Dividends Paid

$111.9

$100.3

Implied CWH Share Price

2014E

2015E

Non-Core Asset Sales/year

CAD after Dividends Paid

$69.3

$81.0

$40.13

$0.0

$150.0

$300.0

$450.0

$600.0

Non-Core Asset Sales

300.0

300.0

7.00%

$43.11

$43.95

$44.97

$46.21

$47.76

Divested NOI (Assumes Dispositions Mid-Year)

(11.3)

(33.8)

Cap

7.25%

40.83

41.57

42.46

43.56

44.92

Share Repurchases

$358.1

$347.2

Rate

7.50%

38.70

39.35

40.13

41.08

42.27

Share Repurchase Price Assumed

$28.00

$33.00

7.75%

36.71

37.27

37.94

38.76

39.79

% Premium to Stock Price at 2/10/14

9.0%

28.5%

8.00%

34.84

35.32

35.89

36.59

37.47

Shares Repurchased

12.8

10.5

% Change to Current Share Price

% of Shares Outstanding (Current)

10.8%

8.9%

Non-Core Asset Sales/year

$0.0

$150.0

$300.0

$450.0

$600.0

Beginning Shares

118.3

105.5

7.00%

67.9%

71.2%

75.1%

80.0%

86.0%

Ending Shares

105.5

95.0

Cap

7.25%

59.0%

61.9%

65.4%

69.6%

74.9%

Avg. Shares Outstanding

111.9

100.3

Rate

7.50%

50.7%

53.2%

56.3%

60.0%

64.6%

7.75%

42.9%

45.1%

47.7%

50.9%

55.0%

Dividend Coverage

8.00%

35.7%

37.5%

39.8%

42.5%

45.9%

Adj. CAD after Non-Core Asset Sales

$170.0

$147.5

Annual Dividends Paid

$111.9

$100.3

Payout Ratio

65.8%

68.0%

Stabilized Cash NOI (after Non-Core Asset Sales)

(in millions, except per share amounts)

73

Valuation Update

Public Peer Analysis

Our weighted average cap rate for the continuing operations portfolio is 7.3% vs. the public peer

average of 6.7% despite CWH having a higher percentage of CBD/urban infill assets

Note:  Stock prices as of 2/10/14.  All CWH statistics based on continuing operations portfolio only.

See other footnotes on page 80.

(7)

(7)

(7)

(7)

(7)

(6)

(6)

(6)

(6)

(6)

(NAV)

(1)

CommonWealth

(Current price)

Peer Avg.

Brandywine

Parkway

(2)

Highwoods

(3)

Piedmont

Cousins

Share price

$35.51

$25.68

$13.98

$17.77

$37.27

$16.25

$10.76

Implied cap rate

(4)

7.3%

8.7%

6.7%

7.0%

6.2%

6.9%

6.7%

6.6%

TEV / SF

$208

$177

$200

$187

$246

$169

$210

$190

% CBD / urban infill

66.6%

62.1%

46.7%

27.7%

70.8%

20.0%

64.2%

51.0%

Avg gross rent $PSF

$20.34

$18.62

$23.46

$23.28

$24.27

$21.36

$26.85

$21.54

Top 5 Markets

(5)

Chicago

Philadelphia Suburbs

Houston

Raleigh

Washington, D.C.

Atlanta

% of total rent / NOI

12.7%

28.4%

34.7%

18.8%

22.8%

48.0%

Avg gross rent $PSF

$22.06

N/A

$22.27

$20.23

$34.48

N/A

Philadelphia

Philadelphia CBD

Charlotte

Atlanta

New York

Houston

% of total rent / NOI

11.9%

24.6%

14.0%

15.0%

16.4%

30.0%

Avg gross rent $PSF

$28.30

N/A

$24.61

$25.79

$33.22

N/A

Austin

Metropolitan DC

Atlanta

Nashville

Chicago

Austin

% of total rent / NOI

6.8%

20.6%

10.2%

13.5%

12.5%

5.0%

Avg gross rent $PSF

$17.44

N/A

$25.83

$25.57

$27.03

N/A

Indianapolis

New Jersey / Delaware

Jacksonville

Tampa

Minneapolis

Dallas

% of total rent / NOI

4.2%

9.1%

10.2%

12.5%

7.5%

4.0%

Avg gross rent $PSF

$22.48

N/A

$20.94

$18.74

$27.80

N/A

Denver

Austin

Phoenix

Richmond

Boston

Birmingham

% of total rent / NOI

4.0%

6.7%

7.4%

10.1%

6.6%

3.0%

Avg gross rent $PSF

$27.89

N/A

$26.00

$18.94

$25.09

N/A

CommonWealth

74

Valuation Update

How We Stack Up Against Management’s Estimate of Value

(1)

CWH Investor Presentation, April 22, 2013.

(2)

Based on concluded value of approximately $7.1BN.

Our valuation is $124 million lower than management’s own

estimates

(1)

of

value

on

nearly

20%

of

the

portfolio

(2)

,

pointing

to

the reasonableness of our $35 per share NAV estimate

Related/

Corvex

Value

$248MM

$236MM

$194MM

$366MM

$110MM

$113MM

$1,267mm

$1,391mm

75

Valuation Update

Portfolio Concentration –

Top 10 Markets

The Top 10 markets, by concluded value, account for over 50% of the value of the

entire portfolio

(1)

(1)

Excludes Australia and land in Austin.

Our weighted average cap rate for the Top 10 markets in CWH’s portfolio is 6.8% while the

average implied cap rate of the public peers is 6.7%

Given that the portfolio of assets in CWH’s Top 10 markets are comparable or superior to the

full portfolios of the average public peer, we believe our weighted average cap rate compares

favorably

NOI

Concluded

Concluded

% Concluded

#

City

($MM)

Cap Rate

Value ($MM)

Value ($PSF)

Value

1

Chicago

$63

7.2%

$865

$204.32

12.4%

2

Philadelphia

$67

7.0%

$851

$185.13

12.2%

3

Austin

$36

7.0%

$511

$202.01

7.3%

5

Bellevue

$19

5.6%

$330

$500.02

4.7%

4

Denver

$21

6.8%

$312

$338.40

4.5%

6

Indianapolis

$22

7.5%

$287

$169.40

4.1%

7

Hoboken

$12

6.0%

$194

$371.33

2.8%

8

Boca Raton

$12

7.0%

$172

$268.60

2.5%

9

Washington D.C.

$9

5.1%

$156

$364.70

2.2%

10

Milwaukee

$11

7.6%

$141

$173.92

2.0%

Top 10 Markets

$271

6.8%

$3,817

$229.93

54.9%

76

Valuation Update

Portfolio Concentration –

Top 20/Top 50 Assets

CWH’s entire portfolio has approximately 305 properties but only 50 of these

assets account for almost 80% of total portfolio value

(1)

Based on Company Filings.

Top 20 Assets

The Top 20 assets, by concluded

value, account for over 55% of the

value of the portfolio, or over 60% if

assets held in discontinued

operations are excluded

Top 50 Assets

The Top 50 assets, by concluded

value, account for nearly 80% of the

value of the portfolio, or nearly 90%

if assets held in discontinued

operations are excluded

We believe CWH’s Top 20 assets represent a portfolio of comparable or superior quality

relative to the full portfolios of CWH’s public peers yet we value CWH’s Top 20 assets at a

weighted average cap rate of 7.1% while the average public peer trades at an implied cap rate

of 6.7%

Subset

Reported

Occupancy

Net Rentable

Area

As-Stabilized

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

% of Concluded

Value

Top 20 Assets

91.3%

18,380,734

$285

7.1%

$3,926

$213.61

56.5%

Top 50 Assets

90.3%

27,521,106

403

7.2%

5,477

199.00

78.8%

Other Continued Operations

87.5%

9,875,136

62

8.3%

828

83.87

11.9%

Total Continued Operations

89.5%

37,396,242

$465

7.3%

$6,305

$168.59

90.7%

Total Discontinued Operations

(1)

71.3%

8,502,942

63

8.7%

649

76.27

9.3%

Total

86.2%

45,899,184

$528

7.5%

$6,953

$151.49

100.0%

77

Valuation Update

Chicago Portfolio

CWH’s Chicago assets account for roughly 12% of the portfolio’s total value

Recent Transactions

120 S. Riverside

Nov-13

$264 PSF

6.3% cap rate

111 W. Jackson

Dec-13

$237 PSF

6.5% cap rate

300 S. Wacker

Aug-13

$220 PSF

6.3% cap rate

625 N. Michigan

Jun-13

$316 PSF

6.0% cap rate

Source:

Comparable data comes from CBRE, HFF and MBReal Estate

We believe our 7.2% weighted average cap rate and

weighted average value per square foot of $204 compare

favorably to recent transaction comparables in the market

place

City

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

Chicago Assets

$63

7.2%

$865

$204.32

“While core cap rates are hovering around 6.0%, it should be

noted that in three of five cases core office cap rates dipped below

6.0% in 2013.”

CBRE Chicago Downtown Office MarketView Q4 2013

78

Valuation Update

Philadelphia Portfolio

CWH’s Philadelphia assets account for roughly 13% of the portfolio’s total

value

Recent Transactions

1500 Spring Garden

Oct-13

$171 PSF

6.99% cap rate

Commerce Sq I & II

Dec-13

$175 PSF

6.5% cap rate

2000 Market

Mar-13

$165 PSF

7.0% cap rate

Source:

Comparable data comes from CBRE, HFF and MBReal Estate

We believe our 7.0% weighted average cap rate and

weighted average value per square foot of $185 compare

favorably to recent transaction comparables in the market

place

City

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

Philadelphia Assets

$67

7.0%

$851

$185.13

“This transaction enables us to acquire two of Philadelphia's Trophy-

class CBD properties [(Commerce Sq I and II)] at a significant discount

to replacement cost.”

Gerard H. Sweeney, President and CEO of Brandywine

79

Valuation Update

By Asset Type and Vintage

Over 60% of CWH’s assets are located in CBD locations or close to 70% if assets

held in discontinued operations are excluded

($ and SF in millions, except PSF)

# of

Cap

Concluded

Concluded

Property Type

Properties

SF

Rate

NOI

Value

Value PSF

Office -

CBD

52

22.0

7.2%

$314

$4,215

$192

Office -

Suburban

188

17.2

7.8%

184

2,256

131

Industrial

47

6.0

8.4%

21

344

57

Other

18

0.8

8.7%

9

138

179

Portfolio

305

45.9

7.5%

$528

$6,953

$151

($ and SF in millions, except PSF)

# of

Cap

Concluded

Concluded

Vintage

Properties

SF

Rate

NOI

Value

Value PSF

Prior to 2000

70

9.6

7.1%

$129

$1,689

$177

2000 -

2005

97

11.3

7.8%

101

1,248

110

2006 -

2008

70

7.9

8.4%

60

688

87

2009 -

2011

62

12.6

7.3%

180

2,538

201

Since 2012

6

4.5

7.3%

58

790

175

Portfolio

305

45.9

7.5%

$528

$6,953

$151

Portfolio

Summary

-

by

Property

Type

Portfolio

Summary

-

by

Vintage

80

Valuation Update

Footnotes

(1)

(2)

(3)

Footnotes to p. 73

(4)

(5)

(6)

(7)

Source: Company filings, Factset, SNL, Greenstreet Advisors

Per estimates from Related.

Pro forma for acquisition of Thomas Properties Group.

Highwoods data excludes industrial and retail.

Per

Greenstreet

Advisors,

except

for

CWH.

CWH

implied

cap

rates

exclude

discontinued

operations

and

are

based

on

total

portfolio Stabilized Cash NOI of $528 million.

% of total for Top 5 markets represents nine months ended 9/30/2013.

Parkway only discloses rent by market.

Parkway rent per square foot for individual markets as of 12/31/2012.