The Case for Change Now at CWH

Presentation to CWH Shareholders

April 18, 2013

Exhibit 20

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 (“EDGAR”) 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 Consent Solicitation

In connection with their solicitation of written consents, Corvex and Related have filed a definitive written consent solicitation statement with the U.S.

Securities and Exchange Commission (the “SEC”) to solicit written consents from shareholders of the Company.  Investors and security holders are urged

to read the definitive written consent solicitation statement and other relevant documents when they become available, because they contain

important information regarding the consent solicitation.

The following persons are participants in connection with the written consent solicitation of the Company’s 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 and David R. Johnson.  Information regarding the participants in the

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

definitive written consent solicitation statement filed with the SEC on April 10, 2013 and Supplement No. 1 thereto filed on April 12, 2013.

The definitive written consent solicitation statement and all other relevant documents are

available, free of charge, on the SEC’s website at www.sec.gov.

3

Table of Contents

I.

Executive Summary

4

II.

History of Underperformance

15

III.

Flawed RMR Structure and Poor Corporate Governance

30

IV.

Refuting the Portnoys’

Spurious Claims

45

V.

New Management Team and Strategy

51

VI.

Appendix

56

4

Executive Summary

5

Executive Summary

Immediate Change is Needed

Outdated structure creates inherent conflicts of interest between shareholders and external

manager Reit Management and Research, LLC (“RMR”), which is owned by Barry Portnoy

and his son Adam, the two Managing Trustees of CWH

–

RMR receives fees based on gross historical cost basis of real estate, incentivizing

growth through acquisitions regardless of returns to CWH shareholders

–

CWH paid out $395 million in fees to RMR during 2007-2012 (nearly 30% of CWH’s

market

cap

as

of

2/25/13

(1)

),

while

CWH’s

share

price

declined

68%

during

this

time

Poor corporate governance has led to continued self-dealing for benefit of RMR and the

Portnoys in our view

–

Over $2 billion of related party transactions in the last 5 years alone

–

ISS has taken notice and recommended voting against incumbent trustees last year

–

Given

entrenching

devices

in

CWH’s

documents,

shareholders

must

act

now

to

remove

the

board

or

face

at

least

three

more

years

of

mismanagement

CWH’s performance on key shareholder return and operating metrics has been poor in

absolute

and

relative

terms

over

any

relevant

time

period

in

our

view

We

firmly

believe

Commonwealth

REIT

(“CWH”

or

the

“Company”)

is

in

desperate need of a shareholder referendum given its flawed externally advised

management structure, poor corporate governance, and track record of

underperformance

(1)

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

6

Executive Summary

Shareholder Referendum: Path

Path: action by written consent requiring 2/3 vote to remove entire board of trustees

–

We filed definitive consent solicitation materials with the SEC on April 10, 2013

–

We delivered to CWH formal shareholder demands to fix a record date to determine

shareholders entitled to act by written consent on April 12, 2013

–

In

light

of

the

board’s

refusal

to

recognize

our

consent

solicitation

and

fix

a

record

date,

it

is

our

position

that

the

record

date

will

be

the

close

of

business

on

April

22

(i.e.

the

10

th

day after our request)

–

We and our lawyers believe CWH’s recent bylaw amendments, which would effectively

eliminate shareholder rights to remove trustees without cause, are invalid and a

desperate

attempt

to

disenfranchise

shareholders

(see

pg.

39

and

41

for

details)

–

With a successful 2/3 vote, shareholders can remove current trustees, elect new trustees

at a special meeting, terminate RMR’s management agreement, and unlock significant

value for all shareholders

–

Act

now:

the

future

of

the

Company

is

in

your

hands,

its

owners

We believe removing CWH’s entire board of trustees immediately is in the best

long-term interests of all shareholders, and the only near-term means for

shareholders to effect change

7

Executive Summary

Shareholder Referendum: Value

Value: $35 per share potential NAV at 4/17/13 after removal of current trustees, and target stock

price of $44+ per share at 12/31/14  (see Appendix for details on valuation)

–

$35

represents

upside

potential

of

55%

and

121%

to

current

share

price

(1)

and

unaffected

share

price

(2)

,

respectively,

after

removal

of

board

In our view, NAV represents current fair market value (if current trustees are removed)

based on bottom-up property-by-property valuation analysis led by Related, one of the

most prominent privately-owned real estate firms in the U.S.

–

Key changes from previous valuation include CWH’s massively dilutive equity offering

(followed by dilutive debt tender at a premium), sale of CWH’s minority stake in GOV, and

additional market input

–

We believe CWH could trade at a stock price of $44 or higher at 12/31/14 through

internalization of management, operational turnaround, improved capital allocation, and

multiple

expansion

–

a

straightforward

path

if

shareholders

act

now

to

remove

the

board

–

In

our

view,

potential

downside

of

-40%

or

greater

to

current

price

should

existing

trustees

remain

in

place,

due

to

market

overhangs

from

external

management,

poor

corporate

governance,

and

likelihood

of

continued

underperformance

–

(1)

Based on a closing price of $22.56 on April 17, 2013.

(2)

Based

on

a

closing

price

of

$15.85

on

February

25,

2013,

the

day

prior

to

Related

and

Corvex’s

first

public

filing.

We believe our path will unlock significant value for all shareholders, whereas

the

status

quo

will

lead

to

continued

value

destruction

and

self

dealing

for

the

benefit of the Portnoys

8

Executive Summary

Shareholder Referendum: Strategic Plan

Strategic

Plan:

manage

the

Company

in

ways

that

maximize

long-term

CWH

shareholder

value,

not

fees

paid

to

RMR.

Quite

simply,

CWH

must

adopt

best

practices

While corporate management will be replaced, we anticipate current property level

employees will be hired to work at the new CWH

–

Amend

existing

Declaration

of

Trust

and

bylaws

to

conform

to

ISS

and

Glass

Lewis

best

practices

–

no

more

shareholder

disenfranchisement

–

Cease

all

acquisition

activity

until

CWH’s

stock

price

exceeds

its

NAV

–

no

more

dilutive

equity

offerings

or

ignoring

the

views

of

shareholders

–

Use

excess

cash

flow

to

buy

back

CWH

stock

until

the

Company’s

stock

price

exceeds

its

NAV

–

no

more

‘buy

high,

sell

low’

capital

allocation

–

Cease

all

related

party

transactions

–

no

more

self-dealing

for

benefit

of

the

Portnoys 

Jim

Lozier,

former

CEO

and

co-founder

of

the

Archon

Group

L.P.,

and

CBRE,

the

world’s

largest

commercial

real

estate

services

firm,

are

in

discussions

with

us

to

be

available

to

provide

interim

management,

property

management

services,

and

leasing

services

to

the

CWH

portfolio

as

necessary

While

a

new

board

selected

by

all

shareholders

will

ultimately

determine

the

details

of

CWH’s

new

strategic

plan,

we

propose

the

following

key

elements

as

a

starting

point

for

the

Company’s

new

direction

–

Internalize management, adopt a market cost structure, and align

management

compensation with shareholder returns –

no more skewed incentives

9

Executive Summary

“Structural Change is Much Needed”

(1)

Note: Citi was a lead underwriter in CWH’s recent massively dilutive equity offering completed on February 27, 2013.

Even CWH’s underwriter has taken pains to point out the Company’s flawed

structure and history of value destruction

10

Executive Summary

Track Record of Underperformance

CWH has in our view performed poorly in absolute terms and underperformed

its peers

(1)

on almost any metric over any relevant time period

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

years,

5

years,

and

10

years,

respectively

(2)

Recent

valuation

nearly

40%

below

peers

on

unlevered

cap

rate

basis

(3)

53% and 41% discount to peers on a price / forward FFO multiple basis for last year and 3

years, respectively

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

performance of its peers

$2.7

billion

of

net

acquisitions

and

capex

since

2007

(over

2x

CWH’s

recent

market

cap

(3)

),

while CWH book value per share is essentially flat

In

our

view,

there

is

absolutely

no

way

to

slice

and

dice

the

data

in

favor

of

the

Portnoys

–

their

performance

has

been

horrible

(1)

Select peers include Piedmont Office Realty (PDM), Highwoods Properties (HIW), Mack-Cali Realty (CLI), Brandywine Realty (BDN), and Parkway Properties (PKY).

(2)

Returns

data

calculated

through

February

25,

2013,

the

day

prior

to

Related

and

Corvex’s

first

public

filing.

(3)

Based

on

a

closing

price

of

$15.85

on

February

25,

2013,

the

day

prior

to

Corvex

and

Related’s

first

public

filing.

11

Executive Summary

Flawed RMR Structure and Poor Corporate Governance

ISS

recommended

voting

against

incumbent

trustees

last

year

(per

ISS

Proxy

Advisory

Services

report,

April

25,

2012)

Proposal

to

Elect

Director

William

A.

Lamkin

–

ISS

RECOMMENDATION:

AGAINST

Proposal

to

Elect

Director

Adam

D.

Portnoy

–

ISS

RECOMMENDATION:

AGAINST

ISS Governance Risk Indicators:

–

“Shareholder Rights HIGH CONCERN”

“The board is classified”

“The company has a poison pill in effect”

“The company’s poison pill includes a dead-hand, slow-hand, or similar provision”

“The company’s poison pill has not been approved by shareholders”

–

“Board Structure MEDIUM CONCERN”

“40% of the directors are family members of executives or majority shareholders”

“The

company

has

a

poison

pill

that

contains

a

dead-hand,

slow-hand,

or

similar

feature.

Such

features

are

uncommon

and

are

unjustifiable

from

a

governance

standpoint.

Not

only

do

dead-hand

poison

pills

and

their

variants

exclude

shareholders

from

the

corporate

governance

process,

but

they

also

disenfranchise

future

directors…”

12

Executive Summary

“Gigantic Conflicts of Interest”

“The externally managed REIT structure creates conflicts of interest that are so

severe, we don’t believe we can quantify the share price discount an investor should

require to buy any of these companies. As a result, we have long

deemed the Portnoy

REITs to be ‘uninvestable.’”

“For most externally advised REITs, the fee paid to the advisor is predicated on the

company’s size –

not on its success (or lack thereof). Therein lies the conflict

of

interest. The advisor carries a strong incentive to constantly sell common stock in

order to raise funds for acquisitions. The price at which the equity is raised matters

little to the advisor –

making the REIT bigger and increasing the advisory fee is a

primary objective.”

“The Portnoy REITs –

What It Means to be ‘Uninvestable’,”

Green Street Advisors,

March 1, 2013

13

Executive Summary

Questions All CWH Shareholders Should be Asking

Have

current

trustees

created

value

for

CWH

shareholders?

Is it possible for existing trustees to fairly represent shareholders given their conflicts of interest?

Why have RMR’s fees gone up 30% since 2007 while CWH’s stock has declined 68%?

Why are the Portnoy REITs some of the last remaining externally managed equity REITs in the

public markets?

Will

CWH

ever

trade

at

a

peer

valuation

with

RMR

as

its

external

manager?

How

much

of

the

Portnoy

fortune

has

been

extracted

from

the

savings

of

retail

investors?

Why does CWH lag peers on nearly every relevant operational metric?

Why did CWH seek to sell equity at a 48% discount to book value to repay debt trading above

par with no maturities or liquidity needs?

Why did CWH sell its $240 million minority stake in GOV only after massively diluting

shareholders by issuing $650 million in new CWH equity at $19.00?

How can existing trustees defend selling equity at $19.00, a massive discount, at the same time

they ignored an offer at $27.00, a significant premium?

How

can

CWH

call

its

hand-picked

trustees

“independent?”

14

Executive Summary

Questions All CWH Shareholders Should be Asking (cont’d)

Why

haven’t

CWH’s

“independent”

trustees

formed

an

independent

committee

and

hired

independent advisors?

How have CWH shareholders been compensated for the multiple new RMR platforms launched with

CWH’s assets?

Does

CWH

even

have

a

strategy,

or

is

it

simply

recycling

capital

to

create

the

appearance

of doing

something?

Why does CWH refuse to hold Q&A on its conference calls and roadshows?

Why

are

the

Portnoys

trying

to

change

Maryland

law

rather

than

face

a

shareholder

vote?

Why haven’t current trustees prepared a detailed presentation of their own

demonstrating how much

value they have created for CWH shareholders?

Why isn’t anyone in the REIT industry speaking up to defend the Portnoys?

How much CWH shareholder money have existing trustees already wasted in the last seven weeks

trying to further entrench themselves?

How

much

more

damage

will

be

inflicted

on

CWH

shareholders

in

the

next

3

years

if

current

trustees

are

not

removed

immediately?

15

History of Underperformance

16

History of Underperformance

CWH has in our view performed poorly in absolute terms and underperformed

its peers on almost any metric over any relevant time period

Stock price performance and total shareholder return

Valuation

Cost structure

Acquisitions and return on investment

NOI, EBITDA, CAD, and FFO / share growth

Corporate governance

In

our

view,

there

is

absolutely

no

way

to

slice

and

dice

the

data

in

favor

of

the

Portnoys

–

their

performance

has

been

horrible

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

Enterprise

Implied

G&A /

Current

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

11.1%

$89

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%

CLI

Mack-Cali Realty Corp.

$27.15

$2,715

$4,983

8.2%

$158

1.8%

44%

10.6x

10.5x

13.4x

13.3x

6.6%

PDM

Piedmont Office Realty Trust Inc.

$19.66

$3,294

$4,699

6.9%

$229

0.6%

30%

14.0x

13.5x

15.8x

15.1x

4.1%

PKY

Parkway Properties Inc.

$16.39

$920

$2,096

6.0%

$177

1.8%

37%

13.3x

12.4x

14.2x

13.7x

2.7%

High

$3,294

$4,999

8.2%

$229

1.8%

58%

14.0x

13.5x

15.8x

15.1x

6.6%

Mean

2,359

4,293

7.0%

177

1.4%

42%

12.0x

11.5x

14.6x

14.1x

4.6%

Median

2,715

4,699

6.9%

176

1.3%

40%

13.1x

12.4x

14.2x

13.8x

4.6%

Low

920

2,096

6.0%

144

0.6%

30%

9.0x

8.6x

13.4x

13.3x

2.7%

17

History of Underperformance

Summary Public Comparables

CWH trades 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 13D filing

Financial information as of Q4 2012. Implied nominal cap rate is calculated as GAAP LTM NOI / TEV.

(1) CWH implied cap rate based on CWH standalone TEV of $4,914 million and Related and Corvex estimates of comparable, stabilized  NOI of $547 million

Source: Company filings and FactSet

18

History of Underperformance

Total Returns –

1 year

HIW: 15.5%

PDM: 15.3%

CWH: (9.4%)

PKY: 65.5%

CLI: 1.5%

BDN: 25.2%

RMZ: 10.6%

Note: Total returns include dividends

Source: SNL

1 year

3 year

PKY

65.5%

6.9%

BDN

25.2%

35.8%

HIW

15.5%

42.1%

PDM

15.3%

39.1%

CLI

1.5%

(2.7%)

Average

24.6%

24.2%

RMZ

10.6%

52.5%

CWH

(9.4%)

(26.6%)

CWH –

Avg.

34.0%

50.8%

CWH has underperformed its peers over the last year

CWH's peer with the closest total return performance is CLI, which has consistently outperformed

CWH notwithstanding having 80% of its office markets either struggling or in secular decline

19

History of Underperformance

Total Returns –

3 years

CWH has underperformed its peers over the last 3 years

HIW: 42.1%

PDM: 39.1%

CWH: (26.6%)

PKY: 6.9%

CLI: (2.7%)

BDN: 35.8%

RMZ: 52.5%

Note: Total returns include dividends

Source: SNL

1 year

3 year

PKY

65.5%

6.9%

BDN

25.2%

35.8%

HIW

15.5%

42.1%

PDM

15.3%

39.1%

CLI

1.5%

(2.7%)

Average

24.6%

24.2%

RMZ

10.6%

52.5%

CWH

(9.4%)

(26.6%)

CWH –

Avg.

34.0%

50.8%

20

History of Underperformance

Share Price Performance –

1 year

CWH has underperformed its peers over the last year

HIW: 9.8%

PDM: 10.1%

CWH: (16.9%)

PKY: 60.2%

CLI: 5.0%

BDN: 19.1%

Source: Factset

1 year

3 year

PKY

60.2%

(0.7%)

BDN

19.1%

15.4%

HIW

9.8%

21.4%

PDM

10.1%

16.1%

CLI

(5.0%)

(18.9%)

Average

18.8%

6.6%

CWH

(16.9%)

(42.9%)

CWH –

Avg.

35.7%

49.5%

21

History of Underperformance

Share

Price

Performance

–

3

years

CWH has underperformed its peers over the last three years

HIW: 21.4%

PDM: 15.4%

CWH: (42.9%)

PKY: (0.7%)

CLI: (18.9%)

BDN: 16.1%

Source: Factset

1 year

3 year

PKY

60.2%

(0.7%)

BDN

19.1%

15.4%

HIW

9.8%

21.4%

PDM

10.1%

16.1%

CLI

(5.0%)

(18.9%)

Average

18.8%

6.6%

CWH

(16.9%)

(42.9%)

CWH –

Avg.

35.7%

49.5%

22

History of Underperformance

FFO Multiples

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

PDM: 14.0x

CWH: 5.4x

HIW: 13.1x

CLI: 10.6x

BDN: 9.0x

Source: Factset

PKY: 13.3x

Average

1 year

3 year

PKY

9.9x

7.9x

BDN

8.9x

8.6x

HIW

12.3x

12.8x

PDM

12.6x

12.3x

CLI

10.4x

11.1x

Average

10.8x

10.5x

CWH

5.0x

6.2x

CWH –

Avg.

(53.4%)

(40.7%)

23

History of Underperformance

Operating Performance

Value

accruing to

RMR, not

shareholders

Poor performance on key financial metrics, while fees paid to RMR continue to

grow 

(1)

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

Source: Company filings and SNL

($ in millions)

For the Fiscal Year Ending December 31,

2010

2011

2012

Share

Price

Performance

(if

held

since)

(1)

(38.2%)

(39.0%)

(6.9%)

SF Owned per Share (% growth)

(15.9%)

(5.2%)

(0.6%)

NOI per Share (% growth)

(19.1%)

(4.2%)

16.1%

EBITDA per Share (% growth)

(22.1%)

(4.7%)

(27.2%)

FFO per Share (% growth)

(13.8%)

(9.9%)

0.0%

CAD per Share (% growth)

(23.7%)

(27.7%)

(17.3%)

Fees Paid to RMR

$62.2

$69.5

$77.3

% growth

3.4%

11.7%

11.2%

24

History of Underperformance

Same Store Underperformance

CWH trails its core office REIT peers by 225 bps and 265 bps on same store rental growth

and NOI growth, respectively

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

CWH underperforms its peers on a same store basis

Note: Analysis excludes PDM, which does not disclose same store rent

(1)

(2)

(3)

Source: Company filings

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)

CommonWealth excluded 94 underperforming properties 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

Average does not include CWH

Unlike CWH, 80% of CLI’s markets are either struggling or in secular decline

(3.0%)

(2.0%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

4.0%

2.8%

2.2%

0.8%

(1.1%)

(2.0%)

PKY

HIW

BDN

CWH

CLI

6.5%

3.3%

2.7%

0.2%

(1.1%)

(2.0%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

PKY

HIW

BDN

CWH

CLI

70.5%

67.7%

61.0%

59.8%

57.7%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

BDN

HIW

CLI

PKY

CWH

Avg

(2)

: 1.2%

Avg

(2)

: 2.8%

Avg

(2)

: 64.7%

(3)

(3)

25

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

(1)

Average does not include CWH

Source: Company filings

2010 rent growth

2010 NOI growth

2010 NOI margin

2011 rent growth

2011 NOI growth

2011 NOI margin

0.3%

(2.8%)

(2.5%)

(3.5%)

(5.2%)

(6.0%)

(5.0%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

0.0%

1.0%

HIW

BDN

CLI

CWH

PKY

Avg

(1)

:

(2.5%)

(0.9%)

(3.3%)

(3.7%)

(6.2%)

(8.5%)

(9.0%)

(8.0%)

(7.0%)

(6.0%)

(5.0%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

0.0%

HIW

CLI

BDN

PKY

CWH

Avg

(1)

:

(3.5%)

68.4%

66.6%

60.2%

55.7%

54.3%

50.0%

55.0%

60.0%

65.0%

70.0%

BDN

HIW

CLI

PKY

CWH

Avg

(1)

:

62.7%

(1.6%)

(2.6%)

(3.0%)

(3.4%)

(3.7%)

(4.0%)

(3.5%)

(3.0%)

(2.5%)

(2.0%)

(1.5%)

(1.0%)

(0.5%)

0.0%

CWH

BDN

HIW

CLI

PKY

Avg

(1)

:

(3.2%)

0.0%

(0.9%)

(3.1%)

(4.3%)

(6.4%)

(7.0%)

(6.0%)

(5.0%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

0.0%

1.0%

HIW

PKY

BDN

CWH

CLI

Avg

(1)

:

(2.6%)

69.5%

67.3%

60.2%

55.9%

53.6%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

BDN

HIW

CLI

CWH

PKY

Avg

(1)

:

62.7%

26

History of Underperformance

Acquisition Activity

CWH has grown primarily through asset acquisitions, which we believe benefit

RMR and not shareholders

(1)

Market cap as of 12/31/12. Metric shown includes SIR.

(2)

Includes net sale proceeds from consolidated joint venture

(3)

Weighted by market cap

Source: Company filings and Factset

Net

acquistions

/

CapEx

as

%

of

Recent

Market

Cap

(1)

2007

2008

2009

2010

2011

2012

Cumulative

Parkway Properties Inc. (PKY)

6.4%

26.2%

2.2%

8.7%

42.4%

75.2%

161.1%

Highwoods Properties Inc. (HIW)

5.3%

5.2%

2.3%

3.4%

6.1%

9.0%

31.3%

Mack-Cali Realty Corp. (CLI)

15.0%

3.6%

0.8%

3.6%

3.6%

3.3%

29.9%

Piedmont

Office

Realty

Trust

Inc.

(PDM)

(2)

1.5%

4.1%

1.2%

2.1%

(2.5%)

0.5%

6.9%

Brandywine Realty Trust (BDN)

(6.6%)

(12.8%)

6.0%

10.4%

0.9%

0.3%

(1.8%)

Average

(3)

4.7%

3.1%

2.2%

4.6%

4.9%

8.7%

28.2%

CWH

31.0%

6.1%

33.5%

27.3%

44.6%

55.6%

198.1%

CWH share price

$30.92

$13.48

$25.88

$25.76

$16.64

$15.84

CWH price / FFO multiple

6.8x

3.1x

6.0x

6.9x

4.9x

4.7x

CWH has spent $2.7 billion on acquisitions since 2007 as the stock has underperformed

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

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

27

History of Underperformance

Management and Board Ownership

CWH trustees and senior management hold a smaller stake than those of peers

CWH’s insiders currently hold a 0.3% 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

Source: Company filings, CWH holdings per proxy filed 2/25/13

CWH Insider Holdings

Position

% of S/O

Directors and Executive Officers:

1

Barry M. Portnoy

233,086

0.20%

2

Adam D. Portnoy

38,599

0.03%

3

John C. Popeo

33,500

0.03%

4

David M. Lepore

29,250

0.02%

5

Frederick N. Zeytoonjian

10,967

0.01%

6

William A. Lamkin

8,812

0.01%

7

Joseph L. Morea

2,000

0.00%

356,214

0.30%

Total CWH Director and Executive

Officer Ownership

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

6.8%

3.0%

3.0%

2.8%

0.5%

0.3%

CLI

HIW

PKY

BDN

PDM

CWH

Avg. (1): 3.2%

28

History of Underperformance

Externally Managed Equity REITs

Out of approximately 90 equity REITs with greater than $1 billion market cap and greater than 1

year in the public markets, only six are externally managed today

The externally managed REITs have consistently underperformed their internally managed peers

SNH peers include HCP, VTR, HCN, ARE, BMR, OHI, HTA, HR, NHI, MPW, LTC, SBRA, and UHT

HPT peers include HST, LHO, DRH, RHP, RLJ, SHO, PEB, BEE, HT, AHT, FCH, CHSP, INN, CLDT, MDH, and SPPR

CWH and GOV peers include PKY, PDM, BDN, CLI, and HIW

As of March 12, 2013

Source: SNL 

: CWH –

Avg.

Company (ticker)

Property type

External corporate

adviser

Market cap

($M)

Premium/

discount to NAV

(%)

3-year total

return (%)

Senior Housing Properties Trust (SNH)

Health care

RMR

4,742.7

(33.6)

(25.0)

Hospitality Properties Trust (HPT)

Hotel

RMR

3,277.6

1.2

(0.7)

CommonWealth REIT (CWH)

Office

RMR

2,573.1

(40.8)

(32.5)

Government Properties Income Trust (GOV)

Office

RMR

1,361.7

2.7

0.7

Select Income REIT (SIR)

Diversified

RMR

1,028.8

NA

NA

Average

2,596.8

(17.6)

(14.4)

RMR manages five of those six REITs

The sixth is Alexander’s (ALX), which is managed by Vornado; however Vornado, also holds a

32% stake in the company

29

History of Underperformance

No Management Credibility

Management appears to lack an understanding of their own finances given a 50%

cut in the dividend one quarter after dismissing the question

CWH appears to have now discontinued Q&A on all of its conference calls

“Yeah.

I'm

glad

you

asked

that,

John,

because

it's

something

that

a

lot

of

investors

have

asked

us

about,

and

it's

the

security

of

the

dividend.

Right

now,

we

acknowledge

that

it

certainly

appears

that

the

market

is

expecting

a

dividend

cut.

We

disclosed

our

CAD

payout

ratio

as

a

104%.

That

is

above

100%,

it's

not

much

above

100%.

We

think

we

can

maintain

this

dividend

for

the

foreseeable

future.

If

the

payout

ratio

were

to

balloon

up,

well

above

104%,

well

above

100%,

and

be

there

for

quite

some

time,

I

think

we'd

have

to

seriously

consider

reducing

the

dividend.

But

right

now,

there's

no

intention

from

management

or

the

Board,

to

do

anything

with

the

dividend.

Now

that

might

change

as

circumstances

change.

But

today,

we

have

no

intention

of

changing

the

dividend.

And

I

have

to

tell

you,

it

is

–

at

times

it

is

perplexing

to

us,

because

we

look

at

our

numbers

and

say

we

can

afford

the

dividend,

and

the

dividend

doesn't

look

like

it

should

be

at

risk.

Yet

the

stock

price

seems

to

indicate

that

everybody

else

doesn't

see

that.

They

think

that

we're

going

to

–

that

there

should

be

a

dividend

cut.

Maybe

they

are

anticipating

something

years

from

now,

or

a

long

time

from

now.

But

I

don't

–

it

is

–

sometimes

it's

as

perplexing

to

us

as

to

maybe

you,

John,

but

that's

our

thoughts

on

it.”

“And

then

the

last

question,

the

obvious

question,

as

you

are

bouncing

around

$18,

$19

a

share,

high

10s

on

the

dividend,

clearly

when

you're

at

that

level,

people

are

either

anticipating

a

diminution

or

a

decline

in

share

value

and/or

a

dividend

adjustment.

And

it

seems

to

me

that

if

the

stocks

price

can't

get

back

up

into

the

low

to

mid

20's,

a

dividend

cut

would

be

the

prudent

thing

to

do.

In

fact,

if

you

cut

the

dividend

down

to

$1.20

you'd

still

have

one

of

the

highest

dividends

in

the

office

industrial

REIT

space.

So

what's

your

thought

process

on

all

that?”

Stifel Nicolaus: Q1 2012 Earnings Call, May 3, 2012

Adam Portnoy: Q1 2012 Earnings Call, May 3, 2012

30

Flawed RMR Structure and

Poor Corporate Governance

31

Flawed RMR Structure and Poor Corporate Governance

RMR Fees vs. CWH Shareholder Returns

Fees paid to RMR continue to grow, while CWH shareholder value continues to

decline

RMR extracted nearly 30% of CWH’s market cap during 2007-2012, as CWH stock continued

to plummet

'07-'12

2007

2008

2009

2010

2011

2012

Total

Fees Paid Out to RMR

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$394.6

RMR Fees % Growth

--

5.9%

(1.0%)

(0.5%)

11.7%

11.2%

29.5%

RMR

Fees

as

%

of:

CWH Market Cap

4.5%

4.8%

4.7%

4.7%

5.2%

5.8%

29.7%

CWH Market Cap, Cumulative

4.5%

9.3%

14.0%

18.6%

23.9%

29.7%

29.7%

CWH Cumulative Stock Price Return

(37.4%)

(74.7%)

(46.0%)

(48.4%)

(66.3%)

(67.9%)

(67.9%)

(1)

Market cap of $1.3 billion based on a closing price of $15.85 on February 25, 2013, the day prior to Related and Corvex’s first public filing.

(2)

RMR fees paid per CWH public filings.

32

Flawed RMR Structure and Poor Corporate Governance

Flawed RMR Structure

We believe CWH’s externally managed structure skews incentives, reduces

cash flow through excessive fees, destroys investor confidence, and impairs

valuation multiple (off already depressed earnings)

RMR receives fees based on gross historical cost basis, incentivizing growth through

acquisitions regardless of returns to CWH shareholders or strategic rationale

–

$2.7 billion of net acquisitions and capex since 2007 (over 2x CWH’s recent market

cap

(1)

), while CWH book value per share essentially flat

Trustees

own

less

than

1%

of

CWH

stock,

but

certain

trustees

own

100%

of

RMR,

skewing

their incentives in favor of the external manager

–

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

–

All executive officers of CWH are also officers of RMR

–

Barry Portnoy’s son-in-law is also an officer of RMR

Given

these

inherent

and

widely

recognized

problems,

CWH

and

the

other

Portnoy

REITs

are

some of the last remaining publicly traded equity REITs today

(1)

Market cap of $1.3 billion based on a closing price of $15.85 on February 25, 2013, the day prior to Related and Corvex’s first public filing.

33

Flawed RMR Structure and Poor Corporate Governance

“External Manager RMR Causes Concern”

“We recommend investors avoid the shares of CWH at this time due to the uncertainty

generated by the spinoff of SIR and the continuous decline in per share values. SIR is

the second spinoff since 2009 and a recent one, GOV, did not seem to benefit the

share holders. It appears that SIR, which carried little debt and all of the highest

margin properties from CWH to its own portfolio, may become an acquisition vehicle.

The

manager

seems

to

be

making

decisions

which

are

beneficial

to

the

management

company and detrimental to the shareholders. The management contract awards

compensation for growing the portfolio but not as much for improving share value.

The

portfolio

is

in

good

shape

and

could

be

worth

more

to

an

acquirer…

An

acquirer

could also reduce the operating costs by about $50 million annually by replacing

RMR.”

“External Manager RMR Causes Concern At CommonWealth REIT,”

Seeking Alpha,

August 27, 2012

34

Flawed RMR Structure and Poor Corporate Governance

Poor Corporate Governance

In our view trustees have crossed the limits of legally enforceable corporate

governance time and time again in order to disenfranchise CWH shareholders,

insulate

management,

and

maximize

control

and

financial

benefits

for

RMR

One of the Portnoys’

latest legal maneuvers was a secret, failed attempt (likely using CWH

funds)

to

insert

an

11

th

hour

amendment

into

a

Maryland

House

Bill

that

would

have

allowed

CWH to unilaterally eliminate shareholders right to remove trustees without cause

–

Trustees would rather intervene in the Maryland legislative process and change the law

than face their own shareholders

Over $2 billion of related party transactions in last 5 years

–

CWH assets have been repeatedly used to seed new platforms for RMR, creating new

income streams for RMR without, in our view, due compensation for CWH shareholders,

and worsening the cash flow profile of CWH

We

believe

3

so-called

“independent”

trustees

are

conflicted

by

any

common

sense definition

–

2

of

CWH’s

“independent”

trustees

serve

on boards of other RMR-managed entities

–

3

rd

“independent”

trustee

was

former

RBC

banker

in

capital

markets

division (retired in

2012), which regularly receives lucrative business from CWH (including recent dilutive

equity offering) and RMR’s other entities

Other issues include a classified board, poison pill, and slow hand provision

ISS

has

taken

notice

and

recommended

voting

against

incumbent

trustees

last

year

35

Flawed RMR Structure and Poor Corporate Governance

Scorched Earth Policies Require Action Now

These value destructive actions include:

–

A massively dilutive equity offering done 48% below book value to repay debt trading

above par

–

Two separate bylaw amendments that in our view are invalid and seek to disenfranchise

shareholders by effectively eliminating their ability to act by written consent to remove

trustees without cause

–

A failed attempt to secretly change Maryland law to make it impossible for shareholders

to remove trustees without cause

–

A contemplated sale of CWH’s 56% controlling interest in SIR at a potential discount to

the

market

price

rather

than

a

control

premium

(which

would

also

allow

RMR

to

continue

extracting fees from SIR)

If any shareholders had doubts as to where the trustees’

allegiances lie, these actions have

made clear it is with the Portnoys and not shareholders

Since our first call for change seven weeks ago, the Portnoys and their hand-

picked trustees have used Company funds in a self-serving campaign aimed at

in our view advancing their own financial interests and entrenchment

If shareholders don’t act now to remove the entire board, we will be subject to at

least

three

more

years

of

mismanagement,

the

minimum

time

needed

to

replace

a

simple

majority

of

CWH’s

“super-charged”

staggered

Board

If less than the entire board is removed, vacancies will be filled by the remaining

trustees and no change will be effected

36

Flawed RMR Structure and Poor Corporate Governance

Conflicted Board of Trustees

Significant overlap of board members across RMR entities, including so-called

“independent”

trustees 

In

our

view

Portnoys

and

“independent”

trustees

conflicted

by

any

common

sense

definition

2

of

3

“independent”

trustees

serve

on

other

Portnoy

boards

3

“independent”

trustee

just

retired

from

RBC

capital

markets

division

in

2012,

a

division

which regularly receives lucrative business from CWH (including the recent dilutive equity

offering) and RMR’s other entities

Same Job, Different Company?

Travel Centers

Five Star

RMR Real Estate

Name

Title

CWH

HPT

SNH

GOV

SIR

of America

Senior Living

Income Fund

Senior

Management:

Adam D. Portnoy

President & Managing Trustee

Vern D. Larkin

Director of Internal Audit

Jennifer B. Clark

Secretary

Board

of

Directors:

Adam D. Portnoy

President & Managing Trustee

Barry D. Portnoy

Managing Trustee

William A. Lamkin

Partner at Ackrell Capital

Frederick N. Zeytoonjian

Founder & CEO of Turf Products

Joseph Morea

Retired RBC Banker

rd

37

Flawed RMR Structure and Poor Corporate Governance

Dilutive Equity Offering

Despite protests from some of its largest shareholders, a bona fide offer for $27.00 per share,

and in our view no need to issue equity, on March 5, 2013 CWH sold 34.5 million shares at

$19.00

–

Transaction increased CWH’s share count by 41% and diluted CWH’s NAV by over $6

per share

Why did CWH sell its $240 million minority stake in GOV only after issuing new CWH shares

at a 48% discount to book value?

–

Perhaps recognizing its actions were indefensible, trustees insulated themselves from

questioning and ignored shareholder demands to stop offering

–

Canceled investor lunch and did not hold Q&A on roadshow call

CWH’s use of proceeds for the equity offering, at a massive discount, was to repay debt

trading at prices ranging from 102% to 111% of par

–

Remarkably, CWH did not have any upcoming maturities or liquidity issues associated

with this debt or any debt

–

We believe recently completed equity offering serves as clear example of poor

management, skewed incentives, and terrible capital allocation

However,

equity

offering

increases

Company’s

equity

base,

creating

additional

capacity

to

do

acquisitions

and

thereby

pay

more

management

fees

to

RMR

38

Flawed RMR Structure and Poor Corporate Governance

“Acting in the best interest of RMR rather than as a fiduciary”

“[Related and Corvex] are spending their own dollars, while CWH is spending

shareholder

money

to

prevent

RMR

from

being

terminated

-

an

outcome

we

think

virtually all shareholders favor. Ironic.”

“RMR, with $77mm of high-margin annual revenue on the line, has too much to lose

and is directing the CWH board to fight to the finish (using shareholder dollars to do

so).”

“The CWH board, controlled by external manager RMR, is in the unique position

of acting in the best interest of RMR rather than as a fiduciary

to the CWH

Shareholders.”

“If RMR prevails, we believe the end result is the instantaneous resumption of

CWH shares trading at a significant discount to NAV -

we believe a $15/sh price...”

Stifel Nicolaus, March 7, 2013

39

Flawed RMR Structure and Poor Corporate Governance

March 1 Bylaw Amendment

On Friday, March 1, 2013, CWH announced its bylaws had been amended to “clarify that a

shareholder seeking to take action to remove one or more Trustees must comply with the

same bylaw requirements as a shareholder making a nomination of an individual for election

to the Board.”

(3% / 3 year requirement)

–

‘Clarification’

is actually an attempt to re-craft bylaws in order to effectively eliminate a

shareholder

right

(action

by

written

consent

to

remove

trustees)

granted

in

CWH’s

Declaration of Trust since 1986

–

The Declaration of Trust can only be changed through a shareholder vote, explaining

why trustees are attempting to use the bylaws in this backdoor manner

The Declaration of Trust supersedes the bylaws, and bylaws cannot be used to remove a

right granted in the Declaration of Trust

–

Amateurish word games suggest to us that trustees are terrified of facing their own

shareholders, and have looked to throw up any obstacle or delay tactic they can

We

are

litigating

this

matter

in

Maryland

Court

and

have

a

hearing

scheduled

for

May

3

rd

–

We

and

our

legal

team

believe

the

board’s

attempted

‘clarification’

is

inconsistent

with

CWH’s

own

Declaration

of

Trust

and

thus

null

and

void

as

a

matter

of

law

Related

and

Corvex

believe

CWH’s

March

1

bylaw

amendment

is

invalid

and

a

desperate attempt to disenfranchise shareholders

st

40

Flawed RMR Structure and Poor Corporate Governance

Failed Maryland House Bill Amendment

Proposed amendment would have opened door to make it impossible to remove trustees

without cause in many Maryland companies (regardless of voting threshold), even if

shareholders had explicit right to do so in a company’s charter

Similar to March 1st bylaw amendment, CWH couched proposed amendment as a

“clarification”

We believe notion that amendment was a “clarification”

is absurd, as existing Maryland law

expressly contemplates removal of staggered board without cause when provided for in a

company’s

charter

–

as

is

unequivocally

done

in

CWH’s

Declaration

of

Trust

CWH used deceptive letters (which were later withdrawn) from a conflicted attorney in an

attempt to mislead Maryland senators into believing amendment had broad legal support and

was

ministerial,

when

in

fact

it

had

not

even

been

discussed

by

key

Maryland

bar

committee

(1)

Fortunately for CWH shareholders and all shareholders of Maryland-based corporations and

trusts,

the

amendment

quickly

died

once

legislators

became

aware

of

CWH’s

manipulative

behavior and the clear fact that the amendment was substantive and not at all a “clarification”

Current

trustees

would

rather

manipulate

the

Maryland

legislative

process

and

change

the

law

than

face

their

own

shareholders

One

of

the

Portnoys’

latest

legal

maneuvers

was

a

secret

attempt

(likely

using

CWH money) to insert an 11

th

hour amendment into a Maryland House Bill

(1)

The proposed amendment was not even discussed by the Corporation Law Committee of the Business Law Section of the Maryland State Bar Association, a group

which typically reviews and comments on all changes to Maryland corporate and REIT law before changes are heard by the General Assembly.

41

Flawed RMR Structure and Poor Corporate Governance

April 12 Bylaw Amendment

On

April

12,

2013,

CWH

purported

to

“opt-in”

to

Section

3-803

of

the

Maryland

General

Corporation Law, which allows Maryland companies to adopt a classified board (something

CWH has had in place since 1986)

CWH

has

taken

the

view

that

“opting

in”

to

Section

3-803

enables

them

to

unilaterally

eliminate shareholders’

right to remove trustees without cause

–

We

and

our

lawyers

firmly

believe

that

they

are

wrong

In fact, CWH  recently sought to amend Section 3-803 to “clarify”

that a company opting-in to

Section 3-803 could eliminate shareholders right to remove trustees without cause. The

Maryland legislature did not approve the proposed amendment. Various senators noted

during hearing that CWH’s proposed amendment represented a substantive change in the

law, not a “clarification”

CWH’s novel interpretation of Section 3-803 conflicts with 14 years of public filings by CWH,

which not once mention the potential effects of opting into Section 3-803, notwithstanding

extensive disclosure of Maryland law applicable to shareholder rights, and CWH ’s continuous

reminder to shareholders that trustees can be removed without cause by a two-thirds vote

CWH’s latest bylaw amendment conflicts with 14 years of their own public

disclosure

42

Flawed RMR Structure and Poor Corporate Governance

No Shareholder Return on Investment

Trustees continue to spend on acquisitions and issue more shares

despite poor shareholder

returns due to skewed incentives created by RMR’s external management

Management has spent $2.7 billion on acquisitions and capex since 2007 (over

2x

CWH’s

entire

market

cap

(1)

), while CWH book value per share is essentially

flat

(1)

Market

cap

of

$1.3

billion

based

on

a

closing

price

of

$15.85

on

February

25,

2013,

the

day

prior

to

Related

and

Corvex’s

first

public filing.

(2)

Historical book values calculated using SIR and GOV market values.  Market cap and 2012 book value uses stock market prices as of 2/25/13.

(3)

Metric shown includes SIR.

'07-'12

'07-'12

2007

2008

2009

2010

2011

2012

CAGR

Cumulative

Book Value

(2)

$2,198

$2,217

$2,259

$2,702

$2,816

$3,086

7.0%

40.4%

Book Value per Share

$36.11

$34.68

$35.66

$37.53

$33.24

$36.82

0.4%

2.0%

Memo: Shares Outstanding

60.9

63.9

63.4

72.0

84.7

83.8

6.6%

37.6%

Gross Real Estate Assets

(3)

$6,156

$6,242

$6,324

$6,357

$7,244

$7,829

4.9%

27.2%

Cumulative

Net Acquisitions and CapEx

$419

$83

$453

$369

$604

$753

$2,681

% of Recent Market Cap

31.6%

6.2%

34.1%

27.8%

45.5%

56.7%

201.9%

Total RMR Management Fees

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$394.6

% of Recent Market Cap

4.5%

4.8%

4.7%

4.7%

5.2%

5.8%

29.7%

43

Flawed RMR Structure and Poor Corporate Governance

“A Dinosaur”

“As the REIT industry grew rapidly during the ‘90s, the externally advised model

became a dinosaur. The IPO wave of the ‘90s brought forth companies with top-notch

managers/employees whose financial interests were strongly aligned with those of

shareholders.

While

the

externally

advised

structure

remains

the

norm

in

the non-

traded REIT world, where conflicts of interest run rampant, the Portnoy REITs stand

out like a sore thumb in the publicly traded REIT domain.

If

the

conflicts

of

interest

are

so

detrimental

to

shareholders,

why

don’t

they

and the

Boards of the REITs terminate the advisory contract and staff the REIT with its own

employees?

With

respect

to

the

Portnoy

REITs,

a

primary

reason

is

that

the

corporate

governance impediments are substantial. Staggered boards are a primary obstacle.

Poison

pills

are

another.

In

addition,

the

valuation

gap

between

the

Portnoy

companies

and

their

REIT

peers

has

usually

been

wide,

but

rarely

wide

enough to

make the financial reward worthwhile for the vast effort required to enact change.”

“The

Portnoy

REITs

–

What

It

Means

to

be

‘Uninvestable’,”

Green

Street

Advisors,

March 1, 2013

44

Flawed RMR Structure and Poor Corporate Governance

A Case Study in Skewed Incentives

How does a misalignment in incentives manifest itself in financial losses for

CWH

shareholders

and

profits

for

RMR?

Capital Investment

$10,000,000

Equity Investment

$10,000,000

Current Occupancy

0.0%

Financing at 60% LTV

$15,000,000

New Occupancy

80.0%

  Total Capital Investment

$25,000,000

Incremental NOI

$2,000,000

Incremental NOI (6% cap rate)

$1,500,000

Less: Financing Cost (4.5%)

($675,000)

  Equity Cash Flow

$825,000

Return on Equity

20.0%

Return on Equity

8.3%

Incremental Fees to RMR

Incremental Fees to RMR

% of historical cost basis

0.5%

% of historical cost basis

0.5%

Incremental historical cost basis

$10,000,000

Incremental historical cost basis

$25,000,000

  Incremental Fees to RMR

$50,000

  Incremental Fees to RMR

$125,000

Capital Allocation Option "B"

Capital Allocation Option "A"

Acquire New Property at lower ROE

Reinvest in Existing Property to Maximize ROE

Which option would you have chosen?

Which option do you think RMR chose?

Is

it

any

wonder

that

CWH’s

stock

is

down

43%

over

the

past

3

years?

•

The case study below is based on extensive due diligence performed by Related on a specific

vacant property in CWH’s portfolio, which we believe management is unwisely looking to sell

45

Refuting the Portnoys’

Spurious Claims

46

Refuting the Portnoys’

Spurious Claims

Shareholders are Being Asked to “Relinquish Control”

Existing trustees falsely claim Related and Corvex are asking shareholders to

“relinquish control”

–

in fact it is totally the opposite

We

believe

our

consent

solicitation

to

remove

the

board

will

serve

as

a

shareholder

referendum

on

the

current

board

of

trustees

and

senior

management

and

their

value

destructive

behavior

–

Shareholders

are

not

being

asked

by

Related/Corvex

to

“relinquish

control”

of

CWH

in

any

way;

they

are

being

asked

to

take

back

CWH

from

the

grip

of

the

Portnoys

and

RMR,

and

restore

control

to

all

CWH’s

shareholders

–

The only group at risk of losing control is RMR and the Portnoys, which we believe have

used CWH as their own personal piggy bank for years

Once the current trustees are removed, CWH is required to promptly call a special meeting for

all shareholders to elect new trustees

–

At

that

time

we

hope

and

expect

all

CWH

shareholders

will

work

to

collectively

identify

an

independent

slate

of

highly

qualified

nominees

–

including

real

estate

industry

veterans

with

pristine

credentials

–

that

are

prepared

to

work

for

the

interests

of

all

shareholders

We

also

hope

and

expect

a

newly

elected

board

would

adopt

ISS

and

Glass

Lewis

corporate

governance

best

practices,

restoring

appropriate

shareholder

rights

for

all

CWH

shareholders

going

forward

47

Refuting the Portnoys’

Spurious Claims

CWH Has a “Strategic Plan”

Existing trustees claim to have a “strategic plan”

Unfortunately, in our view the so-called strategic plan consists largely of capital recycling,

without any path to actual value creation for shareholders

–

Creates

the

appearance

of

activity,

but

does

not

actually

result

in

any

progress

–

Only figures associated with strategic plan reference volume of activity, and make no

mention of shareholder returns or value creation

–

Strategic

plan

continues

management’s

historical

practice

of

“buy

high,

sell

low”

capital

allocation

The two “key elements”

of the so-called strategic plan are:

“Strategic Plan”

Says:

We Believe “Strategic Plan”

Actually Means:

Improving CommonWealth's Financial

Condition and Liquidity

Sell equity at a massive discount to repay debt

trading at a premium, to give the appearance of

changing capital structure (i.e. buy high, sell low)

Continued Repositioning of

CommonWealth's Property Portfolio

Sell vacant suburban properties at a massive

discount and recycle proceeds to acquire fully

occupied CBD properties at premium valuations

(i.e. buy high, sell low)

48

Refuting the Portnoys’

Spurious Claims

CWH Will be Unable to Continue Normal Operations

The Portnoys have tried to paint a bleak picture of CWH upon removal of

themselves

and

their

conflicted

trustees

–

a

fictional

picture

of

a

company

without leadership, unable to comply with basic regulatory obligations

These

statements

represent

a

scare

tactic

employed

by

current

trustees

in

a

desperate

attempt

to

intimidate

CWH’s

shareholders;

nothing

could

be

further

from

the

truth

Upon removal of the current board, we are committed to put at the immediate disposal of CWH

and all its shareholders all of our considerable resources, including highly qualified property and

financial managers

–

Jim Lozier, former CEO and co-founder of the Archon Group L.P., has agreed to a

potential interim CEO position

–

CBRE, the world’s largest commercial real estate services firm, has agreed to provide

interim

property

management

services

and

leasing

services

to

the

CWH

portfolio

as

necessary

49

Refuting the Portnoys’

Spurious Claims

“Change of Control”

under Credit Agreement, Other Agreements

In connection with their scare tactics, current trustees have also emphasized

risk that a termination of RMR’s agreements could lead to a “change of

control”

under CWH’s credit agreements and other agreements

We, along with our financial advisor Deutsche Bank, have analyzed the Company’s credit

agreements

Deutsche Bank has already given us highly confident letters for necessary refinancings which

may arise under a change of control, positioning CWH for a smooth transition

50

Refuting the Portnoys’

Spurious Claims

Current Trustees and RMR “Acting in Best Interests”

of CWH

Existing trustees claim they and RMR are acting in the best interests of CWH

Based on what track record and what evidence?

–

Why would trustees acting in the best interests of shareholders pursue and even upsize

an unnecessary, massively dilutive equity offering?

–

Why would trustees acting in the best interests of shareholders attempt to pass bylaw

amendments to disenfranchise shareholders?

–

Why would trustees acting in the best interests of shareholders attempt to secretly pass

a new Maryland law making it impossible to remove them?

–

Why would trustees acting in the best interests of shareholders make plans to potentially

sell

CWH’s

controlling

stake

in

SIR

at

a

discount

to

market

rather

than

a

premium?

51

New Management Team and Strategy

52

New Management Team and Strategy

New Strategic Plan

Internalize

management,

adopt

a

market

cost

structure,

and

align

management

compensation

with

shareholder

returns

–

no

more

skewed

incentives

–

While corporate management will be replaced, we anticipate current property level

employees will be hired to work at the new CWH

Amend

existing

Declaration

of

Trust

and

bylaws

to

conform

to

ISS

and

Glass

Lewis

best

practices

–

no

more

shareholder

disenfranchisement

Cease

all

acquisition

activity

until

CWH’s

stock

price

exceeds

its

NAV

–

no

more

dilutive

equity

offerings

and

ignoring

the

views

of

shareholders

–

We believe reinvesting in CWH’s existing portfolio can lead to a stabilized NOI of $547

million, an increase of ~20% from the Company’s LQA 4Q12 cash NOI

Use excess cash flow to buy back CWH stock until the Company’s stock price exceeds its

NAV

–

no

more

‘buy

high,

sell

low’

capital

allocation

Cease

all

related

party

transactions

–

no

more

self-dealing

for

benefit

of

the

Portnoys

Adopt

best

practices

and

manage

the

Company

in

ways

which

maximize

long-term

CWH

shareholder

value,

not

fees

paid

to

RMR

While a new board selected by all shareholders will ultimately determine the

details of CWH’s new strategic plan, we propose the following key elements as

a starting point for the Company’s new direction

53

New Management Team and Strategy

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

54

New Management Team and Strategy

Potential Interim CEO

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 could serve as interim CEO until the new board decides to hire a permanent CEO. As

interim CEO, he would focus on transition of management services, continuity of financial

reporting, and building out a permanent management team

Related/Corvex have identified a potential interim CEO, Jim Lozier, to help

transition

CWH

to

internal

management.

Mr.

Lozier

is

a

30+

year

real

estate

industry veteran with impeccable credentials who has created significant value

for equity holders during his career

55

New Management Team and Strategy

About CBRE

CBRE Asset Services group provides property management, financial reporting and construction

management to clients

CBRE

(1)

employs 42,000+ people in 430+ offices and manages more than 3.3 billion square feet of

commercial property and corporate facilities across the globe

Successfully

managed

transition

of

leasing

/

management

services

for

1.2

billion

square

feet

of

commercial properties in the U.S. over the previous nine years, including transitions done under

significant time pressure

(1)

Employees,

offices,

and

square

footage

under

management

includes

CBRE

affiliate

offices.

CBRE, the world’s largest commercial real estate services firm, has agreed to

provide interim property management and leasing services to the CWH

portfolio as necessary

56

Appendix

57

Appendix

Valuation Summary

(1)

Includes value of SIR stake as of April 17, 2013.

(2)

Stabilized NOI of $547 million.

(3)

Wholly-owned LQA GAAP NOI of $487.3 million per CWH 4Q12 Supplemental.

(4)

Wholly-owned square feet per Company filings and Related / Corvex analysis.

(1)

With the removal of current trustees, we estimate an NAV per share of $35

today (4/17/13) based on bottom-up property-by-property analysis, and a target

stock price of $44 or higher at 12/31/14

We believe NAV can be thought of as fair market value of the current portfolio, before benefit

from any other value enhancing actions (which we believe are plentiful)

Valuation was led by Related, one of the most well respected real estate developers,

operators, and investors in the U.S. with a 40 year history and a portfolio of over $15 billion of

real estate operating assets today

We believe CWH could trade at a stock price of $44 or higher at 12/31/14 through

internalization of management, operational turnaround, improved capital allocation, and

multiple expansion

Stock Price

Related / Corvex

@ 2/25

NAV @ 4/17

Stock Price

$15.85

$34.92

% Change

--

120.3%

Cap Rate of Stabilized NOI

(2)

11.12%

7.66%

Cap Rate of LQA NOI

(3)

9.92%

6.83%

Price / LQA Normalized FFO

5.9x

13.0x

Price / GAAP Book Value per Share

0.43x

0.95x

Price / Square Foot

(4)

$89

$135

Dividend Yield @ Current $0.25 / Qtr

6.31%

2.86%

58

Appendix

Underwriting Methodology

Related and Corvex believe CWH’s wholly owned real estate is worth $7.1 billion

today after removal of current trustees (compared to a cost basis of $7.0 billion

and

implied

market

value

of

$4.9

billion

as

of

2/25/13)

based

on

property-by-

property underwriting

(1)

CWH $4.9 billion enterprise value calculated using SIR and GOV market value as of 2/25/13.

Related did not rely on book value and

instead, did a bottoms up real estate

valuation on 90% of the portfolio

Related analyzed market rental,

vacancy and cap rate trends as

well as market research reports

Related performed site visits,

met with local brokers and had

appropriate internal Related teams

review underwriting assumptions

Related used Gross Asset Value

(“GAV”) and Cap Rate Valuation

methodologies to determine NAV per

share.

59

Appendix

Underwriting Methodology (continued)

The

most

extensive

property

level

detail

that

CWH

provides

is

a

Schedule

3

(accumulated

depreciation

schedule)

produced

at

the

end

of

every

fiscal

year.

This

report

does

not

show

the

assets’

names

or

addresses

and

is

merely

a

list

of

properties

identified

by

an

ID

number.

The

following

represents

our

underwriting

methodology:

1.

Associate each property ID in the Schedule 3 with an address, name and portfolio where

appropriate

2.

Remove any SIR spin-off properties (76 total) based on Schedule 1.1 of Form 8-K dated

3/31/12

3.

Account for any acquisitions and dispositions during 2012 and 2013

4.

Perform extended due diligence on 367 properties

•

Represents 90% of the portfolio’s total SF

•

Represents 90% of the portfolio’s total cost basis

5.

Extrapolate results to the rest of the portfolio

6.

Analyze market rental, vacancy and cap rate trends and meet with brokers, research

comparable transactions and perform site visits to further  improve property level assumptions

7.

Determine CWH’s NAV per share based on gross asset value (“GAV”) and cap rate

methodologies

•

We believe GAV is a more appropriate indicator of valuation because of the nature of

CWH’s portfolio

60

Appendix

How RMR is Paid

Business management agreement

–

Requires

CWH

to

pay

RMR

at

annual

rate

of

0.7%

of

the

historical

cost

basis

of

U.S.,

Canadian, and Puerto Rican investments for the first $250 million of such investments

and 0.5% thereafter

1.0% fee level for investments outside the U.S., Canada, and Puerto Rico

–

Additionally, RMR is entitled to an incentive fee equal to 15% of the product of (i)

weighted average fully diluted shares outstanding and (ii) the excess of FFO per share

over FFO per share in the preceding fiscal year

No incentive paid in recent years given continued FFO per share declines

Property management agreement

–

Provides for fees equal to 3.0% of gross collected rents, and construction supervision

fees equal to 5.0% of construction costs

CWH is managed under two agreements with RMR (terminable by Company

with 60 days notice), which generate steady fees based on gross historical cost

basis and gross rents

'07-'12

2007

2008

2009

2010

2011

2012

Cumulative

Business Management Fees

$31.0

$33.4

$33.6

$34.7

$39.2

$43.6

$215.6

Property Management Fees

28.7

29.8

29.0

27.5

30.3

33.7

$179.0

RMR Management Fees

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$394.6

% of Recent Market Cap

4.5%

4.8%

4.7%

4.7%

5.2%

5.8%

29.7%

% of Rental Income

7.1%

8.4%

7.4%

7.3%

7.6%

7.5%

61

Appendix

CWH Related Party Transactions

5 Year

Related

Party

Transactions

2008

2009

2010

2011

2012

Cumulative

SNH

$346.8

$214.6

$374.1

$262.9

$1,198.3

GOV

395.3

231.0

626.3

SIR

400.0

400.0

AIC

5.2

5.3

5.4

6.7

5.3

28.0

Total

$352.0

$615.2

$610.5

$269.6

$405.3

$2,252.6

Figures discussed in presentation per disclosure in CWH public filings.  Figures above do not include fees paid to

RMR and distributions from minority stakes, which would have the impact of increasing the amount of related party

transactions.

62

Appendix

Related & Corvex Overview

Related and Corvex collectively own 10.9 million shares of CWH (9.2% of

shares outstanding)

Related Companies

–

Related Fund Management, LLC is an affiliate of Related Companies (“Related”), one of

the most prominent privately-owned real estate firms in the United States

–

Formed 40 years ago, Related is a fully-integrated, highly diversified industry leader with

experience in virtually every aspect of development, acquisitions, management, finance,

marketing and sales

–

Related’s existing portfolio of real estate assets, valued at over $15 billion, is made up of

best-in-class mixed-use, residential, retail, office and affordable properties

Corvex Management

–

Value-based investing across the capital structure in situations with clearly identifiable

catalysts

–

Active investing to create asymmetric risk/reward opportunities

–

13D investments since inception include AboveNet (acquired by Zayo in March 2012),

Corrections Corporation of America (elected REIT status in February 2013), Ralcorp

(acquired by ConAgra in November 2012), and ADT (Keith Meister joined Board in

December 2012)