DFAN14A 1 d666658ddfan14a.htm DFAN14A DFAN14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

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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

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The Case for Change Now at CWH
Presentation to CWH Shareholders
January 30, 2014


2
Disclaimer
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 
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.
five
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 statement and other relevant documents because they contain important
information regarding the solicitation.
The definitive 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
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
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 new, truly independent Board of Trustees
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; the
consent solicitation must be concluded within 30 calendar days of the record date


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).
(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 highly qualified
new leadership  committed to good governance and unlocking the
substantial value embedded in CommonWealth for shareholders


8
Executive Summary
A Vote on Leadership
An imperfect governance framework is only as good as those entrusted to
govern
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


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, 50% higher than the closing
price on January 29, 2014
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 and has been previously disclosed as a potential interim CEO.


11
Executive Summary
Corvex/Related’s Turnaround and Governance Plan To Maximize Value
The fair and unfettered election of a new Board consisting solely 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:  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 and Related continue to propose the following Turnaround and
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
12
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:
Corporate strategic analysis for large real estate owner/operators
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
nominees
are
highly
qualified
with
wide-ranging
and
relevant  real estate, finance and corporate governance experience


13
Executive Summary
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
Without
wholesale
change,
the
Portnoys
will
retain
effective
control
of
CWH
Actions
over
the
past
year
belie
“turned
leaf”
intentions
“Perpetual Fee Streams”
are a powerful incentive to maintain “Accountability Vacuum”
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


14
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


15
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
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


16
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)


17
Appendix
Table of Contents:
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


18
I. History of Underperformance


19
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


20
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


($ 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%
21
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


22
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%)


23
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.
(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
(2)
(3)
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
CWH stock price
Cumulative fees paid out to RMR


24
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
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%


25
History of Underperformance
Total Returns –
3 years
CWH
has
underperformed
its
peers
over
the
last
3
years
ending
2/25/2013
(1)
Note: Total returns include dividends
(1)
The last trading the day prior to Related and Corvex’s first public filing.
Source: SNL
PKY
BDN
HIW
PDM
CUZ
CWH
RMZ
(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
HIW: 42.1%
PDM: 39.1%
CWH: (26.6%)
PKY: 6.9%
CUZ: 42.5%
BDN: 35.8%
RMZ: 52.5%
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%


26
History of Underperformance
FFO Multiples
CWH traded at the lowest price to FFO multiple of its peers prior to our 13-D filing
Source: Factset
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
PDM: 14.0x
CWH: 5.4x
HIW: 13.1x
CUZ: 18.2x
BDN: 9.0x
PKY: 13.3x
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%)


27
History of Underperformance
Operating Performance
Value
accruing to
RMR, not
shareholders
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
($ 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%


28
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)
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
Avg.:
2.0%
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
5.1%
3.3%
(0.4%)
(2.3%)
(3.0%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
CUZ
BDN
HIW
CWH
PKY
Avg.:
1.3%
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


29
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)
6.5%
3.3%
3.3%
2.7%
0.1%
PKY
CUZ
HIW
BDN
CWH
Avg.:
4.0%
2.8%
2.2%
0.9%
0.8%
(1.1%)
(2.0%)
(1.0%)
0.0%
1.0%
2.0%
3.0%
PKY
HIW
CUZ
BDN
CWH
Avg
.:
1.7%
3.2%
0.3%
(2.8%)
(3.5%)
(5.2%)
(6.0%)
CUZ
HIW
BDN
CWH
PKY
Avg.:
(1.1%)
68.4%
66.6%
59.7%
55.7%
54.3%
50.0%
55.0%
60.0%
65.0%
70.0%
BDN
HIW
CUZ
PKY
CWH
Avg.:
62.6%
70.5%
67.7%
60.0%
59.8%
54.3%
BDN
HIW
CUZ
PKY
CWH
Avg.:
64.5%
0.4%
(1.6%)
(2.6%)
(3.0%)
(3.7%)
(4.0%)
(3.0%)
(2.0%)
(1.0%)
0.0%
1.0%
CUZ
CWH
BDN
HIW
PKY
Avg.:
(2.2%)
4.9%
0.0%
(0.9%)
(3.1%)
(4.3%)
(6.0%)
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
6.0%
CUZ
HIW
PKY
BDN
CWH
Avg.:
(0.2%)
69.5%
67.3%
57.9%
55.9%
53.6%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
BDN
HIW
CUZ
CWH
PKY
Avg.:
62.1%
4.0%
(0.9%)
(3.7%)
(6.2%)
(8.5%)
(10.0%)
CUZ
HIW
BDN
PKY
CWH
Avg.:
(1.7%)
0.0%
2.0%
4.0%
6.0%
8.0%
(4.0%)
(2.0%)
0.0%
2.0%
4.0%
(5.0%)
0.0%
5.0%
55.0%
60.0%
65.0%
70.0%
50.0%
75.0%


30
History of Underperformance
Acquisition Activity
CWH
has
grown
primarily
through
asset
acquisitions,
which
we
believe
benefits
RMR
and
therefore
the
Portnoys
personally
but
not
shareholders
(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
(5)
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
Its peers acquired assets at approximately one-fifth 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
Net acquistions / CapEx as % of Market Cap
(1)
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
$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


31
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
Source: Company filings, CWH holdings per proxy filed 01/29/2014, SNL
CWH Insider Holdings
Position
% of S/O
Trustees
and
Executive
Officers:
Barry M. Portnoy
246,200
0.21%
Adam D. Portnoy
48,099
0.04%
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
401,828
0.34%
5.4%
4.4%
2.1%
1.5%
0.5%
0.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
CUZ
PKY
HIW
BDN
PDM
CWH
Avg. (1): 2.8%


32
II. History of “Worst-In-Class”
Corporate
Governance


33
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
th
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:


34
History of “Worst-In-Class”
Corporate Governance
Independent Parties Agreed With Us
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
its owners.”
Glass Lewis report, June 17, 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
Consistently
poor
corporate
governance
has
not
gone
unnoticed
by
independent,
highly-respected parties
ISS annual reports consistently reported Shareholder Rights were of “High Concern”
“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.”
“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 


35
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


36
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


“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…
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.”
37
History of “Worst-In-Class”
Corporate Governance
“The Portnoys Receive an F”
New York Times
“Despite
Doldrums
in
Deal
Activity,
A
Few
Highlights
This
Year,”
New
York
Times,
December 17, 2013


38
III. The Portnoys’
Reversible Governance
Alterations In Context


39
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 fatal 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


40
The Portnoys’
Reversible Governance Alterations In Context
Why It’s All Smoke and Mirrors
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?
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
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


41
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


42
The Portnoys’
Reversible Governance Alterations In Context
Why It’s All Smoke and Mirrors
Reality
Portnoys’
Window Dressing
Board Composition
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
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


43
The Portnoys’
Reversible Governance Alterations In Context
Why It’s All Smoke and Mirrors
Reality
Portnoys’
Window Dressing
Red Tape Bylaws
Bylaws amended to have a seemingly less
offensive process of director nominations at
annual meeting
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
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


44
The Portnoys’
Reversible Governance Alterations In Context
Why It’s All Smoke and Mirrors
Reality
Portnoys’
Window Dressing
Poison Pill
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
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


45
The Portnoys’
Reversible Governance Alterations In Context
Why It’s All Smoke and Mirrors
Reality
Portnoys’
Window Dressing
RMR Management Agreement
(1)
Adjusted for reverse stock splits.
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
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
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
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


46
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?


47
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


48
IV. Corvex/Related’s Turnaround and
Governance Plan


49
Corvex/Related’s Turnaround and Governance Plan
Corvex/Related’s Plan To Maximize Value
The fair and unfettered election of a new Board consisting solely 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:  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 and Related continue to propose the following Turnaround and
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


50
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


51
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:
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
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 nominations of replacement Trustees concurrently with the removal of existing
Trustees
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


52
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, clearly incentivized to minimize disruption as one of CWH’s largest
shareholders, 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
Jim
Lozier,
a
30+
year
industry
veteran,
can
be
retained
to
lead
CWH
on
an
interim
basis
(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
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’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
square
feet
of
commercial properties in the U.S. over the previous 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
CommonWealth
and
has
agreed
to
serve
in
the
role
of
interim
CEO
of
the
Company on such terms as may be reasonably agreed to by Mr. Lozier and CWH.
(2)
CBRE will perform management and leasing services on customary terms to be agreed to in the event CommonWealth’s management agreement with RMR is
terminated.


53
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


54
Corvex/Related’s Turnaround and Governance Plan
About Corvex
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
Value-based
investing
across
the
capital
structure
in
situations
with
clearly
identifiable catalysts


55
Corvex/Related’s Turnaround and Governance Plan
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


56
Corvex/Related’s Turnaround and Governance Plan
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


57
V. Highly Qualified Nominees


58
Highly Qualified Nominees
Truly Independent
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.


59
Highly Qualified Nominees
Truly Independent (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.


60
Highly Qualified Nominees
Truly Independent (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.


61
VI. Valuation Update


62
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.”
Kansas City Business Journal, October 23, 2013
Over the past six months, representatives from Corvex and/or Related have
independently performed detailed site visits on approximately 85% of the
portfolio


63
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:


64
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


Plus: Management Fee Savings
65
Valuation Update
NAV Components
(1)
Properties classified as “Held for Sale”
and “Discontinued
Operations”
are per CWH’s SEC filings.
(2)
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.
Source: 10-Q, 9/30/2013, adjusted for subsequent asset sales.
Related performed a bottoms-up
real estate analysis on a property-
by-property basis
We believe our estimate of stabilized
NOI is supported by our extensive field
due diligence
We find support for cap rate
assumptions and price per foot
valuations from:
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
NAV Methodology
(In millions, except PSF and per share amounts)
Continuing
Held for
Operations
Sale
(1)
Total
In-Place NOI
$443
$46
$489
8
2
10
Plus: Stabilization Improvement
14
16
29
As-Stabilized 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 1/29/14)
598
Cash
360
Other Current Assets, Net
54
Total Asset Value
$7,965
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
$4,196
Shares Outstanding
118
NAV / Share
$35.44
(2)


66
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
(in millions, except per share amounts)
2013E
2014E
2015E
Estimated CAD
$150.0
Stabilized Cash NOI (after Non-Core Asset Sales)
$483.0
lower than consensus due to asset sales
Cap Rate Assumed
7.50%
Implied CWH TEV
$6,440.0
Business Mgmt. Fees Savings
$11.0
CWH Pro forma Net Debt (Net of SIR, Cash, other assets)
1,973.3
Property Mgmt Fees Savings
10.0
Preferred Equity
655.0
Incremental CAD
$21.0
Implied CWH Equity Value
$3,811.7
Reduction in Interest-Bond Tender
10.2
Implied CWH Share Price, 12/31/15
$40.13
Adjusted CAD
$181.2
$181.2
$181.2
% Change to Current
88.4%
Memo: Shares Outstanding
95.0
Current Quarterly Dividend
$0.25
$0.25
Avg. Shares Outstanding
111.9
100.3
Implied CWH Share Price
Annual Dividends Paid
$111.9
$100.3
Non-Core Asset Sales/year
$40.13
$0.0
$150.0
$300.0
$450.0
$600.0
2014E
2015E
7.00%
$43.11
$43.95
$44.97
$46.21
$47.76
CAD after Dividends Paid
$69.3
$81.0
Cap
7.25%
40.83
41.57
42.46
43.56
44.92
Non-Core Asset Sales
300.0
300.0
Rate
7.50%
38.70
39.35
40.13
41.08
42.27
Divested NOI
(11.3)
(33.8)
7.75%
36.71
37.27
37.94
38.76
39.79
Share Repurchases
$358.1
$347.2
8.00%
34.84
35.32
35.89
36.59
37.47
Share Repurchase Price Assumed
$28.00
$33.00
% Premium to Current Price
18.7%
39.9%
% Change to Current Share Price
Non-Core Asset Sales/year
Shares Repurchased
12.8
10.5
$0.0
$150.0
$300.0
$450.0
$600.0
% of Shares Outstanding (Current)
10.8%
8.9%
7.00%
102.4%
106.4%
111.1%
117.0%
124.2%
Cap
7.25%
91.7%
95.2%
99.4%
104.5%
110.9%
Beginning Shares
118.3
105.5
Rate
7.50%
81.7%
84.7%
88.4%
92.9%
98.5%
Ending Shares
105.5
95.0
7.75%
72.3%
75.0%
78.1%
82.0%
86.8%
Avg. Shares Outstanding
111.9
100.3
8.00%
63.6%
65.8%
68.5%
71.8%
75.9%


67
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
See footnotes on page 74.
(7)
(7)
(7)
(7)
(7)
(6)
(6)
(6)
(6)
(6)
CommonWealth
(NAV)
(1)
CommonWealth
(Current price)
Peer Avg.
Brandywine
Parkway
(2)
Highwoods
(3)
Piedmont
Cousins
Share price
$35.51
$23.59
$14.05
$17.71
$36.42
$16.52
$10.45
Implied cap rate
(4)
7.3%
9.1%
6.7%
7.0%
6.2%
6.9%
6.7%
6.6%
TEV / SF
$208
$170
$200
$187
$246
$167
$212
$186
% 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


68
Valuation Update
How We Stack Up Against Management’s Estimate of Value
Related/
Corvex
Value
$248MM
$236MM
$194MM
$366MM
$110MM
$113MM
$1,267mm
$1,391mm
(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


69
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%


70
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%


71
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
“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
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


72
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
“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
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


73
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
Portfolio Summary - by Property Type
($ 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
$151
Portfolio Summary - by Vintage
($ 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


74
Valuation Update
Footnotes
Footnotes to p. 67
Per estimates from Related.  Implied cap rate, TEV/SF, % CBD/urban infill, Avg gross rent $PSF, and Top 5 Market data
include continuing operations only.
Pro forma for acquisition of Thomas Properties Group.
Highwoods data excludes industrial and retail.
Per
Greenstreet
Advisors,
except
for
CWH.
CWH
implied
cap
rates
are
based
on
stabilized
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.
(2)
(3)
(4)
(5)
(6)
(7)
Source: Company filings, Factset, SNL, Greenstreet Advisors
(1)