Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in the CommonWealth REIT. Investigations into the CommonWealth REIT began when allegations were made in a lawsuit filed by an investor in the U.S. District Court for the District of Massachusetts regarding false and misleading statements about the REIT’s prospects and financial standings that were allegedly made between January 10, 2012 and August 8, 2012. Investigations continue in light of a recent letter sent in June 2013 urging shareholders to vote for the removal of all of the REIT’s directors.
The letter was sent by Corvex Management LP and Related Fund Management LLC. Corvex and Related are separately managed investment funds. Together, they own around 9.6 percent of all outstanding CommonWealth REIT common shares.
The letter from Corvex and Related states: “An outdated management structure, abysmal corporate governance, and mismanagement of operations have in our view been a significant driver in the 45 percent decline in CommonWealth REIT’s stock price over the last five years. We believe this continued value destruction is by design — the direct result of self-interested actions taken by CommonWealth’s current Board of Trustees and its external manager, REIT Management and Research LLC (RMR) which is owned by Barry Portnoy and his son, Adam.”
According to the letter, in the last six months, the Portnoys and RMR have attempted to change bylaws and Maryland law in an effort to prevent the removal of trustees and “further entrench management.” Corvex and Related assert that these actions “make it clear that RMR is not operating CommonWealth for the benefit of shareholders, but, rather, for the benefit of the Portnoys. Not only has the Company repeatedly taken action to eliminate shareholder rights, in March they enacted a highly dilutive equity offering in a purported attempt to maintain ‘investment grade ratings’ — only to be downgraded to junk status by Standard & Poor’s as a result of ‘weak’ management and corporate governance.”
In addition to the issues outlined in the letter to shareholders, securities arbitration lawyers are investigating potential investor loss recovery on the basis of allegations that CommonWealth did not disclose certain facts, including the fact that leased office spaces had fallen below expectations, existing tenants were receiving concessions which were eroding CommonWealth’s income and, as a result, CommonWealth’s positive statements about its occupancy rate, dividend payout and leverage ratio were not reasonably founded. For more information about these allegations, please see the previous blog post, “CommonWealth REIT Investors Could Recover Losses.”
If you have suffered significant losses as a result of your investment in the CommonWealth REIT, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.