UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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

Check the appropriate box:

¨ Preliminary Proxy Statement

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

¨ Definitive Proxy Statement

x Definitive Additional Materials

¨ Soliciting Material Pursuant to §240.14a-12

COMMONWEALTH REIT

(Name of the Registrant as Specified In Its Charter)

CORVEX MANAGEMENT LP

KEITH MEISTER

RELATED FUND MANAGEMENT, LLC

RELATED REAL ESTATE RECOVERY FUND GP-A, LLC

RELATED REAL ESTATE RECOVERY FUND GP, L.P.

RELATED REAL ESTATE RECOVERY FUND, L.P.

RRERF ACQUISITION, LLC

JEFF T. BLAU

RICHARD O’TOOLE

DAVID R. JOHNSON

JAMES CORL

EDWARD GLICKMAN

PETER LINNEMAN

JIM LOZIER

KENNETH SHEA

EGI-CW HOLDINGS, L.L.C.

DAVID HELFAND

SAMUEL ZELL

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

Payment of Filing Fee (Check the appropriate box):

x	No fee required.
¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
¨	Fee paid previously with preliminary materials.
¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount Previously Paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:

A New Beginning

Presentation to CWH Shareholders

March 12, 2014

2

Table of Contents

Executive Summary

Appendix

I.

Exposing

The

Portnoys’

Scare

Tactics

II.

The

Portnoys’

Latest

Financial

Distortions

III.

The

Portnoys’

Reversible

Governance

Alterations

In

Context

IV.

Widespread

Disapproval

Of

The

Portnoys

V.

History

of

Underperformance

3

Executive Summary

A New Beginning

CommonWealth Shareholders Have A Choice Between Two Paths

CWH has underperformed for years due to a severe misalignment of

interests in an external

management structure through which 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

Not surprisingly, CWH's stock generated a cumulative total return of a mere 7% over a nearly

16-year

span

(1)

during

which

time

CWH

paid

RMR

approximately

$791

million

(2)

in

fees

In

glaring

contrast,

Sam

Zell's

track

record

speaks

for

itself:

Mr.

Zell

created

3

of

the

most

successful REITs in history

As evidenced in the chart on the following page, we believe Mr. Zell's chairmanship of EOP,

EQR, ELS has unquestionably maximized value for shareholders over the same 16-year

period in which CWH generated 7% returns

4

The

Portnoys’

path

of

conflicted

external

management,

value

destruction,

and

the absence of accountability, with which CWH shareholders are all too familiar

OR

Sam Zell’s path of aligned internal management and accountability that fosters

the

incentives

critical

in

building

a

successful

company

focused

on

the

long-

term creation of shareholder value

We believe the choice could not be more clear

(1)

From 7/7/1997 (the earliest date on which the Zell-chaired REITs and CWH were  all public) to  2/25/2013 (the last trading day before Corvex and Related filed their initial 13-D).

(2)

RMR fees paid per CWH public filings include SIR. 2013 includes fees paid to SIR after deconsolidation on July 1, 2013 to make the figure comparable to historically disclosed

figures.

The Choice Is Clear:  Value Creation

Sam Zell’s Unrivaled Track Record For Value Creation

Total

Return

Performance

–

Zell-Chaired

REITs

vs.

CWH

vs.

RMR

Fees   

(1)

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

(2)

RMR fees paid per CWH public filings include SIR. 2013 includes fees paid to SIR after deconsolidation on July 1, 2013 to make the figure comparable to historically

disclosed figures.

Sources: Company filings, SNL

(1)

(2)

5

($100)

$0

$100

$200

$300

$400

$500

$600

$700

$800

(100%)

0%

100%

200%

300%

400%

500%

600%

700%

800%

1997

2000

2003

2006

2009

2012

CWH

EOP

EQR

ELS

Cumulative RMR

Fees

EOP:

368%

CWH: 7%

EQR:

422%

ELS:

574%

Cumulative RMR

Fees

since

1997: $791 million

(2)

Cumulative total returns

Zell-Chaired REITs

CWH

Variance

Timeframe

EOP

368%

103%

(265%)

7/7/1997 -

2/9/2007

EQR

422%

7%

(415%)

7/7/1997 -

2/25/2013

ELS

574%

7%

(567%)

7/7/1997 -

2/25/2013

6

The Choice Is Clear:  Uniquely Qualified

Sam Zell & David Helfand Have Joined Corvex/Related’s Slate Of Nominees

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

–

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

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

Equity

Office

Properties

Trust

(formerly

the

largest

REIT

in

the

U.S.)

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

–

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

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

and CEO of Equity LifeStyle Properties

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

credentials

to

an

already

highly

qualified

slate

of

nominees

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

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

Office Properties Trust (“EOP”), Equity Residential (“EQR”), and Equity

LifeStyle Properties (“ELS”)

7

The Choice Is Clear:  Alignment of Interests & Accountability

Board & Management Focused On Increasing Shareholder Value

Sam

Zell

and

David

Helfand

fully

support

efforts

to

maximize

value

at

CommonWealth

for

all

shareholders

and

see

an

attractive

opportunity

at

CommonWealth

uniquely

suited

to

their

expertise

in

leading

public

real

estate

companies

and

in

turning

around

underperforming

assets

Mr.

Zell

and

Mr.

Helfand

plan

to

bring

to

the

Company

their

highly

qualified

and

experienced

management

team

to

execute

on

a

value-driven

strategy

and

utilize

their

expertise

in

turning

around

underperforming

assets

Their

business

philosophy

includes:

A

core

operating

principle

of

aligning

interests

between

company

leadership

and

shareholders

A

conviction

that

an

internal

management

structure

promotes

incentives

to

build

successful

companies

for

the

long-term

creation

of

shareholder

value,

while

external

management

structures

are

flawed

given

inherent

conflicts

of

interest

A

belief

that

shareholders

deserve

good

governance,

transparency

and

accountability

from

company

leadership

A

belief

that

a

public

company’s

fiduciary

responsibility

to

its

shareholders

is

paramount

Led by Sam Zell, our highly qualified nominees offer shareholders a choice to

elect an accountable and properly aligned board charged with being their

advocate

8

The Choice Is Clear:  Good Governance

With Good Governance Shareholders Will Always Have A Choice

“We

are

concerned

about

any

attempts

to

preclude

shareholder

rights,

and

our

companies

are

free

of

such

impediments.”

With

good

corporate

governance,

shareholders

will

be

able

to

hold

their

board

and

managers

accountable

without

having

to

spend

exorbitant

sums

litigating

for

the

right

to

do

so

–

if

shareholders

disapprove

of

our

slate’s

performance,

they

can

simply

nominate

to

replace

them

at

the

next

Annual

Meeting

Annual

elections

for

all

Trustees

beginning

at

the

2014

Annual

Meeting

(no

staggered

board)

–

Plurality

vote

for

contested

elections

A

conventional

notification

process

for

trustee

nominations

and

other

important

Company

business

–

i.e.,

elimination

of

unreasonably

burdensome

ownership/holding

period

requirements

and

other

procedural

roadblocks

No

changes

to

these

provisions

without

a

shareholder

vote

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

The core governance principles below are necessary underpinnings to good governance:

9

The Case For Removal

Irrefutable

“Faced with the very clear prospect of a shareholder-led eviction, we find the board elected to submit little more than a

redux of its previously failed arguments and suspect methodologies. We expect this circumstance speaks less to the

current trustees' ability to submit strong arguments, and more to the fact that there are so few strong arguments to

submit

in

favor

of

the

current

trustees:

CW's

unaffected

returns

have

been

objectively

poor

by

any

reasonable

methodology, the fees paid to RMR have been both exorbitant and disproportionate to the middling gains realized by

investors and the board has more than once attempted to impose sharply regressive governance policies on CW's

independent owners.”

-

Glass Lewis Report, March 6, 2014

Underperformance has been irrefutable;

the unprecedented governance malfeasance undeniable

Every

major

principle

of

our

case

for

removal

has

been

validated

by

multiple

independent

third

parties

For

the

second

time

in

nine

months,

ISS

and

Glass

Lewis,

the

two

leading

independent

proxy

advisory

and

corporate

governance

advisory

firms

in

the

U.S.,

recommended

removal

of

the

entire

Board

“On balance it seems clear –

from the dismal relative and absolute shareholder returns the company eked out before

the dissidents’

arrival, to the dissidents’

central and compelling argument that this underperformance results from a

misaligned external management structure this board nonetheless continues to support, to the overwhelming long-

term evidence of this board’s willingness to unilaterally amend the bylaws in support of entrenchment rather than

accountability –

that the dissidents have made a compelling case that change at the board level is necessary.”

-

ISS Report, February 28, 2014

10

The Case For Removal

Third

Party

Confirmation

–

Indisputable

Underperformance

Corvex and Related have presented to shareholders over the past year

extensive data proving indisputably the abysmal long term underperformance

of CWH's Board and management team

On March 19, 2014, Glass Lewis agreed:

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 our

opinion,

this

portion

of

the

overall

argument

is

effectively

concluded,

both

because

the

Trust's

trading

history

since

February

25,

2013

has

been

impacted

by

the

public

involvement

of

Corvex/Related and, of equal import, because the data points prior thereto offer clear and largely

irrefutable perspectives on the performance of incumbent management and the board.

As

covered

at

length

in

our

prior

report,

CW

vastly

underperformed

a

relevant

peer

set,

the

S&P

500

Office

REITs

Index

and

the

S&P

500

REITs

Industry

Index

for

the

one-,

three-

and

five-year

periods

ended February 25, 2013.”

Glass Lewis Report, March 19, 2014

11

The Case For Removal

Third

Party

Confirmation

–

Corporate

Governance

Malfeasance

Corvex

and

Related

have

documented

the

Portnoys’

inexcusable

governance

malfeasance as well as an unmistakable pattern of behavior that leaves no

doubt as to where their true intentions lie

On February 28, 2014, ISS agreed:

“To

breezily

reappoint

[following

the

2013

annual

meeting]

a

nominee

just

rejected

by

four

out

of

five

shareholders

underscores

the

central

concern

the

dissidents

have

articulated:

whether

there

is

any

attentiveness within this board to the concerns of the owners, rather than the managers, of the

company.

The numerous bylaw changes over the past several years—not simply the ones proposed after the

Arbitration Panel ruled against the board—suggest the board’s attention, instead, has gone to

reinforcing its defenses. Particularly noteworthy is the 2008 amendment which require that at least

two

trustees

be

members

of

management

or

involved

in

day-to-day

operations—a

bylaw

which

swims

upstream against the  pronounced, shareholder-driven trend over the last decade of enhancing a

board’s independence from management.”

ISS Report, February 28, 2014

The

Portnoys’

intentions

are

revealed

in

their

actions,

not

in

their

promises

or

what is written in their governing documents

12

The Case For Removal

A Vote on Leadership

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

Perhaps the most brazen tactic to eviscerate shareholder rights that the Portnoys employed

over

the

past

year

was

a

secret

attempt

to

change

Maryland

law

(1)

:

–

RMR,

an

external

service

provider

that

owns

virtually

no

shares,

sponsored

secret legislation to strip the only right shareholders have to hold them accountable

–

Had they succeeded, the Portnoys would have finally cemented their control over CWH

for good

–

Equally appalling, the Portnoys attempted to railroad their proposal through the Maryland

Assembly at the last minute rather than process it through a standard, legislative process

An imperfect governance framework is only as good as those entrusted

to govern

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

(1)

See  SEC filed  presentation  entitled  “The  Portnoys  Unsuccessfully  Try To  Change  Maryland  Law: A Case Study  On The Portnoys’  True Intentions And The

Pernicious Effects Of  External Management” dated  March 7, 2014. Also available at www.shareholdersforcommonwealth.com.

13

The Case For Removal

A Vote on Leadership (cont.)

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

plainly granted by the Declaration of Trust since 1986

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

the 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

over

$30

million

of

shareholders’

money

on

a

year-long

litigation

process

in

a

brazen

campaign to systematically disenfranchise shareholders

The

Portnoys’

unconscionable

actions

over

the

past

year

speak

volumes

about 

whether they are fit to lead this company

In addition to the secret attempt to change Maryland law, over the past year the

Board also deliberately:

A few months of ineffective governance alterations cannot erase the inexcusable

actions of this Board over the past year, much less 28 years of underperformance

14

The Case For Removal

A Clear and Open Path

The Choice Is Clear

The escape path for long-suffering shareholders leads to a destination that is

indisputably superior to where shareholders have been for 28 years

Sam Zell’s track record in REITs paints a clear picture of what the future CommonWealth will

look like

Meanwhile,

the

Portnoys’

28-year

history

of

underperformance

and

corporate

governance

malfeasance paints an equally clear picture of how the future will look without board removal

The Portnoys are effectively telling shareholders (again) that they do not really

have the ability to exercise their charter-given right to remove the Board,

because now the path to a new board is obstructed by a “parade of horribles”

rather than the Portnoys’

governance malfeasance of the past year

As

we

outline

in

the

Appendix,

we

firmly

believe

the

Portnoys’

“risks”

are

extremely

remote

and are dwarfed by the near certain value destruction that will take place, in our view, if the

Portnoys are left in place

ISS

and

Glass

Lewis

specifically

address

the

Portnoys’

“parade

of

horribles”

and

agree

the

risks are remote

Holders of 70% of the outstanding shares dismissed these scare tactics last year

15

Removal Of The Entire Board Is the Necessary Path

Portnoys Acknowledge Governance Proposals Were Window Dressing

This

comes

after

months

of

touting

their

corporate

governance

“epiphany”

and

telling

shareholders

that

CommonWealth

had

adopted

“best-in-class”

corporate

governance.

Which other hollow Portnoy promises are unilaterally reversible?

–

Exactly how many seats will be up for nomination at the 2014 annual meeting?

•

The

Bylaws

still

contain

a

requirement

that

two

trustees

be

at

all

times

employees

of

RMR.

–

If

Barry

Portnoy

does

not

receive

the

requisite

vote

at

the

2014

annual

meeting,

will

he

accept re-appointment like Joe Morea did in 2013?

–

Will

the

Trustees

amend

the

Bylaws

such

that

the

new

“improved”

nomination

process

cannot be amended without a shareholder vote?

Nothing stops the Board from re-introducing restrictive access provisions like a

3%/3-year holding requirement for nominations at the 2015 Annual Meeting.

–

Why does the Board refute the ability of the Arbitration Panel that protected shareholders’

rights to decide future challenges by shareholders?

That means shareholders who have an issue with future bylaw amendments will have

to spend tens of millions of dollars to initiate a new arbitration while the Portnoys spend

tens

of

millions

of

shareholders’

money

fighting

back.

–

Will the Portnoys try to change Maryland law again?

Ten days before the consent deadline the Portnoys acknowledge – that their proposed Board

de-staggering was a hollow promise that could have been unilaterally reversed at any time.

16

Removal Of The Entire Board Is the Necessary Path

Portnoys Have Actively Opposed The “Customary Channel”

The Portnoys proclaim that the removal of an entire Board is unprecedented,

but so too are the abysmal performance and inexcusable governance

malfeasance at CWH

CalPERS pushed for the annual election of all trustees at Hospitality Properties Trust (HPT),

another RMR-managed REIT every year from 2009-2013

–

In 2012, CalPERS was joined by five other pension funds (CalSTRS, Public Employees’

Retirement Association of Colorado, Florida State Board of Administration, North

Carolina

Retirement

Systems

and

Ohio

Public

Employees

Retirement

System)

–

After 5 years, the Portnoys only proposed the same misleading de-staggering structure

in 2013 that they proposed at CWH

–

Even

if

the

board

is

actually

de-staggered

in

2016,

it

will

have

required

eight

years

to effect change at HPT

•

“For the past three consecutive years, shareowner proposals to declassify the board won overwhelming

support

from

shareowners,

receiving

in

each

year

a

supermajority

of

the

votes

cast

and

a

majority

of

outstanding shares. The proposal received support from over 73 percent of voting shares in 2009, over 90

percent

in

2010

and

over

88

percent

in

2011.

The

company

has

yet

to

adopt

the

reform.”

•

“In 2010, a shareowner proposal to eliminate HPT’s supermajority voting requirements won support of

more than 88 percent of voting shares and 70 percent of the outstanding shares. The company has yet to

adopt this reform.”

Pension

Fund

Letter

to

Shareholders,

April

26,

2012

Instead, the Portnoys claim shareholders have a clear path using “customary

channels,” yet they have repeatedly and actively blocked this path

17

Removal Of The Entire Board Is the Necessary Path

Portnoys Have Actively Opposed The “Customary Channel”

In 2008, Locksmith sought the election of two nominees to the Board of TravelCenters of

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

The

proposals

did

not

even

reach

a

vote

and

Locksmith

was

forced

to

give

up:

Similarly, the “customary channel” did not work out well for Locksmith Capital

Management

“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.”

Locksmith Capital Management, April 2008

18

Removal Of The Entire Board Is the Necessary Path

Potent In-place Bylaws Block The “Customary Channel”

The Portnoys neglect to mention critical gating issues that effectively block

shareholders’

ability

to

achieve

meaningful

representation

on

the

Board

via

the

“customary channel”

The

“Managing

Trustee”

bylaw:

The Portnoys misleadingly claim a majority of the board will stand for one year terms in

2015

–

Yet, the bylaws require two RMR employees to always be on CWH’s Board

–

Barry and Adam Portnoy currently fulfill that requirement but they stand for election in

2014 and 2015, respectively, effectively shielding their two seats from being filled by

new nominees

–

If Barry and Adam Portnoy’s two seats must be held by RMR, shareholders cannot

practically elect new trustees to a majority of the board in 2015 as the Portnoys claim

–

As a result, shareholders must wait until 2016 to effect any real change

–

However even that conclusion assumes the Portnoys do nothing to impede or

frustrate

shareholder

action

as

they

have

repeatedly

done

in

the

past

We have publicly asked the Board to clarify whether they will continue to maintain this

bylaw requirement

–

The Board has yet to respond

The

“Managing

Trustee”

bylaw

exposes

the

Portnoys’

recent

governance

alterations

as

mere window dressing

19

Removal Of The Entire Board Is the Necessary Path

Potent In-place Bylaws Block The “Customary Channel”

(cont.)

Even

if

the

Portnoys

eliminate

the

“Managing

Trustee”

requirement,

they

still

have at their disposal other potent tools that block the “customary channel”

The

Portnoy

Board

retains

the

unilateral

power

to

amend

the

bylaws

–

This power alone has proven to be a potent means of blocking shareholder action as

we discovered over the past year, and Lockwood discovered in 2008

–

Corvex/Related have spent the past year and tens of millions of dollars to strike down

illegal bylaw amendments aimed at eliminating the right to hold a consent solicitation

–

We and the Portnoys are in the same position with the solicitation process that we

would have been in one year ago had the Portnoys not passed illegal bylaw

amendments

–

However, as is their strategy, the Portnoys have succeeded in creating a lengthy and

expensive process for effecting change, while funding their entrenchment with

shareholder funds rather than their own

In other words, nothing stops the Portnoys from re-inserting the 3%/3-year bylaw for

Trustee nominations at future annual meetings

–

In

fact,

Select

Income

REIT

(“SIR”)

–

another

RMR-managed

REIT

–

re-inserted

an

arbitration clause in its bylaws months after clearing SEC comments and going public

–

The SEC had questioned the clause during SIR’s IPO process

The

unilateral

power

to

amend

the

bylaws

exposes

the

Portnoys’

recent

governance

alterations as mere window dressing

20

Removal Of The Entire Board Is the Necessary Path

Potent

In-place

Bylaws

Block

The

“Customary

Channel”

(cont.)

The Portnoy Board also retains the ability to reinstate hand-picked Trustees who fail to be

elected by shareholders

–

The Portnoy Board at CWH reinstated Joe Morea in 2013 after he received the votes of

only 14% of the outstanding shares and 21% of the shares voted

–

The

Portnoy

Board

at

HPT

reinstated

William

Lamkin

in

2013

after

he

received

the

votes of only 31% of the outstanding shares and 43% of the shares voted

–

The

Portnoy

Board

at

HPT

reinstated

Dr.

Bruce

Gans

in

2012

after

he

received

the

votes of only 32% of the outstanding shares and 42% of the shares voted

The

Portnoys

have

also

shown

an

aptitude

for

using

even

the

most

innocuous

bylaws

to

silence shareholders

–

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

(1)

Their long-term pattern of behavior combined with the potent entrenchment tools

still

at

their

disposal

prove

the

Portnoys’

“customary

channel”

is

a

red

herring

designed to trap shareholders in a cycle of litigation and delay

With

no

reliable

ability

to

act

via

the

“customary

channel,”

the

Portnoys’

recent

governance alterations are exposed as mere window dressing

The Portnoys’

potent tools (cont.):

(1)

See

SEC

filed

presentation

entitled

“A

Case

Study

in

‘Worst-In-Class’

Corporate

Governance:

The

Portnoys'

Red

Tape

Bylaws”

dated

February

6,

2014.

Also

available at

www.shareholdersforcommonwealth.com.

21

Removal Of The Entire Board Is the Necessary Path

Portnoys Do Not Prefer Constructive Engagement That Leads to Real Accountability

Corvex/Related strongly prefer constructive engagement, but the shareholders

of CWH have issued a mandate demanding real accountability and an

unambiguous

ability

for

shareholders

to

choose

who

should

manage

their

company

We prefer and have a history of constructive engagement, but based on the

Portnoys’

demonstrated aversion to real accountability, it appears that the

Portnoy Board and real accountability cannot co-exist at CommonWealth

Unfortunately, the Portnoys repeatedly demonstrate an aversion to accountability:

–

They secretly attempt to change state laws to avoid having to face a shareholder vote

–

They impose illegal bylaw amendments to avoid having to face a shareholder vote

–

They reinstate hand-picked trustees who fail to win re-election

–

They publish financial analyses with cherry-picked time frames to exclude periods of

their underperformance

–

They tout recent financial results that exclude hundreds of properties whose

underperformance they are directly responsible

Most telling, the Portnoys continue to cling to the incredulous and intransigent claim that

external management benefits CWH shareholders despite all evidence to the contrary

–

If

that

is

the

Portnoys’

unshakable

belief,

and

they

own

100%

of

the

external

manager,

how

likely

are

they

to

truly

engage

constructively

if

it

means

subjecting

the

external

manager

(and

themselves)

to

real

accountability?

22

Over the past year, the Portnoys have apparently scoured all of CWH’s

documents in search of the most minor technical issues with which to mislead

shareholders and frighten them from voting for change, even though such issues

have little practical relevance

Board Transition

Exposing the Portnoys’

Scare Tactics

Most appalling, however, is that it is well within the ability of the Portnoy  Board to provide for a

seamless transition and thereby preclude their highly unlikely “parade of horribles” 

from ever occurring

With all of the potent tactics at the Portnoys’ disposals to block shareholder action, why is it

impossible for them to use the same tools for the benefit of shareholders, particularly with

assistance from the Arbitration Panel??

What does it say about their true intentions that they don’t?

Ironically, had the Portnoys read the charter’s board removal provisions equally as carefully and

literally, perhaps a year of litigation and tens of millions of dollars in expenses could have been

prevented

As is their custom, the Portnoys are distorting the truth by removing context, misdirecting

shareholders’

attention, and relying on half-truths,

They are effectively telling shareholders (again) that they do not really have the ability to exercise

their

charter-given

right

to

remove

the

Board,

due

to

the

“parade

of

horribles”

that

will

befall

CWH

if they do

In

the

Appendix,

we

address

each

of

the

Portnoys’

scare

tactics

and

explain

what

the

Portnoys

are not telling shareholders about their “parade of horribles”

23

Timeline

The

Panel

set

forth

the

following

procedures

for

the

new

consent

solicitation:

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

–

Corvex and Related submitted a formal request for a record date on February 14,

2014

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

request

–

On February 10, 2014, CWH announced a record date of February 18, 2014,

conditioned on their receipt of the record date request that Corvex and Related have

now delivered

In accordance with the Arbitration Panel’s interim award our consent solicitation will be

completed no later than March 20, 2014

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

24

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)

25

Appendix

26

I. Exposing The Portnoys’

Scare Tactics

27

The

Portnoys

have

repeatedly

stressed

SEC

“sanctions”

(1)

and

NYSE

delisting

as

horrors

that

will

befall

the

Company

if

our

consent

solicitation

is

successful,

because

CommonWealth will temporarily be left without a board with a majority of independent

trustees and an independent audit committee

“The

mission

of

the

U.S.

Securities

and

Exchange

Commission

is

to

protect

investors,

maintain fair, orderly, and efficient markets, and facilitate capital formation.”

-

SEC Mission, available at sec.gov

•

We firmly believe the SEC and NYSE are unlikely to take action for temporary

noncompliance that results from a supermajority of shareholders exercising their

rights and choosing new leaders

•

Regulations requiring a majority independent board and independent audit

committee are intended to ensure accountability to public shareholders

•

Shareholders taking advantage of their first opportunity  in 28 years to hold trustees

accountable should, in our view, be applauded by regulators

Reality

Exposing the Portnoys’

Scare Tactics

Portnoys Fail to Understand Purpose of the SEC & NYSE

(1)

We do note that in their latest Presentation dated March 5, 2014, the Portnoys downgraded the threat level related to SEC matters such that they no

longer refer to “sanctions”.  The Portnoys have not disclosed the reason for their change of heart.

Portnoys’

Complaint

28

Exposing the Portnoys’

Scare Tactics

Portnoys Fail to Understand Purpose of the SEC & NYSE (cont.)

ISS Agrees With Us

“While

the

risk

of

sanction

by

the

SEC

or

delisting

by

the

NYSE

is

a

serious

consideration,

both

the

underlying

reason

for

any

rule

violation—shareholder’s

exercise

of

their

governance

rights,

rather

than

willful

violation

by

a

sitting

board

—

may

mitigate

this

particular

regulatory

risk.

The

point

of

a

regulation

requiring

a

majority-independent

board

or

audit

committee,

after

all,

is

to

help

ensure

accountability

to

public

shareholders

which

might

be

endangered

by

too

close

an

affinity

with

management.

It seems unlikely,

therefore, that regulators would rush to sanction a company where a supermajority of

shareholders felt the entire board had demonstrated such lack of independence that it need

be removed—particularly when the bylaws already provide for a clear, and relatively swift

(in regulatory time), resolution of the unintended regulatory violation.”

-ISS Report , 2/28/14

29

Removal of the Board of Trustees of CommonWealth will give competing landlords an

opportunity to take advantage of the uncertainty

•

Removal of the Trustees will not immediately impact property operations

•

RMR has acknowledged it will continue to manage the properties until the new board

terminates contracts and transitions management

•

Only

5.8%

of

CWH’s

annualized

rental

revenue

expires

during

all

of

2014

(1)

•

Tenants with leases expiring during transition to the new board still face the same

“switching costs”

of tenants whose leases expire outside of a transition period

•

Office tenants are often loathe to disrupt their businesses and incur the costs

associated with moving, with the transition of the CWH Board likely factoring

little into such decisions

•

CBRE

has

agreed

to

provide

interim

property

management

services

(2)

•

Sam Zell and David Helfand plan to bring to CWH their highly qualified and

experienced management team

Reality

Exposing the Portnoys’

Scare Tactics

Management of Properties Will Not Be Immediately Impacted

(1)

Per Company filings.

(2)

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

terminated.

Portnoys’

Complaint

30

ISS Agrees With Us

Exposing the Portnoys’

Scare Tactics

Management of Properties Will Not Be Immediately Impacted (cont.)

“The actual business risk to the company is less clear, given that there should be no

change to management—at the C-suite level or at the property level. Any competent

competitors would likely try to take advantage of any uncertainty at CommonWealth; at the

same time, it is worth noting that the company leases office space, where tenants generally

lock into multi-year leases and face significant switching costs—in everything from moving

expenses to business disruption—suggesting there is low risk of meaningful lease

cancellations during a comparatively short period between boards. RMR, moreover, will

continue to manage the company under its contract regardless of whether a board is in

place, and the board has stated that it intends to take all appropriate action to mitigate any

resulting harm to Commonwealth and its shareholders’ if the consent solicitation is

successful.”

-ISS Report dated 2/28/14

31

The Portnoys believe that the Rating Agencies are likely to immediately downgrade CWH’s

unsecured debt rating to below investment grade.

Reality

•

It is widely known in the marketplace that rating agencies are deliberative organizations and we fully

expect them to take the time to meet with the new Zell-led board and management team rather than

issue a knee-jerk rating based on false statements issued by the Portnoys prior to their removal

•

Zell-chaired REIT Equity Office Properties was investment grade and operated with prudent financial

management during its  life as a public company

•

Zell-chaired REIT Equity Residential Properties has been investment grade for at least 15 years

•

Zell-chaired REIT Equity LifeStyle Properties has no public debt outstanding or agency rating, but is

operated with modest leverage and prudent financial management policies

•

Corvex and Related have never proposed selling CWH’s best assets and engaging in imprudent

financial management

•

In fact, S&P recently downgraded CWH’s issuer rating to below investment grade status in June

2013, noting concerns that “…external management structures can potentially result in a weaker

alignment of interests between shareholders and management when compared with internally

managed REITs.”

•

Downgrade

was

issued

in

spite

of

the

Portnoys’

massively

dilutive

equity

offering

of

February

2013

which was executed expressly for the purpose of avoiding a rating agency downgrade

Portnoys’

Complaint

Exposing the Portnoys’

Scare Tactics

The Risk Of A Rating Agency Downgrade is Minimal

32

ISS Reaction

Exposing the Portnoys’

Scare Tactics

The Risk Of A Rating Agency Downgrade is Minimal

“The risk of a credit downgrade—which the board argues would be realized ‘immediately’—

is also a credible risk. Shareholders should note, however, that the company was

downgraded in 2013 for, among other things, the competitive risk inherent in having an

external manager structure. As importantly, neither Moody’s nor S&P has issued any

warnings related to, or put the company on credit watch negative for, the risk the board

might be replaced by shareholders, despite the fact the 2013 consent solicitation

demonstrated enough support among shareholders to make that a distinct possibility in the

current effort.  Any rating downgrade issued in response to the removal of the incumbent

board, moreover, would presumably be up for review once a new board were elected—and

a restoration to at least the current rating might be all the more likely if the new board also

acted to eliminate the external management structure which occasioned last summer’s

downgrade.”

-ISS Report dated 2/28/14

33

Removal

of

the

board

will

trigger

preferred

shareholders’

right

to

convert

their

shares

and will dilute existing common shareholders

•

If the consent solicitation is successful, Series D preferred shareholders will have

the

right

to

convert

at

a

2%

discount

to

the

prevailing

market

price

of

the

stock

(1)

•

The governing documents contain a mechanism to repurchase the Series D

preferred shares for its liquidation preference plus accrued dividends which would

enable us to avoid a problem if the current board is willing work together

cooperatively

•

While we believe it is preferable to avoid conversion of the Series D preferred, we

find it ironic that the Portnoys are concerned that preferred shareholders could

convert

their

shares

at

a

price

near

current

levels

(in

the

high

$20’s

per

share),

when

the Portnoys themselves issued shares representing 29% of the current shares

outstanding

at

$19

per

share

one

year

ago

despite

protests

from

their

largest

shareholders

Reality

Portnoys’

Complaint

Exposing the Portnoys’

Scare Tactics

Conversion Of Preferred Stock Is A Minimal Risk

(1)

Market price means, with respect to any Fundamental Change Conversion Date, the average of the Closing Sale Prices of the Common Shares for the

five (5) consecutive Trading Days ending on the third Trading Day prior to the Fundamental Change Conversion Date. See Company Filings.

34

ISS Report

WE AGREE WITH ISS

Exposing the Portnoys’

Scare Tactics

Conversion Of Preferred Stock Is A Minimal Risk

“Without an extant board, the company might in fact be unable to borrow $380 million to

repurchase preferreds from holders who wish to convert, and common shareholders

would experience dilution of about 12%. This is, however, a feature of the preferred

security itself, not a new wrinkle created by the consent solicitation.

Were the company

unable to borrow the $380 million to repurchase the preferreds directly, moreover, it could

achieve the same end—fending off dilution to common shareholders—by authorizing a

repurchase program for an equivalent amount of common shares once a new board is in

place. Any dilution risk which common shareholders would prefer the board eliminate

through cash repurchases, therefore, could be eliminated just as effectively after a new

board is seated.”

-ISS Report dated 2/28/14

35

Upon removal of the board, the Portnoys claim bank lenders will call a default and accelerate

CommonWealth’s debt.

Reality

•

The bank debt is currently trading above par highlighting the high credit quality and safety with which

the market views the debt

•

It is widely accepted amongst sophisticated market participants that institutional lenders have a

strong

preference

to

avoid

acceleration

or

“foreclosure”

due

to

the

substantial

expenses

involved

•

With

the

debt

trading

above

par,

there

is

no

financial

incentive

to

accelerate

or

“foreclose”

and

by

doing so generate a recovery that will likely be less than par due to the expenses involved

•

Institutional lenders are also in the relationship business and not in the business of “foreclosing”

on

valuable,

performing

debt

issued

by

desirable

clients

–

ie,

banks

do

now

want

to

“own”

CWH

in

our

view

•

Sam Zell has a long history of success running public REITs. We believe lenders will be encouraged

by the opportunity for Zell to be chairman of CWH

•

We have publicly committed to purchase 51% of the bank debt to prevent acceleration if necessary

•

Any member of the lending group can therefore sell debt to us rather than incur “foreclosure”

expenses

in

the

highly

unlikely

event

such

member

is

considering

acceleration

•

CWH’s claim that a waiver of default requires two-thirds approval ignores the fact that calling

an acceleration in the first place requires the support of 50% of the debt

•

We will simultaneously seek to obtain waivers from lenders and begin the process to refinance the

debt

if

necessary,

which

we

can

believe

can

be

accomplished

in

a

timely

manner

Portnoys’

Complaint

Exposing the Portnoys’

Scare Tactics

Acceleration Of Debt Is Highly Preventable

36

WE AGREE WITH ISS

ISS Report

Exposing the Portnoys’

Scare Tactics

Acceleration Of Debt Is Highly Preventable

-ISS Report dated 2/28/14

“That lenders might call the company’s debt is possible, but whether it is likely remains unclear. The debt

which is publicly traded currently trades above par, creating an economic disincentive for holders to call

a default. For another, lenders are generally more concerned with changes to a company’s business

outlook—which directly affects a company’s ability to service its debt—than with changes to the

composition of its board. Given the dissidents have nominated Zell, a well-known REIT investor and

executive with a long history of success, lenders might well believe the company’s business prospects

would grow brighter, rather than dim, with the proposed board change.

37

Removal of the board may impact the Company’s ability to pay dividends to shareholders.

Reality

•

The last dividend to shareholders was paid on February 21, 2014

•

Historically, the next dividend will not be paid until late May 2014

•

If the current board decides not to declare and approve payment of the next dividend

before the Trustees are removed, we believe there will be ample time for the new

board to declare and pay the dividend before the end of May

•

We do not believe the potential delay of one quarter’s worth of dividends will harm

shareholders in a material way, particularly in light of the dramatically improved

outlook for the Company under new leadership

Portnoys’

Complaint

Exposing the Portnoys’

Scare Tactics

Next Dividend Can Be Authorized By Current Or New Board

38

II. The Portnoys’

Latest Financial Distortions

39

The Portnoys’

Latest Financial Distortions

Exercise Caution!

On

the

following

pages,

we

highlight

some

of

the

Portnoys’

most

egregious

financial distortions of the truth

Given

the

numerous

errors

and

misleading

financial

analyses

the

Portnoys

have

presented

over

the

last

few

weeks,

we

caution

shareholders

to

view

any

claims

or

statistics

asserted

by

the

Company

with

a

healthy

dose

of

skepticism

Glass Lewis Agrees:

“What it appears the board was ultimately able to take away from this marginally

mitigated

defeat

--

and

how

it

elected

to

address

the

decidedly

foreseeable

effort

by

Corvex

and

Related

to

further

pursue

comprehensive

board-level

change

--

reflects,

in

our view, a disconcertingly intransigent reliance on half-truths, misdirection and flatly

disingenuous analyses as a means to preserve the status quo.”

Glass Lewis Report, March 19, 2014

40

The Portnoys' Latest Financial Distortions

External Management “Benefits Shareholders”

The

Portnoys

make

the

incredulous

claim

that

external

management

“benefits

shareholders”

and

base

this

claim

on

immaterial

financial

metrics

that

are

erroneous

and

extremely

misleading

Further, the statistics the Portnoys tout are the epitome of myopic financial

analysis, a classic example of “losing the forest between the trees”

In reality, the pernicious effects of external management are glaring when viewed through a

more holistic lens:

–

“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’.”

–

Green

Street,

March 1, 2013

CWH

has

paid

the

Portnoys

nearly

$800

million

in

cumulative

fees

since

1997

while

shareholders

have

experienced

a

meager

7%

total

return

and

-79%

share

price

decline

The

twisted

incentives

of

externalized

management

have

motivated

the

Portnoys

to

engage

in

unconscionable

governance

malfeasance

in

order

to

protect

their

external

fee

stream

Wall Street analysts explicitly discount CWH for its external management structure:

The REIT industry long ago recognized the need to leave behind the inherent flaws of the

external management structure in order to create mutually beneficial and aligned relationships

between shareholders and management

–

Out of approximately 108 equity REITs with greater than a $1 billion market cap and greater than 1

year in the public markets, only seven are externally managed today, five of which are Portnoy REITs

41

The Portnoys' Latest Financial Distortions

G&A Expense

The Portnoys claim that CWH benefits from being externally managed by RMR

based on incorrect & misleading G&A statistics

However,

presenting

G&A

statistics

in

a

vacuum

completely

misses

the

mark,

and

is

an

obvious

attempt

to

distract

shareholders

from

the

real

issues

RMR runs CWH in this manner because they are not in the real estate business, in our view,

but

the

AUM

(1)

business

in

which

they

are

compensated

to

grow

the

size

of

the

Company

rather than its profitability

When comparing NOI margin % as well as same store NOI performance over the last several

years vs a true peer set, CWH has clearly underperformed as shown on pages 84-85

We believe this is explained by, among other things, the fact that G&A at CWH is composed

primarily of fees to RMR and RMR in turn uses only a skeleton leasing and asset

management staff in order to optimize profits for an external service provider:  the Portnoys

Meanwhile, G&A at internally managed REITs

is spent on value additive expenses:  people,

services, equipment, etc., in order to maximize profits for the company rather than for an

outside party

RMR’s

skeleton

leasing/asset

management

staff

manages

5

REITs

(>$20B

in

assets)

and

also the Portnoys’

private real estate holdings, which altogether encompass an excessively

wide range of property types:  office, industrial, retail, hospitality, senior housing, and land

Based on our extensive diligence in the field, the staff at RMR is smaller than that of much

smaller real estate organizations who focus on just a single property type

1)

“AUM”

refers to Assets Under Management.

42

The Portnoys' Latest Financial Distortions

G&A Expense (cont.)

For the record, we also believe that in their presentation of 3/5/14, the Portnoys

understate pro forma G&A expense by 11% and also use a faulty peer set to

create misleading financial analyses

The Company uses a faulty peer set:

–

PKY manages 12.2 million square feet of office space for third parties on top of the 17.6 million square

feet

it

owns

outright

and

therefore

incurs

substantially

greater

G&A

expense

relative

to

Revenues,

Gross Real Estate Assets, and NOI

–

LRY maintains a larger than normal construction and development operation and is also an industrial

property REIT but CWH has very limited industrial exposure in continuing operations

–

CLI’s properties are highly concentrated in a geography that is widely viewed as being in secular or

long

term

decline

and

therefore

generates

below

average

revenues

and

NOI

–

DRE is an industrial REIT and does not belong in the peer set

When the Portnoys’

financial analysis is performed correctly, pro forma G&A expense  ratios

for

CWH

appear

to

be

roughly

in

line

with

a

true

peer

set

rather

than

significantly

better

But

as

we

note

on

the

prior

page,

this

ignores

the

impact

of

the

skewed

incentives

and

poor

management

practices

of

external

management

on

NOI

performance

43

The Portnoys' Latest Financial Distortions

Fourth Quarter 2013 Same Property NOI

The

Portnoys

tout

highly

misleading

Q4

same

property

NOI

results

as

vindication for their purported “business plan”

We remind shareholders that CWH’s same property NOI excludes 205 underperforming

buildings placed in discontinued operations (out of an original portfolio total of 439 at Q4

2012)

that

have

been

either

sold

or

impaired

for

a

total

loss

of

$415

million

(or

$3.51

per

share)

(1)

–

CWH no longer reports same store NOI statistics for this discontinued portfolio

–

The Portnoys would like to disown the abysmal performance record

of the discontinued

portfolio,

but

if

the

Portnoys

are

not

accountable,

who

is?

–

The Portnoys never cease to demonstrate an aversion to accountability

–

As depicted on the following pages: since Q4 2002, CWH has reported 45 quarters of

same

property

NOI

statistics,

during

which

time

there

have

been

7

“flashes

in

the

pan”

of

positive

growth,

while

the

remaining

38

exhibited

average

negative

growth

of

3.6%

(2)

–

During

the

same

time

period,

CWH

total

return

performance

lagged

peers

(3)

by

26%

On the earnings conference call, Adam Portnoy admitted the stated growth rate of 8.4%

would actually be 5%, excluding a nonrecurring expense from Q4 2012

1)

Represents

the

sum

of

1)

Loss

on

asset

impairment

from

discontinued

operations,

2)

Loss

from

discontinued

operations;

and

3)

Net

gain

on

sale

of

properties

from

discontinued operations, for 2012 and 2013, per company filings.

2)

Represents

GAAP

NOI

vs

Cash

NOI.

Unlike

almost

all

other

REITs,

CWH

did

not

begin

disclosing

same

property

NOI

growth

on

a

cash

basis

until

mid-2013.

3)

Peers include: PKY, HIW, CUZ and BDN.

No one but the Portnoys are making the incredulous claim that CWH has outperformed:

We

also

strongly

caution

against

making

long

term

extrapolations

from

a

single

period:

44

The Portnoys' Latest Financial Distortions

Fourth Quarter 2013 Same Property NOI (cont.)

The Dangers of Extrapolation: In 2006, it appeared that CWH’s plan to acquire

to industrial properties was “working”

Year-over-year Same Property NOI Growth 2002-06, by quarter

(12.0%)

(10.0%)

(8.0%)

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

6.0%

45

The Portnoys' Latest Financial Distortions

Fourth Quarter 2013 Same Property NOI (cont.)

Putting

It

In

Context:

Does

it

look

like

the

Portnoys’

business

plans

have

ever

“worked”?

Year-over-year Same Property NOI Growth since 2002, by quarter

46

The Portnoys' Latest Financial Distortions

Their Business Plan Is “Working”

The Portnoys tout their purported portfolio repositioning as their salvation for

nearly three decades of underperformance

But CWH shareholders have seen this movie before, and know how it ends

Over its 28-year history, CWH has operated a wide variety of property types:

senior housing,

hospitality, industrial, office, land, vineyards, etc.

CWH has also operated in every region of the U.S. as well as internationally

In

other

words,

CWH

has

always

lacked

a

true

strategy

other

than

the

indiscriminate

accumulation of assets to generate fees for an external service provider

Over its history, the Company has transitioned to various property types not for strategic real

estate reasons, in our view, but to optimize the marketing of equity offerings and maximize the

size of the Company

What

shareholders

are

now

witnessing

in

real

time

is

yet

another

such

meandering

transition,

disguised as a “business plan”

Regardless

of

property

type,

geography,

purported

“business

plan,”

or

timeframe,

the results at CWH have always been the same:  dismal underperformance

But what has remained constant is the management team

Rather

than

“reset”

the

property

portfolio,

perhaps

it’s

finally

time

to

“reset”

the

management team

47

The Portnoys’

Latest Financial Distortions

The Portnoys “Cherry-Pick”

Timeframes To Skew CWH Stock Performance

Portnoys’

Distortion

(1)

•

By selecting 1/1/2011 as an end date for their performance

comparison above, the Portnoys ignore the period of 2011

through early 2013 as if they are only accountable for

performance during periods of their choosing

•

The

Portnoys’

actions

repeatedly

demonstrate

an

aversion

to accountability

Reality

See footnotes on p. 88.

•

By selecting 2/28/2014 as an end date for their performance

comparison above, the Portnoys attempt to take credit for

almost

a

full

year

of

stock

performance

that

occurred

after

Corvex and Related filed their initial 13-D

(2)

Excludes over 2 years

of recent history

~1 year after

Corvex/Related’s

initial 13-D filing

Last  trading day

before

Corvex/Related’s

initial 13-D filing

Total Shareholder Return

1/1/2000 to 2/28/2014)

172%

147%

CWH

Office REIT Peers

Average

(

101%

97%

CWH

Office REIT Peers

Average

Total Shareholder Return

(1/1/2000 to1/1/2011)

52%

148%

CWH

Office REIT Peers

Average

Total Shareholder Return

(1/1/2000 to

2/25/2013)

The Portnoys are attempting to disclaim 

selected periods of underperformance, 

while taking credit for outperformance for 

which they are not responsible, but in our 

view there is no way to slice and dice the 

data in favor of the Portnoys – their 

performance has been horrible

48

The Portnoys’

Latest Financial Distortions

More Errors and End Dates

Portnoys’

Distortion

(1)

Reality

1)

CommonWealth REIT Presentation to Shareholders, p. 8, 3/5/14.

Source: Bloomberg, Factset

•

The

Portnoys

select

an

end

date

of

February

22,

2013,

presumably

because

they

prefer

that

shareholders

overlook the massively dilutive equity offering they announced on the next trading day, February 25, 2013, which

drove CWH’s stock price down 12.1%

in a single day

•

Even if February 22 were an appropriate end date, the Portnoys appear to miscalculate CWH’s total return by an

additional 154 percentage points, for a total misstatement of over 200 percentage points

Last  trading day

before

Corvex/Related’s

initial 13-D filing

Total Shareholder Return

(1/2/1990 to 2/22/2013)

639%

589%

CWH

S&P 500 Index

414%

579%

CWH

S&P 500 Index

Total Shareholder Return

(1/2/1990 to 2/25/2013)

The Portnoys selected as an

end date the last trading day

before

the announcement of

their massively dilutive equity

offering which drove the

stock down 12%

While we question the analytical value of comparing an office REIT with the S&P 500 rather than its 

office peers over the extended period  in question, we believe the deceptiveness of the Portnoys’ 

analysis is particularly appalling

49

III. The Portnoys’

Reversible Governance

Alterations In Context

50

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys' Governance Alterations Are Illusory

All of the Portnoys' alterations are ineffective, and most importantly nearly all are 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

–

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

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

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

exercise their fundamental right to vote

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

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

believe suggest total disdain for shareholder rights

The

Portnoys’

“Check-the-Box”

governance

alterations

create

the

illusion

of

reform,

but

still

bring

zero

incremental

accountability

and

therefore

offer

no

guaranteed

ability

for

shareholders

to

choose

who

runs

their

company

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

51

The Portnoys’

Reversible Governance Alterations In Context

Reality

Annual Elections

Portnoys’

Window Dressing

Why It’s All Smoke and Mirrors

Propose

declassification

of

Board

at

the

2014

annual

meeting

Requires a total of 4 annual meetings

•

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

•

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?

52

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

The Board that appointed the two new

“independent”

Trustees is the same one that has

unconditionally supported the Portnoys and re-

appointed Joe Morea after he was voted out of

office at the 2013 annual meeting

•

Why would the new Trustees be any more

“independent”

than Joe Morea, William Lamkin

and Frederick Zeytoonjian?

•

Are shareholders expected to believe

that this time it is different because the

new appointees were found by a

headhunter hired by CWH?

•

Neither

of

the

two

new

“independent”

Trustees

will be up for election at the 2014 annual

meeting

–

they

were

conveniently

added

to

the

classes up for election in 2015 and 2016

•

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

election

in

2014

–

shareholders

cannot

hold him

accountable until 2016

Portnoys’

Window Dressing

Board Composition

•

Size of the Board to be increased

such that the ratio of Independent

Trustees compared to total Trustees

will increase from the current 71% to

at least 75%

•

Added Ronald J. Artinian and Ann

Logan

as

“independent”

Trustees

•

Lead Independent Trustee will be

designated after appointment of

another Trustee. Expected before

2014 annual meeting

•

Added share ownership guidelines

53

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

Red

Tape

Bylaws

can

be

amended

at

any

time

by

the

Board without shareholder approval, as they were last

year to prevent ability to hold a consent solicitation; in

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

modify bylaws at all

•

Shareholders are expected to assume that Bylaws will

not be again amended whenever convenient to the

Portnoys

•

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

Red

Tape

bylaws

–

even

the

most

innocuous

ones

–

to

silence shareholders

•

Portnoys’

Window Dressing

Red Tape Bylaws

Bylaws amended to have a seemingly less

offensive process of trustee nominations at

annual meeting

•

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

year bylaw for Trustee nominations before the 2015

annual meeting

•

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

managed REIT 44% of whose shares are owned by

CWH

–

re-inserted

an

arbitration

clause

in

its

bylaws

within

months

after

clearing

SEC

comments

and

going

public

(SEC

had

challenged

the clause during SIR’s IPO process)

We had to prove to the Portnoys in arbitration that

our  record date request had been sent via

registered mail return receipt requested (which it

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

FedEx), in order to be counted as a “valid”

request

54

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

Company will continue to have a poison pill

built into its charter and bylaws that prohibit

stock acquisitions over 9.8 percent

•

Still no response to our letter request for

a waiver despite resolution of disputes

by the Arbitration Panel

•

As

“look

through”

entities

for

tax

purposes, REIT status concerns

regarding the 9.8% limitation are not an

issue with respect to Corvex and

Related

•

Company can always unilaterally add back in

the “dead hand”

provisions or implement a new

poison pill overnight without shareholder

approval

Portnoys’

Window Dressing

•

Expiration of poison pill to be

accelerated from October 17, 2014 to

a date soon after resolution of the

pending disputes with Corvex/Related

•

“Dead-hand”

provisions eliminated

Poison Pill

55

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

•

CWH still externally advised by a conflicted outside

party not subject to accountability by CWH’s

shareholders and that owns virtually no stock in CWH

•

Continues to primarily incentivize RMR to grow

assets at the expense of shareholders when the

company resumes its history of serial equity issuance

•

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

Portnoys’

Window Dressing

•

Beginning in 2014, base business

management fee to be based on the

lower of: (i) gross historical cost of real

estate assets or (ii) CWH’s total market

capitalization

•

10% of base business management fees

will be paid in stock

•

Annual incentive fees will be based upon

total returns realized by shareholders

(i.e., appreciation plus dividends) in

excess of benchmark

RMR Management Agreement

(1)

Adjusted for reverse stock splits.

56

IV. Widespread Disapproval Of The Portnoys

How can such a diverse group of parties all be wrong

about

the

Portnoys

and

their

true

intentions?

57

Widespread Disapproval Of The Portnoys

The Arbitration Panel Has Spoken

The Panel struck down illegal bylaws passed by the current Board, expressly

prohibited any action intended to impede or frustrate the new solicitation and

ruled

that

Corvex/Related

had

satisfied

onerous

“red

tape”

bylaw

requirements

Most importantly, the Panel Declared it would remain available to resolve any

issues or disputes in the new consent solicitation

“There is no question that CWH’s Bylaws, in the aggregate, erect a complex wall of

procedural hurdles to any consent solicitation.”

Interim Arbitration Award, 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 and capable of continuing their campaign of shareholder

disenfranchisement

“Given the significant risk that leaving any incumbents on the board would prevent

shareholders from effecting the necessary change, however—and particularly in light

of the fact the board has demonstrated its willingness to reappoint even a trustee

whom shareholders just voted out of office by a four-to-one margin—shareholders

should consent to removal of the entire board by voting FOR the proposal.”

ISS report, February 28, 2014

58

Widespread Disapproval Of The Portnoys

ISS Disapproves of the Portnoys

“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.”

ISS

report,

June

13,

2013

ISS recommended removal of the entire Board for the second time in nine months

“…as clearly stated in our original report…we continue to believe shareholders should

support the current arbitration-enforced solicitation and effect the board change

proposed and supported nearly a full year ago...”

Glass Lewis report, March 5, 2014

59

Widespread Disapproval Of The Portnoys

Glass Lewis Disapproves of the Portnoys

“In

lieu

of

further

subjugation

of

shareholder

rights,

we

believe

the

Dissident’s

consent

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

and its owners.”

Glass Lewis report, June 17, 2013

Glass Lewis recommended removal of the entire Board for the second time in

nine months

“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.”

Green Street Advisors, March 1, 2013

60

Widespread Disapproval Of The Portnoys

Green Street Advisors Disapproves of the Portnoys

“We are concerned about the ability of Newton, Mass.-based CommonWealth REIT's

management to improve the competitive positioning of its office portfolio given weak

office market conditions. We also assess CommonWealth's management and

governance as "weak".”

“The rating on CommonWealth also reflects our "weak" assessment of its

management and governance. Through subsidiaries, RMR provides fee-based

services to CommonWealth, including the direction of capital market activities,

selection and acquisition of its investments, execution of property transactions, and

management and leasing of its properties. Standard & Poor's believes that external

management structures can potentially result in a weaker alignment of interests

between shareholders and management when compared with internally managed

REITs. Further, CommonWealth's staggered, small, and interrelated board

manifests a lack of independence from management and may provide

insufficient oversight and scrutiny of key enterprise risks, in our view.”

“CommonWealth REIT Rating Is Lowered To 'BB+'; Outlook Stable; '2’

Recovery

Rating Is Assigned To Senior Unsecured Debt,”

Standard and Poors, June 10, 2013

61

Widespread Disapproval Of The Portnoys

Standard and Poors Disapproves of the Portnoys

62

Widespread Disapproval Of The Portnoys

Delaware County Employees Retirement Fund Disapproves of the Portnoys

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

“[The Portnoys] have directly participated in and received substantial monetary

benefits from the wrongdoing alleged herein. Year-after-year, they reinstate the

Portnoys and RMR as CWH’s manager, pursuant to lucrative agreements, despite

CWH’s

failing

performance…

Accordingly,

and

for

the

additional

reasons

alleged

herein, CWH is operated and controlled by Defendants, including a majority of its

Board of Trustees, whose interests materially conflict with the interests of CWH.”

Complaint as filed from Delaware County Employees Retirement Fund,

February 28, 2013

63

Widespread Disapproval Of The Portnoys

Six Pension Funds Disapprove of the Portnoys

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.

“HPT HAS A LONG HISTORY OF DISREGARDING SHAREOWNERS”

•

“For the past three consecutive years, shareowner proposals to declassify the board won

overwhelming support from shareowners, receiving in each year a supermajority of the votes cast

and a majority of outstanding shares. The proposal received support from over 73 percent of voting

shares in 2009, over 90 percent in 2010 and over 88 percent in 2011. The company has yet to

adopt the reform.”

•

“In 2010, a shareowner proposal to eliminate HPT’s supermajority voting requirements won

support of more than 88 percent of voting shares and 70 percent of the outstanding shares. The

company has yet to adopt this reform.”

Pension Fund Letter to Shareholders, April 26, 2012

CalPERS has pushed for the annual election of all trustees every year from 

2009-2013.

64

Widespread Disapproval Of The Portnoys

Perry Corp. Disapproves of the Portnoys

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 our view, conflicted decision-makers have allowed CWH’s assets to suffer from

underinvestment and mismanagement, which has caused CWH’s shares to be

woefully undervalued. We believe that the poor strategic decisions are a direct result

of

the

fact

that

there

is

no

shareholder

check

on

management

who

are

compensated

via RMR for growing assets instead of generating returns for shareholders of CWH.

Changing

the

RMR

management

structure

–

and

the

conflicted

corporate

governance

that

enables

it

to

stay

in

place

–

is

therefore

critical

to

bridging

the

gap

between

market and intrinsic value. The CWH board has demonstrated that they will go to

extraordinary lengths to preserve their unchecked control. Management is running a

scorched earth campaign to disenfranchise shareholders to continue milking their

cash cow. The Board must be replaced in its entirety to protect shareholders.”

Perry Corp. 13D/A, April 30, 2013

65

Widespread Disapproval Of The Portnoys

Locksmith Capital Disapproves of the Portnoys

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

“We continue to be amazed that Barry Portnoy, Arthur G. Koumantzelis, Thomas M.

O'brien,

Barbara

D.

Gilmore,

and

Patrick

F.

Donelan

have

spent

a

significant

amount

of

shareholder

money

in

order

to

disenfranchise

its

shareholders,”

said

Timothy

Brog,

Managing Director of Locksmith Capital Management LLC. “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.”

Locksmith Capital Management, April 2008

“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.”

“Despite

Doldrums

in

Deal

Activity,

A

Few

Highlights

This

Year,”

New

York

Times,

December 17, 2013

66

Widespread Disapproval Of The Portnoys

The

New

York

Times

Disapproves

of

the

Portnoys

“The

Portnoys

Receive

an

F”

–

New

York

Times

“…So, to recap, the founder of CommonWealth and his son run the company, manage

the

property

for

a

hefty

fee

and

dominate

the

board

–

all

while

having

little

equity

stake

in the company.”

“…If the conflicts at CommonWealth are so glaring, why don’t shareholders agitate for

change? Some have tried, only to encounter an array of barriers that appear to

be

set

up

to

keep

the

outside

managers’

lucrative

contract

in

place

and

the

company under their control.”

“The

list

of

entrenchment

tactics

is

lengthy

…As

if

these

barriers

were

not

enough,

they have been strengthened in the last five years by no less than six changes to the

company’s bylaws favoring the Portnoys and their management company.”

“Management, to the Barricades!,”

New York Times, May 4, 2013

67

Widespread Disapproval Of The Portnoys

The New York Times Disapproves of the Portnoys

“Management,

to

the

Barricades!”

–

New

York

Times

"The corporate governance track record of Portnoy-managed companies isn't

pretty,"

says

Ann

Yerger,

executive

director

of

the

Council

of

Institutional

Investors, a

Washington-based nonprofit that focuses on shareholder rights.

Wall Street Journal, March 5, 2014

68

Widespread Disapproval Of The Portnoys

Council of Institutional Investors

The Council of Institutional Investors is a prominent nonprofit association of

pension funds, endowments and foundations with assets that exceed $3 trillion.

The Council of Institutional Investors is one of the leading voices for effective

corporate governance and strong shareholder rights.

“We

agree

with

the

need

for

structural

change

at

CommonWealth,

as

we

have

noted

for years and articulated by activist shareholders Corvex/Related. External mgmt for

equity REITs is a relic in the REIT sector; it has created a clear incentive for CWH to

grow and maintain assets. The co.'s strategy over its history has been value

destructive,

characterized by leveraged acquisitions, more limited capital recycling

and weak core fundamentals. Even when assets were sold, they were sold to affiliated

RMR

entities

keeping

AUM

‘in

house’

and

not

maximizing

value.

This

has

resulted in

large dividend reductions and now prompted a large equity offering. An internalization

and restructuring of mgmt and better capital allocations in our view would be major

positives for the stock.”

Citi Research, February 26, 2013

69

Widespread Disapproval Of The Portnoys

Citigroup Disapproves of the Portnoys

70

Widespread Disapproval Of The Portnoys

UBS Disapproves of the Portnoys

“We

believe

SNH's

planned

acquisition

of

a

$1.1

billion

Boston

life

science

complex

highlights

problematic

issues

with

regard

to

its

external

management

structure…”

“An

Unjustified

24%

G&A

Increase.

As

an

externally-

managed

REIT,

SNH

must

pay

its

manager,

RMR,

a

combination

of

fees.

The

base

fee

equates

to

0.5%

of

acquisition

cost,

w/

property

management

at

3%

of

MOB/Life

Science

revenues.

For

the

$1.1bn

acquisition

of

the

Vertex

buildings,

we

est.

$7.7m

of

additional

fees

for

RMR

(or

$0.04/sh).

The

fee

streams

to

RMR

will

increase

SNH's

G&A

by

an

estimated

24%

in

2014.

Stated

another

way,

the

fees

to

RMR

on

a

per

share

basis

roughly

equal

the

accretion

of

the

deal

to

SNH

shareholders

.

RMR

has

locked

in

about

$115m

of

fees

over

the

life

of

the

15-year

lease

on

the

building

for

an

asset

that

is

96%

occupied

under

a

triple-net

lease

that

we

think

requires

virtually

no

incremental

asset/property

management

oversight.”

“Latest

acquisition

highlights

issues

with

external

management

structure

at

SNH.

We

see

SNH

shares

moving

to

a

substantial

discount

to

underlying

Net

Asset

Value,

as

the

market

assigns

a

greater

discount

for

a

corporate

structure

that

utilizes

an

external

manager

whose

interests

can

conflict

with

those

of

SNH's

shareholders.”

UBS, February 11, 2014

“Okay, okay. And then, Adam [Portnoy], we’re both fiduciaries to investors, so don’t

take this personally and take it constructively please. But when I talk to investors

about CommonWealth, the investment strategy, the balance sheet, the

operations, there’s just zero investor confidence out there. The term that most

people use is “uninvestable.”

Stifel Nicholas, August 8, 2012

71

Widespread Disapproval Of The Portnoys

Stifel Nicholas Disapproves of the Portnoys

“The

scale

of

the

Portnoy

real

estate

empire

and

its

conflicts

of

interest

are

even

larger than that…”

“But

there

is

no

getting

around

the

damaging

conflict

of

interest

at

the

heart

of

Commonwealth’s business.

The Portnoys are not employed executives at the trust in

any conventional sense and do not own much of its stock. Their firms runs the

business

under

a

management

contract.

In

general,

the

fees

go

up

as

the

trust

gets

bigger, and not necessarily when it performs better for shareholders.”

“This kind of business leadership arrangement is known in the real estate trust world

as

“external

management,”

and

it

has

been

on

the

way

out

for

years.

Nearly everyone

acknowledges its built-in conflicts are toxic.”

“Finally, Tougher Foes May Humble Real Estate Empire,”

The Boston Globe, February 4, 2014

72

Widespread Disapproval Of The Portnoys

The Boston Globe Disapproves of the Portnoys

The Portnoys are even criticized in their own hometown!

73

Widespread Disapproval Of The Portnoys

Shareholders Vote Against The Portnoys And Their Beholden Trustees

In recent elections, shareholders have expressed displeasure with the Portnoys

and their Trustees at various RMR-managed entities

In 2013 only 14% of CommonWealth’s outstanding shares and 21% of the shares voting in

the election voted FOR the election of Joe Morea

In 2013 only 20% of Senior Housing Properties Trust’s outstanding shares and 27% of the

shares voting in the election voted FOR the re-election of Adam Portnoy

In 2013 only 23.5% of Senior Housing Properties Trust’s outstanding shares and 32% of the

shares voting in the election voted FOR the re-election of John Harrington

In 2012 only 32% of Senior Housing Properties Trust’s outstanding shares and 43% of the

shares voting in the election voted FOR the re-election of Barry Portnoy

In 2013 only 31% of Hospitality Properties Trust’s outstanding shares and 43% of the shares

voting in the election voted FOR the re-election of William Lamkin

In 2012 only 32% of Hospitality Properties Trust’s outstanding shares and 42% of the shares

voting in the election voted FOR the re-election of Dr. Bruce Gans

In 2013 only 33% of Five Star Quality Care’s outstanding shares and 45% of the shares

voting in the election voted FOR the re-election of Dr. Bruce Gans

If Barry Portnoy receives a similar disapproval at the 2014 CommonWealth

meeting what will he do?

Despite these unfavorable results, each of these individuals still serves on the Board of the

respective entity

74

V. History of Underperformance

75

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

76

History of Underperformance

By Any Metric Over Any Relevant Time Period…

(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 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

2013,

YTD

9/30/2012,

2011,

and

2010,

respectively

(1)

Acquisitions and

return on investment

$2.7

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

($ 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%

77

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

78

History of Underperformance

RMR Fees vs. CWH Shareholder Returns

(1)

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 fees paid per CWH public filings include SIR. 2013 includes fees paid to SIR after deconsolidation on July 1, 2013.

RMR

extracted

approximately

36%

of

CWH’s

unaffected

market

capitalization

(1)

during

2007

-

2013,

as

CWH

share

price

continued

to

plummet

2007

2008

2009

2010

2011

2012

2013

2007-

2013

Cumulative

Fees Paid Out to RMR

(2)

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$83.7

$478.2

RMR Fees % Growth

--

5.9%

(0.9%)

(0.6%)

11.7%

11.2%

8.3%

40.2%

RMR Fees as % of:

CWH Market Cap

(1)

4.5%

4.7%

4.7%

4.6%

5.2%

5.8%

6.3%

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%)

79

History of Underperformance

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

(1)

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

(2)

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

Sources: Company filings, SNL

(1)

(2)

Fees paid to RMR climbed 40% from 2007 to 2013, while the share price

declined 68%

(1)

$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

80

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

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%)

39.3%

59.9%

CWH-Avg.

81

History of Underperformance

Total Returns –

3 years

CWH

has

underperformed

its

peers

over

the

last

3

years

ending

2/25/2013

(1)

HIW: 42.1%

PDM: 39.1%

CWH: (26.6%)

PKY: 6.9%

CUZ: 42.5%

BDN: 35.8%

RMZ: 52.5%

Note: Total returns include dividends

(1)

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

Source: SNL

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%)

39.3%

59.9%

CWH-Avg.

82

History of Underperformance

FFO Multiples

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

PDM: 14.0x

CWH: 5.4x

HIW: 13.1x

CUZ: 18.2x

BDN: 9.0x

Source: Factset

PKY: 13.3x

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%)

83

History of Underperformance

Operating

Performance

Value

accruing to

RMR, not

shareholders

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

(1)

2013 figures include SIR. 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.

(3)

SIR does not disclose CAD, therefore the figures will not be comparable post deconsolidation of SIR.

Source: Company filings and SNL

($ in millions)

For the Fiscal Year Ending December 31,

2010

2011

2012

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%)

(17.8%)

NOI per Share (% growth)

(19.1%)

(4.2%)

16.1%

(20.0%)

EBITDA per Share (% growth)

(22.1%)

(4.7%)

(27.2%)

(21.9%)

FFO per Share (% growth)

(13.8%)

(9.9%)

0.0%

(13.2%)

CAD per Share (% growth)

(23.7%)

(27.7%)

(17.3%)

N/A

(3)

Fees Paid to RMR

$62.2

$69.5

$77.3

$83.7

% growth

(0.6%)

11.7%

11.2%

8.2%

CWH trails its core office REIT peers by 188 bps and 200 bps on same store rental growth and

NOI growth, respectively

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

placed 115 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

84

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

2013 rent growth

(1)

2013 NOI growth

(1)

2013 NOI margin

(1)

As a result, we also show on the following pages, results from 2010 through 9/30/2012

85

History of Underperformance

Same Store Underperformance (cont’d)

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

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)

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

86

History of Underperformance

Acquisition Activity

(1)

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

(2)

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

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

(3)

Includes net sale proceeds from consolidated joint venture.

(4)

Weighted by market cap.

(5)

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

Source: Company filings and Factset

(5)

Net acquistions / CapEx as % of Market Cap

(1)

2007

2008

2009

2010

2011

2012

2013

Cumulative

Parkway Properties Inc. (PKY)

5.4%

22.4%

1.9%

7.4%

36.2%

64.2%

3.4%

140.9%

Highwoods Properties Inc. (HIW)

4.8%

4.7%

2.1%

3.0%

5.5%

8.1%

11.9%

40.1%

Cousins Properties Inc. (CUZ)

(2)

25.2%

11.7%

4.3%

(7.0%)

3.9%

(17.2%)

137.9%

158.8%

Piedmont Office Realty Trust Inc. (PDM)

(3)

1.4%

3.7%

1.1%

1.9%

(2.3%)

0.4%

13.6%

19.9%

Brandywine Realty Trust (BDN)

(6.2%)

(11.9%)

5.6%

9.6%

0.8%

0.3%

(7.5%)

(9.1%)

Average

(4)

3.7%

3.6%

2.6%

3.3%

4.7%

6.8%

20.3%

45.0%

CWH

31.0%

6.1%

33.5%

27.6%

45.2%

56.3%

3.3%

202.9%

Net Acquisitions and CapEx

$419

$83

$453

$369

$604

$753

$44

$2,725

CWH share price

$30.92

$13.48

$25.88

$25.76

$16.64

$15.84

$15.85

Book value per share

36.11

34.68

35.66

37.53

33.24

36.82

N/A

CWH price / FFO multiple

6.8x

3.1x

6.0x

6.9x

4.9x

4.7x

5.4x

CWH

spent

$2.7

billion

on

acquisitions

during

2007

–

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

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

therefore the Portnoys personally – but not shareholders

87

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

252,903

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

408,531

0.35%

Footnotes

88

Footnotes to page 47

1)

Charts re-created from CommonWealth REIT Presentation to Shareholders, p. 6, 3/5/14.

2)

2/25/13 is the last trading day before Corvex and Related filed their initial 13-D.

Source: Factset

Note:  For comparability purposes we use the same peer set described in CWH’s Presentation to Shareholders of 3/5/14:  BDN, CLI,

DRE, HIW, LRY, and PKY, but we exclude

PDM as PDM did not go public until 2/9/10.  Peer Average represents a simple

average.

89

Disclaimer

Additional Information Regarding the Solicitation

SEC’s

website

at

www.sec.gov.

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

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

receives a confidential offering memorandum and related subscription documentation.

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

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

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

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

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

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

and other filings of the Company, copies of which are available on the U.S. Securities and Exchange Commission website at www.sec.gov/edgar. 

No representations, express or implied, are made as to the accuracy or completeness of such forward-looking statements, estimates or projections

or with respect to any other materials herein.  Corvex and Related may buy, sell, cover or otherwise change the form of their investment in the

Company for any reason at any time, without notice, and there can be no assurances that they will take any of the actions described in this

document.  Corvex and Related disclaim any duty to provide any updates or changes to the analyses contained in this document, except as may

be required by law.  Shareholders and others should conduct their own independent investigation and analysis of the Company.  Except where

otherwise indicated, the information in this document speaks only as of the date set forth on the cover page.  Permission to quote third party

reports in this presentation has been neither sought nor obtained.

The

definitive

solicitation

statement

and

all

other

relevant

documents

are

available,

free

of

charge,

on

the

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

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

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

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

of their direct and indirect interests, by security holdings or otherwise, to the extent applicable, is available in the definitive solicitation statement filed with

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

security

holders are urged to read the definitive solicitation statement and other relevant documents because they contain important

information regarding the solicitation.

Investors and

Corvex

Management

LP

and

Related

Fund

Management,

LLC

have

filed

a

definitive

solicitation

statement

with

the

Securities

and

Exchange

Commission

(the

“SEC”)

to

(1)

solicit

consents

to

remove

the

entire

board

of

trustees

of

CommonWealth

REIT

(the

“Removal

Proposal”),

and

(2)

elect

a

slate

of

new

trustees

at

a

special

meeting

of

shareholders

that

must

be

promptly

called

in

the

event

that

the

Removal

Proposal

is

successful.