CommonWealth REIT’s (NYSE:CWH) share price surged by more than 50 percent on Tuesday following the announcement that activist investor Keith Meister and real estate major Related Cos said they were willing to acquire the commercial property REIT for $2.1 billion (₤1.38 billion) or more.
Corvex Management, run by Mr Meister and Related Fund Management, the investment arm of Related Cos, unveiled yesterday they have a ten percent stake in the REIT and asked for the cancellation of the upcoming share and debt offering by the company. Corvex and Related offered to pay $25 a share for CommonWealth, valuing the company at $2.1 billion (₤1.38 billion). Following the completion of due diligence the offer could be increased meaningfully, the two prospective buyers have stated.
“We believe that the company's real estate assets are significantly undervalued due to the misalignment of incentives between the company and its externally advised management structure, and track record of underperformance," the investors wrote in their letter to the REIT’s board. Corvex and Related released a slide presentation in which they called CommonWealth’s stock “massively undervalued” with its property “trapped inside an entity which structurally fails shareholders”.
A spokesman for CommonWealth REIT rejected the criticism of the management structure and blamed the company’s disappointing results on its large number of suburban buildings, which have been hit hard by the financial crisis. He said the REIT is looking to shift its focus to urban property and sell dozens of suburban properties. The spokesman also said the board will "thoroughly review the filing and then decide when or how to meet" with Related and Corvex.
Two months after making a major acquisition of industrial properties in the Halifax-area, Canada, Toronto-based Dundee REIT (TSE:D.UN) remains open to further purchases. But according to Herald Business, available properties in the Halifax-area are scarce and there is no telling when the REIT will get the opportunity to grow its portfolio.
“It’s very difficult to acquire income-producing industrial assets in that market, so it’s hard to make a significant investment,” Scott Hayes, chief executive officer of Dundee Industrial REIT, told Herald Business in an interview on Tuesday.
Dundee Industrial made a significant investment on 19 December when it bought 79 light industrial properties across Canada for C$498.5 million (₤321 million), including 24 in the Halifax area, which it considers attractive. “We like it because of the fundamentals,” CEO Hayes said. “There’s institutional ownership. There’s not a lot of overbuilding or a lot of new development that comes in.”
Dundee Industrial expects its Halifax properties to perform very well in the coming weeks as demand in the area is growing with little additional supply in the pipeline. Mr Hayes said the REIT has some plans on how to improve its cash flow over time but will remain focused on its principal business of purchasing income-generating assets and paying distribution to shareholders.
CommonWealth REIT’s share price as of 27.02.2013, 08.40 GMT, was $24.40.
Dundee REIT’s share price as of 27.02.2013, 08.40 GMT, was C$36.66.