CWH is a real estate investment trust, or REIT, that owns a
portfolio of office and industrial buildings. It is managed
by REIT Management & Research LLC ("RMR"). CWH
founder and Trustee, Barry Portnoy, is chairman and majority owner
of RMR, and his son, CWH Trustee Adam Portnoy, is President and
Chief Executive Officer of RMR. RMR's fees are tied to growth
in CWH's assets - whether or not that growth actually equates to
increased shareholder value.
RMR's management of CWH has been abysmal. For example, CWH
trades at a significant discount to its peers on all key measures,
and CWH's cost structure is inferior to its peers despite the
Company's larger scale of operations. Further, since 2007,
the Company has made over twice its own market capitalization in
acquisitions and capital expenditures while, at the same time, its
book value has only grown 2.4 percent. These costly
acquisition initiatives are motivated solely by the distorted
incentives created by RMR's fees for management of the Company, and
the conflicted nature of the CWH Board.
Despite RMR's mismanagement of CWH, it has received over $336
million in management fees from the Company in the past five
years. This extraordinary amount equates to roughly 20% of
the Company's current market capitalization.
As a direct result of the Company's mismanagement and disregard
of its fiduciary duties, on February 23, 2013, two of the Company's
largest shareholders - Corvex Management, LP ("Corvex") and Related
Fund Management, LLC ("Related") - increased their stake in CWH and
publicly criticized the Company's mismanagement. Rather than
engage with Corvex and Related or re-evaluate CWH's relationship
with RMR, the Board's response was clear - do whatever was
necessary to entrench itself in office.