UPDATED, 4:08 p.m., March 13: Billionaire Sam Zell’s nomination to CommonWealth REIT’s board by dissident investors has the company’s leadership concerned about a potential conflict of interest.
Zell is also a lead investor in Par Petroleum Corp., one of Select Income REIT’s largest tenants. Select is 44 percent-owned by the Newton, Massachusetts-based CommonWealth. Company investors Corvex Management and the Related Companies collectively own 9.6 percent of the REIT and are currently looking to take over CommonWealth’s board.
The CommonWealth board is under fire for alleged mismanagement. The duo nominated Zell to the board last month.
“We are concerned that Zell is joining the Related/Corvex hostile takeover effort so he may influence these lease negotiations to the benefit of his company and the detriment of SIR shareholders, including CWH,” Adam Portnoy, CommonWealth president, said in a statement.
Zell’s Chai Trust Company, a division of his Equity Group Investments, is Par Petrolium’s largest shareholder with a 32.5 percent stake, according to Bloomberg.
Related and Corvex told The Real Deal that the conflict-of-interest allegations were “completely unfounded.”
“There is simply no conflict of interest,” the companies said in an emailed statement to TRD. “Through an equity offering engineered by Barry Portnoy himself, CommonWealth REIT ceased to own a majority of Select Income REIT in July 2013 and abrogated all control of its operations to Barry Portnoy’s privately controlled external management company RMR, who in fact has always had de facto control of SIR. We find it distasteful that the Portnoys would try to lecture anyone on conflicts of interest in light of the hundreds of millions of dollars they have extracted from CommonWealth in just the last six years alone while shareholders continued to suffer from their terrible performance.” [Bloomberg] — Julie Strickland