Edgar Filing: CommonWealth REIT

DFAN14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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¨		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

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The Case for Change Now at CWH

Presentation to CWH Shareholders

January 30, 2014

Disclaimer

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.

Additional Information Regarding the Solicitation

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

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.

five

new

trustees

special

meeting

shareholders

that

must

promptly

called

the

event

that

the

Removal

Proposal

successful.

Investors

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

information regarding the solicitation.

The definitive solicitation statement and all other relevant documents are available, free of charge, on the

SEC’s

website

www.sec.gov.

Table of Contents

Executive Summary

Appendix

History of Underperformance

II.

History

“Worst-In-Class”

Corporate

Governance

III.

The

Portnoys’

Reversible

Governance

Alterations

Context

IV.

Corvex/Related Turnaround and Governance Plan

Highly Qualified Nominees

VI.

Valuation Update

Executive Summary

Introduction

Corvex and Related are undertaking this consent solicitation to remove the entire

Board

Trustees

CommonWealth

REIT

(“CommonWealth,”

“CWH”

the

“Company”) after a hard-fought battle for shareholders to hold this vote, and to

subsequently elect a new, truly independent Board of Trustees

The Arbitration Panel's ruling in late 2013 established a clear process to facilitate this

consent solicitation

CommonWealth stands on the brink of a new phase in its history in which

shareholders can choose who will manage their company, unlock substantial value,

and leave behind a history as an underperforming, controlled company rife with

conflicts of interest

Corvex and Related will request a record date by February 16; CommonWealth must

establish the record date to be within 10 business days of the record date request; the

consent solicitation must be concluded within 30 calendar days of the record date

Executive Summary

The Case for Removal: Abysmal Performance

While

the

stock

price

plummeted

68%

during

2007-2013

(1)

annual

fees

paid

RMR,

the

external

manager

wholly-owned

Barry

and

Adam

Portnoy,

increased

40%

(2)

the

fees

are linked primarily to the size of the Company rather than to profitability for shareholders

Over

the

year,

years,

and

years

ended

February

25,

2013

(3)

the

stock price declined -17%, -45%, -43%, -45%, and -53%, respectively

The

Portnoys

effectively

control

CWH

despite

owning

virtually

stock,

with

the

fees

they

pay

themselves through RMR being their only meaningful economic interest in the Company

result,

with

ability

for

shareholders

hold

management

accountable,

believe

the

Portnoys have had nothing to fear and underperformance has thrived

CWH’s performance record is abysmal by almost any metric over any relevant

time period, in our view, but all the while the Portnoys have continued with

impunity to line their pockets

Shareholders can now take back CommonWealth, choose a new, truly

independent Board, and unlock the substantial value trapped within the

Portnoys’

conflicted external management structure

(1)

Assumes 2013 share price as of 2/25/2013, last trading day before Corvex and Related filed their initial 13-D.

(2)

RMR fees paid per CWH public filings include Select Income REIT (SIR).

(3)

Last trading day before Corvex and Related filed their initial 13-D.

Executive Summary

The Case for Removal: Corporate Governance Malfeasance

Having deliberately manufactured a highly lucrative and insulated situation for themselves

over 28 years, it is not surprising the Portnoys would harbor a deep commitment to retaining

control

However, the actions taken over the past year to silence shareholders were unconscionable,

in our view, and included, among many others, illegal bylaw amendments (later invalidated)

and a secret attempt to manipulate Maryland lawmakers into changing the Maryland

Unsolicited Takeover Act

Independent governance advisory firms such as ISS and Glass Lewis have long issued

negative opinions on CWH’s governance practices and recommended against re-election of

certain Trustees

Conveniently coinciding with a solicitation to allow shareholders to take back their company,

the Portnoys are now trumpeting highly misleading governance alterations, that can be

unilaterally reversed at any time, and shamelessly asking shareholders to believe that they

have experienced an “epiphany”

We believe the Board’s actions over the past year alone, coupled with serial

underperformance and atrocious corporate governance practices, warrant

removal

Shareholders should not allow a few conveniently timed, reversible governance

alterations to erase 28 years of poor governance, let alone the inexcusable

actions of the past year

Executive Summary

What Are Shareholders Voting On?

•

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

distract

shareholders,

but

referendum

whether

not

the

individuals

sitting

the

current

Board

are

fit

lead

this

company

•

The consent solicitation also creates an opportunity to elect highly qualified

new leadership committed to good governance and unlocking the

substantial value embedded in CommonWealth for shareholders

Executive Summary

A Vote on Leadership

An imperfect governance framework is only as good as those entrusted to

govern

There

are

gaping

loopholes

the

Portnoys’

recent

and

illusory

governance

alterations,

not

the

least

which

that

they

are

all

unilaterally

reversible

the

Board

But the obvious flaw in the governance modifications is that they require shareholders to trust

the same individuals who deliberately harmed shareholder rights over the past year with

actions such as:

–

Passing illegal bylaw amendments to eviscerate the ability to hold any consent solicitation, a right

plainly granted by the Declaration of Trust since 1986

–

Secretly attempting to manipulate state lawmakers into changing the Maryland Unsolicited Takeover

Act to eliminate the right to hold this consent solicitation

–

Refusing

eliminate

bylaws

that

require

Trustees

employed

RMR,

the

manager

owned

100%

by the Portnoys

In effect, the Portnoys are asking to be judged solely on the misleading modifications of the

past two months, rather than their 28-year history of poor governance, not to mention the

inexcusable actions of the past year

When a board deliberately harms shareholder rights through unconscionable

tactics to protect their own interests, accepting flawed governance alterations

while

leaving

the

same

board

place

simply

invites

the

same

Executive Summary

CWH Valuation Upside: NAV of Approximately $35 Per Share

We believe removal of the conflicted and underperforming Trustees will unlock

substantial

value

for

shareholders,

and

estimate

current

NAV

(1)

approximately $35 per share in such a scenario, 50% higher than the closing

price on January 29, 2014

Extensive due diligence has confirmed poor property and asset management practices,

validating the flaws of conflicted external management

believe

there

would

substantial

“low-hanging

fruit”

easily

within

the

grasp

properly incentivized management team

–

While we continue to estimate 24-36 months for NOI to reach stabilization, we

believe

measurable

progress

can

begin

soon

after

installation

new

management

with progress reports communicated to shareholders on a regular basis

Once CWH joins the ranks of other public REITs with institutional quality management,

and benefits from internalized management, operational turnaround, and improved capital

allocation, we believe CWH could trade at approximately $40 per share at 12/31/15

(1)

Represents estimate of private market value of all properties owned by CWH as disclosed in 9/30/13 10-Q filing, adjusted for recent asset sales reported in the media.

We believe installing a new independent Board and an effective management

team will make CWH “investable”

for previously untapped REIT investors in the

public markets, and remove the downside risk that the current conflicted

management structure will persist

Executive Summary

NAV Highlights

Estimated NAV is supported by extensive and continuing due diligence

Corvex/Related, with the assistance of Jim Lozier

(1)

, conducted independent site visits to

85% of the properties, by value, and leveraged Related’s already extensive network of

market contacts with that of Mr. Lozier, the co-founder and former CEO of Archon Group

L.P., a subsidiary of Goldman Sachs with 8,500 employees at the time of Mr. Lozier’s

departure in 2012

Stabilized NOI and private market cap rates are estimates based on a hyper-local,

property-by-property build-up, supported by discussions with hundreds of local market

participants in all of CWH’s relevant markets, including investment sales and leasing

brokers, tenants, owner/operators, and property managers

Estimates

private

market

cap

rates

are

further

supported

peer

analysis

comparable public REITs

Top

assets

value

represent

57%

the

total

portfolio,

and

the

Top

assets

value represent 79%

(1)

Mr. Lozier has been retained by Corvex/Related as a consultant and has been previously disclosed as a potential interim CEO.

Executive Summary

Corvex/Related’s Turnaround and Governance Plan To Maximize Value

The fair and unfettered election of a new Board consisting solely of truly independent Trustees

–

After consultation with fellow shareholders, we have proposed a slate of highly qualified

nominees for election to the Board at the Special Meeting to be held if the current Board is

removed: James Corl, Edward Glickman, Peter Linneman, Jim Lozier and Kenneth Shea

Best-in-Class corporate governance to finally impose accountability

–

Amend

existing

Declaration

Trust

and

bylaws

conform

ISS

and

Glass

Lewis

best

practices

–

Eliminate

the

requirement

that

least

Trustees

affiliated

with

RMR

–

Permanently opt out of MUTA

Internalize management and align management compensation with shareholder returns

“Right

the

ship”

with

basic

operating

strategies

not

currently

being

employed

existing

conflicted

management structure

–

We believe proper staffing levels and reinvestment in CWH’s existing portfolio can harvest a

substantial amount of “low hanging fruit”

poison

pill

Adoption

policy

against

new

pills

without

shareholder

approval

Cease

all

acquisition

activity

and

dilutive

capital

raises

until

stock

price

exceeds

its

NAV

Cease all related party transactions not approved by a vote of disinterested shareholders

Corvex and Related continue to propose the following Turnaround and

Governance Plan:

While dramatically different from CWH’s existing plan, these reforms are in our

view self-evident to every informed investor and will make CWH look like

virtually every other member of the S&P 500

Our Nominees have the qualifications to close the valuation gap by guiding the

Company to a share price which more accurately reflects

its value and prospects

Executive Summary

Our Nominees

Each nominee brings critical perspectives and skills that will be important to CommonWealth’s

future growth and success in unlocking value for shareholders

They have ready-to-implement strategic ideas designed to improve performance and are prepared

to hit the ground running to oversee immediate improvements

Their collective experience includes, but is not limited to:

–

Corporate strategic analysis for large real estate owner/operators

–

Public REIT operations and financial reporting

–

Intensive asset management and property management operations

–

Leading Wall Street valuation techniques for public REITs

–

Raising capital in the public markets

–

Implementing best practices corporate governance

Biographies of our nominees are included in the Appendix

Our

truly

independent

nominees

are

highly

qualified

with

wide-ranging

and

relevant real estate, finance and corporate governance experience

Executive Summary

Clear Case For Change

Underperformance

undisputedly

poor

CWH

rare

Historical

governance

policies

egregious

they

are

CWH

are

rare

How often do ISS and Glass Lewis and holders of more than 70% of

the outstanding shares

support removal of an entire Board?

Entrenchment

tactics

appalling

they

are

CWH

are

rare

The Portnoys ignored the shareholder right to vote enshrined in the Company’s charter for 28

years, and forced us to litigate for months to have the right confirmed by the Panel

Without

wholesale

change,

the

Portnoys

will

retain

effective

control

CWH

Actions

over

the

past

year

belie

“turned

leaf”

intentions

“Perpetual Fee Streams”

are a powerful incentive to maintain “Accountability Vacuum”

The case for removal could not be easier to make than it is at CWH:

For

the

first

time

since

the

Portnoys

began

erecting

barriers

free

and

fair

consent solicitation almost one year ago, shareholders of CommonWealth now

have an unobstructed path to deciding their own fate

Executive Summary

Timeline and Path

The

Arbitration

Panel

ruling

November

18,

2013

cleared

path

open

and fair consent solicitation process

Seize

the

Moment:

The

Time

Make

Real

Change

CommonWealth

Now

Despite taking every action imaginable to deny shareholders a vote, the Portnoys now have

no choice but to face their shareholders in a clear process established by the Panel

The Panel struck down all of the illegal bylaws passed by the current Board:

The Panel expressly prohibited any action intended to impede or frustrate the new solicitation

The

Panel

also

declared

would

remain

available

resolve

any

issues

disputes

"There

question

that

CWH's

Bylaws…erect

complex

wall

procedural

hurdles

any

consent

solicitation."

Arbitration

Panel,

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 to and capable

of continuing their campaign of shareholder disenfranchisement

Executive Summary

Timeline and Path (cont.)

The

Panel

set

forth

the

following

procedures

for

the

new

consent

solicitation:

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

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

request

Consent solicitation must be concluded within 30 calendar days of the record date

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

the

special

meeting

must

within

calendar

days

the

date

notice of such meeting

Executive Summary

Voting Instructions

The

Time

Act

Now

Please

Sign,

Date

and

Return

the

GOLD

Consent

Card

Today

A Non-vote

is a Vote

for the Portnoys

Place

your

vote

now

remove

the

entire

Board

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

the

company

–

the

shareholders

Please

note

that

internet

voting

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)

Appendix

Table of Contents:

History of Underperformance

II.

History

“Worst-In-Class”

Corporate

Governance

III.

The

Portnoys’

Reversible

Governance

Alterations

Context

IV.

Corvex/Related Turnaround and Governance Plan

Highly Qualified Nominees

VI.

Valuation Update

I. History of Underperformance

History of Underperformance

The Fundamental Cause

of Underperformance

continue

believe

that

the

fundamental

cause

underperformance

CWH is the absence of accountability, and more specifically the inability of

shareholders to choose their own manager

Ironically,

the

severe

conflicts

the

external

management

structure

demand

rigorous

accountability

and

superior

governance,

but

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

accountability

when

“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

result,

RMR

held

accountable

one

and,

our

view,

enjoys

complete

immunity from shareholders

History of Underperformance

By Any Metric Over Any Relevant Time Period…

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

CWH

abysmal

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

years

ended

2/25/13,

respectively

(1)

Valuation

Unaffected

valuation

approximately

35%

below

peers

(2)

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

years,

respectively

(1)

Cost structure

6%,

10%,

8%,

and

below

its

peers

(2)

NOI

margin

basis

for

YTD

9/30/2013,

YTD

9/30/2012,

2011,

and

2010,

respectively

(1)

Acquisitions and

return on investment

$2.9

billion

net

acquisitions

and

CapEx

since

2007

(over

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

(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 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%

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

2/25/2013,

the

day

before

and

Corvex's

13-D

filing.

Financial

information

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

History of Underperformance

RMR Fees vs. CWH Shareholder Returns

(1)

RMR fees paid per CWH public filings include SIR.

(2)

Annualized YTD 9/30/2013 RMR fees include Q3 RMR fees paid by SIR to make the figure comparable to historically disclosed figures.

(3)

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

extracted

approximately

36%

CWH’s

unaffected

market

capitalization

(3)

during 2007 -

2013, as CWH share price continued to plummet

(2)

2007

2008

2009

2010

2011

2012

Annualized

2013

2007-

2013

Cumulative

Fees Paid Out to RMR

(1)

$59.7

$63.2

$62.6

$62.2

$69.5

$77.3

$83.5

$478.0

RMR Fees % Growth

5.9%

(0.9%)

(0.6%)

11.7%

11.2%

8.0%

39.8%

RMR Fees as % of:

CWH Market Cap

(3)

4.5%

4.7%

4.6%

5.2%

5.8%

6.2%

35.7%

CWH Market Cap, Cumulative

4.5%

9.2%

13.9%

18.5%

23.7%

29.5%

35.7%

CWH Cumulative Stock Price Return

(37.4%)

(74.7%)

(46.0%)

(48.4%)

(66.3%)

(67.9%)

History of Underperformance

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

(1)

2007 to 2013 RMR cumulative fee growth % is based on annualized YTD 9/30/2013 fees.

(2)

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

(3)

Includes Q3 2013 RMR fees paid by SIR in order to make the figure comparable to previously reported figures.

Sources: Company filings, SNL

(2)

(3)

Fees

paid

RMR

climbed

40%

from

2007

2013

(1)

while

the

price

declined 68%

(2)

$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

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

(25.0%)

0.0%

25.0%

50.0%

75.0%

2/24/2012

4/9/2012

5/25/2012

7/10/2012

8/25/2012

10/10/2012

11/25/2012

1/10/2013

2/25/2013

PKY

BDN

HIW

PDM

CUZ

CWH

RMZ

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%)

: CWH -

Avg.

39.3%

59.9%

History of Underperformance

Total Returns –

3 years

CWH

has

underperformed

its

peers

over

the

last

years

ending

2/25/2013

(1)

Note: Total returns include dividends

(1)

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

Source: SNL

PKY

BDN

HIW

PDM

CUZ

CWH

RMZ

(60.0%)

(40.0%)

(20.0%)

0.0%

20.0%

40.0%

60.0%

80.0%

2/25/2010

7/12/2010

11/26/2010

4/12/2011

8/27/2011

1/11/2012

5/27/2012

10/11/2012

2/25/2013

HIW: 42.1%

PDM: 39.1%

CWH: (26.6%)

PKY: 6.9%

CUZ: 42.5%

BDN: 35.8%

RMZ: 52.5%

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%)

: CWH -

Avg.

39.3%

59.9%

History of Underperformance

FFO Multiples

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

Source: Factset

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

2/25/2008

10/10/2008

5/26/2009

1/10/2010

8/26/2010

4/11/2011

11/26/2011

7/11/2012

2/25/2013

PKY

BDN

HIW

PDM

CUZ

CWH

PDM: 14.0x

CWH: 5.4x

HIW: 13.1x

CUZ: 18.2x

BDN: 9.0x

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

Average

10.8x

10.6x

10.0x

CWH

5.0x

5.6x

5.4x

: CWH -

Avg.

(54.2%)

(46.6%)

(45.8%)

History of Underperformance

Operating Performance

Value

accruing to

RMR, not

shareholders

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

(1)

YTD 9/30/2013 figures include SIR. Growth rates based on YTD 9/30/2012. 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.

Source: Company filings and SNL

($ in millions)

For the Fiscal Year Ending December 31,

YTD

2010

2011

2012

9/30/2013

(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%)

(32.7%)

NOI per Share (% growth)

(19.1%)

(4.2%)

16.1%

(28.0%)

EBITDA per Share (% growth)

(22.1%)

(4.7%)

(27.2%)

(20.1%)

FFO per Share (% growth)

(13.8%)

(9.9%)

0.0%

(19.1%)

CAD per Share (% growth)

(23.7%)

(27.7%)

(17.3%)

(15.6%)

Fees Paid to RMR

$62.2

$69.5

$77.3

$62.6

% growth

(0.6%)

11.7%

11.2%

10.6%

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.

CUZ figures represent consolidated portfolio.

Source: Company filings

9 months ended 9/30/2013 rent growth

(1)

9 months ended 9/30/2013 NOI growth

(1)

9 months ended 9/30/2013 NOI margin

(1)

4.5%

2.7%

1.3%

(0.4%)

(0.6%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

CUZ

BDN

HIW

CWH

PKY

Avg.:

2.0%

CWH trails its core office REIT peers by 234 bps and 359 bps on same store rental growth and

NOI growth, respectively

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

placed 112 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

5.1%

3.3%

(0.4%)

(2.3%)

(3.0%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

CUZ

BDN

HIW

CWH

PKY

Avg.:

1.3%

71.2%

65.7%

59.6%

58.1%

56.4%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

BDN

HIW

PKY

CUZ

CWH

Avg.:

62.2%

As a result, we also show on the following pages, results from 2010 through

9/30/2012

History of Underperformance

Same Store Underperformance (cont’d)

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

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

2011 rent growth

(2)

2011 NOI growth

(2)

2011 NOI margin

(2)

9 months

ended

9/30/2012

rent

growth

(1)

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)

6.5%

3.3%

2.7%

0.1%

PKY

CUZ

HIW

BDN

CWH

Avg.:

4.0%

2.8%

2.2%

0.9%

0.8%

(1.1%)

(2.0%)

(1.0%)

0.0%

1.0%

2.0%

3.0%

PKY

HIW

CUZ

BDN

CWH

Avg

1.7%

3.2%

0.3%

(2.8%)

(3.5%)

(5.2%)

(6.0%)

CUZ

HIW

BDN

CWH

PKY

Avg.:

(1.1%)

68.4%

66.6%

59.7%

55.7%

54.3%

50.0%

55.0%

60.0%

65.0%

70.0%

BDN

HIW

CUZ

PKY

CWH

Avg.:

62.6%

70.5%

67.7%

60.0%

59.8%

54.3%

BDN

HIW

CUZ

PKY

CWH

Avg.:

64.5%

0.4%

(1.6%)

(2.6%)

(3.0%)

(3.7%)

(4.0%)

(3.0%)

(2.0%)

(1.0%)

0.0%

1.0%

CUZ

CWH

BDN

HIW

PKY

Avg.:

(2.2%)

4.9%

0.0%

(0.9%)

(3.1%)

(4.3%)

(6.0%)

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

6.0%

CUZ

HIW

PKY

BDN

CWH

Avg.:

(0.2%)

69.5%

67.3%

57.9%

55.9%

53.6%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

BDN

HIW

CUZ

CWH

PKY

Avg.:

62.1%

4.0%

(0.9%)

(3.7%)

(6.2%)

(8.5%)

(10.0%)

CUZ

HIW

BDN

PKY

CWH

Avg.:

(1.7%)

0.0%

2.0%

4.0%

6.0%

8.0%

(4.0%)

(2.0%)

0.0%

2.0%

4.0%

(5.0%)

0.0%

5.0%

55.0%

60.0%

65.0%

70.0%

50.0%

75.0%

History of Underperformance

Acquisition Activity

CWH

has

grown

primarily

through

asset

acquisitions,

which

believe

benefits

RMR

–

and

therefore

the

Portnoys

personally

–

but

not

shareholders

(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)

CWH

spent

$2.9

billion

acquisitions

during

2007

–

YTD

9/30/2013,

even

the

stock

has

underperformed,

but

book

value

per

remains

flat,

suggesting

minimal

return

investment

RMR’s

fee

income

has

grown

due

being

linked

primarily

the

size

the

company

Its peers acquired assets at approximately one-fifth of CWH’s rate over the same period

PKY

has

also

been

acquisitive,

but

internally

managed

and

has

made

accretive

capital

allocation

decisions,

leading to 42% stock price appreciation from 2011 to 2012

Net acquistions / CapEx as % of Market Cap

(1)

2007

2008

2009

2010

2011

2012

YTD 9/30/2013

Cumulative

Parkway Properties Inc. (PKY)

5.4%

22.4%

1.9%

7.4%

36.2%

64.2%

17.1%

154.6%

Highwoods Properties Inc. (HIW)

4.8%

4.7%

2.1%

3.0%

5.5%

8.1%

13.1%

41.2%

Cousins Properties Inc. (CUZ)

(2)

25.2%

11.7%

4.3%

(7.0%)

3.9%

(17.2%)

136.2%

157.1%

Piedmont Office Realty Trust Inc. (PDM)

(3)

1.4%

3.7%

1.1%

1.9%

(2.3%)

0.4%

6.1%

12.4%

Brandywine Realty Trust (BDN)

(6.2%)

(11.9%)

5.6%

9.6%

0.8%

0.3%

(2.7%)

(4.3%)

Average

(4)

3.7%

3.6%

2.6%

3.3%

4.7%

6.8%

20.2%

44.9%

CWH

31.0%

6.1%

33.5%

27.6%

45.2%

56.3%

14.7%

214.3%

Net Acquisitions and CapEx

$419

$83

$453

$369

$604

$753

$197

$2,878

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

History of Underperformance

Management and Board Ownership

CWH Trustees and senior management have no meaningful ownership of CWH

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

246,200

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

401,828

0.34%

5.4%

4.4%

2.1%

1.5%

0.5%

0.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

CUZ

PKY

HIW

BDN

PDM

CWH

Avg. (1): 2.8%

II. History of “Worst-In-Class”

Corporate

Governance

History of “Worst-In-Class”

Corporate Governance

The Portnoys’

Actions Speak Louder Than Our Words Ever Could

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

by the Declaration of Trust since 1986

Secretly attempted to manipulate state lawmakers into changing the Maryland Unsolicited

Takeover

Act

via

hour

amendment

eliminate

the

right

hold

this

consent

solicitation

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

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 nearly $30 million of shareholders’

money on a year-long litigation process in a brazen

campaign to systematically disenfranchise shareholders

Should

two

months

reversible

governance

alterations

erase

the

inexcusable

actions of this Board or 28 years of poor governance and performance?

The Portnoys’

unconscionable actions over the past year say more about their

intentions than their promises ever will

Over the past year, the Board deliberately:

History of “Worst-In-Class”

Corporate Governance

Independent Parties Agreed With Us

ISS has issued highly critical reviews of CWH’s corporate governance policies

2013

CWH

received

the

worst

possible

score,

10,

for

Shareholder

Rights

A score of 1 indicates lower governance risk while a 10 indicates higher governance risk

ISS and Glass Lewis already supported removing the entire board in June 2013

–

ISS report, June 13, 2013

its owners.”

–

Glass Lewis report, June 17, 2013

The Arbitration Panel struck down the illegal bylaws that stripped shareholders

of their right to vote through a consent solicitation

“There is no question that CWH’s Bylaws…erect a complex wall of procedural hurdles to

any

consent

solicitation.”

–

Arbitration

Panel,

November

18,

2013

Consistently

poor

corporate

governance

has

not

gone

unnoticed

independent,

highly-respected parties

ISS annual reports consistently reported Shareholder Rights were of “High Concern”

“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.”

“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

History of “Worst-In-Class”

Corporate Governance

Widespread Disapproval of the Portnoys’

Governance

Over the years, prominent and diverse parties have stood up against the

Portnoys, the conflicted management structures at their various entities, and

their actions against shareholder rights

How

can

such

diverse

group

all

wrong

about

the

Portnoys

and

their

true

intentions?

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

Six

pension

funds

(CalPERS,

CalSTRS,

Public

Employees’

Retirement

Association

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

–

CalPERS

has

pushed

for

the

annual

election

all

trustees

every

year

from

2009-2013

Green Street Advisors, the preeminent independent investment research company focused on REITs, issued

a report on March 1, 2013 on the RMR-controlled REITs and labeled them “Uninvestable”

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 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, noting at the time: “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.”

Council of Institutional Investors, a leading voice for effective corporate governance and strong shareowner

rights has consistently expressed concern regarding CWH and other Portnoy REITs

History of “Worst-In-Class”

Corporate Governance

The Arbitration Panel Has Spoken

The Arbitration Panel ruling on November 18, 2013, cleared a path to a free and

fair consent solicitation process

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

The Panel struck down illegal bylaws passed by the current Board

The Panel expressly prohibited any action intended to impede or frustrate the new solicitation

The Panel declared it would remain available to resolve any issues or disputes

The

Panel

ruled

that

Corvex/Related

had

satisfied

onerous

“red

tape”

bylaw

requirements

The Panel determined that opting into Section 3-803 of the Maryland Unsolicited Takeovers

Act

(“MUTA”)

does

not

revoke

the

right

shareholders

remove

Trustees

without

cause,

misleadingly claimed by the Portnoys

Ruling

INVALID AS A MATTER OF LAW

Contested Bylaws

3%/3yr holding requirement to request a record date

All shares must be held in certificated form to request a

record date

30 day period to respond to a record date request

60 day period to set a record date

90 day period to certify the results of the consent solicitation

“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

their

power

prevent

Corvex

Management

and

the

Companies from removing the Portnoys. The Portnoys banked on CommonWealth’s

unique

requirement

that

shareholders

arbitrate

all

disputes

with

the

company

stymie

the two hedge funds. It didn’t work, and the arbitration panel ruled against

CommonWealth,

clearing

the

way

for

the

funds

begin

campaign

unseat

them.

The Portnoys receive an F.”

History of “Worst-In-Class”

Corporate Governance

“The Portnoys Receive an F”

–

New York Times

“Despite

Doldrums

Deal

Activity,

Few

Highlights

This

Year,”

New

York

Times,

December 17, 2013

III. The Portnoys’

Reversible Governance

Alterations In Context

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys' Governance Alterations Are Illusory

The Portnoys’

“Check-the-Box”

governance alterations create the illusion of

reform,

but

bring

zero

incremental

accountability

and

therefore

offer

guaranteed

ability

for

shareholders

choose

who

runs

their

company

When a board deliberately harms shareholder rights through unconscionable

tactics to protect their own interests, accepting flawed governance alterations

while

leaving

the

same

board

place

simply

invites

the

same

All

the

Portnoys'

alterations

are

ineffective,

and

most

importantly

all

are

unilaterally

reversible

through the extraordinary powers of the Portnoys and their hand-picked Trustees:

–

Require

two

RMR

employees

always

the

Board,

even

though

RMR

owns

equity

CWH

and

our

opinion

has

incentives

diametrically

opposed

those

shareholders

–

Unilaterally amend the bylaws (while shareholders cannot) to effectively cripple shareholder action

–

Unilaterally stagger the Board under MUTA, without shareholder approval

–

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 fatal 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’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

After the countless tactics employed over the past year, would the Portnoys really now implement

meaningful

corporate

governance

enhancements

and

subject

themselves

true

accountability

knowing

full well they have severely underperformed for years? Would they really put at risk their invaluable

“Perpetual Fee Stream”?

How can the Portnoys possibly justify reappointing Joseph Morea to the Board after he received the vote

only

14%

the

outstanding

and

how

can

charge

“spearheading”

purported

governance reforms?

What

impact

might

losing

the

consent

solicitation

have

the

Portnoys’

other,

much

larger

and

lucrative externally managed REITs?

Did the Portnoys purposefully enact only reversible governance changes just to win votes from some

shareholders and remain in power with zero real improvement in corporate governance or accountability?

the

following

pages,

review

and

highlight

the

flaws

the

Portnoys’

“Check-the-Box”

governance alterations from December 26, 2013

Questions shareholders should ask themselves while conducting such a review

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

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Annual Elections

•

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

•

Section 3-803 of the Maryland Unsolicited Takeover

Act allows Portnoys to unilaterally re-classify CWH

Board at any time regardless of contrary provisions

in governing documents, without a shareholder vote

•

CWH has not permanently opted out of

Section 3-803

•

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

“rock

the

vote”

the

2014

meeting

to de-classify Board, or could they allow the

proposal to languish?

Portnoys’

Window Dressing

Propose declassification of Board at the 2014

annual meeting

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Portnoys’

Window Dressing

Board Composition

•

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

2014

–

shareholders

cannot

hold

him accountable until 2016

•

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

“independent”

Trustees

•

Lead Independent Trustee will be

designated after appointment of

another Trustee. Expected after 2014

annual meeting

•

Added share ownership guidelines

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Portnoys’

Window Dressing

Red Tape Bylaws

Bylaws amended to have a seemingly less

offensive process of director nominations at

annual meeting

•

Red

Tape

Bylaws

can

amended

any

time

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 –

silence shareholders

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

arbitration

clause

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

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Portnoys’

Window Dressing

Poison Pill

•

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

•

“look

through”

entities

for

tax

purposes, REIT status concerns

regarding the 9.8% limitation are not an

issue with respect to Corvex and

•

Company can always unilaterally add back in

the “dead hand”

provisions or implement a new

poison pill overnight without shareholder

approval

•

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

The Portnoys’

Reversible Governance Alterations In Context

Why It’s All Smoke and Mirrors

Reality

Portnoys’

Window Dressing

RMR Management Agreement

(1)

Adjusted for reverse stock splits.

•

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

(1)

~$2.5

billion

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

negotiated

the

Board

with

assistance

from

RMR

and

without

independent outside

advisors

•

Stock component is not meaningful

•

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

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys' True Intentions Revealed

On January 21, 2014, we sent the Board a public letter, providing them an

opportunity to address the gaping loopholes in their governance alterations

and

commit

permanent,

true

governance

reform

The Board’s response? Silence.

Coupled with the unconscionable actions taken over the last year,

what else do you need to know?

We asked if the Portnoy Board will:

–

Eliminate

the

requirement

that

least

Trustees

affiliated

with

RMR?

–

Amend the charter to ensure that the Board cannot opt back into Section 3-803 of the Maryland

General Corporation Law which allows them to unilaterally re-stagger the Board?

–

Amend governance documents to commit that if Barry Portnoy is not elected as a Trustee at the 2014

Annual Meeting, he cannot be unilaterally reinstated as Joseph Morea was after receiving the vote of

only 14% of the outstanding shares?

–

Amend the charter and bylaws to ensure the new provisions that make the annual meeting and

nomination process less offensive reversible only with a shareholder vote?

–

Amend the charter and bylaws to replicate the Arbitration Panel’s procedural guidelines for any future

consent solicitation?

–

Post online the entire un-redacted transcript of the October 2013 hearing before the Arbitration Panel

so that shareholders can understand management’s testimony about, among other things, their

fiduciary

duties

RMR

vs.

shareholders

and

how

the

RMR

contract

“negotiated”

every

year?

–

Work with Corvex/Related and the Arbitration Panel to implement obvious solutions that address the

Board’s professed concerns regarding the transition to a new Board?

The Portnoys’

Reversible Governance Alterations In Context

The Portnoys’

Actions Explained

RMR’s business model, in our view, is founded on creating and preserving the conflict of

interest

its

externally

managed

REITs

order

manufacture

“Perpetual

Fee

Streams”,

regardless of the impact on CWH’s share price

believe

the

Portnoys

view

control

CWH

binary

–

either

they

have

dominant

control

over

the

fee

stream

built

over

years,

they

not

our

opinion,

the

profits

from

RMR’s

“Perpetual

Fee

Streams”

could

valued

~20x

cash

flow (but for the ability of the Board to terminate RMR management contracts), given the

highly

recurring

and

practically

infinite,

growing

nature

the

cash

flow

streams

under

the

protection of the “Accountability Vacuum”

believe

the

staggering

value

“Perpetual

Fee

Streams”

are

powerful

motivator for dodging accountability, leading the Portnoys to always choose

“Check-The-Box”

governance revisions over real reform

We believe the Portnoys harbor an extraordinarily deep commitment to

protecting

their

“Perpetual

Fee

Streams”

and

will

attempt

mislead

shareholders

with

“Check-the-Box”

reform

rather

than

true

accountability

IV. Corvex/Related’s Turnaround and

Governance Plan

Corvex/Related’s Turnaround and Governance Plan

Corvex/Related’s Plan To Maximize Value

The fair and unfettered election of a new Board consisting solely of truly independent Trustees

–

After consultation with fellow shareholders, we have proposed a slate of highly qualified

nominees for election to the Board at the Special Meeting: James Corl, Edward Glickman,

Peter Linneman, Jim Lozier, and Kenneth Shea

Best-in-Class corporate governance to finally impose accountability

–

Amend

existing

Declaration

Trust

and

bylaws

conform

ISS

and

Glass

Lewis

best

practices

–

Eliminate

the

requirement

that

least

Trustees

affiliated

with

RMR

–

Permanently opt out of MUTA

Internalize management and align management compensation with shareholder returns

“Right

the

ship”

with

basic

operating

strategies

not

currently

being

employed

existing

conflicted

management structure

–

We believe proper staffing levels and reinvestment in CWH’s existing portfolio can harvest a

substantial amount of “low hanging fruit”

poison

pill

Adoption

policy

against

new

pills

without

shareholder

approval

Cease

all

acquisition

activity

and

dilutive

capital

raises

until

stock

price

exceeds

its

NAV

Cease all related party transactions not approved by a vote of disinterested shareholders

Corvex and Related continue to propose the following Turnaround and

Governance Plan:

While dramatically different from CWH’s existing plan, these reforms are in our

view self-evident to every informed investor and will make CWH look like

virtually every other member of the S&P 500

Corvex/Related’s Turnaround and Governance Plan

A Simple Blueprint for Change

CommonWealth can then elect a Board of Trustees that:

–

Is truly independent (per ISS’s definition)

–

Implements and can describe to shareholders the procedures designed to ensure its

independent Trustees can continue to operate independently

–

Is accountable to shareholders

–

Hires its own independent advisors when necessary

–

Systematically sets performance goals for the management team, measures its

performance, and holds it accountable for its failures

–

Objectively

benchmarks

its

corporate

governance

policies

against

peers

–

Challenges management’s thinking on material strategic issues when appropriate

Once shareholders take back control of CommonWealth and can choose who

should manage their company, the conflict of interest between manager and

owner will be eliminated

In short, shareholders can elect an experienced, independent Board charged

with being their advocate

Corvex/Related’s Turnaround and Governance Plan

Peaceful

Transition

Authority

–

“Plan

A”

To eliminate the already miniscule risks, the Board members could implement the following

to protect CommonWealth and its shareholders:

We also point out that the Arbitration Panel will remain available for resolving disputes

even

after

the

removal

the

Trustees

and

during

the

transition

newly

elected

Board

While we wholeheartedly dismiss the scare tactics employed by the Portnoys –

that

removal

Trustees

will

cause

the

business

material

harm

–

point

out

that ironically the sitting Board members could easily preclude any of their

imagined disruptions from occurring by acting responsibly in advance of a

consent solicitation

We have asked the Board to work with Corvex/Related and the Arbitration Panel

to implement obvious solutions that address the Board’s professed concerns,

but the Board refuses to respond

Agree to allow nominations of replacement Trustees concurrently with the removal of existing

Trustees

Request waivers under existing financing agreements regarding a change in control or

arrange for replacement facilities

RMR could remove language or simply agree not to immediately terminate its management of

the assets in the event of a change in control

Corvex/Related’s Turnaround and Governance Plan

Disruptive

Transition

Authority

–

“Plan

B”

In the event the Trustees are not cooperative in transitioning authority, Related

and Corvex, clearly incentivized to minimize disruption as one of CWH’s largest

shareholders, have a plan to protect the Company

Shareholders should not be coerced into voting for the current Board out of fear

that

the

existing

Trustees

will

“burn

down

the

house”

the

way

out

the

door

Jim

Lozier,

30+

year

industry

veteran,

can

retained

lead

CWH

interim

basis

(1)

Mr. Lozier served as co-founder and CEO of the Archon Group L.P., a subsidiary of Goldman Sachs,

from its formation in 1996 until 2012

During

Mr.

Lozier’s

tenure

Archon,

the

company

grew

from

320

employees

8,500

employees

managing 36,000 assets with a gross value of approximately $59 billion

Archon’s

core

competencies

include

the

ability

quickly

integrate

new

properties

into

its

operating

platform, regardless of the condition of the property or the difficulty of transitioning such properties

CBRE, one of the world’s largest integrated real estate services firms, has agreed to provide

interim

property

management

services

(2)

Successfully

managed

transition

leasing

management

services

for

1.2

billion

square

feet

commercial properties in the U.S. over the previous nine years, including transitions done under

significant time pressure

Related and Corvex have agreed to purchase up to 51% of the bank

debt in order to prevent

acceleration of the Company’s debt

(1)

Mr.

Lozier

providing

consulting

services

connection

with

Related’s

investment

CommonWealth

and

has

agreed

serve

the

role

interim

CEO

the

Company on such terms as may be reasonably agreed to by Mr. Lozier and CWH.

(2)

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

terminated.

Corvex/Related’s Turnaround and Governance Plan

About Related

Founded in 1972 by Stephen Ross, Related is amongst the most prolific and respected real

estate developers, operators and investors in the nation

Owns and operates a portfolio valued at over $15 billion including 5 million square feet of

commercial space and over 40,000 apartment units

Over 2,000 employees located in Boston, Chicago, Dallas, Los Angeles, Miami, New York, San

Francisco, Shanghai, Abu Dhabi and Sao Paulo

Experience with portfolios of assets in distressed or hostile situations, including:

Several assets representing hundreds of millions of dollars in value in contested

foreclosure or adversarial bankruptcy proceeding, including acting as agent for court

appointed receivers between 2010-2012

Portfolio of 32 REO properties comprised of 10,000 multifamily units on behalf of GSE

Founded over 40 years ago, Related operates a real estate portfolio valued at

over $15 billion today including residential, office, mixed-use, and affordable

properties

Corvex/Related’s Turnaround and Governance Plan

About Corvex

Follows an opportunistic approach to investing with a specific focus on equity investments,

special situations and distressed securities largely in North America.

Active investing to create asymmetric risk/reward opportunities

Public markets view for fundamental and event-driven investing

Successfully engages with management teams of invested companies

Value-based

investing

across

the

capital

structure

situations

with

clearly

identifiable catalysts

Corvex/Related’s Turnaround and Governance Plan

Potential Interim CEO

Mr. Lozier served as co-founder and CEO of the Archon Group L.P., a subsidiary of Goldman

Sachs, from its formation in 1996 until 2012

Archon is an international real estate services and advisory company based in Dallas, TX

During Mr. Lozier’s tenure at Archon, the company grew from 320 employees to 8,500

employees managing 36,000 assets with a gross value of approximately $59 billion

Archon underwrote, acquired and asset managed real estate and real estate debt for

Goldman Sachs with a concentration in office, multi-family and limited service hospitality

Prior to the formation of Archon, Mr. Lozier was an employee of the J.E. Robert Company and had

been

responsible

for

managing

the

JER

joint

venture

for

two

years.

Mr.

Lozier

directed

the

acquisition

efforts

the

joint

venture

between

and

JER

from

1991-1995

Mr. Lozier could serve as interim CEO until the new Board decides to hire a permanent CEO. As

interim CEO, he would focus on transition of management services, continuity of financial

reporting, and building out a permanent management team

Related/Corvex have identified a potential interim CEO, Jim Lozier, to help

transition CWH to internal management

Mr. Lozier is a 30+ year real estate industry veteran with impeccable

credentials

who

has

created

significant

value

for

equity

holders

during

his

career

Corvex/Related’s Turnaround and Governance Plan

About CBRE

CBRE Asset Services group provides property management, financial reporting and construction

management to clients

CBRE

(1)

employs 42,000+ people in 430+ offices and manages more than 3.3 billion square feet of

commercial property and corporate facilities across the globe

Successfully

managed

transition

leasing

management

services

for

1.2

billion

square

feet

commercial properties in the U.S. over the previous nine years, including transitions done under

significant time pressure

(1)

Employees,

offices,

and

square

footage

under

management

includes

CBRE

affiliate

offices.

CBRE, the world’s largest commercial real estate services firm, has agreed to

provide interim property management and leasing services to the CWH

portfolio as necessary

V. Highly Qualified Nominees

Highly Qualified Nominees

Truly Independent

James Corl

Managing Director and Head of Real Estate, Siguler Guff & Company

James Corl has been a Managing Director at Siguler Guff & Company since 2009, and is the Head of Real Estate. Mr. Corl oversees the

Firm’s real estate investment activities, setting investment strategy, designing and constructing the portfolio, identifying potential

investments, and negotiating investment terms and conditions. Prior to joining Siguler Guff, Mr. Corl spent 13 years in the REIT

investment industry, most recently as Chief Investment Officer for all of the real estate activities of Cohen & Steers, Inc., a leading investor

global

real

estate

securities.

While

Cohen

Steers,

Inc.,

Mr.

Corl

was

directly

responsible

for

over

$30

billion

client

assets

invested in mutual funds and institutional separate accounts around the world. As an Associate with the Real Estate Investment Banking

group at Credit Suisse First Boston, Mr. Corl was involved in acquiring portfolios of non-performing loans and distressed real estate

assets for CSFB’s Praedium Real Estate Recovery Fund, as well as restructuring troubled real estate companies as publicly traded

REITs.

Edward Glickman

Executive Director, Center for Real Estate Finance Research, New York University Stern School of Business

Clinical Professor of Finance, New York University Stern School of Business

Executive Chairman, FG Asset Management US

Senior Advisor, Econsult Solutions, Inc.

Edward

Glickman

the

Executive

Director

the

Center

for

Real

Estate

Finance

Research

and

Clinical

Professor

Finance

New

York

University

Stern

School

Business,

and

has

been

Professor

the

Stern

School

Business

since

2006.

Mr.

Glickman

also

currently

the

Executive

Chairman

Asset

Management

US,

alternative

asset

manager

serving

Korean

investors,

and

Senior

Advisor

for

Econsult Solutions, Inc., an econometric consulting firm. From 2004 to 2012 Mr. Glickman served as President and Chief Operating

Officer

the

Pennsylvania

Real

Estate

Investment

Trust,

where

oversaw

all

operating

functions

and

was

member

its

Board

Trustees. Mr. Glickman has more than 30 years of experience in the real estate and financial services industry having been previously

employed by The Rubin Organization, Presidential Realty Corporation, Shearson Lehman Brothers and Smith Barney. Mr. Glickman is a

Fellow of the Royal Institute of Chartered Surveyors, a Certified Treasury Professional and a Registered Securities Principal.

Highly Qualified Nominees

Truly Independent (cont.)

Peter Linneman

Emeritus Albert Sussman Professor of Real Estate, University of Pennsylvania, Wharton School of Business

Principal, Linneman Associates

Principal, American Land Funds

From 1979 to 2011, Dr. Linneman was a Professor of Real Estate, Finance and Public Policy at the University of Pennsylvania, Wharton

School of Business and is currently an Emeritus Albert Sussman Professor of Real Estate there. Dr. Linneman is currently a principal of

Linneman Associates, a real estate advisory firm, and a principal of American Land Funds, a private real estate acquisition fund. For more

than

years

has

advised

leading

corporations

and

served

over

public

and

private

boards,

including

serving

Chairman

Rockefeller Center Properties, where he led the successful restructuring and sale of Rockefeller Center in the mid-1990s. Dr. Linneman

has won accolades from around the world, including PREA’s prestigious Graaskamp Award for Real Estate Research, Wharton’s Zell-

Lurie Real Estate Center’s Lifetime Achievement Award, Realty Stock Magazine’s Special Achievement Award, and has been named

“One

the

Most

Influential

People

Real

Estate”

Realtor

Magazine

and

was

included

The

New

York

Observer’s

“100

Most

Powerful People in New York Real Estate.”

Jim Lozier

Co-founder and former CEO, Archon Group L.P.

Jim Lozier served as co-founder and CEO of Archon Group L.P. from its formation in 1996 until 2012. Archon, a wholly owned subsidiary of

Goldman Sachs, is a diversified international real estate services and advisory company that under Mr. Lozier’s leadership managed 36,000

assets with a gross value of approximately $59 billion and over 8,500 employees in offices located in Washington D.C.,

Los Angeles,

Dallas,

Boston,

Asia

and

Europe.

Prior

the

formation

Archon,

Mr.

Lozier

was

employee

the

J.E.

Robert

Company

and

was

responsible

for

managing

the

Goldman

Sachs/J.E.

Robert

joint

venture

for

two

years.

Mr.

Lozier

directed

the

acquisition

efforts

the

joint venture between GS and JER from 1991-1995. Jim has served on the Board of Directors of Dallas CASA (Court Appointed Special

Advocates for Children) since 1999, and currently is on the Executive Committee and is heading CASA’s capital campaign.

Highly Qualified Nominees

Truly Independent (cont.)

Kenneth Shea

President, Coastal Capital Management LLC

Kenneth

Shea

the

President

Coastal

Capital

Management

LLC,

affiliate

Coastal

Development,

LLC,

New

York-based

privately-held developer of resort destinations, luxury hotels and casino gaming facilities. Prior to joining Coastal in September 2009, from

July 2008 to August 2009, Mr. Shea was a Managing Director for Icahn Capital LP, where Mr. Shea had responsibility for principal

investments in the gaming and leisure industries. From 1996 to 2008, Mr. Shea was employed by Bear, Stearns & Co., Inc., where he was

a Senior Managing Director and global head of the Gaming and Leisure investment banking department. At Bear, Stearns, Mr. Shea

played an active role on over $55 billion of M&A and capital raising transactions for many of the leading public companies in the gaming

and leisure sector including Harrah’s Entertainment, Inc., Station Casinos Inc., Penn National Gaming Inc., Las Vegas Sands Corp., Wynn

Resorts Ltd., and Carnival Corp. Mr. Shea currently serves on the board of directors of CVR Refining, LP.

VI. Valuation Update

Valuation Update

Intensive Due Diligence Continues…

Based

repeated

feedback

from

tenants,

brokers

and

owner/operators

across

CWH’s

markets regarding their experience with RMR, we believe:

Many

leasing

brokers

representing

tenants

across

CWH’s

markets

steer

tenants

away

from RMR-managed properties because of a lack of attention from RMR personnel

RMR often fails to execute simple asset and property management functions, such as

responding to tenant work requests, and challenging real estate tax assessments

“Blake Schreck, president and economic development director for the Lenexa Chamber of

Commerce, didn't sound unhappy about Southlake Technology Park changing hands. He

echoed multiple local commercial real estate brokers, who indicated that CommonWealth's

slow response to requests for lease proposals from prospective tenants had likely cost the

933,0000-square-foot office park deals and contributed to its 48 percent occupancy rate.”

Kansas City Business Journal, October 23, 2013

Over the past six months, representatives from Corvex and/or Related have

independently performed detailed site visits on approximately 85% of the

portfolio

Valuation Update

Where Are The Employees?

RMR employees service assets for CWH in addition to other RMR-managed public REITs

(SIR,

GOV,

HPT,

SNH)

well

the

Portnoys’

privately

owned

real

estate,

all

which

encompass office, retail, hospitality, senior housing, land and other property types

It appears that the leasing staff is too small, resources are spread too thin, and a true asset

management department is non-existent

The majority of, if not all, leases from CWH, SIR, HPT, SNH and GOV are processed

through the CWH’s headquarters office for review, approval and negotiation

There appears to be little delegation to local RMR representatives, creating a substantial

bottleneck that leads to very slow response times

It appears that staffing is maintained at deficient levels in order to maximize profit margins for

RMR at the expense of CWH shareholders

Clearly, assets that are suffering from such poor management should only be sold after first

maximizing value for CWH shareholders

Opportunistic funds with expensive capital (such as Oaktree Capital and Garrison

Investment

Group)

were

among

the

largest

buyers

assets

the

last

round

CWH

dispositions

We believe there are too few employees spread over too many assets and

product types:

Valuation Update

Significant Operational Upside

We are confident that misaligned incentives at the corporate level have translated into

underperforming run rate NOI

In our opinion, properties can achieve our estimate of stabilized NOI within 24-36 months of

installing an effective management team whose incentives are aligned with shareholders

Furthermore, we believe that measurable progress can begin within several months of

initiating a repositioning program with progress reports communicated to shareholders in real

time

The cost to shareholders of a severely conflicted external management

structure was self-evident during our work in the field

Plus: Management Fee Savings

Valuation Update

NAV Components

(1)

Properties classified as “Held for Sale”

and “Discontinued

Operations”

are per CWH’s SEC filings.

(2)

Estimate based upon Related’s expertise and knowledge of

the real estate market and having considered factors such as

size and location of CWH’s real estate portfolio as well as

estimates from and discussions with CBRE regarding the

potential extension of management services for CWH.

Source: 10-Q, 9/30/2013, adjusted for subsequent asset sales.

Related performed a bottoms-up

real estate analysis on a property-

by-property basis

We believe our estimate of stabilized

NOI is supported by our extensive field

due diligence

We find support for cap rate

assumptions and price per foot

valuations from:

Implied cap rates of CWH’s

public peers

Analysis of private market

transactions in local markets

CWH management’s own

published valuation of key

assets

Cap rate surveys published by

national brokerage firms

NAV Methodology

(In millions, except PSF and per share amounts)

Continuing

Held for

Operations

Sale

(1)

Total

In-Place NOI

$443

$46

$489

Plus: Stabilization Improvement

As-Stabilized NOI

$465

$63

$528

Cap Rate

7.3%

8.7%

7.5%

As-Stabilized Value

$6,346

$731

$7,077

Plus: Australia Assets Held at Book Value

Plus: Potential Development Assets

Concluded Value

$6,475

$731

$7,205

Less: Stabilization Costs

(170)

(82)

(252)

Concluded Value

$6,305

$649

$6,953

$PSF

$168

$76

$151

NAV Calculation

PF 9/30/13

Concluded Value

$6,953

Stake in SIR (as of 1/29/14)

598

Cash

360

Other Current Assets, Net

Total Asset Value

$7,965

Less:

Unsecured Revolving Credit Facility

($334)

Unsecured Term Loan

(500)

Unsecured Notes

(1,361)

Mortgage Notes Payable

(920)

Series D Preferred Stock

(380)

Series E Preferred Stock

(275)

Total Debt + Preferred stock

($3,769)

Net Asset Value

$4,196

Shares Outstanding

118

NAV / Share

$35.44

(2)

Valuation Update

2-Year Forward Share Price Analysis

The illustrative roll-forward analysis below demonstrates the potential to drive substantial

value creation through thoughtful capital allocation strategies

CWH

could

the

gap

between

its

stock

price

and

NAV

using

excess

cash

flow

and/or

proceeds

from

non-core

asset

sales to buy back stock at prices below NAV

Analysis

assumes

stabilized

NOI

remains

flat,

ie,

market

growth

the

office

sector

(in millions, except per share amounts)

2013E

2014E

2015E

Estimated CAD

$150.0

Stabilized Cash NOI (after Non-Core Asset Sales)

$483.0

lower than consensus due to asset sales

Cap Rate Assumed

7.50%

Implied CWH TEV

$6,440.0

Business Mgmt. Fees Savings

$11.0

CWH Pro forma Net Debt (Net of SIR, Cash, other assets)

1,973.3

Property Mgmt Fees Savings

10.0

Preferred Equity

655.0

Incremental CAD

$21.0

Implied CWH Equity Value

$3,811.7

Reduction in Interest-Bond Tender

10.2

Implied CWH Share Price, 12/31/15

$40.13

Adjusted CAD

$181.2

% Change to Current

88.4%

Memo: Shares Outstanding

95.0

Current Quarterly Dividend

$0.25

Avg. Shares Outstanding

111.9

100.3

Implied CWH Share Price

Annual Dividends Paid

$111.9

$100.3

Non-Core Asset Sales/year

$40.13

$0.0

$150.0

$300.0

$450.0

$600.0

2014E

2015E

7.00%

$43.11

$43.95

$44.97

$46.21

$47.76

CAD after Dividends Paid

$69.3

$81.0

Cap

7.25%

40.83

41.57

42.46

43.56

44.92

Non-Core Asset Sales

300.0

Rate

7.50%

38.70

39.35

40.13

41.08

42.27

Divested NOI

(11.3)

(33.8)

7.75%

36.71

37.27

37.94

38.76

39.79

Share Repurchases

$358.1

$347.2

8.00%

34.84

35.32

35.89

36.59

37.47

Share Repurchase Price Assumed

$28.00

$33.00

% Premium to Current Price

18.7%

39.9%

% Change to Current Share Price

Non-Core Asset Sales/year

Shares Repurchased

12.8

10.5

$0.0

$150.0

$300.0

$450.0

$600.0

% of Shares Outstanding (Current)

10.8%

8.9%

7.00%

102.4%

106.4%

111.1%

117.0%

124.2%

Cap

7.25%

91.7%

95.2%

99.4%

104.5%

110.9%

Beginning Shares

118.3

105.5

Rate

7.50%

81.7%

84.7%

88.4%

92.9%

98.5%

Ending Shares

105.5

95.0

7.75%

72.3%

75.0%

78.1%

82.0%

86.8%

Avg. Shares Outstanding

111.9

100.3

8.00%

63.6%

65.8%

68.5%

71.8%

75.9%

Valuation Update

Public Peer Analysis

Our weighted average cap rate for the continuing operations portfolio is 7.3% vs. the public

peer average of 6.7% despite CWH having a higher percentage of CBD/urban infill assets

See footnotes on page 74.

(7)

(6)

CommonWealth

(NAV)

(1)

CommonWealth

(Current price)

Peer Avg.

Brandywine

Parkway

(2)

Highwoods

(3)

Piedmont

Cousins

Share price

$35.51

$23.59

$14.05

$17.71

$36.42

$16.52

$10.45

Implied cap rate

(4)

7.3%

9.1%

6.7%

7.0%

6.2%

6.9%

6.7%

6.6%

TEV / SF

$208

$170

$200

$187

$246

$167

$212

$186

% CBD / urban infill

66.6%

62.1%

46.7%

27.7%

70.8%

20.0%

64.2%

51.0%

Avg gross rent $PSF

$20.34

$18.62

$23.46

$23.28

$24.27

$21.36

$26.85

$21.54

Top 5 Markets

(5)

Chicago

Philadelphia Suburbs

Houston

Raleigh

Washington, D.C.

Atlanta

% of total rent / NOI

12.7%

28.4%

34.7%

18.8%

22.8%

48.0%

Avg gross rent $PSF

$22.06

N/A

$22.27

$20.23

$34.48

N/A

Philadelphia

Philadelphia CBD

Charlotte

Atlanta

New York

Houston

% of total rent / NOI

11.9%

24.6%

14.0%

15.0%

16.4%

30.0%

Avg gross rent $PSF

$28.30

N/A

$24.61

$25.79

$33.22

N/A

Austin

Metropolitan DC

Atlanta

Nashville

Chicago

Austin

% of total rent / NOI

6.8%

20.6%

10.2%

13.5%

12.5%

5.0%

Avg gross rent $PSF

$17.44

N/A

$25.83

$25.57

$27.03

N/A

Indianapolis

New Jersey / Delaware

Jacksonville

Tampa

Minneapolis

Dallas

% of total rent / NOI

4.2%

9.1%

10.2%

12.5%

7.5%

4.0%

Avg gross rent $PSF

$22.48

N/A

$20.94

$18.74

$27.80

N/A

Denver

Austin

Phoenix

Richmond

Boston

Birmingham

% of total rent / NOI

4.0%

6.7%

7.4%

10.1%

6.6%

3.0%

Avg gross rent $PSF

$27.89

N/A

$26.00

$18.94

$25.09

N/A

Valuation Update

How We Stack Up Against Management’s Estimate of Value

Related/

Corvex

Value

$248MM

$236MM

$194MM

$366MM

$110MM

$113MM

$1,267mm

$1,391mm

(1)

CWH Investor Presentation, April 22, 2013.

(2)

Based on concluded value of approximately $7.1BN.

Our valuation is $124 million lower than management’s own

estimates

(1)

value

nearly

20%

the

portfolio

(2)

pointing

the reasonableness of our $35 per share NAV estimate

Valuation Update

Portfolio Concentration –

Top 10 Markets

The Top 10 markets, by concluded value, account for over 50% of the value of the

entire portfolio

(1)

Excludes Australia and land in Austin.

Our weighted average cap rate for the Top 10 markets in CWH’s portfolio is 6.8% while the

average implied cap rate of the public peers is 6.7%

Given that the portfolio of assets in CWH’s Top 10 markets are comparable or superior to the

full portfolios of the average public peer, we believe our weighted average cap rate compares

favorably

NOI

Concluded

% Concluded

City

($MM)

Cap Rate

Value ($MM)

Value ($PSF)

Value

Chicago

$63

7.2%

$865

$204.32

12.4%

Philadelphia

$67

7.0%

$851

$185.13

12.2%

Austin

$36

7.0%

$511

$202.01

7.3%

Bellevue

$19

5.6%

$330

$500.02

4.7%

Denver

$21

6.8%

$312

$338.40

4.5%

Indianapolis

$22

7.5%

$287

$169.40

4.1%

Hoboken

$12

6.0%

$194

$371.33

2.8%

Boca Raton

$12

7.0%

$172

$268.60

2.5%

Washington D.C.

5.1%

$156

$364.70

2.2%

Milwaukee

$11

7.6%

$141

$173.92

2.0%

Top 10 Markets

$271

6.8%

$3,817

$229.93

54.9%

Valuation Update

Portfolio

Concentration

–

Top

20/Top

Assets

CWH’s entire portfolio has approximately 305 properties but only 50 of these

assets account for almost 80% of total portfolio value

(1)

Based on Company Filings.

Top 20 Assets

The Top 20 assets, by concluded

value, account for over 55% of the

value of the portfolio, or over 60% if

assets held in discontinued

operations are excluded

Top 50 Assets

The Top 50 assets, by concluded

value, account for nearly 80% of the

value of the portfolio, or nearly 90%

if assets held in discontinued

operations are excluded

We believe CWH’s Top 20 assets represent a portfolio of comparable or superior quality

relative to the full portfolios of CWH’s public peers yet we value CWH’s Top 20 assets at a

weighted average cap rate of 7.1% while the average public peer trades at an implied cap rate

of 6.7%

Subset

Reported

Occupancy

Net Rentable

Area

As-Stabilized

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

% of Concluded

Value

Top 20 Assets

91.3%

18,380,734

$285

7.1%

$3,926

$213.61

56.5%

Top 50 Assets

90.3%

27,521,106

403

7.2%

5,477

199.00

78.8%

Other Continued Operations

87.5%

9,875,136

8.3%

828

83.87

11.9%

Total Continued Operations

89.5%

37,396,242

$465

7.3%

$6,305

$168.59

90.7%

Total Discontinued Operations

(1)

71.3%

8,502,942

8.7%

649

76.27

9.3%

Total

86.2%

45,899,184

$528

7.5%

$6,953

$151.49

100.0%

Valuation Update

Chicago Portfolio

CWH’s Chicago assets account for roughly 12% of the portfolio’s total value

Recent

Transactions

120 S. Riverside

Nov-13

$264 PSF

6.3% cap rate

111 W. Jackson

Dec-13

$237 PSF

6.5% cap rate

300 S. Wacker

Aug-13

$220 PSF

6.3% cap rate

“While core cap rates are hovering around 6.0%, it should be

noted that in three of five cases core office cap rates dipped below

6.0% in 2013.”

CBRE Chicago Downtown Office MarketView Q4 2013

625 N. Michigan

Jun-13

$316 PSF

6.0% cap rate

Source:

Comparable data comes from CBRE, HFF and MBReal Estate

We believe our 7.2% weighted average cap rate and

weighted average value per square foot of $204 compare

favorably to recent transaction comparables in the market

place

City

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

Chicago Assets

$63

7.2%

$865

$204.32

Valuation Update

Philadelphia Portfolio

CWH’s Philadelphia assets account for roughly 13% of the portfolio’s total

value

Recent Transactions

1500 Spring Garden

Oct-13

$171 PSF

6.99% cap rate

Commerce Sq I & II

Dec-13

$175 PSF

6.5% cap rate

“This transaction enables us to acquire two of Philadelphia's Trophy-

class CBD properties [(Commerce Sq I and II)] at a significant discount

to replacement cost.”

Gerard H. Sweeney, President and CEO of Brandywine

2000 Market

Mar-13

$165 PSF

7.0% cap rate

Source:

Comparable data comes from CBRE, HFF and MBReal Estate

We believe our 7.0% weighted average cap rate and

weighted average value per square foot of $185 compare

favorably to recent transaction comparables in the market

place

City

NOI ($MM)

Cap Rate

Concluded

Value ($MM)

Concluded

Value PSF

Philadelphia Assets

$67

7.0%

$851

$185.13

Valuation Update

By Asset Type and Vintage

Over 60% of CWH’s assets are located in CBD locations or close to 70% if assets

held in discontinued operations are excluded

Portfolio Summary - by Property Type

($ and SF in millions, except PSF)

# of

Cap

Concluded

Property Type

Properties

Rate

NOI

Value

Value PSF

Office - CBD

22.0

7.2%

$314

$4,215

$192

Office - Suburban

188

17.2

7.8%

184

2,256

131

Industrial

6.0

8.4%

344

Other

0.8

8.7%

138

179

Portfolio

305

45.9

7.5%

$528

$6,953

$151

Portfolio Summary - by Vintage

($ and SF in millions, except PSF)

# of

Cap

Concluded

Vintage

Properties

Rate

NOI

Value

Value PSF

Prior to 2000

9.6

7.1%

$129

$1,689

$177

2000 - 2005

11.3

7.8%

101

1,248

110

2006 - 2008

7.9

8.4%

688

2009 - 2011

12.6

7.3%

180

2,538

201

Since 2012

4.5

7.3%

790

175

Portfolio

305

45.9

7.5%

$528

$6,953

$151

Valuation Update

Footnotes

Footnotes to p. 67

Per estimates from Related. Implied cap rate, TEV/SF, % CBD/urban infill, Avg gross rent $PSF, and Top 5 Market data

include continuing operations only.

Pro forma for acquisition of Thomas Properties Group.

Highwoods data excludes industrial and retail.

Per

Greenstreet

Advisors,

except

for

CWH.

CWH

implied

cap

rates

are

based

stabilized

NOI

$528

million.

% of total for top 5 markets represents nine months ended 9/30/2013.

Parkway only discloses rent by market.

Parkway rent per square foot for individual markets as of 12/31/2012.

(2)

(3)

(4)

(5)

(6)

(7)

Source: Company filings, Factset, SNL, Greenstreet Advisors

(1)