Moody's Fears Hedge Fund Takeover Of REIT

Mar 11 2014 | 8:15am ET

The embattled board of directors at CommonWealth REIT has won a rare show of support in its battle with a hedge fund.

Moody's Investors Service on Friday put the company's credit rating on review for a possible downgrade, citing Corvex Fund Management's plan to make private-equity billionaire Sam Zell its chairman should it succeed in ousting CommonWealth's board. Moody's said a victory for Corvex would create the potential "for increased leverage, secured debt and/or core asset sales."

Zell defended his record, saying that he doesn't put the companies he runs at such risk.

Moody's fears put it at odds with proxy advisors Institutional Shareholder Services and Glass Lewis & Co. Glass Lewis threw its backing behind Corvex's candidates last week, citing the current board's "failed arguments and suspect methodologies," adding that the risks of replacing the board are "both transitory and decidedly unlikely."

Corvex, which is working with Related Fund Management, is widely seen as likely to succeed in its battle to remove the Portnoy family from control of the REIT: The two firms last year claim to have won the proxy battle, only to see it invalidated on technical grounds.

CommonWealth investors are currently voting on whether to remove the current board. If the proposal receives two-thirds of the vote by March 20, it would force a board election ahead of its June 15 annual meeting.

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...