CommonWealth REIT gets tenders for $663.05 million, lifts offer cap

By Susanna Moon

Chicago, March 11 - CommonWealth REIT said investors had tendered $663,053,000 of four series of notes issued by HRPT Properties Trust, which was the name of the company at issuance, by 5 p.m. ET on March, the early tender date.

CommonWealth also will now purchase up to $665 million of notes, up from $650 million, according to a company press release.

The company announced the cash tender offer on Feb. 25 and, at the time, said it would purchase up to $450 million of the notes. The offer cap was raised on March 1 to $650 million.

The breakdown for the tendered notes as of the early tender date is as follows:

• $144,432,000, or 59.03%, of the $244,655,000 5.75% senior notes due Feb. 15, 2014;

• $150,476,000, or 80.90%, of the $186 million 6.4% senior notes due Feb. 15, 2015;

• $107,534,000, or 43.01%, of the $250 million 5.75% senior notes due Nov. 1, 2015; and

• $260,611,000, or 65.15%, of the $400 million 6.25% senior notes due Aug. 15, 2016.

The company said it expects to purchase all of the early tendered notes on March 12.

The tender offer will continue until midnight ET on March 22.

Tender offer terms

As noted before, pricing for the notes, listed in order of priority acceptance level, will be set at 2 p.m. ET on March 11 using the bid-side price of a reference security plus a fixed spread as follows:

• For the 5.75% notes due 2014 pricing will be based on the 0.75% Treasury note due Aug. 15, 2013 plus a spread of 50 basis points;

• For the 6.4% notes pricing will be based on the 0.25% Treasury note due Jan. 31, 2015 plus a spread of 75 bps;

• For the 5.75% notes due 2015 pricing will be based on the 0.25% Treasury note due Jan. 31, 2015 plus a spread of 125 bps; and

• For the 6.25% notes 2016 pricing will be based on the 0.375% Treasury note due Feb. 15, 2016 plus a spread of 160 bps.

The total purchase price will include $20 per $1,000 principal amount of notes tendered by the early tender date.

Holders who tender after the early deadline will receive the total payment less the early premium.

Tendered notes may be withdrawn by the early tender deadline.

The company also will pay accrued interest up to but excluding the payment date.

Citigroup Global Markets Inc. (800 558-3745 or collect 212 723-6106) and RBC Capital Markets, LLC (877 381-2099 or collect 212 618-7822) are the dealer managers. Global Bondholder Services Corp. (866 952-2200 or 212 430-3774) is the tender agent and information agent.

Corvex counteroffer, complaint

The company said on Feb. 27 that it planned to continue the cash tender offer despite objections stated in a schedule 13D jointly filed on Feb. 26 by Corvex Management LP and Related Fund Management, LLC with the Securities and Exchange Commission and a separate open letter.

CommonWealth's board of trustees determined that continuing the tender offer would serve the trust's best interests, according to a prior press release by CommonWealth.

Corvex and Related demanded that "the issuer immediately cease its proposed equity offering and debt repurchase, and enter into discussions with Corvex and Related regarding maximizing long-term value for all of the issuer's shareholders," according to the SEC filing.

Corvex and Related said that initially they would be prepared to acquire all of the issuer's outstanding shares at a price of $25.00 per share, which is a 58% premium to the closing price of $15.85 per share on Feb. 25.

The companies also said there was an "opportunity to meaningfully increase this proposed offer after completing due diligence."

"If the issuer proceeded with the proposed equity offering, however, their proposed valuation would be significantly negatively impacted," the filing noted.

Corvex and Related said they would file a complaint to enjoin CommonWealth from implementing or completing the proposed equity offering.

The complaint alleged that CommonWealth's trustees have breached their fiduciary duties to shareholders, the filing said.

More investor objections

The Delaware County Employees Retirement Fund has sought to enjoin the company from repurchasing its notes under the tender offer, according to a previous press release by Chimicles & Tikellis LLP, Haverford, PA and Shapiro Haber & Urmy LLP.

The hearing was slated to place at noon ET on March 4.

Separately, Luxor Capital Group, LP is "actively exploring litigation to recoup the value destroyed by the offering and are willing to use any and all appropriate legal means to prevent further destruction of shareholder value," according to another press release, as previously reported.

The New York investment manager said it beneficially owns and controls in excess of 6.7 million common shares of CommonWealth REIT, or about 8% of the common shares outstanding.

"We find it unconscionable that the board of trustees would vote to issue shares significantly below market in light of the offer on the table from a credible buyer at a significant premium.

"We agree with CNBC's assessment of the transaction, which they described as 'a real-life poison pill' and their mocking assessment of your decision to pursue the offering in light of the bid - 'amazing - amazing that they did this,'" Luxor said in the release.

The investment manager has demanded that the board of trustees stop all stock offerings and to form an independent committee to pursue strategic alternatives.

CommonWealth is a Newton, Mass.-based office and industrial real estate investment trust.

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