Perry Capital Joins the Battle at CommonWealth REIT

Page 1 of 2

Last month the management of CommonWealth REIT (NYSE:CWH) launched an offering of common stock with the intent to use the proceeds to pay down debt. A number of investors, including Keith Meister’s Corvex Capital, campaigned against the move and have recently announced plans to replace the company’s Board of Directors. Richard Perry’s Perry Capital had not owned any shares of CommonWealth at the end of December (see which stocks Perry reported owning), but a recent 13D filed with the SEC has disclosed that the fund now owns 6.5 million shares of the stock. The filing states that Perry supports the efforts of Corvex and other activists to improve CommonWealth’s corporate governance but does not make any specific mention of the Board campaign (it’s possible the fund was not aware of this move while it was preparing the filing).

CommonWealth REIT (NYSE:CWH)

CommonWealth is a real estate investment trust which invests in office and industrial buildings. Real estate investment trusts are a special class of companies which receive preferential tax status conditional on distributing a large share of their taxable income to shareholders; this often leads to high dividend yields, making them popular picks among income investors. CommonWealth, for example, has made quarterly dividend payments of 25 cents per share the last two quarters (after paying 50 cents per share for the previous 9) and if we annualize that we get a yield of 4.5% at current prices.

When analyzing REITs, it’s more useful to evaluate their “funds from operations” as a financial metric than net income. This is because real estate does not really depreciate as many assets do- in fact, in many circumstances the value of real estate appreciates over time. CommonWealth reported about $280 million in funds from operations available to common shareholders for 2012, up from about $260 million for 2011. Similar numbers apply for the company’s “normalized funds from operations.” We would note that the current market cap for the stock is $2.5 billion, so the ratio of market value to funds from operations is somewhat low. While using value analysis to evaluate REITs can be dicey, income investors should be able to take some comfort that the stock price makes sense.

During the fourth quarter of 2012, Luxor Capital initiated a position of 6.3 million shares in CommonWealth; that fund is managed by Christian Leone (find Luxor’s favorite stocks). J. Alan Reid, Jr.’s Forward Management was another major holder of the stock (check out Reid’s stock picks).

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!