A fiduciary duty is an obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to the shareholders, a trustee has a fiduciary duty to the trust's beneficiaries, and an attorney has a fiduciary duty to a client.
A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the client. The fiduciary must knowingly accept that trust and confidence to exercise his expertise and discretion to act on the client's behalf.
When one person does agree to act for another in a fiduciary relationship, the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for his own benefit in relation to the subject matter. The client is entitled to the best efforts of the fiduciary on his behalf and the fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure in regard to the client and must not obtain a personal benefit at the expense of the client.
The following is historical fact. Management (RMR) controlled and owned by Portnoys have expanded the amount of properties they collect fee’s by destroying share value of CWH formerly HRP. Since 2007 every, and I mean every dilution and spin off has destroyed share value of CWH formerly HRP from pre split 13 dollars a share to 4 dollars a share.
They are in my opinion guilty of destroying share value for self-gain. Note! I should have said legal thieves that are out for themselve. It is true in general people are out for themselves and that is human nature, but when one destroys others wealth just to enrich themselves I call that unethical thievery, or in this case a violation of Fiduciary duty.
Was it ethical to spin off best incoming properties to other companies the Portnoys control? Was it ethical and legal to keep diluting shares below book and selling price? Who gained from this shareholders or Portnoys? This is not speculation but historical fact.
Adam Portnoy said in one of the conferences “Things would have been worse if they didn’t do what they did”. I do not buy that statement. All four dilutions and spin offs of best income producing properties has been below book value; which has destroyed share value. He also admitted that diluting shares destroys share value but said he had to do it.
Speculation: In may of 2012 I wrote in the message board: “Will the Portnoys continue to dilute shares of CWH for self gain, spin off more properties to other companies they control, or actually do something to increase share value; like a buy back or simple a statement that they will no longer keep diluting shares of CWH.” Is it speculation that CWH is selling round 50 to 60% book whereas most Reits in general are selling at or above book value? It is now 2013 and once again they are diluting shares without regard to shareholders.
In my opinion their track record shows beyond a reasonable doubt they have violated their Fiduciary Duty to shareholders only to increase their own personal wealth. They should be removed from all boards they control and fined for violating their Fiduciary Duty. It should also be pointed out that Adam and his father Barry Portnoy including members of the board of directors have been awarding themselves thousands of shares each year at no cost while share value has been declining.
I have been a long term investor in HRP and then CWH. I totally agree with you Abe and many have stated the same less completely in the past here on Yahoo boards. I finally concluded RMR would never raise dividends to the benefit of shareholders and swapped for the preferred where I could more or less count on the dividends. BUT the actions of RMR in this recent battle are blatant as they come. Math condemns them. $25 is more than $19. 31.57% more and that is the just one measure of the damages caused to the shareholders by the recent breach.
My question to you. How has the market for office buildings been over the last 15 years? There have been lots of bankruptcies and lots of loans extended pretending things will get better. The vast majority of office properties aren't doing well(of course there are notable exceptions as anything), but your case will do nothing but enrich lawyers.
Law is based on facts. I just stated the facts. Four dilutions and spinoffs of best producing properties made by the Portnoys who own RMR has been made below book value driving share price down. In turn more and more properties were purchased to increase real estate fees for themselves. If I was a judge I would find them guilty of violating their Fiduciary Duty to shareholders for self gain. Simply put shareholders loss has been managements gain. Personally I feel there should be a law forbidding management companies of real estate from holding office and control of the companies they manage. In my opinion this conflict of interest should not be legal.
If anyone else feels the same as I do, that the Portnoys are guilty of violating their Fiduciary Duty just reply “Guilty”.