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Glass Lewis urges change at Commonwealth REIT

NEW YORK (AP) -- Proxy advisory firm Glass Lewis & Co. has backed two activist investors' efforts and recommended Tuesday that shareholders of Commonwealth REIT vote to remove its entire board of trustees.

Commonwealth, which is based in Newton, Mass., is a real estate investment trust that invests primarily in office and industrial space.

Corvex Management LP and Related Fund Management LLC are seeking shareholder support for their efforts to remove the board. They believe the company's stock is undervalued and that its current leadership is mismanaging the company.

The companies, which combined are Commonwealth's second-biggest investor, also attempted to acquire the company. They made two unsolicited bids for Commonwealth REIT and have opted instead to try to oust the board and take it private through shareholder votes.

Commonwealth, however, says the effort to remove the board is not valid, because it doesn't meet the qualifications under its bylaws. The dispute is also entering arbitration and Commonwealth says it must move through that process first to determine if the solicitation is valid.

It also argues that the company is better off with its current structure and strategy. The company has urged shareholders not to vote on the proposals from Corvex and Related.

Glass Lewis said in its report that Corvex and Related make a compelling case that the Commonwealth shareholders would benefit from a fresh perspective at the board level. While the activist shareholder's plan entails its own risks, including a potentially vacant board and near-term share volatility, the proxy advisory firm sees the potential benefits of the proposal outweighing these uncertainties.

Another advisory firm, Institutional Shareholder Services, backed the plan to remove Commonwealth REIT's board earlier this month.

Shares of the company increased 16 cents to close at $21.95 Tuesday. The stock is up 39 percent this year.