NEW YORK CITY—Just weeks after Sam Zell became the new chairman of CommonWealth REIT in a sequence of events that was precipitated by activist shareholders dissatisfied with the company's governance, a major shareholder in an affiliated REIT has made public its own concerns about governance. The REIT in question is Select Income REIT, whose board includes the father-and-son team of Barry and Adam Portnoy, both of whom had also served on CWH's board prior to an ouster of CWH's entire board. The Portnoys also control REIT Management & Research, which externally manages both CWH and SIR.

A June 11 letter from New Yiork City-based Lakewood Capital Management LP, over the signature of managing partner Anthony T. Bozza, takes the net lease REIT's board to task for what Lakewood sees as lapses in governance. “During the past five weeks, we have witnessed a sickening series of events unfold whereby the SIR trustees have deliberately taken multiple steps to protect their own interests at the expense of shareholders in clear breach of their fiduciary duties,” according to Lakewood's letter. “We believe SIR's shares are substantially undervalued and we urge the board to start minding the interests of the shareholders they were elected to represent and immediately cease any activities that further entrench the board and management.”

Among those activities is what Lakewood sees as dilution of existing shareholders via “further equity offerings at prices below the fair value of the company's underlying assets.” Lakewood currently controls 5.8% of SIR's stock; its interest in the company was 6.8% prior to a recent equity offering that diluted the value. Lakewood also took the trustees to task for expanding the size of the REIT's board and offering to repurchase shares directly from SIR's largest shareholder, CWH, “without making such offer available to all shareholders on equal terms.”