New York-based activist hedge fund Corvex Management LP and Related Fund Management LLC are about to mount a consent solicitation proxy fight at Boston's CommonWealth REIT. The campaign is aimed squarely at the real estate management empire behind the industrial and office building real estate investment trust and its structure -- which is a throwback to the early days of REITs.

That's why, industry observers say, this fight will be to the death.

Corvex, which was founded by an ex-Carl Icahn lieutenant, and Related Fund, an affiliate of Related Cos. LP, owned by New York property magnate Stephen Ross, have gone in, guns blazing, calling for the ouster of CommonWealth's entire board.

The firms also have a $27 per share offer on the table to buy the company, which amounts to about $2.3 billion.

The funds held a 9.8% stake, just below the company's 10% poison pill. Luxor Capital Group LP, an 8% stakeholder, has also said it will back the effort.

The activists already tried to stop a recent $450 million share offering by CommonWealth, saying it was diluting shareholders at a massive discount, but a federal judge in Massachusetts refused to grant an emergency restraining order and the sale went forward this month. In fact, it was upsized to $650 million. Proceeds from the offering went mostly to pay down debt. Corvex's and Related's stake went down to 8.6% after the offering.

Besides the usual difference of opinion about what the company's stock should be worth -- CommonWealth is currently trading at a 60-day moving average of about $22.25 per share, while the investors claim it ought to be trading as high as $40 per share -- this is also a fight to pry away lucrative fees from Barry Portnoy, the founder of Boston real estate management company REIT Management & Research LLC, known as RMR, which manages CommonWealth and other REITs controlled by the management firm. In addition to CommonWealth, those REITs include publicly listed Hospitality Properties Trust and senior living community owner Senior Housing Properties Trust, its wholly owned subsidiary commercial single tenant owner and leasor Select Income REIT, as well as a stake in Government Properties Income Trust.

Back in the 1970s, when the REIT structure was new, the entities were small and usually administered by an outside manager. The entire sector was worth less than $10 billion, according to real estate and REIT analytics firm Green Street Advisors.

Now the industry's market capitalization weighs in at $550 billion, according to Green Street figures, and the very structure of REITs -- by law, the trusts must pay 90% of profits as a dividend to shareholders -- makes them an attractive investment for market participants that run the gamut from the largest pension fund to the ubiquitous exchange traded fund products sold to mom and pop investors. That, in turn, has ensured the survival and growth of the A-listed REITs, like mall owners Simon Properties Group Inc. and General Growth Properties Inc., office property owner Boston Properties Inc. and multifamily residential property REIT, Chicago's Equity Residential, all with multibillion-dollar market caps, as compared to CommonWealth's current market cap of almost $2.7 billion.

With growth, the REITs jettisoned the external management structure of earlier years and brought management in-house.

That's not the case with RMR's REIT for which the manager still charges property management fees. RMR's REITs don't have their own staff; they are fully staffed by the management company's 820 employees, which charges an additional business management fee; it's those fees that the activist investors claim are skewing the decisions made by CommonWealth's board (Portnoy's son Adam is the president), because what RMR makes money on is not selling and right-sizing the portfolio when necessary to enhance the stock price. Or increasing the dividend and doing share buybacks.

No, what RMR wants is more and more properties on which it can charge fees to put in its own kitty. So even if it ought to sell, it won't, and it will buy when it shouldn't.

Or, so Corvex and Related claim, not only in their presentation to investors and their federal court case, but also in a suit filed in Maryland state court at the end of February (CommonWealth is incorporated under Maryland law).

Analysts and real estate investors also say that the external manager places conflicts of interest on the REIT that should not be a part of anything that would get a good governance stamp of approval.

Green Street managing director Jim Sullivan calls the RMR companies "uninvestable."

What that means, Sullivan said, is that "we can't quantify the conflict of interests. We can't tell an investor that it might be $2 or $4 or $20 per share."

Sullivan points out that the same thing holds at RMR's other publicly listed REITs.

The problem for the activists, however, is that the stock is relatively cheap and investors like that steady dividend. Also, a consent solicitation requires that two-thirds of the shareholders vote in favor of removing the board, a proportion that, even under a best-case scenario, or worst, depending on one's point of view, is difficult to achieve.

Given that RMR's fees have been steadily mounting, it is unlikely that the management company will just shrug and settle.

CommonWealth paid $77.3 million in business and property management fees to RMR in 2012, up from $69.5 million in 2011, according to the company's financial reports.

Corvex and Related estimated in an investor presentation that over the past five years, CommonWealth paid $395 million in fees, or nearly 30% of the REIT's market cap.

Fees at RMR's other REITs were also up year-over-year. Hospitality Trust paid RMR $44 million in 2012, up from $41 million, while Senior Housing paid $31.2 million in 2012, up from $25.3 million year-over-year.

It's those fees that will also give RMR the resources to go head-to-head with Corvex and Related in an expensive consent solicitation fight, one industry watcher observed. Plus, the incentive is there to fight because what happens at Commonwealth could set a precedent at the other REITs managed by RMR.

In most proxy fights, when an activist investor wins seats, he has an incentive to work alongside management, but Corvex and Related want to fire RMR and bring on a cheaper management company.

In addition, once RMR is no longer involved with its need to keep the fee machine going, when the opportunity arises, solid assets that CommonWealth has accumulated in various metropolitan areas, such as Austin, Texas, Philadelphia, Denver or Chicago could be sold, either as a block, or one at a time, in order to give money back to shareholders.

However, as one investor in the REIT sector put it: "Barry is not going to let his baby go easily."

For one thing, CommonWealth hasn't been idle; it has been actively changing the way consent solicitations can be done at the company. As soon as Corvex and Related announced their intentions to go after management, the company amended its bylaws to clarify a requirement that shareholders must have held at least a 3% stake for three years applied not only to director nominations, but also to attempts to remove directors.

On March 15, the dissident shareholders amended their Maryland complaint to include an action to declare the bylaw changes void.

CommonWealth has also done what many companies do when faced with a proxy fight: sell assets. On March 11, it sold its nearly 10 million share interest in Government Properties Income Trust, which owns properties that are mostly leased to government offices, for $240 million, or $24.13 per share, a discount of 4.2% to the REIT's prior closing price.

Now on Monday, CommonWealth said that it had filed preliminary consent revocations with the Securities and Exchange Commission, which it claimed would halt the consent process until its papers were reviewed.

"Rather than creating value for all of CommonWealth's shareholders, we believe that Corvex and Related are primarily interested in reputation building, as demonstrated by the remarkable effort they have undertaken to generate media interest in their self-serving activism campaign against CommonWealth's Board," the company wrote in its statement. "We believe that only Corvex and Related stand to benefit from their consent solicitation campaign, and that shareholders should reject their self-serving effort to seize CommonWealth."

Stifel Nicholas & Co. analyst John Guinee asked in a note following the Government Properties stake sale: "why weren't GOV and Select Income REIT [in which CommonWealth holds a 56% stake] sold to delever CWH as opposed to selling 41% of CWH via a dilutive equity offering in the first place."

Guinee continued: "Was the GOV sale in the best interests of CWH shareholders or defensive positioning by RMR in anticipation of activist shareholder actions."

Green Street's Sullivan, however, takes a more optimistic view of what could happen in Portnoy's REIT world.

"We encourage REIT investors to pay attention to the Commonwealth action," Sullivan wrote. "The five Portnoy REITs represent roughly 2.5% of the RMZ [the MSCI REIT Index] ... if the activists now stirring the CommonWealth pot do achieve their goals, the Portnoy REITs, under a more appealing, shareholder-friendly wrapper, may become part of [the] 'investable' menu of public REIT names. Stay tuned."