<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
TARRAGON REALTY INVESTORS, INC.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
TARRAGON REALTY INVESTORS, INC.
280 Park Avenue, East Building, 20th Floor
New York, New York 10017
(212) 949-5000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 18, 1999
Please join us for the Annual Meeting of Stockholders of Tarragon
Realty Investors, Inc., which will be held on Wednesday, August 18, 1999 at
10:00 a.m., local New York City time, at 280 Park Avenue, East Building, 20th
Floor, New York, New York 10017.
The purposes of the Annual Meeting are:
1. To elect nine (9) Directors to serve until the next Annual
Meeting of Stockholders;
2. To approve and ratify the selection of Arthur Andersen LLP as
independent auditors for fiscal year 1999; and
3. To consider and take action upon any other business that may
properly come before the meeting.
You are cordially invited to attend the Annual Meeting in person.
You must be a stockholder of record at the close of business on Friday,
July 2, 1999 to vote at the Annual Meeting.
Your vote is important. Accordingly, whether or not you plan to attend
the Annual Meeting, please sign, date and promptly return the enclosed proxy
card in the envelope provided.
Dated: July 15, 1999 BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHRYN MANSFIELD
Kathryn Mansfield
Executive Vice President and Secretary
<PAGE> 3
TARRAGON REALTY INVESTORS, INC.
280 Park Avenue, East Building, 20th Floor
New York, New York 10017
(212) 949-5000
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
AUGUST 18, 1999
GENERAL INFORMATION
This Proxy Statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors of Tarragon Realty Investors,
Inc. for use at the Annual Meeting of Stockholders. The Annual Meeting will be
held on Wednesday, August 18, 1999, at 10:00 a.m., local New York City time, at
280 Park Avenue, East Building, 20th Floor, New York, New York 10017. This Proxy
Statement and the accompanying proxy card are first being mailed to stockholders
on or about July 15, 1999.
STOCKHOLDERS ENTITLED TO VOTE
You are entitled to vote at the Annual Meeting and any adjournments
thereof if you are a holder of record of Tarragon common stock, par value $0.01
per share (the "Shares"), as of the close of business on July 2, 1999 (the
"Record Date"). As of the Record Date, there were 8,339,753 Shares outstanding.
You are entitled to one vote for each Share you hold on the Record Date.
VOTING OF PROXIES
You can vote in person at the Annual Meeting or you can vote by proxy.
To vote by proxy, you must sign, date and return the enclosed proxy card to
American Stock Transfer and Trust Company in the envelope provided prior to the
Annual Meeting. You may choose to vote for all of the nominees for Director,
withhold authority for voting for all of the nominees, or withhold authority for
voting for any individual nominee. Unless you instruct otherwise, the persons
named as your proxy will vote your Shares FOR the election of each of the
nominees for Director, and FOR the approval and ratification of Arthur Andersen
LLP as independent auditors, as recommended by the Board of Directors.
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<PAGE> 4
REVOKING PROXIES
You may revoke a proxy at any time before it is exercised by delivering
written notice of revocation to the Secretary of Tarragon, or by signing and
delivering a proxy card bearing a later date. You may also attend the Annual
Meeting, withdraw your proxy before it is exercised, and vote in person.
If you are a beneficial owner of Shares and intend to vote in person at
the Annual Meeting, you should obtain a legal proxy or power of attorney from
your broker and present it to the inspectors of election at the Annual Meeting
to establish your right to vote such Shares.
VOTE REQUIRED FOR APPROVAL
The holders of a majority of the outstanding Shares entitled to vote
must be represented at the Annual Meeting in person or by proxy to constitute a
quorum for the transaction of business at the Annual Meeting.
In order to be elected as a Director, each nominee must receive the
affirmative vote of a plurality of the votes cast at the Annual Meeting
(Proposal 1). The affirmative vote of a majority of the votes cast at the Annual
Meeting is required to ratify the appointment of Arthur Andersen LLP as
Tarragon's independent auditors (Proposal 2).
Votes withheld from the election of any nominee for Director and
abstentions will be treated as Shares that are present and entitled to vote for
the purposes of determining the presence of a quorum, but will not be counted in
the number of votes cast on any matter. If a broker does not receive voting
instructions from the beneficial owner of Shares on a particular matter and
indicates on the proxy that it does not have discretionary authority to vote on
that matter, those Shares will be considered as present and entitled to vote
with respect to that matter, but will not be counted in the number of votes cast
FOR or AGAINST the matter.
As of July 2, 1999, management and affiliates held 2,940,248 Shares
representing approximately 35% of the Shares outstanding. Management intends to
vote all of such Shares for the election of each of the nine nominees for
Director and for the ratification of the appointment of Arthur Andersen LLP as
independent auditors.
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<PAGE> 5
PROPOSAL 1
ELECTION OF DIRECTORS
Tarragon's Board of Directors currently consists of nine members.
Chester Beck, Willie K. Davis, William S. Friedman and Michael E. Smith were
initially named as Directors in the Tarragon Articles of Incorporation and were
elected at an annual meeting of shareholders of Vinland Property Trust, a
predecessor of the Company, held on July 10, 1997.
On November 24, 1998, Tarragon merged with National Income Realty Trust
("NIRT"), a California business trust, with Tarragon being the survivor to such
merger. Pursuant to the merger, the NIRT shareholders received 1.97 Shares of
Tarragon for each NIRT share of beneficial interest they held on the effective
date. Following the merger, the Tarragon Board of Directors was expanded by
adding five former NIRT trustees, to create a nine member Board of Directors.
Carl B. Weisbrod, Raymond V.J. Schrag, Lawrence G. Schafran, Lance
Liebman and Sally Hernandez-Pinero were each elected trustees of NIRT at the
last annual meeting of shareholders of NIRT held on March 20, 1997 and were
appointed to the Board of Directors of Tarragon on December 3, 1998, pursuant to
the terms of the merger.
NOMINEES
Each of the current members of the Board of Directors of Tarragon has
been nominated to serve for an additional term, until the next Annual Meeting of
Stockholders or until his or her respective successor has been duly elected and
qualified. Each nominee has consented to being named in this Proxy Statement as
a nominee and has agreed to serve as a Director if elected. The persons named as
your proxy will vote your shares for the election of each of the nominees unless
you instruct otherwise. If any nominee is unable or unwilling to serve (an event
which is not anticipated), then the persons named as your proxy may vote for any
substitute nominee proposed by the Board of Directors in place of such nominee.
The nine nominees are listed below, together with their ages, terms of
service, all positions and offices with Tarragon (or its predecessors and
advisors), other principal occupations, business experience and directorships
with other companies during the last five years or more. There are no family
relationships among any of the directors or executive officers of Tarragon. The
designation "Affiliated" when used below with respect to a Director means that
the Director is an officer, director or employee of Tarragon. The designation
"Independent" means that the Director is not an officer of Tarragon, nor was
that person an officer, director or employee of Tarragon Realty Advisors, Inc.,
the advisor to Tarragon and its predecessors until November 24, 1998, although
Tarragon may have certain business or professional relationships with such
Director as discussed below under "Certain Relationships and Related
Transactions."
3
<PAGE> 6
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOLLOWING NOMINEES FOR ELECTION AS DIRECTOR:
CHESTER BECK: Director since April 1997 (Independent) Age: 69
Trustee (May 1995 to July 1997) of Vinland Property Trust; President (since
March 1995) of Highland Funding Corp., a mortgage brokerage firm; National
Sales Manager (January 1994 to March 1995) of Columbia Equities Limited, a
real estate financing entity; Senior Vice President (April 1992 to January
1994) of Peregine Mortgage Company, Inc., an FHA approved mortgagee
specializing in multi-family and healthcare project financing.
WILLIE K. DAVIS: Director since April 1997 (Independent) Age: 67
Trustee (October 1988 to July 1997) of Vinland Property Trust; Trustee
(October 1988 to March 1995) of NIRT; President (1971 to 1985) and chairman
and 50% shareholder (since 1985) of Mid-South Financial Corporation, holding
company for Mid-South Mortgage Company and Gibbs Mortgage Company; President
(1978 to 1995) and Chairman and sole shareholder (since December 1995) of
FMS, Inc., a property management and real estate development firm; Director
(since 1987) of Southtrust Bank of Middle Tennessee; Trustee and Treasurer
(since 1986) of Baptist Hospital, Inc., a Tennessee general welfare
not-for-profit corporation; and Trustee or Director (October 1988 to March
1995) of Continental Mortgage and Equity Trust, Income Opportunity Realty
Trust, and Transcontinental Realty Investors, Inc.
WILLIAM S. FRIEDMAN: President, Chief Executive Officer and Director
since April 1997 (Affiliated) Age: 55
Trustee (from March 1988), Chief Executive Officer (from December 1993),
President (from December 1988), Acting Chief Financial Officer (May 1990 to
February 1991), Treasurer (August to September 1989), and Acting Principal
Financial and Accounting Officer (December 1988 to August 1989) of Vinland
Property Trust (until July 1997) and NIRT (until November 1998); and Attorney
at Law (since 1971).
SALLY HERNANDEZ-PINERO: Director since December 1998 (Independent) Age: 45
Trustee (May 1994 to November 1998) of NIRT; Senior Vice President of The
Related Companies (since April 1999); Managing Director (July 1998 to April
1999) of Fannie Mae American Communities Fund; Of Counsel (October 1994 to
June 1998) at Kalkines, Arky, Zall and Bernstein, New York City; Chairwoman
(February 1992 to April 1994) of the New York City Housing Authority;
Director (since July 1994) of Consolidated Edison; Director (since April
1994) of Dime Savings Bank; and Attorney at Law (since 1978).
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<PAGE> 7
LANCE LIEBMAN: Director since December 1998 (Independent) Age: 57
Trustee (March 1994 to November 1998) of NIRT; William S. Beinecke Professor
of Law, Columbia Law School; Director Parker School of Foreign and
Comparative Law; Director Designate, American Law Institute; Dean (1991 to
1996) of Columbia Law School; Assistant Professor, Professor, and Associate
Dean (1970 to 1991) of Harvard Law School; Director (since 1991) of Greater
New York Insurance Co. (both mutual and stock companies); Director (since
1995) of M & F Worldwide; Director (since 1996) of Brookfield Financial
Properties, Inc.; and Attorney at Law (since 1968).
LAWRENCE G. SCHAFRAN: Director since December 1998 (Independent) Age: 60
Trustee (March 1995 to November 1998) of NIRT; Managing General Partner
(since 1984) of L.G. Schafran & Associates, a real estate investment and
development firm in New York City; Director (since 1986) of Publicard, an Old
Greenwich, Connecticut, NYSE listed holding company that operates through
subsidiaries in manufacturing services; Director (1986 to December 1997) of
Capsure Holdings Corp., a Chicago, Illinois, NYSE listed property and
casualty insurer; Director (March 1993 to 1996) of Oxigene, Inc., a U.S. and
Swedish pharmaceutical developer; Director (January 1995 to July 1997) of
Glasstech, Inc., a Perrysberg, Ohio, manufacturer of glass bending and
tempering equipment; and Director (December 1993 to October 1997), Member
(September 1994 to October 1997), and Chairman (December 1994 to October
1997) of the Executive Committee of The Dart Group Corporation, a Landover,
Maryland, NASDAQ listed holding company engaged with other publicly traded
subsidiaries in discount automotive parts and accessories (Trak Auto
Corporation), discount bookstores (Crown Books Corporation), discount
supermarkets, beverages, and real estate; Chairman (since January 1996) of
Delta-Omega Technologies, Inc., a Broussard, Louisiana, manufacturer and
distributor of environmentally safe fire foams, industrial cleaners and
degreasers; Director (since 1997) of Discovery Zone, Inc.; Director (since
1997) of Kasper A.S.L. Ltd.; and Director (since 1997) of Comsat Corporation.
RAYMOND V.J. SCHRAG: Director since December 1998 (Independent) Age: 53
Trustee (October 1988 to May 1995) of Vinland Property Trust; Trustee
(October 1988 to November 1998) of NIRT; Attorney, Law Offices of Raymond
V.J. Schrag in New York, New York (since January 1995); attorney, Law Offices
of Paul J. Schrag in New York, New York (since 1975); and Trustee or Director
(October 1988 to August 1994) of Continental Mortgage and Equity Trust,
Income Opportunity Realty Trust, and Transcontinental Realty Investors, Inc.
MICHAEL E. SMITH: Director since April 1997 (Independent) Age: 56
Trustee (October 1988 to August 1991 and May 1995 to July 1997) of Vinland
Property Trust; Assistant Professor of Law (since August 1995), University of
Wisconsin, Madison, Wisconsin; Research Director of the Remington Center at
the University of Wisconsin Law School (since 1997); President (1988 to 1995)
and Director (1978 to 1994) of the Vera Institute of Justice, a New York
not-for-profit corporation concerned with the administration of justice;
Trustee of
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<PAGE> 8
Prosecuting Attorney's Research Council, Inc., (1987 to 1995), New York
Lawyers for the Public Interest (1986 to 1990), Housing and Services, Inc.
(1986 to 1993), Manhattan Bowery Corporation, Inc. (1978 to 1995), Center for
Alternative Sentencing and Employment Services, Inc., formerly the Court
Employment Project, Inc. (1978 to 1995), and New York City Criminal Justice
Agency, Inc. (since 1978); and Attorney at Law (since 1971).
CARL B. WEISBROD: Chairman of the Board and Director since
December 1998 (Independent) Age: 54
Chairman of the Board (March 1995 to November 1998) and Trustee (February
1994 to November 1998) of NIRT; Trustee (February 1994 to May 1995) of
Vinland Property Trust; Trustee (since 1996) of the Ford Foundation;
President (since 1994) of Alliance for Downtown New York, Inc.; and President
and Chief Executive Officer (April 1990 to 1994) of New York City Economic
Development Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors reviews the business plan of Tarragon to
determine that it is in the best interest of the stockholders, supervises the
performance of management, selects executive officers and reviews the
reasonableness of their compensation, reviews Tarragon's operating results and
approves major acquisitions, sales and joint venture investments. In 1998 and
historically, the Independent Directors on the Board also reviewed Tarragon's
agreement with its advisor, supervised the performance of the advisor, and
reviewed the reasonableness of the compensation which Tarragon paid to the
advisor in terms of the nature and quality of services performed.
During the fiscal year ended December 31, 1998, the Board held three
regular meetings and two special meetings and acted once by written consent.
Each of the Directors attended at least 75% of the aggregate of all meetings
held by the Board and all meetings held by the committees of the Board, if any,
upon which such Director served during the period of time that such person
served on the Board or such committee.
The Board has an Audit Committee, an Option Committee, and an Executive
Compensation Committee.
The Audit Committee, which met once during 1998, reviews Tarragon's
operating and accounting procedures. The Audit Committee currently consists of
Messrs. Schrag, Davis, and Beck.
The Option Committee administers Tarragon's Stock Option and Incentive
Plan and authorizes option grants thereunder. The Option Committee, which
currently consists of Messrs. Weisbrod, Smith, and Schafran, acted by written
consent three times during 1998.
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<PAGE> 9
The Executive Compensation Committee was created by the Board in
December 1998 to make recommendations to the Board for the compensation of the
Company's senior executive officers. The Committee, which did not meet in 1998,
consists of Messrs. Liebman, Weisbrod, and Schrag.
DIRECTOR COMPENSATION
Independent Directors receive annual compensation of $15,000 per year
plus reimbursement of expenses for their service on the Board. The Chairman of
the Board receives an additional $25,000 per year as compensation for his
services as Chairman. Independent Directors also receive $2,000 per year for
each committee of the Board on which they serve, $1,000 per year for each
committee that they chair, and $1,000 per day for any special services rendered
to Tarragon at the request of the Board, plus reimbursement of expenses.
Directors who are also officers of Tarragon receive no separate compensation for
their services as director.
Messrs. Beck, Davis, Smith, Liebman, and Schafran each received $10,000
for special services rendered to Tarragon (or its predecessor, NIRT), in
connection with the merger.
Tarragon's Independent Director Stock Option Plan (the "Tarragon
Director Plan") provides automatic annual grants of options to purchase Shares
to Independent Directors serving on the Board on the first day of Tarragon's
fiscal year. The exercise price of all options granted under Tarragon's Director
Plan is equal to the market price on the grant date. The options expire on the
earlier of the first anniversary of the date on which a director ceases to be a
director of Tarragon or ten years from the date of grant and are immediately
exercisable.
Pursuant to Tarragon's Director Plan, Messrs. Smith, Beck, and Davis
received options to acquire 300 Shares on January 1, 1998. Messrs. Weisbrod,
Liebman, Schrag and Schafran and Ms. Hernandez-Pinero each received options to
acquire 1,000 Shares of Beneficial Interest of NIRT on January 1, 1998, in
accordance with NIRT's Independent Trustee Share Option Plan (the "NIRT Plan").
Pursuant to the terms of the merger, the NIRT Plan was consolidated with and
into Tarragon's Director Plan, with the Shares available under the consolidated
plan for option awards being increased by the number of NIRT Shares of
Beneficial Interest available under the NIRT Plan multiplied by the exchange
ratio of 1.97 to 1, and the option awards authorized by the consolidated plan
being increased by the option awards authorized by the NIRT Plan, as adjusted by
the exchange ratio. Following the consolidation of the NIRT Plan into Tarragon's
Director Plan, each of the incumbent Independent Directors received options to
purchase 2,000 Shares on January 1, 1999.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Although the Board is directly responsible for managing the affairs of
Tarragon and for setting the policies which guide it, until November 24, 1998,
the day-to-day operations of Tarragon (and its predecessor NIRT) were performed
by Tarragon Realty Advisors, Inc. ("TRA"), an advisory firm owned by William S.
Friedman, a Director, President, and Chief Executive Officer of Tarragon, and
his wife, Lucy N. Friedman. Immediately following the merger of Tarragon and
NIRT, Tarragon
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<PAGE> 10
acquired TRA from Mr. and Mrs. Friedman for 100,000 Shares and options to
acquire 350,000 additional Shares at prices ranging from $13 to $16 per Share.
TRA operated under the supervision of the Board of Directors pursuant
to a written advisory agreement approved by Tarragon's stockholders. The duties
of TRA included, among other things, locating, investigating, evaluating, and
recommending real estate investments and sale opportunities and financing and
refinancing sources for Tarragon. TRA also served as a consultant in connection
with the business plan and investment policy decisions made by the Board of
Directors. Pursuant to the terms of the advisory agreement, TRA was entitled to
receive an incentive advisory fee equal to 16% of Tarragon's adjusted funds from
operations before deduction of the advisory fee for the period from January 1,
1998, through November 24, 1998, as well as acquisition commissions and mortgage
brokerage and refinancing fees equal to 1% of the acquisition cost of real
estate or 1% of the amount of the loan originated or refinanced.
Tarragon had no employees prior to its acquisition of TRA and paid no
salaries. Instead, employees of TRA rendered services to Tarragon and were
compensated by TRA. In accordance with the terms of the advisory agreement,
certain services provided by TRA, including accounting, legal, investor
relations, data processing, and related departmental overhead, were reimbursed
directly by Tarragon.
From April 1, 1994, through November 24, 1998, TRA or Tarragon
Management Inc. ("TMI"), its wholly-owned subsidiary, also provided property
management services to Tarragon for a fee of 4.5% of the monthly gross rents
collected. In fiscal year 1998 (through November 24, 1998), Tarragon incurred
fees and paid expense reimbursements to TRA and TMI as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1998
<S> <C>
Advisory Fees $1,048
Property Management Fees $1,884
Commercial Lease Commissions $ 12
Real Estate Acquisition Fees $ 105
Equity Refinancing Fees $ 643
Expense Reimbursements $2,215
</TABLE>
OTHER RELATED TRANSACTIONS
In February 1998, National Omni Associates, L.P., a partnership in
which Tarragon holds a 70% interest, paid a brokerage commission of $100,000 to
Highland Funding Corp. for consulting services it provided in connection with
the partnership's acquisition of 5600 Collins Avenue, a 289 unit high rise
apartment building in Miami Beach, Florida. Chester Beck, who serves as a
Director of Tarragon, is the President of Highland Funding Corp.
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<PAGE> 11
From January 1993 to January 1998, FMS, Inc. provided property-level
management services for several properties owned by Tarragon. In 1998, FMS, Inc.
earned fees of $6,706 for performing such services. Willie K. Davis, who serves
as a Director of Tarragon, was the Chairman, President, and sole shareholder of
FMS, Inc. at the time FMS, Inc. was so employed.
In fiscal year 1998, affiliates of William S. Friedman and his wife,
Lucy N. Friedman, made advances to Tarragon and its predecessor pursuant to the
terms of an unsecured line of credit. Advances under the line of credit bear
interest at the lower of LIBOR plus 1% per annum or the lowest rate at which
credit is offered to Tarragon by any third party and were made in part to
facilitate acquisitions by Tarragon and partnerships in which it holds
interests. The balance of such advances at December 31, 1998, was $5.9 million,
including interest accrued during the year of $41,000. As of May 31, 1999, the
amount outstanding under the line of credit was $4.4 million. Interest of
$260,000 has been paid through May 31, 1999 on advances under the line of
credit.
Management believes that all of the foregoing transactions were at
least as advantageous to Tarragon as could have been obtained from unrelated
third parties.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
In connection with an action styled Olive, et al. v. National Income
Realty Trust, et al., NIRT, among others, entered into an agreement in May 1994
(the "Olive settlement") which provided that any related party transaction
entered into prior to April 27, 1999, with certain limited exceptions, would
require the unanimous approval of the NIRT Board of Trustees. In addition,
pursuant to the Olive settlement, related party transactions could only be
undertaken in exceptional circumstances, and after a determination by the Board
of Trustees that the transaction was in the best interest of NIRT and that no
other opportunity existed that was as good as the opportunity presented by such
transaction.
In light of the consolidation of NIRT into Tarragon, the Board of
Directors of Tarragon voluntarily elected to treat the requirements for approval
of related party transactions contained in the Olive settlement as binding on
Tarragon through April 27, 1999. Following that date, the Board has elected to
continue the policy of discouraging related party transactions except in
exceptional circumstances, after full disclosure of all material facts as to the
relationship and financial interest of the relevant individuals in the
transaction, a determination that the transaction is fair to the Company, and
approval by a majority of the Independent Directors entitled to vote, all in
accordance with the Company's Articles of Incorporation and Bylaws.
In November 1994, William S. Friedman consented to an order prohibiting
him from participating in an insured depository institution without the prior
written approval of the Director of the Office of Thrift Supervision. Mr.
Friedman has been released from any liability arising from his association with
the former San Jacinto Savings Association, a savings institution placed under
conservatorship of the Resolution Trust Corporation on November 30, 1990.
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<PAGE> 12
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected the firm of Arthur Andersen LLP to
audit the consolidated financial statements of Tarragon for the fiscal year
ending December 31, 1999, and has directed that its selection of independent
auditors be submitted for ratification by the stockholders at the Annual
Meeting. In the event of a negative vote on ratification, the Board of Directors
will reconsider its selection.
Arthur Andersen LLP served as the auditors for Tarragon for the 1997
and 1998 fiscal years, and as the auditors for NIRT for the 1997 fiscal year.
Representatives of Arthur Andersen LLP have been invited to attend and are
expected to be present at the Annual Meeting. They will have the opportunity to
make a statement if they desire to do so, and to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND
RATIFICATION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
EXECUTIVE COMPENSATION
Mr. Friedman and the individuals listed below currently serve as the
executive officers of Tarragon. Their positions with Tarragon are not subject to
a vote of stockholders. With the exception of Mr. Friedman, whose employment
with Tarragon is subject to the terms of an employment contract more fully
described below, the executive officers serve until the first meeting of the
Board of Directors following the next succeeding annual meeting of stockholders
or until their successors have been duly chosen and qualified. See "Election of
Directors-Nominees" for similar information about Mr. Friedman.
<TABLE>
<S> <C> <C>
PENNY D. BARBER Age 34 Senior Vice President and Director of Property Management (since
December 1998) of the Company; Executive Vice President (since November
1998) of TMI; Vice President and Director of Marketing (May 1998 to
November 1998) of TRA; National Director of Marketing & Education
(October 1996 to May 1998), Galesi Management Corporation; National
Marketing Director (February 1995 to September 1996), Anne Sadovsky &
Co.; Regional Marketing and Training Director (February 1990 to January
1995), Lincoln Property Company.
CHRIS CLINTON Age 51 Senior Vice President - Commercial Asset Management (since March 1994)
and Vice President (October 1988 to March 1994) of the Company and
NIRT; Senior Vice President (since March 1994) of TRA.
ERIN D. DAVIS Age 37 Executive Vice President and Chief Financial Officer (since December
1998), Vice President and Chief Accounting Officer (September 1996 to
November 1998), and Accounting Manager (June 1995 to August 1996), of
the Company, NIRT and TRA; Senior Associate (January 1993 to June
1995), BDO Seidman; and Certified Public Accountant (since 1990).
</TABLE>
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<TABLE>
<S> <C> <C>
PETER LARSEN Age 56 Senior Vice President - Acquisitions (since July 1997), and Vice
President - Acquisitions (April 1996 to June 1997) of the Company, NIRT
and TRA; Independent Real Estate Consultant (January 1995 to April
1996); and Vice President (May 1992 to December 1994) of Basic Capital
Management, Inc. and Carmel Realty Services, Inc.
KATHRYN MANSFIELD Age 39 Executive Vice President (since December 1998), Secretary and Corporate
Counsel (since May 1998), and Vice President (May 1998 to December
1998) of the Company, NIRT and TRA; Vice President and Senior Counsel
(October 1994 to May 1998) of CB Richard Ellis, Inc., formerly CB
Commercial Real Estate Group, Inc.; Litigation Counsel (March 1990 to
October 1994), Basic Capital Management, Inc.; and Attorney at Law
(since 1984).
LORI MEYER Age 38 Senior Vice President - Deputy Director of Property Management (since
December 1998) of the Company; Senior Vice President (since November
1998), Controller (since February 1996) and Vice President (February
1996 to November 1998) of TMI; Assistant Controller (February 1990 to
January 1995) of South West Property Trust, Inc.; and Certified Public
Accountant (since 1996).
TODD C. MINOR Age 41 Senior Vice President (since December 1998) and Treasurer (since
December 1996), Senior Vice President - Mortgage Servicing and
Financing (May 1995 to November 1996), Senior Vice President - Finance
(March 1994 to April 1995 and July 1993 to January 1994) and Vice
President (April 1991 to July 1993) of the Company and NIRT; Senior
Vice President (since March 1994) of TRA.
CHARLES RUBENSTEIN Age 40 Executive Vice President (since December 1998) and General Counsel
(since September 1998), and Senior Vice President (September 1998 to
December 1998) of the Company, NIRT and TRA; General Counsel (January
1996 to February 1998), Simpson Housing Limited Partnership, Denver,
Colorado; Real Estate Attorney (October 1987 to November 1995), Andrews
& Kurth, LLP, New York, New York; and Attorney at Law (since 1984).
JOHN C. STRICKLIN Age 53 Managing Director - Real Estate Transactions (since November 1998) of
the Company; Executive Vice President (May 1995 to April 1996) of NIRT;
Senior Vice President - Real Estate (May 1994 to April 1995) and Vice
President - Real Estate (February 1994 to April 1995) of Vinland
Property Trust; Special Assistant to the President (April 1996 to
November 1998), Basic Capital Management, Inc.
</TABLE>
In addition to the foregoing, Tarragon has other officers who are not listed
herein.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
In connection with Tarragon's acquisition of TRA from William S.
Friedman and Lucy N. Friedman, Mr. Friedman entered into an employment agreement
with Tarragon for a term of four years, at a salary of $300,000 per year. In
addition, Mr. Friedman received immediately exercisable stock options to
purchase 250,000 Shares at an exercise price of $12 per share and 200,000 Shares
at
11
<PAGE> 14
an exercise price of $15 per share. Mr. Friedman's employment agreement includes
a broad covenant not to compete with Tarragon and a right of first refusal in
favor of Tarragon with regard to any real estate investment opportunity that
comes to Mr. Friedman's attention.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
None of the executive officers of Tarragon earned or received
compensation in excess of $100,000 from Tarragon in the fiscal year ended
December 31, 1998. The following table sets forth information with respect to
the compensation of the Chief Executive Officer of Tarragon (the "named
executive officer") for services rendered in all capacities to Tarragon and its
subsidiaries during the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL AWARDS
NAME AND PRINCIPAL POSITION COMPENSATION SECURITIES UNDERLYING
OPTIONS/SARS
YEAR SALARY (NO. OF SHARES)
<S> <C> <C> <C>
William S. Friedman 1998 $28,846 450,000
Director, President, and Chief
Executive Officer
</TABLE>
STOCK OPTION GRANTS
The following table shows all grants of stock options made during 1998 to the
named executive officer of Tarragon.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS/ EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME SARS GRANTED(1) 1998 ($/SHARE) DATE VALUE(3)
<S> <C> <C> <C> <C> <C>
William S. Friedman 250,000 29% $12 11/23/08 $414,394
200,000 23% 15 11/23/08 171,989
75,000(2) 9% 13 11/23/08 100,577
50,000(2) 6% 15 11/23/08 42,997
50,000(2) 6% 16 11/23/08 34,161
</TABLE>
12
<PAGE> 15
(1) Options granted to the named executive officer in 1998 represent all of
the exercisable options held by him as of fiscal year ended December
31, 1998.
(2) These options were granted to Mr. Friedman in connection with
Tarragon's acquisition of TRA.
(3) The present value of the options granted during 1998 was estimated
using the Black-Scholes pricing model using the following assumptions:
<TABLE>
<S> <C>
Expected volatility 13.12%
Risk-free rate of return 5.60%
Dividend yield 4.00%
Expected life 8 years
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until November 24, 1998, the executive officers of Tarragon were
compensated solely by TRA, and the amount of their compensation was determined
solely by TRA. Following the acquisition of TRA, the Board of Directors
established an Executive Compensation Committee to review TRA's compensation
policies and the compensation paid to the executive officers of Tarragon by TRA
and to make recommendations to the Board regarding the adoption of executive
compensation policies and programs for Tarragon in the fiscal year ending
December 31, 1999. The Executive Compensation Committee, which did not meet in
1998, consists of Messrs. Liebman, Weisbrod, and Schrag. None of the members of
the committee are former or current officers or employees of Tarragon or its
subsidiaries.
REPORT OF THE BOARD ON COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Board of Directors as a whole considered and approved the terms of
the employment agreement entered into with William S. Friedman in November,
1998, following the merger and acquisition of TRA by Tarragon. Prior to entering
into the employment agreement, the Board considered Mr. Friedman's
qualifications and experience in the real estate industry in general, and his
long term commitment to Tarragon and its predecessors. The Board also considered
the financial performance of Tarragon and its predecessors under TRA's
management, in terms of net increase in assets and asset value, shareholder
return and increase in market price of the Shares. The Board determined that it
was in the best interest of Tarragon to ensure Mr. Friedman's continued full
time involvement in management, and fashioned a compensation package consisting
of base salary and stock option awards to achieve this purpose. In determining
the amount of base salary awarded to Mr. Friedman, the Board considered the
responsibilities of the position, the competitive marketplace for comparable
executive talent, including market information relative to the compensation paid
to other chief executive officers of comparable REITs, and the financial
performance of Tarragon in fiscal year 1998 and historically. Mr. Friedman was
also awarded options to purchase Shares at above market prices, reflecting the
Board's desire to motivate its chief executive officer to achieve strategic and
financial goals and to create value for the shareholders of Tarragon.
13
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the holdings of
each person known to Tarragon to be the beneficial owner of more than five
percent of the Shares, of each Director and named executive officer, and of all
of Tarragon's directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF APPROXIMATE
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
<S> <C> <C>
Lucy N. Friedman 3,030,718 35.59%
280 Park Avenue, East Building, 20th Floor (2)(3)(4)(5)(6)
New York, New York 10017
William S. Friedman (+) 3,480,718 38.83%
(2)(3)(4)(5)(6)
Chester Beck(+) 13,007(7) *
Willie K. Davis(+) 6,200(8) *
Sally Hernandez-Pinero(+) 15,672(9) *
Lance Liebman(+) 17,848(10) *
Lawrence G. Schafran(+) 15,672(11) *
Raymond V.J. Schrag(+) 60,420(12) *
Michael E. Smith(+) 4,500(13) *
Carl B. Weisbrod(+) 17,777(14) *
All Directors and Executive Officers as a group 3,704,826 40.69%
(18 persons) (2)-(14)
</TABLE>
*Less than 1%
+Nominee
(1) The percentages are based upon 8,339,753 Shares of Common Stock outstanding
on July 2, 1999.
(2) Includes 92,674 Shares owned by Williams S. Friedman directly and 625,000
Shares covered by two separate presently exercisable options; one presently
exercisable option covering 450,000 Shares issued in connection with Mr.
Friedman's employment agreement with Tarragon is not included in Mrs. Friedman's
information.
(3) Includes 1,889,061 Shares owned by Mrs. Friedman directly and 175,000 Shares
covered by a presently exercisable option.
(4) Includes 124,735 Shares owned by Tarragon Capital Corporation of which Mrs.
Friedman and Mr. Friedman are officers and directors; 131,343 Shares owned by
Tarragon Partners, Ltd. of
14
<PAGE> 17
which Mrs. Friedman and Mr. Friedman are limited partners and Tarragon Capital
Corporation is the general partner; and 543,607 Shares owned by Beachwold
Partners, L.P. in which Mrs. Friedman and Mr. Friedman are the general partners
and their four children are the limited partners.
(5) Includes 74,298 Shares owned by Mr. and Mrs. Friedman's minor sons, Gideon
and Samuel Friedman. Mr. and Mrs. Friedman each disclaim beneficial ownership of
such Shares.
(6) Does not include 90,504 Shares owned by Ezra Friedman or 66,343 Shares owned
by Tanya Friedman, the adult children of Mr. and Mrs. Friedman. Mr. and Mrs.
Friedman each disclaim beneficial ownership of such Shares.
(7) Includes 9,507 Shares owned by Chester Beck directly and 3,500 Shares
covered by five separate presently exercisable options.
(8) Includes 4,200 Shares owned by Willie K. Davis directly and 2,000 Shares
covered by one presently exercisable option.
(9) Includes 15,672 Shares covered by five separate presently exercisable
options.
(10) Includes 2,176 Shares owned by Lance Liebman directly and 15,672 Shares
covered by five separate presently exercisable options.
(11) Includes 15,672 Shares covered by five separate presently exercisable
options.
(12) Includes 38,338 Shares owned by Raymond V.J. Schrag directly and 15,672
Shares covered by five separate presently exercisable options. Also includes
6,410 Shares owned by Mr. Schrag's wife as custodian for his minor son, Ben. It
does not include 1,410 Shares owned by Mr. Schrag's adult daughter, Rebecca, as
to which Shares Mr. Schrag disclaims any beneficial ownership.
(13) Includes 1,000 Shares owned by Michael E. Smith directly and 3,500 Shares
covered by five separate presently exercisable options.
(14) Includes 5,105 Shares owned by Carl B. Weisbrod directly and 12,672 Shares
covered by five separate presently exercisable options.
15
<PAGE> 18
COMPLIANCE WITH SECTION 16(a) REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires that Company directors,
executive officers, and persons holding more than ten percent of the Company's
Common Stock file initial reports of ownership of the Company's Common Stock and
reports of any changes in that ownership to the Securities and Exchange
Commission. Specific due dates for these reports have been established, and the
Company is required to report any failure to file by these dates during fiscal
1998.
To the Company's knowledge, based solely upon the written
representations of its incumbent directors, executive officers, and its ten
percent holders, and copies of the reports that they have filed with the
Securities and Exchange Commission, all of these filing requirements were
satisfied during 1998 except that the initial reports on Form 3 for Messrs.
Minor, Stricklin, Clinton and Larsen and for Ms. Meyer were filed late.
PERFORMANCE GRAPH
The following performance graph and table compare the cumulative total
shareholder return on Tarragon's Shares of common stock for the five year period
ending December 31, 1998 with the cumulative total return on the Standard &
Poor's 500 Stock Index ("S&P 500 Index") and the National Association of Real
Estate Investment Trusts Equity REIT Total Return Index ("NAREIT Equity Index")
over the same period. The comparison assumes that $100 was invested on December
31, 1993 in Tarragon's Shares and in each of the indices and further assumes the
reinvestment of all dividends. The shareholder return shown on the graph below
is not necessarily indicative of future performance.
[PERFORMANCE GRAPH]
16
<PAGE> 19
COMPARISON OF CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEARS ENDED DECEMBER 31, 1998
AMONG TARRAGON*, S&P 500 INDEX, AND NAREIT EQUITY INDEX
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
TARRAGON* 100 106.00 115.36 154.53 221.32 307.22
S&P 500 INDEX 100 101.31 139.23 171.19 228.32 293.57
NAREIT EQUITY INDEX 100 103.17 118.92 160.86 193.45 159.59
</TABLE>
*The merger of Tarragon and NIRT was accounted for as a reverse
acquisition of Tarragon by NIRT using the purchase method of
accounting. As a result, Tarragon's historical balances and operations
for dates prior to November 24, 1998, the effective date of the merger,
are those of NIRT. Information set forth above for dates prior to
November 24, 1998 reflect the performance of NIRT and its shares of
beneficial interest, as adjusted to give effect to the 1.97 to 1
exchange ratio established in the merger.
FINANCIAL STATEMENTS
The audited financial statements of Tarragon (and its predecessors) in
comparative form as of December 31, 1998 and 1997, are contained in the 1998
Annual Report to Stockholders, which is being delivered with this Proxy
Statement. Such report and the financial statements therein are not to be
considered a part of this solicitation.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If, however, any other matters should properly come
before the Annual Meeting, the persons named in the accompanying proxy will vote
the Shares represented by duly executed proxies in accordance with their best
judgment.
FUTURE PROPOSALS OF STOCKHOLDERS
If you want to present a stockholder proposal at Tarragon's Annual
Meeting of Stockholders in 2000, you must send the proposal to Kathryn
Mansfield, Corporate Secretary, 3100 Monticello, Suite 200, Dallas, TX 75205, by
registered or certified mail, not later than February 1, 2000, in order for it
to be considered for inclusion in Tarragon's proxy statement and form of proxy
for that meeting.
17
<PAGE> 20
SOLICITATION OF PROXIES
This Proxy Statement is furnished to Stockholders to solicit proxies on
behalf of the Board of Directors of Tarragon. The cost of soliciting proxies
will be borne by Tarragon. Directors and officers of Tarragon may, without any
additional compensation, solicit proxies by mail, in person or by
telecommunication.
COPIES OF TARRAGON'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 1998 ON FORM 10-K ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO TARRAGON REALTY INVESTORS, INC., 280 PARK AVENUE, EAST BUILDING, 2OTH
FLOOR, NEW YORK, NEW YORK, 10017, ATTN: INVESTOR RELATIONS.
Dated: July 15, 1999 BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHRYN MANSFIELD
Kathryn Mansfield, Executive Vice President
and Secretary
18
<PAGE> 21
- --------------------------------------------------------------------------------
PROXY
TARRAGON REALTY INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 18, 1999.
The undersigned stockholder of TARRAGON REALTY INVESTORS, INC. hereby
appoints WILLIAM S. FRIEDMAN and CARL B. WEISBROD, each with full power of
substitution, as attorneys and proxies to vote all Shares of Common Stock, par
value $0.01 per share, of TARRAGON REALTY INVESTORS, INC. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of Tarragon to be held
on August 18, 1999 at 10:00 a.m., local New York City time, at 280 Park Avenue,
East Building, 20th Floor, New York, New York 10017, or any adjournment(s)
thereof, with all powers the undersigned would possess if personally present, as
indicated below, for the transaction of such other business as may properly come
before said meeting or any adjournment(s) thereof, all as set forth in the July
15, 1999 Proxy Statement for said meeting:
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED
IT WILL BE VOTED FOR ALL NOMINEES AND FOR THE RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING, THIS
PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.
(continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
Please date, sign and mail your proxy
card back as soon as possible!
Annual Meeting of Stockholders
TARRAGON REALTY INVESTORS, INC.
August 18, 1999
Please Detach and Mail in the Envelope Provided
*
- --------------------------------------------------------------------------------
|X| PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C> <C>
1. ELECTION OF DIRECTORS
[] FOR All Nominees listed at right (except as marked
to the contrary) NOMINEES
[] WITHHOLD Authority For All Nominees listed at right Chester Beck
Willie K. Davis
INSTRUCTION: To withhold authority to vote William S. Friedman
for any individual nominee, strike a line Sally Hernandez-Pinero
through the nominee's name listed at right. Lance Liebman
Lawrence G. Schafran
Raymond V.J. Schrag
Michael E. Smith
Carl B. Weisbrod
2. RATIFICATION OF THE APPOINTMENT OF ARTHUR
ANDERSON LLP AS INDEPENDENT AUDITORS FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion on any other matters which may properly come before the meeting or any adjournment(s)
thereof.
Please complete, date, sign and return this proxy promptly in the accompanying envelope.
PLEASE SIGN HERE: Dated: , 1999
-------------------------------------------------------------------------- ---------------------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON. WHEN THERE IS MORE THAN ONE OWNER, EACH MUST SIGN. WHEN SIGNING
AS AN AGENT, ATTORNEY, ADMINISTRATOR, EXECUTOR, GUARDIAN, OR TRUSTEE, PLEASE INDICATE YOUR TITLE AS SUCH. IF EXECUTED BY A
CORPORATION, THE PROXY SHOULD BE SIGNED BY A DULY AUTHORIZED OFFICER WHO SHOULD INDICATE HIS TITLE. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME BY AN AUTHORIZED PERSON. PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
