SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ( )
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
WASHINGTON REAL ESTATE INVESTMENT TRUST
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
( ) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
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):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) 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:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
May 5, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of the Washington Real Estate Investment Trust to be held on Wednesday, June 24,
1998. The formal Notice of the meeting and a Proxy Statement describing the
proposals to be voted upon are enclosed.
From time-to-time over the last 38 years your Trustees have recommended
and you have approved amendments to our Declaration of Trust. These were
necessary to remain both competitive and prepared for the future. A recent
review of our Declaration of Trust leads us to recommend additional
modifications.
THE AMENDMENTS ARE INTENDED TO BRING THE DECLARATION OF TRUST UP TO
DATE IN TERMS OF AUTHORITY AND FLEXIBILITY TO ALLOW THE TRUST TO MORE
EFFECTIVELY COMPETE WITH OTHER REITS AND INVESTORS IN TODAY'S MARKETPLACE. THE
BOARD OF TRUSTEES BELIEVES THAT THESE AMENDMENTS WILL BE OF SUBSTANTIAL BENEFIT
TO THE TRUST AND RECOMMENDS YOUR APPROVAL OF THE SAME.
Please read the Proxy Statement, then complete, sign and return your
proxy card in the enclosed envelope. REGARDLESS OF THE NUMBER OF SHARES YOU OWN,
YOUR VOTE IS IMPORTANT. THIS IS PARTICULARLY IMPORTANT THIS YEAR AS SOME OF THE
MATTERS TO BE VOTED UPON REQUIRE THE APPROVAL OF 70% OF THE SHAREHOLDERS. Should
you have any questions, please contact Mr. Larry E. Finger at 1-800-565-WRIT
(9748).
Sincerely,
Arthur A. Birney
Chairman of the Board
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of the
Washington Real Estate Investment Trust (the "Trust") will be held at the Hyatt
Regency Hotel, One Bethesda Metro Center, Bethesda, Maryland on Wednesday, June
24, 1998 at 11:00 a.m., for the following purposes:
1. To elect three Trustees;
2. To approve amendments to the Declaration of Trust to authorize
the issuance of Preferred Shares;
3. To approve an amendment to the Declaration of Trust to
authorize the Trustees to adopt future changes to the
Declaration of Trust to preserve REIT status;
4. To approve amendments to the Declaration of Trust to modify
certain investment policies;
5. To approve an amendment to the Declaration of Trust to revise
the super-majority voting provision; and
6. To transact such other business as may properly come before
the meeting.
The Trustees have fixed the close of business on April 16, 1998 as
the record date for shares entitled to vote at the Annual Meeting.
The Annual Report of the Trust, Proxy Statement and a Proxy Card are
enclosed with this Notice.
You are requested, if you cannot be present at the meeting, to sign and
return the Proxy Card in the enclosed business reply envelope promptly.
BENJAMIN H. DORSEY
Secretary
May 5, 1998
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
10400 Connecticut Avenue
Kensington, Maryland 20895
PROXY STATEMENT
This Proxy Statement is furnished by the Trust's Board of Trustees (the
"Board") in connection with its solicitation of proxies for use at the Annual
Meeting of Shareholders on June 24, 1998 and at any and all adjournments
thereof. Mailing of this Proxy Statement will commence on or about May 5, 1998.
All proxies will be voted in accordance with the instructions contained therein,
and if no choice is specified, the proxies will be voted in favor of the
proposals set forth in the Notice of Annual Meeting. Abstentions are voted
neither "for" nor "against", but are counted in the determination of a quorum. A
Proxy on the enclosed form may be revoked by the shareholder at any time prior
to its exercise at the Annual Meeting by submitting, to the Secretary of the
Trust, a duly executed Proxy bearing a later date or by attending the Annual
Meeting and orally withdrawing the Proxy.
The voting securities of the Trust consist of shares of beneficial
interest, $0.01 par value ("Shares"), of which 35,683,987 Shares were issued and
outstanding at the close of business on March 31, 1998. So far as is known to
the Trust, no person holds of record or beneficially as much as 5% of the
outstanding Shares. The Trust has no other class of voting security. Each Share
outstanding on April 16, 1998, will be entitled to one vote. Shareholders do not
have cumulative voting rights.
I.
THE BOARD OF TRUSTEES AND MANAGEMENT
THE BOARD OF TRUSTEES
The Board consists of seven Trustees divided into two classes of two
Trustees each and one class of three Trustees. The terms of the Trustees
continue until the Annual Meetings to be held in 1998, 1999 and 2000,
respectively, and until their respective successors are elected and qualified.
At each Annual Meeting, two or three Trustees are elected, subject to the
limitations described below, for a term of three years to succeed those Trustees
whose terms expire at such Annual Meeting. The Trust's By-Laws provide that no
Trustee shall be nominated or elected as a Trustee after such person's 72nd
birthday. The By-Laws further provide that any Trustee who is first elected a
Trustee after December 19, 1995 shall tender his resignation as a Trustee on his
72nd birthday.
The Board held 16 meetings in 1997. The Nominating Committee,
consisting of Messrs. Birney, Cronin, Derrick and Osnos, makes recommendations
to the Board for nomination of Trustees. The Nominating Committee met once in
1997 for the purpose of nominating a successor Trustee to Mr. Dorsey. Mr.
Dorsey, in accordance with the Trust's By-Laws, retires this year. The Trustees
will consider recommendations for nominations for Trustee received from
shareholders provided that the shareholder submits such recommendation in
writing before December 24, 1998 accompanied by a written statement setting
forth the reasons the Trust would benefit from the election of such
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<PAGE>
nominee. The Audit Committee, consisting of Messrs. Cafritz, Derrick and Osnos,
meets at least quarterly with the President and Chief Executive Officer, Chief
Financial Officer and Chief Accounting Officer, together and/or individually, to
review operating results and other matters. The Audit Committee reviews
management's independent public accountant selection and makes recommendations
to the Board based on that review. The Committee also questions management and
the Trust's independent public accountants on the application of accounting and
reporting standards to the Trust and makes recommendations to the Board
regarding dividend declarations. The Audit Committee met four times in 1997. A
Compensation Committee, composed of Messrs. Cronin, Snyder and Cafritz, is
responsible for making recommendations to the Board with respect to compensation
decisions. The Compensation Committee met twice during 1997. See "Report on
Executive Compensation" below. All members of the Board attended more than 75%
of the total number of meetings held during 1997.
The six non-officer Trustees of the Trust, Messrs. Birney, Cafritz,
Derrick, Dorsey, Osnos and Snyder, were compensated in the form of fees. During
1997, each such Trustee received fees of $33,000 for 1997. Mr. Birney, who
served as Chairman of the Board, and Mr. Dorsey who served as Secretary of the
Trust, received additional remuneration for such services of $9,500 and $24,000,
respectively. During 1997, the Trust utilized the legal services of the law firm
of Arent Fox Kintner Plotkin & Kahn, of which Trustee David M. Osnos is a senior
partner. The amount of fees paid to Arent Fox did not exceed 5% of that firm's
1997 gross revenues or 5% of the Trust's 1997 gross revenues.
Effective January 1, 1998, the Trustee compensation structure was
revised in accordance with the recommendations contained in the 1997 Board of
Trustees and Executive Compensation Review prepared by an independent
consultant. The revised structure is intended to promote strong links between
Trustee contributions and overall corporate performance, reward performance that
directly supports the achievement of the Trust's business objectives and attract
and retain the critical Trustee technical and management talent necessary for
the Trust's success. Effective January 1, 1998, the six non-officer Trustees of
the Trust receive an annual retainer of $15,000 plus a $1,000 per meeting fee
for attending Board and committee meetings. In addition, each non-officer
Trustee will receive an annual grant of 2,000 Share options and 400 unrestricted
Shares. The Chairman of the Board will receive additional remuneration for such
services of $9,500.
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<PAGE>
The following table sets forth the names and certain biographical
information concerning each of the current Trustees.
<TABLE>
<CAPTION>
Served as Term
Name Principal Occupation(*) Trustee Since Age Expires
- ---- ----------------------- ------------- --- -------
<S><C>
Edmund B. Cronin, Jr. President and Chief Executive 1994 61 1998
Officer
Benjamin H. Dorsey Secretary of the Trust 1960 74 1998
Retired General Counsel
David M. Osnos Senior partner, Arent, Fox, Kintner, 1987 66 1998
Plotkin & Kahn, PLLC (legal counsel
to the Trust);Director, VSE
Corporation (engineering);
Director, EastGroup Properties
(real estate investment trust)
William N. Cafritz President, William Cafritz 1984 72 1999
Development Corp. (real
estate development)
Stanley P. Snyder Chairman, Snyder-Cohn-Collyer- 1968 63 1999
Hamilton & Associates, P.C.,
formerly Snyder, Kamerow &
Associates, P.C. (Certified
Public Accountants)
Arthur A. Birney Chairman of the Trustees 1961 70 2000
Managing Partner and Chief Executive
Officer, Washington Brick & Terra
Cotta Co. (Real Estate Holding and
Development Company); Managing
Partner, Queenstown Harbor Golf
Links LP
John M. Derrick, Jr. Chairman/CEO - Potomac Electric Power 1997 59 2000
Company
</TABLE>
(*) Each person has held the indicated position for more than the past
five years except Messrs. Birney, Cronin, Derrick and Dorsey.
Mr. Arthur A. Birney, a founding Trustee, has been a Managing Partner
and Chief Executive Officer of Washington Brick & Terra Cotta Co., a real estate
investment and holding company founded in 1892, since 1965; President of Port
Annapolis Marina, Inc. and Managing Partner of Queenstown Harbor Golf Links L.P.
Mr. Edmund B. Cronin, Jr. has 37 years of real estate investment,
development, operations and finance experience in the Mid-Atlantic region. From
1977 to 1993, he served as Chairman and Chief Executive Officer of Smithy
Braedon, a full service commercial real estate firm providing leasing, sales,
asset management, finance, consulting, advisory and development services. From
1976 until joining the Trust in June 1994, Mr. Cronin was Chief Executive
Officer of H.G. Smithy Company, a real estate management and advisory service
holding company.
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<PAGE>
Mr. John M. Derrick is Chairman/CEO of the Potomac Electric Power
Company (PEPCO). He joined PEPCO in 1961. Mr. Derrick belongs to the
Institute of Electrical and Electronic Engineers, the National Society of
Professional Engineers, the Washington Society of Engineers, the Edison
Electric Institute, and the Greater Washington Board of Trade.
Mr. Benjamin H. Dorsey was the Trust's General Counsel from 1960
until his retirement on December 31, 1995. Mr. Dorsey serves as a Trustee
until the expiration of his term on June 24, 1998.
OTHER EXECUTIVE OFFICERS
The following table contains information regarding other executive
officers of the Trust. Such officers are elected annually by the Board and serve
at the Board's discretion.
<TABLE>
<CAPTION>
Name Age Position
- ------------------ --- -----------------------------------
<S><C>
Larry E. Finger 45 Senior Vice President--Chief Financial Officer
George F. McKenzie 42 Senior Vice President--Real Estate
Mary Beth Avedesian 38 Vice President--Real Estate
Brian J. Fitzgerald 36 Vice President--Leasing
Laura M. Franklin 37 Vice President--Chief Accounting Officer, Asst. Secy.
Kenneth C. Reed 45 Vice President--Property Management
Thomas L. Regnell 41 Vice President--Acquisitions
</TABLE>
Mr. Larry E. Finger, an attorney and CPA, joined the Trust in December
1993 and was elected Senior Vice President, Chief Financial Officer in June
1995. From 1978 to 1991, Mr. Finger served with Savage/Fogarty Companies, Inc.,
a real estate investment, management and development company based in
Alexandria, Virginia, most recently as Chief Operating Officer. During 1992 and
1993, Mr. Finger created and operated a multi-restaurant delivery business.
Mr. George F. McKenzie joined the Trust in September of 1996 and was
elected Senior Vice President--Real Estate in December 1997. From 1985 to 1996,
Mr. McKenzie served with the Prudential Realty Group, a subsidiary of Prudential
Insurance Company of America, most recently as Vice President, Investment &
Sales. Prior assignments included real estate finance originations and asset
management in the Mid-Atlantic region.
Ms. Mary Beth Avedesian joined the Trust as Vice President--Real Estate
in March 1995. From 1993-1995, Ms. Avedesian was an Assistant Vice President
for Towle Financial Services, responsible for acquisition due diligence
and asset management.
Mr. Brian J. Fitzgerald joined the Trust in January of 1996 as
Vice President--Leasing. From 1984 to 1993, Mr. Fitzgerald served as a
commercial leasing broker with Smithy Braedon Company, in Northern Virginia.
In 1993, he became a Vice President of H. G. Smithy Company, with
responsibilities for managing all agency leasing activities. From the date of
the merger of H.
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G. Smithy Commercial Management Group with Cushman & Wakefield of Washington,
D.C., Inc. in June of 1994 until joining the Trust, Mr. Fitzgerald managed
institutional agency leasing activities at Cushman & Wakefield, Inc. of
Washington, D.C.
Ms. Laura M. Franklin, a CPA, joined the Trust in 1993 as Assistant
Vice President--Finance, and is currently Vice President and Chief Accounting
Officer as well as Assistant Secretary to the Trust. From 1984 to 1993, Ms.
Franklin served with the public accounting firm of Reznick, Fedder and
Silverman, P.C. specializing in audit and tax services for real estate clients.
Mr. Kenneth C. Reed joined the Trust as Vice President--Property
Management in June of 1995. Mr. Reed has served as President of CSN Management
Corp. since 1988 and continues to serve as CSN President. CSN manages only
WRIT properties.
Mr. Thomas L. Regnell joined the Trust as Vice
President--Acquisitions in January of 1995. From 1992 through 1994, Mr.
Regnell served as an Investment (Acquisitions) Officer with Federal Realty
Investment Trust in Bethesda, Maryland. Previously, Mr. Regnell was a Vice
President with Spaulding & Slye Company, a real estate development, brokerage
and management company.
There are no family relationships between any Trustee or executive
officer.
OWNERSHIP OF SHARES BY TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning all
Shares beneficially owned as of April 16, 1998, by each Trustee, by the nominee
for Trustee, by each of the "Named Officers" (as defined in "Executive
Compensation" below) and by all Trustees and Executive Officers as a group.
Unless otherwise indicated, the voting and investment powers for the Shares
listed are held solely by the named holder.
<TABLE>
<CAPTION>
Percentage
Name Shares Owned of Total
- ---- ------------- ----------
<S><C>
Arthur A. Birney 76,889 (1) 0.22%
William N. Cafritz 19,349 0.05%
Edmund B. Cronin, Jr. 92,367 (2) 0.26%
John M. Derrick, Jr. 800 0.00%
Benjamin H. Dorsey 78,522 (1)(2) 0.22%
Larry E. Finger 24,017 (2) 0.07%
Brian J. Fitzgerald 4,029 (2) 0.01%
George F. McKenzie 763 0.00%
John P. McDaniel - 0.00%
David M. Osnos 900 0.00%
Thomas L. Regnell 12,040 (2) 0.03%
Stanley P. Snyder 5,062 0.01%
All Trustees and Executive Officers as a group
(14 persons) 358,527 1.00%
</TABLE>
- --------------
(1) Includes shares held in a trust.
(2) Includes shares subject to options exercisable within 60 days, as
follows: Mr. Cronin, 49,171; Mr. Dorsey, 23,376; Mr. Finger,
20,825;Mr. Fitzgerald, 8,329; Mr. Regnell, 11,465; and all Trustees
and Executive Officers as a group, 147,156.
5
<PAGE>
II.
ELECTION OF TRUSTEES
Messrs. Cronin, McDaniel and Osnos stand for election as Trustees at
the Annual Meeting, to serve for three years. It is intended that the
proxies given to the persons named in the accompanying Proxy (unless
otherwise indicated on such Proxy) will be voted for the election of Messrs.
Cronin, McDaniel and Osnos. Mr. Cronin currently serves as President and
Chief Executive Officer and Trustee. Mr. Osnos currently serves as a
Trustee.
Mr. John P. McDaniel is Chief Executive Officer of the Medlantic
Healthcare Group, a multi-institutional, not-for-profit health care organization
serving Washington, D.C., Maryland, Virginia and the mid-Atlantic region. Mr.
McDaniel's tenure began at Medlantic's inception in 1982 when he became CEO of
the Washington Hospital Center. From that base, he formed the Medlantic
Healthcare Group which has become, in cooperation with other institutions, one
of the region's most comprehensive health care delivery systems. During his
career in the industry, Mr. McDaniel has held a number of executive positions
including serving as President and Chief Executive Officer of Washington
Hospital Center Corporation, President of Maryland Health Care System, Inc., and
President of Lutheran Hospital of Maryland, Inc. Mr. McDaniel is a past chairman
and currently a member of the Executive Committee of the Greater Washington
Board of Trade, is also a Trustee and member of the Executive Committee of the
Federal City Council, and a member of the Board of the Directors of Lutheran
Brotherhood, a financial services company. He is a member of the Maryland State
Racing Commission, is a Fellow of the American College of Healthcare Executives
and chairs the Washington-area Business Coalition.
If a nominee becomes unable or unwilling to stand for election for any
reason not presently known or contemplated, the persons named in the enclosed
Proxy will have discretionary authority to vote pursuant to the Proxy for a
substitute nominee nominated by the Board. The election of Trustees requires the
affirmative vote of the holders of a majority of the shares voting at the Annual
Meeting either in person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
ELECTION OF EDMUND B. CRONIN, JR., JOHN P. MCDANIEL AND
DAVID M. OSNOS.
III.
AMENDMENTS TO THE DECLARATION OF TRUST TO AUTHORIZE
PREFERRED SHARES
The Board has declared advisable and recommends to the shareholders
amendments (the "Preferred Shares Amendment") to the Trust's Declaration of
Trust (i) to make available for issuance, Preferred Shares with such
designations, preferences, rights and limitations as are approved, from time to
time, by the Board and (ii) to make certain conforming amendments to the
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<PAGE>
terms of the Shares (the "Preferred Shares Amendment"). The full text of
Sections 4.1, 5.8, 5.10, 7.3, 7.5, 9.1, 10.1 and 10.2 of the Declaration of
Trust as they will be amended if the Preferred Shares Amendment is approved by
shareholders is set forth as Exhibit A to this Proxy Statement.
PURPOSE AND EFFECT
The Declaration of Trust currently authorizes only the Shares which are
Common Shares. The principal purpose and effect of the Preferred Shares
Amendment would be to provide the Board with additional flexibility in the
management of the Trust's capitalization. Preferred Shares could be used by the
Trust, instead of Common Shares, in connection with (i) raising of capital, (ii)
future acquisitions and (iii) other business purposes. The ability to issue
shares with preferential distribution, liquidation or other rights could be
particularly important in connection with efforts to raise additional capital. A
substantial number of real estate investment trusts have the authority to issue
preferred shares, and a significant number of these real estate investment
trusts have issued preferred shares. The Trustees and management of the Trust
believe that the Preferred Shares Amendment would provide the Trust with an
authority now common among real estate investment trusts and is important for
the Trust to be competitive with other real estate investment trusts in
financing its operations.
TERMS
The Preferred Shares Amendment would grant the Board broad discretion
with respect to designating the terms of each series of Preferred Shares prior
to its issuance. The following is a brief description of the terms, rights and
preferences which the Board will be entitled to designate with respect to the
Preferred Shares.
Number. The Trust initially would be authorized to issue up to 500,000
Preferred Shares, par value $.01 per share. As authorized by Maryland law and
currently provided in the Declaration of Trust, the Board has the authority to
increase the number of Common Shares authorized for issuance without further
shareholder approval. The Preferred Shares amendment would authorize the Board
to increase the number of Preferred Shares authorized for issuance without
further shareholder approval. The Preferred Shares Amendment also would
authorize the Board to decrease the number of authorized shares without further
shareholder approval.
Issuable in Series. The Preferred Shares may be issued in series
established from time to time by the Board. The Board may fix for each series
(i) the number of shares included in the series, (ii) the rate and other terms
of the dividend, (iii) the amount payable in the event of liquidation, (iv) the
voting powers, if any, (v) the terms, if any, on which the shares may be
converted, (vi) the redemption price, if any, and other redemption terms, (vii)
sinking fund provisions, if any, for the redemption of the shares and (viii)
other rights and restrictions.
Dividends. The holders of each series of Preferred Shares will be
entitled to receive, when and as declared by the Board, out of funds legally
available therefor, dividends at the time and at the
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<PAGE>
rates fixed by the Board. A series may be entitled to cumulative dividends
and/or to participate in dividends paid on the Common Shares. All accrued and
unpaid dividends on Preferred Shares must be paid in full or a sum sufficient
for such payment must be set aside for such payment before dividends are
declared or paid on Common Shares.
Redemption. Subject to the terms of the Trust's outstanding debt, any
series of Preferred Shares may be redeemable by the Trust, at the option of the
Trust or at the option of the holder, upon such terms as may be designated by
the Board. The amount payable upon redemption will be fixed by the Board. The
Board may designate that a series may be redeemed, in whole or in part, or that
one series may be redeemed, in whole or in part, without redeeming another
series.
Liquidation. In the unlikely event of the liquidation of the Trust, the
holders of each series of then outstanding Preferred Shares will be entitled to
receive, prior to any distribution to holders of Common Shares, an amount fixed
by the Board, which may include accrued but unpaid dividends.
Sinking Fund. Subject to the terms of the Trust's outstanding debt,
the Board may establish a sinking or other fund for the redemption or purchase
of Preferred Shares.
Conversion. The Board may establish terms and conditions upon which any
Preferred Shares may be converted into Common Shares or any other security
issuable by the Trust.
Voting Powers. The Board may establish the voting powers for each
series of Preferred Shares, including the number of votes to which each share is
entitled and whether the series shall vote together with the Common Shares or as
part of a separate class of Preferred Shares. Depending upon the voting powers
granted, issuance of Preferred Shares could result in a disproportionate
decrease in the voting powers of the Common Shares.
AMENDMENTS TO COMMON SHARES
Because the Declaration of Trust currently authorizes only Common
Shares, certain modifications must be made to the Declaration of Trust, in
addition to those described above, to distinguish the rights of the holders of
Common Shares and the holders of Preferred Shares.
As stated above, the Board currently is authorized to increase the
number of Common Shares authorized for issuance without further shareholder
approval. In order to conform the terms of the Preferred Shares and the Common
Shares, the Preferred Shares Amendment also would authorize the Board (i) to
decrease the number of authorized Common Shares and (ii) to classify unissued
Common Shares into one or more classes or series of shares without further
shareholder approval.
Section 5.8 of the Declaration of Trust currently imposes limitations
on the ownership of more than 10 percent of the Trust's outstanding shares. The
Preferred Shares Amendment would amend this Section to make clear that this
limitation applies to all shares in the aggregate, computed on the basis of the
value of such shares. The Section also provides for the repurchase of shares in
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<PAGE>
order to enforce such limitations. The Preferred Shares Amendment would further
amend this Section to make clear that any Preferred Shares subject to repurchase
pursuant to this limitation would be redeemed (i) at cost or at the last sale
price of a share as of the date immediately preceding the day on which the
demand for repurchase is mailed, whichever price is higher or (ii) at such other
amount as is set forth in the terms of such class or series of shares so called
for repurchase.
Currently, the Declaration of Trust grants certain voting powers to the
holders of the Trust's "shares." As stated above, Preferred Shares may be issued
with varying voting rights and may have no voting rights except as may be
required by law. In order to distinguish the voting rights of the Common Shares
and the Preferred Shares, it is proposed as part of the Preferred Shares
Amendment that Section 7.3 of the Declaration of Trust be amended and restated
to specify that the holders of the Common Shares shall be entitled to vote on
(i) the election or removal of Trustees, (ii) the amendment of the Declaration
of Trust, (iii) the termination of the Trust, (iv) any merger of the Trust and
(v) any other matter on which, by law, the holders of the Common Shares are
required to vote.
Section 10.1 of the Declaration of Trust specifies the vote required to
amend the Declaration of Trust. The Preferred Shares Amendment would amend this
Section to provide that any amendment of the Declaration of Trust would require
the vote of the Common Shares and any class of Preferred Shares entitled to vote
thereon, voting as separate classes.
Section 10.2 of the Declaration of Trust provides for the removal of
Trustees. The Preferred Shares Amendment would amend this Section to provide
that only shares entitled to vote generally on the election of Trustees would be
entitled to vote on the removal of Trustees.
Several other Sections of the Declaration of Trust would be amended by
the Preferred Shares Amendment to acknowledge that the Trust may have multiple
classes or series of shares outstanding, including classes or series of
Preferred Shares and to refer to particular classes or series of Preferred
Shares for their terms.
The Declaration of Trust currently includes numerous references to
"shares." The Preferred Shares Amendment would make clear that all references in
the Declaration of Trust to "shares" include both Common Shares and Preferred
Shares.
POSSIBLE ANTI-TAKEOVER EFFECT
The Preferred Shares Amendment is not designed to impede the
acquisition of the Trust. The Board is not aware of any current effort by any
person to accumulate Common Shares or obtain control of the Trust. However,
voting or convertible Preferred Shares could be issued by the Trust in a private
placement or public offering, or rights to purchase such shares could be issued,
to create impediments to an effort to acquire the Trust without the Board's
approval.
Preferred Shares could be issued with voting powers which make approval
of a merger or another transaction requiring the vote of shareholders more
difficult to obtain. The Board, if unable
9
<PAGE>
to recommend a proposed acquisition, could authorize the issuance of Preferred
Shares to a person or persons opposed to the transaction, and the shares could
possess voting powers (either voting with the holders of the Common Shares or
voting as a separate class) which could impede obtaining the vote necessary for,
or provide a veto power over, a proposed acquisition of the Trust.
The issuance of Preferred Shares, or rights to purchase Preferred
Shares, could also increase the absolute cost of a merger or other transaction
if the price to be paid in such transaction for such additional shares or
rights, pursuant to their terms or otherwise, exceeds the consideration received
by the Trust upon the issuance of such shares or rights. Such a result, however,
might also be achieved without the Preferred Shares Amendment by the issuance of
rights to purchase Common Shares.
Any of the foregoing actions could discourage an attempt to acquire the
Trust, thus depriving shareholders of the benefits that could result from such
an attempt, such as the realization of a premium over the market price of their
shares in a tender offer or merger, or the temporary increase in market price
that such an attempt might cause.
The Trust has no specific plans to issue Preferred Shares, and there
are no other agreements, understandings or arrangements for the issuance of the
Preferred Shares which would be authorized by the Preferred Shares Amendment.
The Preferred Shares may be issued upon the Board's approval, without any
further vote of the shareholders. The Declaration of Trust does not provide for
any preemptive rights upon the issuance of Preferred Shares.
APPROVAL
Approval of the Preferred Shares Amendment requires the vote of holders
of 70 percent of the outstanding Common Shares entitled to vote at the Annual
Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE PREFERRED SHARES AMENDMENT.
IV.
AMENDMENT TO THE DECLARATION OF TRUST TO
AUTHORIZE AMENDMENTS TO PRESERVE REIT STATUS
The Board has declared advisable and recommends to the shareholders an
amendment to the Trust's Declaration of Trust (the "REIT Amendment") to
authorize the Board to amend the Declaration of Trust from time to time, by a
vote of two-thirds of the Trustees, in any manner necessary to enable the Trust
to continue to qualify as a real estate investment trust ("REIT") under the
Internal Revenue Code (the "Code") or under Title 8 of the Maryland Business
Corporation Law, which governs the organization of a REIT under Maryland law
(the "Maryland Law").
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<PAGE>
PURPOSE AND EFFECT
The Trust has elected to be taxed as a REIT under the Code. A REIT
which meets certain qualifications is relieved of federal income taxes on
ordinary income and capital gains distributed to shareholders. The Trustees
believe that it is in the best interest of the shareholders for the Trust to
preserve its status as a REIT. The REIT Amendment is intended to permit the
Board to respond rapidly in the future to any changes in the Code or the
Maryland Law which would require an amendment to the Declaration of Trust in
order to preserve the Trust's status as a REIT. The REIT Amendment would enable
the Trustees to adopt any amendment to the Declaration of Trust necessary under
the Code or the Maryland Law to preserve the Trust's status as a REIT without
the necessity of calling a meeting of the shareholders or obtaining a vote of
the shareholders. The Trust is not currently aware of any amendment required to
be made to the Declaration of Trust in order to preserve the status of the Trust
as a REIT.
APPROVAL
Approval of the REIT Amendment requires the vote of holders of 70
percent of the outstanding Common Shares entitled to vote at the Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE REIT AMENDMENT.
V.
AMENDMENTS TO DECLARATION OF TRUST
TO MODIFY CERTAIN INVESTMENT POLICIES
The Board has declared advisable and recommends to the shareholders
amendments to the Trust's Declaration of Trust to modify certain investment
policies set forth in Article 14 of the Declaration of Trust (the "Investment
Policy Amendments").
PURPOSE AND EFFECT
Article 14 of the Declaration of Trust sets forth certain investment
policies of the Trust. The Trustees believe that certain of these policies have
become out of date and otherwise impose unnecessary limitations on the operation
of the Trust. The investment policies are proposed to be modified as set forth
in this section.
Section 14.3 of the Declaration of Trust provides that
The Trust may, on a temporary basis, invest in United States
government obligations, state or municipal obligations,
commercial paper, or similar investments, as a means of
providing for contingencies and future purchases. Such
investments will not be
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in amounts that would, in the opinion of counsel for the
Trust, disqualify the Trust for treatment as a "real estate
investment trust" under the Internal Revenue Code and
Regulations thereunder.
The Trustees believe that the specification that such investments be
"on a temporary basis" is ambiguous and unnecessary. The Trust may from time to
time hold funds in investments of the sort described in Section 14.3, such as
pending the application of proceeds from an offering of securities or pending
the reinvestment of the proceeds from the sale of a property. Depending upon
real estate market conditions, money market conditions, the terms of the Trust's
borrowings and other money management issues, the Trust may choose to retain
funds in such investments for an extended period. The Trustees believe that the
Trust should be permitted to hold such investments for such period as is in the
best interest of the Trust without particular requirements as to the Trust's
intention with respect to the time that such investments would be held. Further,
the Trust may choose, from time to time, to invest a modest portion of the
Trust's funds in notes secured by mortgages on real property. The Trustees
believe that the Trust also should be permitted to hold such an investment for
such period as they believe will provide the greatest benefit to the Trust and
without artificial time limitations. Further, the Trustees understand that the
current provision of the Declaration of Trust that such investments be held on a
"temporary basis" is not required by the Code or by the Maryland Law.
Accordingly, the Trustees have approved an amendment to Section 14.3 to delete
the phrase "on a temporary basis."
Section 14.6 of the Declaration of Trust provides, among other things,
that the Trust may not (i) "invest in securities of other issuers for the
purpose of exercising control or in securities of or interests in any person
primarily engaged in real estate activities, except where the purpose is to
acquire the underlying properties of said issuer or persons," (ii) "make
unsecured loans to other persons," or (iii) "enter into any advisory contract
for a period of more than one year."
The Trustees understand that these limitations also are not required by
the Code or by the Maryland Law and believe that they impose unnecessary
limitations on the operation of the Trust. Although the Trustees are not
currently contemplating entering into any transaction prohibited by the existing
terms of Section 14.6 and anticipate that the ability to enter into any such
transactions would be used sparingly, they believe that it could be desirable
for the Trust in certain circumstances to enter into any one of these currently
prohibited transactions. For example, it may be prudent for the Trust to make an
unsecured loan in connection with hiring a new officer and advancing moving or
relocation expenses. Also, although the Trustees have no plans whatsoever to
hire any third-party advisor with respect to the Trust's investments, it might
be in the Trust's interest to enter into long-term advisory arrangements with
respect to discrete matters such as environmental consulting. Finally, though
also an unlikely event, the prohibition on making investments for the purpose of
exercising control could interfere with the Trust's ability to make
acquisitions, including the acquisition of another real estate investment trust.
The Trustees are aware that certain investments could be inconsistent with the
Trust's status as a real estate investment trust under the Code, and the
Trustees will not knowingly make any investments which would disqualify the
Trust for treatment as a real estate investment trust under the Code.
Accordingly, the Trustees have approved
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amendments to Section 14.6 to delete (i) clause 6 (pertaining to making
investments for the purpose of exercising control), (ii) clause 7 (pertaining to
making unsecured loans) and (iii) clause 8 (pertaining to entering into advisory
contracts for a period of more than one year).
APPROVAL
Approval of the Investment Policy Amendments requires the vote of
holders of a majority of the outstanding Common Shares entitled to vote at the
Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE INVESTMENT POLICY AMENDMENTS
VI.
AMENDMENT TO DECLARATION OF TRUST
TO REVISE SUPER-MAJORITY VOTING PROVISION
The Board has declared advisable and recommends to the shareholders an
amendment to the Trust's Declaration of Trust to revise the super-majority
voting provision set forth in the last sentence of Section 10.1 of the
Declaration of Trust (the "Super-Majority Amendment").
PURPOSE AND EFFECT
The last sentence of Section 10.1 of the Declaration of Trust specifies
that the affirmative vote of the holders of 70 percent or more of the
outstanding shares of the Trust entitled to vote generally in the election of
Trustees shall be required to amend or repeal Section 5.8 (restricting the
ownership of more than ten percent of the Trust's shares), Section 5.10
(restricting the ownership of the shares of the Trust and of certain "sister
corporations"), Section 8.1 (establishing the size of the Board and providing
for the filling of vacancies on the Board), Section 8.2 (providing for the
staggered election of the Trustees), Section 10.1 (concerning the amendment of
the Declaration of Trust) or Article 15 of the Declaration of Trust (concerning
special voting requirements in connection with certain acquisition
transactions).
In proposing the Preferred Shares Amendment, the Trustees noted that
the 70 percent vote required by the last sentence of Section 10.1 currently
applies to any amendment of Section 10.1, rather than just an amendment to the
last sentence of Section 10.1. Accordingly, in order to adopt the amendments to
Section 10.1 necessary to specify the voting power of any Preferred Shares the
Trust may issue, a 70 percent vote is required. Because the first sentence of
Section 10.1 only requires a majority vote in order to amend most provisions of
the Declaration of Trust or to terminate the Trust, there is no purpose to be
served by requiring a 70 percent vote to amend these provisions.
The Trustees believe that the requirement to obtain the vote of the
holders of 70 percent or more of the shareholders is very burdensome, requiring
extraordinary efforts and imposing unusual expenses in order to obtain the
requisite vote. The Trustees believe that this requirement should be
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reserved only for provisions important to the protection of the Trust and should
not be utilized in connection with provisions which might require modification
from time to time. Because the Trust is already required to obtain a 70 percent
vote in connection with the Preferred Shares Amendment, the Trustees believes
that this is an opportune time to make this technical correction to the terms of
Section 10.1 of the Declaration of Trust.
Accordingly, the Trustees have approved an amendment to the last
sentence of Section 10.1 specifying that the 70 percent vote requirement only
applies to the amendment of the last sentence of Section 10.1 and not to the
rest of Section 10.1. The 70 percent vote required to amend Sections 5.8, 5.10,
8.1, 8.2 and Article 15 is retained and is not affected by the Super-Majority
Amendment.
APPROVAL
Approval of the Super-Majority Amendment requires the vote of holders
of seventy percent of the outstanding Common Shares entitled to vote at the
Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE SUPER-MAJORITY AMENDMENT
VII.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows the compensation awarded, earned
or paid during the past three years to the Trust's Chief Executive Officer and
each of the Trust's four other most highly compensated executive officers (the
"Named Officers") whose compensation exceeded $100,000 for the period(s)
indicated.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL CASH COMPENSATION SHARES OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) GRANTED (#)(1) GRANTED (#)(2)
- --------------------------- ---- ---------- --------- -------------- --------------
<S><C>
Edmund B. Cronin, Jr., Trustee, 1997 $395,000 $162,989 3,121 61,000
President and Chief Executive Officer 1996 $360,000 $ 84,933 26,650
1995 $295,000 20,171
Larry E. Finger, Senior Vice President 1997 $210,000 $ 86,652 1,291 25,224
and Chief Financial Officer 1996 $200,000 $ 47,185 14,806
1995 $150,000 6,838
George F. McKenzie, Senior Vice 1997 $120,000 $ 49,516 285 11,582
President - Real Estate 1996 $ 32,135
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL CASH COMPENSATION SHARES OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) GRANTED (#)(1) GRANTED (#)(2)
- --------------------------- ---- ---------- --------- -------------- --------------
<S><C>
Thomas L. Regnell, Vice President - 1997 $130,000 $ 53,642 285 12,547
Acquisitions 1996 $125,000 $ 29,491 9,254
1995 $107,914
Brian J. Fitzgerald, Vice President - 1997 $ 88,500 $ 66,689 237 10,406
Leasing 1996 $ 84,743 $ 11,352 5,776
</TABLE>
(1) Represents Share Grants awarded on December 16, 1997. Share
Grants vest 20% per year on the anniversary of the award date.
(2) All options reflected in the table were granted under the Washington
Real Estate Investment Trust 1991 Stock Option Plan, as amended (the
"Stock Option Plan"), 13,333 of Mr. Cronin's 1995 options, which were
granted as non-qualified options pursuant to his Employment Agreement.
OPTION GRANTS TABLE
The following table shows the specified information with respect to
options granted to the Named Officers in 1997.
1997 OPTION GRANTS TABLE
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Share
Number of Percentage Price Appreciation
Securities of Total Full 10-Year
Underlying Options Option Term
Options Granted to Exercise Expiration --------------------------------
Name Granted (1) Employees Price Date 5% 10%
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Edmund B. Cronin, Jr. 61,000 33.3% $16.125 12/16/2007 $1,602,221 $2,551,270
Larry E. Finger 25,224 13.8% $16.125 12/16/2007 $662,532 $1,054,971
George F. McKenzie 11,582 6.3% $16.125 12/16/2007 $304,212 $484,407
Thomas L. Regnell 12,547 6.8% $16.125 12/16/2007 $329,559 $524,767
Brian J. Fitzgerald 10,406 5.7% $16.125 12/16/2007 $273,323 $435,222
</TABLE>
(1) Options become exercisable 50% after one year and 100% after two years.
54,799 of Mr. Cronin's options, 19,023 of Mr. Finger's options, 5,381 of Mr.
McKenzie's options, 6,346 of Mr. Regnell's and 4,205 of Mr. Fitzgerald's options
were granted as non-qualified stock options. See "VIII. Report on Executive
Compensation Program."
The dollar amounts under the 5% and 10% columns in the table above are
the result of calculations required by the SEC's rules and therefore are not
intended to forecast possible future appreciation in the price of the Shares,
which would benefit all shareholders. For example, in order for the Named
Officers to realize the potential values set forth in the 5% and 10% columns in
the table above, the price per Share of the Shares would have to be
approximately $26-1/4 and $41-13/16, respectively, as of the expiration date of
the option. Actual gains, if any, on option exercises and Share holdings are
dependent on the future performance of the Shares and overall stock market
conditions.
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<PAGE>
AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
The following table shows information concerning the exercise of
options during 1997 by each of the Named Officers and the year-end value of
unexercised options.
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised in
Options at December 31, the Money Options at
Shares 1997 December 31, 1997
Acquired Value --------------------------------------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Edmund B. Cronin, Jr. - - 49,171 9,290 $53,151 $38,125
Larry E. Finger - - 20,825 32,627 $24,818 $15,765
Thomas L. Regnell - - 11,465 17,174 $24,818 $ 7,842
George F. McKenzie - - - 11,582 $ - $ 7,239
Brian J. Fitzgerald - - 8,329 13,495 $ - $ 6,504
</TABLE>
PENSION PLAN
The Trust has a non-contributory defined benefit pension plan (the
"Pension Plan") that covers all employees who meet certain requirements
regarding age and years of service before December 31, 1995. The Pension Plan
was amended on December 12, 1995 to fix benefits and years of service accruals
as of December 31, 1995.
The following table is illustrative of various annual payments that
would be made pursuant to the Pension Plan and the Supplemental Benefit Plan (as
defined below) upon retirement on an individual's 65th birthday, assuming the
indicated five-year average remuneration and years of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Years of Service
Remuneration 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
<S><C>
$125,000 $ 34,440 $ 45,920 $ 57,400 $ 68,880 $ 71,176
150,000 41,565 55,420 69,275 83,130 85,901
175,000 48,690 64,920 81,150 97,380 100,626
200,000 55,815 74,420 93,025 111,630 115,351
225,000 62,940 83,920 104,900 125,880 130,076
250,000 70,065 93,420 116,775 140,130 144,801
300,000 84,315 112,420 140,525 168,630 174,251
400,000 112,815 150,420 188,025 225,630 233,151
450,000 127,065 169,420 211,775 254,130 262,601
500,000 141,315 188,420 235,525 282,630 292,051
</TABLE>
The Pension Plan provides for retirement upon the participant's 65th
birthday, disability or attainment of age 50 with 10 or more years of service at
an actuarially reduced benefit. The Pension Plan provides both retirement
benefits and death benefits prior to retirement. Retirement benefits are based
on the participant's average salary during the five years of employment which
produces
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<PAGE>
the highest average. Accrued pension benefits are fully vested after six years
of employment. Death benefits are based on the projected monthly pension
benefit.
VIII.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
The Board determined executive compensation for 1997. A Compensation
Committee (the "Compensation Committee") composed of Messrs. Cronin, Cafritz and
Snyder was responsible for making recommendations to the Board with respect to
1997 compensation decisions. Mr. Cronin, the Trust's Chief Executive Officer,
was not involved in the consideration or vote concerning his own compensation.
EXECUTIVE COMPENSATION PRINCIPLES
The Trust's Executive Compensation Program is based on guiding
principles designed to align executive compensation with Trust values and
objectives, business strategy, management initiatives and business financial
performance. In applying these principles, the Compensation Committee, based
upon the recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant, has established a
program designed to:
o Attract and retain key executives critical to the long-term
success of the Trust.
o Reward executives for long-term strategic management and the
enhancement of shareholder value.
o Support a performance-oriented environment that rewards
performance based upon exceeding Trust operating performance
goals.
EXECUTIVE COMPENSATION PROGRAM
For 1997, the Board, upon recommendation of the Compensation Committee,
adopted an Incentive Compensation Plan (the "Plan") based upon the
recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant to align executive
compensation with Shareholder interests through salaries, cash bonuses, Share
grants and option grants tied to pre-set objective performance goals.
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Under the Plan, salaries for the Trust's executive officers were set
based upon (i) a review of the compensation paid to similarly situated executive
officers employed by companies comprising the EREIT Index; (ii) the independent
consultant report described above; and (iii) a subjective evaluation of
each executive officer's performance throughout the year. See "Executive
Compensation--Performance Graph" for additional discussion regarding the EREIT
Index.
Cash bonuses would be paid only if the Trust's Funds From Operations
("FFO") per share grew by at least 5%. If this minimum threshold was achieved, a
bonus pool would be created as follows: 10% of the first 7% of the growth in FFO
per Share, plus 20% of the growth in FFO per Share in excess of 7% would go into
the bonus pool. Executive officers of the Trust and selected senior and middle
management share the bonus pool pro-rata based on their salaries.
Long-term incentives are provided through the Stock Option and Share
Grant Plans. Vice Presidents receive option grants with a value equal to 22.5%
(36% for the Chief Executive Officer and 28% for the Senior Vice Presidents) of
their annual salary plus projected annual bonus ("Cash Compensation"). The
option value is based upon the Black Scholes model calculation. This value is
divided into 22.5% of the individual's Cash Compensation (36% for the Chief
Executive Officer and 28% for the Senior Vice Presidents), and the resulting
number is the number of Shares subject to the grant of an option for such year.
Notwithstanding the forgoing, the number of options which may be granted to any
individual is limited to 100,000 in any one year. Certain members of middle
management are also eligible to receive Share grants under the Share Option
Plan. Executive officers are also eligible to receive Share grants through the
Share Grant Plan. Under the Share Grant Plan, Vice Presidents receive an award
of Shares with a market value of 2.5% of the individual's Cash Compensation (9%
for the Chief Executive Officer and 7% for Senior Vice Presidents) at the date
of the award. Shares granted under the Share Grant Plan vest 20% per year over 5
years and are restricted from transfer for 5 years from the date of grant.
The Board believes that compensation paid to the Trust's executive
officers is comparable to that paid by the companies comprising the EREIT Index.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Cronin's 1997 compensation consisted of his salary, bonus, Share
grants and options based upon the Executive Compensation Program described
above. Mr. Cronin's salary was determined by the Board (excluding Mr. Cronin)
after a recommendation by the Compensation Committee (excluding Mr. Cronin) and
was based upon (i) a review of the compensation paid to chief executive officers
employed by companies comprising EREIT Index, (ii) the independent consultant
report described above; and (iii) a subjective evaluation of Mr. Cronin's
performance throughout the year. As described above under the Plan, specific
performance goals were not established for Mr. Cronin during 1997 as relates to
salary but, as described above, were established for bonus, Share grant and
option purposes. In general, the EREIT Index comparison and the subjective
evaluation were weighted equally by the Board when making the decision to set
Mr. Cronin's 1997 salary at
18
<PAGE>
$395,000. Compensation paid to Mr. Cronin is comparable to compensation paid
to the chief executive officers of the companies comprising the EREIT Index.
THE BOARD OF TRUSTEES
Arthur A. Birney
William N. Cafritz
Edmund B. Cronin, Jr.
John M. Derrick, Jr.
Benjamin H. Dorsey
David M. Osnos
Stanley P. Snyder
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<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total shareholder
return on the Shares with the cumulative total return of companies making up the
Standard & Poor's 500 Stock Index as provided by Standard & Poor's Corporation
and the Equity Real Estate Investment Trust Index (excluding Health Care REITs)
(the "EREIT Index") as provided by the National Association of Real Estate
Investment Trusts. The EREIT Index is a compilation of 176 companies as of
December 31, 1997 which qualify as real estate investment trusts and own real
property and/or equity interests in real property and has been weighted
according to each individual company's stock market capitalization. The EREIT
Index companies are traded on the New York and American Stock Exchanges and on
the Nasdaq National Market. The graph assumes an initial investment of $100 on
December 31, 1992 and the reinvestment of all dividends paid thereafter with
respect to such $100 investment.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[Graph Appears Here -- Plot Points Below]
1992 1993 1994 1995 1996 1997
------------------------------------------------------
WRIT $100 $106 $ 88 $ 91 $107 $109
EREIT 100 120 123 142 192 231
S&P 100 110 111 153 188 251
IX.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Trust's independent
public accountants for 1997. The Board has appointed Arthur Andersen LLP as the
Trust's independent public accountants
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<PAGE>
for 1998. Representatives of Arthur Andersen LLP are expected to attend the
Annual Meeting, will be provided with an opportunity to make a statement, should
they desire to do so, and will be available to respond to appropriate questions
from the shareholders.
SECURITIES REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Trustees and certain officers to file reports of changes in stock
ownership with the SEC and with the American Stock Exchange, with copies to the
Trust. Based solely on a review of such copies, the Trust believes that all such
filing requirements have been met for the year ended December 31, 1997.
EXPENSES AND ADMINISTRATION
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, some of the officers and regular employees of
the Trust may solicit proxies by telephone or telecopier, will request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
material to the beneficial owners of Shares held of record by such persons and
may also verify the accuracy of marked proxies by contacting record and
beneficial owners of Shares. The Trust will reimburse such persons for expenses
incurred in forwarding such soliciting material.
1999 ANNUAL MEETING
Shareholders may present proposals to be considered for inclusion in
the Proxy Statement relating to the 1999 Annual Meeting, provided they are
received by the Trust no later than December 24, 1998 and are in compliance with
applicable laws and SEC regulations.
Benjamin H. Dorsey
Secretary
May 5, 1998.
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<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO THE DECLARATION OF TRUST
WITH RESPECT TO PREFERRED SHARES
Section 4.1 is proposed to be entirely restated to read as follows:
Section 4.1 The beneficial interest of the Trust shall be divided into
shares of beneficial interest (the "shares"). The Trust has authority to issue
100,000,000 common shares of beneficial interest, par value $.01 per share
("Common Shares"), and 500,000 preferred shares of beneficial interest, par
value $.01 per share ("Preferred Shares").
(a) Common Shares. Subject to the provisions of Article 5,
each Common Share shall entitle the holder thereof to one vote on each
matter upon which holders of Common Shares are entitled to vote. The
Board of Trustees may reclassify any unissued Common Shares from time
to time in one or more classes or series of shares.
(b) Preferred Shares. The Board of Trustees may classify any
unissued Preferred Shares and reclassify any previously classified but
unissued Preferred Shares of any series from time to time, in one or
more series of shares.
(c) Classified or Reclassified Shares. Prior to issuance of
classified or reclassified shares of any class or series, the Board of
Trustees by resolution shall (i) designate that class or series to
distinguish it from all other classes and series of shares; (ii)
specify the number of shares to be included in the class or series;
(iii) set, subject to the provisions of Article 5 and subject to the
express terms of any class or series of shares outstanding at the time,
the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications and terms and conditions of redemption for each class or
series; and (iv) cause the Trust to file articles supplementary with
the State Department of Assessments and Taxation of Maryland (the
"SDAT"). Any of the terms of any class or series of shares set pursuant
to clause (iii) of this Section 4.1(c) may be made dependent upon facts
ascertainable outside the Declaration of Trust (including the
occurrence of any event, including a determination or action by the
Trust or any other person or body) and may vary among holders thereof,
provided that the manner in which such facts or variations shall
operate upon the terms of such class or series of shares is clearly and
expressly set forth in the articles supplementary filed with the SDAT.
(d) Authorization by Board of Share Issuance. The Board of
Trustees may authorize the issuance from time to time of shares of any
class or series, whether now or hereafter authorized, or securities or
rights convertible into shares of any class or series, whether now or
hereafter authorized, for such consideration (whether in cash,
property, past or future services, obligation for future payment or
otherwise) as the Board of Trustees may deem advisable (or without
consideration in the case of a share split or share dividend),
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<PAGE>
subject to such restrictions or limitations, if any, as may be set
forth in the Declaration of Trust or the Bylaws of the Trust.
(e) Dividends and Distributions. The Board of Trustees may
from time to time authorize and declare to shareholders such dividends
or distributions, in cash or other assets of the Trust or in securities
of the Trust or from any other source as the Board of Trustees in its
discretion shall determine. The Board of Trustees shall endeavor to
declare and pay such dividends and distributions as shall be necessary
for the Trust to qualify as a real estate investment trust under the
Internal Revenue Code of 1986, as amended (the "Code"); however,
shareholders shall have no right to any dividend or distribution unless
and until authorized and declared by the Board. The exercise of the
powers and rights of the Board of Trustees pursuant to this Section
4.1(e) shall be subject to the provisions of any class or series of
shares at the time outstanding. Notwithstanding any other provision in
the Declaration of Trust, no determination shall be made by the Board
of Trustees nor shall any transaction be entered into by the Trust
which would cause any shares or other beneficial interest in the Trust
not to constitute "transferable shares" or "transferable certificates
of beneficial interest" under Section 856(a)(2) of the Code or which
would cause any distribution to constitute a preferential dividend as
described in Section 562(c) of the Code.
(f) Declaration and Bylaws. All shareholders are subject to
the provisions of the Declaration of Trust and the Bylaws of the Trust.
(g) Divisions and Combinations of Shares. Subject to an
express provision to the contrary in the terms of any class or series
of beneficial interest hereafter authorized, the Board of Trustees
shall have the power to divide or combine the outstanding shares of any
class or series of beneficial interest, without a vote of shareholders.
(h) Increase in Shares. The Board of Trustees may amend the
Declaration of Trust from time to time to increase or decrease the
aggregate number of shares or the number of shares of any class that
the Trust has authority to issue, without a vote of shareholders.
(i) References to Shares and Shareholders. The words "shares"
and "shareholders" wherever used in this Declaration of Trust, except
where the context otherwise requires, shall refer to both the Common
Shares and the Preferred Shares and to the holders of shares of both
classes, respectively.
Section 5.8 is proposed to be amended to read as follows:
Section 5.8. If any person, corporation, partnership, trust or any
other legal entity is or becomes at any time the beneficial owner, directly or
indirectly, of more than ten percent (10%) IN VALUE of the outstanding shares,
or if the tax status of the Trust under Public Law 86-779 or any other tax
statute or regulation is or can be endangered by the purchase or retention of
shares by any person, corporation, partnership, trust or any other legal entity,
the Trustees may, in their sole
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<PAGE>
discretion, refuse to sell, transfer or deliver shares to such person or entity,
or, may repurchase any or all shares held by such person or entity (i) at cost
or at the last sale price of a share as of the date immediately preceding the
day on which the demand for repurchase is mailed, whichever price is higher or
(ii) AT SUCH OTHER AMOUNT AS IS SET FORTH IN THE TERMS OF SUCH CLASS OR SERIES
OF SHARES SO CALLED FOR REPURCHASE. After the mailing of the demand for
repurchase, the shares may be cancelled upon the records of the Trust by the
order of the Trustees and the Trust shall pay promptly for such shares as above
determined.
Section 5.10 is proposed to be amended to read as follows:
Section 5.10. If the Trustees shall at any time and in good faith be of
the opinion that direct or indirect ownership of shares of this Trust has or may
become concentrated to an extent which would cause any rent to be paid to this
Trust by a "sister corporation," if one existed, to fail to qualify or be
disqualified as rent from real property by virtue of Section 856(d)(2)(B) of the
Code, or similar provisions of successor statutes, pertaining to the
qualification of this Trust as a real estate investment trust, trustees shall
have the power (1) by lot or other means deemed equitable by them to call for
purchase from any shareholder of this Trust such number of shares as shall be
sufficient in the opinion of the Trustees to maintain or bring the direct or
indirect ownership of shares of this Trust into conformity with the requirements
of said Section 856(d)(2)(B) pertaining to this Trust, and (2) to refuse to
register the transfer of shares to any person whose acquisition of such shares
would, in the opinion of the Trustees, result in this Trust being unable to
conform to the requirements of said Section 856(d)(2)(B). For purposes of this
Section, the term "sister corporation" means a corporation, the shares of which
are owned by exactly or substantially the same persons and in exactly or
substantially the same numbers as are the shares of this Trust. This Section
shall apply even if a "sister corporation" does not exist (1) at the time the
Trustees determine that the ownership of shares of this Trust has or may become
so concentrated, or (2) at the time the Trustees call shares for purchase or
refuse to register the transfer of shares.
The purchase price for the shares purchased pursuant hereto shall be
equal to (i) the fair market value of such shares as reflected in the closing
price for such shares on the principal stock exchange on which such shares are
listed or, if such shares are not listed, then the last bid for the shares, as
of the close of business on the date fixed by the Trustees for such purchase or,
if no such quotation is available, as shall be determined in good faith by the
Trustees OR (ii) SUCH OTHER AMOUNT AS IS SET FORTH IN THE TERMS OF SUCH CLASS OR
SERIES OF SHARES SO CALLED FOR PURCHASE. From and after the date fixed for
purchase by the Trustees, the holder of any shares so called for purchase shall
cease to be entitled to dividends, voting rights and other benefits with respect
to such shares, except the right to payment of the purchase price fixed as
aforesaid.
In order to further assure that ownership of the shares does not become
so concentrated, any transfer of shares that would prevent amounts received by
this Trust from a "sister corporation," if one existed, from qualifying as
"rents from real property" as defined in Section 856(d) of the Code, by virtue
of the application of Section 856(d)(2)(B) of the Code, shall be void ab initio
and the intended transferee of such shares shall be deemed never to have had an
interest therein. If the
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foregoing provision is determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the transferee of such shares shall
be deemed to have acted as agent on behalf of this Trust in acquiring such
shares and to hold such shares on behalf of this Trust. For purposes of
determining whether this Trust is in compliance with Section 856(d)(2)(B),
Section 856(d)(5) of the Code, or similar provisions of successor statutes shall
be applied. The shareholders of this Trust shall, upon demand, disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of the shares of this Trust as the Trustees deem necessary to
determine whether this Trust satisfies the provisions of Section 856(a)(5) and
(6) and Section 856(d) of the Code or the regulations thereunder as the same
shall from time to time be amended, or to comply with the requirements of any
other taxing authority.
Section 7.3 is proposed to be entirely restated to read as follows:
Section 7.3. Subject to the provisions of any class or series of shares
then outstanding, the shareholders shall be entitled to vote only on the
following matters: (a) election or removal of Trustees as provided in Sections
2.3 or 10.2; (b) amendment of this Declaration of Trust as provided in Section
10.1; (c) termination of the Trust as provided in Section 10.1; (d) any merger
and (e) any other matter on which, by law, the holders of the shares are
required to vote. Except with respect to the foregoing matters, no action taken
by the shareholders at any meeting shall in any way bind the Trustees.
Section 7.5 is proposed to be amended to read as follows:
Section 7.5. Except as expressly set forth herein OR AS EXPRESSLY
PROVIDED BY ANY CLASS OR SERIES OF SHARES THEN OUTSTANDING, any matter requiring
a vote of shareholders shall be approved by a vote of the holders of a majority
of shares OF EACH CLASS OR SERIES ENTITLED TO VOTE THEREON VOTING AS SEPARATE
CLASSES OR SERIES. At any meeting of the shareholders, any shareholder of shares
entitled to vote thereat may vote by proxy. Only shareholders of record of such
shares shall be entitled to vote and each full share shall be entitled to one
vote UNLESS OTHERWISE EXPRESSLY PROVIDED BY ANY CLASS OR SERIES OF SHARES THEN
OUTSTANDING. Fractional shares shall not be entitled to any vote UNLESS
OTHERWISE EXPRESSLY PROVIDED BY ANY CLASS OR SERIES OF SHARES THEN OUTSTANDING.
When any such share is held jointly by several persons, any one of them may vote
at any meeting in person or by proxy in respect of such share, but if more than
one of them shall be present at such meeting in person or by proxy, and such
joint owners or their proxies so present disagree as to any vote to be cast,
such vote shall not be received in respect of such share. If the holder of any
such share is a minor or a person of unsound mind, and subject to guardianship
or to the legal control of any other person as regards the charge or management
of such share, he may vote by his guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
Section 9.1 is proposed to be amended to read as follows:
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Section 9.1. The Trustees shall from time to time distribute ratably
among the shareholders OF ANY CLASS OR SERIES OF SHARES such proportions of the
net profits, surplus (including paid-in surplus), capital, or assets held by the
Trustees as they may deem proper and such distribution may be made in cash or
property (including without limitation any type of obligations of the Trust or
any assets thereof); and the Trustees may distribute ratably among the
shareholders OF ANY CLASS OR SERIES OF SHARES additional shares issuable
hereunder in such manner and on such terms as the Trustees may deem proper; but
the amount of all distributions and the time of declaration and payment thereof
shall be wholly in the discretion of the Trustees (OR AS PROVIDED BY ANY CLASS
OR SERIES OF SHARES THEN OUTSTANDING), as shall also the determination of what
constitutes net profits or surplus, and such distributions may be made even
though the paid-in capital of this Trust at the time of any distribution exceeds
the net assets of the Trust based either on the market value (as determined by
the Trustees under Section 2.16 of Article 2 hereinabove) or the book value; and
such distribution may be among the shareholders of record at such other date
(not more than twenty (20) days prior to payment of such distribution) as the
Trustees shall determine.
Section 10.1 is proposed to be amended to read as follows:
Section 10.1. The provisions of this Declaration of Trust may be
amended by a vote of the holders of a majority of shares OF EACH CLASS OR SERIES
ENTITLED TO VOTE THEREON, VOTING AS SEPARATE CLASSES OR SERIES, OR BY A VOTE OF
TWO-THIRDS OF THE TRUSTEES IN ANY MANNER NECESSARY TO ENABLE THE TRUST TO
CONTINUE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST UNDER THE CODE OR TITLE 8
OF THE CORPORATION AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND.
The Trust may be terminated by the vote of the Trustees with the approval of the
holders of a majority of shares OF EACH CLASS OR SERIES ENTITLED TO VOTE
THEREON, VOTING AS SEPARATE CLASSES OR SERIES. Notwithstanding the foregoing
(and notwithstanding the fact that some lesser percentage may be permitted by
law), the affirmative vote of the holders of 70% or more of the outstanding
shares of the Trust entitled to vote generally in the election of Trustees shall
be required to amend or repeal Sections 5.8, 5.10, 8.1, 8.2, this SENTENCE OF
Section 10.1, or Article 15 of the Declaration of Trust.
Section 10.2 is proposed to be amended to read as follows:
Section 10.2. Any Trustee may be removed either (1) at any meeting of
shareholders called for the purpose, by the affirmative vote of not less than
two-thirds in interest of the shares then outstanding hereunder and entitled to
vote GENERALLY IN THE ELECTION OF TRUSTEES; or (2) by the unanimous vote of all
other Trustees with the approval of the holders of a majority of the shares
ENTITLED TO VOTE GENERALLY IN THE ELECTION OF TRUSTEES.
All proposed additions are marked in bold text and underlined. The proposed
additions to Section 10.1 also include the proposed changes with respect to (i)
authorizing the Trustees to make
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amendments to the Declaration of Trust to preserve the Trust's status as a real
estate investment trust and (ii) revising the super-majority voting provision.
27
<PAGE>
<TABLE>
<CAPTION>
<S><C>
FRONT OF PROXY CARD
FOR WITHHELD
1. Election of three Trustees Nominees (for the
For, except vote withheld from the following terms stated in the Proxy
Nominee: Statement):
Edmund B. Cronin, Jr.
David M. Osnos
John P. McDaniel
- --------------------- ----------------
</TABLE>
2. Amendments of Declaration of Trust to authorize the issuance of Preferred
Shares.
3. Amendment of Declaration of Trust to authorize the Trustees to adopt
future changes to the Declaration of Trust to preserve REIT status.
4. Amendments of Declaration of Trust to modify certain investment policies.
5. Amendment of Declaration of Trust to revise the super-majority voting
provision.
6. Such other matters as may come before the meeting, hereby revoking any
proxy or proxies heretofore given.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE NOMINATED
TRUSTEES. PROXIES WILL BE VOTED AS DIRECTED OR SPECIFIED.
PLEASE vote at once. It is important.
Please mark your choice in black ink.
SIGNATURE________________ DATE__________ SIGNATURE______________ DATE__________
NOTE: SIGNATURE(S) MUST CORRESPOND EXACTLY WITH NAME(S) AS IMPRINTED HEREON.
When signing as attorney, executor, administrator, trustee or guardian,
please give the full title as such and if the signer is a corporation,
please sign with the full corporate name by a duly authorized officer.
If stock is held in the name of more than one person, all named holders
must sign the proxy.
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<PAGE>
REAR OF PROXY CARD:
WASHINGTON REAL ESTATE INVESTMENT TRUST
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS JUNE 24, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of Washington Real Estate Investment Trust
appoints Benjamin H. Dorsey and Edmund B. Cronin, Jr., and each of them, with
full power of substitution, as proxy to vote all shares of the undersigned in
Washington Real Estate Investment Trust at the Annual Meeting of Shareholders to
be held on June 24, 1998, and at any adjournment thereof, with like effect and
as if the undersigned were personally present and voting, upon the following
matters:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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