WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
March 30, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Washington Real Estate Investment Trust to be held on Monday, May 24, 1999.
The formal Notice of the meeting and a Proxy Statement describing the proposals
to be voted upon are enclosed.
Last year, the shareholders approved two amendments to our Declaration of
Trust. A third amendment would have authorized the issuance of preferred
shares. This amendment required the approval of 70% of all outstanding shares
i.e., unvoted shares effectively counted as negative votes. Even though over
89% of voting shares approved the amendment, since only 77% of our outstanding
shares voted on the matter at all, the "yes" votes totaled only 69.1% of all
outstanding shares and the amendment therefore failed to pass.
The Board believes that the preferred share amendment is in the best
interests of the Trust and the shareholders. The Board also believes that this
amendment failed to pass last year due to a lack of voting rather than a lack
of support by the shareholders. This is evidenced by the 89% approval of the
shares which were voted. Accordingly, we are again proposing the preferred
share amendment for approval by the shareholders.
We believe that the amendment is beneficial to the Trust and the
shareholders because it will allow the Trust to issue preferred shares when
market pricing is favorable. Unlike our common dividend, this dividend never
increases and at the same time, under current market conditions, WRIT would
retain the right to repurchase the preferred shares at their original cost at
any time after 5 years.
Had we issued preferred shares last year, the proceeds from the sale of
these preferred shares would have been a source of funds for 1998 and 1999 real
estate acquisitions. These acquisitions are anticipated to produce a first year
return on investment of over 9.6% which is substantially above the fixed
dividend that would have been paid to preferred shareholders. The entire
differential between the 9.6% acquisition return on investment and the preferred
share dividend would have directly increased our Funds From Operations and
therefore increased our ability to pay common dividends, without any dilution to
the common shareholders. In addition, to the extent that the income from these
acquisitions grew, the excess available for common dividends would also have
grown because the preferred dividend would have remained fixed.
This year we are also asking the shareholders to approve a technical
amendment to our Declaration of Trust required by the rules of the New York
Stock Exchange related to the settlement of share trades. This amendment is
explained in the Proxy Statement.
Please read the Proxy Statement, then complete, sign and return your proxy
card in the enclosed envelope. PLEASE NOTE THAT THIS YEAR YOU MAY ALSO VOTE VIA
TELEPHONE OR THE INTERNET SHOULD YOU PREFER. TO DO SO, JUST FOLLOW THE
INSTRUCTIONS ON THE ENCLOSED CARD.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT. THIS
IS PARTICULARLY IMPORTANT AS THE AMENDMENTS TO BE VOTED UPON REQUIRE THE
APPROVAL OF 70% OF THE SHAREHOLDERS, AND THE PREFERRED SHARE AMENDMENT FAILED
LAST YEAR SIMPLY BECAUSE NOT ENOUGH SHAREHOLDERS VOTED. Should you have any
questions, please contact Mr. Larry E. Finger at 1-800-565-WRIT (9748).
Thank you for your prompt attention to this proxy matter. We sincerely
believe that these amendments are in the best interests of all shareholders.
Sincerely,
/s/ Arthur A. Birney
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 Monday, May 24,
1999 at 11:00 a.m., for the following purposes:
1. To elect two 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 pertaining to the
settlement of share trades;
4. To transact such other business as may properly come before the meeting.
The Trustees have fixed the close of business on March 25, 1999 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.
/s/ Laura M. Franklin
Laura M. Franklin
Corporate Secretary
March 30, 1999
<PAGE>
WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
PRELIMINARY COPIES
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 May 24, 1999 and at any and all adjournments
thereof. Mailing of this Proxy Statement will commence on or about March 30,
1999. 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 and broker
non-votes (proxies that do not indicate that brokers or nominees have received
instructions from the beneficial owner of shares) are counted for purposes of
determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulating the total number of votes cast
on proposals presented to shareholders, whereas broker non-votes are not
counted for purposes of determining the total number of votes cast. 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 35,709,789 Shares were issued
and outstanding at the close of business on March 25, 1999. 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 March 25, 1999, 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 1999, 2000 and 2001,
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 1998. The Nominating Committee, consisting of
Messrs. Birney, Cronin, Derrick and Osnos, makes recommendations to the Board
for nomination of Trustees. The Nominating Committee did not meet in 1998 and
met three times in 1999 for the purpose of nominating successor Trustees to Mr.
Cafritz and Mr. Snyder. Mr. Cafritz, in accordance with the Trust's By-Laws,
retires this year and Mr. Snyder is not standing for reelection. The Trustees
will consider recommendations received from shareholders for nominations for
Trustees to be elected at the 2000 Annual Meeting. Such recommendation must be
submitted in writing before December 24, 1999 accompanied by a written statement
setting forth the reasons the Trust would benefit from the election of such
nominee. The Audit Committee, consisting of Messrs. Cafritz, Derrick, McDaniel
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 Audit 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 1998. A Compensation Committee, composed of Messrs.
Birney, Cronin, McDaniel and Snyder, is responsible for making recommendations
to the Board with respect to compensation decisions. The Compensation Committee
met once during 1998. See "Report on Executive Compensation" below. All members
of the Board attended more than 75% of the total number of meetings held during
1998.
<PAGE>
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 Trust 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
receives an annual grant of 2,000 Share options and 400 unrestricted Shares.
The Chairman of the Board receives additional remuneration for such services of
$9,500.
During 1998, the Trust utilized the legal services of the law firm of
Arent Fox Kintner Plotkin & Kahn PLLC, 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 1998 gross revenues or 5% of the Trust's 1998 gross revenues.
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> <C> <C> <C>
William N. Cafritz President, William Cafritz Development Corp. 1984 73 1999
(real estate development)
Stanley P. Snyder Chairman, Snyder-Cohn-Collyer-Hamilton & 1968 64 1999
Associates, P.C. (Certified Public Accountants)
Arthur A. Birney Managing Partner and Chief Executive Officer, 1961 71 2000
Washington Brick & Terra Cotta Co. (Real
Estate Holding and Development Company);
Managing Partner, Queenstown Harbor Golf
Links LP
John M. Derrick, Jr. President/CEO -- Potomac Electric Power 1997 59 2000
Company (PEPCO)
Edmund B. Cronin, Jr. President and Chief Executive Officer, WRIT; 1994 62 2001
Director -- Potomac Electric Power Company
John P. McDaniel Chief Executive Officer -- Medstar Health; 1998 56 2001
Director Lutheran Brotherhood
David M. Osnos Senior partner, Arent, Fox, Kintner, Plotkin & 1987 67 2001
Kahn, PLLC (legal counsel to the Trust);
Director, VSE Corporation (engineering);
Director, EastGroup Properties (real estate
investment trust)
</TABLE>
- ----------
(*) Each person has held the indicated position for more than the past five
years except Messrs. Cronin and Derrick.
Mr. Edmund B. Cronin, Jr. has 38 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.
Mr. John M. Derrick Jr. is President/CEO of Potomac Electric Power
Company (PEPCO). He joined PEPCO in 1961 and has held his current position since
October 1997. 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 is a director of the
Greater Washington Board of Trade, the Federal City Council, Economic Club of
Washington and is Chairman of the Maryland Chamber of Commerce.
Mr. John P. McDaniel is Chief Executive Officer of Medstar Health, a
multi-institutional, not-for-profit healthcare organization serving Washington
DC, Maryland, Virginia and the mid-Atlantic region. Mr. McDaniel is a member of
the Executive Committee of the Greater Washington Board of Trade, the Executive
Committee of the Federal City Council, the Board of Directors of Lutheran
Brotherhood, the Maryland State Racing Commission, a Fellow of the American
College of Healthcare Executives and chairs the Washington-area Business
Coalition.
2
<PAGE>
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> <C>
Larry E. Finger ............. 46 Senior Vice President -- Chief Financial Officer
George F. McKenzie .......... 43 Senior Vice President -- Real Estate
Mary Beth Avedesian ......... 39 Vice President -- Real Estate
Brian J. Fitzgerald ......... 37 Vice President -- Leasing
Laura M. Franklin ........... 38 Vice President -- Chief Accounting Officer, Corporate Secretary
Kenneth C. Reed ............. 46 Vice President -- Property Management
Thomas L. Regnell ........... 42 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 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. 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, CPA, joined the Trust in 1993 as Assistant Vice
President -- Finance, and is currently Vice President and Chief Accounting
Officer as well as Corporate 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 served as President of CSN Management
Corp. from 1988 to 1998. CSN managed WRIT's properties until its assets were
purchased by WRIT in 1998.
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. 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 and/or executive
officer.
3
<PAGE>
OWNERSHIP OF SHARES BY TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning all Shares
beneficially owned as of March 16, 1999, by each Trustee, by the nominees 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> <C>
Arthur A. Birney ................................. 76,996(1) 0.21%
William N. Cafritz ............................... 19,749 0.06%
Edmund B. Cronin, Jr. ............................ 122,019(2) 0.34%
John M. Derrick, Jr. ............................. 2,200 0.01%
Larry E. Finger .................................. 45,735(2) 0.13%
Brian J. Fitzgerald .............................. 14,285(2) 0.04%
Clifford M. Kendall .............................. 2,000 0.01%
John P. McDaniel ................................. 1,400 0.00%
George F. McKenzie ............................... 8,664 0.02%
David M. Osnos ................................... 1,300 0.00%
Thomas L. Regnell ................................ 24,200(2) 0.07%
Stanley P. Snyder ................................ 5,462 0.02%
Susan J. Williams ................................ -- 0.00%
All Trustees and Executive Officers as a group (14
persons) ........................................ 401,643(2) 1.12%
</TABLE>
- ----------
(1) Includes shares held in a trust.
(2) Includes shares subject to options exercisable within 60 days, as follows:
Mr. Cronin, 92,997; Mr. Finger, 40,840; Mr. Fitzgerald, 10,979; Mr.
McKenzie, 5,791; Mr. Regnell, 22,365; and all Trustees and Executive
Officers as a group, 247,066.
II.
ELECTION OF TRUSTEES
Ms. Susan J. Williams and Mr. Clifford M. Kendall 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 Ms.
Williams and Mr. Kendall.
Ms. Susan J. Williams, age 58, is Founding Partner and President of Bracy
Williams & Company, government and public affairs consultants. Ms. Williams'
career includes public service as a legislative professional on Capitol Hill
and Assistant Secretary of Transportation. She also played a founding role in
Project Head Start. Ms. Williams is immediate past Chair of The Greater
Washington Board of Trade and Chair of its Federal Affairs and Federal Affairs
Political Action Committees. She has served on the Board of Directors of the
Adams National Bank. She serves on the Board of Directors of the Henry L.
Stimson Center (a foreign policy institute), the American Institute for Public
Service, the Historical Society of Washington, D.C., the National Aquarium in
Baltimore, and the D.C. Agenda Project. She is also a member of the Board that
is preparing the Washington-Baltimore region's bid to host the 2012 Olympic
Games, the Economic Club of Washington, the Federal City Council and Leadership
Washington. In addition, she is currently on the Advisory Board for George
Mason University.
Clifford M. Kendall, age 67, is a director of Affiliated Computer Service,
Inc. (ACS). Before the merger with ACS, Mr. Kendall served as Chairman and CEO
of Computer Data Systems, Inc. (CDSI) from 1971 to 1991 and Chairman from 1991
to 1998. Prior to joining CDSI, his career included positions with Washington
Gas Light Company, American University, Washington University in St. Louis, and
Booz, Allen & Hamilton, Inc. Mr. Kendall is a past Chairman and continues to
serve on the Board and Executive Committee of the High Technology Council of
Maryland and the Advisory Board for the Montgomery County Technology Enterprise
Center. He is a director of the Potomac Knowledge Way, Montgomery County
Community Foundation and The Lighthouse, which manages investments of the
Columbia Lighthouse for the Blind. Mr. Kendall also serves on the Board of
Trustees of George Washington University and is a member of the Board of
Regents for the University System of Maryland. He is past Chairman of the
Greater Washington Board of Trade, and has served as Chairman of the
Montgomery/Prince Georges County CEO Roundtable.
4
<PAGE>
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 SUSAN J. WILLIAMS AND CLIFFORD M. KENDALL.
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 terms
of the Shares (the "Preferred Shares Amendment"). The full text of Sections
4.1, 5.8, 5.10, 7.3, 7.5, 8.1, 8.4, 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 capital, (ii)
future acquisitions and (iii) other business purposes. The ability to issue
preferred shares 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 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 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.
5
<PAGE>
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 subject to proposed Section 4.1(f) of the Declaration of
Trust, which limits the voting rights of any series of Preferred Shares that
may be authorized. Pursuant to Section 4.1(f), the voting rights of Preferred
Shares are limited to, among other things, (i) the right to approve any
transaction resulting in the issuance by the Trust of any class or series of
Preferred Shares ranking senior to such Preferred Shares, (ii) the right to
approve any amendment to the Declaration of Trust if such amendment would
materially and adversely alter the rights, preferences or privileges of such
Preferred Shares, (iii) the right to approve certain mergers in which the Trust
is not the surviving entity, and (iv) the right to elect up to two additional
Trustees following the Trust's failure to pay required dividends on such
Preferred Shares for a specified number of quarterly periods. Any such
additional Trustees generally would serve during the period the Trust remained
in default plus a limited period following the cure of such default, all as to
be specified in the terms of articles supplementary establishing the terms of a
particular class or series of Preferred Shares. The full text of proposed
Section 4.1(f) is set forth in Exhibit A to this Proxy Statement.
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
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 limited 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 subject to Section 4.1(f) (described above) the shareholders
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
shareholders are required to vote.
6
<PAGE>
Section 8.1 of the Declaration of Trust specifies the minimum and maximum
number of Trustees. The Preferred Shares Amendment would amend this Section to
provide that no less than three nor more than seven Trustees shall be elected
by the holders of the Common Shares. The Preferred Shares Amendment would also
permit the election of up to two Trustees (but in no event a majority of the
Trustees) by the holders of Preferred Shares following a failure to pay
required dividends on such Preferred Shares for a specified number of quarterly
periods. This provision would authorize such additional Trustees during the
period the Trust remained in default plus a limited period following the cure
of such default, but the provision would only be implemented by the Board in
connection with the adoption of articles supplementary establishing the terms
of a particular class or series of Preferred Shares.
Section 8.4 of the Declaration of Trust provides for the filling of
vacancies on the Board by the remaining Trustees. The Preferred Shares
Amendment would amend this Section to provide that a vacancy among the Trustees
elected by the holders of the Common Shares would be filled by the remaining
Trustees elected by the holders of the Common Shares and that a vacancy among
the Trustees elected by the holders of the Preferred Shares would be filled by
the remaining Trustee elected by the holders of the Preferred Shares.
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 a Trustee elected by the holders of the Common Shares may only be removed
by a vote of the holders of the Common Shares and that a Trustee elected by the
holders of the Preferred Shares may only be removed by a vote of the holders of
the Preferred Shares. As stated above, Trustees elected by the holder of
Preferred Shares would only serve during the period the Trust remained in
default on the payment of dividends on the Preferred Shares plus a limited
period following the cure of such default.
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.
OTHER EFFECTS
The Board is not aware of any current effort by any person to accumulate
Shares or obtain control of the Trust, and the Preferred Shares Amendment is
not designed to impede the acquisition of the Trust. Indeed, the Preferred
Shares Amendment, by limiting the potential voting rights of Preferred Shares,
is intended to avoid the possibility that the issuance of Preferred Shares
would have an anti-takeover effect.
The Board has no current intention to adopt a "shareholder rights plan"
(which, if adopted, could have an anti-takeover effect), but the Board could
adopt such a plan without the Preferred Shares Amendment or without utilizing
the Preferred Shares. The Board will not, without shareholder approval, utilize
the availability of Preferred Shares to implement such a plan.
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 Shares entitled to vote at the Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE PREFERRED SHARES AMENDMENT.
7
<PAGE>
IV.
AMENDMENT TO THE DECLARATION OF TRUST
WITH RESPECT TO SETTLEMENT OF SHARE TRADES
The Board has declared advisable and recommends to the shareholders an
amendment to the Trust's Declaration of Trust making clear that Sections 5.8
and 5.10 (or any other Section) of the Declaration of Trust will not preclude
the settlement of any transaction entered through the facilities of the New
York Stock Exchange or any other national securities exchange or automated
inter-dealer quotation system (the "Settlement Amendment"). The full text of
proposed Section 5.11 of the Declaration of Trust is set forth as Exhibit B to
this Proxy Statement.
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 and
provides that the Trust may refuse to sell, transfer or deliver shares to such
person or entity, or may repurchase any and all Shares held by such person or
entity. Further, Section 5.10 of the Declaration of Trust currently imposes
limitations on the ownership of the Trust's outstanding Shares if such ownership
would cause the holder to be deemed a "sister corporation," as that term is
defined in the Declaration of Trust, and also provides that the Trust may
repurchase Shares or refuse to register the transfer of Shares to any person
whose acquisition of Shares would, in the opinion of the Trustees, be
inconsistent with such limitations. These provisions are intended to help the
Trust meet the requirements of certain provisions of the Internal Revenue Code
with which it must comply in order to preserve its status as a real estate
investment trust.
In connection with the listing of the Shares on the New York Stock
Exchange in January 1999, the New York Stock Exchange required that the Trust
at its next annual meeting of shareholders adopt an amendment to its
Declaration of Trust specifying that nothing in the Declaration of Trust would
preclude the settlement of any transaction entered through the facilities of
the New York Stock Exchange. The Trust understands that the New York Stock
Exchange requires this amendment in order to avoid uncertainty as to the
completion and finality of trades effected on the New York Stock Exchange and
is not intended to impose any material limitation on the effectiveness of
Sections 5.8 and 5.10 of the Declaration of Trust. The Trust also understands
that the New York Stock Exchange requires the declaration of trust of all real
estate investment trusts listed on the New York Stock Exchange which include
limitations like Sections 5.8 or 5.10 of the Declaration of Trust to include
this provision.
In connection with applying to list the Shares on the New York Stock
Exchange, the Trustees considered this requirement and determined that it would
not materially impair the protection afforded the Trust by Sections 5.8 and 5.10
of the Declaration of Trust and was an acceptable condition to the listing of
the Shares. In accordance with these determinations, the Trustees have proposed
an amendment to the Declaration of Trust to meet the New York Stock Exchange's
requirement. The Settlement Amendment, as set forth in proposed Section 5.11,
specifies that neither Sections 5.8 or 5.10 nor any other provision of the
Declaration of Trust will preclude the settlement of trades of Shares effected
on the New York Stock Exchange (or any other exchange or other facility upon
which the Shares may trade), but also makes clear that this provision does not
otherwise impair the ability to enforce the provisions of Sections 5.8 and 5.10
or any other provision of the Declaration of Trust.
Approval of the Settlement Amendment requires the vote of holders of 70
percent of the outstanding Shares entitled to vote at the Annual Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE SETTLEMENT AMENDMENT.
V.
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 $100,000 for the period(s)
indicated.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL CASH
COMPENSATION
--------------------------
OTHER
SHARES OPTIONS ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) GRANTED (1) GRANTED (2) COMPENSATION (3)
- ------------------------------------ ------ ------------ ----------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Edmund B. Cronin, Jr., Trustee,
President and Chief Executive
Officer ........................... 1998 $395,000 $309,408 3,368 100,000 $4,800
1997 $395,000 $162,989 3,121 61,000 $9,500
1996 $360,000 $ 84,933 -- 26,650 --
Larry E. Finger, Senior Vice
President and Chief
Financial Officer ................. 1998 $225,000 $176,245 1,492 75,140 $4,800
1997 $210,000 $ 86,652 1,291 25,224 $9,500
1996 $200,000 $ 47,185 -- 14,806 --
George F. McKenzie, Senior Vice
President -- Real Estate .......... 1998 $150,000 $117,497 995 50,094 $4,500
1997 $120,000 $ 49,516 285 11,582 --
1996 $ 32,135 -- -- -- --
Thomas L. Regnell, Vice
President -- Acquisitions ......... 1998 $146,000 $114,364 346 39,180 $4,380
1997 $130,000 $ 53,642 285 12,547 $4,583
1996 $125,000 -- -- 9,254 --
Brian J. Fitzgerald, Vice
President -- Leasing .............. 1998 $ 95,000 $118,919 294 33,275 $2,850
1997 $ 88,500 $ 66,689 237 10,406 $2,167
1996 $ 84,743 $ 11,352 -- 5,776 --
</TABLE>
- ----------
(1) Represents Share grants awarded on December 15, 1998 and December 16, 1997
in accordance with the Incentive Compensation Plan approved by the
Trustees in 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") in accordance with the Incentive Compensation Plan approved
by the Trustees in 1997.
(3) Represents amounts contributed on the officers' behalf by the Trust to its
401(k) plan.
OPTION GRANTS TABLE
The following table shows the specified information with respect to
options granted to the Named Officers in 1998.
<PAGE>
1998 OPTION GRANTS TABLE
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF SHARE
PRICE APPRECIATION
FULL 10-YEAR
OPTION TERM
-----------------------------
NUMBER OF PERCENTAGE
SECURITIES OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE EXERCISE
NAME GRANTED (1) EMPLOYEES PRICE DATE 5% 10%
- ------------------------------- ------------- ----------- ----------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edmund B. Cronin, Jr. ......... 100,000 23.9% 17.594 12/15/2008 $1,106,446 $2,803,951
Larry E. Finger ............... 75,140 18.0% 17.594 12/15/2008 $ 831,383 $2,106,889
George F. McKenzie ............ 50,094 12.0% 17.594 12/15/2008 $ 554,263 $1,404,611
Thomas L. Regnell ............. 39,180 9.4% 17.594 12/15/2008 $ 433,505 $1,098,588
Brian J. Fitzgerald ........... 33,275 8.0% 17.594 12/15/2008 $ 368,170 $ 933,015
</TABLE>
- ----------
(1) Options become exercisable 50% after one year and 100% after two years.
94,316 of Mr. Cronin's options, 69,456 of Mr. Finger's options, 44,410 of
Mr. McKenzie's options, 33,486 of Mr. Regnell's options and 27,591 of Mr.
Fitzgerald's options were granted as non-qualified stock options. See "VI.
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 rules of the Securities and Exchange
Commission 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
9
<PAGE>
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 $28.66 and $45.63, 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.
AGGREGATED OPTION EXERCISES AND OPTION VALUE TABLE
The following table shows information concerning the exercise of options
during 1998 by each of the Named Officers and the year-end value of unexercised
options.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED IN
UNEXERCISED OPTIONS THE MONEY OPTIONS AT
AT DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------------- ------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- -------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Edmund B. Cronin, Jr. ......... -- -- 92,996 130,500 $244,528 $179,400
Larry E. Finger ............... -- -- 40,840 87,752 $117,604 $ 88,271
George F. McKenzie ............ -- -- 5,791 55,885 $ 14,478 $ 66,149
Thomas L. Regnell ............. -- -- 22,366 45,454 $ 65,594 $ 56,099
Brian J. Fitzgerald ........... -- -- 10,929 38,478 $ 27,087 $ 47,331
</TABLE>
PENSION PLAN
The Trust has a non-contributory defined benefit pension plan (the
"Pension Plan") that covers all employees who met certain requirements
regarding age and years of service before December 31, 1995. The Pension Plan
was amended on December 12, 1995 to fix benefits, participation 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> <C> <C> <C> <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 the highest average. Accrued pension benefits are fully vested after
six years of employment. Death benefits are based on the projected monthly
pension benefit.
10
<PAGE>
VI.
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
The Board determined executive compensation for 1998. A Compensation
Committee (the "Compensation Committee"), composed of Messrs. Birney, Cronin,
McDaniel and Snyder, was responsible for making recommendations to the Board
with respect to 1998 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 1998, 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.
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; and (ii) 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 times the average shares outstanding for the year, plus 20% of
the growth in FFO per Share in excess of 7% times the average shares
outstanding for the year, 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 a 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
five years and are restricted from transfer for five years from the date of
grant.
11
<PAGE>
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 1998 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) with Mr.
Derrick abstaining due to interlocking directorships, 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, and (ii) 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 1998 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 1998 salary at $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.
John P. McDaniel
David M. Osnos
Stanley P. Snyder
12
<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 173 companies as
of December 31, 1998 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, 1993 and the reinvestment of all dividends paid thereafter with
respect to such $100 investment.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
WRIT .......... $100 $ 83 $ 87 $102 $104 $123
EREIT ......... 100 103 119 161 193 160
S&P ........... 100 101 139 171 228 294
</TABLE>
VII.
OTHER MATTERS
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP served as the Trust's independent public
accountants for 1998. The Board has appointed Arthur Andersen LLP as the
Trust's independent public accountants for 1999. 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.
13
<PAGE>
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, 1998.
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. In addition, the
Trust has engaged the firm of McKenzie Partners to assist in the solicitation
of proxies. Pursuant to this engagement, the Trust will pay McKenzie Partners a
fee not to exceed $10,500, will reimburse their reasonable out of pocket
expenses and indemnify them against certain liabilities under the securities
laws.
2000 ANNUAL MEETING
Shareholders may present proposals to be considered for inclusion in the
Proxy Statement relating to the 2000 Annual Meeting, provided they are received
by the Trust no later than December 24, 1999 and are in compliance with
applicable laws and SEC regulations.
/s/ Laura M. Franklin
Laura M. Franklin
CORPORATE SECRETARY
March 30, 1999.
14
<PAGE>
EXHIBIT A
PROPOSED AMENDMENTS TO THE DECLARATION OF TRUST
WITH RESPECT TO PREFERRED SHARES
All proposed additions to current Sections are marked in bold text and
underlined.
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 this Article 4, Article 5 and 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), 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
15
<PAGE>
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) Voting Rights of Preferred Shares. Notwithstanding any other
provision of the Declaration of Trust, no designation pursuant to Section
4.1(c) shall specify that a class or series of Preferred Shares shall have
voting rights greater than (i) the right to elect up to two additional
Trustees, constituting less than a majority of the Trustees, following the
Trust's failure to pay required dividends on such Preferred Shares for a
specified number of quarterly periods, and to remove such Trustees, (ii)
the right to approve any transaction resulting in the issuance by the
Trust of any class or series of Preferred Shares ranking senior to such
Preferred Shares with respect to the payment of dividends or distributions
or the distribution of assets on liquidation, (iii) the right to approve
any amendment to the Declaration of Trust, including Articles
Supplementary, if such amendment would materially and adversely alter the
rights, preferences or privileges of such Preferred Shares, (iv) the right
to approve any merger in which the Trust is not the surviving entity,
unless the terms of such merger provide that (A) the holders of such
Preferred Shares shall receive equity securities of the surviving entity
with preferences, rights and privileges substantially equivalent to the
preferences, rights and privileges of such Preferred Shares ("New
Preferred Shares") and (B) upon the completion of such merger there shall
not be outstanding equity securities of the surviving entity ranking as to
distribution rights and liquidation preferences senior to such New
Preferred Shares (other than securities issued for securities of the Trust
outstanding prior to such merger which were senior as to distribution
rights and liquidation preferences to such Preferred Shares), (v) the
right to vote on the termination of the Trust and (vi) such other voting
rights as are expressly required by law.
(g) Declaration and Bylaws. All shareholders are subject to the
provisions of the Declaration of Trust and the Bylaws of the Trust.
(h) 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.
(i) 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.
(j) 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 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
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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 24 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 Section 4.1(f) and 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 8.1 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
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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.
THE FIRST SENTENCE OF SECTION 8.1 IS PROPOSED TO BE AMENDED TO READ AS FOLLOWS:
Section 8.1. The number of Trustees shall not be less than three (3) nor
more than seven (7), AND SUCH TRUSTEES SHALL BE ELECTED BY THE HOLDERS OF THE
COMMON SHARES. FURTHER, THE HOLDERS OF PREFERRED SHARES MAY HAVE THE RIGHT TO
ELECT SUCH NUMBER OF ADDITIONAL TRUSTEES, UP TO TWO (2), BUT CONSTITUTING LESS
THAN A MAJORITY OF THE TRUSTEES, FOLLOWING THE TRUST'S FAILURE TO PAY REQUIRED
DIVIDENDS ON SUCH PREFERRED SHARES FOR A SPECIFIED NUMBER OF QUARTERLY PERIODS,
THE OTHER TERMS OF SUCH RIGHT, INCLUDING THE TERM OF OFFICE OF ANY SUCH
ADDITIONAL TRUSTEES, TO BE AS PROVIDED BY THE ARTICLES SUPPLEMENTARY
ESTABLISHING ANY SUCH CLASS OR SERIES OF PREFERRED SHARES.
THE FIRST SENTENCE OF SECTION 8.4 IS PROPOSED TO BE AMENDED TO READ AS FOLLOWS:
Section 8.4. In case a vacancy in the number of Trustees shall occur
through death, resignation, or removal (unless the vacancy occurring through
removal has already been filled by the shareholders acting pursuant to the
provisions of Section 10.2 hereof), the remaining Trustees or Trustee OF SUCH
CLASS (IE., THE TRUSTEES ELECTED BY THE HOLDERS OF COMMON SHARES OR THE HOLDERS
OF PREFERRED SHARES, RESPECTIVELY) may fill such vacancy by appointing by an
instrument in writing signed by a majority of SUCH Trustees such person as they
or he in their absolute discretion shall see fit, but no such appointment shall
become effective unless and until the person so appointed shall have delivered
to the President of the Trust an instrument in writing, signed by such person
acknowledging and agreeing to be bound by this Declaration of Trust.
SECTION 9.1 IS PROPOSED TO BE AMENDED TO READ AS FOLLOWS:
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 Section
10.1, or Article 15 of the Declaration of Trust.
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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 IN THE ELECTION OF SUCH CLASS OF TRUSTEES; or (2) by the unanimous vote of
all other Trustees of such class with the approval of the holders of a majority
of the shares ENTITLED TO VOTE IN THE ELECTION OF SUCH CLASS OF TRUSTEES.
EXHIBIT B
PROPOSED AMENDMENT TO THE DECLARATION OF TRUST
WITH RESPECT TO SETTLEMENT OF SHARE TRADES
A NEW SECTION 5.11 IS PROPOSED TO BE ADOPTED AS FOLLOWS:
Section 5.11. Nothing in these Articles shall preclude the settlement of
any transaction entered through the facilities of the New York Stock Exchange
or any other national securities exchange or automated inter-dealer quotation
system. The fact that the settlement of any transaction is so permitted shall
not negate the effect of any other provision of these Articles, and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in these Articles.
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FRONT OF PROXY CARD
PRELIMINARY COPIES
FOR WITHHELD
1. Election of two Trustees Nominees (for the terms
stated in the Proxy Statement):
For, Except vote withheld from the following Ms. Susan J. Williams
Nominee: Mr. Clifford M. Kendall
- ------------------ -----------------------
2. Amendments of Declaration of Trust to authorize the issuance of Preferred
Shares.
3. Amendment of Declaration of Trust pertaining to the settlement of share
trades.
4. 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 AND "FOR" PROPOSALS 2 AND 3. PROXIES WILL BE VOTED AS DIRECTED OR
SPECIFIED.
PLEASE vote at once. It is important.
Please mark your choice in black ink.
<TABLE>
<S> <C> <C> <C>
SIGNATURE _________________ DATE _________ SIGNATURE _________________ DATE______________________
</TABLE>
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.
<PAGE>
REAR OF PROXY CARD:
WASHINGTON REAL ESTATE INVESTMENT TRUST
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS MAY 24, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of Washington Real Estate Investment Trust
appoints Larry E. Finger and Laura M. Franklin, 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 May 24, 1999, 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.)
