<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant |x|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
__________________________CORNERSTONE PROPERTIES INC.__________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|x| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
|_| $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
|_| 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 No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Cornerstone Properties Inc.
126 East 56th Street
New York, New York 10022
May 10, 1996
Dear Stockholder:
The Annual Meeting of Stockholders of Cornerstone Properties Inc., a Nevada
corporation (the "Company"), will be held on Thursday, June 20, 1996, at 2:00
p.m. (local time) in Room E-2 at the head office of Deutsche Bank AG,
Taunusanlage 12, Frankfurt (Main) Germany, for the purposes identified below.
Your Board of Directors urges you to please complete, date and sign your voting
instructions and proxy and return them in the enclosed envelope no later than
June 18, 1996.
At the Annual Meeting, stockholders will vote upon the following proposals:
1. To elect ten directors for the ensuing year.
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the fiscal year 1996.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Your Board strongly urges you to vote in favor of all of the proposals.
Sincerely,
/s/ Rolf-E. Breuer /s/ John S. Moody
Dr. Rolf-E. Breuer John S. Moody
Chairman President
THE COMPANY IS SUBJECT TO UNITED STATES SECURITIES LAWS
RELATING TO SOLICITATION OF PROXIES FROM ITS STOCKHOLDERS.
<PAGE> 3
TABLE OF CONTENTS
INTRODUCTION .............................................................. 3
ELECTION OF DIRECTORS (Item 1 on Proxy Card) .............................. 4
Information Concerning Nominees and Directors ........................ 4
Board of Directors Committees, Meetings and Remuneration ............. 5
Officers ............................................................. 6
EXECUTIVE COMPENSATION .................................................... 7
Summary Compensation Table ........................................... 7
Options Grants in Last Fiscal Year ................................... 7
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values .................................. 8
Supplemental Pension Benefit ......................................... 8
Report of the Audit Committee ........................................ 8
Stockholder Return Graph ............................................. 9
CERTAIN TRANSACTIONS ...................................................... 10
Hines Interests Limited Partnership .................................. 10
Deutsche Bank AG ..................................................... 11
Underwriting ......................................................... 11
SELECTION OF AUDITORS (Item 2 on Proxy Card) .............................. 11
OTHER MATTERS (Item 3 on Proxy Card) ...................................... 12
2
<PAGE> 4
CORNERSTONE PROPERTIES INC.
126 East 56th Street
New York, New York 10022
PROXY STATEMENT
ANNUAL MEETING - JUNE 20, 1996
Introduction. The enclosed proxy is solicited by and on behalf of the Board
of Directors of the Company for voting at its Annual Meeting of Stockholders,
which is to be held on Thursday, June 20, 1996, at 2:00 p.m. (local time) in
Room E-2 at the head office of Deutsche Bank AG, Taunusanlage 12, Frankfurt
(Main) Germany. This Proxy Statement and related form of proxy are first being
mailed to the stockholders on or about May 10, 1996.
The Board of Directors urges you to please complete, date and sign your
voting instructions and proxy and return them in the enclosed envelope to the
bank holding your Common Stock no later than June 18, 1996. In the event your
bank has not provided you with a return envelope, please return your proxy
directly to your depository bank.
Solicitation of Proxies. Solicitation will be by mail, which may be
supplemented by telephone or other personal contact, to be made without special
compensation by regular officers or other representatives of the Company or the
Transfer Agent. The Company will reimburse banks and other custodians, nominees
and agents of the stockholders for the costs incurred in obtaining from their
principals authorization to execute a Proxy Card. The entire cost of
solicitation will be borne by the Company. If a stockholder has not received a
copy of the Proxy Statement, the Company, upon request, will furnish such
stockholder a copy free of charge, as soon as practicable.
Approximately 96% of the outstanding shares of Common Stock are held
through Deutsche Auslandskassenverein AG, Frankfurt ("AKV"). The Company has
issued to AKV a share certificate for shares of Common Stock registered in AKV's
name. AKV has issued a global (or collective) certificate representing such
shares that has been deposited by AKV with the collective depository for
securities, the Deutscher Kassenverein AG, Frankfurt. For co-owners of such
global certificate, the following procedure for communicating their voting
instruction to AKV has been instituted: each bank totals the votes received from
its clients holding the Company's shares and then notifies AKV of the number of
such votes, which AKV will then transmit by June 20, 1996 to the Company.
Revocability of Proxies. Your proxy may be revoked at any time prior to the
exercise thereof either by filing with the Secretary of the Company a written
instrument of revocation or later dated proxy prior to the Annual Meeting or if
the person executing the proxy is present at the meeting and elects to vote in
person.
Voting Securities and Principal Holders Thereof. Only stockholders of
record at the close of business on April 30, 1996 will be entitled to notice of
and to vote at the meeting. The Company's Common Stock is its only class of
voting security. Each share is entitled to one vote. On the record date set
forth above, 20,309,165 shares of the Common Stock of the Company were issued
and outstanding. Based on the records of the Company at the close of business on
December 31, 1995, no person owned beneficially more than five percent of the
Common Stock of the Company.
Quorum; Appraisal Rights. Under the Bylaws of the Company, twenty percent
of the outstanding shares entitled to vote, whether represented in person or by
proxy, shall constitute a quorum at the Annual Meeting. Proxies marked "abstain"
will be considered present at the meeting for quorum purposes, but will not be
counted for the purpose of determining the number of votes cast with respect to
any matter. However, abstentions will have the effect of a "no" vote if the vote
required is a majority of the shares outstanding and entitled to be voted. Such
a vote is not required for any of the matters to be voted upon this year. Under
the General Corporation Law of Nevada, stockholders are not entitled to any
dissenters' rights of appraisal in respect of any of the proposals to be voted
upon at the Annual Meeting.
3
<PAGE> 5
ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
At the Annual Meeting of Stockholders, ten directors will be elected, each
to hold office from the date of election until the next Annual Meeting of
Stockholders and until his successor shall have been elected and qualified. Each
current director of the Company is nominated for election, and all of the
nominees, except Mr. Eagle, were previously elected by the stockholders. Mr.
Eagle was elected a director by the Board on November 13, 1995. Unless
instructed otherwise, the enclosed proxy will be voted in favor of the election
of all of the nominees.
The Board of Directors has no reason to believe that any of the persons
named as nominees will not be available, but in the event that a vacancy among
the original nominees occurs prior to the meeting or any of the nominees named
should for any reason be unable to serve, the enclosed proxy will be voted for a
substitute nominee or nominees designated by the Board of Directors and for the
remaining nominees named herein.
The table below sets forth the names, principal occupations during the last
five years, positions held at the Company, ages and length of continuous service
as a director of the nominees for election, and the number of shares of Common
Stock beneficially owned by each nominee and by all executive officers and
directors as a group as of April 30, 1996.
Information Concerning Nominees and Directors
<TABLE>
<CAPTION>
Shares of
Common
Principal Occupations Stock
During the Last Beneficially Director
Directors/Nominees (1) Five Years (2) Age Owned Since
- ---------------------- --------------------- --- ----- -----
<S> <C> <C> <C> <C>
Dr. Rolf-E. Breuer Chairman of the Board of the Company; Member of the 58 1,400 1986
Board of Managing Directors of Deutsche Bank AG,
Frankfurt (Main)
Blake Eagle Chairman, since January 1994, of the MIT Center for 62 -- 1995
Real Estate, Cambridge, Massachusetts; Senior Real
Estate Consultant from January 1992 to December 1993
and President of Real Estate Consulting from 1985 to
December 1991 of the Frank Russell Company, Tacoma,
Washington
Dr. Karl-Ludwig Hermann Independent financial consultant, Greenwich, Connecticut 61 -- 1981
Gerhard A. Koning Executive Officer (Direktor) of Commerzbank AG, 47 -- 1995
Frankfurt (Main)
Hans C. Mautner Chairman and Chief Executive Officer of Corporate
Property Investors (real estate investments),
New York City 58 -- 1992
John S. Moody President and Chief Executive Officer of the Company
since June 1991, President and Chief Executive Officer,
from April 1991 to July 1995, of Deutsche Bank
Realty Advisors, Inc., New York City 47 57,692(3) 1991
Gerald Rauenhorst Chairman and Chief Executive Officer of Opus Corporation 68 -- 1993
(construction and development), Minneapolis, Minnesota
Dr. Walter Schorr Managing Partner (Retired) of Bankhaus Gebrueder Bethmann 65 -- 1991
(investment banking), Frankfurt (Main)
Michael J. G. Topham Executive Vice President of Hines Interests Limited
Partnership (real estate investment and management),
Houston, Texas 48 -- 1995
Berthold T. Wetteskind Chairman of the Board of Managing Directors, since 1991,
of Deutsche Immobilien Anlagegesellschaft mbH (real estate
investments), Frankfurt (Main) 58 -- 1992
Directors and Executive Officers
as a group (16 persons) 179,721(4) --
</TABLE>
- --------------
(1) The information set forth above as to the beneficial ownership of Common
Stock of the Company and as to other information not of record with the
Company is based upon the information furnished to the Company by said
persons. All shares referred to carry sole voting and investment power. The
above amounts are all less than 1% of the total shares outstanding.
(2) Except as otherwise indicated, each of the above-named individuals has been
engaged in the principal occupation set forth opposite his name or has held
a similar position with the same company for more than the last five years.
(3) These are shares of restricted stock awarded to him in his capacity as an
executive officer of the Company.
(4) See "Officers" below.
4
<PAGE> 6
Dr. Breuer is also a director of The Central European Equity Fund, Inc.,
The Germany Fund, Inc. and The New Germany Fund, Inc.; Mr. Eagle is also a
director of Storage Trust Realty; Mr. Mautner is also a director of Julius Baer
Investment Management, Dreyfus Capital Value Fund, Inc., Dreyfus New Leaders
Fund, Inc., Dreyfus Municipal Bond Fund, Inc., Dreyfus Strategic Municipals,
Inc., Dreyfus Strategic Municipal Bond Fund, Inc., Dreyfus Insured Municipal
Bond Fund, Inc., Dreyfus Municipal Money Market Fund, Inc. and Dreyfus
California Tax Exempt Money Market Fund; Mr. Rauenhorst is also a director of
ConAgra, Inc.; and Mr. Moody is also a director of Meridian Industrial Trust.
See "Certain Transactions" below for information regarding transactions
between the Company and persons or entities associated with the above-named
individuals. Deutsche Immobilien Anlagegesellschaft mbh is a wholly-owned
subsidiary of Deutsche Bank AG.
Board of Directors Committees, Meetings and Remuneration
The Board of Directors met six times during 1995, and, with the exception
of Dr. Hermann, each director attended all of the meetings of the Board and of
any committee on which he served held during the period he was a director. In
1995, except as stated in the second following paragraph, each director of the
Company, other than Dr. Breuer and Messrs. Eagle and Wetteskind, received a fee
of $5,000 for his services as a director and an additional $5,000 for each
committee of the Board of which he was a member. Mr. Eagle did not join the
Board until November 13, 1995 and was paid a total of $2,500. Consistent with
Deutsche Bank AG policy, Dr. Breuer and Mr. Wetteskind waived their fees because
the Company was advised by an affiliate of Deutsche Bank until July 1, 1995. See
"Certain Transactions -- Deutsche Bank AG" below. The Company either reimburses
each director for his expenses incurred in attending any meeting of the Board of
Directors or a committee or pays such expenses directly.
Commencing January 1, 1996, each director of the Company, other than Mr.
Moody (but including Dr. Breuer and Mr. Wetteskind), will receive an annual
retainer of $10,000, payable half in cash and half in the form of restricted
stock and an annual cash fee of $5,000 for service on a Board standing
committee. In addition, each director, other than Mr. Moody, received a one-time
grant of stock options for 10,000 shares of Common Stock at an exercise price of
$14.30, with a ten-year term and to vest 50% after one year and 100% after two
years.
The Board of Directors has a standing Administrative Committee comprised of
Dr. Breuer, Mr. Mautner and Mr. Moody. To the extent permitted by law, the
Administrative Committee may take action with the same force and effect as if
the entire Board of Directors had acted in such situation where time is of the
essence and it would be impractical and not in the best interests of the Company
to convene a meeting of the entire Board of Directors. In place of the normal
compensation for committee service, Mr. Moody received $10,000 and Mr. Mautner
received $8,000 for serving on the Administrative Committee in 1995. Mr. Moody
will receive no compensation for Board or committee service in 1996.
The Board of Directors has a standing Audit Committee chaired by Mr.
Mautner with Mr. Eagle, Dr. Hermann, and Dr. Schorr as its other members. The
Audit Committee, which met three times in 1995, recommends an independent
auditor for the Company, meets with the independent auditor to review the annual
statements and accounts and the scope of the audit of the Company and reviews
the internal controls and financial structure of the Company. The Audit
Committee also functions as a compensation committee (without additional fees to
the members), and some of its meetings are devoted wholly or substantially to
compensation matters.
The Board of Directors has a standing Investment Committee, chaired by Mr.
Rauenhorst. Its other members are Mr. Mautner, Mr. Moody and Mr. Wetteskind. The
Investment Committee met one time in 1995. It reviews potential investments for
the Company.
The Company does not have a standing nominating committee.
5
<PAGE> 7
Officers
The officers of the Company are elected by the Board of Directors to serve
for a term of one year or until their successors are elected and qualified. The
table below sets forth the name, principal occupations during the last five
years, ages and length of continuous service as an officer of the Company, and
beneficial ownership of Common Stock as of April 30, 1996. The individuals
listed below are all the executive officers of the Company.
<TABLE>
<CAPTION>
Shares of Common
Principal Occupations During Stock Beneficially
Officers the Last Five Years Age Owned (1)
- -------- ------------------- --- ------
<S> <C> <C> <C>
John S. Moody President and Chief Executive Officer of the Company since June 1991 47 57,692
and President and Chief Executive Officer of Deutsche Bank Realty
Advisors, Inc. from April 1991 to July 1995.
Scott M. Dalrymple Vice President of the Company since July 1991. Vice President from 37 13,846
December 1993 to July 1995 and Assistant Vice President from
July 1991 to December 1993 of Deutsche Bank Realty Advisors, Inc.;
Assistant Vice President from 1990 to July 1991 and Associate from
1987 to 1990 of Deutsche Bank Capital Corporation.
Rodney C. Dimock Executive Vice President of the Company since October 1995. 49 41,958
President of Aetna Realty Investors from April 1991 to October 1995.
Thomas P. Loftus Vice President and Controller of the Company since June 1992 37 18,042
and Secretary of the Company since June 1993. Director-Fund
Administration from December 1993 to July 1995, Vice
President-Fund Administration from June 1992 to December 1993,
and Vice President-Controller from April 1991 to June 1992 of
Deutsche Bank Realty Advisors, Inc.: Assistant Vice President
from December 1988 to January 1990 of Deutsche Bank Capital
Corporation.
Kevin P. Mahoney Vice President and Treasurer of the Company since September 35 13,846
1992. Vice President from December 1993 to July 1995 and
Assistant Vice President from July 1991 to December 1993 of
Deutsche Bank Realty Advisors, Inc.; Assistant Vice President
from January 1990 to July 1991 and Associate from 1988 to
January 1990 of Deutsche Bank Capital Corporation.
Andrew E. Masters, Jr. Vice President of the Company since March 1992. Director-Asset 45 19,091
Management from December 1993 to July 1995 and Vice
President-Asset Management from February 1992 to December 1993
of Deutsche Bank Realty Advisors, Inc.; Vice President of
February 1992., Inc. from 1987 to Real Estate
Thomas A. Nye Vice President of the Company since July 1995. Vice President 31 13,846
from December 1993 to July 1995 and Assistant Vice President from
July 1991 to December 1993 of Deutsche Bank Realty Advisors, Inc.;
Assistant Vice President from 1990 to Uuly 1991 and Associate
from 1987 to 1990 of Deutsche Bank Capital Corporation.
</TABLE>
- ------------
(1) These are shares of restricted stock awarded to the named officers in their
capacities as executive officers of the Company.
6
<PAGE> 8
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and two other officers for the period July
1, 1995 through December 31, 1995. Prior to July 1, 1995, the Company was
managed pursuant to an advisory agreement with Deutsche Bank Realty Advisors,
Inc. and paid no compensation to its officers, who were compensated by Deutsche
Bank Realty Advisors, Inc. for services to it, including the payment of bonuses.
See "Certain Transactions -- Deutsche Bank AG" below. Only the following three
officers' salary and bonus from the Company exceeded $100,000 in 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation(1) Long-Term Awards
_____________________ _______________________
Restricted Securities
Stock Underlying
Name and Principal Position Year Salary Bonus(3) Awards(4) Options (#) All Other Compensation(5)
- --------------------------- --- ---- ------ ------ ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
John S. Moody, President and
Chief Executive Officer 1995 $175,000 $100,000 $825,000 300,000 $17,783
Rodney C. Dimock, Executive Vice
President 1995(2) 57,291 100,000 600,000 150,000 77,500
Andrew E. Masters, Jr., Vice
President 1995 72,500 30,000 273,000 75,000 13,841
</TABLE>
- --------------
(1) See the lead-in paragraph to the Table.
(2) Mr. Dimock commenced employment with the Company on October 16, 1995.
(3) Awarded on March 12, 1996 for performance in the second half of 1995;
payable in June 1996. It is anticipated that bonuses for 1996 and
future years will not be awarded until June of the following year.
(4) Dollar value calculated by multiplying the closing market price on the
Frankfurt Stock Exchange on the date of grant by the number of shares
awarded. The aggregate number of restricted shares held and their
value as of December 31, 1995 were as follows: Mr. Moody -- 57,692
shares/$845,188; Mr. Dimock -- 41,958 shares/$614,685; Mr. Masters --
19,091 shares/$279,683. All of these shares were awarded for 1995.
They will fully vest with respect to 13.333% on June 30, 1996, 1997,
1998 and 1999, and with respect to 46.668% on June 30, 2000. Regular
dividends are paid on restricted stock.
(5) "All Other Compensation" includes Company contributions to the Profit
Sharing Plan on behalf of the named individuals in the following
amounts: Mr. Moody -- $15,000; Mr. Dimock -- $15,000; and Mr. Masters
-- $12,859. Also includes premiums paid by the Company for life
insurance for the benefit of the named individuals in the following
amounts: Mr. Moody -- $2,783; and Mr. Masters -- $982, and a one-time
payment of $62,500 to Mr. Dimock as part of the arrangements for his
joining the Company.
Options Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for
Individual Grants Option Term
_____________________________________________________ ________________________
Number of Market
Securities % of Total Price on
Underlying Options Granted Exercise Date of
Options to Employees in Price Grant Expiration
Name Granted (#)(1) Fiscal Year ($/Sh)(2) ($/Sh)(3) Date 0%($) 5%($) 10%($)
---- -------------- ----------- --------- --------- ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John S. Moody 300,000 34.78% $14.30 $16.75 8/1/05 $735,000 $3,894,000 $8,745,000
Rodney C. Dimock 150,000 17.39 14.30 16.75 8/1/05 367,500 1,947,000 4,372,500
Andrew E. Masters, Jr. 75,000 8.70 14.30 16.75 8/1/05 183,750 973,500 2,186,250
</TABLE>
- ------------
(1) The Company has not granted any stock appreciation rights. These
options become exercisable in installments of 20% each year following the
date of grant and have a term of ten years. All outstanding stock options
would become fully exercisable prior to any reorganization, merger or sale
of assets of the Company where the Company is not the surviving corporation
or prior to liquidation of the Company or a change in control (as defined).
(2) The exercise price of the options is equal to the per share public offering
price of the Common Stock in the offering in Germany in August 1995 and is
paid in cash.
(3) Closing market price on the Frankfurt Stock Exchange.
7
<PAGE> 9
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-the-
Shares Acquired Options at FY-End(#) Money Options at FY-End ($)(1)
Name on Exercises(#) Value Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
----- --------------- ------------ ------------------- ------------------
<S> <C> <C> <C> <C>
John S. Moody 0 $0 0/300,000 $0/$105,000
Rodney C. Dimock 0 0 0/150,000 0/52,500
Andrew E. Masters, Jr. 0 0 0/75,000 0/26,250
- -----------
</TABLE>
(1) Market value of stock on the Frankfurt Stock Exchange at year-end less
option price.
Supplemental Pension Benefit
The Company has entered into a contract with Mr. Moody whereby amounts are
accrued under an unfunded arrangement to pay Mr. Moody a supplemental pension.
Under the contract, his supplemental pension account was established with a
credit of $250,000 as of July 1, 1995, and the Company is obligated to credit
the account in the amount of $60,000 each subsequent July 1 during the
continuance of Mr. Moody's employment. The account is also credited with any
deemed income, gains or losses which would be attributable to a corresponding
investment of an equal cash amount in such investment as the Company, taking
into account Mr. Moody's views, shall deem the account to be invested. In
general, unless his employment is terminated by the Company for cause (as
defined), Mr. Moody will receive in a lump sum the total amount credited to his
supplemental pension account when he retires or his employment otherwise ceases.
In the event Mr. Moody's employment is terminated by the Company other than for
cause, or if he resigns for good reason (as defined), in either case following a
change in control (as defined), the Company is obligated to credit his
supplemental pension account with an amount equal to $60,000 times the number of
years (and fractions) remaining between his age on the date his employment
ceases and age 60.
Report of the Audit Committee
The Audit Committee of the Board of Directors of the Company also functions
as the Compensation Committee. As such, it is responsible for administering
officers' compensation and makes recommendations to the Board in connection
therewith. All the members of the Committee are independent, non-employee
directors who are not eligible to participate in the programs which the
Committee oversees. Dr. Schorr is a retired Managing Partner of Bankhaus
Gebrueder Bethmann, whose parent, Bayerische Vereinsbank, received $5,720 as its
share of underwriting fees and commissions as an underwriter of the Company's
Common Stock offering in Germany in 1995. See "Certain Transactions --
Underwriting" below.
In early 1995, in anticipation of becoming self-administered on July 1, the
Company engaged Coopers & Lybrand L.L.P. to make recommendations with respect to
compensation. The resulting Coopers & Lybrand L.L.P. study recommended the
continuation of a short-term incentive compensation program for officers in the
form of cash bonuses and a long-term incentive program in the form of restricted
stock and stock option grants. The Audit Committee agrees with these
recommendations and has proposed, and the Board of Directors has adopted,
programs to implement them.
As to short-term compensation, the Committee believes that a large part of
officers' compensation should consist of annual bonuses based on Company
performance relative to predetermined goals and individual performance relative
to predetermined objectives. Under the bonus program as adopted, a target bonus
pool is established each year. Each officer's share of the pool is fixed based
on his/her level of responsibility, his/her performance relative to the
pre-established objectives and the President's evaluation of the officer's
performance. As a result of this process, target bonus levels for individuals
may range from 25% to 60% of base salary, with the weighted average for all
officers being 48%.
8
<PAGE> 10
The target pool will be awarded if the Company meets the pre-set goals. For
lesser, but still acceptable, performance, less than the target will be awarded.
For outstanding performance, more than the target will be awarded. As in effect
for 1996, the most important factors in evaluating performance are funds from
operations per share and subjective Board assessment, each weighted at 34%. The
other two factors are share price performance measured against the NAREIT office
building universe and total return as measured against the NACREIF office
building universe, both weighted at 16%. The President and CEO of the Company
participates in the bonus program on the same basis as other officers.
The Committee did not become responsible for executive compensation until
July 1, 1995, when the Company became self-administered. Except for Mr. Moody,
it continued executive officers' salaries for the rest of the year at the same
level as was being paid to the executive officers by Deutsche Bank Realty
Advisors, Inc. ("DBRA"), as such salaries were thought to be generally within
competitive ranges. It increased the annual salary portion of the compensation
of the President and CEO, Mr. Moody, from $250,000 to $350,000 in anticipation
of the annual bonus portion of his compensation in the immediate future being
about $100,000 less than the bonus portion of his compensation from DBRA. DBRA
paid bonuses to the Company's officers in 1995; the Company paid no bonuses in
1995, but the Board, upon recommendation of the Committee, has awarded bonuses
for payment in June 1996 based on performance in the second half of 1995,
including $100,000 to Messrs. Moody and Dimock, and $30,000 to Mr. Masters.
These bonuses were based on the subjective judgment of the Committee, taking
into account the success factors mentioned in the last paragraph of this report,
and not on the bonus process described above.
The Committee believes that, in general, executive compensation -- base
salaries plus annual incentive for meeting targets -- should be aimed at the
70th percentile of peer companies as provided by professional compensation
consultants. Company performance does not affect base salaries appreciably.
The restricted stock and stock option grants awarded in 1995 to Mr. Moody
and the other officers were based on recommendations by Coopers & Lybrand L.L.P.
and, among other factors, on the success of the Company in reducing leverage,
becoming self-administered, strengthening the management team through the
employment of Mr. Dimock and identifying additional investments. The grants to
Mr. Moody have identical terms to those of the other officers.
Submitted by the Audit Committee (functioning as the
Compensation Committee) of the Board of Directors.
Mr. H. C. Mautner, Chairman
Mr. B. Eagle
Dr. K.-L. Hermann
Dr. W. Schorr
Stockholder Return Graph
The following graph compares the yearly percentage change in the Company's
cumulative total stockholder return on its Common Stock (assuming reinvestment
of distributions at date of payment into Common Stock of the Company) with the
cumulative total return on the published Standard & Poor's 500 Stock Index and
the cumulative total return on the published NAREIT All Equity Index over the
preceding five year period. The following graph is presented pursuant to U.S.
Securities and Exchange Commission rules.
9
<PAGE> 11
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG CORNERSTONE PROPERTIES INC., S&P 500 INDEX AND
THE NAREIT ALL EQUITY INDEX**
Cornerstone S&P NAREIT
----------- --- ------
1990 100 100 100
1991 107 131 136
1992 119 141 155
1993 189 155 186
1994 182 157 192
1995 191 215 221
Assumes $100 invested on December 31, 1990 in Cornerstone Common Stock, S&P
500 Index and NAREIT All Equity Index.
- ---------------
* Total return assumes reinvestment of dividends and distributions.
** Fiscal year ending December 31.
CERTAIN TRANSACTIONS
Hines Interests Limited Partnership
Through an affiliate, Hines Interests Limited Partnership ("HILP"), of
which Mr. Topham is an Executive Vice President, held a 9% managing general
partnership interest and a 1% limited partnership interest in the limited
partnership which owns One Norwest Center in Denver, Colorado. The Company,
through a subsidiary, held a 90% general partnership interest in such limited
partnership. HILP has a management agreement with such partnership which expires
December 31, 2005 pursuant to which it was paid a management fee of
approximately $609,000 for 1995. It was also paid approximately $1,152,000 by
the limited partnership for other services rendered during 1995. The Company,
through a subsidiary, has acquired the HILP affiliate's 10% interest in this
partnership for $17,925,976 ($5,000,000 Common Stock and $12,925,976 promissory
note). The purchase price for the 10% partnership interest was arrived at by
arm's-length bargaining, with the Company being represented principally by Mr.
Moody. Another affiliate of HILP holds a 49% managing general partnership
interest and a 1% limited partnership interest in the limited partnership which
owns Norwest Center in Minneapolis, Minnesota. The Company, through a
subsidiary, holds a 50% general partnership interest in such limited
partnership. HILP has a management agreement with such partnership with an
initial term expiring December 31, 2001 pursuant to which it was paid
approximately $905,000 for 1995. It was also paid approximately $1,055,000 by
this limited partnership for other services rendered during 1995. HILP has a
management agreement for 125 Summer Street in Boston which was acquired by the
Company in the Fall of 1995. This agreement has an initial term expiring
December 31, 1999, and HILP was paid approximately $64,000 by the Company in
1995 under the agreement. HILP has similar arrangements with respect to three
other properties in Houston, Texas for which the Company is the real estate
adviser. In addition, HILP or its affiliates manage and own properties in the
Denver, Minneapolis, Boston and New York markets which compete with the
Company's properties and in the Houston market which compete with the advised
properties.
10
<PAGE> 12
Deutsche Bank AG
During 1995, the Company incurred an aggregate expense of approximately
$11,471,000 to Deutsche Bank AG New York Branch, Los Angeles Branch and Cayman
Islands Branch (the "Deutsche Bank Branches") as interest on loans and fees
related to interest rate hedges. In addition, the Company has a $12,000,000 line
of credit with Deutsche Bank AG Cayman Islands Branch, of which $10,530,000 was
available on April 30, 1996, and a $32,500,000 term loan with Deutsche Bank AG
London. All such fees and the agreements providing therefor were established
after arm's-length negotiations and are on terms that the Board believes to be
reasonable and similar to or better than those available to comparable customers
of the Deutsche Bank Branches.
In 1995, after approval by stockholders, the Advisory Agreement referred to
below between the Company and an affiliate of Deutsche Bank AG was terminated,
and the Company became self-administered. The Company continues to be managed by
substantially the same individuals who did so before such termination, but
Deutsche Bank no longer has any formal role in providing investment advice to
the Company. As another part of an overall plan, following the Common Stock
offering referred to under "Underwriting," Deutsche Bank purchased $50,000,000
of non-voting 7% Cumulative Preferred Stock of the Company convertible into
Common Stock commencing in 2000 at a conversion price of $16.50. The proceeds of
this sale were applied to the repayment of (i) $47,000,000 of senior debt of a
subsidiary of the Company in partial repayment of amounts owed to Deutsche Bank
AG relating to the Company's Seattle property and (ii) $3,000,000 of senior debt
of another subsidiary in partial repayment of amounts owed to Deutsche Bank
relating to the Company's Minneapolis property.
From June 1991 to July 1995, the Company was advised by Deutsche Bank
Realty Advisors, Inc. ("DBRA"), an affiliate of Deutsche Bank AG. The DBRA
Advisory Agreement was terminated by mutual consent on June 30, 1995, when the
Company became self-administered. DBRA received $1,077,000 (including
approximately $27,000 of reimbursable expenses) from the Company in 1995
pursuant to the agreement.
Underwriting
Deutsche Bank AG led a group of underwriters, including Commerzbank AG and
Bayerische Vereinsbank (the parent of Bankhaus Gebrueder Bethmann), in a
$90,500,000 Common Stock offering of the Company in Germany in 1995 for which it
received fees and commissions in the amount of $4,522,375. Commerzbank AG
received $114,400, and Bayerische Vereinsbank received $5,720 as their
respective share of the underwriting fees and commissions.
SELECTION OF AUDITORS
(Item 2 on Proxy Card)
The Audit Committee has recommended and the Board of Directors has selected
Coopers & Lybrand L.L.P. as independent auditors for the Company for the fiscal
year ending December 31, 1996. This selection is being presented to the
stockholders for ratification, although the Board of Directors may terminate the
appointment of Coopers & Lybrand L.L.P. as the Company's independent auditors
without the approval of the stockholders of the Company. The Company has been
advised that representatives of Coopers & Lybrand L.L.P. are expected to be
present at the Annual Meeting, will have the opportunity to make a statement and
will be available to respond to appropriate questions.
11
<PAGE> 13
OTHER MATTERS
(Item 3 on Proxy Card)
The Board of Directors does not currently intend to present any matter for
action at the Annual Meeting other than the matters described in this Proxy
Statement and does not know of any other matter to be brought before the
meeting. If any other matter should properly come before the meeting, the
persons named in the enclosed proxy will vote in regard thereto according to
their discretion, unless otherwise directed in the proxy.
* * *
Proposals of stockholders of the Company must be received by the Secretary
of the Company at its principal office not later than January 10, 1997 in order
to be included in the Company's proxy materials for the 1997 Annual Meeting of
Stockholders.
Upon written request to Cornerstone Properties Inc., 126 East 56th Street,
New York, New York 10022, Attention: Mr. Thomas P. Loftus, Vice President, any
stockholder may obtain a copy of the Company's Annual Report on Form 10-K filed
with the United States Securities and Exchange Commission for the fiscal year
ended December 31, 1995.
May 10, 1996
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<PAGE> 14
<TABLE>
<CAPTION>
PROXY -- CORNERSTONE PROPERTIES INC.
The undersigned stockholder of Cornerstone Properties Inc. (the "Company") hereby appoints John S. Moody and Claudia H. Steckler,
and each of them, as Proxies, each with the power of substitution, to vote all of the shares of Common Stock the undersigned may be
entitled to vote upon all matters at the Company's Annual Meeting of Stockholders to be held on Thursday, June 20, 1996, at 2:00
p.m. (local time) in Room E-2 at the head office of Deutsche Bank AG, Taunusanlage 12, Frankfurt (Main) Germany, and at all
adjournments thereof, with all powers the undersigned would possess if then and there personally present. Without limiting the
general authorization and power hereby given, the undersigned directs said Proxies to cast the undersigned's vote as specified on
the reverse side hereof. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR APPROVAL OF EACH OF THE PROPOSALS LISTED ON THE
REVERSE SIDE HEREOF. Stockholders who plan to attend the Annual Meeting may revoke their proxy by casting their vote at the meeting
in person.
<S> <C>
---------------------------------------
Name of Stockholder (please print)
---------------------------------------
Signature
---------------------------------------
Number of Shares Held
---------------------------------------
Name of Correspondent Bank
_________________________________, 1996
Date
PLEASE DATE, SIGN AND MAIL THIS PROXY TODAY IN THE ENCLOSED ENVELOPE.
</TABLE>
<PAGE> 15
<TABLE>
<S> <C> <C>
1. Election of Directors: | | FOR all nominees listed below | | WITHHOLD AUTHORITY to
(except as marked to the contrary below) vote for all nominees below
(INSTRUCTION: To withhold authority to vote for any nominee strike a line through the nominee's name)
R.-E. Breuer B. Eagle K.-L. Hermann G.A. Koning H.C. Mautner J.S. Moody G. Rauenhorst W. Schorr M.J.G. Topham B.T. Wetteskind
FOR AGAINST ABSTAIN
2. To ratify the appointment of Coopers & Lybrand L. L. P. as the Company's independent public
accountants for the fiscal year 1996. | | | | | |
3. To vote at the discretion of the Proxies upon such other matters as may properly come before
the meeting or any adjournment thereof. | | | | | |
---------------------
I intend to attend the Annual Meeting of Stockholders. Please send me an entry card. | |
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
(Continued and to be dated and signed on the reverse side)
</TABLE>
