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 Section 240.14a-11(c) or Section 240.14a-12
UNITED DOMINION REALTY TRUST
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[UNITED DOMINION LOGO]
REALTY TRUST
March 26, 1999
Dear Fellow Shareholders:
Please accept my personal invitation to attend the Annual Meeting of
Shareholders to be held on Tuesday, May 11, 1999, at 4:00 p.m. at the Omni
Richmond Hotel, 12th and Cary Streets, Richmond, Virginia. A map to the Omni is
located on your proxy card.
The formal business to be conducted at the meeting will be the election of
directors. We will also review 1998, report on recent financial results and
discuss expectations for the future. The directors and senior management will be
available to answer your questions during the meeting and afterward when you
will have the opportunity to speak informally with the directors and officers of
the Company.
We rely upon all shareholders to execute and return their proxies promptly
in order to avoid costly proxy solicitation. If you attend the Annual Meeting,
as I hope you do, you may withdraw your proxy at the meeting and vote your
shares in person from the floor. Your vote is important to the Company.
Thank you.
Sincerely,
UNITED DOMINION REALTY TRUST, INC.
/s/ John P. McCann
JOHN P. MCCANN
CHAIRMAN OF THE BOARD
UNITED DOMINION REALTY TRUST, INC.
10 South Sixth Street o Richmond, Virginia 23219-3802 o Tel: 804.780.2691
o Fax: 804.343.1912
<PAGE>
[UNITED DOMINION LOGO]
March 26, 1999
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 11, 1999 AT 4:00 P.M.
The Annual Meeting of Shareholders (the "Annual Meeting") of United Dominion
Realty Trust, Inc. (the "Company") will be held at the Omni Richmond Hotel,
12th and Cary Streets, Richmond, Virginia, on Tuesday, May 11, 1999, at 4:00
p.m., for the following purposes:
1. To elect eleven directors to serve for the ensuing year.
2. To transact such other business as may properly come before the meeting.
The holders of shares of Common Stock of record at the close of business on
March 5, 1999 (the "Record Date") are entitled to vote at the Annual Meeting.
If you are present at the Annual Meeting, you may vote in person even though
you have previously delivered your proxy.
By Order of the Board of Directors
/s/ Katheryn E. Surface
Katheryn E. Surface
CORPORATE SECRETARY
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
General Information About Voting 2
Election of Directors 2
Board of Directors and Committees 4
Executive Committee 4
Compensation Committee 5
Corporate Governance Committee 5
Audit Committee 5
Compensation of Directors 6
Ownership of Equity Securities 6
Indebtedness of Management to the Company 8
Compensation of Executive Officers 8
Compensation Committee Report on Executive Compensation 10
Compensation Design and Philosophy 10
Base Salary 11
Annual Incentives 11
Long Term Incentives 12
Employment Agreements 14
Performance Graph 15
Independent Public Accountants 16
Matters to be Presented at the 2000 Annual Meeting of Shareholders 16
Other Matters 16
</TABLE>
1
<PAGE>
[UNITED DOMINION LOGO]
PROXY STATEMENT
MARCH 26, 1999
GENERAL INFORMATION ABOUT VOTING
The enclosed proxy is solicited by the directors of the Company for the
Annual Meeting to be held at the Omni Richmond Hotel, 12th and Cary Streets,
Richmond, Virginia, at 4:00 p.m. on Tuesday, May 11, 1999. You may revoke the
proxy at any time prior to voting by notifying the persons named on the card of
your intention to revoke or by conduct inconsistent with continued
effectiveness of the proxy, such as delivering a later dated proxy or voting in
person at the Annual Meeting. Shares represented by executed proxies will be
voted, unless a different specification is made, FOR election as directors of
all of the persons nominated for directors. This proxy statement and the
enclosed proxy card were mailed beginning on or before March 26, 1999 to common
shareholders of record at the close of business on the Record Date. The Company
has mailed each holder of Common Stock of record as of the Record Date an
Annual Report that includes audited financial statements for the year ended
December 31, 1998.
At the close of business on the Record Date, there were 104,060,609 shares
of Common Stock outstanding and entitled to vote. Each share of Common Stock
has one vote on all matters, including those to be acted upon at the Annual
Meeting. The holders of a majority of the Common Stock present at the Annual
Meeting in person or represented by proxies will constitute a quorum. If a
quorum is present, the affirmative vote of a plurality of the shares of Common
Stock voting at the Annual Meeting is required to elect directors.
Shareholders who wish to abstain from voting on any matter to be voted on
at the Annual Meeting may do so by specifying that their vote on the matter be
withheld in the manner provided in the enclosed proxy, and the shares otherwise
votable by such shareholders will not be included in determining the number of
shares voted on such matter. The Company will comply with instructions in a
proxy executed by a broker or other nominee shareholder that less than all of
the shares of which such shareholder is the holder of record on the Record Date
are to be voted on a particular matter. All such shares which are not voted
("broker non-votes") will be treated as shares as to which vote has been
withheld.
Notices of revocation of proxies should be sent to the Company at 10 South
Sixth Street, Richmond, Virginia 23219-3802, Attention: Investor Services.
THE COMPANY WILL PROVIDE SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1998, ON WRITTEN REQUEST TO THE
MAILING ADDRESS SET FORTH ABOVE.
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting, each to hold
office until the next Annual Meeting of Shareholders and until his or her
successor is duly elected and qualified, except in the event of death,
resignation or removal. Unless otherwise specified, proxies solicited hereby
will be voted FOR election of the nominees listed below, except that in the
event any of those named should not continue to be available for election,
discretionary authority may be exercised to vote for a substitute. No
circumstances are presently known
2
<PAGE>
that would render any nominee named herein unavailable. All of the nominees are
now members of the Board of Directors and, other than Messrs. Freeman and
Klingbeil, were elected at the 1998 Annual Meeting of Shareholders. Messrs.
Freeman and Klingbeil were appointed to the Board at the closing of the
acquisition of American Apartment Communities II, Inc. ("AAC II") in December
1998. Mr. Williams, a director of the Company since 1972, and Chairman of the
Board from 1977 until 1996, will retire from the Board at the Annual Meeting.
The nominees, their ages, the year of election of each to the Board, their
principal occupations during the past five years or more, and directorships of
each in other companies, are as follows:
JEFF C. BANE, 69, is President of Blake & Bane Inc., Richmond, Virginia,
real estate brokers. He is a director of F&M Bank, Richmond, Virginia. He was
first elected to the Board in 1972.
R. TOMS DALTON, JR., 66, is of counsel and a former partner with Allen &
Carwile, Waynesboro, Virginia, attorneys. He is a director of First Virginia
Bank of Augusta, Waynesboro, Virginia. He was first elected to the Board in
1973.
ROBERT P. FREEMAN, 53, has been Managing Director, Lazard Freres & Co.,
L.L.C., New York, New York, since January 1, 1998, and is a principal and past
president of Lazard Freres Real Estate Investors, L.L.C. ("LFREI"). Mr. Freeman
is also a managing member of Prometheus Realty Investors, L.L.C., and a director
of Atlantic American Properties, Inc., The Rubenstein Company, Atria Senior
Quarters, Inc., ARV Assisted Living, Inc. and American Apartment Communities
III. He was appointed to the Board in connection with the acquisition of AAC II
(the "AAC Merger"). Mr. Freeman is a nominee, together with Mr. Klingbeil,
selected pursuant to provisions of the AAC Merger agreement giving L. F.
Strategic Realty Investors, L.P. ("LFSRI"), a partnership controlled by LFREI,
the right to select two nominees as holder of the shares of the Company's Series
D Cumulative Convertible Redeemable Preferred Stock ("Series D Preferred Stock")
issued in the AAC Merger.
JON A. GROVE, 55, was the Chairman of the Board, President and Chief
Executive Officer of ASR Investments Corporation ("ASR") since its organization
in 1987 until its acquisition by the Company in 1998. He is also a director of
American Southwest Holdings, Inc., in Phoenix, Arizona. Under the terms of the
Company's agreement for the acquisition of ASR, Mr. Grove was to be nominated as
a director at the 1999 annual meeting. Mr. Grove was appointed to the Board of
Directors in 1998 concurrently with the Company's acquisition of ASR.
JAMES D. KLINGBEIL, 63, has been the Chairman and Chief Executive Officer
of American Apartment Communities III, a privately owned real estate investment
trust ("REIT") based in San Francisco, California, since 1997. He was Chairman
and Chief Executive Officer of AAC II from 1995 until its acquisition by the
Company in December 1998. He is also Chairman and CEO of The Klingbeil Company
and Khempco Building Supply Company. He is a director of Burnham Pacific
Properties, Inc. and numerous private companies. He was appointed to the Board
in connection with the acquisition of AAC II. Mr. Klingbeil is a nominee,
together with Mr. Freeman, selected pursuant to provisions of the AAC Merger
agreement giving LFSRI, a partnership controlled by LFREI, the right to select
two nominees as holder of the shares of the Series D Preferred Stock issued in
the AAC Merger.
BARRY M. KORNBLAU, 49, a private investor, was employed by the Company as
Director of Apartments until April 18, 1997. He is also a director of Commerce
Bank of Virginia, RentGrow, Inc. and Virginia Community Development Corporation.
He was first elected to the Board in 1993.
3
<PAGE>
JOHN P. MCCANN, 54, is Chairman of the Board and Chief Executive Officer of
the Company and served as President from 1974 until the December 1998 meeting of
the Board. He is a director of LandAmerica Financial Group, Inc. (formerly
Lawyers Title Insurance Corporation), Richmond, Virginia, and Storage USA, Inc.,
Memphis, Tennessee. He was first elected to the Board in 1978.
LYNNE B. SAGALYN, Ph.D., 51, is the Earle W. Kazis and Benjamin Schore
Director of the M.B.A. Real Estate Program at Columbia University's Graduate
School of Business and has been a professor in its Finance and Economics
Division since 1992. From 1991 to 1992, she was a visiting professor at Columbia
University. From 1987 to 1991, she was an associate professor of Planning and
Real Estate Development at Massachusetts Institute of Technology. Dr. Sagalyn is
a trustee of Capital Trust, a public real estate company that specializes in
real estate lending, and a director of The Retail Initiative. She was first
elected to the Board in 1996.
MARK J. SANDLER, 56, was a senior managing director of Bear, Stearns & Co.,
Inc., an investment banking firm, in charge of its real estate operations from
prior to 1987 until his retirement in October 1988. Since that time, Mr. Sandler
has managed his personal and family investments. Mr. Sandler was a director of
South West Property Trust Inc. ("South West") at the time it was acquired by the
Company in 1996. He was first elected to the Board in 1996.
ROBERT W. SCHARAR, 50, is President and a director of FCA Corp., a
registered investment advisor, which he founded in 1983. He is also president
and a director of FCA Investment Company, a small business investment company,
and serves as a trustee of First Commonwealth Mortgage Trust and of United
Investors Realty Trust, both of which are REITs. Mr. Scharar is also past
president of the American Association of Attorneys - CPAs and was a director of
South West at the time it was acquired by the Company in 1996. He was first
elected to the Board in 1996.
JOHN S. SCHNEIDER, 60, is the President and Chief Operating Officer of the
Company and the Vice Chairman of the Board. He was the former Chief Executive
Officer and Chairman of the Board of South West or a predecessor from 1973
through 1996. He was first elected to the Board in 1996.
BOARD OF DIRECTORS AND COMMITTEES
During 1998, the Board held eight meetings (including one special
meeting). Each director attended at least 75% of the meetings of the Board and
of the committee or committees to which he or she was assigned. The Board has
established an Executive Committee, a Compensation Committee, a Corporate
Governance Committee and an Audit Committee as its standing committees. The
Company does not have a nominating committee, but, as noted below, the
Corporate Governance Committee performs the functions of a typical nominating
committee.
EXECUTIVE COMMITTEE
MEMBERS: FREEMAN, MCCANN, SAGALYN, SANDLER AND SCHNEIDER
The Board of Directors reactivated the Executive Committee in 1998. The
members of the Executive Committee are the chairpersons of each of the other
Committees of the Board, and Messrs. McCann and Schneider. The Executive
Committee:
o has, to the extent permitted by law, all powers of the Board of
Directors, except those powers specifically denied by the Board.
o serves as the Board's steering committee and recommends matters for
board action.
o met two times in 1998.
4
<PAGE>
COMPENSATION COMMITTEE
MEMBERS: FREEMAN (CHAIR), DALTON, GROVE, SANDLER AND WILLIAMS
The Compensation Committee:
o sets directors' fees and the compensation of the Chief Executive Officer,
the Chief Operating Officer and the Chief Financial Officer.
o administers the contributions and awards, if any, under the 401(k) and
profit sharing plans and management incentive programs, and other
management compensation, if any.
o approves the calculation of incentive/bonus compensation under the
employment agreements described in the "Employment Agreements" section.
o recommends for Board approval appropriate changes in director
compensation.
o sets annual objectives, subject to full Board approval, for the Chief
Executive Officer and approves annual objectives for the Chief Operating
Officer and Chief Financial Officer.
o met four times in 1998.
CORPORATE GOVERNANCE COMMITTEE
MEMBERS: SANDLER (CHAIR), GROVE, KLINGBEIL, KORNBLAU AND SCHARAR
The Board of Directors formed the Corporate Governance Committee in 1998.
The Corporate Governance Committee:
o exercises general oversight of Board governance matters.
o reviews and evaluates effectiveness, procedures and practices of the
Board and its members.
o considers and recommends nominees for election to the Board and the
composition of the Board and its committees.
o met two times in 1998.
AUDIT COMMITTEE
MEMBERS: SAGALYN (CHAIR), BANE, KLINGBEIL, MINOR AND SCHARAR
The Audit Committee:
o reviews the financial reporting practices of the Company and the
external audit function.
o oversees the integrity of the Company's financial records.
o oversees compliance with the Company's policies, plans and procedures,
as well as laws and regulations.
o hires the independent auditor.
o met four times in 1998.
5
<PAGE>
COMPENSATION OF DIRECTORS
o For 1998, directors were paid annual retainer fees of $15,000 plus $1,000
for each regular meeting attended and $300 for each phone meeting. During
1998, the directors as a group (other than Messrs. McCann, Dolphin and
Schneider, who received no additional compensation for serving as
directors) received fees of $206,260.
o Each independent director also receives an automatic annual grant of
2,000 stock options upon reelection.
o Any independent director retiring from the Board after at least twenty
years of service will receive $5,000 per year for the five years following
retirement.
o For 1999, the Board determined that annual retainer fees will be paid in
the form of an annual grant of stock options based on the closing price of
Common Stock on the first business day of the calendar year. Options
valued at approximately $15,000 were granted at the closing market price
on the first business day of 1998 and vest in equal amounts on the first
day of each quarter of 1998.
OWNERSHIP OF EQUITY SECURITIES
Beneficial ownership1 of shares of Common Stock as of the Record Date by
each director, each Named Executive and all directors and executive officers as
a group of the Company and nominees for election at the Annual Meeting,
including (1) shares deemed owned as a consequence of ownership of stock
options exercisable within 60 days; (2) shares the Company may issue on
redemption of units ("OP Units") in United Dominion Realty, L.P. ("UDRLP"), the
Company's operating partnership, redeemable within 60 days; and (3) shares
issuable on conversion of Series D Preferred Stock, is indicated in the table
below. Except as otherwise indicated in the footnotes, each person named in the
table and included in the director/officer group has sole voting and investment
powers as to such shares, or shares such powers with his or her spouse and
minor children, if any. As of the Record Date, there are no shareholders known
to the Company who own beneficially 5% or more of the outstanding shares of
Common Stock, other than LFSRI, which owns all outstanding shares of the Series
D Preferred Stock that is convertible into Common Stock as described in the
table below.
- ----------
1"Beneficial ownership" has been determined by the Securities and Exchange
Commission (the "Commission") and is not to be construed as an admission that
any of such shares are in fact beneficially owned by any person.
6
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
--------------------------------------
SHARES FOR WHICH TOTAL BENEFICIAL OWNERSHIP
SHARES BENEFICIAL OWNERSHIP ----------------------------
NAME OF BENEFICIALLY CAN BE ACQUIRED NUMBER OF PERCENT
BENEFICIAL OWNER OWNED (1) WITHIN 60 DAYS (2) SHARES (2) OF CLASS (2)
- ----------------------------------------------- -------------- --------------------- ------------ -------------
<S> <C> <C> <C> <C>
Jeff C. Bane (3) .............................. 115,829 19,500 135,329 .11%
R. Toms Dalton, Jr. ........................... 54,320 17,500 71,820 .06%
Robert P. Freeman (4) ......................... -- 7,500 7,500 .01%
Jon A. Grove .................................. 389,078 9,500 398,578 .33%
James D. Klingbeil (5) ........................ -- 7,500 7,500 .01%
Barry M. Kornblau ............................. 271,035 144,009 415,044 .34%
Lynne B. Sagalyn .............................. 2,500 18,500 21,000 .02%
Mark J. Sandler (7) ........................... 89,432 11,500 100,932 .08%
Robert W. Scharar ............................. 33,172 11,500 44,672 .04%
C. Harmon Williams, Jr. (3) ................... 110,604 19,500 130,104 .11%
John S. Schneider (6) ......................... 453,937 89,593 543,530 .45%
John P. McCann (3) (6) ........................ 413,400 432,985 846,385 .70%
James Dolphin ................................. 173,821 284,064 457,885 .38%
Richard A. Giannotti (6) ...................... 80,446 78,373 158,819 .13%
Mark E. Wood (6) .............................. 29,000 11,666 40,666 .03%
All directors and executive officers as a group
(15 persons) ................................. 2,121,574 1,163,190 3,379,764 2.80%
All directors and officers as as a group
(57 persons) ................................. 2,416,196 1,641,234 4,057,430 3.36%
5% Owners
LFSRI ........................................ 12,307,692 -- 12,307,692 10.2%
</TABLE>
- ----------
(1) Includes shares purchased pursuant to the Officers' Stock Purchase and Loan
Program.
(2) Assumes (i) conversion of all outstanding Series D Preferred Stock; (ii)
exercise in full of all options exercisable within 60 days; and (iii)
redemption in exchange for Common Stock of all OP Units redeemable within
60 days.
(3) Includes, in the case of Messrs. McCann, Bane and Williams and all
directors and officers as a group, 47,500 shares owned by Planned Property
Realty Corp., of which Mr. McCann is President and 50% shareholder and of
which Messrs. Bane and Williams are each 25% shareholders.
(4) Does not include shares of Series D Preferred Stock outstanding which are
indirectly beneficially owned by LFSRI. Mr. Freeman, who is a principal of
the general partner of LFSRI, has disclaimed beneficial ownership of these
shares.
(5) Mr. Klingbeil owns 1,071,906 OP Units which are not redeemable until
December 7, 1999.
(6) Does not include 284,548 shares, 180,407 shares, 93,559 shares and 33,334
shares issuable upon the exercise of options granted to Messrs. McCann,
Schneider, Giannotti and Wood, respectively, which are not exercisable
within 60 days.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
(7) Mr. Sandler filed a late Form 4 in January of 1999 with respect to a
purchase of Common Stock in July of 1998.
7
<PAGE>
CERTAIN TRANSACTIONS
In a transaction related to the AAC Merger, certain limited partners of
American Apartment Communities II, L.P., AAC II's operating partnership
("AACLP"), including two entities controlled by Mr. Klingbeil, contributed
their partnership interests in AACLP to UDRLP in exchange for a total of
5,359,532 OP Units, and Mr. Klingbeil contributed his interest in AACLP to
UDRLP for $1,127,570 in cash. In the AAC Merger, the Company also issued
8,000,000 shares of Series D Preferred Stock to LFSRI, an affiliate of Lazard
Freres & Co., L.L.C., of which Mr. Freeman is a Managing Director.
The Company determined the purchase price for the AAC Merger on the basis
of its analysis of the portfolio of apartment properties owned by AAC and the
expected effects of the transaction on its earnings and shareholder value in
the long-term. The purchase price consisted of cash, assumption of debt, OP
Units and Series D Preferred Stock, which, except for assumption of debt, were
allocated among the various affiliated selling entities and persons, including
Mr. Klingbeil, the partnerships controlled by him and LFSRI, in accordance with
their directions.
INDEBTEDNESS OF MANAGEMENT TO THE COMPANY
The directors and executive officers of the Company listed in the table
below are indebted to the Company for Common Stock purchased pursuant to the
Company's 1991 Stock Purchase and Loan Plan (the "Stock Purchase Plan"). The
table indicates the largest amount of the indebtedness outstanding since the
beginning of fiscal year 1998 and the amount outstanding at March 31, 1999. As
provided in the Stock Purchase Plan, such indebtedness bears interest at 7% per
annum.
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
INDEBTEDNESS INDEBTEDNESS
NAME SINCE JANUARY 1, 1998 AT MARCH 31, 1999
------- ----------------------- ------------------
<S> <C> <C>
John P. McCann ................................ $1,656,992 $1,613,813
John S. Schneider ............................. 156,404 155,579
James Dolphin ................................. 841,968 823,042
Richard A. Giannotti .......................... 602,274 592,383
Mark E. Wood .................................. -- --
Curtis W. Carter .............................. 516,175 504,124
Walter J. Lamperski ........................... 178,647 176,968
Robert L. Landis .............................. 186,824 185,532
Katheryn E. Surface ........................... 339,447 335,205
All directors and executive officers as a group
(19 persons) ................................. 4,478,731 4,386,646
</TABLE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents information relating to total compensation
during the fiscal years ended December 31, 1998, 1997 and 1996, of the chief
executive officer and the persons who were the four executive officers serving
at the end of fiscal 1998 who were most highly compensated for that year or who
served as executive officers during 1998 and would have been among the four
most highly compensated executive officers serving at 1998 year end if they
were then serving as executive officers (collectively, the "Named Executives"):
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
AWARDS PAYOUTS
----------------------------- ---------
OTHER RESTRICTED SECURITIES
NAME AND BASE ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION (1)
- ------------------- ------ ----------- ------------- ---------------- ------------ ---------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John P. McCann 1998 $374,000 $ 56,000(3) -- -- 220,000 -- $ --
Chief Executive 1997 363,000 119,400 -- -- 160,000(2) -- 805
Officer 1996 335,000 53,626 -- -- 65,000 -- 2,590
John S. Schneider 1998 $266,000 $ 56,000(3) -- -- 150,000 -- $ --
President and 1997 258,300 107,100 -- -- 150,000(2) -- 805
Chief Operating 1996 -- -- -- -- -- -- --
Officer
James Dolphin 1998 $230,000 $ -- -- -- -- -- $ (4)
Executive Vice 1997 223,300 68,000 -- -- 120,000 -- 805
President 1996 186,000 35,000 -- -- 32,500 -- 2,590
and Chief Financial
Officer
Richard A. Giannotti 1998 $175,000 $ 52,000 -- -- 33,333 -- $ --
Senior Vice President 1997 153,300 56,700 -- -- 70,000(2) -- 805
Director of 1996 134,500 21,053 -- -- 30,000 -- --
Development-East
Mark E. Wood 1998 $138,000 $ 86,775 -- -- 33,333 -- $ --
Vice President and 1997 124,000 8,000 -- -- 20,000(2) -- 805
Director of 1996 -- -- -- -- -- -- --
Development-West
</TABLE>
- ----------
(1) Represents contributions to the Profit Sharing Plan for each of the Named
Executives.
(2) For Messrs. McCann, Schneider, Giannotti and Wood, 106,667, 80,000, 33,333
and 13,333, respectively of their stock options granted on December 9,
1997, at $14.25 were cancelled. See "Long Term Incentives" in Compensation
Committee Report on Executive Compensation.
(3) Messrs. McCann and Schneider each received $30,000 of their 1998 bonus in
the form of a grant of stock options, with each option being valued at
$1.00 using the Black-Scholes fair value pricing model.
(4) Beginning in January 1999, severance compensation of $500,000 is payable to
Mr. Dolphin in twenty-four equal monthly installments of $20,833.33 each.
9
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR END (1) AT FISCAL YEAR END (2)
NAME ON EXERCISE REALIZED (2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- ------------- -------------- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
John P. McCann 5,892 $ 39,403 401,457/286,076 $--/$--
John S. Schneider -- -- 41,932/178,068 $--/$--
James Dolphin(3) 12,660 (15,825) 284,064/ -- $--/$--
Richard A.Giannotti -- -- 70,754/101,178 $--/$--
Mark E. Wood -- -- 6,622/38,378 $--/$--
</TABLE>
- ----------
(1) Includes unvested options for 220,000 shares, 150,000 shares, 33,333 shares
and 33,333 shares for Messrs. McCann, Schneider, Giannotti and Wood,
respectively.
(2) These values are calculated based on the difference between the exercise
price(s) and the fair market value of the stock, as determined by
reference to the closing sale prices on the NYSE as of the exercise
date(s) or December 31, 1998, as appropriate.
(3) In accordance with a severance agreement dated October 7, 1998 by and
between the Company and Mr. Dolphin, all of Mr. Dolphin's options became
exercisable as of December 31, 1998.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board is responsible for developing and
administering compensation programs for (i) executive officers, including base
salaries, annual incentives and long term incentive plans; and (ii) long term
incentive compensation plans for all associates. This Committee also sets
annual objectives for the Chief Executive Officer and approves annual
objectives for the Chief Operating Officer and the Chief Financial Officer
based upon recommendations of the Chief Executive Officer. The Chief Executive
Officer sets the annual objectives for the other Named Executives.
COMPENSATION DESIGN AND PHILOSOPHY
The Company's compensation plan for officers and other key associates is
designed to:
o provide appropriate incentives for the executives while aligning their
interests with those of the Company's shareholders.
o be competitive.
o attract and retain management talent.
o focus key associates on business objectives and critical issues.
With respect to executive officer compensation, the Compensation Committee
has adopted the following specific philosophies:
o base salaries should be slightly below industry averages.
o annual incentive compensation, which is tied to meeting Company and
individual objectives, should be approximately equal to industry average
when objectives are met.
10
<PAGE>
o long term incentive compensation, which aligns the interest of executive
officers with those of shareholders, can be above industry averages when
the long-term performance of the Company's common stock is above average.
The Company's executive compensation consists of base salary, annual
incentives and long term incentives. Each of the elements and the process are
described below.
BASE SALARY
The Chief Executive Officer makes recommendations to and consults with the
Compensation Committee as to the amount of proposed base salaries for the Chief
Operating Officer and the Chief Financial Officer. After consulting with the
Chief Executive Officer, and considering the factors discussed below, the
Compensation Committee sets the base salaries for the year. Factors considered
by the Compensation Committee in setting base salaries include salaries paid
for similar positions within the real estate and REIT industry (with emphasis
on the multi-family sector) as published in industry statistical surveys, any
planned change of responsibility for the forthcoming year, and proposed base
salary relative to that of the other executive officers, Company performance
and total return to shareholders versus other apartment REITs, with no one
factor being given more weight than any of the other factors. The Compensation
Committee also considered the comments of the KPMG Peat Marwick LLP, now
William M. Mercer, Inc. (the "Compensation Consultant") hired by the Company in
1998 (see "Long Term Incentives") when setting base salaries for the Chief
Executive Officer and the Chief Operating Officer.
ANNUAL INCENTIVES
After the full Board establishes annual Company objectives, the
Compensation Committee establishes performance measures and targets for the
Chief Executive Officer, and for the Chief Operating Officer and Chief
Financial Officer after consulting with the Chief Executive Officer. The Chief
Executive Officer establishes performance measures and targets for the other
key executives and weighting among Company, departmental and personal
performance objectives depending upon the particular executive's
responsibilities. The targets were used to focus the executive's attention on
key business issues and objectives.
There are two key components to annual incentive compensation. The first
component for the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer was up to 50% of annual incentive compensation based upon (i)
growth in funds from operations ("FFO") versus the prior year; and (ii) Company
total return to common shareholders versus other apartment REITs as shown on
the performance graph in this proxy statement. The actual amount of this
component is a function of the rate of FFO per share growth over the prior year
and the actual total return to shareholders as compared to other apartment
REITs (the "Index") as shown in the performance graph in this proxy statement.
The Company did not reach either of these performance goals in 1998, so none of
the Named Executives earned this component of annual incentive compensation for
1998. The second component, consisting of departmental and personal objectives,
focused on individual areas of responsibility and goals for each executive,
such as strategic Company objectives for Mr. McCann, property performance
growth and various new initiative objectives for Mr. Schneider and financing,
systems and shareholder relations objectives for Mr. Dolphin. Certain
objectives were met, including, with respect (i) to the Chief Executive
Officer, progress on the strategic repositioning and the AAC Merger; and (ii)
with respect to the Chief Operating Officer, same community net operating
income growth.
11
<PAGE>
LONG TERM INCENTIVES
During 1998, the Compensation Committee engaged the Compensation
Consultant to study program design for long term executive incentive
compensation, including the Stock Purchase Plan and the Stock Option Plan,
which were the principal long term incentive compensation vehicles of the
Company, and employment contracts. The Compensation Consultant made several
recommendations to the Compensation Committee, including an annual grant of
stock options with vesting over three years, the implementation of a
shareholder value plan and revisions to executive employment agreements.2
Historically, the Company has used either annual grants or biannual grants
of stock options vesting over one or two years as the principal means of long
term incentive compensation. The Compensation Consultant recommended that stock
options, and restricted stock in the case of non-officer key associates, be
granted every year but vest over three years to better bind officers and other
key associates to the Company and to align the interests of officers and
non-officers to stock performance and the shareholders. The Compensation
Committee adopted these recommendations in 1998. In order to begin granting
options annually to implement the recommendation, the officers agreed that
unvested options that were granted in 1997 were cancelled. The Company then
granted options for 1998, that vest over a three year period beginning in 1999,
at an exercise price of $10.875, which was the fair market value of the Common
Stock as of December 8, 1998.
The Compensation Consultant also recommended a shareholder value plan
("Shareholder Value Plan") as the second part of long term incentive
compensation, which the Compensation Committee adopted for 1999 long term
incentive compensation. Compensation in the Shareholder Value Plan is tied to
the total return to shareholders over a three year period exceeding the Index.
Because there is a new three year performance period each year, the Shareholder
Value Plan also binds the officers to the Company and aligns this component of
long term incentive compensation to total shareholder return.
The following tables present information concerning the cancellation of
stock options previously awarded to the Company's executive officers and the
new stock option grants described above. The Company does not grant stock
appreciation rights.
- ----------
2 Recommendations concerning employment agreements, which were adopted by the
Compensation Committee, are described in the "Employment Agreements" section
below.
12
<PAGE>
TEN YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF CANCELLED
SECURITIES OPTION TERM
UNDERLYING MARKET PRICE EXERCISE PRICE REMAINING AT
OPTIONS OF STOCK AT AT TIME OF DATE OF
NAME DATE CANCELLED (#)(1) CANCELLATION ($) CANCELLATION ($) CANCELLATION
- ---------------------- --------- ------------------ ------------------ ------------------ -------------
<S> <C> <C> <C> <C> <C>
John P. McCann 12/8/98 106,667 $ 10.88 $ 14.25 9 years
John S. Schneider 12/8/98 80,000 $ 10.88 $ 14.25 9 years
Richard A. Giannotti 12/8/98 33,333 $ 10.88 $ 14.25 9 years
Mark E. Wood 12/8/98 13,333 $ 10.88 $ 14.25 9 years
Curtis W. Carter 12/8/98 40,000 $ 10.88 $ 14.25 9 years
Robert C. Landis 12/8/98 40,000 $ 10.88 $ 14.25 9 years
Walter J. Lamperski 12/8/98 40,000 $ 10.88 $ 14.25 9 years
Katheryn E. Surface 12/8/98 40,000 $ 10.88 $ 14.25 9 years
</TABLE>
- ----------
(1) These options vested in 1999.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL
SECURITIES OPTIONS/SAR'S RATES OF SHARE PRICE
UNDERLYING GRANTED TO EXERCISE OR APPRECIATION FOR OPTION TERM
OPTIONS/SAR'S EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#)(2) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ---------------- ------------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John P. McCann 220,000 19.34% $ 10.875 12/8/08 $1,504,630 $3,813,029
John S. Schneider 150,000 13.18% $ 10.875 12/8/08 $1,025,884 $2,599,792
Richard A.Giannotti 33,333 2.93% $ 10.875 12/8/08 $ 227,972 $ 577,726
Mark E. Wood 33,333 2.93% $ 10.875 12/8/08 $ 227,972 $ 577,726
Curtis W. Carter 45,000 3.96% $ 10.875 12/8/08 $ 307,765 $ 779,938
Walter J. Lamperski 45,000 3.96% $ 10.875 12/8/08 $ 307,765 $ 779,938
Robert C. Landis 45,000 3.96% $ 10.875 12/8/08 $ 307,765 $ 779,938
Katheryn E. Surface 40,000 3.52% $ 10.875 12/8/08 $ 273,569 $ 693,278
</TABLE>
- ----------
(1) A total of 1,137,665 employee stock options were granted in 1998.
(2) These options vest over a three year period beginning in 1999.
13
<PAGE>
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with each of the Named
Executives, other than Mr. Wood, in December of 1998, terminating agreements
that had previously been entered into with Messrs. McCann, Schneider and
Giannotti. The new agreements were executed to incorporate covenants not to
compete and non-solicitation protections for the Company and change of control
protections for the executives in accordance with the recommendations of the
Compensation Consultant. The employment agreement for Mr. Dolphin terminated as
of December 31, 1998. The employment agreements (i) expire annually on December
31 but renew automatically for successive one year periods unless sooner
terminated; (ii) are on substantially similar terms except for base
compensation terms; (iii) provide annual base salaries for the executives,
subject to increase at the discretion of the Board of Directors or the Chief
Executive Officer in the case of Mr. Giannotti, which base salaries are
disclosed in the Summary Compensation Table; and (iv) provide for annual
incentive/bonus compensation, as described above. Other than in the event of a
change of control which is described below, the agreements provide that the
executive is entitled to severance pay equal to (x) one year of annual base
salary; (y) incentive/bonus compensation earned by the executive for that year;
and (z) an amount equal to the sum of annual incentive compensation earned by
the executive over the past two calendar years divided by two.
The agreements also provide for certain benefits in the event of a change
of control of the Company followed by termination of employment without cause
following the change of control for a period of two years. The benefits are
also paid in the event of termination by the employee for certain reasons,
including the assignment to the executive of duties inconsistent with those
that are currently assigned, greater than a 10% decrease in pay, change in
principal work location or decrease in benefits. In the event of a change of
control, Messrs. McCann and Schneider are to receive up to three years of
annual base compensation, incentive compensation and benefits, and Mr.
Giannotti is to receive up to two years of annual base compensation, incentive
compensation and benefits. All incentive compensation is based upon the average
annual incentive compensation earned by the executive for the two calendar
years prior to the effective date of termination. The agreements also provide
for all long term benefits to become fully vested and payable upon the change
of control.
COMPENSATION COMMITTEE
Robert P. Freeman, Chairman
R. Toms Dalton, Jr. Mark J. Sandler
Jon A. Grove C. Harmon Williams, Jr.
14
<PAGE>
PERFORMANCE GRAPH
The following graph indicates appreciation of $100 invested on December
31, 1993, in Company Common Stock ("UDR"), S&P 500, NAREIT Equity REIT Total
Return Index and NAREIT Equity Apartment REIT Total Return Index securities,
assuming full reinvestment of dividends.
[GRAPH]
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
United Dominion Realty Trust 100 106.53 118.32 130.58 125.84 100.98
NAREIT Equity Apartment 100 102.19 114.76 147.31 170.93 157.29
NAREIT Equity 100 103.17 118.93 160.86 193.45 159.60
S&P 500 100 101.31 139.23 171.24 228.37 293.64
</TABLE>
The NAREIT Equity Apartment Index and NAREIT Equity Index are published by
The National Association of Real Estate Investment Trusts ("NAREIT"). Index
data reflect monthly reinvestment of dividends and are based upon the monthly
closing prices of shares of all tax-qualified equity apartment REITs and equity
REITs, including the Company, listed on the New York Stock Exchange, the
American Stock Exchange and traded in the NASDAQ National Market System. At
December 31, 1998, the NAREIT Equity Apartment Index included 26 equity
apartment REITs with a total market capitalization of $22.4 billion and the
NAREIT Equity Index included 173 equity REITs with a total market
capitalization of $126.9 billion.
15
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company, from its inception, has engaged the firm of Ernst & Young,
LLP or a predecessor as its independent public accountants, and the Audit
Committee of the Board selected Ernst & Young, LLP as auditors for 1999.
Representatives of Ernst & Young, LLP will be present at the Annual
Meeting, will be given the opportunity to make any statement they desire to
make and will be available to respond to questions.
MATTERS TO BE PRESENTED AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS
Any qualified shareholder wishing to make a proposal to be acted upon at
the Annual Meeting of Shareholders in 2000 must submit such proposal, to be
considered by the Company for inclusion in the proxy statement, to the Company
at its principal office in Richmond, Virginia, no later than December 11, 1999.
OTHER MATTERS
Management knows of no matters other than election of directors likely to
be brought before the Annual Meeting. However, if any matters not now known
come before the Annual Meeting, the persons named in the enclosed proxy are
expected to vote the shares represented by such proxy on such matters in
accordance with their best judgment.
THE COMPANY DEPENDS UPON ALL SHAREHOLDERS PROMPTLY SIGNING AND RETURNING
THE ENCLOSED PROXY TO AVOID COSTLY SOLICITATION. YOU CAN SAVE THE COMPANY
CONSIDERABLE EXPENSE BY SIGNING AND RETURNING YOUR PROXY AT ONCE.
16
<PAGE>
Proxy Solicited by the Shares of Common Stock
Board of Directors
United Dominion Realty Trust, Inc.
ANNUAL MEETING OF SHAREHOLDERS
May 11, 1999
The undersigned hereby appoints John P. McCann and John S. Schneider as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote all shares of Common Stock of the undersigned in
United Dominion Realty Trust, Inc. at the Annual Meeting of Shareholders to be
held on May 11, 1999, and at any and all adjournments thereof:
(Please date and sign on the reverse side)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR election of all nominees for the Board of Directors who are listed, all as
described in the Proxy Statement dated March 26, 1999, receipt of a copy of
which is acknowledged by execution of this proxy.
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
[UNITED DOMINION LOGO]
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
1. ELECTION OF DIRECTORS Nominees: Jeff C. Bane, R. Toms Dalton, Jr., Robert P. Freeman, 2. SUCH OTHER BUSINESS AS MAY
Jon A. Grove, James D. Klingbeil, Barry M. Kornblau, PROPERLY COME BEFORE THE MEETING.
FOR all nominees VOTE WITHHELD John P. McCann, Lynne B. Sagalyn, Mark J. Sandler,
listed (except as for all nominees Robert W. Scharar and John S. Schneider FOR AGAINST ABSTAIN
written to the listed (INSTRUCTION: To withhold authority to vote for any [ ] [ ] [ ]
contrary) individual nominee, write that nominee's
[ ] [ ] name in the space provided below.)
__________________________________________________
Dated: ______________________________,1999
__________________________________________
__________________________________________
(Signature)
Please sign exactly as your name(s) appear(s) on this
proxy. Only one owner of jointly owned shares need
sign. When signing in a representative capacity, please
give title. PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY USING THE ENCLOSED ENVELOPE.
</TABLE>
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
UNITED DOMINION REALTY TRUST, INC.
ANNUAL SHAREHOLDERS' MEETING
TUESDAY, MAY 11, 1999 [MAP]
4:00 P.M.
OMNI RICHMOND HOTEL
JAMES RIVER ROOM
100 SOUTH 12TH STREET
RICHMOND, VIRGINIA 23219
Coming From The North
(Fredericksburg, Washington, D.C., Maryland...)
Arriving on 95 South o Take exit 74A (195 or Downtown
Expressway) o Take first exit which is Canal Street exit o Next
right onto 10th Street (see sign for Shockoe Slip) o Take right at
next light which is Cary Street.
Coming From The South
(Petersburg, North Carolina...)
Arriving on 95 North o Take exit 74A (195 or Downtown
Expressway) o Take first exit which is Canal Street exit o Next
right onto 10th Street (see sign for Shockoe Slip) o Take right at
next light which is Cary Street.
Coming From The West
(Charlottesville, Lexington...)
Follow 64 East to 95 South o Take exit 74A (195 or Downtown
Expressway) o Take first exit which is Canal Street exit o Next
right onto 10th Street (see sign for Shockoe Slip) o Take right at
next light which is Cary Street.
Coming From The East
(Virginia Beach, Norfolk, Williamsburg or Richmond Airport...)
Arriving on 64 West o Take exit to 95 South o Take exit 74A
(195 or Downtown Expressway) o Take first exit which is Canal
Street exit o Next right onto 10th Street (see sign for Shockoe
Slip) o Take right at next light which is Cary Street.
For your convenience, the Company will validate parking for the garage located
beneath the Omni Richmond Hotel.
