<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT")
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<CAPTION>
Check the appropriate box:
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
AMERICAN INDUSTRIAL PROPERTIES REIT
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
<TABLE>
<CAPTION>
Payment of Filing Fee (Check the appropriate box):
<S> <C>
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------------------------
</TABLE>
<PAGE> 2
AMERICAN INDUSTRIAL PROPERTIES REIT
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 8, 1999
---------------
TO THE SHAREHOLDERS OF AMERICAN INDUSTRIAL PROPERTIES REIT:
You are cordially invited to attend the annual meeting of shareholders
of American Industrial Properties REIT to be held at 2200 Ross Avenue, Suite
2200, Dallas, Texas 75201, on December 8, 1999, at 9:00 a.m. Dallas time for the
following purposes:
1. To elect 11 trust managers.
2. To ratify the selection of Ernst & Young LLP as independent auditors
for the fiscal year ending December 31, 1999.
3. To transact such other business as may properly come before the
annual meeting or any postponements or adjournments thereof.
Only holders of record of our common shares of beneficial interest on
November 1, 1999 will be entitled to notice of, and to vote at, the annual
meeting or any postponements or adjournments thereof.
A copy of the proxy statement relating to the annual meeting
accompanies this notice of annual meeting of shareholders. You are urged to read
the proxy statement in its entirety.
YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF COMMON SHARES YOU HOLD. YOU ARE INVITED TO ATTEND
THE ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, YOU MAY
ENSURE YOUR REPRESENTATION BY COMPLETING, SIGNING, DATING AND PROMPTLY RETURNING
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL
MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Trust Managers
Marc A. Simpson
Secretary and Chief Financial Officer
November 1, 1999
<PAGE> 3
AMERICAN INDUSTRIAL PROPERTIES REIT
6210 N. BELTLINE ROAD
SUITE 170
IRVING, TEXAS 75063
(972) 756-6000
------------
PROXY STATEMENT
--------------
ANNUAL MEETING OF SHAREHOLDERS
---------------
This proxy statement is furnished in connection with the solicitation
of proxies by our trust managers for use at the annual meeting of shareholders
to be held at 2200 Ross Avenue, Suite 2200, Dallas, Texas 75201, at 9:00 a.m.
Dallas time on December 8, 1999. Accompanying this proxy statement is the proxy
for the annual meeting, which you may use to indicate your vote as to each of
the proposals described in this proxy statement. This proxy statement and the
accompanying proxy are first being mailed to you on or about November 5, 1999.
The annual report outlining our operations for the year ended December 31, 1998
was mailed to you on or about May 13, 1999.
The close of business on November 1, 1999 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the annual meeting. As of the record date, we had outstanding 20,903,212 common
shares of beneficial interest, $0.10 par value, our only outstanding security.
At the annual meeting, action will be taken to: (1) elect 11 trust
managers to hold office until their successors, if any, are duly elected and
qualified at the next annual meeting of shareholders; (2) ratify the selection
of Ernst & Young LLP as our independent auditors for the year ending December
31, 1999; and (3) transact such other business as may properly come before the
annual meeting or any postponements or adjournments thereof.
You are entitled to cast one vote for each common share you held on the
record date on all matters to be considered at the annual meeting. Cumulative
voting for the election of trust managers is not authorized by our Third Amended
and Restated Declaration of Trust.
You are urged to sign the accompanying proxy, and after reviewing the
information contained in this proxy statement, to return the proxy in the
envelope enclosed for that purpose. Valid proxies will be voted at the annual
meeting and at any adjournments thereof in the manner specified by you in the
proxy. If you give the proxies no direction, but you validly execute the proxy,
your proxy will be voted FOR proposals one and two. In their discretion, the
persons authorized under the proxies will vote upon such other business as may
properly come before the annual meeting.
You may revoke your proxy at any time before it is voted either by
filing with our corporate secretary at our principal executive office a written
notice of revocation, by submitting a duly executed proxy bearing a later date,
or by attending the annual meeting and expressing a desire to vote your common
shares in person.
The holders of a majority of the common shares issued and outstanding
and entitled to vote, present in person or represented by proxy (10,451,607
common shares), shall constitute a quorum for the transaction of business at the
annual meeting. If a quorum is not present at the annual meeting, the meeting
may be adjourned from time to time without notice, other than announcement at
the annual meeting, until a quorum is present. At any adjourned meeting at which
a quorum is present or represented, any business may be transacted that might
have been transacted at the original meeting.
Abstentions and broker non-votes will be included in the determination
of the number of common shares present at the annual meeting for quorum
purposes. However, abstentions and broker non-votes will not be treated as
entitled to vote. Broker non-votes occur when a nominee holding common shares
for a beneficial owner has not
<PAGE> 4
received voting instructions from the beneficial owner with respect to a
particular matter and such nominee does not possess or choose to exercise
discretionary authority with respect thereto.
The expense of preparing, printing and mailing proxy materials to you
will be paid by us. Proxies may also be solicited personally or by telephone by
our officers and employees, none of whom will receive additional compensation
for those services. In addition to mailing this material to shareholders, we
have asked banks and brokers to forward copies to persons for whom they hold
shares and to request authority for execution of the proxies. We will reimburse
the banks and brokers for their reasonable out-of-pocket expenses in forwarding
the materials.
Our principal executive offices are located at 6210 N. Beltline Road,
Suite 170, Irving, Texas 75063.
PROPOSAL ONE
ELECTION OF TRUST MANAGERS
The number of trust managers to be elected at the annual meeting is 11.
The election of trust managers requires the affirmative vote of a majority of
the outstanding common shares represented in person or by proxy at the annual
meeting (10,451,607 common shares). The term of each person elected as a trust
manager will continue until his successor is duly elected and qualified. Unless
such authority is withheld, it is the intention of the proxies to vote such
proxy FOR the election of the 11 nominees. All nominees currently serve as trust
managers. Any current trust manager not receiving the affirmative vote of a
majority of the outstanding common shares shall nevertheless remain a trust
manager unless another proper nominee receives the requisite vote. The following
table sets forth the name, age and year of election to the board of trust
managers of each person who is a nominee for trust manager.
<TABLE>
<CAPTION>
NAME AGE TRUST MANAGER SINCE
---- --- -------------------
<S> <C> <C>
Scott A. Wolstein 47 July 1998
Albert T. Adams 48 July 1998
William H. Bricker 67 September 1985
T. Patrick Duncan 50 December 1996
Robert H. Gidel 47 July 1998
Robert E. Giles 51 March 1996
Edward B. Kelley 58 December 1996
Stanley J. Kraska, Jr. 39 July 1997
J. Timothy Morris 33 January 1999
James A. Schoff 53 July 1998
Charles W. Wolcott 46 August 1993
</TABLE>
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each nominee during
the last five years has been furnished to us by each such nominee.
Scott A. Wolstein was appointed as a trust manager and as chairman of
the board of trust managers on July 30, 1998. Mr. Wolstein became chairman of
Developers Diversified Realty Corporation, commonly known as DDR, in February
1997, and has served as president and chief executive officer of DDR since its
organization in 1992 and its February 1993 initial public offering Mr. Wolstein
was a principal and executive officer of DDR's predecessors prior to 1993. Mr.
Wolstein is a graduate of the Wharton School at the University of Pennsylvania
and
2
<PAGE> 5
of the University of Michigan Law School. Following his graduation from the
University of Michigan Law School, Mr. Wolstein was associated with the
Cleveland law firm of Thompson, Hine & Flory. He is currently a member of the
board of trustees of the National Association of Real Estate Investment Trusts
and the International Council of Shopping Centers and serves as the general
co-chairman of the Cleveland Campaign for the State of Israel Bonds. He is also
a member of the Young Presidents Organization, The Urban Land Institute, the
Real Estate Roundtable and the Wharton Real Estate Center.
Albert T. Adams was appointed as a trust manager on July 30, 1998. Mr.
Adams has been a partner with the law firm of Baker & Hostetler LLP in
Cleveland, Ohio, since 1984, and has been affiliated with the firm since 1977.
Mr. Adams is a graduate of Harvard College, Harvard Business School and Harvard
Law School. He serves as a member of the board of trustees of the Greater
Cleveland Roundtable and of the Western Reserve Historical Society and is a vice
president of the Harvard Business School Club of Northeastern Ohio. Mr. Adams
also serves as a director of DDR, Associated Estates Realty Corporation, Boykin
Lodging Company, Captec Net Lease Realty, Inc. and Dairy Mart Convenience
Stores, Inc.
William H. Bricker has served as a trust manager since September 1985.
Mr. Bricker has served as president of DS Energy Services Incorporated and has
consulted in the energy field and on international trade since 1987. In May
1987, Mr. Bricker retired as the chairman and chief executive officer of Diamond
Shamrock Corporation where he held various management positions from 1969
through May 1987. Mr. Bricker is a director of the LTV Corporation, the Eltech
Systems Corporation and the National Paralysis Foundation. He received his
Bachelor of Science and Master of Science degrees from Michigan State
University.
T. Patrick Duncan has served as a trust manager since December 1996,
when he was appointed as a trust manager at the request of USAA Real Estate
Company, commonly known as Realco, pursuant to the Share Purchase Agreement
between the Trust and Realco dated as of December 13, 1996. Mr. Duncan joined
Realco in November 1986 as chief financial officer. With over 24 years of
experience, Mr. Duncan serves as senior vice president of real estate operations
of Realco with responsibilities which include the direction of all acquisitions,
sales, management and leasing of real estate for USAA-affiliated companies. Mr.
Duncan received degrees from the University of Arizona in Accounting and
Finance. He is a certified public accountant, certified commercial investment
manager, and holds a Texas real estate broker's license. Mr. Duncan is also a
member of the board of directors of USAA Equity Advisors, Inc.
Robert H. Gidel was appointed as a trust manager on July 30, 1998. Mr.
Gidel is the managing partner of Liberty Partners, LP, an investment partnership
formed to purchase securities interests in private and public real estate
companies. From 1997 through 1998, he was President and Chief Executive Officer
of Meridian Point VIII (AMEX:MPH), an industrial REIT based in San Francisco.
Prior to Meridian, he was President and Chief Operating Officer of Paragon Group
(NYSE:PAO), a multi-family REIT based in Dallas, Texas, from 1995 through 1997.
During 1993 through 1995, he was President ant Chief Executive Officer of Brazos
Partners based in Dallas, Texas. Prior to this, Mr. Gidel was a managing
director and member of the board of directors of Alex. Brown Kleinwort Benson
Realty Advisors, a real estate investment management firm formed in 1990 as a
result of the merger of Alex. Brown Realty Advisors (commonly known as ABRA) and
Financial Investment Advisors. Mr. Gidel had been president of ABRA since 1986.
From 1981 through 1985, Mr. Gidel served in a wide range of positions at Heller
Financial and its subsidiary, Abacus Real Estate Finance. He is a graduate of
the University of Florida's Warrington College of Business with a major in real
estate. Mr. Gidel is currently the chairman of the Real Estate Advisory Board at
the Warrington College of Business and a Hoyt Fellow at the Homer Hoyt
Institute.
Robert E. Giles has served as a trust manager since March 1996. Mr.
Giles is currently the owner and president of Robert E. Giles Interests, Inc., a
real estate consulting and development firm based in Houston, Texas. Mr. Giles
also serves as president of Title Network, Ltd., a national title insurance
agency. Mr. Giles was a vice president with the J.E. Robert Companies, Inc. from
1994 to 1995. From 1990 to 1994, Mr. Giles was president and a director of
National Loan Bank, a publicly-held company created through the merger of
Chemical Bank and Texas Commerce Bank. Mr. Giles received his Bachelor of Arts
degree from the University of Texas at Austin in 1970 and received a Master of
Arts degree from University of Texas at Arlington in 1973.
Edward B. Kelley has served as a trust manager since December 1996. Mr.
Kelley is president of Realco. He joined Realco in April 1989 as executive vice
president and chief operating officer before assuming his new title in August
1989. Mr. Kelley received his Bachelor of Business Administration degree from
St. Mary's University in
3
<PAGE> 6
1964 and a Masters in Business Administration from Southern Methodist University
in 1967, and is a member of the Appraisal Institute. Mr. Kelley is a member of
the board of directors of USAA Equity Advisors, Inc.
Stanley J. Kraska, Jr. has served as a trust manager since July
1997,when he was appointed as a trust manager at the request of ABKB/LaSalle
Securities Limited Partnership and LaSalle Advisors Capital Management, Inc.
pursuant to the terms of the common share purchase agreements between us and
ABKB (as agent for the benefit of a particular client) dated as of July 3, 1997.
Mr. Kraska has been employed by ABKB or its affiliates since February 1988. He
currently serves as managing director, with responsibility for private placement
investment. Mr. Kraska graduated from Dartmouth College in 1982 with a Bachelor
of Arts degree and received a Master of Business Administration degree from
Harvard University in 1986.
J. Timothy Morris has served as a trust manager since January 15, 1999.
Mr. Morris is a principal at Morgan Stanley Dean Witter and head of Morgan
Stanley's Real Estate Special Situations Program. Mr. Morris has over 11 years
experience at Morgan Stanley in the investment banking and direct investment
areas. Prior to heading up the Special Situations initiative, Mr. Morris spent
five years in Hong Kong leading Morgan Stanley's real estate business for Asia.
Mr. Morris currently serves on the board of Grove Property Trust, as well as on
the boards of two private REITs. He is a graduate of Indiana University and
holds a Bachelors degree in Finance.
James A. Schoff was appointed as a trust manager on July 30, 1998. Mr.
Schoff is vice chairman of the board and chief investment officer of DDR. Prior
to this promotion, Mr. Schoff served as DDR's executive vice president and chief
operating officer from the time of DDR's initial public offering, and he was a
principal and executive officer of DDR's predecessors. Mr. Schoff is a graduate
of Hamilton College and Cornell University Law School. Mr. Schoff practiced law
with the firm of Thompson, Hine and Flory where he specialized in the
acquisition and syndication of real estate properties. Mr. Schoff currently
serves as a member of the executive committee and board of trustees of the
Western Reserve Historical Society and the National Committee for Community and
Justice.
Charles W. Wolcott currently serves as trust manager, president and
chief executive officer. Mr. Wolcott was hired as the president and chief
executive officer in May 1993 and has served as a trust manager since August
1993. Mr. Wolcott was president and chief executive officer for Trammell Crow
Asset Services, a real estate asset and portfolio management affiliate of
Trammell Crow Company, from 1990 to 1992. He served as our vice president and
chief financial and operating officer from 1988 to 1991. From 1988 to 1990, Mr.
Wolcott was a partner in Trammell Crow Ventures Operating Partnership. Prior to
joining the Trammell Crow Company in 1984, Mr. Wolcott was president of Wolcott
Corporation, a firm engaged in the development and management of commercial real
estate properties. Mr. Wolcott graduated from the University of Texas at Austin
in 1975 with a Bachelor of Science degree and received a Master of Business
Administration degree from Harvard University in 1977.
We have no reason to believe that any of the nominees will not serve if
elected, but if any of them should become unavailable to serve as a trust
manager, and if the trust managers designate a substitute nominee, the proxies
will vote for the substitute nominee designated by the trust managers, unless a
contrary instruction is given in the proxy. The trust managers did not appoint a
nominating committee to nominate trust managers for election. No family
relationship exists among any of the trust managers or executive officers of the
trust.
Pursuant to the purchase agreement by and between us and DDR dated as
of July 30, 1998, as amended, Scott A. Wolstein, Robert H. Gidel, Albert T.
Adams and James A. Schoff, each of whom is a DDR designee, have been appointed
to our board of trust managers and Mr. Wolstein was elected chairman of the
board.
The purchase agreement with DDR further provides that at any of our
meetings held to elect trust managers, DDR will be entitled to nominate four
trust managers, including the chairman of the board. This right will continue,
based on DDR's ownership, as follows: (1) so long as DDR holds a number of
common shares that is equal to or greater than 75% of the number of common
shares purchased by DDR under the agreement, DDR will be entitled to nominate
four trust managers, including the chairman of the board; (2) so long as DDR
holds less than 75%, but equal to or greater than 50%, of the number of
purchased shares, DDR will be entitled to nominate three trust managers,
including the chairman; (3) so long as DDR holds less than 50%, but equal to or
greater than 25%, of the number of purchased shares, DDR will be entitled to
nominate two trust managers; and (4) if DDR holds a number of common shares that
is less than 25% of the number of purchased shares, then DDR's right to nominate
trust managers will terminate. The purchase agreement also provides that if the
board establishes committees, to the extent not precluded by the New York Stock
Exchange, DDR's nominees will have the right to serve on each such committee in
the same ratio as DDR's nominees represent of the entire board.
4
<PAGE> 7
The purchase agreement also provides that so long as DDR owns a number
of common shares that is more than 10%, but less than 25%, of the number of
purchased shares, in addition to the rights described in the preceding
paragraph, DDR will have the right to have a representative attend all of our
regular and special board meetings and those of our subsidiaries and any
committees thereof. This right includes the right to receive the same notice and
materials provided to members of such boards and each committee thereof.
Pursuant to the terms of the agreement by and among us, USAA, ABKB,
LaSalle Advisors and Morgan Stanley affiliates dated January 29, 1998, we must
nominate for election or re-election as trust manager at each annual meeting of
shareholders one nominee of the Morgan Stanley affiliate and one nominee of
ABKB, as agent and for the benefit of particular clients. We have no further
obligation to nominate their nominees at the time their holdings fall below 5%
of our issued and outstanding shares. Upon determining that a party has fallen
below the threshold, we may require such party's nominee to immediately resign
or to not seek election at the next annual meeting of shareholders. Pursuant to
the terms of the Realco share purchase agreement, Realco retains the right to
nominate an additional two trust managers to the board of trust managers.
Pursuant to the terms of the common share purchase agreement dated as of January
29, 1998 between us and Praedium II Industrial Associates LLC, Praedium obtained
full observation rights with respect to our board of trust managers, including
the right to obtain full and timely notice of all meetings of the board of trust
managers and of each of its committees, to obtain copies of all written and
other materials given to the board and to designate a person to attend in person
or by telephone all meetings of the board or its committees. Praedium's
observation rights terminate upon the occurrence of our annual meeting on
December 8, 1999.
Eighteen regular or special trust manager meetings were held during the
fiscal year ended December 31, 1998. Edward B. Kelley attended fewer than 75% of
the aggregate of the total number of meetings of the board of trust managers and
the total number of meetings held by all trust manager committees on which he
served.
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is information regarding the names and ages of our
executive officers, all positions held with us by each individual, and a
description of the business experience of each individual for at least the past
five years.
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
Charles W. Wolcott 46 Trust Manager, President and Chief
Executive Officer
Lewis D. Friedland 40 Executive Vice President and Chief
Operating Officer
Marc A. Simpson 45 Senior Vice President and Chief
Financial Officer, Secretary and
Treasurer
David B. Warner 41 Senior Vice President-Real Estate
Operations
</TABLE>
Information regarding the business experience of Mr. Wolcott is
provided under "Proposal One -- Election of Trust Managers" on page 4.
Lewis D. Friedland currently serves as executive vice president and
chief operating officer. He was hired as our vice president and chief investment
officer in 1997. Prior to joining us, Mr. Friedland was a founding partner of
Crimson Partners, an investment firm formed in 1992 that engaged in the
acquisition and development of real estate assets. Prior to founding that firm,
he was a division partner and managing director of Trammell Crow Company where
he was responsible for that firm's development, leasing and property management
activities in Richmond, Virginia. Mr. Friedland graduated from the Wharton
School of the University of Pennsylvania in 1981 with a Bachelor of Science
degree in Economics and received a Master of Business Administration degree from
Harvard University in 1985.
5
<PAGE> 8
Marc A. Simpson currently serves as senior vice president and chief
financial officer, secretary and treasurer. Mr. Simpson was hired as the vice
president and chief financial officer, secretary and treasurer in March 1994.
From November 1989 through March 1994, Mr. Simpson was a manager in the
financial advisory services group of Coopers & Lybrand L.L.P. Prior to that
time, he served as controller of Pacific Realty Corporation, a real estate
development company. Mr. Simpson graduated with a Bachelor of Business
Administration from Midwestern State University in 1978, and received a Master
of Business Administration from Southern Methodist University in 1990.
David B. Warner currently serves as senior vice president-real estate
operations. Mr. Warner was hired as vice president and chief operating officer
in May 1993. From 1989 through the date he accepted a position with us, Mr.
Warner was a director of the equity investment group for the Prudential Realty
Group. From 1985 to 1989, he served in the real estate banking group of NCNB
Texas National Bank. Mr. Warner graduated from the University of Texas at Austin
in 1981 with a degree in Finance and received a Master of Business
Administration from the same university in 1984.
COMMITTEES OF THE TRUST MANAGERS
AUDIT COMMITTEE. The audit committee met two times during the 1998
fiscal year. The audit committee reviews and approves the scope and results of
any outside audit of the trust, and the fees concerning such audit, and makes
recommendations to the trust managers or management concerning auditing and
accounting matters and the efficacy of the trust's internal control systems. The
audit committee selects our independent auditors subject to shareholder
ratification. During the 1998 fiscal year, Messrs. Bricker, Kelley and Giles
served on the audit committee. Current members of the audit committee are
Messrs. Bricker, Kelley, Giles and Schoff.
COMPENSATION COMMITTEE. The compensation committee met three times
during the 1998 fiscal year. The compensation committee recommends to the board
guidelines for compensation and benefits of our executive officers based upon
achievement of objectives and other factors. The compensation committee is also
responsible for acting upon all matters concerning, and exercising such
authority as is delegated to it under the provisions of, any benefit, retirement
or pension plan. During the 1998 fiscal year, Messrs. Bricker, Duncan and Giles
served on the compensation committee. Current members of the compensation
committee are Messrs. Bricker, Duncan, Giles and Gidel.
INVESTMENT COMMITTEE. The investment committee met three times during
1998 prior to being dissolved on July 29, 1998. The investment committee
reviewed potential real property acquisitions and made recommendations to the
board of trust managers. During the 1998 fiscal year, Messrs. Duncan, Giles,
Kraska and Wolcott served on the investment committee.
EXECUTIVE COMMITTEE. The executive committee was formed on July 29,
1998 and has the power to authorize acquisitions and dispositions not to exceed
$50 million and to bind us to capital raising transactions not to exceed $100
million. The executive committee met seven times during 1998. During the 1998
fiscal year, Messrs. Wolstein, Gidel, Duncan and Wolcott served on the executive
committee. Current members of the executive committee are Messrs. Wolstein,
Gidel, Duncan, Morris and Wolcott.
ELECTION OF TRUST MANAGERS AND EXECUTIVE OFFICERS
Trust managers are elected at each of our annual meetings of
shareholders and remain in office until their successors have been duly elected
and qualified, or until their earlier death, resignation or removal. Executive
officers serve at the discretion of the trust managers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee for fiscal 1998 were Messrs.
Bricker, Duncan and Giles. None of our executive officers served as a member of
the compensation committee or as a director of any other entity, one of whose
executive officers served on our compensation committee or as one of our trust
managers.
6
<PAGE> 9
EXECUTIVE AND TRUST MANAGER COMPENSATION
The following table summarizes the compensation paid to our executive
officers for the three years ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
NAME AND ALL OTHER UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ------------------ ---- ------ ----- ------------ ----------
<S> <C> <C> <C> <C> <C>
Charles W. Wolcott 1998 $223,750 $152,375 (1) $1,120,630 (4) 250,000
President and CEO 1997 202,500 153,750 (2) 8,071 (5) 50,000
1996 195,000 100,000 (3) 8,039 (6) --
Lewis D. Friedland 1998 178,750 122,563 (1) 816,680 (7) 135,000
Executive Vice 1997 102,462 72,000 (2) 5,168 (5) 35,000
President and COO 1996 -- -- -- --
Marc A. Simpson 1998 135,000 66,150 (1) 542,305 (8) 70,000
Senior Vice President 1997 117,500 72,000 (2) 8,071 (5) 20,000
CFO, Secretary 1996 110,000 55,000 (3) 8,039 (6) --
and Treasurer
David B. Warner 1998 131,250 63,788 (1) 525,430 (9) 70,000
Senior Vice 1997 117,500 72,000 (2) 8,071 (5) 20,000
President - Real 1996 110,000 55,000 (3) 8,039 (6) --
Estate Operations
</TABLE>
- --------------
(1) Represents bonus payments for 1998 paid in January 1999.
(2) Represents bonus payments for 1997 paid in January 1998.
(3) Represents bonus payments for 1996 paid in January 1997.
(4) Includes a change of control payment of $862,500, payments made under
dividend equivalent rights granted in April 1998 of $116,000, vesting of
restricted shares valued at $135,100 pursuant to change of control payments
and contribution to the retirement and profit sharing plan in January 1999
of $7,030.
(5) Represents our contribution to the retirement and profit sharing plan in
January 1998.
(6) Represents our contribution to the retirement and profit sharing plan in
January 1997.
(7) Includes a change of control payment of $693,750, payments made under
dividend equivalent rights granted in April 1998 of $58,000, vesting of
restricted shares valued at $57,900 pursuant to change of control payments
and contribution to retirement and profit sharing plan of $7,030.
(8) Includes a change of control payment of $472,500, payments made under
dividend equivalent rights granted in April 1998 of $29,000, vesting of
restricted shares valued at $33,775 pursuant to change of control
provisions and contribution to retirement and profit sharing plan of
$7,030.
(9) Includes a change of control payment of $455,625, payments made under
dividend equivalent rights granted in April 1998 of $29,000, vesting of
restricted shares valued at $33,775 pursuant to change of control and
contribution to retirement and profit sharing plan of $7,030.
In fiscal year 1998, the trust paid an annual retainer of $25,000 to
non-employee trust managers plus $1,000 for each trust manager meeting attended
in person, $500 for each trust manager meeting attended via teleconference, $500
for each committee meeting attended in person and $250 for each committee
meeting attended via teleconference. Additionally, the trust managers are
reimbursed for their expenses incurred in connection with their duties as trust
managers. Each non-employee trust manager has the right to receive his annual
retainer in cash and/or shares. In addition to the annual retainer, Mr. Bricker
earned $14,750, Mr. Giles earned $13,750, Mr. Kelley
7
<PAGE> 10
earned $7,500, Mr. Duncan earned $12,750, Mr. Kraska earned $11,250, Mr.
Wolstein earned $2,250, Mr. Schoff earned $1,500, Mr. Gidel earned $2,250 and
Mr. Adams earned $1,500 in 1998 for attendance at board and committees meetings.
In December 1998, we adopted a deferred compensation plan for non-employee trust
managers which will give the trust managers the option to defer receipt of fees.
Such deferred fees are credited to a deferral account in units representing
common shares. The value of the units is increased or decreased measured by the
market value of our common shares.
OPTION GRANTS
The following table sets forth the share option grants made in the 1998
fiscal year to each of our executive officers. The table also sets forth the
hypothetical gains that would exist for the options at the end of their
four-year terms after vesting, assuming compound rates of stock appreciation of
5% and 10%. The actual future value of the options will depend on the market
value of our common shares. All option exercise prices are based on a price
higher than the market price on the grant date.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF SHARE
NUMBER OF % OF TOTAL PRICE APPRECIATION AT END OF
SHARES OPTIONS TEN YEAR
UNDERLYING GRANTED TO EXERCISE OPTION TERMS (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED (2) FISCAL 1998 PER SHARE DATE 5% 10%
- ---- ----------- ------------ --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Wolcott 200,000 43% $13.625 04/01/08 $1,673,015 $4,278,105
Lewis D. Friedland 100,000 22% 13.625 04/01/08 836,508 2,139,052
Marc A. Simpson 50,000 11% 13.625 04/01/08 418,254 1,069,526
David B. Warner 50,000 11% 13.625 04/01/08 418,254 1,069,526
</TABLE>
- ----------------
(1) "Potential Realizable Value" is disclosed in response to SEC rules, which
require such disclosure for illustrative purposes only, and is based on the
difference between the potential market value of shares issuable (based
upon assumed appreciation rates) upon exercise of such options and the
exercise price of such options. The values disclosed are not intended to
be, and should not be interpreted as, representations or projections of
future value of our shares or of the share price.
(2) Share option grants vest in equal increments on their date of grant and on
each of the first four anniversaries of their date of grant. As a result of
a change in control resulting from DDR's investment, all options became
vested on December 10, 1998.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the value of
the unexercised options as of December 31, 1998 held by our executive officers.
No options were exercised in the 1998 fiscal year by any of our executive
officers.
AGGREGATE OPTION EXERCISES IN FISCAL 1998 AND FISCAL 1998
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING UNEXERCISED OPTIONS AT
FISCAL 1998 YEAR-END
--------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- ----------- -------------
<S> <C> <C>
Charles W. Wolcott 250,000 0
Lewis D. Friedland 135,000 0
Marc A. Simpson 70,000 0
David B. Warner 70,000 0
</TABLE>
8
<PAGE> 11
In April 1998, we entered into severance and change in control agreements
with each of Messrs. Wolcott, Simpson, Friedland and Warner. The agreements are
effective for a term of five years, followed by one year automatic renewals
unless either party gives 180 days advance notice of its intent not to renew.
The agreements generally provide that if a change in control occurs, the
employee will be entitled to receive an amount equal to 2.5 times the employee's
annual base salary, continuation of health and welfare benefits for up to one
year and 2.5 times the employee's target bonus for the year in which the change
in control occurs. Each of our executives received change in control payments in
connection with DDR's investment. The board is currently contemplating making
revisions in these agreements.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for our executive officers is administered under the
direction of the compensation committee with all recommendations of the
compensation committee being subject to approval by the board of trust managers.
The following is the compensation committee's report, on 1998 compensation
practices for the executive officers of the Trust. The report and the
performance graph that appears immediately after such report shall not be deemed
to be soliciting material or to be filed with the SEC, under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
incorporated by reference in any document so filed.
BASE SALARY. The compensation committee recommends base salaries for
executive officers by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions at other real estate investment trusts, to historical
levels of salary paid by the trust, and to recommendations of independent
compensation consultants to us. Salary adjustments are based on a periodic
evaluation of the performance of the trust and of each executive officer, and
also take into account new responsibilities as well as changes in the
competitive marketplace. Mr. Wolcott, who has served as president and chief
executive officer since the commencement of his employment in May 1993, received
a base salary of $223,750 for the 1998 fiscal year. Mr. Warner, who currently
serves as senior vice president-real estate operations, received a base salary
of $131,250 for the 1998 fiscal year. Mr. Simpson, who currently serves as
senior vice president, chief financial officer, secretary and treasurer,
received a base salary of $135,000 for the 1998 fiscal year. Mr. Friedland, who
currently serves as executive vice president and chief operating officer,
received a base salary of $178,250 for the 1998 fiscal year. The compensation
committee was advised by a compensation consultant from Deloitte & Touche LLP
that our base compensation levels for the 1998 fiscal year were below the REIT
industry as a whole, which was consistent with our desire to focus on the
incentive portion of compensation.
PERFORMANCE-BASED BONUS PLAN. Each year, in order to encourage the
accomplishment of our short-term goals, the compensation committee reviews and
recommends a performance-based bonus plan for executive officers. During the
1998 fiscal year, performance goals were established related to capital
committed and share price appreciation, in addition to discretionary amounts.
During the 1998 fiscal year, executive officers were eligible to receive the
following bonus amounts (on base salary) based upon achievement of performance
goals:
<TABLE>
<CAPTION>
Wolcott/Friedland Simpson/Warner
----------------- --------------
<S> <C> <C>
Capital Committed 35% 24.5%
FFO/Share 35% 24.5%
Discretionary 30% 21.0%
</TABLE>
With respect to the 1998 fiscal year, the compensation committee recommended,
and the board of trust managers approved, a $152,375 bonus for Mr. Wolcott, a
$122,563 bonus for Mr. Friedland, a $66,150 bonus for Mr. Simpson and a $63,788
bonus for Mr. Warner.
9
<PAGE> 12
OTHER COMPENSATION. Other compensation payable to the executive officers
includes contributions to the employee retirement and profit sharing plan and
insurance premiums paid under our medical, dental, life and long-term disability
plans.
1998 Compensation Committee,
William H. Bricker
Robert E. Giles
T. Patrick Duncan
PERFORMANCE GRAPH
The rules and regulations of the SEC require the presentation of a line
graph comparing, over a period of five years, the cumulative total shareholder
return to a performance indicator of a broad equity market index and either a
nationally recognized industry index or a peer group index constructed by us.
The chart below compares the performance of our common shares with the
performance of the RUSSELL 2000 Index and the NAREIT Equity REIT Index. The
comparison assumes $100 was invested on December 31, 1993 in our common shares
and in each of the foregoing indices and assumes reinvestment of dividends.
<TABLE>
<CAPTION>
NAREIT
EQUITY REIT
AIP RUSSELL 2000 INDEX INDEX
--- ------------------ -----------
<S> <C> <C> <C>
12-31-93 100.00 100.00 100.00
12-31-94 61.11 98.18 103.17
12-31-95 90.56 126.10 118.92
12-31-96 104.06 146.90 160.86
12-31-97 126.02 179.75 193.45
12-31-98 115.35 175.18 159.59
</TABLE>
10
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of common shares by (1) each trust manager, (2) our chief
executive officer and each executive officer, (3) all trust managers and
executive officers as a group, and (4) to our knowledge, by any person owning
beneficially more than 5% of our outstanding common shares, in each case at
October 1, 1999. Except as otherwise noted, each person named in the table has
sole voting and investment power with respect to all common shares as
beneficially owned by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENTAGE
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------- ----------------------- ----------
<S> <C> <C>
Albert T. Adams 1,000(1) *
William H. Bricker 4,000(2) *
T. Patrick Duncan 1,200 *
Robert H. Gidel 2,030(1) *
Robert E. Giles 7,012(2) *
Edward B. Kelley 2,000 *
Stanley J. Kraska, Jr 4,000(2) *
J. Timothy Morris 0 *
James A. Schoff 1,000(1) *
Charles W. Wolcott 336,000(3) 1.56%
Scott A. Wolstein 1,006(1)(9) *
Lewis D. Friedland 158,383(4) *
Marc A. Simpson 90,650(5) *
David B. Warner 79,900(5) *
USAA Real Estate Company 1,680,086(6) 7.80%
9830 Colonnade Boulevard, Suite 600
San Antonio, Texas 78230-2239
Morgan Stanley, Dean Witter, Discover & Co.
The Morgan Stanley Real Estate Special Situations
Fund II, L.P.
Morgan Stanley Asset Management Inc. 1,999,653(7) 9.29%
1585 Broadway
New York, New York 10036
ABKB/LaSalle Securities Limited Partnership
and LaSalle Advisors Limited Partnership 1,502,578(8) 6.98%
100 East Pratt Street
Baltimore, MD 21202
Scott A. Wolstein and Developers Diversified 9,756,656(9) 45.30%
Realty Corporation
3300 Enterprise Parkway
Beachwood, Ohio 44122
All trust managers and executive officers as a 684,180(1)(2)(3)(4)(5 3.17%
group (11 persons)
</TABLE>
11
<PAGE> 14
- --------------
* Ownership is less than 1% of outstanding common shares.
(1) Includes vested options to purchase 1,000 common shares.
(2) Includes vested options to purchase 4,000 common shares.
(3) Includes vested options to purchase 250,000 common shares.
(4) Includes vested options to purchase 135,000 common shares.
(5) Includes vested options to purchase 70,000 common shares.
(6) Based upon Amendment No. 4 to Schedule 13D filed jointly by United Services
Automobile Association, USAA Capital Corporation, and Realco on August 6,
1998. USAA is the sole stockholder of USAA CC and USAA CC is the sole
stockholder of Realco. Based upon these relationships, USAA, USAA CC, and
Realco have shared voting and dispositive power over 1,680,086 common
shares.
(7) Based upon Amendment No. 1 to Schedule 13D filed jointly by Morgan Stanley,
MSAM and Morgan Stanley Real Estate Special Situations Fund II, L.P. on
March 17, 1998, Morgan Stanley has sole voting and dispositive power over
120,231 common shares and shared voting and dispositive power over
1,879,422 common shares held by the investors for whom MSAM acts as an
investment advisor. Pursuant to separate investment management agreements
between MSAM and MSRE, MSAM has been granted voting and dispositive power
with respect to the common shares held by MSRE. MSAM has shared voting and
dispositive power over 1,879,422 common shares held by the MSAM purchasers
and the Morgan Stanley Real Estate Special Situations Fund II, L.P. has
shared voting and dispositive power over 652,415 of such common shares.
Pursuant to separate investment management agreements between MSAM and the
MSAM purchasers, MSAM has been granted voting and dispositive power with
respect to the common shares held by each of the MSAM purchasers.
(8) Based upon Amendment No. 2 to Schedule 13D filed jointly by ABKB and
LaSalle Advisors on February 10, 1998, (A) ABKB has sole voting and
dispositive power over 480,213 common shares and shared voting and
dispositive power with respect to 480,212 common shares; and (B) LaSalle
Advisors has shared dispositive power with respect to 542,153 common
shares.
(9) Based upon Amendment No. 6 to Schedule 13D filed jointly by DDR and Scott
A. Wolstein on August 26, 1999, DDR has sole voting and dispositive power
over 9,756,656 common shares and Mr. Wolstein has sole voting and
dispositive power over six common shares. Mr. Wolstein, as chairman of the
board, president and chief executive officer of DDR, may be deemed to
beneficially own all shares held by DDR.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and any amendments
thereto) furnished to us with respect to the 1998 fiscal year or written
representations from certain reporting persons that no forms were required, no
person failed to disclose on a timely basis, as disclosed in such forms, reports
required by Section 16(a) of the Exchange Act.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
You are asked to ratify the appointment by the trust managers of Ernst &
Young LLP as the trust's independent auditors for the fiscal year ending
December 31, 1999. The selection was based upon the recommendation of the audit
committee.
Representatives of Ernst & Young LLP will be present at the annual meeting
to respond to appropriate questions from you and to make a statement if they
desire.
12
<PAGE> 15
SHAREHOLDER VOTE
The affirmative vote of the holders of a majority of the common shares
present in person or represented by proxy and entitled to vote at the annual
meeting is required to adopt this proposal. The trust managers have unanimously
approved the proposal, subject to your approval. DDR, Realco, MSAM, ABKB,
LaSalle Advisors, Praedium and management of the trust have advised the trust
that they intend to vote their collective 15,784,582 common shares (75.5% of the
outstanding common shares) in favor of proposal two. See "Security Ownership of
Certain Beneficial Owners and Management."
RECOMMENDATION OF THE TRUST MANAGERS
THE TRUST MANAGERS UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE FOR
PROPOSAL TWO.
PROPOSALS BY SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at our annual
meeting to be held in 2000 and received at the trust's principal executive
office no later than July 7, 2000, will be included in the proxy statement and
proxy related to the annual meeting to be held in 2000.
OTHER MATTERS
The trust managers are aware of no other matter that will be presented for
action at the annual meeting. IF SUCH PROPOSALS OR ANY OTHER MATTERS REQUIRING A
VOTE OF THE SHAREHOLDERS PROPERLY COMES BEFORE THE ANNUAL MEETING, THE PERSONS
AUTHORIZED UNDER THE PROXIES WILL VOTE AND ACT ACCORDING TO THEIR BEST JUDGMENT.
13
<PAGE> 16
- --------------------------------------------------------------------------------
AMERICAN INDUSTRIAL PROPERTIES REIT
ANNUAL MEETING OF SHAREHOLDERS
The shareholder of American Industrial Properties REIT whose name and signature
appear on the reverse side of this card, having received the notice of annual
meeting of shareholders and the related proxy statement/prospectus for the
trust's annual meeting of shareholders to be held at 2200 Ross Avenue, Suite
2200, Dallas, Texas 75201 on December 8, 1999 at 9:00 a.m., hereby appoints
Charles W. Wolcott and Marc A. Simpson or each of them, the proxies of the
shareholder, each with full power of substitution, to vote at such annual
meeting, and at any adjournments of such meeting, all common shares of
beneficial interest that the shareholder is entitled to vote, in the manner
shown on the reverse side of this card.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUST MANAGERS AND THE SHARES
REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDER'S DIRECTIONS
ON THE REVERSE SIDE OF THIS CARD. IF NO DIRECTION IS GIVEN, THEN THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND IN THE
PROXIES' DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SEE REVERSE SIDE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. Election of Trust Managers (Albert T. Adams, William H. Bricker, T. Patrick
Duncan, Robert H. Gidel, Robert E. Giles, Edward B. Kelly, Stanley J.
Krasta, Jr., J. Timothy Morris, James A. Schoff, Charles W. Wolcott, Scott
A. Wolstein)
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY
(except as marked to the contrary) to vote for all nominees
listed above
INSTRUCTIONS: TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THAT NOMINEE'S NAME ABOVE.
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
FOR THE 1999 FISCAL YEAR.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. I authorize the aforementioned proxies to vote in their discretion on any
other matters that may properly come before the annual meeting or any
adjournments thereof.
The undersigned hereby revokes any proxy heretofore given to vote with respect
to the common shares of beneficial interest of the trust and hereby ratifies and
confirms all that the proxies, their substitutes or any of them may lawfully do
by virtue hereof.
----------------------------------------
Signature
----------------------------------------
Date
----------------------------------------
Signature
----------------------------------------
Date
Note: Please sign exactly as name(s)
appear(s) on this card. When shares are
held jointly, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. When
executed by a corporation or
partnership, please sign in full
corporate or partnership name by a duly
authorized officer or partner, giving
title. Please sign, date and mail this
proxy promptly whether or not you expect
to attend the meeting. You may
nevertheless vote in person if you do
attend.
- --------------------------------------------------------------------------------
