INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the registrant |X|
Filed by a party other than
the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement |_| Confidential, for use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to
Rule 14a-11(c) or Rule 14a-12
HRPT PROPERTIES TRUST
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(4) Date Filed:
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<PAGE>
HRPT PROPERTIES TRUST
400 Centre Street
Newton, Massachusetts 02458
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 1999
To the Shareholders of HRPT Properties Trust
Notice is hereby given that the Annual Meeting of Shareholders of HRPT
Properties Trust, a Maryland real estate investment trust (the "Company"), will
be held at 9:30 A.M. on Tuesday, May 11, 1999, at State Street Bank and Trust
Company, 225 Franklin Street, 33rd Floor, Boston, Massachusetts, for the
following purposes:
1. To elect two Trustees in Group I of the Company's Board of Trustees.
2. To consider and act upon such other matters as may properly come before
the meeting.
The Board of Trustees has fixed the close of business on March 22, 1999 as
the record date for determination of the shareholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Trustees,
DAVID J. HEGARTY, Secretary
March 31, 1999
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE SIGN, DATE AND RETURN
YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH.
<PAGE>
HRPT PROPERTIES TRUST
400 Centre Street
Newton, Massachusetts 02458
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Tuesday, May 11, 1999
----------------
INTRODUCTION
A Notice of the Annual Meeting of Shareholders (the "Meeting") of HRPT
Properties Trust, a Maryland real estate investment trust (the "Company"), is
set forth on the preceding page, and there is enclosed herewith a form of proxy
solicited by the Board of Trustees of the Company. The cost of this
solicitation will be borne by the Company. In addition to solicitation by mail,
the Trustees and officers of the Company may solicit proxies personally or by
telephone or telegram. This proxy statement is being first sent to shareholders
on or about March 31, 1999, together with a copy of the Annual Report to
Shareholders for the year ended December 31, 1998 (including audited financial
statements of the Company).
Only shareholders of record as of the close of business on March 22, 1999
(the "Record Date") are entitled to notice of and to vote at the Meeting and/or
any adjournment thereof. The outstanding shares of beneficial interest of the
Company on the Record Date entitled to vote consisted of 131,893,126 common
shares of beneficial interest, $.01 par value per share (the "Common Shares").
The holders of the outstanding Common Shares are entitled to one vote per
Common Share.
All Common Shares represented by valid proxies received by the Company
prior to the Meeting will be counted for purposes of determining the presence
of a quorum and will be voted as specified in the proxies. If no specification
is made by the shareholder, the Common Shares will be voted FOR the proposal
set forth below. The proposal set forth below requires the affirmative vote of
a majority of the Common Shares issued and outstanding. Abstentions are
considered present for purposes of determining a quorum. A shareholder marking
the proxy "Withhold" will not be counted as voting in favor of any nominee for
Trustee. A shareholder giving a proxy has the power to revoke it any time prior
to its exercise by delivering to the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date, or by attending the
Meeting and voting his or her Common Shares in person.
Item 1. Election of Trustees in Group I of the Board of Trustees.
The number of Trustees of the Company is currently fixed at five and the
Board of Trustees is currently divided into three groups, with two Trustees in
Group I, two Trustees in Group II and one Trustee in Group III. Trustees in
each Group are elected to three-year terms.
The business of the Company is conducted under the general direction of
the Board of Trustees as provided by the Amended and Restated Declaration of
Trust, as amended (the "Declaration of Trust"), and the Amended and Restated
Bylaws of the Company and the laws of the State of Maryland, the state of the
Company's organization on October 9, 1986.
Three of the Trustees, Bruce M. Gans, M.D., the Rev. Justinian Manning,
C.P. and Patrick F. Donelan are the Company's "Independent Trustees," that is,
Trustees who are not otherwise affiliated with the Company, REIT Management &
Research, Inc., a Delaware corporation which is the Company's investment
advisor ("RMR"), or any other person or
<PAGE>
entity that holds in excess of 8.5% of the issued and outstanding Common Shares
of the Company. The Independent Trustees also comprise the Audit Committee of
the Board of Trustees. The Audit Committee meets with the Company's independent
auditors to discuss the procedures for conducting, and the results of, audits
of the Company's financial records, and recommends to the Board of Trustees the
hiring or retention of independent auditors. The Company does not have a
Compensation Committee or a Nominating Committee.
During 1998, the Board of Trustees held eight meetings and the Audit
Committee of the Board of Trustees held three meetings. Each Trustee attended
75% or more of the total number of meetings of the Board and any Committee of
which he was a member.
Each Independent Trustee receives an annual fee of $20,000 for services as
a Trustee, plus $500 for each meeting of the Board or Board Committee attended
by such Trustee. The Chairperson of the Audit Committee receives an additional
$2,000 annually; such position rotates annually among the Independent Trustees.
Each Independent Trustee also receives an annual grant of 500 Common Shares
under the Company's 1992 Incentive Share Award Plan (the "Plan"). The Company
reimburses all Trustees for travel expenses incurred in connection with their
duties as Trustees of the Company. The Company has also agreed to pay any
Independent Trustee who brings a property to the attention of the Company a fee
equal to one percent of any investment made by the Company in the property. No
fees have been earned to date by any Independent Trustee with respect to any
investments by the Company.
The present Trustees in Group I are Bruce M. Gans, M.D. and Barry M.
Portnoy. The term of the Group I Trustees elected at the Meeting will expire at
the Company's 2002 Annual Meeting of Shareholders. To be elected, each nominee
for Trustee of the Company must receive the vote of a majority of the Common
Shares issued and outstanding. It is the intention of the persons authorized by
the enclosed proxy to nominate and vote for Dr. Gans and Mr. Portnoy as Group I
Trustees. RMR, which has voting control over 2,463,366 Common Shares, HRPT
Advisors, Inc. ("Advisors"), an affiliate of RMR which owns 1,134,372 Common
Shares directly and Gerard M. Martin and Barry M. Portnoy who each own 44,851
Common Shares directly (totaling approximately 2.8% of the Common Shares
outstanding and entitled to vote at the Meeting) intend to vote in favor of the
election of Dr. Gans and Mr. Portnoy as the Group I Trustees. The principal
occupations for the past five years and ages as of the Record Date of Dr. Gans
and Mr. Portnoy are as follows:
BRUCE M. GANS, M.D. Age: 52
Effective April 5, 1999, Dr. Gans will be Senior Vice President for
Continuing Care and Chairman of Physical Medicine and Rehabilitation at the
North Shore Long Island Jewish Health System, and Professor of Physical
Medicine and Rehabilitation at the Albert Einstein College of Medicine. From
1989 through March 26, 1999, Dr. Gans was a Professor and Chairman of the
Department of Physical Medicine and Rehabilitation at Wayne State University
and a Senior Vice President of the Detroit Medical Center. Dr. Gans has served
on the Board as a Group I Trustee since October 1995, when he was elected to
fill a vacancy on the Board of Trustees.
BARRY M. PORTNOY Age: 53
Barry M. Portnoy has been a Managing Trustee of the Company since its
organization in 1986. Mr. Portnoy served as a Director of Horizon Healthcare
Corporation ("HHC") until his resignation in July 1996. Mr. Portnoy is Chairman
of RMR and a Director and 50% shareholder of RMR, Connecticut Subacute
Corporation ("CSC") and Connecticut Subacute Corporation II ("CSCII"), a
Director and 33% shareholder of each of Vermont Subacute Corporation ("VSC")
and New Hampshire Subacute Corporation ("NHSC") and a Managing Trustee of
Hospitality Properties Trust ("HPT"), a New York Stock Exchange listed real
estate investment trust which invests in hotels. Mr. Portnoy is an attorney and
was a partner of the law firm of Sullivan & Worcester LLP, counsel to the
Company, from 1978 through March 31, 1997, and was Chairman of that firm from
1994 to his retirement in 1997.
2
<PAGE>
In addition to Dr. Gans and Mr. Portnoy, the following persons currently
serve on the Board of Trustees or serve as executive officers of the Company.
Their principal occupations for the last five years and their ages as of the
Record Date are as follows:
PATRICK F. DONELAN Age: 56
Mr. Donelan has been a Director of Dresdner Kleinwort Benson since 1998
and has since 1996 been an Executive Vice President of Dresdner Kleinwort
Benson North America LLC, a New York-based banking institution which is a
subsidiary of Dresdner Bank AG of Germany. Prior to 1996, Mr. Donelan was
Chairman of Kleinwort Benson North America, Inc., a subsidiary of Kleinwort
Benson Ltd. of England, which was acquired by Dresdner Bank AG in 1995. Mr.
Donelan was elected to the Board of Trustees in 1998 to fill a vacancy. Mr.
Donelan is the Group III Trustee; his term will expire at the 2001 Annual
Meeting of Shareholders.
REV. JUSTINIAN MANNING, C.P. Age: 72
The Reverend Justinian Manning, C.P., has been, since September 1990, the
pastor of St. Gabriel's parish in Brighton, Massachusetts. He is also on the
Board of Directors of Charlesview, a low and moderate income housing program.
He is past Treasurer and a former Director of St. Paul's Benevolent,
Educational and Missionary Institute, a New Jersey corporation, which oversees
foundations in Massachusetts, Connecticut, New York, Pennsylvania, Maryland and
Florida and the Institute's Overseas Missions. He was formerly on the Board of
Directors of St. Paul's Monastery Manor, in Pittsburgh, Pennsylvania, a
congregate housing facility. He belonged to the Provincial Council of the
Passionist Provincialate and is the former Director of Consolidation for the
Community. The Reverend Manning is a Group II Trustee; his term will expire at
the 2000 Annual Meeting of Shareholders.
GERARD M. MARTIN Age: 64
Mr. Martin is a Managing Trustee of the Company. Mr. Martin is a private
investor in real estate and has been a Trustee of HRP since its organization in
1986. Mr. Martin served as a Director of HHC until his resignation in July
1996. Mr. Martin has been active in the health care and real estate industries
for more than 25 years as a manager, developer and builder. Mr. Martin is also
a Director and 50% shareholder of each of RMR, CSC and CSCII, a Director and
33% shareholder of each of VSC and NHSC and a Managing Trustee of HPT. Mr.
Martin is a Group II Trustee; his term will expire at the 2000 Annual Meeting
of Shareholders.
DAVID J. HEGARTY Age: 42
David J. Hegarty, a Certified Public Accountant, joined the Company in
July 1987 as Treasurer, became Executive Vice President in July 1993 and became
the President and Chief Operating Officer of the Company in April 1994. Mr.
Hegarty has also been the Secretary of the Company since 1987. In December
1997, he became a Director, President, Chief Operating Officer and Secretary of
RMR. Also in December 1997, Mr. Hegarty became Treasurer and Secretary of
Advisors where since 1994 he had been a Director, President, Chief Operating
Officer and Secretary. From 1985 to 1987, Mr. Hegarty was an audit manager with
Ernst & Young LLP, the Company's independent auditors.
AJAY SAINI Age: 39
In April 1995, Ajay Saini, a Certified Public Accountant, became the
Treasurer of the Company and in August 1995 also became Chief Financial
Officer. From July 1993 to December 1997, he was Vice President and Chief
Accounting Officer of Advisors. From June 1990 to July 1993, Mr. Saini served
as Controller of Advisors. In April 1995, he became Treasurer of Advisors. In
December 1997, Mr. Saini became a Vice President of RMR. Prior to joining
Advisors, Mr. Saini was employed by Ernst & Young LLP, the Company's
independent auditors.
JOHN A. MANNIX Age: 43
John A. Mannix became Executive Vice President of the Company in May 1998.
Mr. Mannix has served in various capacities with RMR and its affiliates since
1989. Prior to 1989, Mr. Mannix was employed by Grubb & Ellis, a national real
estate brokerage and service firm. Mr. Mannix is a member of the Urban Land
Institute and the Greater Boston Real Estate Board's Real Estate Finance
Association.
3
<PAGE>
DAVID M. LEPORE Age: 38
David M. Lepore is the Senior Vice President of the Company responsible
for building operations, leasing and acquisition diligence. Mr. Lepore has been
employed in various capacities by RMR and its affiliates since 1992. Prior to
1992, he was employed by The Beacon Companies. Mr. Lepore is a member of the
Building Owners and Managers Association and is a Certified Real Property
Administrator.
There are no family relationships among any Trustees and executive
officers of the Company. Executive officers serve at the will of the Board of
Trustees.
OTHER INFORMATION
Compensation of Executive Officers
The Company does not have any employees; services which otherwise would be
provided by employees are performed by RMR. Payments by the Company to RMR for
services during 1998 are described in "Certain Relationships and Related
Transactions."
Except with respect to incentive share awards, the Company has not paid
and has no current plans to pay compensation to its executive officers. RMR,
which conducted the day-to-day operations of the Company during 1998,
compensated Messrs. Martin, Portnoy, Hegarty, Saini, Mannix and Lepore in
connection with their services to RMR and to the Company. The following table
provides summary long-term compensation information for restricted share awards
made for the past three years to executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Restricted
Share
Name and Principal Position Year Awards(1)
--------------------------- ---- ---------
<S> <C> <C>
David J. Hegarty ..................... 1998 $68,913
President and Chief Operating Officer 1997 $55,688
(chief executive officer) 1996 $51,750
Ajay Saini ........................... 1998 $46,563
Treasurer and Chief Financial Officer 1997 $37,125
1996 $34,500
John A. Mannix (2) ................... 1998 $23,281
Executive Vice President
David M. Lepore (2) .................. 1998 $23,281
Senior Vice President
</TABLE>
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(1) All incentive share awards have been granted pursuant to the Plan and
provide that one third of each annual incentive share award vests
immediately upon grant and one third vests on each of the first and second
anniversaries of the grant. In the event any executive officer who has
been granted an incentive share award ceases to perform the duties of an
executive officer of the Company during the vesting period of such award,
the Common Shares which have not yet vested may be repurchased by the
Company for nominal consideration, unless vesting of Common Shares is
accelerated by the Board of Trustees. At December 31, 1998, the aggregate
20,700, 10,500, 2,250 and 2,250 Common Shares granted as annual incentive
share awards under the Plan to Messrs. Hegarty, Saini, Mannix and Lepore,
respectively, had a value of $289,800, $147,000, $31,500 and $31,500
respectively, based upon a $14.00 per share closing price for the Common
Shares as reported on the New York Stock Exchange on that date. Vested and
unvested
4
<PAGE>
Common Shares are entitled to dividends as declared by the Company. The
dollar amounts shown in the table represent the number of restricted Common
Shares awarded during the year shown which have vested or continue to be
subject to vesting multiplied by the closing price for the Common Shares on
the New York Stock Exchange on the date of grant.
(2) New officer in 1998.
Compensation Committee Interlocks and Insider Participation
The Company does not have a standing Compensation Committee; rather, a
committee comprised of the Company's Independent Trustees (Dr. Gans, the Rev.
Manning and Mr. Donelan) makes recommendations for grants of Common Shares
under the Plan, and such recommendations are acted upon by the full Board of
Trustees (Dr. Gans, the Rev. Manning and Messrs. Donelan, Martin and Portnoy).
Barry M. Portnoy, a member of the Board of Trustees, is a former partner in the
firm of Sullivan & Worcester LLP, counsel to the Company.
Performance Graph--Comparison of Cumulative Total Return
The graph below shows, for the years indicated, the Company's cumulative
total shareholder return on its Common Shares (assuming a $100 investment on
December 31, 1993) as compared with (a) the National Association of Real Estate
Investment Trust, Inc.'s index of all tax-qualified real estate investment
trusts listed on the New York Stock Exchange, the American Stock Exchange and
the NASDAQ/National Market System (NAREIT) and (b) the Standard & Poor's 500
Index. The comparison assumes all dividends are reinvested and, in the case of
the Company, that the reinvestment occurred on the dividend payment date.
[LINE GRAPH PLOT POINTS]
HRP NAREIT S&P 500 INDEX
1993 100 100 100
1994 99 101 101
1995 132 119 139
1996 169 162 171
1997 190 192 228
1998 144 156 294
Executive Compensation Report
HRPT Properties Trust (the "Company") developed and implemented its 1992
Incentive Share Award Plan (the "Plan") in May 1992 in recognition of the
following circumstances. First, the Company's Common Shares are primarily a
yield vehicle for shareholders and do not appreciate in value in the same
manner as other equity securities. Therefore, a conventional stock option plan
would not provide appropriate incentives for the Company's management. Second,
because the executive officers of the Company are employees of its investment
advisor and not of the Company, and receive their salary compensation from its
advisor, the Trustees wished to establish a vehicle which would, among other
things, (a) foster a continuing identity of interest between management of the
Company and its shareholders, and (b) recognize that the Company's executive
officers perform certain duties on behalf of the Company, primarily with regard
5
<PAGE>
to shareholder relations and investor communications, which fall outside of the
services covered by the advisory contract between the Company and its advisor.
In granting incentive share awards, the Trustees consider factors such as the
amount and terms of restricted Common Shares previously granted to executive
officers and the amount of time spent and complexity of the duties performed by
executive officers on behalf of the Company, speaking at Company conferences,
road shows and making additional presentations, interfacing with analysts and
preparing and distributing shareholder reports, materials, statements and other
information. The Trustees have imposed vesting restrictions and may impose
other conditions on the granted Common Shares, which may further promote
continuity of management.
In 1998, Mr. Hegarty, President and Chief Operating Officer of the
Company, received a grant of 3,700 Common Shares under the Plan, 1,234 of which
vested immediately upon grant and 1,233 of which will vest on each of the first
and second anniversaries of the date of the grant. In 1998, Mr. Saini,
Treasurer and Chief Financial Officer of the Company, received a grant of 2,500
Common Shares under the Plan, 834 of which vested immediately upon grant and
833 of which will vest on each of the first and second anniversaries of the
date of the grant. In 1998, Mr. Mannix, Executive Vice President of the Company
received a grant of 1,250 Common Shares under the Plan, 416 of which vested
immediately upon grant and 417 of which will vest on each of the first and
second anniversaries of the date of the grant. In 1998, Mr. Lepore, Senior Vice
President of the Company, received a grant of 1,250 Common Shares under the
Plan, 416 of which vested immediately upon grant and 417 of which will vest on
each of the first and second anniversaries of the date of grant. The
determination of the number of Common Shares granted to Messrs. Hegarty, Saini,
Mannix and Lepore was not specifically based on an estimate of the Company's
performance, but instead was based on the relationship of the fair market value
of the Common Shares so granted, on the number of Common Shares previously
granted to each such individual, and on the Board's opinion as to the value of
the "outside" services to the Company, as discussed above, performed by these
officers.
BOARD OF TRUSTEES
Patrick F. Donelan
Bruce M. Gans, M.D.
Rev. Justinian Manning, C.P.
Gerard M. Martin
Barry M. Portnoy
6
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Common Shares by each person known to the Company
to be the beneficial owner of more than 5% of the Common Shares, each Trustee
and officer, and all officers and Trustees of the Company as a group, as of the
Record Date. The address of each of the Trustees and current officers of the
Company is c/o HRPT Properties Trust, 400 Centre Street, Newton, Massachusetts
02458.
<TABLE>
<CAPTION>
Beneficial Ownership
----------------------
Number
Name and Address of Shares Percent
- -------------------------------------------------------------------------- ----------- --------
<S> <C> <C>
Patrick F. Donelan(1) .................................................... 500 *
Bruce M. Gans(1) ......................................................... 1,500 *
David J. Hegarty(2) ...................................................... 23,000 *
David M. Lepore .......................................................... 2,250 *
Rev. Justinian Manning, C.P.(1) .......................................... 3,500 *
John A. Mannix(3) ........................................................ 2,421 *
Gerard M. Martin(4) ...................................................... 3,642,589 2.8%
Barry M. Portnoy(4) ...................................................... 3,642,589 2.8%
Ajay Saini(5) ............................................................ 11,018 *
All executive officers and Trustees as a group (nine persons) (2)(3)(4)(5) 3,731,629 2.8%
</TABLE>
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* Less than 1% of the Company's outstanding Common Shares.
(1) Each of the Independent Trustees receives annual grant of 500 Common Shares
as part of his annual compensation.
(2) Includes 2,300 Common Shares held jointly by Mr. Hegarty and his wife.
(3) Includes shares acquired under the Company's Dividend Reinvestment Plan.
(4) Advisors, which is wholly owned by Messrs. Martin and Portnoy, owns
1,134,372 Common Shares directly. Solely in its capacity as successor
voting trustee of a voting trust agreement, RMR, which is also wholly
owned by Messrs. Martin and Portnoy, exercises voting control over
1,000,000 Common Shares owned by AMS Properties, Inc. and pledged to the
Company to secure the obligations of Mariner Post-Acute Network, Inc. and
its affiliates to the Company. RMR also exercises voting control as proxy
over 1,463,366 Common Shares owned by Mr. John F. Chapple, III. Mr. Martin
and Mr. Portnoy each own 44,851 Common Shares directly.
(5) Includes 500 Common Shares in Mr. Saini's IRA account and approximately 18
Common Shares held by Mr. Saini as custodian for his minor daughter. Mr.
Saini disclaims beneficial ownership of the Common Shares held on behalf
of his daughter.
Certain Relationships and Related Transactions
Messrs. Martin and Portnoy are principal shareholders of CSC, CSCII, NHSC
and VSC (collectively the "Subacute Entities"). The Subacute Entities are
borrowers/mortgagors or lessees of the Company. The Company has extended a $4
million line of credit to CSC until June 30, 1999. At December 31, 1998, there
was $1 million outstanding under this agreement. In addition, the Company
agreed to fund $1 million for improvements to the properties leased to CSC. At
December 31, 1998, $760,547 had been funded under this agreement. The lease and
loan transactions with the Subacute Entities are based on market terms and are
generally similar to the Company's lease and mortgage agreements with
unaffiliated companies. The former president of the Company, Mr. Mark
Finkelstein, is the president of the Subacute Entities. Rent and interest paid
to the Company by the Subacute Entities was $13.7 million in 1998.
7
<PAGE>
The Company has entered into an advisory agreement with RMR (the "Advisory
Agreement"), under which RMR provides investment and administrative services to
the Company. RMR is owned by Messrs. Martin and Portnoy. The Advisory Agreement
provides, for an annual base advisory fee equal to 0.70% of the Company's
Average Invested Capital, as defined in the Advisory Agreement, up to $250
million, and 0.50% of Average Invested Capital equal to or exceeding $250
million; and an annual incentive fee, calculated on the basis of 15% of the
increase in funds from operations from the prior year on a fully diluted basis,
but no more than $.01 per fully diluted Common Share outstanding. All incentive
fees which may be earned by RMR will be paid in Common Shares. The base
advisory fee paid to RMR for fiscal year 1998 was $13.6 million, of which
approximately $511,300 was attributable to investments in the Subacute
Entities. The incentive fee award for fiscal year 1998 was $1.4 million, paid
by the issuance of approximately 89,702 Common Shares, having a market value at
December 31, 1998 of $1.3 million.
Effective January 1, 1998, the Company also entered into a property
management agreement with RMR (the "Property Management Agreement"), under
which RMR provides property management services for the Company's multi-tenant,
government-leased and other office buildings. Fees paid to RMR under the
Property Management Agreement are based on a formula (generally 3% of gross
collected rents as an annual management fee and 5% of gross construction costs
as a construction management fee) relating to the buildings under its
management. Effective January 1, 1998, the Company entered into a parking
operation management agreement (the "Parking Management Agreement") pursuant to
which Garage Management, Inc. ("GMI"), a Delaware corporation owned by Messrs.
Martin and Portnoy, provides parking management services for garages associated
with certain of the Company's properties. Under the Parking Management
Agreement, the Company has agreed to pay GMI a monthly management fee of 3% of
gross monthly parking receipts. The Company paid RMR, GMI and their affiliates
$6.7 million in total management fees in 1998.
Until March 31, 1997, Mr. Portnoy was a partner in the firm of Sullivan &
Worcester LLP, counsel to the Company and to HPT, RMR, the Subacute Entities,
GMI and affiliates of each of the foregoing, and in 1998 Mr. Portnoy received
payments from that firm in respect of his retirement.
Messrs. Martin and Portnoy each have material interests in the
transactions between the Company and each of the Subacute Entities, RMR,
Advisors and GMI. To the extent that the terms of the Company's investments in
properties owned or leased by the Subacute Entities have been somewhat
negotiated among related parties, they have not been determined on an arm's
length basis. Investment terms, however, have been based upon independent
appraisals of the properties, where available, but the Company has historically
placed a greater emphasis on what it believes to be more determinative factors
such as cash flow available for rent and debt service. All existing business
relationships between the Company, on the one hand, and RMR, Advisors, the
Subacute Entities, GMI and/or their affiliates, on the other hand, have been
approved by, and, unless and until any such company no longer has relationships
with the Company or its affiliates which are the same or similar to those
described above, all such future relationships will be submitted for approval
by, majority vote of the Independent Trustees.
Mr. Donelan is a Director of Dresdner Kleinwort Benson and an Executive
Vice President of Dresdner Kleinwort Benson North America LLC, the agent and a
lender under the Company's revolving bank credit facility. The Company uses the
facility for interim acquisition funding and for working capital borrowings. In
1998, the facility was expanded to permit borrowings up to $500 million and its
maturity was extended to 2002. The facility provides for interest on advances
at LIBOR plus a spread, as well as for certain alternate interest rates, and
the lenders and agents under the facility are entitled to receive certain fees.
Certain Litigation.
As previously disclosed, in early 1995 the Company commenced an action in
Florida state court to collect on a secured indemnity agreement from a former
tenant and mortgagor, together with certain related parties (collectively, the
"Former Tenant"). In May 1995 the Former Tenant filed a counterclaim and
third-party complaint against the Company and others including Messrs. Martin
and Portnoy, Advisors and Sullivan & Worcester LLP, seeking, among other
things,
8
<PAGE>
to set aside the indemnity agreement and to recover substantial damages. After
a Massachusetts state court ordered the dispute to arbitration and a Florida
court stayed further proceedings pending arbitration, the Former Tenant brought
a separate action against the Company in the United States District Court for
the District of Massachusetts and realleged many of the same allegations made
in the counterclaims and third-party complaints previously brought by them in
response to the Company's original action, and adding allegations of violations
of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule
10b-5 promulgated thereunder and violations of 18 U.S.C. [sec]1962 (RICO). In
September 1996, the United States District Court for the District of
Massachusetts ordered the case brought by the Former Tenant dismissed and all
disputes between the Former Tenant and the Company referred to arbitration.
The arbitration is proceeding, and although the amount of damages claimed
by the Former Tenant is material, all claims of the Former Tenant against the
Company were dismissed in January of this year, except a basic claim for common
law fraud, which is scheduled for trial before the arbitrators in October 1999.
The arbitrators' ruling, dismissing all but one claim against the Company, both
narrows substantially the scope of claims pending against the Company and
diminishes greatly the risk of the Former Tenant being able to hold the Company
liable for (i) attorneys fees and costs, or (ii) multiple damages, should the
Former Tenant prevail on its sole remaining claim against the Company. The
Company continues to pursue its indemnity claims in the arbitration.
As the Company has previously disclosed, certain related cases have also
been filed by creditors or assignees of the Former Tenant. The amounts of
damages claimed by the creditors or assignees of the Former Tenant are
material. The Company will defend the claims of the creditors or assignees of
the Former Tenant in these related proceedings, currently pending in
Massachusetts Superior Court. The outcome of the arbitration and the related
pending claims and proceedings cannot be predicted.
The Declaration of Trust provides that Trustees of the Company shall be
indemnified in certain circumstances by the Company in connection with claims
asserted against them by reason of their status, subject to various limitations
contained in the Declaration of Trust. Were Messrs. Martin and Portnoy to be
held liable in the proceedings described above, they may have a claim for
indemnification from the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Trustees and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of securities with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
Trustees and greater than 10% shareholders are required to furnish the Company
with copies of all forms they file pursuant to Section 16(a). Based solely on
review of the copies of such reports furnished to the Company or written
representations that no other reports were required, the Company believes that,
during the 1998 fiscal year, all filing requirements applicable to its
executive officers, Trustees and greater than 10% shareholders were met.
AUDITORS
The Company is not required to submit the selection of its auditor to a
vote of shareholders. The Company's independent auditor since its organization
in 1986 has been Ernst & Young LLP or its predecessors.
A representative of Ernst & Young LLP is expected to be present at the
Meeting, with the opportunity to make a statement if desired, and is expected
to be available to respond to appropriate questions from shareholders who are
present at the Meeting.
9
<PAGE>
SHAREHOLDER PROPOSALS
The Company's 2000 Annual Meeting of Shareholders is presently expected to
be held on or about May 9, 2000. Proposals of shareholders intended to be
presented at the 2000 Annual Meeting and nominations for Trustee must be
received not later than March 2, 2000 and not earlier than January 12, 2000 for
inclusion in the Company's proxy statement and proxy for that meeting.
The Company's Bylaws establish an advance notice procedure with regard to
the nomination, other than by the Board, of candidates for election as Trustees
(the "Nomination Procedure"). The Nomination Procedure provides that only
persons who are nominated by or at the direction of the Board of Trustees, or
by a shareholder of record on the date of the giving of the notice described
below and on the record date for the determination of shareholders entitled to
vote upon such nomination who has given timely prior written notice to the
Secretary of the Company prior to the meeting at which Trustees are to be
elected, will be eligible for election as Trustees. To be timely, notice of a
shareholder's nominee in the case of an annual meeting must be received by the
Company not less than 70 days nor more than 120 days prior to the anniversary
date of the immediately preceding annual meeting (i.e., not later than March 2,
2000, nor earlier than January 12, 2000, with respect to the 2000 Annual
Meeting of Shareholders).
OTHER MATTERS
As of this time, the Board of Trustees knows of no other matters to be
brought before the Meeting. However, if other matters properly come before the
Meeting or any adjournment thereof, and if discretionary authority to vote with
respect thereto has been conferred by the enclosed proxy, the persons named in
the proxy will vote the proxy in accordance with their discretion as to such
matters.
By Order of the Board of Trustees
DAVID J. HEGARTY, Secretary
Newton, Massachusetts
March 31, 1999
HLRCM-PS99
10
<PAGE>
HRPT PROPERTIES TRUST
400 Centre Street, Newton, Massachusetts 02458
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of HRPT Properties Trust, a Maryland real estate
investment trust (the "Company"), hereby appoints DAVID J. HEGARTY, GERARD M.
MARTIN and BARRY M. PORTNOY, or any of them, as proxies for the undersigned,
with full power of substitution in each of them, to attend the Annual Meeting of
Shareholders of the Company to be held at State Street Bank and Trust Company,
225 Franklin Street, 33rd Floor, Boston, Massachusetts on Tuesday, May 11, 1999
at 9:30 a.m., and any adjournment or postponement thereof, to cast on behalf of
the undersigned all the votes that the undersigned is entitled to cast at such
meeting and otherwise to represent the undersigned at the meeting with all
powers possessed by the undersigned if personally present at the meeting. The
undersigned hereby acknowledges receipt of the Notice of the Annual Meeting of
Shareholders and of the accompanying Proxy Statement and revokes any proxy
heretofore given with respect to such meeting.
The votes entitled to be cast by the undersigned will be cast as instructed on
the reverse side hereof. If this Proxy is executed but no instruction is given,
the votes entitled to be cast by the undersigned will be cast "for" each of the
nominees for trustee and in the discretion of the Proxy holder on any other
matter that may properly come before the meeting or any adjournment or
postponement thereof.
- --------------------------------------------------------------------------------
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE: Please sign exactly as name(s) appear(s) hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
- ------------------------------------- ---------------------------------------
<PAGE>
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------
HRPT PROPERTIES TRUST 1. Election of Trustees in Group I: For All With- For All
- ---------------------------------------------------------- Nominees hold Except
Bruce M. Gans, M.D. [ ] [ ] [ ]
Barry M. Portnoy
If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the name of
the nominee. Your shares will be voted for the remaining nominee.
RECORD DATE SHARES:
2. In their discretion, the Proxies are authorized to vote on such
other business as may properly come before the meeting.
-----------
Please be sure to sign and date this Proxy. Date
- --------------------------------------------------------- Mark box at right if an address change or comment has been [ ]
noted on the reverse side of this card.
- --------------------------------------------------------
Shareholder sign here Co-owner sign here
DETACH CARD DETACH CARD
</TABLE>
