<PAGE>
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
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
STARWOOD FINANCIAL TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
STARWOOD FINANCIAL TRUST
1114 AVENUE OF THE AMERICAS
27TH FLOOR
NEW YORK, NEW YORK 10036
April 30, 1999
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Starwood Financial Trust, a Maryland real estate investment trust (the
"Company"), to be held at The Sheraton New York Hotel & Towers, 811 Seventh
Avenue, New York, New York, 10019 on June 1, 1999 at 1:00 p.m. local time (the
"Annual Meeting").
At the Annual Meeting, the holders of the Class A Shares and Class B Shares
of beneficial interest of the Company (the "Shareholders") will be asked to
elect four (4) Trustees to the Board of Trustees and to consider and vote on a
proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the year ended December 31, 1999.
Details of the proposals to be voted on at the Annual Meeting and other
important matters are contained in the attached Proxy Statement, which you are
encouraged to read carefully.
YOUR BOARD OF TRUSTEES HAS CONCLUDED THAT THE ELECTION OF THE NOMINEES AS
TRUSTEES AND THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS ARE IN THE BEST INTERESTS OF BOTH
THE COMPANY AND THE SHAREHOLDERS. THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE
FOR APPROVAL OF ALL OF THE PROPOSALS.
All Shareholders are cordially invited to attend the Annual Meeting in
person. Any Shareholder attending the Annual Meeting may vote in person even if
he or she previously returned a proxy.
Sincerely,
[LOGO]
Barry S. Sternlicht
Chairman of the Board
<PAGE>
STARWOOD FINANCIAL TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Starwood
Financial Trust, a Maryland real estate investment trust (the "Company"), will
be held at The Sheraton New York Hotel & Towers, 811 Seventh Avenue, New York,
New York, 10019 on June 1, 1999 at 1:00 p.m. local time (the "Annual Meeting"),
for the following purposes as further described in the accompanying Proxy
Statement:
1. To elect to the Board of Trustees four (4) members to hold office
until the second succeeding annual meeting of shareholders and until their
successors have been duly elected and qualified. The nominees to the Board
of Trustees are Barry S. Sternlicht, Jay Sugarman, William M. Matthes and
Kneeland C. Youngblood.
2. To consider and vote upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants for the
fiscal year ended December 31, 1999.
3. To transact such other business as may properly come before the
Annual Meeting or any postponement or adjournment thereof.
The Board of Trustees has fixed April 30, 1999 as the record date for the
determination of shareholders entitled to receive notice of and to vote at the
Annual Meeting or any postponement or adjournment thereof, and only holders of
record of Class A Shares and Class B Shares at the close of business on that day
will be entitled to vote.
By Order of the Board of Trustees
[LOGO]
Spencer B. Haber
Secretary of the Company
New York, New York
April 30, 1999
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WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, TO ENSURE YOUR
REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE
ENCLOSED FOR THAT PURPOSE.
- --------------------------------------------------------------------------------
<PAGE>
STARWOOD FINANCIAL TRUST
1114 AVENUE OF THE AMERICAS
27TH FLOOR
NEW YORK, NEW YORK 10036
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 1999
This proxy statement (the "Proxy Statement") is being sent to shareholders
(the "Shareholders") of Starwood Financial Trust, a Maryland real estate
investment trust (the "Company"), on or about April 30, 1999 in connection with
the solicitation by the Board of Trustees of the Company (the "Board of
Trustees") of proxies to be voted at the Company's 1999 Annual Meeting of
Shareholders (the "Annual Meeting") to be held at The Sheraton New York Hotel &
Towers, 811 Seventh Avenue, New York, New York, 10019 on June 1, 1999 at 1:00
p.m. local time, or at any postponement or adjournment thereof.
This Proxy Statement is accompanied by a copy of the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
GENERAL INFORMATION
Only holders of record of the Class A Shares, par value $1.00 per share (the
"Class A Shares") and Class B Shares, par value $0.01 per share (the "Class B
Shares", and together with the Class A Shares, the "Shares"), at the close of
business on April 30, 1999 (the "Record Date") are entitled to receive notice of
and to vote at the Annual Meeting or at any postponement or adjournment thereof.
On the Record Date, the issued and outstanding shares of the Company were
52,470,951 Class A Shares and 26,203,859 Class B Shares. The presence, either in
person or by proxy, of the holders of a majority of the outstanding Class A
Shares and a majority of the Class B Shares on the Record Date is necessary to
constitute a quorum at the Annual Meeting.
As of April 30, 1999, Starwood Mezzanine Investors, L.P. ("Starwood
Mezzanine"), SOFI-IV SMT Holdings, L.L.C ("SOFI IV") and B Holdings, L.L.C.
("BLLC") had the right to vote an aggregate of 51,839,802 Class A Shares and
26,203,859 Class B Shares, representing over 98% of the total voting interest
held by Class A Shares and Class B Shares outstanding on such date. Each of
Starwood Mezzanine, SOFI IV and BLLC has indicated that it intends to vote all
of the Class A Shares and Class B Shares held by it for approval of each of the
proposals discussed herein.
Class A Shares and Class B Shares represented by a proxy in the accompanying
form, if such proxy is properly executed and is received by the Company prior to
voting at the Annual Meeting, will be voted in the manner specified on the
proxy. If no such specification is made, the Class A Shares and Class B Shares
will be voted FOR the proposals as described herein and as recommended by the
Board of Trustees with regard to all other matters in its discretion. Any
Shareholder of the Company who casts a vote by proxy may revoke it at any time
before it is voted by giving written notice to the Secretary of the Company
expressly revoking the proxy, by signing and forwarding to the Company a later
dated proxy, or by attending the Annual Meeting and personally voting the Class
A Shares or Class B Shares owned of record by such Shareholder.
In voting upon any matter which may come before the Annual Meeting, each
Shareholder is entitled to one vote for each Class A Share or Class B Share
registered in the Shareholder's name on the Record Date.
Those Shareholders who received a proxy card marked with a blue stripe
currently possess share certificates ("Old Certificates") of the Company's
predecessor in interest, Starwood Financial Trust, a California business trust
formerly known as Angeles Participating Mortgage Trust ("SFT-CA"). The Old
Certificates represent Class A Shares of the Company that have not been
exchanged. In June 1998,
<PAGE>
SFT-CA merged into the Company and the Company exchanged its Shares for those of
SFT-CA at an exchange ratio of six Class A Shares of SFT-CA for each Class A
Share of the Company and six Class B Shares of SFT-CA for each Class B Share of
the Company. Each Shareholder who possesses Old Certificates is entitled to vote
the number of Class A Shares registered in the Shareholder's name on the Record
Date, which number is one sixth of the shares represented by the Old
Certificates.
If you are in possession of Old Certificates, please contact the transfer
agent, ChaseMellon Shareholder Services, L.L.C. at 1-800-777-3674 for
information regarding how to exchange your Old Certificates for certificates
representing Class A Shares of the Company.
All Shareholders of both Class A Shares and Class B Shares shall vote
together as a single class, with a majority vote of the outstanding Class A
Shares and Class B Shares required for approval and ratification of each matter.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting, who will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the Shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
The Company will pay the cost of soliciting proxies from its Shareholders.
In addition to solicitation by mail, certain Trustees, officers and regular
employees of the Company may solicit the return of proxies by telephone,
facsimile, personal interview or otherwise without additional remuneration. The
Company will also reimburse brokerage firms and other persons representing the
beneficial owners of Class A Shares for their reasonable expenses in forwarding
proxy solicitation material to such beneficial owners in accordance with the
proxy solicitation rules and regulations of the Securities and Exchange
Commission and the American Stock Exchange ("AMEX"), on which the Class A Shares
are traded under the symbol "APT."
PROPOSAL 1:
ELECTION OF TRUSTEES
Four Class II Trustees are to be elected at the Annual Meeting to hold
office until the 2001 Annual Meeting of Shareholders of the Company and until
their successors are duly elected and qualified. The nominees are Barry S.
Sternlicht, Jay Sugarman, William M. Matthes and Kneeland C. Youngblood.
TRUSTEES AND NOMINEES
The persons named as proxy holders in the accompanying proxy card have
advised the Company that they will vote the Shares represented by the proxies
they hold in favor of the election of the four nominees named below as Trustees,
unless and except to the extent that authority to vote for one or more nominees
is withheld in the proxies. In no case will proxies be voted for a greater
number of persons than the number of nominees for election to the Board. All of
the nominees for Trustee are presently Trustees who have been nominated for
re-election. Their current terms of office will expire on the date of the Annual
Meeting and when their successors are duly elected and qualified. If a nominee
becomes unavailable to serve as a Trustee for any reason, the Shares represented
by any proxy will be voted for the person, if any, who may be designated by the
Board of Trustees to replace such nominee. However, the Board of Trustees has no
reason to believe that any nominee will be unavailable to serve as a Trustee if
elected.
2
<PAGE>
Each of BLLC, the sole holder of Class B Shares, and Starwood Mezzanine and
SOFI IV, who as of April 30, 1999 owned an aggregate of 51,839,802 Class A
Shares and 26,203,859 Class B Shares, or over 98% of the outstanding voting
shares, have indicated that they will vote all Shares held by each for the
election of Messrs. Sternlicht, Sugarman, Matthes and Youngblood at the Annual
Meeting. Pursuant to a Shareholders Agreement (the "Shareholders Agreement")
among the Company, BLLC, SAHI Partners, Starwood Mezzanine and SOFI IV during
any period in which: (i) the Class B Shares remain controlled by Starwood
Capital Group, L.L.C. ("Starwood Capital") or by an entity under common control
with Starwood Capital; and (ii) the advisory agreement (the "Advisory
Agreement") between the Company and Starwood Financial Advisors, L.L.C. (the
"Advisor") has not been terminated by the Advisor or terminated for cause by the
Company, the Company is required to use its best efforts to cause five nominees
designated by Starwood Capital or by the parties who control Starwood Capital to
be elected to the Board of Trustees and to cause such persons to be included as
the management slate of nominees to the Board of Trustees. Further, during such
period the Company has agreed to use its best efforts to cause such nominees or
Trustees to be replaced from time to time, with or without cause, with new
persons designated by Starwood Capital or the parties who control Starwood
Capital at the request of Starwood Capital or persons who control Starwood
Capital. Mr. Sternlicht and Mr. Sugarman have been designated by Starwood
Capital as nominees. Finally, each of Messrs. Sugarman, Dishner, Eilian and
Kleeman has agreed in writing to resign as a Trustee at the request of Starwood
Capital or persons who control Starwood Capital. No other arrangement or
understanding exists between any nominee and any other person or persons
pursuant to which any nominee was or is to be selected as a Trustee or nominee.
None of the nominees has any family relationship between them nor with any
Trustee or executive officer of the Company. However, Messrs. Dishner, Eilian,
Kleeman and Sugarman are employed by an entity controlled by Mr. Sternlicht.
The following table sets forth the name, age and the position(s) with the
Company (if any) currently held by each person nominated as a Trustee:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------ ----------- -------------------------------------------------
<S> <C> <C>
Barry S. Sternlicht................. 38 Chairman
Jay Sugarman........................ 36 Chief Executive Officer, President and Trustee
William M. Matthes(2)............... 39 Trustee
Kneeland C. Youngblood(1)(2)........ 43 Trustee
</TABLE>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
BARRY S. STERNLICHT became a Trustee of the Company in March 1994 and was
elected Chairman in September 1996. Mr. Sternlicht was Chief Executive Officer
of the Company from September 1996 to November 1997. Mr. Sternlicht was Chairman
of the Audit and Compensation Committee of the Company from March 1994 until
December 1995. He is founder and General Manager of Starwood Capital and
co-founder of its predecessor entities and has been the President and Chief
Executive Officer of Starwood Capital Group, L.P. since its formation in 1991.
In addition, Mr. Sternlicht is currently the Chairman of the Board of Trustees
of Starwood Hotels & Resorts, Chairman of the Board of Directors and Chief
Executive Officer of Starwood Hotels & Resorts Worldwide, Inc., and is a
director of U.S. Franchise Systems. Mr. Sternlicht is a member of the Urban Land
Institute, the National Multi-Family Housing Council, the Board of Directors of
the Council for Christian and Jewish Understanding, the Young Presidents
Organization and the Board of Directors of Junior Achievement for Fairfield
County, Connecticut.
JAY SUGARMAN became Chief Executive Officer of the Company in November 1997
and President and Trustee of the Company in September 1996. From January 1994 to
March 1998, Mr. Sugarman was Senior
3
<PAGE>
Managing Director of Starwood Capital and President of Starwood Mezzanine. From
1990 through 1993, Mr. Sugarman managed a diversified, privately owned
investment fund, which was a founding investor in Starwood Capital Group, L.P.
Earlier in his career, Mr. Sugarman worked at First Boston Corporation and
Goldman, Sachs & Co. Mr. Sugarman is a director of Commercial Guaranty
Assurance, a financial insurance company and WCI Communities, Inc., a
residential developer in South Florida.
WILLIAM M. MATTHES was elected a Trustee in March 1998. Since April 1996,
Mr. Matthes has been a Managing Partner of Behrman Capital, a New York and San
Francisco based private equity investment fund with in excess of $600 million of
equity capital under management. From July 1991 to April 1996, Mr. Matthes was
employed as Senior Vice President and Chief Operating Officer of Holsted
Marketing, Inc. Mr. Matthes was a general partner of Brentwood Associates from
1991 to July 1994 and previously was employed as an analyst at Morgan Stanley &
Co., Inc. Mr. Matthes is a director of Condor Systems, Inc., TMNG, Inc.,
Intertech Management Group, Holsted Marketing, Inc. and Holsted, Inc.
KNEELAND C. YOUNGBLOOD was elected as a Trustee in March 1998. Mr.
Youngblood is co-founder and Managing Partner of Pharos Capital Group, L.L.C., a
private equity firm. Mr. Youngblood was a director of the United States
Enrichment Corporation, an independently run government-owned nuclear fuel
corporation privatized in 1998. He is also a fiduciary trustee for the Teacher
Retirement System of Texas ("TRS"), in which capacity he has responsibility for
hiring investment advisors, determining asset allocations and formulating
investment/benefit policies. As Chairman of the TRS Real Estate Committee, he
has directed a major restructuring of the TRS's portfolio, which has assets of
$1.4 billion, and is responsible for considering and approving significant
transactions within the portfolio. Mr. Youngblood is a trustee of the American
Advantage Funds, a $6 billion mutual fund managed by AMR Investments, a division
of American Airlines. He is a member of the Council on Foreign Relations.
The following table sets forth the name, age and the position(s) with the
Company (if any) currently held by each Trustee with a term expiring at the 2000
Annual Meeting of Shareholders of the Company:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------------- --------- -------------------------------------------
<S> <C> <C>
Jeffrey G. Dishner(1)...................... 34 Trustee
Jonathan D. Eilian......................... 31 Trustee
Robin Josephs(1)(2)........................ 39 Trustee
Merrick R. Kleeman......................... 35 Trustee
</TABLE>
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(1) Member of Audit Committee.
(2) Member of Compensation Committee.
JEFFREY G. DISHNER was elected a Trustee of the Company in March 1998. Mr.
Dishner is a Managing Director of Starwood Capital. Prior to joining Starwood
Capital in 1994, Mr. Dishner was employed by the commercial mortgage finance
group of J.P. Morgan & Co. Mr. Dishner obtained his M.B.A. during 1991 and 1992
and was employed by JMB Realty Corporation from 1987 through 1991.
JONATHAN D. EILIAN was elected a Trustee of the Company in March 1997. Mr.
Eilian has been a Senior Managing Director or executive officer of Starwood
Capital (and its predecessor entities) since its formation in September 1991.
Prior to being a founding member of Starwood Capital, Mr. Eilian served as an
Associate for JMB Realty Corporation, a real estate investment firm, and for The
Palmer Group, L.P., a private investment firm specializing in corporate
acquisitions.
ROBIN JOSEPHS was elected a Trustee of the Company in March 1998. Ms.
Josephs manages private real estate investments. Ms. Josephs served as a Vice
President at Goldman Sachs from 1986 to 1996 in various capacities. Prior to
working at Goldman Sachs, Ms. Josephs was a consultant for Booz Allen & Hamilton
in New York from 1982 to 1984.
4
<PAGE>
MERRICK R. KLEEMAN was elected a Trustee of the Company in March 1998. Mr.
Kleeman is a Senior Managing Director of Starwood Capital. Prior to joining
Starwood Capital in August 1992, Mr. Kleeman was employed by the investment
banking division of Merrill Lynch and by Coastal Management and Consultant,
Inc., a real estate investment company.
INFORMATION REGARDING THE BOARD OF TRUSTEES AND ITS COMMITTEES
The Board of Trustees has delegated certain powers to an Audit Committee and
a Compensation Committee. The Audit Committee makes recommendations to the Board
of Trustees concerning the selection of the Company's independent auditors,
oversees the financial reporting process, develops and approves plans for the
annual duties of the Trustees, reviews fees charged by the independent auditors,
reviews the scope and results of the auditors' reports and reviews and monitors
the implementation of suggestions made by the independent auditors. The Audit
Committee is kept apprised by management of the Company's internal control
procedures. Additionally, the Audit Committee reviews and monitors non-audit
services provided by the independent auditors. The Compensation Committee
oversees, reviews and approves the compensation of the Trustees and officers of
the Company. The Compensation Committee also administers the Company's incentive
plans. Ms. Josephs and Messrs. Dishner and Youngblood currently serve on the
Audit Committee with Mr. Youngblood serving as Chairman. Ms. Josephs and Messrs.
Matthes and Youngblood currently serve on the Compensation Committee with Ms.
Josephs serving as Chairman.
BOARD OF TRUSTEES AND COMMITTEE MEETINGS.
During the fiscal year ending December 31, 1998, the Board of Trustees held
nine meetings. Each of the Trustees attended at least 75% of all meetings of the
Board. During 1998, there were two meetings of the Audit Committee at which all
of the members participated and one meeting of the Compensation Committee, at
which all of the members participated.
RECOMMENDATION REGARDING THE BOARD ELECTION PROPOSAL
The Board of Trustees recommends that you vote FOR the four named nominees
to be elected as the Trustees of the Company.
PROPOSAL 2:
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Trustees has selected PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending December 31, 1999,
subject to ratification by the Shareholders. The Company expects a member of
PricewaterhouseCoopers LLP to attend the Annual Meeting to make a statement, if
he or she desires, and to respond to appropriate questions.
Deloitte & Touche LLP served as the Company's independent auditors for the
fiscal year ended December 31, 1996. Deloitte & Touche LLP was not selected by
the Board of Trustees to continue to serve as independent auditors to the
Company for the fiscal year ending December 31, 1997 and was dismissed on
December 19, 1997. There were no disagreements between the Company and Deloitte
& Touche LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures during the last fiscal
year.
Deloitte & Touche LLP has not reported on the Company's financial statements
in the last two fiscal years. The decision to change accountants was recommended
and approved by the Audit and Compensation Committee.
During fiscal 1997 there were no disagreements with Deloitte & Touche LLP on
any matter of accounting principles or practices, financial statement
disclosure, auditing scope or procedure, which
5
<PAGE>
disagreement, if not resolved to the satisfaction of Deloitte & Touche LLP,
would have caused it to make reference to the subject matter of the disagreement
in connection with its report.
RECOMMENDATION REGARDING RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP
The Board of Trustees recommends that you vote FOR ratification of this
appointment.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2000 Annual Meeting
must be sent in writing, by certified mail, return receipt requested, to the
Company at its principal office, addressed to the Secretary of the Company, and
must be received by the Company no later than January 1, 2000, for inclusion in
the 2000 proxy materials.
OTHER INFORMATION
EXECUTIVE OFFICERS
The following information relates to the executive officer of the Company
who is not a Trustee and is not nominated as a Trustee. The officers of the
Company serve at the pleasure of the Board of Trustees and are customarily
appointed as officers at the annual meeting of the Board of Trustees held
following each Annual Meeting of Shareholders.
SPENCER B. HABER became Chief Financial Officer and Secretary of the Company
in June 1998. Prior to joining the Company, Mr. Haber was Senior Vice President
of Lehman Brothers in Global Real Estate from 1993 to 1998, where he was most
recently responsible for the firm's real estate mergers and acquisitions
business. Prior to joining Lehman Brothers, Mr. Haber was a member of the real
estate investment banking group at Salomon Brothers and associated with MIG
Capital Management, a domestic real estate pension fund advisor, and
Charterhouse, Inc., a British merchant bank. Mr. Haber is a member of the Urban
Land Institute, National Association of Real Estate Investment Trusts and
American Senior Housing Association. Mr. Haber is 30 years old.
EXECUTIVE OFFICERS' COMPENSATION
For the year ended December 31, 1998, neither Mr. Sugarman nor any other
executive officer of the Company received any compensation from the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's compensation policy is to set salaries at
levels the Compensation Committee believes will attract, retain and motivate
highly competent individuals. Additionally, the Compensation Committee generally
seeks to create a commonality of interest between the executives and the
Shareholders by linking the executive's total compensation to the performance of
the Company. The Compensation Committee met once during 1998. Mr. Sugarman was
not compensated as Chief Executive Officer in 1998. Mr. Sugarman is not expected
to receive any compensation from the Company in 1999.
The Compensation Committee currently intends for all compensation paid to
the Company's executive officers to be tax deductible to the Company pursuant to
Section 162(m) of the Code ("Section 162(m)"). Section 162(m) provides that
compensation paid to executive officers in excess of $1,000,000 cannot be
deducted by the Company for federal income tax purposes unless, in general, such
compensation is performance-based, is established by an independent committee of
Trustees, is objective and the plan or agreement providing for such
performance-based compensation has been approved in advance by the Shareholders.
In the future, however, if, in the judgment of the Compensation Committee, the
benefits to the Company of a compensation program that does not satisfy the
arbitrary and inflexible
6
<PAGE>
conditions of Section 162(m) outweigh the costs to the Company of failure to
satisfy these conditions, the Compensation Committee may adopt such a program.
Robin Josephs (Chairman)
William M. Matthes
Kneeland C. Youngblood
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee oversees, reviews and approves the compensation
of the Trustees and officers of the Company. Currently, Ms. Josephs and Messrs.
Matthes and Youngblood serve on the Compensation Committee, with Ms. Josephs
serving as Chairman.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Trustees, executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Shares and other equity securities of the Company.
Trustees, officers and greater than 10% shareholders are required to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company, during the fiscal year ended December 31,
1998, all Section 16(a) filing requirements applicable to its Trustees, officers
and greater than 10% beneficial owners were complied with except (i) each of
BLLC and Starwood Opportunity Fund II, L.P., each part of a group that
beneficially owns 10% of the Shares of the Company, failed to file a Form 3 and
a Form 4, each reporting one transaction, on a timely basis; (ii) Starwood
Capital failed to file one Form 4, reporting two transactions, on a timely
basis; (iii) each of SOFI IV, Starwood Opportunity Fund IV, L.P. and SOFI IV
Management, L.L.C. failed to file a Form 3 and a Form 4, each reporting one
transaction, on a timely basis; and (iv) Robin Josephs, a Trustee of the
Company, failed to file a Form 5, reporting one transaction, on a timely basis.
TRUSTEES' COMPENSATION
Each Trustee who is not also an officer or employee of the Company or of
Starwood Capital, currently receives a fee of $20,000 per year, which is paid
quarterly. Each such unaffiliated Trustee also receives an additional fee of
$1,000 for each meeting of the Board of Trustees which he or she attends in
person, $750 for each meeting of the Board of Trustees which he or she attends
telephonically, and $500 for each committee meeting which he or she attends,
either personally or telephonically. Trustees are also reimbursed for any
expenses incurred in attending such meetings or incurred as a result of other
work performed for the Company. The Trustees who are officers or employees of
the Company or Starwood Capital do not receive any compensation from the
Company.
The Company and each of its Trustees and executive officers have entered
into indemnification agreements. The indemnification agreements provide that the
Company will indemnify the Trustees and the executive officers to the fullest
extent permitted by the law against certain liabilities (including settlements)
and expenses actually and reasonably incurred by them in connection with any
threatened or pending legal action, proceeding or investigation to which any of
them is, or is threatened to be, made a party by reason of their status as a
Trustee, officer or agent of the Company, or serving at the request of the
Company in any other capacity for or on behalf of the Company; provided that
such Trustee or executive officer acted in a manner determined in good faith to
be within the scope of his authority and to be in the best interest of the
Company and so long as the Trustee or executive officer was not guilty of gross
negligence, misconduct or a breach of his fiduciary obligations in the act or
failure to act. The Company will not indemnify the Trustees and executive
officers to the extent prohibited by the Company's
7
<PAGE>
Amended and Restated Declaration of Trust (the "Declaration of Trust") or Title
8 of the Maryland Corporations Code ("Title 8"). If an amendment to the
Declaration of Trust or Title 8 with respect to removal of limitations on
indemnification is approved, the indemnification agreements will be amended
accordingly. The Company is not required to indemnify any Trustee or executive
officer for liabilities: (i) for which he receives payment under an insurance
policy, except for the excess beyond payment under such insurance, or which
could have been claimed under an expired insurance policy; (ii) based upon or
attributable to his gaining in fact any personal profit or advantage to which he
was not legally entitled; (iii) resulting from an accounting of profits under
Section 16(b) of the Exchange Act; or (iv) brought about or contributed to by
his dishonesty, willful misconduct or bad faith unless a judgment or other final
adjudication adverse to the Trustee or executive officer establishes that he was
not guilty of the claimed conduct and that the conduct was not material to the
course of action so adjudicated. In addition, the Company has obtained Trustee
and officer insurance for the Trustees and executive officers of the Company.
PERFORMANCE GRAPH
The following graph compares the total cumulative shareholder return on the
Class A Shares from December 31, 1993 to December 31, 1998 to that of: (i)
Standard & Poor's 500 Index (the "S&P 500"); (ii) the Russell 1000 Financial
Services Index (the "Russell Index"), a capitalization-weighted index of 1,000
companies that provide financial services; and (iii) the NAREIT Mortgage REIT
Total Return Index (the "NAREIT Index"), an index that includes 20 companies.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
TOTAL RETURN INDEX (DEC. 31, 1993
=100)
<S> <C> <C> <C> <C>
Russell 1000 S&P 500 The Company NAREIT
Dec-1993 100.00 100.00 100.00 100.00
Jan-1994 104.53 104.41 103.35 118.80
Feb-1994 99.93 100.68 100.56 106.30
Mar-1994 96.60 92.86 96.19 118.80
Apr-1994 99.60 93.07 97.44 106.30
May-1994 104.44 91.97 99.02 131.30
Jun-1994 101.39 89.26 96.58 131.30
Jul-1994 103.61 91.27 99.77 143.80
Aug-1994 107.31 93.57 103.84 93.80
Sep-1994 100.34 88.80 101.33 100.00
Oct-1994 100.97 84.03 103.65 62.50
Nov-1994 95.00 79.12 99.85 68.80
Dec-1994 96.04 75.70 101.31 56.30
Jan-1995 101.74 81.09 103.94 56.30
Feb-1995 107.93 91.27 107.97 46.90
Mar-1995 108.95 91.72 111.17 65.60
Apr-1995 112.26 93.73 114.41 65.60
May-1995 119.73 100.18 118.92 62.50
Jun-1995 121.73 102.09 121.72 62.50
Jul-1995 126.10 103.10 125.77 56.30
Aug-1995 132.55 111.10 126.11 56.30
Sep-1995 139.71 112.84 131.40 56.30
Oct-1995 136.61 115.24 130.94 50.00
Nov-1995 146.20 117.96 136.70 56.30
Dec-1995 147.28 123.70 139.23 50.00
Jan-1996 153.94 130.61 143.97 59.40
Feb-1996 156.59 125.38 145.30 56.30
Mar-1996 158.50 131.69 146.70 56.30
Apr-1996 156.51 129.48 148.86 62.50
May-1996 159.88 137.93 152.70 87.50
Jun-1996 161.27 143.26 153.28 100.00
Jul-1996 158.37 146.13 146.51 100.00
Aug-1996 164.48 153.90 149.60 103.10
Sep-1996 174.84 158.59 158.02 187.50
Oct-1996 186.10 168.94 162.38 168.80
Nov-1996 202.76 176.14 174.65 162.50
Dec-1996 197.47 186.62 171.19 175.00
Jan-1997 211.45 194.95 181.89 362.49
Feb-1997 219.93 200.63 183.31 312.49
Mar-1997 204.29 181.57 175.78 287.49
Apr-1997 218.61 189.74 186.28 312.50
May-1997 230.09 202.43 197.62 287.50
Jun-1997 243.02 209.81 206.47 281.29
Jul-1997 270.87 216.11 222.90 237.49
Aug-1997 254.07 213.94 210.42 287.49
Sep-1997 274.27 212.57 221.94 443.79
Oct-1997 268.95 205.76 214.53 437.49
Nov-1997 279.85 202.10 224.46 449.99
Dec-1997 296.50 193.76 228.32 612.48
Jan-1998 287.57 202.28 230.84 531.28
Feb-1998 312.85 197.95 247.49 487.49
Mar-1998 330.46 199.34 260.16 462.49
Apr-1998 335.55 195.96 262.80 468.79
May-1998 327.13 190.37 258.28 449.99
Jun-1998 339.33 192.32 268.77 816.64
Jul-1998 338.31 187.20 265.91 926.64
Aug-1998 262.60 148.54 227.46 605.93
Sep-1998 270.58 167.33 242.03 939.25
Oct-1998 299.43 143.32 261.71 1,190.78
Nov-1998 317.90 158.11 277.57 1,345.82
Dec-1998 326.17 137.15 293.57 1,006.27
</TABLE>
In previous Proxy Statements, the Company compared its cumulative return to
the S&P 500 and the NAREIT Index. The Company has selected the Russell Index to
replace the NAREIT Index because management believes that it represents a group
of companies which is more comparable to the Company in terms of business
strategy and size.
8
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of April 30, 1998 with respect
to any Class A Shares and Class B Shares owned by the Trustees and executive
officers of the Company, and any individual or group of Shareholders known to be
the beneficial owner of more than five percent (5%) of the issued and
outstanding Class A Shares or Class B Shares. There are no other Trustees,
nominees for Trustee or executive officers of the Company who beneficially own
either Class A Shares or Class B Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL
TITLE OF CLASS OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------------------- ------------------------- ------------------ -----------------
<S> <C> <C> <C>
Class A Shares................................... Starwood Mezzanine 10,759,890 20.5%
Investors, L.P.(2)
Class A Shares................................... Starwood Mezzanine 10,759,890(3) 20.5%
Holdings, L.P.(2)
Class A Shares................................... Starwood Capital 10,759,890(4) 20.5%
Group I, L.P.(2)
Class A Shares................................... BSS Capital 10,759,890(5) 20.5%
Partners, L.P.(2)
Class A Shares................................... Sternlicht Holdings II, 10,759,890(6) 20.5%
Inc.(2)
Class A Shares................................... SOFI-IV SMT Holdings, 41,079,912 78.3%
L.L.C.(2)
Class A Shares................................... Starwood Opportunity Fund 41,079,912(7) 78.3%
IV,
L.P.(2)
Class A Shares................................... SOFI IV Management, 41,079,912(8) 78.3%
L.L.C.(2)
Class A Shares................................... Starwood Capital Group, 41,079,912(9) 78.3%
L.L.C.(2)
Class A Shares................................... Barry S. Sternlicht(10) 51,841,922(11) 98.8%
Class A Shares................................... Robin Josephs(12) 3,632(13) --
Class A Shares................................... William Matthes(14) 3,332(15) --
Class A Shares................................... Kneeland C. 3,332(15) --
Youngblood(16)
Class A Shares................................... Jeffrey G. Dishner(2) 11 --
Class A Shares................................... Merrick R. Kleeman(2) 56 --
Class A Shares................................... Jonathan Eilian(2) 218 --
Class A Shares................................... Jay Sugarman(17) 1,373 --
Class A Shares................................... Spencer B. Haber(17) 72,222 --
Class B Shares................................... B Holdings, L.L.C.(2) 26,203,859 100.0%
Class B Shares................................... Starwood Capital Group, 26,203,859(18)
L.L.C.(2)
Class B Shares................................... Starwood Opportunity Fund 26,203,859(19) 100.0%
II, L.P..................
Class B Shares................................... Barry S. Sternlicht 26,203,859(20) 100.0%
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF BENEFICIAL OF BENEFICIAL
TITLE OF CLASS OWNER OWNERSHIP(1) PERCENT OF CLASS
- ------------------------------------------------- ------------------------- ------------------ -----------------
<S> <C> <C> <C>
Class A Shares................................... All Executive Officers, 51,926,098(21) 99.0%
Trustees and nominees
for Trustee as a group
(nine persons)
Class B Shares................................... All Executive Officers, 26,203,859(22) 100.0%
Trustees and nominees
for Trustee as a group
(nine persons)
</TABLE>
- ------------------------
(1) Except as otherwise indicated and subject to applicable community property
laws and similar statutes, the person listed as beneficial owner of shares
has sole voting power and dispositive power with respect to the shares.
(2) Three Pickwick Plaza, Suite 250, Greenwich, CT 06830.
(3) Starwood Mezzanine Holdings, L.P. ("Starwood Holdings") is a general partner
of Starwood Mezzanine, and as such shares voting and dispositive power of
the Class A Shares owned by Starwood Mezzanine. Starwood Holdings disclaims
beneficial ownership of such Shares except to the extent of its applicable
pecuniary interest therein.
(4) Starwood Capital Group I, L.P. ("Starwood Capital LP") is: (i) a general
partner of Starwood Mezzanine; and (ii) the general partner of Starwood
Holdings, which is the other general partner of Starwood Mezzanine, and as
such shares voting and dispositive power of the Class A Shares owned by
Starwood Mezzanine. Starwood Capital LP disclaims beneficial ownership of
such Shares except to the extent of its pecuniary interest therein.
(5) BSS Capital Partners, L.P. ("BSS") is the general partner of Starwood
Capital LP, which is: (i) a general partner of Starwood Mezzanine; and (ii)
the general partner of Starwood Holdings, which is the other general partner
of Starwood Mezzanine; as such BSS shares voting and dispositive power of
the Class A Shares owned by Starwood Mezzanine. BSS disclaims beneficial
ownership of such Shares except to the extent of its pecuniary interest
therein.
(6) Sternlicht Holdings II, Inc. ("SHII") is the general partner of BSS, which
is the general partner of Starwood Capital LP, which is: (i) a general
partner of Starwood Mezzanine; and (ii) the general partner of Starwood
Holdings, which is the other general partner of Starwood Mezzanine; as such
SHII shares voting and dispositive power of the Class A Shares owned by
Starwood Mezzanine. SHII disclaims beneficial ownership of such Shares
except to the extent of its pecuniary interest therein.
(7) Starwood Opportunity Fund IV, L.P. ("SOFI LP") is the sole member and
manager of SOFI IV and as such shares voting and dispositive power of the
Class A Shares owned by SOFI IV. SOFI LP disclaims beneficial ownership of
such Shares except to the extent of its pecuniary interest therein.
(8) SOFI IV Management, L.L.C. is the general partner of SOFI LP, which is the
sole member and manager of SOFI IV, and as such shares voting and
dispositive power of the Class A Shares owned by SOFI IV. SOFI IV
Management, L.L.C. disclaims beneficial ownership of such Shares except to
the extent of its pecuniary interest therein.
10
<PAGE>
(9) Starwood Capital Group, L.L.C. ("Starwood Capital") is the general manager
of SOFI IV Management, L.L.C., which is the general partner of SOFI LP,
which is the sole member and general manager of SOFI IV; as such Starwood
Capital shares voting and dispositive power of the 41,079,912 Class A Shares
owned by SOFI IV. Starwood Capital disclaims beneficial ownership of such
Shares except to the extent of its pecuniary interest therein.
(10) 777 Westchester Avenue, White Plains, NY 10604.
(11) Represents 10,759,890 Class A Shares beneficially owned by SHII, of which
Mr. Sternlicht is a 100% owner, 41,079,912 Class A Shares beneficially owned
by Starwood Capital, of which Mr. Sternlicht is the general manager and
2,120 Class A Shares owned directly by Mr. Sternlicht. Mr. Sternlicht shares
voting and dispositive power of all of the Class A Shares beneficially owned
by SHII and Starwood Capital. Mr. Sternlicht disclaims beneficial ownership
of such Shares except to the extent of his pecuniary interest therein.
(12) 1420 North Lake Shore Drive, Chicago, IL 60610.
(13) Includes 3,332 Class A Shares issuable upon the exercise of outstanding
options and 300 Class A Shares owned by Ms. Josephs's spouse.
(14) 4 Embarcadero Center, Suite 3640, San Francisco, CA 94111.
(15) Includes 3,332 Class A Shares issuable upon the exercise of outstanding
options.
(16) 2305 Cedar Springs Road, Suite 401, Dallas, TX 75201.
(17) 1114 Avenue of the Americas, 27th Floor, New York, NY 10036.
(18) Starwood Capital is the member of BLLC, and as such, shares voting and
dispositive power of the Class B Shares owned by BLLC. Starwood Capital
disclaims beneficial ownership of such Shares except to the extent of its
pecuniary interest therein.
(19) Starwood Opportunity Fund II, L.P. ("SOFI II") is a member of BLLC, and as
such, shares voting and dispositive power of the Class B Shares owned by
BLLC. SOFI II disclaims beneficial ownership of such Shares except to the
extent of its pecuniary interest therein.
(20) Mr. Sternlicht is the general manager of Starwood Capital, which is a
member of BLLC, and as such, shares voting and dispositive power of the
Class B Shares owned by BLLC. Mr. Sternlicht disclaims beneficial ownership
of such Shares except to the extent of his pecuniary interest therein.
(21) Represents 51,841,922 Class A Shares beneficially owned by Barry S.
Sternlicht, 3,632 Class A Shares beneficially owned by Robin Josephs, 3,332
Class A Shares beneficially owned by William Matthes, 3,332 Class A Shares
beneficially owned by Kneeland Youngblood, 11 Class A Shares beneficially
owned by Jeffrey Dishner, 218 Class A Shares beneficially owned by Jonathan
Eilian, 56 Class A Shares beneficially owned by Merrick Kleeman, 1,373 Class
A Shares beneficially owned by Jay Sugarman and 72,222 Class A Shares
beneficially owned by Spencer Haber.
(22) Represents 26,203,859 Class B Shares beneficially owned by Barry S.
Sternlicht.
11
<PAGE>
OTHER MATTERS
The management of the Company does not intend to bring any other matters
before the Annual Meeting and knows of no other matters that are likely to come
before the meeting. In the event any other matters properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote the Shares
represented by such proxy in accordance with their best judgment on such
matters.
The Company urges you to submit your vote on the accompanying proxy card by
completing, signing, dating and returning it in the accompanying postage-paid
return envelope at your earliest convenience, whether or not you presently plan
to attend the meeting in person.
By Order of the Board of Trustees
[LOGO]
Spencer B. Haber
Secretary of the Company
New York, New York
April 30, 1999
12
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF TRUSTEES OF
STARWOOD FINANCIAL TRUST
1114 AVENUE OF THE AMERICAS, 27TH FLOOR
NEW YORK, NEW YORK 10036
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 1, 1999. TO VOTE
AT THE ANNUAL MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
TRUSTEES OF STARWOOD FINANCIAL TRUST, SIGN AND DATE THE REVERSE SIDE OF THIS
CARD WITHOUT CHECKING ANY BOX.
The undersigned holder of Class A Shares or Class B Shares of Starwood Financial
Trust, a Maryland real estate investment trust (the "Company"), hereby appoints
Spencer B. Haber and Jay Sugarman, or either of them, with full power of
substitution in each, to attend and to cast all votes which the undersigned
shareholder is entitled to cast at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on June 1, 1999, at 1:00 p.m. local time, at The
Sheraton New York Hotel & Towers, 811 Seventh Avenue, New York, New York, 10019
and at any adjournments or postponements thereof, and otherwise to represent the
undersigned at the meeting with all powers possessed by the undersigned if
personally present at the meeting, upon the following matters. The undersigned
shareholder hereby revokes any proxy or proxies heretofore given with respect to
such meeting. Capitalized terms not otherwise defined have the meanings given in
the Proxy Statement to which this proxy relates.
1. The election of four members to the Board of Trustees.
\_\ FOR all nominees listed below (except as marked to the
contrary below)
\_\ WITHHOLD AUTHORITY to vote for all nominees listed below
William M. Matthes Jay Sugarman
Barry S. Sternlicht Kneeland C. Youngblood
TO WITHHOLD AUTHORITY FOR ANY NOMINEE, STRIKE A LINE THROUGH SUCH NOMINEE'S
NAME. If a nominee becomes unavailable for election or unable to serve as a
Trustee, the votes will be cast for a person that will be designated by the
Board of Trustees of the Company.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1999.
\__\ For \_\ Against \__\ Abstain
In their discretion, the proxies are authorized to vote upon
such other matters as may properly come before the Annual Meeting, or
any adjournments thereof and which the Company did not know, a
reasonable time before the Annual Meeting, would be presented at the
Annual Meeting or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner as directed
herein by the undersigned shareholder. UNLESS CONTRARY DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND IN ACCORDANCE WITH THE UNANIMOUS
DETERMINATION OF THE BOARD OF TRUSTEES AS TO OTHER MATTERS. The undersigned
shareholder may revoke this proxy at any time before it is voted by delivering
to the Secretary of the Company either a written revocation of the proxy or a
duly executed proxy bearing a later date, or by appearing at the Annual Meeting
<PAGE>
and voting in person. The undersigned shareholder hereby acknowledges receipt of
the Notice of Annual Meeting of Shareholders and Proxy Statement.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. If you receive more than one proxy card, please sign and return ALL
cards in the enclosed envelope.
DATED:
--------------------------------------------
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
Please date and sign exactly as the name
appears hereon. When signing as executor,
administrator, trustee, guardian,
attorney-in-fact or other fiduciary, please
give title as such. When signing as
corporation, please sign in full corporate
name by President or other authorized
officer. If you sign for a partnership,
please sign in partnership name by an
authorized person.
