<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
|X| Definitive Proxy Statement Rule 14A-6(E)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EQUITY RESIDENTIAL PROPERTIES 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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
_________________________________________________________________
4) Proposed maximum aggregate value of transaction: ________________
5) Total fee paid: _________________________________________________
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid: _________________________________________
2) Form, Schedule or Registration Statement No.: ___________________
3) Filing party: ___________________________________________________
4) Date filed: _____________________________________________________
Notes:
<PAGE>
[LOGO]
---------------------------------------
NOTICE OF THE 1999
ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------
Dear Equity Residential Shareholder:
The trustees and officers of Equity Residential Properties Trust
cordially invite you to attend our 1999 Annual Meeting of Shareholders. This
year's meeting will be held on Monday, May 17, 1999, at 10:00 a.m., at One North
Franklin Street, Third Floor, Chicago, Illinois. At the meeting we will consider
and take action on the following proposals:
(1) Elect five trustees to the Board of Trustees to terms expiring in
2002;
(2) Approve an amendment to Equity Residential's Share Option and Share
Award Plan; and
(3) Attend to any other business properly before the meeting.
Your Board of Trustees recommends that you vote for each of the
proposals. Shareholders of record at the close of business on March 18, 1999 are
entitled to vote at the meeting and at any adjournments that may take place.
This year in addition to being able to vote by signing, dating and
mailing the enclosed proxy card in the envelope provided, you may instead vote
by using a toll-free telephone number or the Internet. If you have access to a
computer, using the Internet is an easy way to cast your vote. If you attend the
meeting and prefer to vote in person, you may do so. Your vote is very
important. Whether you plan to attend the meeting or not, we encourage you to
vote as soon as possible so that your shares will be represented at the meeting.
Sincerely,
/s/ Bruce C. Strohm
Bruce C. Strohm
Executive Vice President, General Counsel
and Secretary
Two North Riverside Plaza
Chicago, Illinois
March 31, 1999
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
- --------------------------------------------------------------------------------
PROXY STATEMENT
- --------------------------------------------------------------------------------
This Proxy Statement contains information related to the Annual Meeting
of Equity Residential Properties Trust ("Equity Residential" or the "Trust"),
which will be held on Monday, May 17, 1999, at 10:00 a.m., at One North Franklin
Street, Third Floor, Chicago, Illinois.
ABOUT THE ANNUAL MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the Annual Meeting, shareholders will vote on the proposals
regarding the election of trustees and the amendment to Equity Residential's
Share Option and Share Award Plan. We sent you these proxy materials because our
Board of Trustees is requesting that you allow your common shares to be
represented at the meeting by the proxies named in the enclosed proxy card. This
Proxy Statement summarizes information that we are required to provide you under
the rules of the Securities and Exchange Commission ("SEC") and that is designed
to assist you in voting your shares. On March 31, 1999, we began mailing these
proxy materials to all shareholders of record at the close of business on March
18, 1999. Equity Residential will pay the cost of this proxy solicitation, which
is expected to be nominal.
WHO IS ENTITLED TO VOTE?
You will be entitled to vote your shares on each of the proposals if
you held your shares as of the close of business on March 18, 1999. Each of the
shares outstanding on that date is entitled to one vote on each of the
proposals.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the common shares outstanding on the record date of March 18, 1999,
will constitute a quorum, permitting the meeting to conduct its business. As of
the record date, a total of 118,838,358 common shares were outstanding and
entitled to vote. If you have returned valid proxy instructions (whether in
writing, by phone or by Internet) or attend the meeting in person, your shares
will be counted for the purpose of determining whether there is a quorum.
Abstentions and broker non-votes count for quorum purposes, but we do not count
abstentions or broker non-votes as votes for or against any proposal.
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HOW DO I VOTE?
YOUR VOTE IS IMPORTANT. Shareholders can vote in person at the Annual
Meeting or by proxy. If you are a registered shareholder (that is, if you hold
your shares in your own name and not through a broker or other nominee), there
are three ways to vote by proxy:
o BY TELEPHONE: You can vote by touch-tone telephone using the
toll-free number 1-877-PRX-VOTE (1-877-779-8683) and following the
instructions on the proxy card;
o BY INTERNET: You can vote by Internet by going to the website at
http://www.eproxyvote.com/eqr and following the instructions
provided; or
o BY MAIL: You can vote by mail by signing, dating and mailing the
enclosed proxy card in the envelope provided.
Please note that if your shares are held in "street name" through a
broker or other nominee, you will need to contact your broker or nominee to
determine whether you will be able to vote by telephone or Internet.
If you vote by proxy, the individuals named on the proxy card as
representatives will vote your shares in the manner you indicate. You may
specify whether your shares should be voted for all, some or none of the
nominees for trustee and whether your shares should be voted for or against the
other proposal.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
If no instructions are indicated on your properly voted proxy, the
representatives holding proxies will vote in accordance with the recommendations
of the Board. In summary, the Board recommends a vote for:
o the election of the nominated slate of trustees; and
o the amendment to the Share Option and Share Award Plan.
With respect to any other matter that properly comes before the
meeting, the representatives holding proxies will vote as recommended by the
Board, or if no recommendation is given, in their own discretion.
CAN I REVOKE OR CHANGE MY PROXY?
Yes, you may change or revoke your proxy at any time before the
meeting. To do so, you must advise the Secretary of Equity Residential in
writing before your shares are voted by the representatives at the meeting,
deliver later proxy instructions, or attend the meeting and vote your shares in
person. The powers of the proxy holders will be suspended if you attend the
meeting in person and so request, but attendance at the meeting will not by
itself revoke a previously granted proxy.
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WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
ELECTION OF TRUSTEES. The affirmative vote of a plurality of all the
votes cast at the meeting is required for the election of trustees, meaning that
the five nominees for trustee with the most votes will be elected. A properly
voted proxy marked "WITHHELD" with respect to the election of one or more
trustees will not be voted with respect to the trustee or trustees indicated,
although it will be counted for purposes of whether there is a quorum.
PLAN AMENDMENT. The affirmative vote of a majority of all the votes
entitled to be cast on the matter is required to approve the amendment to Equity
Residential's Share Option and Share Award Plan. A properly voted proxy marked
"ABSTAIN" with respect to this matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly, an
abstention will have the effect of a negative vote.
If you hold shares in "street name," your broker or nominee may not be
permitted to exercise voting discretion with respect to certain matters that are
not routine. Therefore, unless you give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in determining
whether a quorum exists.
HOW DO I DISCONTINUE FUTURE DUPLICATE COPIES OF ANNUAL REPORTS?
Our 1998 Annual Report has been mailed to shareholders with this Proxy
Statement. If more than one copy of the Annual Report is sent to your address,
we will discontinue the mailing of reports on the account you select if you mark
the designated box on the appropriate proxy card(s), or if you are a shareholder
of record, if you call our transfer agent, EquiServe, toll-free at
1-800-733-5001, or follow the instructions provided if you are voting by
Internet.
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<PAGE>
PROPOSAL 1
ELECTION OF TRUSTEES
BOARD OF TRUSTEES. The business and affairs of Equity Residential are
managed under the direction of the Board, which consists of fourteen trustees.
The Board has responsibility for establishing broad corporate policies and for
the overall performance of Equity Residential rather than day-to-day operating
details. Members of the Board are kept informed of Equity Residential's business
by various reports and documents sent to them each month, as well as by reports
presented at meetings of the Board and its committees by officers of Equity
Residential.
Our Declaration of Trust provides that our trustees are to be divided
into three classes as nearly equal in number as possible, with each class having
three-year terms that expire in successive years. The current term of five of
our trustees expires at the 1999 Annual Meeting. The Board has nominated Samuel
Zell, John W. Alexander, Henry H. Goldberg, Errol R. Halperin and Boone A. Knox
for re-election to serve as trustees of Equity Residential until the 2002
meeting and until their successors are duly elected and qualified.
GENERAL INFORMATION ABOUT THE NOMINEES. All of the nominees are
presently trustees and each of them has consented to be named in this Proxy
Statement and to serve if elected. In 1998 each of the nominees attended at
least 80% of the meetings of the Board and committees on which the nominees
served in that year, except Mr. Knox who attended two of the three meetings he
was eligible to attend. Biographical information for each of the nominees is set
forth below under the caption "Management."
VOTE REQUIRED. The affirmative vote of a plurality of all the votes
cast in person or by proxy at the meeting is required for the election of
trustees. This means that the five nominees for trustee with the most votes will
be elected. An abstention will have no effect on the outcome of the election of
trustees.
Although we know of no reason why any of the nominees would not be able
to serve, if any nominee should become unavailable for election, the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominee designated by the Board.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THE NOMINEES UNLESS INSTRUCTIONS TO
WITHHOLD OR TO THE CONTRARY ARE GIVEN.
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MANAGEMENT
TRUSTEES AND EXECUTIVE OFFICERS
The following table and biographies provide certain information with
respect to the trustees and executive officers of Equity Residential as of March
1, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Samuel Zell 57 Chairman of the Board of Trustees (term expires in 1999)
Douglas Crocker II 58 President, Chief Executive Officer and Trustee
(term expires in 2001)
John W. Alexander 52 Trustee (term expires in 1999)
Stephen O. Evans 53 Executive Vice President - Strategic Investments and Trustee (term expires
in 2000)
Henry H. Goldberg 60 Trustee (term expires in 1999)
Errol R. Halperin 58 Trustee (term expires in 1999)
James D. Harper, Jr 65 Trustee (term expires in 2001)
Boone A. Knox 63 Trustee (term expires in 1999)
Edward Lowenthal 54 Trustee (term expires in 2000)
Jeffrey H. Lynford 51 Trustee (term expires in 2000)
Sheli Z. Rosenberg 57 Trustee (term expires in 2001)
Gerald A. Spector 52 Executive Vice President, Chief Operating Officer and Trustee
(term expires in 2001)
Michael N. Thompson 50 Trustee (term expires in 2001)
B. Joseph White 51 Trustee (term expires in 2000)
Alan W. George 41 Executive Vice President - Acquisitions
Edward J. Geraghty 49 Executive Vice President - Development and Asset Management
Michael J. McHugh 43 Executive Vice President, Chief Accounting Officer and Treasurer
David J. Neithercut 43 Executive Vice President and Chief Financial Officer
Gregory H. Smith 47 Executive Vice President - Asset Management
Bruce C. Strohm 44 Executive Vice President, General Counsel and Secretary
Frederick C. Tuomi 44 Executive Vice President - Property Management
</TABLE>
The following is a biographical summary of the experience of the
trustees and executive officers of the Trust. Officers serve at the pleasure of
the Board.
Samuel Zell has been Chairman of the Board of the Trust since March
1993. Since January 1999, Mr. Zell has been chairman of Equity Group
Investments, LLC, an investment company ("EGI LLC"). For more than five years
prior to 1999, Mr. Zell had been chairman of the board of directors of Equity
Group Investments, Inc., an owner, manager and financier of real estate and
corporations ("EGI"). He is also chairman of the board of directors of Jacor
Communications, Inc., an owner and operator of radio stations ("Jacor"),
American Classic Voyages Co., an owner and operator of cruise lines, Anixter
International Inc., a provider of integrated network and cabling systems
("Anixter"), Manufactured Home Communities, Inc., a real estate investment trust
("REIT") specializing in the ownership and management of
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<PAGE>
manufactured home communities ("MHC"), Chart House Enterprises, Inc., an owner
and operator of restaurants, and Capital Trust, Inc., a specialized finance
company ("Capital Trust"). Mr. Zell is chairman of the board of trustees of
Equity Office Properties Trust, a REIT specializing in the ownership and
management of office buildings ("EOP"). He is a director of Fred Meyer, Inc., an
owner and operator of supermarkets, Davel Communications, Inc., an operator of
public payphones, and Ramco Energy plc, an independent oil company based in the
United Kingdom.
Douglas Crocker II has been Chief Executive Officer, President and a
Trustee of the Trust since March 1993. Mr. Crocker has been a director of
Wellsford Real Properties, Inc. ("WRP"), a publicly traded real estate merchant
banking firm since its formation in June 1997, Ventas, Inc., a real estate
company focusing on the ownership and acquisition of health care properties,
since November 1998, and was a director of Horizon Group Inc., an owner,
developer and operator of outlet retail properties from July 1996 to June 1998.
Mr. Crocker has been president and chief executive officer of First Capital
Financial Corporation, a sponsor of public limited real estate partnerships
("First Capital"), since December 1992, and a director of First Capital since
January 1993. He was an executive vice president of Equity Financial and
Management Company ("EF&M"), a subsidiary of EGI, providing strategic direction
and services for EGI's real estate and corporate activities from November 1992
until March 1997. Mr. Crocker chairs and serves on boards or committees of
various multi-family housing associations, including the National Multi-Housing
Council and the Multifamily Council of the Urban Land Institute, and is a member
of the Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT").
John W. Alexander has been a Trustee of the Trust since May 1993 and is
the president of Mallard Creek Capital Partners, Inc., an investment company
with interests in real estate and development entities. He is also a partner of
Meringoff Equities, a real estate investment and development company, and a
director of Jacor.
Stephen O. Evans has been Executive Vice President - Strategic
Investments and a Trustee of the Trust since December 23, 1997, the date of the
merger of Evans Withycombe Residential, Inc. ("Evans"), a multifamily property
REIT, into the Trust ("Evans Merger"). Prior to the Evans Merger, Mr. Evans
served as the chairman of the board and chief executive officer of Evans since
its formation in May 1994. Mr. Evans founded Evans Withycombe, Inc., the
predecessor of Evans, in 1977 and served as its chairman of the board and chief
executive officer from 1977 to 1994. Mr. Evans is a member of NAREIT, Lambda
Alpha, a national land economic fraternity, and the Urban Land Institute.
Henry H. Goldberg has been a Trustee of the Trust since January 1995.
Mr. Goldberg is chairman of the board, chief executive officer and founder of
The Artery Group, L.L.C., a diversified real estate company.
Errol R. Halperin has been a Trustee of the Trust since May 1993. Mr.
Halperin has been an attorney at the law firm of Rudnick & Wolfe since 1979,
serving as a senior partner and a member of the firm's policy committee since
1981, and a director of Elkay Manufacturing Company, a manufacturer of stainless
steel sinks, faucets, water coolers and cabinets, since 1980.
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<PAGE>
Mr. Halperin specializes in federal income tax counseling and real estate and
corporate transactions.
James D. Harper, Jr. has been a Trustee of the Trust since May 1993.
Mr. Harper is the president of JDH Realty Co., a real estate development and
investment company, and is the principal partner in AH Development, S.E. and AH
HA Investments, S.E., special limited partnerships formed to develop over 400
acres of land in Puerto Rico. He is a trustee of EOP and a director of Burnham
Pacific Properties Inc., a REIT that owns, develops and manages commercial real
estate properties in California, and American Health Properties, Inc., a REIT
specializing in health care facilities. Mr. Harper is also a trustee of the
Urban Land Institute.
Boone A. Knox has been a Trustee of the Trust since October 19, 1998,
the date of the merger of Merry Land & Investment Company, Inc. ("Merry Land"),
a multifamily property REIT, into the Trust ("Merry Land Merger"). Mr. Knox has
been a director of Merry Land Properties, Inc. ("MRYP"), a publicly traded
diversified real estate company, since its formation as part of the Merry Land
Merger. Prior to the Merry Land Merger, Mr. Knox had been chairman of the board
of Merry Land since December 1996. Mr. Knox has served as chairman of the board
of directors of Regions Bank, Central Georgia since January 1997, and has been a
director of Cousins Properties Incorporated, a REIT specializing in the
ownership, development and management of retail and office buildings, since
1969, and The InterCept Group, Inc., a data processing company for community
banks, since February 1998.
Edward Lowenthal has been a Trustee of the Trust since June 1997,
shortly after the merger of Wellsford Residential Property Trust ("Wellsford"),
a multifamily property REIT, and the Trust on May 30, 1997 ("Wellsford Merger").
Mr. Lowenthal has been the president, chief executive officer and a director of
WRP since its formation in January 1997, and had been the president and chief
executive officer and a trustee of Wellsford since its formation in July 1992
until the Wellsford Merger. Mr. Lowenthal is a director of Corporate Renaissance
Group, Inc., a mutual fund, Omega Healthcare, Inc., a healthcare REIT, Omega
Worldwide, Inc., a health care finance company, and Great Lakes REIT, Inc., an
office building REIT. He is also a member of the Board of Governors of NAREIT
and a member of the New York bar.
Jeffrey H. Lynford has been a Trustee of the Trust since June 1997,
shortly after the Wellsford Merger. Mr. Lynford has been the chairman of the
board and secretary of WRP since its formation in January 1997, and had been the
chairman of the board and secretary of Wellsford since its formation in July
1992 until the Wellsford Merger, and the chief financial officer of Wellsford
from July 1992 until December 1994. Mr. Lynford currently serves as a trustee
emeritus of the National Trust for Historic Preservation and as a director of
five mutual funds: Cohen & Steers Equity Income Fund, Inc., Cohen & Steers
Realty Income Fund, Inc., Cohen & Steers Realty Shares, Inc., Cohen & Steers
Special Equity Fund, Inc. and Cohen & Steers Total Return Realty Fund, Inc. He
is also a member of the New York bar.
Sheli Z. Rosenberg has been a Trustee of the Trust since March 1993.
Ms. Rosenberg has been chief executive officer and president of EGI LLC since
January 1999. From November 1994 until 1999, Ms. Rosenberg had been chief
executive officer, president and a director of EGI. Ms. Rosenberg had been a
principal of the law firm of Rosenberg & Liebentritt, P.C.
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<PAGE>
("R&L") from 1980 to 1997. Ms. Rosenberg is a trustee of EOP and is a director
of Capital Trust, Jacor, MHC, Anixter, CVS Corporation, a drugstore chain,
Illinois Power Co., a supplier of electricity and natural gas in Illinois, and
its parent holding company, Illinova Corp.
Gerald A. Spector has been a Trustee and Executive Vice President of
the Trust since March 1993 and Chief Operating Officer of the Trust since
February 1995. Mr. Spector was Treasurer of the Trust from March 1993 through
February 1995. From January 1973 until January 1996, Mr. Spector was an officer
of EF&M, most recently serving as vice president from November 1994 through
January 1996. From September 1990 through November 1994, Mr. Spector was
executive vice president and chief operating officer of EF&M. Mr. Spector was
executive vice president and chief operating officer of EGI from January 1991
through January 1994.
Michael N. Thompson has been a Trustee of the Trust since October 19,
1998, the date of the Merry Land Merger. Mr. Thompson has been president, chief
operating officer and a director of MRYP since its formation as part of the
Merry Land Merger. Prior to the Merry Land Merger, Mr. Thompson served as
executive vice president and chief operating officer of Merry Land since
December 1996, and as a vice president of Merry Land from August 1992 until
December 1996.
B. Joseph White has been a Trustee of the Trust since May 1993. Mr.
White has been a professor at the University of Michigan Business School since
1987 and has served as the dean since 1991. Mr. White is a director of Kelly
Services, Inc., a temporary services firm, Gordon Food Service, Inc., a
midwestern food distribution company, the Cummins Engine Foundation, the
philanthropic arm of Cummins Engine Co., a diesel engine manufacturer, and
several mutual funds managed by Alger Management, Inc., including the Alger
Fund, Alger American Fund, Alger Retirement Fund, Spectra Fund, and Castle
Convertible Fund.
Alan W. George has been Executive Vice President - Acquisitions of the
Trust since February 1997, Senior Vice President - Acquisitions of the Trust
from December 1995 until February 1997 and Vice President Acquisitions and asset
manager of the Trust from August 1993 until December 1995.
Edward J. Geraghty has been Executive Vice President - Development and
Asset Management of the Trust since March 1998. Mr. Geraghty was a managing
director - real estate of The Travelers Investment Group, Inc. from June 1995 to
March 1998. Mr. Geraghty was an officer of The Travelers Realty Investment
Company, a subsidiary of The Travelers Insurance Company, from July 1989 to
January 1995, most recently serving as an executive vice president from December
1992 to June 1995.
Michael J. McHugh has been an Executive Vice President of the Trust
since January 1998, and Chief Accounting Officer and Treasurer of the Trust
since February 1995. Mr. McHugh was Senior Vice President of the Trust from
February 1995 until January 1998. From May 1990 until January 1995, Mr. McHugh
was a senior vice president and chief financial officer of First Capital.
8
<PAGE>
David J. Neithercut has been Executive Vice President and Chief
Financial Officer of the Trust since February 1995. Mr. Neithercut had been Vice
President - Financing of the Trust from September 1993 until February 1995. Mr.
Neithercut was a senior vice president - finance of EGI from January 1995 until
February 1995, and a vice president - finance of Equity Asset Management, Inc.,
a subsidiary of EGI providing real estate ownership services, from October 1990
until December 1994.
Gregory H. Smith has been Executive Vice President - Asset Management
of the Trust since December 1994. Mr. Smith was a senior vice president of
Strategic Realty Advisors, Inc., a real estate and advisory company, from
January 1994 until December 1994. Mr. Smith was employed at VMS Realty Partners,
a sponsor of public and private real estate limited partnerships, from June 1989
until December 1993, most recently serving as first vice president.
Bruce C. Strohm has been Executive Vice President and General Counsel
of the Trust since March 1995 and Secretary of the Trust since November 1995.
Mr. Strohm was a Vice President of the Trust from March 1993 through March 1995
and an Assistant Secretary of the Trust from March 1995 through November 1995.
Mr. Strohm was a vice president of R&L from January 1988 to March 1995, most
recently serving as a member of the firm's management committee.
Frederick C. Tuomi has been Executive Vice President - Property
Management of the Trust since January 1994. Mr. Tuomi had been president of RAM
Partners, Inc., a subsidiary of Post Properties, Inc., a multifamily property
REIT, from March 1991 to January 1994.
MEETINGS AND COMMITTEES OF THE BOARD OF TRUSTEES
MEETINGS. The Board held 20 meetings during 1998. All of the trustees
attended at least 80% of the meetings of the Board and committees on which he or
she served, except Mr. Knox who attended two of the three meetings he was
eligible to attend, and Mr. Barry S. Sternlicht, who attended approximately 40%
of the meetings. Mr. Sternlicht resigned from the Board as of December 8, 1998.
The Board has standing Executive, Compensation and Audit Committees, and in 1998
created a Corporate Governance Committee, all of which are described below.
EXECUTIVE COMMITTEE. The Executive Committee is comprised of Messrs.
Alexander, Crocker, Thompson and Zell. Mr. Zell is the Chairman. The Executive
Committee has the authority within certain parameters to acquire, dispose of and
finance investments for the Trust, including the issuance of additional limited
partnership interests ("OP units") in ERP Operating Limited Partnership (the
"Operating Partnership"). The Executive Committee held one meeting in 1998.
COMPENSATION COMMITTEE. The Compensation Committee, which is comprised
entirely of trustees who are not officers or employees of the Trust, is
comprised of Messrs. Halperin and Harper and Ms. Rosenberg. Mr. Harper is the
Chairman. The Compensation Committee reviews and makes recommendations
concerning proposals by management regarding compensation, bonuses, loans,
employment agreements and other benefits and policies respecting such matters
for the executive officers of the Trust. The Compensation Committee held six
meetings in 1998.
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AUDIT COMMITTEE. The Audit Committee, which is comprised entirely of
trustees who are not officers or employees of the Trust, is comprised of Messrs.
White, Alexander, Halperin, Knox, Lowenthal and Lynford. Mr. White is the
Chairman. The Audit Committee makes recommendations concerning the engagement of
independent public accountants, reviews the plans and results of the audit
engagement with the independent public accountants, approves professional
services provided by the independent public accountants, approves all related
party transactions, considers the range of audit and non-audit fees and reviews
the adequacy of the Trust's internal accounting controls. The Audit Committee
held four meetings in 1998.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee,
established in May 1998, is comprised of Ms. Rosenberg and Messrs. Evans,
Goldberg, Lowenthal and White. Ms. Rosenberg is the Chairman. The Corporate
Governance Committee recommends to the full Board nominees for election as
trustees to fill Board vacancies, considers nominations for elections as
trustees submitted by shareholders, considers issues and makes recommendations
concerning the size, composition and organization of the Board, including
committee assignments, makes recommendations on the Board's practices and
reviews other issues of corporate governance. The Corporate Governance Committee
held one meeting in 1998.
COMPENSATION OF TRUSTEES
Trustees who are not employees of the Trust and Mr. Evans each received
an annual fee in 1998 of $40,000 for serving as trustees. In addition, trustees
who serve on the Executive Committee, the Compensation Committee, the Audit
Committee or the Corporate Governance Committee receive an additional $1,000 per
year for each committee on which they serve. Committee chairs for the Audit
Committee and the Compensation Committee receive an additional $4,000 per year,
the Committee chair of the Executive Committee receives an additional $500 per
year and the Committee chair of the Corporate Governance Committee receives an
additional $1,500 per year. The Trust also reimburses the trustees of each
committee for travel expenses incurred in connection with their activities on
behalf of the Trust. Each trustee is also granted options to purchase 5,000
common shares at the current market price as of each annual meeting of
shareholders. These options vest in approximately equal installments six months,
one year and two years from the date of grant. In addition, in January 1998 Mr.
Zell and Ms. Rosenberg were granted options to purchase 300,000 and 50,000
common shares, respectively, at the current market price as of the grant date.
These options vest in equal installments over three years.
The Trust has adopted an optional deferred compensation plan for its
non-employee trustees pursuant to which these trustees may elect to contribute
any percentage of their annual trustees' fees to a Supplemental Retirement
Savings Plan on a tax deferred basis and use such contributions to purchase
common shares under the Trust's 1996 Non-Qualified Employee Share Purchase Plan.
Each trustee is immediately 100% vested in his or her common shares and is
allowed to begin withdrawals over a one to ten year period following termination
of his or her trusteeship. Each trustee has elected to join the deferred
compensation plan and defer the taxation of all trustee's fees received.
10
<PAGE>
SHARE OWNERSHIP OF TRUSTEES AND MANAGEMENT
This table indicates, as of March 1, 1999, information regarding the
beneficial ownership of the Trust's common shares by each trustee, its five most
highly compensated executive officers at year end, and the trustees and all
executive officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES UPON PERCENT OF
COMMON EXERCISE OF COMMON
NAME SHARES(1) OPTIONS(2) TOTAL(1) SHARES(1)
---- ----------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Samuel Zell 3,076,331(3) 391,667 3,467,998 2.85%
Douglas Crocker II 271,029(4) 565,000 836,029 *
John W. Alexander 5,004 25,001 30,005 *
Stephen O. Evans 850,576(5) 40,167 890,743 *
Henry H. Goldberg 425,504(6) 15,001 440,505 *
Errol R. Halperin 5,711(7) 25,001 30,712 *
James D. Harper, Jr 4,586 25,001 29,587 *
Boone A. Knox 1,595,872(8) 0 1,595,872 1.34%
Edward Lowenthal 103,200(9) 5,001 108,201 *
Jeffrey H. Lynford 82,329 5,001 87,330 *
Sheli Z. Rosenberg 73,561(10) 85,000 158,561 *
Gerald A. Spector 89,109(11) 296,751 385,860 *
Michael N. Thompson 121,525(12) 0 121,525 *
B. Joseph White 5,400 25,001 30,401 *
Edward J. Geraghty 22,407 16,666 39,073 *
Alan W. George 19,910 75,832 95,742 *
Gregory H. Smith 17,538 94,999 112,537 *
Trustees and Executive
Officers as a
Group (21 persons) 6,854,459 2,121,587 8,976,046 7.20%
</TABLE>
- ------------------------------
* Less than 1%.
(1) In accordance with SEC regulations, assumes that all OP units,
convertible preference units in the Operating Partnership and the
Trust's convertible preferred shares of beneficial interest held by the
person are exchanged for common shares, that none of the OP units,
convertible preference units or convertible shares held by other
persons are so exchanged, and that no options to acquire common shares
held by other persons are exercised.
(2) Reflects common shares which may be acquired within 60 days after
March 1, 1999 through the exercise of share options.
(3) Includes 2,431,350 OP units which are exchangeable on a one-for-one
basis into 2,431,350 common shares. Also includes 30,000 common shares
beneficially owned by the Samuel Zell Foundation. Mr. Zell disclaims
beneficial ownership of 567,256 common shares (including the 30,000
common shares held by the Samuel Zell Foundation and assuming the
exchange of 537,256 OP units) because the economic benefits with
respect to such common shares are attributable to other persons.
(4) Includes 8,825 common shares beneficially owned by Mr. Crocker's
spouse, as to which Mr. Crocker disclaims beneficial ownership. Also
includes 175,000 common shares beneficially owned
11
<PAGE>
by MWC Partners, L.P. ("MWC"), of which Mr. Crocker is the sole general
partner. The sole limited partner of MWC is a trust created for the
benefit of Mr. Crocker's wife and Mr. Crocker's children.
(5) Includes 849,066 OP units which are exchangeable on a one-for-one basis
into 849,066 common shares.
(6) Includes 263,347 OP units held by Mr. Goldberg, which are exchangeable
on a one-for-one basis into 263,347 common shares; 5,998 Junior
Convertible Preference Units which are exchangeable into 12,240 common
shares; 48,078 OP units held by Mr. Goldberg's spouse, which are
exchangeable on a one-for-one basis into 48,078 common shares; 6,047
Junior Convertible Preference Units which are exchangeable into 12,340
common shares; and 75,714 OP units held by GGL Investment Partners #1
("GGL"), which are exchangeable on a one-for-one basis into 75,714
common shares. Mr. Goldberg is a general partner of GGL with a 66.67%
percentage interest. Mr. Goldberg disclaims beneficial ownership of the
interests held by his spouse and 33.33% of the interests held by GGL.
(7) Includes 1,000 common shares beneficially owned by Mr. Halperin's
spouse, as to which Mr. Halperin disclaims beneficial ownership.
(8) Includes 1,173,950 common shares beneficially owned by Knox, Ltd., of
which Mr. Knox is the general partner, and includes 3,178 common shares
beneficially owned by BT Investments, of which Mr. Knox is the managing
partner. Mr. Knox disclaims beneficial ownership of the common shares
owned by Knox, Ltd. and BT Investments, except to the extent of his
pecuniary interest in 151,116 common shares. Also includes 3,114 common
shares beneficially owned by Mr. Knox's spouse and 424 common shares
beneficially owned by Mr. Knox, not individually, but as custodian for
his niece and nephew, as to all of which Mr. Knox disclaims beneficial
ownership. Also includes 157,722 common shares beneficially owned by
the Knox Foundation, of which Mr. Knox is the trustee, and includes
174,429 common shares beneficially owned by the Estate of Peter S. Knox
III, of which Mr. Knox is the co-executor. Mr. Knox disclaims
beneficial ownership of the common shares owned by the Knox Foundation
and the Estate of Peter S. Knox III.
(9) Includes 726 common shares beneficially owned by Mr. Lowenthal's
spouse, as to which Mr. Lowenthal disclaims beneficial ownership.
(10) Includes 600 common shares beneficially owned by Ms. Rosenberg's
spouse, as to which Ms. Rosenberg disclaims beneficial ownership. Also
includes 1,528 OP units which are exchangeable on a one-for-one basis
into 1,528 common shares.
(11) Includes 33,500 common shares beneficially owned by Mr. Spector's
spouse, and 2,337 common shares beneficially owned by Mr. Spector as
custodian for his minor children, as to all of which Mr. Spector
disclaims beneficial ownership. Also includes 1,683 OP units which are
exchangeable on a one-for-one basis into 1,683 common shares.
12
<PAGE>
(12) Includes 419 common shares beneficially owned by Mr. Thompson's
children and 2,648 common shares beneficially owned by Mr. Thompson's
spouse, as to all of which Mr. Thompson disclaims beneficial ownership.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
This table sets forth information with respect to persons who are known
to own more than 5% of the Trust's outstanding common shares.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
COMMON SHARES COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) SHARES (1)
- ------------------------------------ ----------------------- -------------
<S> <C> <C>
FMR Corp.(2)
82 Devonshire Street
Boston, MA 02109 10,226,044 8.65%
The Prudential Insurance Company of America (3)
171 Broad Street
Newark, NJ 07102 6,476,790 5.48%
</TABLE>
- ---------------------------
(1) The number of common shares beneficially owned is calculated as of
December 31, 1998 and is based on SEC regulations governing the
determination of beneficial ownership of securities.
(2) Pursuant to a Schedule 13G filed with the SEC effective as of December
31, 1998, FMR Corp. may have direct or indirect voting and/or
investment discretion over these common shares which are held for the
benefit of its clients by its separate accounts, externally managed
accounts, registered investment companies, subsidiaries and/or other
affiliates. FMR Corp. is reporting the combined holdings of these
entities for the purpose of administrative convenience.
(3) Pursuant to a Schedule 13G filed with the SEC effective as of December
31, 1998, The Prudential Insurance Company of America may have direct
or indirect voting and/or investment discretion over these common
shares which are held for its own benefit or for the benefit of its
clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates.
Prudential is reporting the combined holdings of these entities for the
purpose of administrative convenience.
EXECUTIVE COMPENSATION
The following tables show compensation for services to the Trust of the
persons who during 1998 were the Chief Executive Officer and the other four most
highly compensated executive officers.
13
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------- ------------------------- -------
LONG-
RESTRICTED NUMBER TERM
NAME AND SHARE OF OPTIONS INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS (3) GRANTED(4) PAYOUTS COMPENSATION(5)
------------------ ---- --------- -------- ---------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas Crocker II 1998 $650,000 $625,000 $624,996 165,000 $0 $9,600
President and Chief 1997 500,000 625,000 624,976 457,500 0 9,600
Executive Officer 1996 500,000 325,013 324,987 105,000 0 9,000
Gerald A. Spector 1998 400,000 300,000 299,999 80,000 0 9,600
Executive Vice President 1997 375,000 287,500 287,500 192,500 0 9,600
and Chief Operating Officer 1996 360,000 200,011 199,989 80,000 0 9,000
Edward J. Geraghty 1998 240,000(6) 150,000 576,767 50,000 0 148,357
Executive Vice President - 1997 0 0 0 0 0 0
Development and 1996 0 0 0 0 0 0
Asset Management
Alan W. George 1998 251,923 130,000 129,966 50,000 0 64,200
Executive Vice President - 1997 200,000 137,500 137,465 25,000 0 54,315
Acquisitions 1996 140,000 62,501 62,499 17,500 0 9,000
Gregory H. Smith 1998 260,000 125,000 124,983 40,000 0 82,608
Executive Vice President - 1997 250,000 125,000 124,995 25,000 0 54,315
Asset Management 1996 225,000 62,501 62,499 40,000 0 9,000
</TABLE>
- -----------------------
(1) Compensation deferred at the election of named officers is included in the
category and year it would have otherwise been reported had it not been
deferred.
(2) Cash bonuses are reported in the year earned, even if paid in a
subsequent year.
(3) The named executives received restricted common shares as one-half of
their annual bonuses. These common shares vest upon completion of two
years of continuous employment following the date of grant. The dollar
amount shown equals the number of restricted common shares granted
multiplied by the fair market value of the common shares on the grant date
($40.1875 in 1998; $50.6875 in 1997; and $41.50 in 1996) and, in the case
of Mr. Geraghty, reflects the additional value of 8,985 restricted common
shares issued on March 2, 1998 at a price of $47.50 to induce Mr. Geraghty
to join Equity Residential. Mr. Geraghty's restricted common shares vest
as follows: 4,080 on January 24, 1999; 2,500 on January 22, 2000; and
2,405 on January 22, 2001, assuming his continued employment as of such
dates. This valuation does not take into account the diminution in value
attributable to the restrictions applicable to the common shares.
Distributions are paid on all restricted common shares at the same rate as
on unrestricted common shares. The total number of restricted common
shares awarded to each named executive officer for the years of 1998,
1997, and 1996, respectively, were: Mr. Crocker - 15,552, 12,330, and
7,831; Mr. Spector - 7,465, 5,672, and 4,819; Mr. Geraghty - 12,717
(1998); Mr. George - 3,234, 2,712, and 1,506; and Mr. Smith - 3,110,
2,466, and 1,506. As of December 31, 1998, the number and value of total
restricted common shares held by the above officers is: Mr. Crocker -
27,882 shares ($1,123,993); Mr. Spector - 13,137 shares ($529,585); Mr.
Geraghty - 12,717 shares ($512,654); Mr. George - 5,946 shares ($239,698);
and Mr. Smith - 5,576 shares ($224,782).
14
<PAGE>
(4) Shares underlying options are reported in the year granted.
(5) Principally includes employer contributions to Equity Residential's 401(k)
Plan, and for Mr. Geraghty, $63,357 in reimbursements related to his
relocation to Chicago. This column also reflects the dollar value of life
insurance premiums paid for the purchase of split-dollar life insurance
policies for the following executive officers: Mr. Geraghty: 1998 -
$85,000; Mr. George: 1998 - $54,600 and 1997 - $44,715; and Mr. Smith:
1998 - $73,008 and 1997 - $44,715. While the executive is the owner of
such policy, upon the executive's death, the Trust will receive from the
death benefits all premiums paid by it on the executive's behalf, plus 10%
interest per annum on such premium payments for up to 10 years of such
premium payments (collectively, "Trust Premiums"), and the executive's
beneficiary will receive the balance of the death benefits. In addition,
the executive is entitled to 50% of the cash surrender value of the policy
at age 62, and 50% at age 65. Upon the executive's termination of
employment prior to age 62, the executive must borrow against the policy
or partially surrender the policy in an amount sufficient to repay the
Trust Premiums to the Trust.
(6) Reflects the salary paid between March 2, 1998 (Mr. Geraghty's hire date)
and December 31, 1998. Mr. Geraghty's annualized salary in 1998 was
$300,000.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES OF
OPTIONS SHARE PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION -----------------------------
NAME GRANTED(1) IN 1998 SHARE DATE 5% 10%
---- ---------- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Douglas Crocker II 160,000 10.18 $50.6875 1/07/08 $ 5,100,335 $12,925,251
5,000 0.32 49.25 5/14/08 154,865 392,459
Gerald A. Spector 75,000 4.77 50.6875 1/07/08 2,390,782 6,058,711
5,000 0.32 49.25 5/14/08 154,865 392,459
Edward J. Geraghty 50,000 3.18 47.50 3/02/08 1,493,624 3,785,138
Alan W. George 50,000 3.18 50.6875 1/07/08 1,593,854 4,039,141
Gregory H. Smith 40,000 2.55 50.6875 1/07/08 1,275,083 3,231,312
</TABLE>
- ----------------------------
(1) All options are granted at the fair market value of the common shares at
the date of grant. Options granted are for a term of not more than ten
years from the date of grant and vest in equal amounts over three years,
with the exception of the 5,000 options granted annually to each trustee,
which vest as follows: 1,667 shares six months after the grant date, 1,667
shares one year after the grant date and 1,666 shares two years after the
grant date.
(2) The dollar amounts under these columns reflect the 5% and 10% rates of
compounded annual appreciation set by the SEC over the ten year option
term and are not intended to forecast possible future appreciation of the
Trust's common share price. No gain to the optionee is possible without an
increase in common share price, which would benefit all shareholders as
well. A 5% per year compounded appreciation in common share price from
$47.50 yields $77.37 per common share, from $49.25 yields $80.22 per
common share, and from $50.6875 yields $82.56 per common share. A 10% per
year compounded appreciation in common share price from $47.50 yields
$123.20 per common share, from $49.25 yields $127.74 per common share, and
from $50.6875 yields $131.47 per common share.
15
<PAGE>
OPTION EXERCISES IN 1998
AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED
SHARES VALUE OPTIONS AT OPTIONS AT
ACQUIRED REALIZED DEC. 31, 1998 DEC. 31, 1998
UPON UPON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE EXERCISE(1) UNEXERCISABLE UNEXERCISABLE(2)
---- -------- ----------- ------------------ -------------------
<S> <C> <C> <C> <C>
Douglas Crocker II 10,000 $164,375 327,500/500,000 $2,012,597/352,090
Gerald A. Spector 16,750 426,906 184,251/229,999 1,338,265/248,437
Edward J. Geraghty 0 0 0/50,000 0/0
Alan W. George 0 0 44,999/72,501 453,743/57,975
Gregory H. Smith 0 0 59,999/70,001 600,930/132,506
</TABLE>
- ---------------------
(1) Represents the market value of a common share on the exercise date less
the exercise price of the option.
(2) Represents the market value of a common share at December 31, 1998
($40.3125) less the exercise price of in-the-money options.
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
<TABLE>
<CAPTION>
NAME NUMBER OF UNITS PERFORMANCE PERIOD
---- ---------------- ------------------
<S> <C> <C>
Douglas Crocker II 33,000 1-1-99 to 12-31-2002
Gerald A. Spector 16,700 1-1-99 to 12-31-2002
Edward J. Geraghty 6,000 1-1-99 to 12-31-2002
Gregory H. Smith 6,000 1-1-99 to 12-31-2002
Alan W. George 6,000 1-1-99 to 12-31-2002
</TABLE>
This table identifies the target number of performance units awarded under
the Trust's Performance Based Restricted Share Grant Agreement (the "Performance
Based Plan") in January 1999 for services rendered during 1998. The executive
officers have the opportunity to earn in common shares, which will be issued
under the Share Option and Share Award Plan, an amount up to 225% of the target
amount of units. The owners of performance units have no right to vote, receive
dividends or transfer the units until common shares are issued in exchange for
the units. The number of common shares the executive receives on the third
anniversary of the grant date will depend on the excess, if any, by which the
Trust's average annual return (i.e., common share dividends as a percentage of
common share price as of January 1st of each year, and increase in funds from
operations ("FFO") on a per share basis over the prior year) for the three
performance years ("Average Annual Return") exceeds the average of the 10-year
Treasury Note interest rate as of January 1st of each performance year (the
"T-Note Rate").
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
If the Trust's Average
Annual Return exceeds
the T-Note Rate by: 0-0.9% 1-1.9% 2-2.9% 3-3.9% 4-4.9% 5-5.9% 6-6.9% 7%
Then the executive will receive
common shares equal to the
target number of units times the
following percentage: 0% 50% 100% 115% 135% 165% 190% 225%
</TABLE>
16
<PAGE>
Fifty percent of the common shares to which an executive under the
Performance Based Plan may be entitled will vest on the third anniversary of the
award; twenty-five percent will vest on the fourth anniversary and the remaining
twenty-five percent will vest on the fifth anniversary. The executive's rights
will also fully vest upon the employee's death, disability or upon the change of
control of the Trust.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE TRUST'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), THAT MIGHT INCORPORATE FUTURE
FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION PRESENTED BELOW AND THE PERFORMANCE
GRAPH FOLLOWING SUCH REPORT SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FUTURE FILINGS.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board consists of the independent
trustees of the Trust listed below. The Committee's functions include the review
and approval of the Trust's executive compensation structure and overall
benefits program. The purpose of the Trust's executive compensation program is
to establish and maintain a performance and achievement oriented environment
throughout the Trust so that the interests of its executives are aligned with
the interests of the Trust's shareholders. The program is designed so that
executives may earn higher than average total compensation for above-average job
performance. There are four major components of the Trust's executive
compensation program: (1) base salary, (2) bonuses, (3) performance based shares
and (4) restricted share and share option awards. Each of these components is
further discussed below.
BASE SALARY. The Trust's overall salary structure is reviewed annually,
using outside executive compensation surveys of the real estate industry in
general and REITs in particular, to ensure that it remains competitive.
Positions are classified within the salary structure on the basis of assigned
responsibilities and on an evaluation of the latest survey information
available, as to appropriate compensation levels. Individual base salaries are
reviewed at least annually. Salary increases are granted based on each
executive's performance as well as such executive's position in the applicable
salary range.
BONUS. The objectives underlying the Trust's bonus program are to more
closely link bonus awards to value added for the Trust's shareholders and
promote a culture of performance and ownership among the Trust's managers.
Executive officers' mid-term incentives are accomplished by tying the executive
officers' performance to the continued performance of the Trust. The Trust
accomplishes this by awarding the Chief Executive Officer and each other
executive officer some or all of his bonus, as determined by the Compensation
Committee, in restricted common shares or common share equivalents, which shares
vest two years from the date of grant. The Compensation Committee believes that
having its executive officers "invest" a portion of their bonuses in common
shares or common share equivalents facilitates better alignment of the executive
officer's compensation with the performance of the Trust's common shares.
17
<PAGE>
The long-term incentives for executive officers are in the form of
performance-based restricted share awards and restricted share and share option
awards.
PERFORMANCE BASED SHARES. The Performance Based Restricted Share Plan is
designed to focus the Trust's key employees eligible under this plan on
achieving a high level of financial performance (i.e., common share dividends
and FFO growth), and to encourage such key employees to continue their
employment with the Trust. Under this plan, awards are made to certain executive
officers on an annual basis by setting a target number of common shares for each
executive. The employee will be eligible to receive from 0% to 225% of the
target number of common shares, based on the Trust's Average Annual Return (as
described above) during the three-year period following the award. The number of
common shares an executive will receive will be fixed and determined and then
issued (subject to the five-year vesting formula previously discussed) to the
executive beginning on the third anniversary of the grant of award. It is
anticipated that awards will be made on an annual basis so that by the fifth
year of an award, each executive will have vested and unvested rights in each of
the previous five awards.
RESTRICTED SHARE AND SHARE OPTION AWARDS. The Compensation Committee
recognizes that while the bonus program provides rewards for positive short-term
and mid-term performance, the interests of shareholders are also served by
giving key employees the opportunity to participate in the appreciation of the
Trust's common shares through the granting of share options. The Compensation
Committee believes that over an extended period of time, share performance will,
to a meaningful extent, reflect executive performance and that such arrangements
further reinforce management goals and incentives to achieve shareholder
objectives. The share options vest over a period of three years at a rate of
one-third of such grant each year, thereby encouraging the retention of key
employees who receive awards. Beginning in January 1999, the Trust has allowed
its executive officers to take up to one-half of the value of the share options
they otherwise would have received in the form of restricted common shares which
vest in full upon the third anniversary of the share grant. The amount of
restricted shares or share options awarded each executive was determined
utilizing the aforementioned executive compensation surveys and an assessment of
the executive officer's achieved performance goals and objectives.
Based on the executive compensation surveys and the Trust's financial
performance in 1998, the Compensation Committee believes that the salary, bonus,
performance shares and share option grants of Mr. Crocker, the Chief Executive
Officer and President of the Trust, are fair and competitive and that the
Trust's overall executive compensation ranks in the upper quartile among the
general real estate industry and among REITs. This ranking correlates with the
excellent financial performance of the Trust in 1998. The Trust accomplished its
main goals in 1998 by increasing its net income and FFO per common share,
strengthening its balance sheet, increasing its portfolio size and continuing
the diversification of its portfolio across the United States, thereby providing
stability in cash flows and insulation against regional economic downturns.
During Mr. Crocker's tenure as Chief Executive Officer and President, the
Trust has become the largest owner and operator of multifamily properties and
has the largest market capitalization of all multifamily REITs and among the
largest market capitalization of all REITs. The key performance measure the
Compensation Committee used to determine Mr. Crocker's 1998 compensation was the
continued execution of the Trust's growth strategy in 1998 while
18
<PAGE>
simultaneously maintaining excellent financial operating results. The Trust's
financial performance in 1998 was in the top quartile in almost every financial
category when compared to other multifamily REITs, due in large part to Mr.
Crocker's leadership, foresight and experience. The Committee notes the
following factors in support of its conclusion:
o An 11.3% increase in FFO per fully-diluted common share over 1997, compared
with the multifamily REIT average increase of 10.2%;
o Excellent "same store" operating results with such properties achieving a
5.9% increase in net operating income over 1997;
o Distributions per common share of $2.72, a 6.7% increase over 1997 while
simultaneously lowering the Trust's distribution pay-out ratio;
o Acquisition of 212 properties with 56,447 units in 1998 representing an
investment of $3.8 billion: 21,457 units and 94 properties through property
acquisitions and 34,990 units and 118 properties in the Merry Land Merger;
o Disposition of 20 properties with 4,719 units in 1998 representing sales
proceeds of $177 million, for a reported gain of $21.7 million;
o Maintenance of investment grade credit ratings on the Operating
Partnership's unsecured debt: Moody's (A3), Standard & Poor's (BBB+) and
Duff & Phelps (A-); and
o Mr. Crocker's recognition again as Multifamily Property Executive of the
Year by Commercial Property News and Outstanding CEO of the Year by Realty
Stock Review.
Based on the Trust's excellent financial performance in 1998, the
Compensation Committee believes that the compensation program properly rewards
its executive officers for achieving improvements in the Trust's performance and
serving the interest of its shareholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended ("Code"),
generally disallows a Federal income tax deduction for compensation in excess of
$1 million paid in any year to any of the Trust's executive officers listed in
the Summary Compensation Table who are employed by the Trust on the last day of
a taxable year. Section 162(m), however, does allow a deduction for payments of
"performance based" compensation, the material terms of which have been approved
by shareholders. Awards under the Trust's award plans may, but need not, satisfy
the requirements of Section 162(m). The Trust believes that because it qualifies
as a REIT under the Code and therefore is not subject to Federal income taxes,
the payment of compensation that does not satisfy the requirements of Section
162(m) will not affect the Trust's taxable income, although to the extent that
compensation does not qualify for deduction under Section 162(m), a larger
portion of shareholder distributions may be subject to Federal income taxation
as dividend income rather than return of capital. The Trust does not believe
that Section 162(m) will materially affect the taxability of shareholder
distributions, although no assurance can be given in this regard due to the
variety of factors that affect the tax portion of individual shareholders.
RESPECTFULLY SUBMITTED,
James D. Harper, Jr., Chairman
Errol R. Halperin
Sheli Z. Rosenberg
19
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph that compares the cumulative total returns
of the Trust, the Standard & Poor's ("S&P") 500 Stock Index and the index of
equity REITs prepared by NAREIT for the last five calendar years. The
performance graph assumes an investment of $100 in each of the Trust and the two
indexes on December 31, 1993, and the reinvestment of all dividends. The NAREIT
equity index includes all REITs which derive more than 75% of their income from
equity investments in real estate assets and are listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq Stock Market.
[GRAPHIC]
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
EQR 100 100 111 159 206 174
S&P 500 100 101 139 171 229 294
NAREIT 100 103 119 161 193 160
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
DEFERRED COMPENSATION AGREEMENTS. To encourage Mr. Crocker and Mr.
Spector to remain employed by the Trust, the Board has entered into Deferred
Compensation Agreements with Mr. Crocker and Mr. Spector. Mr. Crocker's
Deferred Compensation Agreement, entered into in 1996, provides Mr. Crocker
with a salary benefit after the termination of his employment with the Trust.
If Mr. Crocker's employment is terminated by the Trust without cause, he
would be entitled to annual deferred compensation for a ten year period
commencing on the termination date in an amount equal to $600,000 (as
increased by a CPI index from January 1999), multiplied by a percentage equal
to 10% per each year since December 31, 1995. In the event Mr. Crocker's
employment is terminated as a result of his death, permanent disability or
incapacity, he would be entitled to a similar amount except that the annual
percentage would be 15%, not 10%. Should Mr. Crocker be terminated for cause
or should he choose to leave voluntarily, without good reason, he would not
be entitled to any deferred compensation.
20
<PAGE>
Mr. Spector's Deferred Compensation Agreement, entered into in 1997,
provides Mr. Spector with a salary benefit after the termination of his
employment with the Trust. If Mr. Spector's employment is terminated by the
Trust without cause or voluntarily by Mr. Spector after age 65, he would be
entitled to annual deferred compensation for a 15-year period commencing on the
termination date in an amount equal to 75% of his average annual base
compensation (before bonus) for the prior five calendar years, multiplied by a
percentage equal to 6.67% per each year since December 31, 1996. In the event
Mr. Spector's employment is terminated as a result of his death, permanent
disability or incapacity, he would be entitled to a similar amount except that
the annual percentage would be 10%, not 6.67%. Should Mr. Spector be terminated
for cause or should he choose to leave voluntarily prior to age 65, without good
reason, he would not be entitled to any deferred compensation.
EMPLOYMENT AGREEMENT. In April 1998, Mr. Geraghty executed an employment
agreement with the Trust. The agreement has a three-year term which expires on
March 9, 2001. Pursuant to the agreement, Mr. Geraghty will receive compensation
of at least $300,000 per year, and the initial bonus, restricted share awards
and share options, performance based units and one-time relocation expense
reimbursements described above and in the "Summary Compensation Table."
SHARE DISTRIBUTIONS AGREEMENT. In January 1996, Mr. Crocker was issued
options to purchase 100,000 common shares, which options vest over a three-year
period and are effective for ten years. The Trust also entered into a Share
Distributions Agreement with Mr. Crocker with respect to such options in 1996.
Pursuant to the terms of this agreement, upon the exercise of any of these
options, Mr. Crocker is entitled to a cash payment in an amount equal to the
total amount of common share distributions that would have been paid upon the
exercise of such common shares had he owned them for the period from January 18,
1996 until the date of the exercise of the options. This agreement is not
affected by Mr. Crocker's death or termination of employment with the Trust.
CONSULTING AGREEMENTS. In connection with the Wellsford Merger, Messrs.
Lynford and Lowenthal each executed a consulting agreement with the Operating
Partnership. Each consulting agreement has a term of five years from May 30,
1997, the closing date of the Wellsford Merger. Pursuant to the consulting
agreements, each of Messrs. Lynford and Lowenthal will serve as a senior
management consultant to the Operating Partnership and will receive compensation
at the rate of $200,000 per year plus reimbursement for reasonable out-of-pocket
expenses.
In connection with the Evans Merger, in December 1997, Mr. Evans executed
a Consulting Agreement with an affiliate of the Operating Partnership. The
consulting agreement has a term of two years and expires on December 31, 1999.
Pursuant to the consulting agreement, Mr. Evans will serve as a senior
management consultant to the Operating Partnership and will receive compensation
at the rate of $225,000 per year. Mr. Evans also received an option to purchase
115,500 common shares that vest in three equal annual installments and have an
exercise price equal to $50.125 per common share. Mr. Evans is also eligible to
participate in all of the Trust's employee benefit plans in which persons in
comparable positions participate, effectively treating Mr. Evans as an employee.
21
<PAGE>
Several of the Trust's employment benefit plans provide for enhanced
employee benefits upon "a change in control" of the Trust. A change of control
will generally be deemed to have occurred upon a third party's acquisition of
50% or more of the Trust's stock, whether through purchase, merger or
consolidation or a sale of all or substantially all of the assets of the Trust.
In general, upon a change in control, all share options, restricted shares and
performance based shares become immediately vested.
COMPENSATION COMMITTEE INTERLOCKS AND
INSIDER PARTICIPATION
The Compensation Committee members are Messrs. Harper and Halperin and Ms.
Rosenberg. For a description of certain transactions between the Trust and
Compensation Committee members or their affiliates, see "Certain Relationships
and Related Transactions."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EGI or certain of its affiliated entities provide the Trust with certain
services with respect to certain aspects of the Trust's business, including, but
not limited to, real estate tax evaluation services, and office facility
services. The Audit Committee annually reviews the rates charged by EGI for
services rendered to the Trust. Amounts incurred for these services amounted to
approximately $868,500 for the year ended December 31, 1998.
The Trust has engaged Seyfarth, Shaw, Fairweather & Geraldson, a law firm
in which Ms. Rosenberg's husband is a partner, and Rudnick & Wolfe, a law firm
in which Mr. Halperin is a partner, to perform legal services for the Trust and
certain of its subsidiaries from time to time.
The Trust occupies office space at various office buildings which are
owned and/or managed by EOP and its affiliates. Amounts incurred for such office
space in 1998 were $1,251,700. Multifamily residential communities owned by
various affiliates of Mr. Zell, Mr. Goldberg and Mr. Evans are also managed by
the Trust. The Trust received approximately $5.6 million in property and asset
management fees from such affiliates for the year ended December 31, 1998.
Mr. Goldberg is a two-thirds owner and chairman of the board of directors
of Artery Property Management, Inc., a real estate property management company
("APMI"). In connection with the acquisition of certain properties from Mr.
Goldberg and his affiliates during 1995, the Operating Partnership made a loan
to Mr. Goldberg and APMI of $15,212,000 evidenced by two notes and, as of
December 31, 1998, secured by 445,540 OP units. The largest aggregate amount of
indebtedness outstanding under the loan at any time during 1998 was $15,212,000
and the amount outstanding as of December 31, 1998 was $14,558,484. The first
note issued in the amount of $1,056,000 accrues interest at the prime rate plus
3 1/2 % per annum. The second note issued in the amount of $14,156,000 bears
interest equal to approximately $287,000 per year plus the amount of
distributions payable on 414,615 of the 445,540 OP units pledged as collateral
for the loan. The loan requires mandatory prepayments upon receipt of sale
proceeds from certain of the properties. This loan matures on November 30, 2004.
22
<PAGE>
In connection with the agreement to acquire certain properties from Mr.
Goldberg and his affiliates, the Operating Partnership extended a $12,000,000
non-revolving line of credit to Mr. Goldberg and his wife in September 1998. The
loan bears interest at the prime rate plus 2%. The largest principal amount owed
in 1998 was $5,000,000 and the principal balance due at December 31, 1998 was
$3,853,482. Payment is secured by a pledge of certain of their OP units as well
as additional collateral. The loan requires mandatory prepayments upon receipt
of sale proceeds from certain of the properties. The loan is due in full on
September 3, 1999.
During 1998, the Operating Partnership acquired three properties and the
related management agreements from affiliates of Mr. Goldberg for an aggregate
purchase price of approximately $21.4 million, including the assumption of
approximately $4.2 million of indebtedness. The purchase price also included the
issuance of 48,328 Junior Convertible Preference Units in the Operating
Partnership, which have a liquidation value of $100 and are exchangeable for OP
Units upon certain circumstances. On January 13, 1999, Mr. Goldberg and his wife
received 5,998 and 6,047 of these preference units, respectively, as of December
22, 1998. Mr. Goldberg's interest in these transactions equaled approximately
$3.8 million.
From January 1, 1999 through March 20, 1999, the Operating Partnership
acquired three additional properties and the related management agreements from
affiliates of Mr. Goldberg for an aggregate purchase price of approximately
$37.4 million, including the assumption of approximately $16.9 million of
indebtedness. Mr. Goldberg's interest in these transactions equaled
approximately $3.5 million.
The Operating Partnership has entered into agreements with affiliates of
Mr. Goldberg to acquire six additional properties and the related management
agreements, which acquisitions are expected to close in 1999. The aggregate
purchase price for these properties, before customary prorations, is estimated
at approximately $81.8 million, which amount will include the assumption of
indebtedness and the issuance of Junior Convertible Preference Units. Mr.
Goldberg estimates that his interest in these transactions will equal
approximately $10.3 million.
Mr. Tuomi borrowed $100,000 from the Trust in 1994 related to his purchase
of a home in the Chicago area. The loan bears interest at the 30-day London
Interbank Offered Rate ("LIBOR") plus 2% with interest due quarterly. The
largest principal amount owed in 1998 was $72,000 and the principal balance at
December 31, 1998 was $54,000. The loan is payable in equal principal
installments of $18,000 over the next three years.
Mr. Crocker borrowed $140,000 from the Trust in April 1996 related to the
payment of a tax liability. The largest principal amount owed in 1998 was
$140,000 and the principal balance at December 31, 1998 was zero, as the loan
was paid in full in February 1998. The loan bore interest at 30-day LIBOR plus
2%.
Mr. Crocker borrowed $564,000 from the Trust in August 1996. The loan
bears interest at 30-day LIBOR plus 2% with interest due quarterly. The largest
principal amount owed in 1998 was $483,420 and the principal balance at December
31, 1998 was $402,850. Payment is secured by a pledge of Mr. Crocker's common
shares. The loan is payable in equal principal installments of $80,570 over
seven years commencing March 15, 1997.
23
<PAGE>
Mr. Crocker borrowed $100,000 from the Trust in August 1998 related to the
payment of a tax liability. The loan bears interest at 30-day LIBOR plus 2%. The
largest principal amount owed in 1998, and the principal balance at December 31,
1998, was $100,000. The loan is payable in full in August 2000.
Mr. Spector borrowed $300,000 from an affiliate of the Trust in April 1998
related to the payment of a tax liability. The largest principal amount owed in
1998 was $300,000, and the principal balance at December 31, 1998 was zero, as
the loan was paid in full in July 1998. The loan bore interest at 30-day LIBOR
plus 2%.
Mr. Spector borrowed $105,000 from an affiliate of the Trust in December
1998 related to the payment of a partnership interest expense. The loan bears
interest at 30-day LIBOR plus 2%. The largest principal amount owed in 1998, and
the principal balance at December 31, 1998, was $105,000. The loan is due in
full on April 30, 1999.
Mr. Spector borrowed $258,000 from an affiliate of the Trust in December
1998 related to the payment of a tax liability. The loan bears interest at
30-day LIBOR plus 2%. The largest principal amount owed in 1998, and the
principal balance at December 31, 1998, was $258,000. The loan is due in full on
June 1, 1999.
Mr. George borrowed $100,000 from the Trust in December 1997 related to
home improvements. The loan bears interest at 30-day LIBOR plus 2% with interest
due monthly beginning in January 1998. The largest principal amount owed in
1998, and the principal balance due at December 31, 1998, was $100,000. Payment
is secured by a pledge of Mr. George's common shares and share options and a
second mortgage on Mr. George's home. Payments of principal are due in the
amount of $30,000 on each of April 1, 1999 and April 1, 2000; and $40,000 on
April 1, 2001.
The executive officers listed below are indebted to the Trust as a result
of purchasing common shares from the Trust in June 1994. The loans accrue
interest, payable quarterly in arrears, at the applicable federal rate, as
defined in the Code in effect at the date of each loan. The loans are due and
payable on the first to occur of the date on which the individual leaves the
Trust, other than by reason of death or disability, or the respective loan's due
date. The loans are recourse to the respective individuals and are
collateralized by a pledge of the common shares purchased. All distributions
paid on pledged common shares in excess of the then marginal tax rate on the
taxable portion of such distributions are used to pay interest and principal on
the loans.
<TABLE>
<CAPTION>
LARGEST PRINCIPAL AMOUNT PRINCIPAL BALANCE INTEREST
NAME OWED IN 1998 AT DEC. 31, 1998 RATE
---- ------------ ---------------- --------
<S> <C> <C> <C>
Douglas Crocker II $814,909 $770,846 6.21%
Douglas Crocker II 931,755 894,529 6.15%
Douglas Crocker II 941,415 929,073 7.26%
Douglas Crocker II 1,864,148 1,810,368 7.93%
Frederick C. Tuomi 313,799 312,843 7.26%
Alan W. George 79,062 78,081 7.26%
</TABLE>
24
<PAGE>
CERTAIN AGREEMENTS BETWEEN THE OPERATING PARTNERSHIP AND WRP
The following describes certain aspects of the agreements entered into by
the Operating Partnership and WRP in connection with the Wellsford Merger on the
effective date of the Wellsford Merger. Each of Messrs. Lynford and Lowenthal
are officers and directors of WRP and Mr. Crocker is a director of WRP.
PREFERRED STOCK PURCHASE AGREEMENT. The Operating Partnership has agreed
to purchase from WRP up to 1,000,000 shares of WRP Series A Preferred Stock at
$25.00 per share as requested by WRP over the three-year period commencing on
the date of the Wellsford Merger. The Operating Partnership and WRP entered into
voting agreements, rights of first refusal and registration rights agreements
relating to such shares of WRP.
WRP BOARD MEMBER ELECTED BY THE OPERATING PARTNERSHIP. Upon consummation
of the Wellsford Merger, the Operating Partnership, as the holder of WRP Class A
Common Stock, was entitled to elect, and did so elect, Mr. Crocker to the WRP
Board of Directors. Mr. Crocker received options to purchase 21,375 shares of
WRP common stock upon his election as a director of WRP. In the event Mr.
Crocker (or other person subsequently elected by the Operating Partnership to
the WRP Board of Directors) becomes unable or unwilling to serve as a director
or is no longer employed by the Operating Partnership, the Operating Partnership
and WRP will agree to the election of another member of senior management of the
Operating Partnership to the WRP Board of Directors.
AGREEMENT REGARDING PALOMINO PARK. Upon consummation of the Wellsford
Merger, WRP and the Operating Partnership became the shareholders in Wellsford
Park Highland Corp. ("WPHC"), with WRP owning 80% of the shares of WPHC,
consisting of voting Class A Shares, and the Operating Partnership owning the
remaining 20% of WPHC, consisting of non-voting Class B Shares. WPHC is one of
two members of the limited liability companies which own Phase I and Phase II,
respectively, of Palomino Park, a master planned five phase multifamily
development project in suburban Denver, Colorado. The Operating Partnership has
no further obligation to contribute capital to WPHC.
The Operating Partnership has entered into a credit enhancement agreement
with WRP with respect to the Palomino Park development project. Under this
agreement, the Operating Partnership will make its credit available to Dresdner
Bank, A.G., New York Branch in the form of a guaranty in respect of a letter of
credit issued to WRP for a period of eight years from date of the Wellsford
Merger. WRP has agreed to pay an annual credit enhancement fee to the Operating
Partnership for such enhancement and has agreed to reimburse the Operating
Partnership for any amounts it pays under the guaranty, together with interest
on such amounts.
INTERESTS OF MESSRS. KNOX AND THOMPSON IN THE MERRY LAND MERGER
Messrs. Knox and Thompson received certain benefits from the Trust or the
Operating Partnership in connection with the Merry Land Merger. Each of Messrs.
Knox and Thompson had agreements with Merry Land that entitled him to the
benefits described below.
25
<PAGE>
SEVERANCE PAYMENTS. On July 8, 1998, the Merry Land Board of Directors
adopted a Retention and Severance Program and approved the execution of
agreements with the executive officers of Merry Land as well as 106 other
specified employees. On the date of the Merry Land Merger, Mr. Knox received a
payment of $1.6 million and Mr. Thompson received a payment of $1.7 million
under this program.
STOCK LOANS. Messrs. Knox and Thompson previously purchased shares of
Merry Land common stock at their then fair market value, the purchase price of
which was borrowed from Merry Land and evidenced by interest-free, full-recourse
promissory notes secured by the Merry Land common stock purchased with the stock
loans. On the date of the Merry Land Merger, the then remaining principal
balance of the loans was forgiven for Messrs. Knox and Thompson in the amounts
of approximately $3.1 million and $2.3 million, respectively.
OPTIONS. In December 1998, Mr. Thompson exercised options to purchase
42,832 common shares through a cashless exercise and received approximately
$137,600 in gross proceeds. Also in December 1998, Mr. Thompson exercised
options to purchase 20,517 shares in consideration for an exercise price of
$41.6875 per share in cash. In January 1999, Mr.Thompson exercised options to
purchase 26,831 common shares through a cashless exercise and received
approximately $101,000 in gross proceeds.
EXCISE TAX GROSS-UP. The Retention and Severance Program provided that
Messrs. Knox and Thompson were entitled to receive certain gross-up payments
intended to put them in the same financial position that they would have been in
if the excise tax imposed by Internal Revenue Code Section 4999 was not imposed
on the lump sum payments made under the Retention and Severance Program and on
certain other payments and benefits described above. Messrs. Knox and Thompson
received actual estimated tax gross-up payments of approximately $2.7 million
and $2.3 million, respectively.
APPOINTMENT TO BOARD OF TRUSTEES OF THE TRUST. On October 19, 1998,
Messrs. Knox and Thompson were appointed to the Board of Trustees of the Trust
for terms ending at the annual meeting of the Trust in the years 1999 and 2001,
respectively.
CERTAIN AGREEMENTS BETWEEN THE TRUST AND MRYP
The following describes certain aspects of the agreements entered into by
the Trust and MRYP in connection with the Merry Land Merger on the effective
date of the merger. Mr. Knox is a director and Mr. Thompson is an officer and a
director of MRYP.
DEVELOPMENT AGREEMENT. Merry Land had initiated a program to develop five
new apartment communities utilizing the services of third party developers.
Pursuant to a Development Agreement between MRYP and the Operating Partnership,
MRYP has agreed to manage the completion of this program for the Trust in
exchange for an aggregate fee of approximately $2.4 million payable in monthly
installments based on the progress of development until all development is
complete. Upon consummation of the transactions, the Operating Partnership or
other affiliates of the Trust will own fee simple title to these five
properties.
26
<PAGE>
The Operating Partnership and MRYP also entered into property management
agreements under which MRYP will provide lease-up property management services
with respect to these development properties in exchange for a management fee of
4% of gross revenues, with a minimum of $4,000 per month per project, until an
occupancy level of 85% is reached; provided, that the management agreements may
be terminated earlier by the Operating Partnership, upon a payment to MRYP (if
the agreements are terminated without cause) equal to the difference, if any,
between $500,000 and the aggregate amount of all management fees theretofore
paid by the Trust to MRYP with respect to the five properties. Once the 85%
occupancy level is achieved, the Operating Partnership will have the right to
manage the property itself, contract with a third party upon terms agreeable to
Operating Partnership, or contract with MRYP for a management fee equal to 3.5%
of revenues.
MRYP will also manage the development of Wyndham Apartments, Richmond,
Virginia (264 units) and Prairie Creek II, Dallas, Texas (228 units) on a
month-to-month basis for the Operating Partnership in exchange for an aggregate
fee of $57,250 payable in monthly installments and, if requested by the Trust,
will enter into property management agreements with respect to those properties,
terminable with thirty days' notice without penalty.
OPTION AGREEMENT AND RIGHT OF FIRST/LAST OFFER AGREEMENT. Pursuant to an
Option Agreement and Right of First/Last Offer Agreement (the "Option
Agreement"), MRYP has agreed to grant to the Operating Partnership certain
rights of first refusal and last offer with respect to two apartment development
sites adjacent to communities obtained in the Merry Land Merger, which
communities are among the six communities contributed by the Trust to joint
venture entities as described below. MRYP may not develop or transfer the
development sites (as the same may be improved) without first giving notice to
the Operating Partnership. The Operating Partnership may respond to the notice
by giving consent to the proposed transaction, purchasing the property at fair
market value (in the case of a proposed development) or entering into the
transaction with MRYP (in the case of a proposed sale) in place of the proposed
third parties.
JOINT VENTURE AGREEMENT. MRYP and the Operating Partnership entered into
Joint Venture Agreements pursuant to which the Operating Partnership caused six
apartment communities located in Augusta and Savannah, Georgia and Charleston,
South Carolina, which were obtained by the Trust in the Merry Land Merger to be
contributed to limited liability companies of which the Operating Partnership
and MRYP will be the sole members. The joint venture entities will enter into
management agreements with MRYP pursuant to which MRYP will receive a management
fee equal to 4% of gross revenues. Pursuant to the Joint Venture Agreements,
MRYP will share in rental revenues and/or sale proceeds in excess of certain
targets after the Operating Partnership receives its preferred return. MRYP will
also have a three year option to purchase any or all of these communities under
certain conditions.
TRANSITION FEE. MRYP and the Operating Partnership agreed that MRYP will
perform certain transition services for a period following the Merry Land Merger
in the areas of personnel, capital projects and other matters in exchange for a
transition fee of $2.4 million.
SENIOR DEBT AGREEMENT. As partial consideration for the transfer of the
MRYP properties, the Operating Partnership extended to MRYP a $25 million, one
year, non-revolving Senior Debt
27
<PAGE>
Agreement, approximately $18.3 million of which was outstanding as of December
31, 1998, bearing interest at the rate of LIBOR plus 250 basis points or prime
plus 200 basis points, at the election of MRYP. The Senior Debt Agreement
contains certain financial covenants and events of default restricting the
conduct of MRYP's business.
SUBORDINATED DEBT AGREEMENT. As additional partial consideration for the
transfer of the MRYP properties, the Operating Partnership extended to MRYP a
$20 million, 15-year, Subordinated Debt Agreement, bearing interest payable
quarterly and accruing as follows:
<TABLE>
<S> <C> <C> <C>
Years 1-5.................... 8.00% Year 11..................... 9.75%
Year 6....................... 8.25 Year 12..................... 10.50
Year 7....................... 8.50 Year 13..................... 11.50
Year 8....................... 8.75 Year 14..................... 12.75
Year 9....................... 9.00 Year 15..................... 14.25
Year 10...................... 9.25
</TABLE>
The Subordinated Debt Agreement contains various affirmative and negative
covenants and events of default restricting the conduct of MRYP's business.
PREFERRED STOCK PURCHASE AGREEMENT. Pursuant to a Preferred Stock Purchase
Agreement, the Operating Partnership purchased 5,000 shares of MRYP preferred
stock from Merry Land on the day before the effective date of the Merry Land
Merger for a purchase price of $5 million. The dividend rate on the MRYP
preferred stock is as follows:
<TABLE>
<S> <C> <C> <C>
Years 1-5.................... 8.00% Year 11..................... 9.75%
Year 6....................... 8.25 Year 12..................... 10.50
Year 7....................... 8.50 Year 13..................... 11.50
Year 8....................... 8.75 Year 14..................... 12.75
Year 9....................... 9.00 Year 15..................... 14.25
Year 10...................... 9.25
</TABLE>
The Preferred Stock Agreement contains various affirmative and negative
covenants and events of default similar to those set forth in the Subordinated
Debt Agreement.
OFFICE LEASE AGREEMENT. MRYP and the Operating Partnership entered into an
Office Lease Agreement pursuant to which the Operating Partnership leases a
portion of the MRYP office at 624 Ellis Street in Augusta, Georgia. The term of
the lease is three years from the date of the Merry Land Merger with annual rent
equal to the amount of all operating expenses attributable to the leased space.
28
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENT TO
THE TRUST'S SHARE OPTION AND SHARE AWARD PLAN
THE AMENDMENT. The Trust seeks shareholder approval of an amendment to
increase the number of common shares authorized to be awarded under the Trust's
Fourth Amended and Restated 1993 Share Option and Share Award Plan (the "Award
Plan") from 8,000,000 common shares to 12,500,000 common shares. The Board
approved the amendment to the Award Plan on March 12, 1999, and recommended that
it be submitted to the shareholders of the Trust for approval.
DESCRIPTION OF THE AWARD PLAN. The Award Plan provides a means whereby the
Trust may award common shares, grants of options to purchase common shares,
share appreciation rights (in tandem with or independent of options), and/or
dividend equivalent rights with respect to common shares, restricted shares and
performance based shares to certain key employees, officers, trustees and
consultants of the Trust who are responsible for the Trust's future growth and
continued success. The Board believes that it is advisable to have additional
common shares available for future issuance in connection with employee share
incentive programs.
The purpose of amending the Award Plan is to increase the number of common
shares eligible for issuance thereunder by 4,500,000 common shares, from
8,000,000 common shares to 12,500,000 common shares. As of March 18, 1999,
7,263,521 restricted share awards and share options were outstanding under the
Award Plan. As 736,479 options and share awards have been previously exercised,
there are no common shares available for issuance under the Award Plan. There
were also 214,380 options outstanding under the Merry Land Stock Option and
Incentive Plan that was assumed as part of the Merry Land Merger. No more
options or share grants will be issued under that plan. Subject to shareholder
approval of this amendment, the Compensation Committee will grant approximately
400,000 options and restricted share awards under the Award Plan. If this
amendment is approved, approximately 7.7 million options and restricted share
awards will be outstanding, and approximately 4.1 million common shares will be
available for issuance under the Award Plan (i.e., 12,500,000 - 7,700,000
outstanding - 736,479 exercised). The proposed amendment to the Award Plan will
not result in any new plan benefits to the Trust's trustees, executive officers
or other employees.
VOTE REQUIRED. The amendment to the Award Plan will not take effect until
approved by the holders of a majority of the common shares present, or
represented, and entitled to vote at the meeting. Abstentions will have the same
effect as votes against the approval of this amendment to the Award Plan. Broker
non-votes will not be counted as common shares entitled to vote on the matter
and will have no effect on the vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE AWARD PLAN. PROXIES
SOLICITED BY THE BOARD WILL BE VOTED "FOR" THIS AMENDMENT TO THE AWARD PLAN
UNLESS INSTRUCTIONS TO WITHHOLD OR TO THE CONTRARY ARE GIVEN.
29
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Trust to report, based on
its review of reports to the SEC about transactions in its common shares
furnished to the Trust and written representations of its trustees, executive
officers and 10% common shareholders, that for 1998:
Mr. Alexander filed a Form 4 late to report the purchase of 2,500 common
shares. Ms. Rosenberg filed a Form 4 late to report the purchase of 500 common
shares by her spouse and a Form 5 which included the late report of a grant of
options to acquire 35,000 common shares.
AUDITORS
Ernst & Young LLP served as our auditors for the fiscal years ended
December 31, 1996, 1997 and 1998 and has been engaged to serve as our auditors
for the fiscal year ending December 31, 1999. Representatives of Ernst & Young
LLP are expected to be available at the Annual Meeting. Such representatives
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR THE 2000 MEETING
Shareholder proposals intended to be presented at the 2000 Annual Meeting
of Shareholders must be received by the Secretary of the Trust no later than
November 30, 1999, in order to be considered for inclusion in our 2000 Proxy
Statement.
1998 ANNUAL REPORT
Shareholders are concurrently being furnished a copy of the Trust's 1998
Annual Report which contains its audited financial statements at December 31,
1998. Additional copies of our Annual Report and Form 10-K for the year ended
December 31, 1998, as filed with the SEC, may be obtained at no charge by
contacting Cynthia McHugh, Senior Vice President -- Investor Relations of the
Trust, at Two North Riverside Plaza, Chicago, Illinois 60606, 312-928-1905.
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder action
at the Annual Meeting. If any other matters are properly presented at the
meeting for action, it is intended that the persons named in the proxies will
vote upon such matters in accordance with their best judgment.
By Order of the Board of Trustees
/s/ Bruce C. Strohm
Bruce C. Strohm
Executive Vice President,
General Counsel and Secretary
Chicago, Illinois
March 31, 1999
30
<PAGE>
EQR-PS-99
<PAGE>
<TABLE>
<S> <C>
[1208-EQUITY RESIDENTIAL PROPERTIES TRUST] [FILE NAME: ERP49B.ELX] [VERSION-3] [3/17/99]
ERP49B DETACH HERE
- ------------------------------------------------------------------------------------------------------------------------------------
PROXY
EQUITY RESIDENTIAL PROPERTIES TRUST
TWO NORTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS 60606
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 17, 1999
The undersigned shareholder of Equity Residential Properties Trust, a Maryland real estate investment trust (the "Trust")
hereby appoints DOUGLAS CROCKER II and GERALD A. SPECTOR, or either of them (the "Representatives"), with full power of
substitution, as proxies for the undersigned to represent the undersigned at the Annual Meeting and to vote all Common Shares of
the Trust which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of the Trust to be held in Chicago,
Illinois, on May 17, 1999, and any adjournment thereof. 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
Common Shares.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON THE REVERSE SIDE. IF YOU DO NOT MARK ANY
BOXES, YOUR PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF TRUSTEES' RECOMMENDATIONS. THE REPRESENTATIVES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
Note: If you plan to attend the Annual Meeting in person, please let us know by marking the enclosed proxy card in the space
provided.
- --------------- ---------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- --------------- ---------------
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<PAGE>
EQUITY RESIDENTIAL
PROPERTIES TRUST
C/O EQUISERVE
P.O. BOX 8040
BOSTON, MA 02266-8040
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<S> <C>
- --------------------- --------------------
VOTE BY TELEPHONE VOTE BY INTERNET
- --------------------- --------------------
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY STATEMENT 1. READ THE ACCOMPANYING PROXY STATEMENT
AND PROXY CARD. AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE
1-877-PRX-VOTE (1-877-779-8683). FOR http://www.eproxyvote.com/eqr
SHAREHOLDERS RESIDING OUTSIDE THE UNITED
STATES, CALL COLLECT ON A TOUCH-TONE PHONE 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
1-201-536-8073. LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER 4. FOLLOW THE INSTRUCTIONS PROVIDED.
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/eqr anytime!
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET.
EOP30A DETACH HERE
- ------------------------------------------------------------------------------------------------------------------------------------
[1208-EQUITY RESIDENTIAL PROPERTIES TRUST] [FILE NAME: ERP49A.ELX] [VERSION-4] [3/17/99]
|X| PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
1. Authority to vote for the election as trustees of the five FOR AGAINST ABSTAIN
nominees listed below to terms expiring in 2002: 2. Authority to vote for the approval of | | | | | |
NOMINEES: (01) Samuel Zell, (02) John W. Alexander, the amendment to the Fourth
(03) Henry H. Goldberg, (04) Errol R. Halperin, and Amended and Restated 1993 Share
(05) Boone A. Knox. Option and Share Award Plan.
FOR | | | | WITHHELD
ALL FROM ALL 3. In their discretion, the Representatives are authorized to vote
NOMINEES NOMINEES upon such other matters as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
| | MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
-------------------------------------------------------- DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR AUTHORITY TO VOTE
For all nominees, except vote withheld from the nominees FOR THE ELECTION AS TRUSTEES OF THE FIVE NOMINEES TO TERMS
noted on the line above. EXPIRING IN 2002 AND FOR ITEM 2 AND OTHERWISE IN THE DISCRETION
OF THE REPRESENTATIVES.
MARK HERE | |
TO DISCONTINUE
EXTRA ANNUAL
REPORT
MARK HERE | | MARK HERE | |
FOR ADDRESS IF YOU PLAN
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING.
Note: Please sign as name appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title under signature.
Signature: Date: Signature: Date:
------------------------------ -------------- ------------------------------ --------------
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