SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Mid-Atlantic Realty Trust
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(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):
N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
|_| Fee paid previously with preliminary materials: N/A
|_| 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.:
<PAGE>
(3) Filing Party:
(4) Date Filed:
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<PAGE>
MID-ATLANTIC REALTY TRUST
170 West Ridgely Road, Suite 300
Lutherville, Maryland 21093
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
April 2, 1998
To the Shareholders of Mid-Atlantic Realty Trust:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
MID-ATLANTIC REALTY TRUST ("MART") will be held at the Renaissance Harborplace
Hotel in Baltimore, Maryland on May 15, 1998, at 11:00 a.m., prevailing local
time, for the following purposes:
1. To elect eight Trustees to serve for the ensuing year and
until the election and qualification of their successors;
2. To consider and vote upon an amendment to the Omnibus Share
Plan to, among other things, increase the number of shares
available for the grant of awards under the plan;
3. To consider and vote upon an amendment to MART's Declaration
of Trust to remove certain transfer restrictions that could
conflict with the stock transfer policies of the New York
Stock Exchange;
4. To consider and vote upon the selection of independent
certified public accountants to audit the books and accounts
of MART for calendar year 1998; and
5. To transact such other business as may properly be brought
before the meeting or any adjournments thereof.
Only the shareholders of record of MART at the close of business on
March 20, 1998 will be entitled to notice of and to vote at the meeting.
By Order of the Board of Trustees,
PAUL F. ROBINSON
Secretary
IMPORTANT - YOUR PROXY IS ENCLOSED
Shareholders who do not plan to attend the meeting are requested to
complete, date, sign and return promptly the enclosed proxy in the enclosed
envelope. No postage is required for mailing in the United States.
<PAGE>
MID-ATLANTIC REALTY TRUST
170 West Ridgely Road, Suite 300
Lutherville, Maryland 21093
(410) 684-2000
-------------------------------------------------------------------
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Trustees of MID-ATLANTIC
REALTY TRUST ("MART") in connection with the Annual Meeting of the Shareholders
of MART to be held on May 15, 1998, and any adjournments or postponements
thereof. The approximate date this Proxy Statement and proxy are being sent to
shareholders is April 1, 1998. The proxy is revocable at any time before
exercise by written notice to Paul F. Robinson, Secretary of MART, at the
principal office of MART.
Only holders of record of MART's common shares of beneficial interest, par
value $.01 per share (the "Shares"), at the close of business on March 20, 1998
(the "Record Date") are entitled to notice of and to vote at the meeting. As of
the Record Date, 14,590,243 Shares were outstanding and entitled to vote at the
meeting, with each Share entitled to one vote.
BENEFICIAL OWNERSHIP
The following table reflects the names and addresses of the only persons
known to MART to be the beneficial owners of 5% or more of the Shares
outstanding as of the Record Date. For purposes of calculating beneficial
ownership, Rule 13d-3 of the Securities Exchange Act requires inclusion of
Shares that may be acquired within 60 days, such as upon the conversion of
MART's Convertible Debentures held by each such person (assuming those
Debentures and no other Debentures are converted).
Name and Address Shares Beneficially Percent
of Beneficial Owner Owned of Class
------------------- ----- --------
Credit Suisse Asset Management 952,381 6.1%
c/o BEA Associates
153 East 53rd Street
New York, New York 10022
Fidelity Investments (FMR Corp.) 802,600 5.5%
82 Devonshire Street
Boston, Massachusetts 02109
Palisade Capital Management 1,575,282 10.7%
1 Bridge Plaza
Fort Lee, New Jersey 07024
ELECTION OF TRUSTEES
A Board of Trustees of eight persons is to be elected by the shareholders.
All of the nominees will be elected as Trustees to serve until the 1999 Annual
Meeting of Shareholders and until their respective successors have been elected
and qualify. Under MART's Declaration of Trust and Maryland law, Trustees are
elected by a plurality vote, which means the affirmative vote of holders of a
majority of the Shares present (in person or by proxy) and voted at the meeting.
Consequently, withholding of votes, abstentions and broker non-votes will have
no effect on the outcome of this vote.
<PAGE>
Unless authority to vote is withheld, the enclosed proxy will be voted in
favor of the election as Trustees of the following nominees. The Board of
Trustees does not know of any nominee who will be unable to serve, but if any of
them becomes unable to serve, the proxies may be voted with discretionary
authority for the election of other persons as Trustees.
<TABLE>
<CAPTION>
Principal Occupation Trustee
Name During the Last Five Years Age Since
- ---- -------------------------- --- -----
<S> <C> <C> <C>
David F. Benson.............. President of Meditrust (a publicly owned real estate 49 1993
investment trust)
Marc P. Blum ................ Member - Gordon, Feinblatt, Rothman, Hoffberger & 55 1993
Hollander, LLC; Chief Executive Officer of World Total
Return Fund Limited Partnership and U.S.A. Fund Limited
Partnership (private investment funds) since 1992; Chief
Executive Officer of Coles Colonial Limited Partnership
(operator of Drexel-Heritage furniture stores)
Robert A. Frank ............. Executive Vice President, Director of Research and Co- 48 1993
Head of Capital Markets of Legg Mason Wood Walker, Inc.
(a publicly owned investment banking firm) from
September, 1996; Prior thereto, Managing Director and
Group Head of the Real Estate Securities Research
Department of Alex. Brown & Sons Incorporated (a
publicly owned investment banking firm)
LeRoy E. Hoffberger ......... Chairman of the Board of MART; President of CPC, Inc. 72 1993
(real estate investments); Vice President of Merchants
Terminal Corp. (warehouse company); Of Counsel to
Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC
F. Patrick Hughes ........... President and Chief Executive Officer of MART; President 50 1993
and Chief Operating Officer of BTR Realty, Inc. from
November, 1990
M. Ronald Lipman ............ Member - Lipman, Frizzell & Mitchell, L.L.C. (real estate 59 1993
consultants)
Jack H. Pechter.............. Deputy Chairman of the Board; Chairman of Tri-Star 62 1997
Management (private real estate owners and developers)
Daniel S. Stone ............. President of Stone & Associates, Inc. (real estate developers 53 1993
and consultants)
</TABLE>
Mr. Stanley Moss, a Trustee of MART since 1993, retired in September 1997.
Messrs. Blum and Hoffberger are also directors of nine funds in the Davis Fund
complex, which are investment companies registered under the Investment Company
Act of 1940. Mr. Benson is also a trustee of Meditrust, a public real estate
investment trust.
In 1997, the Board of Trustees held four meetings. During that year, each
Trustee attended, in the aggregate, at least 75% of the meetings of the Board of
Trustees and committees on which he served.
Committees of the Board of Trustees
The Board of Trustees has an Executive Compensation Committee, an Audit
Committee, an Investment Committee and a Nominating Committee.
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<PAGE>
The Audit Committee consists of Messrs. Blum, Frank and Lipman and
recommends to the Board the selection of the independent public accountants,
reviews with such accountants and management financial statements, other results
of the audit, and internal accounting procedures and controls. The Audit
Committee also reviews and considers proposed related party transactions, if
any. The Audit Committee held three meetings in 1997.
The Executive Compensation Committee consists of Messrs. Benson, Blum and
Frank and makes recommendations to the Board regarding compensation of Trustees
and executive officers, executive compensation generally, and benefit plans for
management to be considered by the Board. The Executive Compensation Committee
held four meetings in 1997.
The Investment Committee consists of Messrs. Lipman, Pechter, Stone and
Hoffberger, with Mr. Hughes serving as a member ex officio. The Investment
Committee, which held seven meetings in 1997, reviews the performance of MART's
properties and evaluates redevelopment and acquisition opportunities.
The Nominating Committee, which consists of Messrs. Blum, Benson and Stone,
makes recommendations regarding nominations for Trustees and officers. The
Nominating Committee would consider nominees recommended by shareholders upon
written request made to the committee prior to the time that the committee's
recommendations are made to the Board of Trustees. The Nominating Committee held
one meeting in 1997.
Trustee Compensation
MART paid its Trustees (other than Mr. Hughes, who is employed as President
and Chief Executive Officer of MART) a retainer of $12,000 per annum, $1,000 per
meeting for each Board and committee meeting attended in person, and $500 for
meetings attended by telephone.
Under MART's 1995 Stock Option Plan, each Trustee who was serving as a
Trustee as of September 14, 1995 and who was not an employee of MART was granted
an option to purchase 6,000 Shares. The options became exercisable in increments
of 2,000 Shares each on September 30, 1995, 1996 and 1997 at an exercise price
equal to the market price of the Shares on each vesting date. In addition,
during 1997, each non-management Trustee received an option to purchase 10,000
Shares at a price of $13.375 per Share, the market price of the Shares on
November 14, 1997, the date the option was granted. The options are exercisable
in increments of 3,333 Shares annually on November 14, 1997, 1998 and 1999.
On November 14, 1997, MART adopted a Deferred Compensation and Fee Plan for
Non-Employee Trustees. The purpose of this plan is to provide non-management
members of the Board of Trustees with the opportunity to defer all or part of
their compensation and fees for services as a member of the Board of Trustees.
In order to participate in the plan, a Trustee must submit an election form to
the Plan Administrator prior to January 1 of the calendar year for which the
election applies, except that the initial election for 1998 was required to have
been made before April 1, 1998. An election to defer compensation and fees will
continue in effect until the earlier of: (1) the end of the participant's
services as a member of the Board of Trustees, or (2) the end of the calendar
year during which the participant elects to discontinue deferrals. Participants
may defer their compensation through a deferred money account, in which the
funds accrue interest at market rates, or in a deferred stock account, in which
the funds are invested in MART Shares. The trustee of the deferred compensation
trust is directed to vote any Shares in the deferred stock account in accordance
with the instructions of the Board of Trustees.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that MART's Trustees and executive officers and each person who owns more than
10% of MART's Shares, file with the Securities and Exchange Commission an
initial report of beneficial ownership and subsequent reports of changes in
beneficial ownership of the Shares. To MART's knowledge, all reports required to
be so filed by such persons have been filed on a timely basis. MART believes
that all of its Trustees and executive officers, and all persons owning
beneficially more than 10% of the Shares, complied with all filing requirements
applicable to them with respect to transactions during the fiscal year ended
December 31, 1997.
INFORMATION REGARDING SHARE OWNERSHIP OF MANAGEMENT
The following table reflects, as of the Record Date, the number of Shares
owned by each Trustee, each nominee to become a Trustee and by all Trustees and
executive officers as a group. Share ownership of Trustees and executive
officers is calculated in accordance with Regulation 13D under the Securities
Exchange Act of 1934, as amended, which includes Shares that a person has the
right to acquire within 60 days, including upon exercise of options and
conversion of Debentures.
Name of Shares Percent
Beneficial Owner Beneficially Owned (3) of Class
- -------------------------- ------------------ ---------
David F. Benson 20,666 0.3%
Marc P. Blum 87,014 (1) 0.7%
Robert A. Frank 22,499 0.3%
LeRoy E. Hoffberger 187,757 (2) 1.6%
F. Patrick Hughes 333,898 2.9%
M. Ronald Lipman 64,995 0.5%
Jack H. Pechter 6,666 (4) *
Daniel S. Stone 25,733 0.3%
Paul F. Robinson 198,966 1.8%
All Trustees and Executive Officers
as a Group (9 persons included) 947,528 8.4%(5)
- --------------------
*less than .1%
(1) Mr. Blum's Shares are held by World Total Return Fund Limited
Partnership and by U.S.A. Fund Limited Partnership, investment funds of
which Mr. Blum is the President and CEO of the General Partner and in
which he holds a substantial interest.
(2) Excludes 134,624 Shares owned by the Hoffberger Foundation, Inc., a
charitable foundation of which Mr. Hoffberger is an officer and
director. The number of Shares in the above table includes 95,000 Shares
owned by CPC, Inc., a corporation of which Mr. Hoffberger is a director,
stockholder and executive officer and includes 2,517 Shares registered
in the name of Mr. Hoffberger as co-trustee under a trust agreement.
(3) Includes 19,333 Shares, 19,333 Shares, 19,333 Shares, 39,333 Shares,
97,000 Shares, 15,333 Shares, 6,666 Shares, 19,333 Shares, and 59,867
Shares subject to immediately exercisable options granted pursuant to
the Company's 1993 Omnibus Share Plan and the 1995 Stock Option Plan to
each of Messrs. Benson, Blum, Frank, Hoffberger, Hughes, Lipman,
Pechter, Stone and Robinson, respectively.
(4) Excludes 1,168,981 Shares issuable upon conversion into Shares of Units
of partnership interest in MART Limited Partnership by Mr. Pechter, his
wife, the Pechter Family Limited Partnership and Tripec Associates
Limited Partnership.
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<PAGE>
(5) The total of all Shares attributable to all Trustees, members of
management and their respective affiliates (whether or not included in a
Regulation 13D calculation), including Shares that may be acquired in
the future pursuant to the exercise of outstanding options and the
exchange of Units of MART Limited Partnership, represents approximately
14% of all outstanding Shares of MART.
EXECUTIVE COMPENSATION
The following table reflects, with respect to the chief executive officer
and each executive officer of MART whose annual compensation exceeded $100,000
in 1997, the aggregate amounts paid to or accrued for such officers as
compensation in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Name and Other Annual Restricted LTIP All Other
Principal Position Year Salary Bonus Compensation(1) Stock Award(2) Options Payouts Compensation(3)
- ------------------ ---- ------ ----- ------------ ----------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
F. Patrick Hughes 1997 $210,000 ---(4) $7,800 $2,675,000 75,000 --- $807
President and 1996 $200,000 $100,000 $12,800 --- --- --- $885
Chief Executive Officer 1995 $167,000 $75,000 $12,800 --- 27,000 --- $885
Paul F. Robinson 1997 $140,000 ---(4) $6,874 $1,783,329 50,000 --- $1,571
Executive Vice President, 1996 $130,000 $60,000 $10,400 --- --- --- $1,230
Secretary, and 1995 $107,000 $40,000 $9,145 --- 16,200 --- $653
General Counsel
- -------------------
<FN>
(1) Consists of car allowance and amounts reimbursed under MART's executive
medical reimbursement plan.
(2) Reflects grants of restricted stock that were made pursuant to the 1997
Restricted Share Plan adopted by the Board of Trustees on November 14,
1997. Pursuant to the plan, MART has reserved 400,000 Shares for
issuance to Trustees, officers and employees, subject to certain
restrictions and risk of forfeiture. Mr. Hughes and Mr. Robinson
received grants of 200,000 and 133,333 Shares, respectively, valued at
$13.375 per Share as of November 14, 1997, the date of grant. With
respect to each grant, the Shares vest as follows: 15% vest on January
1, 1998; 51% vest at a rate of 12.75% on each of January 1, 1999, 2000,
2001 and 2002; and 34% vest at a rate of 5.67% on each of January 1,
2003 through 2008. The Shares are subject to a risk of forfeiture in
the event of termination of employment (other than in a change in
control of MART), and are restricted as to transfer prior to vesting.
Mr. Hughes and Mr. Robinson have the right to vote and receive
dividends on the Shares. The value of the Shares on December 31, 1997,
was $2,937,600 for Mr. Hughes and $1,958,395 for Mr. Robinson.
(3) Consists of premiums paid by MART on term life insurance policies on
the lives of Messrs. Hughes and Robinson which are payable to their
respective heirs or estates.
(4) The sum of approximately $300,000 was accrued by MART for company-wide
bonuses for 1997; however, no bonus allocation has as yet been made for
that fiscal year except as otherwise reflected in the table.
</FN>
</TABLE>
5
<PAGE>
The following tables reflect certain information regarding options granted
in, exercised during and held as of the end of the last fiscal year.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Potential Realizable
Value ($) at Assumed
Annual Rates of Stock Price
Individual Grants Appreciation for Option Term
----------------- ----------------------------
Number of % of Total
Securities Granted to
Underlying Employees in Exercise Expiration
Name Options Granted Fiscal Year Price ($) Date 5% 10%
- -------------------------------------------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
F. Patrick Hughes 75,000(1) 25% $13.375 11/13/07 $630,860 $1,598,722
Paul F. Robinson 50,000(2) 16.6% $13.375 11/13/07 $420,573 $1,065,815
<FN>
(1) The options granted under the Omnibus Share Plan are exercisable in increments of 25,000 Shares annually
on November 14, 1997, 1998 and 1999.
(2) The options granted under the Omnibus Share Plan are exercisable in increments of 16,667 Shares annually
on November 14, 1997, 1998 and 1999.
</FN>
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY End at FY End
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
F. Patrick Hughes 97,000/50,000 $329,250/$65,625
Paul F. Robinson 59,867/33,333 $185,050/$43,750
Executive Employment Agreements
MART has Executive Employment Agreements ("Agreements") with F. Patrick
Hughes and Paul F. Robinson. Under the Agreements, the annual base salary for
each of Messrs. Hughes and Robinson for this last fiscal year was $210,000 and
$140,000 respectively. The Agreements provide annual increases of at least
one-half of the annual increase in the Consumer Price Index. The term of each
Agreement is at all times two years. In the event of the termination of
employment due to a change of control in MART, all compensation payable to the
executive for the remainder of the employment period becomes immediately due and
payable. At the election of the executive, such compensation may be payable in a
lump sum, discounted to present value.
Compensation Committee Interlocks and Insider Participation
The Executive Compensation Committee consists of Messrs. Benson, Blum and
Frank. Mr. Blum is a member of, and Mr. Hoffberger is of counsel to, the law
firm of Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC, Baltimore,
Maryland. During 1997, MART paid or incurred legal fees to that firm for
services rendered.
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<PAGE>
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The compensation of members of management of MART is determined by the
Board of Trustees based upon the recommendation of the Executive Compensation
Committee (the "Committee"). The Committee is comprised of independent Trustees,
who are responsible for developing and implementing a comprehensive compensation
program for management.
Compensation Philosophy. The philosophy of the Committee is to ensure that
the interests of management and employees are identical to the interests of
MART's owners - the shareholders. To that end, the Committee has implemented and
will continue to implement a compensation strategy that includes base salary and
cash bonus, as well as incentive stock options and restricted stock grants which
will reward management and employees for adding shareholder value. Base salary
is established at levels which are necessary to attract and retain a high
caliber of management, and cash bonuses provide short-term rewards for current
accomplishments. Incentive stock options and restricted stock grants provide
management and employees with a long-term investment in MART, the value of which
is dependent upon their success in maximizing shareholder value.
The measure of performance for a real estate investment trust ("REIT") is
funds from operations, because most of the funds from operations are distributed
to shareholders as a dividend. To the extent management succeeds at increasing
funds from operations and dividends, share prices and shareholder value should
be increased. Creating long-term shareholder value, however, is not always
consistent with increased short-term distributions. To properly reward
management for achieving a well balanced result, the Committee believes that
both short-term results as well as long-term values must be considered and
separately recognized.
The Committee also recognizes the individual functions of each employee and
provides for individual goals to be attained by each person. While the favorable
performance of MART as a whole is the basis for any reward, the performance by
each employee is the most significant factor in determining awards. The
compensation of Mr. Hughes as the chief executive officer of MART, however, is
based upon the foregoing factors as well as the overall performance of MART and
its management. As CEO, Mr. Hughes is responsible for the overall condition of
the company and its resources, and his performance is evaluated by the
Committee, in its discretion, on that basis as well as on objective criteria
based on reaching certain financial and other benchmarks.
Base Salary. Base salary for senior management for fiscal year 1997 was
based upon salaries paid to such personnel in the preceding year, with
appropriate increases. It is the intention of the Committee to review MART's
executive compensation structure to insure that MART has the continued ability
to attract and retain the high caliber executive talent. To that end, the
Committee will take into account salaries of senior management of comparable
companies within the REIT industry. The base salary for Mr. Hughes will be
consistent with the base salaries of chief executive officers of peer companies.
Incentive Bonuses. The Committee has implemented a discretionary cash bonus
program for management and employees. The program makes available a cash bonus
pool consisting of a percentage of the amount by which MART's funds from
operations for the year exceeds a specified increase over the preceding year.
The Committee has also adopted a bonus program for operating personnel for
exceeding annual goals. For example, personnel engaged in development and
redevelopment of properties would be rewarded for achieving returns at or above
specified levels. Management personnel may participate in such bonus pools. The
purpose of this program is to closely align the interests of management and
employees with the interests of MART's shareholders on a year to year basis. The
performance of the chief executive officer will also be tied to the overall
performance of MART and its management.
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In 1997 the Committee implemented an annual cash bonus program potentially
equal to 100% of base salary for senior management, consisting of Mr. Hughes, as
Chief Executive Officer, and Mr. Robinson, as Executive Vice President. Under
the program, cash incentive compensation equal to 50% of base salary is
available upon attainment of certain objectives. The other half is payable in
whole or in part at the discretion of the Committee for company performance
including, among other things, achieving significant total return and/or for
exceptional performance relating to development, redevelopment and acquisition
criteria.
Long-Term Incentive Compensation Plans. To promote the best long-term
benefits to MART and its shareholders and to provide incentives for MART's
Trustees, officers and employees, MART has a Restricted Share Plan, an Omnibus
Share Plan and a Stock Option Plan.
Restricted Share Plan. In 1997, the Committee recommended, and the Board of
Trustees approved, a Restricted Share Plan. The Committee believes that the
grant of restricted share awards ("Restricted Shares") provides a long-term
incentive to such persons who contribute to the growth of MART and establishes a
direct link between compensation and shareholder return. Shares awarded are
subject to such terms, conditions and restrictions as may be determined by the
Committee, subject to the provisions of the Restricted Share Plan. The
restrictions may include stock transfer restrictions and forfeiture provisions
designed to facilitate the achievement by participants of MART's Share ownership
goals. The Committee may vary the grants of Restricted Shares based on a
subjective assessment of MART's overall performance in relation to long-term
goals and plans. In determining the individuals to whom awards will be made and
the amounts of the grants, the Committee considers the relative position and
responsibilities of each executive officer, past performance of each officer to
MART, total shareholder return relative to peer companies, growth in funds from
operations over time and a review of competitive compensation for executive
officers of similar rank in peer companies. In 1997, Mr. Hughes received a grant
of Restricted Shares in reward for his efforts since 1993 in the formation of
MART and merger with BTR Realty, Inc., effecting a successful initial public
offering, effecting a successful follow-on public offering in 1997, and
achieving significant growth in MART from 1993-1997 including growth in asset
size as well as funds from operations and significant total return. For more
information relating to recent grants of Restricted Shares to executive
officers, reference is made to the tables set forth in this Proxy Statement
under the caption "Executive Compensation."
Stock Option Plans. The Committee determines stock option grants under
MART's Omnibus Share Plan and 1995 Stock Option Plan. The purpose of these plans
is to provide equity-based incentive compensation based on the long-term
appreciation in value of MART's Shares and to promote the interests of MART and
its shareholders by encouraging greater management ownership of MART's Shares.
Because the value of stock options granted to an executive is directly related
to MART's success in enhancing its market value over time, the Committee feels
that its stock option plans have been very effective in aligning the interests
of management and shareholders.
Specific grants are determined taking into account an executive's current
responsibilities and historical performance, as well as the executive's
perceived contribution to MART's funds from operations. Options are also used to
provide incentives to newly-promoted officers at the time they are asked to
assume greater responsibilities. In evaluating option grants, the Committee
considers prior grants and Shares currently held, as well as the recipient's
success in meeting operational goals and the recipient's level of
responsibility. However, no fixed formula is utilized to determine particular
grants. The terms of the options, including vesting, exercisability and term,
are determined by the Committee, subject to the provisions of the plans. Most of
the awards granted or to be granted under these plans vest over a period of
several years, thereby providing a long-term incentive and encouraging a
long-term relationship with MART. Share options are typically granted at
prevailing market price, and therefore will
8
<PAGE>
only have value if MART's Share price increases over the exercise price. The
Committee believes that the opportunity to acquire a significant equity interest
in MART is a strong motivation for executive officers to maximize long-term
value for MART's shareholders and promotes longevity and retention of key
employees. In 1997, Mr. Hughes received a grant of incentive stock options under
the Omnibus Share Plan in recognition of his significant contributions to MART.
For information relating to recent options granted to MART's executive officers,
reference is made to the tables set forth in this Proxy Statement under the
caption "Executive Compensation". For more information relating to the November
14, 1997 amendments to the Omnibus Share Plan, reference is made to "Amendment
of Omnibus Share Plan."
Awards under the plans have been and will continue to be made to employees
who have demonstrated significant management potential or who have the capacity
for contributing in a substantial measure to the successful performance of MART.
The foregoing report is submitted by the following Trustees of MART,
comprising all of the members of the Compensation Committee of the Board of
Trustees.
EXECUTIVE COMPENSATION COMMITTEE
Robert A. Frank, Chairman
David F. Benson
Marc P. Blum
9
<PAGE>
PERFORMANCE GRAPH
MART commenced operations on September 11, 1993 upon the merger of BTR
Realty, Inc. into MART, as a result of which MART acquired the business and
operations of BTR. Consequently, MART had less than four months of operations
during 1993. The following graph tracks the cumulative total return for MART
during those years for 1994, 1995, 1996 and 1997, compared to the S&P 500 and
the National Association of Real Estate Investment Trusts ("NAREIT") Equity REIT
Total Return Index. The cumulative total return represents stock price
appreciation and assumes reinvestment of all dividends paid during the indicated
period. The graph assumes an investment of $100 on September 1, 1993.
<TABLE>
<CAPTION>
Period Ending
<S> <C> <C> <C> <C> <C> <C>
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Index 09/01/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ------------------------------------------------------------------------------------------------------------------------------
MART 100 87.38 86.71 100.45 143.44 202.34
S&P 500 100 101.56 102.89 141.39 173.86 231.88
EQUITY NAREIT 100 97.13 100.22 115.52 156.26 187.91
</TABLE>
Because of the short period (approximately 52 months) covered by the graph, the
graph is not an accurate measure of the cumulative total return or performance
of MART or a proper indicator of its comparison to the S&P 500 or the Equity
REIT Total Return Index in general.
10
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AMENDMENT OF OMNIBUS SHARE PLAN
Effective November 14, 1997, the Board of Trustees approved amendments to
MART's Omnibus Share Plan (the "Plan") to update the Plan and to increase the
number of Shares and certain other benefits available under the Plan. The
amendments increase the number of Shares available for issuance under the Plan
by 1,025,000 Shares, clarify the terms under which incentive stock options and
stock bonuses may be awarded, permit limited transferability of options,
lengthen the exercise right upon death and disability, eliminate the requirement
that MART retain certificates representing grants of restricted shares, and
clarify the accelerated vesting rights upon a change in control. A copy of the
Amended Omnibus Share Plan is available upon request to MART's Secretary. The
following is a summary of the Plan and the proposed amendments.
The Plan
Under the Plan up to 300,000 Shares were reserved for issuance to Trustees,
officers and employees of MART. The purpose of the Plan is to align the
interests of the Trustees, officers and employees of MART with the interests of
MART's shareholders. The Plan also enhances MART's ability to attract and retain
Trustees and employees of outstanding ability and provide them with a way to
acquire or increase their proprietary interest in MART's success.
Employees of MART who have demonstrated significant management potential or
who have the capacity for contributing in a substantial measure to the
successful performance of MART, as determined by the Executive Compensation
Committee (the "Committee"), are eligible to receive awards under the Plan. As
such criteria are subjective in nature, the number of persons who may be
included from time to time cannot be accurately estimated.
Subject to the provisions of the Plan, the Committee may select the persons
eligible to participate in the Plan and may interpret the Plan and establish,
amend and rescind any rules or regulations relating to the Plan. Awards may be
granted upon such terms as the Committee may determine, provided that options
may not be exercisable for more than ten years after the date of grant. The Plan
provides for a variety of awards, including stock options, stock appreciation
rights, performance shares, restricted stock, stock bonuses and other cash and
stock-based awards.
The Amendments
Since January 1994, options to purchase 252,128 Shares have been granted
and are outstanding under the Plan, of which options to purchase 4,462 Shares
have been exercised. No Shares have been issued under the Plan as restricted
stock or stock bonus awards. As a result, a balance of 47,872 Shares remain
available under the Plan. The Board of Trustees approved an amendment that
increases the aggregate number of Shares available under the Plan by 1,025,000
Shares and provides that the Plan be amended from time to time so that the
aggregate number of Shares that may be issued equals 7% of the outstanding
shares of MART. This will afford MART the flexibility to make awards deemed
necessary during the coming years.
To keep the Plan in line with benefits being provided by other companies,
the amendments permit limited transferability of non-qualified stock options to
the optionee's spouse, lineal ascendants, lineal descendants or to a duly
established trust for the benefit of one or more such individuals. The
amendments also extend the exercise period upon the death or disability of a
participant from 180 days to one year. The amendments clarify the terms under
which incentive stock options may be granted and provide that the exercise price
of an option may, in the discretion of the Committee, be less than 100%
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of the fair market value of the Shares on the date of grant. The amendments
provide that an optionee may require MART to withhold and deduct from the number
of Shares deliverable upon exercise of an option a number of Shares having an
aggregate fair market value equal to the amount of taxes and other charges that
MART is obligated to withhold or deduct from the amount payable to the optionee.
Although the Plan has always permitted the award of stock bonuses, the Plan now
expressly provides for stock bonuses. The amendments also delete the requirement
that MART hold any certificates representing restricted stock granted to
participants until the end of the restricted period.
The amendments further provide for accelerated vesting of awards under the
Plan in the event of an "Extraordinary Event" resulting in a change in control.
An Extraordinary Event is defined as the commencement of a tender offer (other
than by MART) for any Shares or a sale or transfer, in one or a series of
transactions, of assets having a fair market value of 50% or more of the fair
market value of all assets of MART, or a merger, consolidation or share exchange
pursuant to which the Shares of MART are or may be exchanged for or converted
into cash, property or securities of another issuer, or the liquidation of MART.
Upon the occurrence of an Extraordinary Event, then (i) regardless of whether or
not the award has vested or become fully exercisable, the award will immediately
vest and become fully exercisable, and (ii) any restrictions or forfeiture
conditions applicable to any other awards granted under the Plan will lapse and
terminate, any performance conditions imposed with respect to any such awards
will be deemed to be fully achieved on and at all times after the Event Date,
and such awards will be deemed fully vested without restriction from and after
the Event Date. The "Event Date" is the date of the commencement of a tender
offer, if the Extraordinary Event is a tender offer, and in the case of any
other Extraordinary Event, the day preceding the record date in respect of such
Extraordinary Event, or if no record date is fixed, the day preceding the date
as of which shareholders of record become entitled to the consideration payable
in respect of such Extraordinary Event. Notwithstanding the foregoing, the
immediate vesting of any award shall be conditioned upon the actual occurrence
and completion of the Extraordinary Event.
The Board of Trustees believes that the granting of stock options and other
awards is an effective way to allow MART's officers and employees to participate
in the growth and profitability of MART. The Board of Trustees further believes
that the amendments are important in order to allow MART to attract and retain
employees who are in a position to contribute materially to the successful
conduct of MART's operations, to meet competitive situations created by stock
option plans of other corporations, and to stimulate in those eligible for
participation an increased desire to render greater service to MART.
Federal Income Tax Aspects
With respect to options granted under the Plan, except as provided below,
when an optionee exercises an incentive stock option, the optionee does not
recognize taxable income and MART will not be entitled to any deduction. If the
Shares acquired upon exercise are not disposed of within the one-year period
beginning on the date of the transfer of the Shares to the optionee, nor within
the two-year period from the date of the grant of the option, any gain or loss
realized by the optionee upon the disposition of such Shares will be taxed as
long-term capital gain or loss. In such event, MART will not be entitled to a
deduction. If the Shares are disposed of within the one-year or two-year periods
referred to above, the excess of the fair market value of the Shares on the date
of exercise (or, if less, the fair market value on the date of disposition) over
the exercise price will be taxable as ordinary income to the optionee at the
time of the disposition, and MART will be entitled to a corresponding deduction.
Upon the grant of a non-qualified stock option, no income will be realized
by the optionee and MART will not be entitled to any deduction. Upon the
exercise of such option, the difference between the option price and any higher
market value of the Shares on the date of exercise will be ordinary income
12
<PAGE>
to the optionee and will be allowed as a deduction for Federal income tax
purposes to MART. When an optionee disposes of Shares acquired by the exercise
of the option, any amount received in excess of the market value of the Shares
on the date of exercise will be treated as long or short term capital gain,
depending upon the holding period of the Shares, which commences upon exercise
of the option. If the amount received is less than the market value of the
Shares on the date of exercise, the loss will be treated as long or short term
capital loss, depending upon the holding period of the Shares.
If the option price is paid for in Shares, to the extent that an optionee
pays all or part of the option price by tendering Shares owned by the optionee,
the normal rules described above apply except that a number of Shares received
upon such exercise equal to the number of Shares surrendered as payment of the
option price will have the same tax basis and tax holding period as the Shares
surrendered.
With respect to stock appreciation rights granted under the Plan, when an
optionee exercises a stock appreciation right under the Plan, the amount of cash
received will be ordinary income to the optionee and will be allowed as a
deduction for Federal income tax purposes to MART.
With respect to restricted stock granted under the Plan, in the absence of
an election by a participant, as explained below, the grant of Shares pursuant
to an award will not result in taxable income to the participant or a deduction
to MART in the year of the grant. The value of the Shares will be taxable to a
participant in the year in which the restrictions lapse. Alternatively, a
participant may elect to treat as income in the year of grant the fair market
value of the Shares on the date of grant. If such an election were made, a
participant would not be allowed to deduct at a later date the amount included
as taxable income if he should forfeit the Shares to MART, but such amount would
be a capital loss. The amount of ordinary income recognized by a participant is
generally deductible by MART in the year the income is recognized by the
participant. Prior to the lapse of restrictions, dividends paid on the Shares
subject to such restrictions will be taxable to the participant in the year
received.
With respect to stock bonuses granted under the Plan, when a participant
receives Shares free of restrictions or when such restrictions lapse, or when an
election is made as discussed above, the fair market value of the Shares will be
ordinary income to the participant and MART will be allowed a corresponding
deduction.
The foregoing discussion summarizes the Federal income tax consequences of
the Plan based on current provisions of the Code which are subject to change.
Participants should consult their own tax advisors as to the tax consequences
applicable to them as well as the State or local tax consequences of
participation in such Plan.
The Board of Trustees unanimously recommends that you vote FOR approval of
the proposed amendment to the Plan. The affirmative vote of the holders of a
majority of the Shares present (in person or by proxy) and voted at the meeting
is needed to approve the Plan. Consequently, withholding votes, abstentions and
broker non-votes will have no effect on the outcome of this vote.
13
<PAGE>
AMENDMENT OF MART'S DECLARATION OF TRUST
On September 18, 1997, MART's Shares began trading on the New York Stock
Exchange ("NYSE"). The NYSE has procedures in place to assure for an orderly
market, including rules and regulations relating to the transfer of stock. To
protect the integrity of the stock transfer system, the NYSE has requested, as a
condition of listing, that MART amend its Declaration of Trust to delete certain
transfer restrictions. In accordance with the NYSE's request, on September 12,
1997, the Board of Trustees authorized an amendment to its Declaration of Trust.
The Internal Revenue Code ("Code") imposes certain requirements and
limitations on the ownership of shares of a real estate investment trust
("REIT"). For MART to qualify as a REIT, the Code requires, among other things,
that not more than 50% of its outstanding Shares may be owned, directly or
indirectly, by five or fewer individuals during the last half of the taxable
year; the Shares must be beneficially owned by 100 persons or more; and certain
percentages of MART's gross income must be from particular activities. To ensure
compliance with these requirements and to safeguard MART against an inadvertent
loss of its REIT status, MART's Declaration of Trust contains provisions that
restrict the ownership and transfer of Shares. The Declaration of Trust contains
Beneficial Ownership Limitations that, with certain exceptions, restrict
shareholders from owning more than 9.9% of the outstanding Shares, in number or
value, either in the aggregate or of any class. In the event that a transfer of
Shares would result in Share ownership in violation of the Ownership Limit, the
number of Shares in excess of the Ownership Limit are treated as "Excess
Shares." Excess Shares are deemed to have been transferred to MART, as Trustee
of a special trust, and are not treated as issued and outstanding Shares of
MART.
The Declaration of Trust prohibits any transfer (a "Prohibited Transfer")
of Shares that would result in the Shares being beneficially owned by less than
100 persons or would result in the Trust being "closely held." Under the
provisions of the Declaration of Trust, any Prohibited Transfer will be void and
have no force or effect, and that the transferor will retain all rights to such
Shares notwithstanding and purported assignment or transfer. The Excess Share
provisions, therefore, serve as a deterrent to Prohibited Transfers by treating
the transferred Shares as Excess Shares.
Article VI, Section 6.6(b)(4) of MART's Declaration of Trust states:
"Any person attempting to make any Transfer shall first
ascertain that such Transfer is not a Prohibited Transfer. Any
Prohibited Transfer or other event which, if effective,
would result in the Shares being Beneficially Owned by less
than 100 persons, or would result in the Trust being "closely
held", shall be void ab initio and of no force and effect, and
the transferor or original owner shall automatically retain
ownership of such Shares notwithstanding any purported
assignment or transfer on the books of the Trust."
The NYSE requires that the phrase "and the transferor or original owner shall
automatically retain ownership of such Shares notwithstanding any purported
assignment or transfer on the books of the Trust" be deleted from the
Declaration of Trust.
In addition, Article VI, Section 6.6(g) ("Remedies Not Limited") of the
Declaration of Trust states:
"Nothing contained in this Article VI shall limit the
authority of the Board of Trustees to take such other action
as it deems necessary or
14
<PAGE>
advisable to protect the Trust and the interests of its
Shareholders by preservation of the Trust's status as a REIT."
The NYSE requires that the phrase "Subject to the provisions of Section 6.10,"
be added to the beginning of the first sentence of Section 6.6(g) to clarify
that the authority to impose other remedies shall be subject to Section 6.10
("Stock Exchange Transactions"), which states: "Nothing in this Article VI shall
preclude the settlement of any transaction entered into through the facilities
of any stock exchange on which the Shares are listed."
The Board of Trustees has determined that, because of the Excess Shares
provisions of MART's Declaration of Trust, the stock transfer restriction of
Section 6.6(b)(4) is not necessary for the protection of MART's status as a REIT
and may be deleted in favor of assuring an orderly market. Because Shares
transferred in violation of the ownership limits will be treated as Excess
Shares, the Board believes that this amendment will not adversely impact MART or
its shareholders.
The Board of Trustees therefore unanimously recommends that you vote FOR
approval of the proposed amendment to the Declaration of Trust. The affirmative
vote of the holders of not less than two-thirds of the Shares outstanding and
entitled to vote at the meeting will be necessary for approval of the proposed
amendment to the Declaration of Trust. Consequently, the withholding of votes,
abstentions and broker non-votes will be the equivalents of votes against the
proposed amendments.
SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
On the recommendation of the Audit Committee, the Board of Trustees has
selected KPMG Peat Marwick, LLP, independent certified public accountants, to
audit the books and accounts of MART for calendar year 1998. The Board of
Trustees considers such accountants to be well qualified and recommends a vote
in favor of their selection.
Representatives of KPMG Peat Marwick, LLP are expected to be present at the
Annual Meeting with the opportunity to make a statement if they so desire and to
be available to respond to appropriate questions.
The Board of Trustees unanimously recommends that you vote FOR the
appointment of KPMG Peat Marwick, LLP as independent certified public
accountants.
SUBMISSION OF SHAREHOLDER PROPOSALS TO BE CONSIDERED
AT THE MAY 1999 ANNUAL MEETING
Any shareholder desiring to present a proposal to be considered by the
shareholders at the Annual Meeting of Shareholders to be held in May 1999, and
desiring that information concerning such proposal be included in the proxy
statement and form of proxy relating to such meeting furnished to shareholders
by the Board of Trustees, should submit in writing proposals, including all
supporting materials, to MART at its principal executive offices no later than
December 1, 1998.
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OTHER MATTERS
The solicitation of proxies will be made by mail at MART's expense,
including charges and expenses of brokerage firms, banks and others for
forwarding solicitation material to shareholders.
The Board of Trustees of MART is not aware of any other matter which may be
presented for action at the meeting, but should any other matter requiring a
vote of the shareholders arise, it is intended that the proxies will be voted
with respect thereto in accordance with the best judgment of the person or
persons voting the proxies, discretionary authority to do so being included in
the proxy.
Shareholders who do not plan to attend the Annual Meeting are urged to
complete, date, sign and return the enclosed proxy in the enclosed envelope, to
which no postage need be affixed if mailed in the United States. Prompt response
is helpful and your cooperation will be appreciated.
Order of the Board of Trustees,
PAUL F. ROBINSON
Secretary
Dated: April 2, 1998
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PROXY
MID-ATLANTIC REALTY TRUST
170 West Ridgely Road, Suite 300
Lutherville, Maryland 21093
This Proxy is Solicited on Behalf of the Board of Trustees of Mid-Atlantic
Realty Trust.
The undersigned hereby appoints LeRoy E. Hoffberger, F. Patrick Hughes and
Paul F. Robinson, and each of them, as proxies, each with the power of
substitution, to vote as designated below all of the shares the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held at the
Renaissance Harborplace Hotel in Baltimore, Maryland on May 15, 1998 at 11:00
a.m., prevailing local time, and any adjournments thereof.
1. ELECTION OF TRUSTEES: FOR all nominees listed below []
(except as set forth to the contrary below)
WITHHOLD AUTHORITY to vote for all nominees listed below []
David F. Benson, Marc P. Blum, Robert A. Frank, LeRoy E. Hoffberger,
F. Patrick Hughes, M. Ronald Lipman, Jack H. Pechter, Daniel S. Stone
The terms of all Trustees expire at the next annual meeting at which their
successors are elected and qualify.
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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2. PROPOSAL TO AMEND THE OMNIBUS SHARE PLAN
For [] Against [] Abstain []
3. PROPOSAL TO AMEND MART'S DECLARATION OF TRUST
For [] Against [] Abstain []
4. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG Peat Marwick, LLP as the
independent certified public accountants of MART for the fiscal year
ending December 31, 1998.
For [] Against [] Abstain []
5. In their discretion, the proxies are authorized to vote upon any other
business which properly comes before the meeting and any adjournments
thereof.
This proxy, when properly executed, will be voted in the manner directed hereby
by the undersigned shareholders. If no direction is made, this proxy will be
voted in favor of all nominees and for Proposal Nos. 2, 3 and 4.
Please sign exactly as your name appears on your proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THE
CARD IN THE ENCLOSED ENVELOPE.
DATED: __________________________, 1998 Signature_____________________________
DATED: __________________________, 1998 Signature_____________________________
