<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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
- --------------------------------------------------------------------------------
MALAN REALTY INVESTORS, INC.
(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:
- --------------------------------------------------------------------------------
<PAGE> 2
MALAN REALTY INVESTORS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 13, 1999
To the Shareholders of Malan Realty Investors, Inc.
The annual meeting of shareholders of MALAN REALTY INVESTORS, INC. (the
"Company") will be held on Thursday, May 13, 1999, at the Community House, 380
South Bates Street, Birmingham, Michigan at 10:00 a.m., local time for the
following purposes:
1. To elect five (5) directors to serve for terms of one to
three years if proposal 2 below is approved, and to elect the same
persons as directors for a term of one year if proposal 2 is not
approved;
2. To approve an amendment to the Company's By-Laws which will create
a classified Board of Directors with staggered three-year terms;
3. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors for the year ending
December 31, 1999; and
4. To transact such other business as may properly come
before the annual meeting.
The Board of Directors currently knows of no other business to be presented by
or on behalf of the Company.
The Board of Directors has fixed the close of business on March 19, 1999 as the
record date for determining the shareholders that are entitled to notice of, and
to vote at, the annual meeting or any adjournment or postponement of the
meeting.
By Order of the Board of Directors
ANTHONY S. GRAMER,
President
Bingham Farms, Michigan
March 29, 1999
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING ENVELOPE TO ENSURE THE PRESENCE
OF A QUORUM. ANY PROXY MAY BE REVOKED IN THE MANNER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE
MEETING.
<PAGE> 3
TABLE OF CONTENTS
Page
ABOUT THE MEETING ................................................. 3
What is the purpose of the annual meeting? ...................... 3
Who is entitled to vote?......................................... 3
What constitutes a quorum?....................................... 3
How do I vote?................................................... 3
Can I change my vote after I return my proxy?.................... 4
What are the board's recommendations?............................ 4
What vote is required to approve each matter to be voted
upon at the meeting?........................................... 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT..... 5
Section 16(a) Beneficial Ownership Reporting Compliance.......... 5
ITEM 1-ELECTION OF DIRECTORS....................................... 6
MANAGEMENT....................................................... 6
The Board of Directors and Committees.......................... 7
Compensation of Directors...................................... 7
EXECUTIVE COMPENSATION............................................. 8
Summary Compensation Table....................................... 8
Stock Option Plan................................................ 8
Other Compensation and Benefits.................................. 9
Total Option Exercises in 1998 and Year-End Option Values........ 9
Report of the Compensation Committee............................. 9
Shareholder Return Performance Graph............................. 10
Certain Employment Arrangements.................................. 10
ITEM 2-AMENDMENT TO THE COMPANY'S BY-LAWS TO CREATE A
CLASSIFIED BOARD OF DIRECTORS WITH STAGGERED THREE-YEAR TERMS...... 11
ITEM 3-RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS........... 12
OTHER MATTERS...................................................... 12
COSTS OF PROXY SOLICITATION........................................ 12
PRESENTATION OF SHAREHOLDER PROPOSALS AT 2000 ANNUAL MEETING....... 12
ANNUAL REPORT...................................................... 12
2
<PAGE> 4
MALAN REALTY INVESTORS, INC.
30200 Telegraph Road
Bingham Farms, Michigan 48025-4503
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 13, 1999
This proxy statement contains information regarding the annual meeting of
shareholders of Malan Realty Investors, Inc. (the "Company") to be held
Thursday, May 13, 1999 at 10:00 a.m., local time, at the Community House, 380
South Bates Street, Birmingham, Michigan. The Company's Board of Directors is
soliciting your proxy to encourage your participation in the voting at the
annual meeting and to obtain your support on each of the proposals.
You are invited to attend the annual meeting and vote your shares directly.
However, even if you do not attend, you may vote by proxy, which allows you to
direct another person to vote your shares at the meeting on your behalf. The
enclosed proxy card is the means by which you authorize another person to vote
your shares in accordance with your instructions. This proxy statement provides
you with information on the proposals and other matters that you may find useful
in determining how to vote. The Company expects to mail this proxy statement on
or about March 29, 1999.
ABOUT THE MEETING
What is the purpose of the annual meeting?
At the annual meeting, holders of the Company's Common Stock will vote upon
the matters outlined in the accompanying Notice of Meeting, including (i) the
election of five directors to serve for terms of one to three years if the
Company's proposal to amend its By-Laws is approved, and to elect the same
persons as directors, for a term of one year if this proposal is not approved,
(ii) the approval of an amendment to the Company's By-Laws to create a
classified Board of Directors with staggered three-year terms, and (iii) the
ratification of the board's selection of the independent auditors. The Board of
Directors does not propose to conduct any other business at the annual meeting.
In addition, management will report on the performance of the Company during
1998 and will respond to questions from shareholders.
Who is entitled to vote?
Only shareholders of record at the close of business on March 19, 1999 (the
record date), are entitled to receive notice of the annual meeting and to vote
those shares of Common Stock that they held on March 19, 1999. Each outstanding
share of Common Stock is entitled to one vote on each matter to be voted upon at
the meeting.
What constitutes a quorum?
The attendance at the annual meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of the Company's Common Stock entitled
to vote at the annual meeting is necessary to constitute a quorum. As of the
record date, March 19, 1999, 5,169,590 shares of Common Stock were outstanding.
If you hold your shares in "street name" through a broker or other nominee to
whom you do not give specific voting instructions, your broker or nominee may
not vote your shares on the proposal to amend the By-Laws or on any other
"discretionary" matter that may properly come before the meeting. Such "broker
non-votes" will nevertheless be counted for purposes of determining whether
there is a quorum. Similarly, a proxy marked "ABSTAIN" with respect to any
matter will not be voted but will be counted as present.
How do I vote?
You may vote your shares at the annual meeting in person or by proxy. To
vote in person, you must attend the annual meeting and obtain and submit a
ballot, which will be provided at the meeting. To vote by proxy, you must
complete and return the enclosed proxy card.
Instructions for completing the proxy card are contained on the card. By
completing and submitting the proxy card, you will direct the designated persons
(known as "proxies") to vote your shares at the annual meeting in accordance
with your instructions. The board has appointed Anthony S. Gramer, Michael K.
Kaline and Elliott J. Broderick to serve as the proxies for the annual meeting.
Your proxy will be valid only if you sign, date and return it before the
annual meeting. If you complete all of the proxy card except the voting
instructions, then the designated proxies will vote your shares for the election
of the nominated directors, for the amendment to the Company's By-Laws and for
the ratification of the Company's independent auditors. If any nominee for
election to the board is unable to serve, which is not anticipated, or if any
other matters properly come before the annual meeting, then the designated
proxies will vote your shares in accordance with their best judgment.
3
<PAGE> 5
Can I change my vote after I return my proxy?
You may revoke your proxy and change your vote at any time before it is
exercised by any of the following means: (i) by notifying the Secretary of the
Company in writing of your revocation, (ii) by submitting a later dated proxy or
(iii) by attending the annual meeting and indicating that you intend to vote
your shares yourself. If you attend the annual meeting, Messrs. Gramer, Kaline
and Broderick, still have authority to vote your shares in accordance with your
instructions on the proxy unless you indicate at the annual meeting that you
intend to vote your shares yourself.
What are the board's recommendations?
Unless you give different instructions on the proxy, Messrs. Gramer, Kaline
and Broderick will vote in accordance with the recommendations of the Board of
Directors. The board recommends a vote:
for election of the nominated slate of directors;
for approval of an amendment to the Company's By-Laws to provide for a
classified Board of Directors with staggered three-year terms; and
for ratification of Deloitte & Touche LLP as the Company's independent
auditors for 1999.
With respect to any other matter that properly comes before the annual
meeting, Messrs. Gramer, Kaline and Broderick will vote as the board recommends
or, if the board gives no recommendation, as they determine in their discretion.
What vote is required to approve each matter to be voted upon at the meeting?
ELECTION OF DIRECTORS. Five directors are to be elected at the meeting. The
affirmative vote of the holders of a plurality of the votes cast at the meeting
is required for the election of directors. A properly signed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more directors will
not be voted for the director(s) so indicated, but it will be counted to
determine whether there is a quorum.
AMENDMENT TO BY-LAWS. The Company proposes to amend its By-Laws to create a
classified Board of Directors with staggered three-year terms. The affirmative
vote of the holders of a majority of the votes cast at the meeting is required
to amend the Company's By-Laws.
RATIFICATION OF AUDITORS. The affirmative vote of a majority of the votes
cast at the annual meeting will be necessary to ratify the Board of Directors'
appointment of Deloitte & Touche LLP as the Company's independent auditors for
1999.
OTHER MATTERS. If any other matter properly comes before the annual
meeting, its resolution will be determined by the affirmative vote of the
holders of a majority of votes cast at the meeting.
EFFECT OF BROKER NON-VOTES AND ABSTENTIONS. Since the election of
directors, the amendment to the By-Laws and the ratification of the board's
appointment of auditors will be determined by votes cast rather than by a
percentage of the shares present, "broker non-votes" and abstentions will not
affect the election of directors, the approval of the amendment or the
ratification of auditors.
4
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 19, 1999, at
which time there were 5,169,590 shares of the Company's Common Stock
outstanding. In preparing this table, the Company has relied upon information
supplied by its officers, directors, and certain shareholders and upon
information contained in filings with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF SHARES
- ------------------------------------ -------------------- ------------------
<S> <C> <C>
Anthony S. Gramer 338,010(1) 6.40%
30200 Telegraph Road
Bingham Farms, Michigan 48025
Michael K. Kaline 92,736(2) 1.76%
Elliott J. Broderick 57,476(3) 1.10%
Robert D. Kemp, Jr. 11,745(4) *
William McBride III 8,120(5) *
William F. Pickard 8,320(6) *
Richard T. Walsh 8,120(5) *
Directors and Executive Officers as a Group
(consisting of seven individuals named) 524,527(7) 9.66%
FMR Corp. 302,600(8) 5.85%
82 Devonshire Street
Boston, Massachusetts 02109
Kensington Investment Group, Inc. 399,500 7.73%
4 Orinda Way
Orinda, California 94563
Peter T. Kross 290,860 5.63%
248 Grosse Pointe Blvd.
Grosse Pointe Farms, MI 48236
National Westminster Bank Plc 353,000(9) 6.39%
175 Water Street
New York, NY 10038
Putnam Investments, Inc. 372,333 7.20%
One Post Office Square
Boston, Massachusetts 02109
The Prudential Insurance Company of America 760,000(10) 13.64%
751 Broad Street
Newark, New Jersey 07102-3777
</TABLE>
* Less than 1%
(1) Includes 4,235 shares registered in Mr. Gramer's name as custodian for his
son and 108,220 shares subject to vested stock options held by Mr. Gramer.
Excludes 1,865 shares owned by Mr. Gramer's son, who shares his household.
See "Management Stock Option Plan."
(2) Includes 86,270 shares subject to vested stock options. See "Management
Stock Option Plan."
(3) Includes 52,160 shares subject to vested stock options. See "Management
Stock Option Plan."
(4) Includes 3,500 shares subject to vested stock options. See "Management-
Compensation of Directors."
(5) Includes 4,500 shares subject to vested stock options. See "Management-
Compensation of Directors."
(6) Includes 3,792 shares subject to vested stock options. See "Management-
Compensation of Directors."
(7) See Notes 1 through 6 above.
(8) Based on a group filing of a Schedule 13G made by FMR Corp.,
Edward C. Johnson and Abigail P. Johnson. Through their ownership of common
stock of FMR Corp. and a shareholders' voting agreement, Mr. Johnson and
Ms. Johnson may also be deemed beneficial owners of the shares.
(9) Represents shares that may be acquired upon the exercise of warrants of the
Company held by National Westminster Bank Plc.
(10) Includes, 400,000 shares that The Prudential Insurance Company of America
has the right to acquire through conversion of convertible debentures of
the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities ("insiders") file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Insiders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms that they file. Based on the Company's review
of the filings made by the Company's insiders, all transactions in and
beneficial ownership of the Company's equity securities were reported in a
timely manner.
5
<PAGE> 7
ITEM 1-ELECTION OF DIRECTORS
Five directors are to be elected at the annual meeting to serve for terms
of one to three years if the By-Laws are amended to provide for a classified
Board of Directors, and if the amendment is not approved, the five directors are
to be elected as directors for a term of one year, and until their successors
are duly elected and qualified. If shareholder approval of the By-Law amendment
is obtained, the directors' classes will be determined by resolution of the
Board of Directors after the annual meeting. All of the nominees are presently
members of the Board of Directors. An affirmative vote of the holders of a
plurality of the votes cast at the annual meeting is required for the election
of directors.
The Board of Directors recommends that you vote FOR the election of the
individuals named below for election to the board.
YEAR FIRST
NAME OF NOMINEE ELECTED AS A DIRECTOR
--------------- ---------------------
Anthony S. Gramer 1986
Robert D. Kemp, Jr. 1994
William McBride III 1994
William F. Pickard 1994
Richard T. Walsh 1994
Although the board has no reason to believe that any of the nominees are
unable or unwilling to serve if elected, if any nominee is unable or unwilling
to serve, the board may designate a substitute nominee. In that case, Messrs.
Gramer, Kaline and Broderick will vote for the board's substitute nominee.
Additional information regarding the nominees is contained below.
MANAGEMENT
Biographical information for each of the executive officers and the members
of the Board of Directors of the Company is contained below.
ANTHONY S. GRAMER, age 56, is the President, Chief Executive Officer and a
Director of the Company, as well as an associate real estate broker of the
Company. Mr. Gramer joined the Company in 1981 and acquired all of the
outstanding shares of the Company's Common Stock in 1986. From 1972 until 1981,
Mr. Gramer served in various executive capacities at companies in the real
estate, banking and mortgage industries. Prior to 1972, Mr. Gramer was a member
of the audit staff of Touche Ross & Co., now known as Deloitte & Touche. Mr.
Gramer is also a past chairman of the legislative committee of the Mortgage
Bankers Association of Michigan. Mr. Gramer has been a Director of the Company
since 1986.
MICHAEL K. KALINE, age 36, serves as Vice President of the Company.
Since joining the Company in 1984, Mr. Kaline has been responsible for
overseeing the leasing of the entire portfolio of the Company. In addition, Mr.
Kaline is responsible for acquisition, development, and property management and
is an associate real estate broker of the Company.
ELLIOTT J. BRODERICK, age 41, is the Chief Accounting Officer of the
Company and oversees the accounting and reporting functions of the Company, as
well as regulatory and tax compliance, short-term investments, information
systems and fiscal planning and budgets. Prior to joining the Company in 1991,
Mr. Broderick was employed for seven years by Plante & Moran, Michigan's largest
regional CPA firm. Mr. Broderick is a certified public accountant and a licensed
real estate sales person and is a member of the American Institute of Certified
Public Accountants and the Michigan Association of Certified Public Accountants.
ROBERT D. KEMP, JR., age 58, is currently a Director of the Company. Mr.
Kemp is a co-founder of Wilson, Kemp and Associates, Inc., where he has served
as the President, Chief Operating Officer and a director since 1968. Wilson,
Kemp and Associates, Inc., is a wholly owned subsidiary of Comerica
Incorporated. In addition, Mr. Kemp currently serves as a director of Wholesale
Auto Receivables Corporation, a wholly-owned subsidiary of General Motors
Acceptance Corporation. Mr. Kemp also serves as the Treasurer, a director and a
member of the Executive Committee of the Detroit and Wayne County Tuberculosis
Foundation. Mr. Kemp has been a Director of the Company since 1994.
WILLIAM MCBRIDE III, age 39, is currently a Director of the Company. Mr.
McBride is Chairman of the Board, Chief Executive Officer and one of the
founders of Assisted Living Concepts, Inc., an owner/operator of assisted living
facilities based in Portland, Oregon and a listed company on The American Stock
Exchange ("AMEX"). He has been serving as Chairman of the Board since August of
1994, and CEO since October 1997. He is also a member of the Board of Directors
for Newcare Health Corporation, a nursing home operating company listed on
NASDAQ. Prior to joining Assisted Living Concepts, Inc. in the full time
position of CEO, Mr. McBride co-founded LTC Properties, Inc., a real estate
investment trust ("REIT"), where he was President, Chief Operating Officer and
Board member from August 1992 to October 1997. Prior to co-founding LTC
Properties, Mr. McBride served from April 1988 to July 1992 as Vice President,
Controller and Chief Accounting Officer at Beverly Enterprises, Inc., an
owner/operator of long-term care facilities, retirement living facilities and
pharmacies. Prior to that, Mr. McBride worked at Ernst & Young, an international
accounting and consulting firm. Mr. McBride has been a Director of the Company
since 1994.
6
<PAGE> 8
WILLIAM F. PICKARD, age 58, is currently a Director of the Company. Dr.
Pickard has served as the Chairman of the Board and Chief Executive Officer of
Regal Plastics Company since 1985. Dr. Pickard currently serves as a director of
Michigan National Corporation (a bank holding company and a subsidiary of
National Australia Bank), WTVS (the Detroit educational television station),
National Association of Black Automotive Suppliers, Detroit Economic Development
Corporation, Michigan Cancer Foundation and Detroit Science Center. Dr. Pickard
is also a member of the U.S. Advisory Committee for Trade Policy and
Negotiations and the Executive Board of the National Association for the
Advancement of Colored People. From 1983 until 1987, Dr. Pickard was also
Chairman of the Board of Directors of the African Development Foundation. Dr.
Pickard has been a Director of the Company since 1994.
RICHARD T. WALSH, age 63, is currently a Director of the Company. Mr. Walsh
is President of RT Enterprises, a private firm involved in business consulting
and investments, where he has served in that capacity since 1992. Since July
1994, Mr. Walsh has also served as Chairman of Pioneer Industries, Inc., a
manufacturer of steel doors and frames. Mr. Walsh served as the President and
Chief Executive Officer of Core Industries, Inc., a New York Stock Exchange
listed company, from 1991 until 1992 and as President and Chief Operating
Officer of Core Industries, Inc. from 1986 until 1991. From 1982 until 1992, Mr.
Walsh also served as a Director of Core Industries, Inc. Mr. Walsh is a Trustee
of Walsh College and a member of the Financial Executive Institute. Mr. Walsh
has been a Director of the Company since 1994.
THE BOARD OF DIRECTORS AND COMMITTEES
During 1998, the Board of Directors of the Company held four regular and
one special meeting. The Board of Directors has two standing committees: a
two-member Audit Committee and a two-member Compensation Committee. During 1998,
each director attended every meeting of the Board of Directors and every
committee meeting on which he served. Directors fulfill their responsibilities
not only by attending board and committee meetings, but also through
communication with the Chief Executive Officer and other members of management
on matters that affect the Company.
The Audit Committee consists of William McBride III and Richard T. Walsh.
The Compensation Committee consists of Robert D. Kemp, Jr. and William F.
Pickard.
The Audit Committee is responsible for overseeing and reviewing the
Company's audit results and monitoring the effectiveness of the Company's
internal audit function. In addition, the Audit Committee recommends to the
Board of Directors the appointment of the independent auditors. The Audit
Committee met five times during 1998.
The Compensation Committee is responsible for establishing compensation and
benefit policies for the Company's executive officers and administering the
Company's 1994 Stock Option Plan. The Compensation Committee met three times
during 1998.
Under the Company's Articles of Incorporation, at least three of the
Company's directors must be "Independent" (i.e., not affiliated with the
Company). Messrs. Kemp, McBride, Pickard and Walsh are all Independent.
COMPENSATION OF DIRECTORS
The Company pays its directors, who are not employees, of the Company an
annual fee of $12,000 plus $1,000 for each regular meeting of the Board of
Directors attended, plus travel expenses. In 1998, the Company incurred costs of
$64,000 relating to the services of Messrs. Kemp, McBride, Pickard and Walsh for
serving as Directors of the Company and as members of a committee of the Board
of Directors. The Company also paid Mr. McBride $1,800 in travel expenses for
1998 for the meeting he attended in person.
Pursuant to the terms of the Malan Realty Investors, Inc. 1995 Stock Option
Plan for Non-Employee Directors (the "Directors Stock Option Plan"), each
non-employee director of the Company is automatically granted a non-qualified
stock option to purchase 1,000 shares of Common Stock of the Corporation
following the annual meeting of the Board of Directors. In the event a vacancy
arises on the Board of Directors following the annual meeting of Shareholders in
any year and a non-employee director is nominated to fill such vacancy prior to
December 31 of the same year, such non-employee director would automatically be
granted an option to acquire 1,500 shares of Common Stock (instead of the normal
1,000 share grant) immediately following the next annual meeting of the Board of
Directors. Following each annual meeting of the Board of Directors thereafter,
the non-employee director would receive the normal 1,000 share grant, assuming
he is re-elected to the board.
The aggregate number of shares of Common Stock issuable under the Directors
Stock Option Plan is 80,000, subject to certain adjustments. All options granted
must have an exercise price equal to the fair market value of the underlying
shares on the date of grant. Options vest upon grant but do not become
exercisable by the director until six months following the date of grant.
Options remain exercisable until the tenth anniversary of the date of grant or,
if earlier, until one year after the director ceases to be a member of the
board.
Messrs. Kemp, McBride, Pickard and Walsh were each granted options on May
13, 1998, to acquire 1,000 shares of Common Stock at an exercise price of
$17.688 per share.
Under the Company's 1995 Stock Compensation Plan for Non-Employee Directors
(the "Stock Compensation Plan"), non-employee directors may make an election
each year to receive all or a portion of their director's compensation for the
following calendar year in the form of Common Stock of the Company instead of
cash. Once made, the election is irrevocable
7
<PAGE> 9
for the following year's compensation. The number of shares to be paid to a
director in lieu of cash compensation is determined based on the closing
price of the Common Stock on the New York Stock Exchange on the day before the
compensation is earned by a director (i.e., the closing price on the day before
a board meeting). For 1998, Messrs. Kemp and Pickard received 100% of their
directors' compensation in the form of Common Stock of the Company, and Messrs.
McBride and Walsh received 50% of their directors' compensation in the form of
Common Stock of the Company.
EXECUTIVE COMPENSATION
The following table provides information over the last three calendar years
on the annual and long-term compensation for the chief executive officer and the
other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------------------- --------------------------------
AWARDS PAYOUTS
---------------------- --------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPENSATION AWARDS OPTIONS(1) PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ($) ($) (#) ($) ($)
- --------------------------- ---- ------ ----- ------------ ---------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Anthony S. Gramer, President,
Chief Executive Officer
and Director 1998 $287,500 $200,000 -- -- -- -- $5,000(3)
1997 $287,500 -- -- -- -- -- $4,750(3)
1996 $287,500 -- -- -- 19,500 -- --
Michael K. Kaline, Vice President 1998 $147,000 $120,000 $7,327(2) -- -- -- $4,627(3)
1997 $137,500 -- $6,910(2) -- -- -- $3,223(3)
1996 $125,000 -- -- -- 15,250 -- --
Elliott J. Broderick,
Chief Accounting Officer 1998 $ 95,000 $ 93,000 $7,327(2) -- -- -- $3,083(3)
1997 $ 82,500 -- $6,910(2) -- -- -- $2,683(3)
1996 $ 75,000 -- -- -- 15,250 -- --
</TABLE>
(1) See "Stock Option Plan."
(2) Loan forgiveness by Company.
(3) Amount of employer's contribution to the Malan Realty Investors, Inc.
401(k) Profit Sharing Plan ("401(k) plan").
STOCK OPTION PLAN
Prior to the Company's initial public offering in June, 1994 (the "IPO"),
the Company adopted The Malan Realty Investors, Inc. 1994 Stock Option Plan (the
"Stock Option Plan") to enable employees of the Company to participate in the
ownership of the Company. The Stock Option Plan is designed to align the
interests of management with those of the shareholders, to provide employees
with incentives to stay with the Company, to attract new employees with
outstanding qualifications and to promote the success of the Company's long-term
business objectives.
Under the Stock Option Plan, executive officers and employees of the
Company may be granted options to acquire shares of Common Stock of the Company.
The Stock Option Plan is administered by the Compensation Committee, which is
authorized to select the executive officers and other employees to whom Options
are to be granted. No member of the Compensation Committee is eligible to
participate in the Stock Option Plan.
The Compensation Committee determines the number of options to be granted
to an employee. However, in accordance with the requirements of the Internal
Revenue Code for performance-based compensation, the provisions of the Stock
Option Plan limit the total number of option shares that the Compensation
Committee may grant to an executive officer during any single year to 100,000
shares.
The exercise price of each option is equal to the fair market value of the
underlying shares on the date of grant. With the exception of those options
granted on the date of the IPO, options vest over a five-year period at the rate
of 20% per year, beginning on the first anniversary of the date of grant. If an
option holder's employment is terminated within the first year of the date of
grant for any reason other than death, disability, or retirement, the right to
exercise the option is forfeited. If an option holder's employment is terminated
more than one year after the date of grant for reasons other than death,
disability, retirement, or cause, the option may be exercised to the extent it
was exercisable at the time of termination of employment. If the termination of
employment is for cause, the right to exercise the option is also forfeited. If
the termination of employment is because of death, disability, or retirement,
the option may be exercised in full. No option may be exercised ten years after
the date of grant.
Notwithstanding the foregoing paragraph, the Compensation Committee may
accelerate the vesting of any option that has been held by an option holder for
at least six months from the date of grant of the stock option.
No options were granted under the Stock Option Plan in 1998 to the
executive officers.
8
<PAGE> 10
OTHER COMPENSATION AND BENEFITS
Messrs. Gramer, Kaline and Broderick also receive medical, group life
insurance and other benefits (including matching contributions under the
company's 401(k) plan) that are available generally to all of the Company's
full-time employees.
TOTAL OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table shows the number of shares covered by both exercisable
and non-exercisable stock options as of December 31, 1998. This table also shows
the value on that date of the "in-the-money" options, which is the positive
spread, if any, between the exercise price of existing stock options and $15.875
per share (the closing market price of the Company's Common Stock on December
31, 1998).
<TABLE>
<CAPTION>
SHARES VALUE NUMBER OF SHARES VALUE OF UNEXERCISED
ACQUIRED REALIZED UNDERLYING UNEXERCISED IN-THE-MONEY
OR EXERCISED $ OPTIONS AT YEAR-END(#) OPTIONS AT YEAR-END($)
------------ -------- ---------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony S. Gramer 0 $ 0 96,440 27,460 $ 70,800 $ 56,900
Michael K. Kaline 0 0 76,440 22,710 $ 60,000 $ 47,625
Elliott J. Broderick 150 $600 44,470 18,430 $ 42,575 $ 36,925
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy. The Company's compensation philosophy has been to
pay its officers a competitive base salary and also to offer incentive-based
compensation. In keeping with this philosophy, the Company established the Stock
Option Plan for employees (including executive officers). The Company has not,
however, made any grants under the Stock Option Plan in the last two years. In
addition, at the time of the IPO, Anthony S. Gramer, the President and Chief
Executive Officer (the "CEO") of the Company, contributed 10% of his
personally-owned shares of the Company as restricted stock awards to employees
of the Company.
Base Salaries. The Compensation Committee established the 1998 base
salaries for the executive officers based on a review of each executive
officer's salary for the previous year, his position and level of responsibility
in the Company, management's assessment of his expected future contribution to
the Company, and salaries of executives of other similar real estate investment
trusts. The Compensation Committee considers the salaries of Messrs. Gramer,
Kaline and Broderick to be reasonable under these criteria.
Bonuses. The maximum total bonuses the Company will pay to its executive
officers and employees for a given year will not exceed 50% of the increase in
the Company's funds from operations over the previous year. Once the aggregate
maximum amount is determined, the Compensation Committee has the discretion to
award all or any portion of that bonus pool based on the CEO's recommendation
and the Compensation Committee's evaluation of the Company's and the
individual's performance. The Company has not paid its executive officers
bonuses for the last two years.
Based on the Company's 1998 earnings, its increase in funds from operations
and the Company's bonus formula, the bonus pool for 1998 could have been as high
as $787,000. However, the 1998 bonus pool was set at $525,000 by the
Compensation Committee. The bonus pool was allocated as follows: $413,000 for
executive officers and $112,000 for staff.
Corporate Tax Deduction in Excess of $1 Million a Year. Section 162(m) of
the Internal Revenue Code, generally limits the corporate tax deduction for
compensation paid to executive officers named in the Summary Compensation Table
in the proxy statement to $1 million. Certain performance-based compensation,
however, is specifically exempt from the deduction limit. Although Company
policy does not require the Compensation Committee to qualify compensation
awarded to executive officers for deductibility under Section 162(m), the
Compensation Committee does consider the cost to the Company in making all
compensation decisions. The Company's 1994 Stock Option Plan described in this
proxy statement complies with the requirements for performance-based
Compensation under Section 162(m).
Compensation of the CEO. The Compensation Committee determined the 1998
base salary of the CEO based upon the Company's performance and the CEO's salary
for the previous years. The base salary for the CEO has not been increased since
1996. The Compensation Committee, based on the Company's bonus formula, awarded
the CEO a $200,000 discretionary bonus for his 1998 performance, which amount
was included in the $525,000 bonus pool discussed above.
Going forward, the Compensation Committee will continue to (i) determine
the compensation to be paid by the Company to the CEO and other executive
officers; (ii) review the compensation and benefits programs, policies and
practices of the Company; and (iii) administer the Company's Stock Option Plan.
The Compensation Committee is committed to maintaining competitive salary levels
for the CEO and the other executive officers of the Company and will continue to
place an emphasis on performance-based compensation.
THE COMPENSATION COMMITTEE
Robert D. Kemp, Jr.
William F. Pickard
9
<PAGE> 11
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph sets forth a comparison of the percentage change
in the cumulative total shareholder return on the Company's Common Stock
compared to the cumulative total return of the S&P Composite 500--Stock Index
and the NAREIT Equity REIT Total Return Index (the "Equity REIT Index") for the
period June 17, 1994, the date on which trading of the Company's Common Stock
commenced, through December 31, 1998 (assuming the reinvestment of dividends).
The Company has selected the Equity REIT Index because it believes the Equity
REIT Index offers shareholders the most meaningful basis for assessing total
shareholder return on the Common Stock and comparing it to the results of
comparable REITs.
The following graph assumes that the value of the investment in the Company
and each of the indices was $100 at the beginning of the period.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE COMPANY,
THE NAREIT EQUITY REIT TOTAL RETURN INDEX AND THE S&P 500 INDEX
[BAR GRAPH]
<TABLE>
<CAPTION>
6/17/94 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Malan Realty Investors, Inc. $100.00 $ 83.32 $ 86.89 $127.70 $156.79 $151.48
NAREIT Equity REIT Total Return Index $100.00 $ 97.97 $112.93 $152.75 $183.70 $151.55
S&P 500 Index $100.00 $104.90 $144.15 $177.25 $236.40 $303.97
</TABLE>
Please note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance.
CERTAIN EMPLOYMENT ARRANGEMENTS
In 1994, the Company entered into an employment agreement with Anthony S.
Gramer (the "Agreement") whereby Mr. Gramer agreed to remain in the employ of
the Company for a term extending until two years following the IPO. The
Agreement provides for annual base compensation to Mr. Gramer in the amount of
$250,000, subject to an annual review and increase by the Compensation Committee
and an annual business travel stipend in the amount of $50,000. Beginning in
1995, the Company and Mr. Gramer agreed that, in lieu of the business travel
stipend, the Company would pay directly or reimburse Mr. Gramer for the actual
amount of any Company related travel expenses. In addition, the Agreement
includes provisions restricting Mr. Gramer from competing directly or indirectly
with the Company during the term of his employment with the Company and for one
year thereafter. Following expiration of the initial term, the Agreement
automatically renews for one-year terms unless either party gives the other 90
days' notice terminating such Agreement.
The Company entered into Change-in-Control Agreements with Messrs. Gramer
(in the form of an amendment to his employment agreement), Kaline and Broderick
in 1997. The agreements provide that if a change in control of the Company
occurs during the person's employment, Messrs. Gramer, Kaline and Broderick
shall receive lump sum payments of $1,000,000, $500,000 and $250,000,
respectively, and are each entitled to receive, at the Company's expense, health
insurance for their respective lifetimes.
10
<PAGE> 12
ITEM 2-AMENDMENT TO THE COMPANY'S
BY-LAWS TO CREATE A CLASSIFIED BOARD OF DIRECTORS WITH
STAGGERED THREE-YEAR TERMS
The Board of Directors has unanimously approved and recommends that the
shareholders adopt an amendment to the Company's By-Laws to divide the Company's
Board of Directors into three approximately equal classes with staggered terms.
After a transitional arrangement, directors will serve for three years, with one
class being elected each year. Each shareholder should carefully study the
advantages and disadvantages of this proposed amendment. The purpose of the
amendment is to promote continuity and stability in the Company's management and
policies, thereby enhancing the ability of the Company to carry out long-range
plans and goals for its benefit and the benefit of shareholders.
To implement the classified Board of Directors, the staggered board
proposal would permit directors elected at this annual meeting to serve for
terms of one year, two years or three years, respectively. If the staggered
board proposal is adopted, Class I directors will hold office until the 2000
annual meeting; Class II directors will hold office until the 2001 annual
meeting; and Class III directors will hold office until the 2002 annual meeting;
and, in each case, until their successors are duly elected and qualified. The
Board of Directors will determine the classes and terms of the persons elected
as Directors of the Company promptly after the annual meeting. At each annual
meeting commencing with the 2000 annual meeting, directors elected to succeed
those in the class whose terms then expire will be elected for three-year terms
so that the terms of one class of directors will expire each year. Thus, the
shareholders will elect only approximately one-third of the directors at each
annual meeting. Neither Michigan law, nor the Company's Articles of
Incorporation or By-Laws require cumulative voting. Pursuant to the Company's
By-Laws, the Board of Directors may fill any vacancies that occur for the
remainder of the term of the director who ceases to be a director.
The Board of Directors believes that three-year terms rather than one-year
terms increases the likelihood of continuity and stability in the policies
formulated by the Board of Directors. This enhances the Company's ability to
carry out its long-range plans and goals for its benefit and the benefit of the
shareholders. While the board has not experienced any problems with continuity
in the past, it wishes to ensure that this will continue and believes that the
staggered election of directors will promote continuity because only
approximately one-third of the directors will be subject to election each year.
The need to ensure continuity in the Board of Directors has increased as a
result of the planning and development time needed to complete some of the
Company's property redevelopments and to negotiate certain possible property
acquisitions.
Shareholders should be aware that the creation of a staggered Board of
Directors is generally referred to as an "Anti-Takeover" device. Because a
majority of directors will not be up for election at each annual meeting, the
creation of a staggered Board of Directors will make it more difficult for
shareholders to replace a majority of the Board of Directors, even if
shareholders desire such a change. Under the proposed amendment to the By-Laws,
it will take at least two annual meetings for shareholders to effectuate a
change in control of the board since only a minority of the directors will be
elected at each meeting. The creation of a staggered Board of Directors could
perpetuate incumbent management because of the additional time required to
change control of the Board of Directors. The creation of a staggered Board of
Directors could also discourage certain mergers and tender offers, offers that
shareholders might regard as beneficial to their interests. Tender offers for
control usually involve a purchase price higher than the current market price
and may involve a bidding contest between potential suitors. The creation of a
staggered Board of Directors could also discourage open market purchases by such
parties. Such purchases could temporarily increase the market value of the
Company's Common Stock, enabling shareholders to sell their shares at a higher
price than what would otherwise prevail. Finally, the creation of a staggered
Board of Directors could result in a decrease in the market price for the Common
Stock by making the stock less attractive to investors who purchase securities
in anticipation of a price increase triggered by a possible takeover attempt.
The Company is not aware of any proposed or contemplated transaction of a
hostile nature and this amendment is not being recommended in response to any
specific effort to obtain control of the Company. Furthermore, the Company does
not presently intend to propose any other anti-takeover measures in future proxy
solicitations.
If the proposed amendment is approved, Section 3.02 of the By-Laws of the
Company would be replaced in its entirety by the following:
NUMBER, QUALIFICATIONS, AND TERM OF OFFICE
The number of directors shall be not more than eleven (11) nor less
than three (3) but such number may be decreased or increased by amendment
of these By-Laws by a majority in interest of the shareholders entitled to
vote. The first board shall consist of five (5) directors. Thereafter,
within the limits above specified, the number of directors may be
determined, between annual meetings of the shareholders, by resolution of
the board of directors. At all times a majority of the board of directors
shall consist of Independent Directors (as that term hereinafter is defined
in this Section 3.02 of these By-Laws). "Independent Directors" shall mean
an individual who is not an employee, officer or agent of the Corporation.
Except as otherwise required by the articles of incorporation, the
directors, who need not be shareholders, shall be divided into three
classes that shall be as nearly equal in number as is possible. At each
annual meeting of shareholders, one class of directors shall be chosen for
a full three-year term and until their successors shall be duly elected and
qualified or, if earlier, until death, resignation or removal.
11
<PAGE> 13
If satisfied immediately following the most recent election or
appointment of directors, any requirements under the articles of
incorporation or these By-Laws regarding the number of directors who must
be "independent" shall be deemed to be satisfied until the next annual
meeting of shareholders, notwithstanding the occurrence of one or more
vacancies on the board of directors occurring between meetings of
shareholders.
The Board of Directors recommends a vote FOR the amendment to the By-Laws
creating a classified Board of Directors with staggered three-year terms.
ITEM 3-RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Company's Audit
Committee, has appointed Deloitte & Touche LLP as the Company's independent
auditors for 1999. Deloitte & Touche LLP also served as the Company's
independent auditors last year. Although shareholder approval of the appointment
is not required by law and is not binding on the Board of Directors, the board
will take the appointment of Deloitte & Touche LLP under advisement if such
appointment is not approved by the affirmative vote of a majority of the votes
cast at the annual meeting.
The Company expects that representatives of Deloitte & Touche LLP will be
present at the annual meeting, and will have an opportunity to make a statement
at the meeting if they desire to do so. The Company also expects that the such
representatives of Deloitte & Touche LLP will be available to respond to
appropriate questions.
The Board of Directors recommends that the shareholders vote FOR the
appointment of Deloitte & Touche LLP as the Company's independent auditors for
1999.
OTHER MATTERS
The Board of Directors does not know of any other matters to be determined
by the shareholders at the annual meeting; however, if any other matter is
properly brought before the meeting, Messrs. Gramer, Kaline and Broderick,
intend to vote in accordance with the board's recommendation or, if there is no
recommendation, in their own discretion.
COSTS OF PROXY SOLICITATION
The Company will pay the cost of preparing, assembling, and mailing the
proxy material. In addition, the Company has engaged D.F. King & Co., Inc.
("King") as proxy solicitors. The Company has agreed to pay King a flat fee of
$7,500.00 plus $3.00 per incoming and outgoing telephone contact with a
shareholder plus line charges and other costs and expenses. In addition, the
Company's directors, officers and regular employees may solicit proxies by mail,
telephone, facsimile or in person, but they will receive no additional
compensation for such work. The Company will also request that brokers and other
custodians and nominees forward proxy materials to the beneficial owners of the
Common Stock. The Company will reimburse the brokers and other custodians and
nominees for their reasonable expenses in complying with this request.
PRESENTATION OF SHAREHOLDER PROPOSALS AT 2000 ANNUAL MEETING
Any shareholder proposal intended to be presented for consideration at the
annual meeting to be held in the year 2000 must be received by the Company at
30200 Telegraph Road, Suite 105, Bingham Farms, Michigan 48025-4503 by the close
of business on November 30, 1999. If the date of the year 2000 annual meeting is
changed by more than 30 days from the date the meeting is scheduled to be held,
the proposal must be received by the Company at a reasonable time before the
solicitation of proxies for the meeting. Proposals should be sent to the
attention of the President. A person may submit only one proposal for inclusion
in the proxy materials, and the proposal, including any accompanying supporting
statement, may not exceed 500 words.
ANNUAL REPORT
The Annual Report of the Company for the year ended December 31, 1998,
including financial statements audited by Deloitte & Touche LLP, independent
accountants, and their reports dated January 28, 1999, is being furnished with
this proxy statement. IN ADDITION, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, WILL BE SENT TO ANY SHAREHOLDER, WITHOUT CHARGE, UPON
WRITTEN REQUEST SENT TO THE COMPANY'S EXECUTIVE OFFICES: MALAN REALTY INVESTOR
SERVICES, 30200 TELEGRAPH ROAD, SUITE 105, BINGHAM FARMS, MICHIGAN 48025-4503.
Please complete the enclosed proxy card and mail it in the enclosed
postage-paid envelope as soon as possible.
By Order of the Board of Directors,
Anthony S. Gramer
President
March 29, 1999
12
<PAGE> 14
MALAN REALTY INVESTORS, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS - MAY 13, 1999
The undersigned appoints each of Anthony S. Gramer, Michael K. Kaline and
Elliott J. Broderick (the "Proxies"), with full power of substitution, to
represent the undersigned at the Annual Meeting of Shareholders of Malan Realty
Investors, Inc. on Thursday, May 13, 1999, and at any adjournment, and to vote
at the meeting all shares of Common Stock that the undersigned is entitled to
vote at the meeting in accordance with the following instructions and to vote in
their judgment upon all other matters which may properly come before the meeting
and any adjournment. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN FAVOR
OF ITEMS (1), (2) AND (3) IF NO INSTRUCTION IS PROVIDED.
If more than one of the above named Proxies shall be present in person or
by substitution at such meeting or at any adjournment, the majority of said
Proxies so present and voting, either in person or by substitution, shall
exercise all of the powers given by this proxy. The undersigned revokes any
proxy previously given to vote at the Annual Meeting.
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED POSTAGE PAID ENVELOPE.
(CONTINUED AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ITEMS 1, 2 AND 3 Please mark your vote as
indicated in this
example [ x ]
1. ELECTION OF DIRECTORS 2. AMENDMENT TO BY-LAWS
[ ] FOR all nominees listed above Approval of an amendment to
the Company's By-Laws to
[ ] WITHHOLD AUTHORITY create a classified Board of
to vote for all nominees listed Directors with staggered three
below year terms.
[ ] FOR
[ ] *EXCEPTIONS
[ ] AGAINST
[ ] ABSTAIN
(Nominees: Anthony S. Gramer, Robert D. Kemp, Jr.,William McBride III,
William F. Pickard, and Richard T. Walsh)
*Exceptions________________________________________________________________
3. RATIFICATION OF INDEPENDENT AUDITORS 4. In their discretion, the
Proxies are authorized to vote
upon such other business as
may properly come before the
meeting.
Ratification of the selection of Deloitte & Touche LLP as independent
auditors for 1999.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Please sign exactly as name appears below. 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 President or other
authorized officer. If a partnership, please sign
in partnership name by an authorized person.
______________________________________________
Signature if held jointly
______________________________________________
Signature
Dated:________________________________, 1999
