<PAGE>
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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 Section 240.14a-11(c) or Section 240.14a-12
ESSEX PROPERTY TRUST, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
ESSEX PROPERTY TRUST, INC.
925 East Meadow Drive
Palo Alto, California 94303
March 31, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of Essex Property Trust, Inc., a Maryland corporation (the
"Company"), to be held at The Stanford Park Hotel, 100 El Camino Real, Menlo
Park, California, on April 28, 1998, at 10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
matters expected to be acted upon at the meeting. We urge you to review these
materials carefully.
Please use this opportunity to take part in the Company's affairs by
voting on the business to be presented at the meeting. Whether or not you plan
to attend the meeting, please complete, sign, date and return the accompanying
proxy card as promptly as possible. If you attend the meeting, you may vote in
person, even if you have previously mailed your proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Keith R. Guericke
-------------------------------
Keith R. Guericke
Vice Chairman of the Board, Chief Executive Officer
and President
<PAGE>
ESSEX PROPERTY TRUST, INC.
Notice of Annual Meeting of Stockholders
To Be Held April 28, 1998
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of Essex
Property Trust, Inc., a Maryland corporation (the "Company"), will be held at
The Stanford Park Hotel, 100 El Camino Real, Menlo Park, California, on April
28, 1998, at 10:00 a.m., local time, to consider and vote upon the following
proposals:
1. Election, by the holders of the Common Stock, of the following three
Class I directors of the Company to serve until the 2001 Annual Meeting of
Stockholders and until their successors are elected and qualified: Keith R.
Guericke, Issie N. Rabinovitch and Thomas E. Randlett;
2. Election, by the holders of the Preferred Stock, of the
following Class I director to serve until the 1999 Annual Meeting of
Stockholders and until his successor is elected and qualified:
Gregory J. Hartman;
3. Ratification, by the holders of the Common Stock, of the
appointment of KPMG Peat Marwick LLP as the independent public auditors
for the Company for the year ending December 31, 1998; and
4. To transact such other business as may properly come before
the Annual Meeting and any adjournment or postponement thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the proxy statement which is attached and made a
part of this Notice.
The Board of Directors has fixed the close of business on March 10,
1998 as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU
ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY
AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE TO ENSURE YOUR
REPRESENTATION AND THE PRESENCE OF A QUORUM AT THE ANNUAL MEETING. IF YOU SEND
IN YOUR PROXY CARD AND THEN DECIDE TO ATTEND THE ANNUAL MEETING TO VOTE YOUR
SHARES IN PERSON, YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE
WITH THE PROCEDURES SET FORTH IN THE PROXY STATEMENT.
By Order of the Board of Directors,
/s/ Keith R. Guericke
-------------------------------
Keith R. Guericke
Vice Chairman of the Board,
Chief Executive Officer and President
Palo Alto, California
March 31, 1998
<PAGE>
Mailed To Stockholders On Or About March 31, 1998
ESSEX PROPERTY TRUST, INC.
925 East Meadow Drive
Palo Alto, California 94303
PROXY STATEMENT
This Proxy Statement is furnished to (i) the holders (the "Common
Stockholders") of the outstanding shares of Common Stock $0.0001 par value (the
"Common Stock") of Essex Property Trust, Inc., a Maryland corporation (the
"Company"), and (ii) the holders (the "Preferred Stockholders") of the Company's
8.75% Convertible Preferred Stock, Series 1996A (the "Preferred Stock"), in
connection with the solicitation by the Company's Board of Directors (the
"Board") of proxies in the accompanying form for use in voting at the 1998
Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be held
on April 28, 1998, at 10:00 a.m., local time, at The Stanford Park Hotel, 100 El
Camino Real, Menlo Park, California, and any adjournment or postponement
thereof. The Common Stockholders and the Preferred Stockholders are sometimes
referred to collectively herein as the "Stockholders."
Form of Proxy Card
This Proxy Statement is accompanied by one of two forms of Proxy Card:
one card is for use by the Common Stockholders and the other card is for use by
the Preferred Stockholders.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is exercised by delivering to the Company
(to the attention of Mr. Jordan E. Ritter) a written notice of revocation or a
properly executed proxy bearing a later date, or by attending the Annual Meeting
and voting in person.
Solicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and the Company
will bear all attendant costs. These costs will include the expense of preparing
and mailing proxy materials for the Annual Meeting and reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to the Stockholders.
The Company may use the services of Corporate Investor Communications,
Inc. to assist in soliciting proxies and, in such event, the Company expects to
pay approximately $5,000 for such services. The Company may conduct further
solicitation personally, telephonically or by facsimile through its officers,
directors and regular employees, none of whom will receive additional
compensation for assisting with the solicitation.
The presence at the Annual Meeting, either in person or by proxy, of
Common Stockholders holding a majority of the shares of Common Stock outstanding
on the Record Date (as defined below) will constitute a quorum for the purposes
of approving Proposals 1 and 3 at the Annual Meeting. The presence at the Annual
Meeting, either in person or by proxy, of Preferred Stockholders holding a
majority of the shares of Preferred Stock outstanding on the Record Date will
constitute a quorum for the purpose of approving Proposal 2 at the Annual
Meeting. The close of business on March 10, 1998 has been fixed as the record
date (the "Record Date") for determining the Stockholders entitled to notice of
and to vote at the Annual Meeting. Each share of Common Stock outstanding on the
Record Date is entitled to one vote on Proposals 1 and 3 (but not on Proposal
2). Each share of Preferred Stock outstanding on the Record Date is entitled to
one vote on Proposal 2 (but not on Proposals 1 or 3). As of the Record Date,
there were 16,624,960 shares of Common Stock and 1,600,000 shares of Preferred
Stock outstanding.
1
<PAGE>
Shares of Common Stock or Preferred Stock represented by proxies that
reflect abstentions or "broker non-votes" (i.e., shares held by a broker or
nominee which are represented at the Annual Meeting but with respect to which
such broker or nominee is not empowered to vote on a particular proposal) will
be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. The affirmative vote of a plurality of the
shares of Common Stock present in person or by proxy and entitled to vote is
required to elect the Common Stock Directors (as defined below). Similarly, the
Preferred Stock Director (as defined below) will be elected by the affirmative
vote of a plurality of the shares of Preferred Stock present in person or by
proxy and entitled to vote. Accordingly, abstentions or broker non-votes as to
the election of directors will not affect the election of the candidates
receiving the most votes. Approval of Proposal 3 requires the affirmative vote
of a majority of shares of Common Stock who are present or represented by proxy
and entitled to vote at the Annual Meeting. For purposes of the vote on Proposal
3, abstentions will have the same effect as a vote against such Proposal and
broker non-votes will not be counted as votes cast and will have no effect on
the result of the vote on such Proposal.
Stockholder votes will be tabulated by the persons appointed by the
Board to act as inspectors of election for the Annual Meeting. The New York
Stock Exchange permits member organizations to give proxies, whether or not
instructions have been received from beneficial owners, to vote as to the
election of directors and also on matters of the type contained in Proposal 3.
The shares of Common Stock represented by properly executed Common Stock proxy
cards will be voted at the Annual Meeting as indicated or, if no instruction is
given, in favor of Proposals 1 and 3. The shares of outstanding Preferred Stock
represented by all properly executed Preferred Stock proxy cards will be voted
at the Annual Meeting as indicated or, if no instruction is given, in favor of
Proposal 2. The Company does not presently know of any other business which may
come before the Annual Meeting.
2
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
The following table sets forth the beneficial ownership of shares of
Common Stock and Preferred Stock as of the Record Date for (i) each person known
by the Company to hold more than 5% of the outstanding shares of Common Stock or
Preferred Stock (as indicated), (ii) each director and each of the executive
officers named in the Summary Compensation Table below, and (iii) all directors
and such executive officers as a group.
The directors and such executive officers do not own any shares of
Preferred Stock.
<TABLE>
<CAPTION>
Percentage of Shares Percentage of Shares
of Common Stock of Common Stock
Amount and Percentage of Outstanding and Outstanding and
Nature of Class of Operating Operating Partnership
Name and Business Address of Beneficial Shares Partnership Interests and Shares
Beneficial Owner Ownership(1)(2) Outstanding(3) Interests(4) of Preferred Stock (5)
- ----------------------------- --------------- -------------- ------------------- -----------------------
<S> <C> <C> <C> <C>
Common Stock
George M. Marcus (6)(7)........ 1,939,277 10.6% 10.4% 9.5%
Chairman of the Board of
Directors
William A. Millichap (6)(8).... 745,831 4.3 4.0 3.6
Director
Keith R. Guericke (6)(9)....... 144,362 * * *
Vice Chairman of the Board,
Chief Executive Officer and
President
Michael J. Schall (6)(10)...... 114,664 * * *
Director, Executive Vice
President and Chief
Financial Officer
David W. Brady (6)(11)......... 5,000 * * *
Director
Anthony Downs (6)(13)......... 2,334 * * *
Director
Gregory J. Hartman (6)........ 0 * * *
Director
Robert E. Larson (6)(12)....... 5,000 * * *
Director
Gary P. Martin (6)(13)......... 5,000 * * *
Director
Issie N. Rabinovitch (6)(12)... 5,000 * * *
Director
Thomas E. Randlett (6)(12)..... 9,347 * * *
Director
Willard H. Smith, Jr. (6)(14).. 3,666 * * *
Director
All directors and executive
officers group (12 2,222,006 12.0 11.9 10.8
persons) (15)..............
Cohen & Steers (16)............ 2,153,100 13.0 11.6 10.6
Morgan Stanley, Dean Witter,
Discover & Co. (17)........ 1,691,900 10.2 9.1 8.3
AMVESCAP PLC (18).............. 866,300 5.2 4.7 4.3
Preferred Stock
Tiger/Westbrook Real Estate
Fund, L.P., and
Tiger/Westbrook Real
Estate Co. L.P.
Investment Partnership,
L.P. (19).................. 1,600,000 100.0(19) 9.0(20) 9.0(20)
- --------------------
</TABLE>
* Less than 1%.
3
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC"). In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that person that
are currently exercisable or exercisable within 60 days of the Record Date
are deemed outstanding. Such shares, however, are not deemed outstanding for
the purposes of computing the percentage ownership of each other person. To
the Company's knowledge, except as set forth in the footnotes to this table
and subject to applicable community property laws, each person named in the
table has sole voting and investment power with respect to the shares set
forth opposite such person's name.
(2) Mr. Marcus, certain officers and directors of the Company and certain other
entities and investors own limited partnership interests in Essex Portfolio,
L.P., a California limited partnership (the "Operating Partnership"), which
presently aggregate to an approximately 10.1% limited partnership interest.
The Company presently has an approximately 89.9% general partnership
interest in the Operating Partnership. The limited partners of the Operating
Partnership share with the Company, as general partner, in the net income or
loss and any distributions of the Operating Partnership. Pursuant to the
partnership agreement of the Operating Partnership, limited partnership
interests can be exchanged into shares of Common Stock.
(3) With respect to shares of Common Stock, assumes exchange of the limited
partnership interests in the Operating Partnership held by such person, if
any, into shares of Common Stock. The total number of shares outstanding
used in calculating this percentage assumes that none of the limited
partnership interests, vested options or Preferred Stock held by other
persons are exchanged or converted into shares of Common Stock and is based
on 16,624,960 shares of Common Stock outstanding as of the Record Date.
(4) Assumes exchange of all outstanding limited partnership interests in the
Operating Partnership. Assumes that none of the Preferred Stock held by
other persons are converted into shares of Common Stock.
(5) Assumes exchange of all outstanding limited partnership interests in the
Operating Partnership and conversion of all outstanding shares of Preferred
Stock into shares of Common Stock.
(6) The business address of such person is 925 East Meadow Drive, Palo Alto,
California 94303.
(7) Includes 1,190,103 shares of Common Stock that may be issued upon the
exchange of all of Mr. Marcus' limited partnership interests in the
Operating Partnership and in certain other partnerships and 301,494, 15,941,
and 43,413 shares of Common Stock that may be issued upon the exchange of
all the limited partnership interests in the Operating Partnership held by
The Marcus & Millichap Company ("M&M"), Essex Portfolio Management Company
("EPMC") and GMMS Partners ("GMMS"), respectively. Also includes 155,000
shares of Common Stock held by M&M, 7,600 shares of Common Stock held by
GMMS, 132,000 shares of Common Stock subject to an option granted to M&M and
exercisable within 60 days of the Record Date, 14,126 shares of Common Stock
held in The Marcus & Millichap Company 401(k) Plan (the "M&M 401(k) Plan")
and 8,000 shares of Common Stock held by Mr. Marcus' children. Mr. Marcus is
a principal stockholder of each of M&M and EPMC and a partner in GMMS and
may be deemed to own beneficially, and to share the voting and dispositive
power of, 655,448 shares of Common Stock (including shares issuable upon
exchange of limited partnership interests and options). Mr. Marcus disclaims
beneficial ownership of (i) all shares, options and limited partnership
interests held by M&M, (ii) 6,376 shares of the 15,941 shares of Common
Stock that may be issued upon conversion of limited partnership interests
held by EPMC and (iii) all limited partnership interests and shares held by
GMMS.
(8) Includes 73,100 shares of Common Stock that may be issued upon the exchange
of all of Mr. Millichap's limited partnership interests in the Operating
Partnership and 301,494, 15,941, and 43,413 shares of Common Stock that may
be issued upon the exchange of all of the limited partnership interests in
the Operating Partnership held by M&M, EPMC and GMMS, respectively. Also
includes 155,000 shares of Common Stock held by M&M, 7,600 shares of
Common Stock held by GMMS, 132,000 shares of Common Stock subject to an
option granted to M&M and exercisable within 60 days of the Record Date and
9,883 shares of Common Stock held in the M&M 401(k) Plan. Mr. Millichap is a
principal stockholder of M&M and EPMC and a partner in GMMS and may be
deemed to own beneficially, and to share the voting and dispositive power
of, 655,448 shares of Common Stock (including shares issuable upon
conversion of limited partnership interests and options). Mr. Millichap
disclaims beneficial ownership of (i) all shares, options and limited
partnership interests held by M&M, (ii) 9,565 shares of the 15,941 shares of
Common Stock that may be issued upon conversion of limited partnership
interests held by EPMC and (iii) all limited partnership interests and
shares held by GMMS.
(9) Includes 48,115 shares of Common Stock that may be issued upon the exchange
of all of Mr. Guericke's limited partnership interests in the Operating
Partnership, 43,413 shares of Common Stock that may be issued upon the
exchange of all of the limited partnership interests in the Operating
Partnership held by GMMS and 7,600
4
<PAGE>
shares of Common Stock held by GMMS. Also includes 33,000 shares of Common
Stock subject to options that are exercisable within 60 days of the Record
Date, 3,534 shares of Common Stock held in the Essex Property Trust, Inc.
401(k) Plan (the "Essex 401(k) Plan") and 7,660 shares of Common Stock
issuable upon satisfying certain vesting requirements of the Company's
Phantom Stock Plan. Mr. Guericke is a partner in GMMS and may be deemed to
own beneficially, and to share the voting and dispositive power of, 51,013
shares of Common Stock (including shares issuable upon conversion of
limited partnership interests). Mr. Guericke disclaims beneficial ownership
of 10,535 of such 51,013 shares.
(10) Includes 26,388 shares of Common Stock that may be issued upon the exchange
of all of Mr. Schall's limited partnership interests in the Operating
Partnership, 43,413 shares of Common Stock that may be issued upon the
exchange of all of the limited partnership interests in the Operating
Partnership held by GMMS and 7,600 shares of Common Stock held by GMMS.
Also includes 24,000 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date, 2,617 shares of Common Stock
held in the Essex 401(k) Plan, and 5,617 shares of Common Stock issuable
upon satisfying certain vesting requirements of the Company's Phantom Stock
Plan. Mr. Schall is a partner in GMMS and may be deemed to own
beneficially, and to share the voting and dispositive power of 51,013
shares of Common Stock (including shares issuable upon exchange of limited
partnership interests). Mr. Schall disclaims beneficial ownership of 40,478
of such 51,013 shares. Further includes 729 shares of Common Stock held by
Mr. Schall's three minor children.
(11) Includes 2,800 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(12) Includes 4,000 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(13) Includes 1,334 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(14) Includes 2,666 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(15) Includes 1,698,554 shares of Common Stock that may be issued upon the
exchange of all of the executive officers' and directors' limited
partnership interests in the Operating Partnership and 209,133 shares of
Common Stock subject to options that are exercisable within 60 days of the
Record Date.
(16) As reported on Schedule 13G filed with the SEC on February 6, 1998. Cohen &
Steers Capital Management, Inc., an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, has the sole power to
vote or direct the vote of 1,890,300 shares and sole dispositive power over
2,153,100 shares of Common Stock. Address: 757 Third Avenue, N.Y., N.Y.
10017.
(17) As reported on Schedule 13G filed with the SEC on February 12, 1998. Morgan
Stanley Asset Management, Inc. is a wholly owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co. Both entities are investment advisors
registered under Section 203 of the Investment Advisors Act of 1940. Morgan
Stanley, Dean Witter, Discover & Co. has the shared power to vote and
direct the vote of 1,539,700 shares and shared dispositive power over
1,691,900 shares. Morgan Stanley Asset Management, Inc. has the shared
power to vote and direct the vote of 1,058,900 and shared dispositive power
over 1,211,100 shares. Addresses: Morgan Stanley, Dean Witter, Discover &
Co., 1585 Broadway, New York, New York 10036. Morgan Stanley Asset
Management, Inc., 1221 Avenue of the Americas, New York, New York.
(18) As reported on Schedule 13G filed with the SEC on February 11, 1998.
AMVESCAP PLC is the parent company of AVZ, Inc., AIM Management Services,
Inc., INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc., INVESCO Funds Group, Inc., INVESCO Management & Research,
Inc., and INVESCO Realty Advisors, Inc. Each of these subsidiaries has the
shared power to vote and direct the vote of 866,300 shares and shared
dispositive power over 866,300 shares. Address: AMVESCAP PLC, 11 Devonshire
Square, London EC2M 4YR, England.
(19) The business address of such entities is c/o Westbrook Partners, LLC, 11150
Santa Monica Boulevard, Los Angeles, California 90025. The shares of
Preferred Stock held by such entities are all the outstanding shares of
Preferred Stock and are convertible at the option of the holder into an
aggregate of 1,828,571 shares of Common Stock, or 9.9% of the outstanding
shares of Common Stock, assuming that no options or limited partnership
interests in the Operating Partnership or in other partnerships are
exchanged into Common Stock.
(20) Assumes conversion of all Preferred Stock into shares of Common Stock.
5
<PAGE>
PROPOSAL NO. 1
ELECTION OF COMMON STOCK DIRECTORS
The Company's Charter provides that the Preferred Stockholders have the
right to elect separately as a class, one member of the Board of Directors
annually and that the Common Stockholders have the right to elect the remaining
directors. The Company's Charter divides the directors into three classes. The
members of each class of directors serve staggered three-year terms. The Board
presently has twelve directors, eleven of whom are Common Stock Directors, and
one of whom, Gregory J. Hartman, is a Preferred Stock Director and is a Class I
director. The eleven Common Stock Directors presently are as follows: Keith R.
Guericke, Issie N. Rabinovitch and Thomas E. Randlett who are classified as
Class I directors; David W. Brady, Robert E. Larson, Michael J. Schall and
Willard H. Smith who are classified as Class II directors; George M. Marcus,
Gary P. Martin, William A. Millichap and Anthony Downs who are classified as
Class III directors. The terms of each of the current Class I, Class II and
Class III directors expire at the Annual Meetings of Stockholders to be held in
1998, 1999 and 2000, respectively, and until such directors' respective
successors are elected and qualified or until any such directors' earlier
resignation or removal. The term of Gregory J. Hartman expires at the Annual
Meeting of Stockholders to be held in 1998, and until such director's successor
is elected and qualified or until such director's earlier resignation or
removal.
At the Annual Meeting, the Common Stockholders will elect three
directors (collectively, the "Common Stock Directors"): if elected, nominees
Keith R. Guericke, Issie N. Rabinovitch and Thomas E. Randlett will serve as
Class I directors for three-year terms. The Class I directors will serve until
the Annual Meeting of Stockholders to be held in 2001 and until such directors'
respective successors are elected and qualified or until such directors' earlier
resignation or removal. The Board believes that each such nominee will stand for
election and will serve if elected as a director. However, in the event any
nominee is unable or unwilling to serve as a director at the time of the Annual
Meeting, the proxies may be voted for the balance of those nominees named and
for any substitute nominee designated by the present Board or the proxy holders
to fill such vacancy, or for the balance of those nominees named without
nomination of a substitute, or the Board may be reduced in accordance with the
Bylaws of the Company.
The affirmative vote of a plurality of the shares of Common Stock
present in person or by proxy and entitled to vote at the Annual Meeting,
assuming a quorum is present, is necessary for the election of a Common Stock
Director. For purposes of the election of Common Stock Directors, abstentions
and other shares not voted will not be counted as votes cast and will have no
effect on the result of the vote.
Certain information about each of such nominees is furnished below.
Keith R. Guericke, Vice Chairman of the Board, is the Company's
President and Chief Executive Officer and oversees the day-to-day operations and
administration of the Company. Mr. Guericke joined the Company's predecessor,
Essex Property Corporation ("EPC"), in 1977. Since that time, he has actively
participated in the acquisition, development, management and disposition of
multifamily, retail and office properties. Prior to joining EPC, Mr. Guericke
was with Kenneth Leventhal & Company in San Francisco. He received his Bachelor
of Science degree in Accounting from Southern Oregon College in 1971. Mr.
Guericke is a member of the National Association of Real Estate Investment
Trusts, the American Institute of Certified Public Accountants, the Urban Land
Institute, and the National Multi-Housing Council.
Issie N. Rabinovitch, Director, is a partner at Cheyenne Capital, a
venture capital firm. Prior to joining Cheyenne Capital, Mr. Rabinovitch served
from 1990 to 1994 as President and Chief Executive Officer of Micro Power
Systems, Inc., a company engaged in the designing, manufacturing and marketing
of multiple semiconductor products. From 1985 to 1990, Mr. Rabinovitch was
President of Berkeley International Capital Corporation, a venture capital firm.
From 1983 to 1985, Mr. Rabinovitch was President of Crowntek Software
International, a software development and distribution company. Before joining
Crowntek, he was employed by the Xerox Corporation in various management roles.
6
<PAGE>
Mr. Rabinovitch presently serves on the Board of Directors of Instashred
Security Systems, Inc. He received a Bachelor of Science degree from McGill
University in 1967 and a Master's of Business Administration degree from Harvard
University in 1970.
Thomas E. Randlett, Director, is a certified public accountant and has
been a principal at the Law & Economics Consulting Group, Inc. since 1992. Prior
to becoming a principal, Mr. Randlett was employed as an affiliated expert. The
firm's professional specialties include the real estate and construction,
financial institutions and transportation industries. Prior to joining the Law &
Economics Consulting Group, Mr. Randlett was a partner and senior real estate
specialist for Peat Marwick Main & Co. in Northern California, where he had been
employed since 1966, and then a consultant at the New York branch of Midland
Bank from 1989 to 1990. Mr. Randlett is a former member of the Policy Advisory
Board, School of Real Estate and Urban Economics, University of California at
Berkeley and a current member of the American Institute of Certified Public
Accountants. He received a Bachelor of Arts degree from Princeton University in
1966.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE COMMON STOCKHOLDERS VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
7
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of the Record Date with
respect to the directors and executive officers, including their ages.
<TABLE>
<CAPTION>
First Term
Name and Position Age Elected Expires
- ----------------------------------------------------- ----- ------- -------
<S> <C> <C> <C>
George M. Marcus................................... 56 1994 2000
Chairman of the Board
William A. Millichap............................... 54 1994 2000
Director
Keith R. Guericke.................................. 49 1994 1998
Vice Chairman of the Board, Chief Executive Officer
and President
Michael J. Schall.................................. 40 1994 1999
Director, Executive Vice President and
Chief Financial Officer
David W. Brady..................................... 57 1994 1999
Director
Anthony Downs...................................... 67 1996 2000
Director
Gregory J. Hartman................................. 39 1996 1998
Director
Robert E. Larson................................... 59 1994 1999
Director
Gary P. Martin..................................... 50 1994 2000
Director
Issie N. Rabinovitch............................... 52 1994 1998
Director
Thomas E. Randlett................................. 55 1994 1998
Director
Willard H. Smith, Jr............................... 61 1996 1999
Director
</TABLE>
Biographical information concerning the director nominees is set forth
above under the caption "Proposal No. 1 Election of Common Stock Directors" and
below under the caption "Proposal No. 2 Election of Preferred Stock Directors."
Biographical information concerning the remaining directors and executive
officers is set forth below.
George M. Marcus, Chairman of the Board of Directors, is the founder
of, and has been the Chairman of, The Marcus & Millichap Company since 1971,
Summerhill Homes since 1977, and EPC since 1971. Mr. Marcus is also the Chairman
of M&M Projects, Inc. and Marcus & Millichap Real Estate Investment Brokerage
Company. Mr. Marcus was one of the original founders and directors of Plaza
Commerce Bank and MidPeninsula Bank, both publicly held financial institutions.
Mr. Marcus continues to serve on the board of MidPeninsula Bank. Mr. Marcus is
also a member of the Board of Directors of both the National Multi-Housing
Council and the Apartment Industry Foundation. He is a member of the Policy
Advisory Board of the University of California at Berkeley's Center for Real
Estate and Urban Economics, the Urban Land Institute, the National Real Estate
Index Advisory Committee, the Bay Area Council and the California Housing
Council. He graduated from San Francisco State University with a Bachelor of
Science degree in Economics in 1965; he was honored as alumnus of the year in
1989. Mr. Marcus is also a graduate of the Harvard University Executive
Management Program and the Georgetown University Leadership Program.
8
<PAGE>
William A. Millichap, Director, has been President of The Marcus &
Millichap Company and Marcus & Millichap Real Estate Investment Brokerage
Company since 1984. Mr. Millichap joined G.M. Marcus & Company in 1971 as one of
its first sales associates and became a regional manager in 1974. In 1976, he
became a principal, and the name of the company was subsequently changed to The
Marcus & Millichap Company. Mr. Millichap became Executive Vice President and
President of The Marcus & Millichap Company in 1978 and 1984, respectively. He
is also Chairman of Marcus & Millichap Corporate Real Estate Services and a
director of AllApartments, Inc. Mr. Millichap is a licensed real estate broker,
a member of the International Council of Shopping Centers and serves on the
Board of Directors of the California Housing Council and the National
Multi-Housing Council. Mr. Millichap received a Bachelor of Science degree in
Economics from the University of Maryland in 1965. Prior to becoming affiliated
with Mr. Marcus in 1971, he served in the United States Navy.
Michael J. Schall, Director, is the Executive Vice President and Chief
Financial Officer of the Company and is responsible for the overall management
and control of the Company's financial matters, including investor relations and
reporting. He joined The Marcus & Millichap Company in 1986. He was also the
Chief Financial Officer of the Company's predecessor, EPC, in which capacity he
was responsible for accounting for multiple investment entities, arranging both
permanent and construction financing and developing a wide range of corporate
borrowing relationships. From 1982 to 1986, Mr. Schall was the Director of
Finance for Churchill International, a technology-oriented venture capital
company. From 1979 to 1982, Mr. Schall was employed in the audit department of
Ernst & Whinney, where he specialized in the real estate and financial services
industries. In 1979, Mr. Schall received his Bachelor of Science degree from the
University of San Francisco. Mr. Schall is a Certified Public Accountant and a
member of the American Institute of Certified Public Accountants.
David W. Brady, Director, is Associate Dean for Academic Affairs and
has been a Professor of Political Science at the Graduate School of Business at
Stanford University, Palo Alto, California since 1988. He is the Bowen H. and
Janice Arthur McCoy Professor of Political Science and Ethics and was a John M.
Olin Faculty Fellow at Stanford University during 1988 and 1989. From 1982 to
1987, Professor Brady was Herbert S. Autry Professor at the Department of
Political Science at Rice University in Houston, Texas. Professor Brady served
as Acting Dean of the School of Social Sciences, Rice University from 1984 to
1985, Associate Chair of the Department of Political Science, Stanford
University from 1988 to 1990, and Area Coordinator, Political Economy, Graduate
School of Business, Stanford University in 1990. Professor Brady has written
numerous books and was awarded in 1989 the Richard F. Fenno Award for Best Book
of Legislative Studies. Professor Brady received his Bachelor of Science degree
from Western Illinois University in 1963, and Master's and Doctorate degrees
from the University of Iowa in 1967 and 1970, respectively.
Anthony Downs, Director, is a Senior Fellow at the Brookings
Institution in Washington, D.C. Brookings is a private, non-profit research
organization specializing in public policy studies. Before that, he was for 18
years a member and then Chairman of Real Estate Research Corporation, a
nationwide consulting firm advising private and public decision-makers on real
estate investment, housing policies and urban affairs. He has served as a
consultant to many of the nation's largest corporations, to major developers, to
dozens of government agencies at local, state and national levels (including the
Department of Housing and Urban Development and the White House), and to many
private foundations. He is currently serving as a consultant for The Marcus &
Millichap Company. From 1967, when President Johnson appointed him to the
National Commission on Urban Problems, to 1989, when HUD Secretary Jack Kemp
appointed him to HUD's Advisory Commission on Regulatory Barriers to Affordable
Housing, he has been an advisor to HUD Secretaries of both parties. He is also a
director or trustee of the Massachusetts Mutual Life Insurance Company, the
Pittway Corporation, General Growth Properties, Inc., Bedford Properties, Inc.,
the NAACP Legal and Educational Defense Fund, Inc., the Urban Land Institute,
the National Housing Partnerships Foundation and the Urban Institute. Dr. Downs
received a Ph.D. in economics from Stanford University, and is the author or
co-author of 15 books and over 400 articles.
9
<PAGE>
His latest books from Brookings are Stuck in Traffic (1992) and New
Visions for Metropolitan America (1994). Dr. Downs is a frequent speaker on real
estate economics, housing, urban policies and other topics. He has made over
1,000 speeches to hundreds of organizations of all types.
Robert E. Larson, Director, has been a General Partner of the Woodside
Fund, a venture capital firm based in the Silicon Valley of Northern California,
since 1983. Professor Larson currently serves as a director of Enterprise Link
Technology Corporation, Myelos Corporation, Orion Instruments, Inc.,
OsteoBiologics, Inc., Poseidon Technology, Inc., Skye Investment Advisors,
Televideo Systems, Inc., and TriVideo Corporation. He is also Chairman of the
Board of Pharmalytics, Inc., Open Systems Control, Inc. and CAST Enterprises,
Inc., a joint venture in the People's Republic of China. Prior to 1983,
Professor Larson was founder, director and President of Systems Control, Inc.
and was employed by IBM Corporation, Hughes Aircraft Company and SRI
International. He was a Consulting Professor at Stanford University from 1973 to
1988 and President of the International Institute of Electrical and Electronic
Engineers in 1982. Professor Larson received his Bachelor of Science Degree from
M.I.T. in 1960, and his Master's and Doctorate degrees from Stanford University
in 1961 and 1964, respectively.
Gary P. Martin, Director, served from August 1995 to January 1998 as
Vice President of Finance and Chief Financial Officer of 3Dfx Interactive, Inc.
Prior to this position, from September 1993 to July 1995, he served as Vice
President of Finance and the Chief Financial Officer for MiniStor Peripherals
Corporation, a supplier of data storage products for the mobile computer market.
From 1985 to 1993, he was Senior Vice President of Finance and Administration
for Chips and Technologies, Inc., where he also developed joint business
ventures within the Soviet Union. From 1983 to 1984, Mr. Martin was Vice
President of Finance and Chief Financial Officer for Starstruck, Inc., a company
involved in space development through private enterprise. In addition, Mr.
Martin was one of the earliest employees at Apple Computer, Inc., where he held
both corporate and European controller positions during the period from 1977 to
1983. Prior to working at Apple Computer, Inc., from 1971 to 1977, he worked for
Aero Air Freight and National Semiconductor. Mr. Martin currently serves on the
Board of Directors of the Emergency Housing Consortium. He received a Bachelor
of Science degree in Accounting from San Jose State University in 1971.
Willard H. Smith, Jr., Director, was employed at Merrill Lynch & Co.
from 1979 through 1995, and served as Managing Director since 1983 in their
Equity Capital Markets Division. From 1992 through 1995, Mr. Smith's primary
focus was the REIT industry. His duties as Managing Director at Merrill Lynch
included evaluating companies' capital structure and equity requirements,
placing offerings with Merrill Lynch's retail and institutional client base, and
assessing the market's demand for potential equity security offerings. Mr. Smith
is also a Board Member of the Cohen & Steers Realty Shares, the Cohen & Steers
Realty Income Fund, the Cohen & Steers Special Equity Fund, Inc., the Cohen &
Steers Total Return Realty Fund and the Cohen & Steers Equity Income Fund. He is
also a Board member of Highwoods Properties, Inc. and Realty Income Corporation,
which are both REITS. Recently, Mr. Smith joined the Board of Directors of
Willis Lease Finance Corporation. Prior to joining Merrill Lynch, Mr. Smith
worked at F. Eberstadt & Co. from 1971 to 1979. A member of NAREIT, Mr. Smith
received his Bachelor of Science degree in Business Administration, and Bachelor
of Science degree in Industrial Engineering from the University of North Dakota
in 1959 and 1960, respectively.
Meetings and Committees of the Board of Directors
During 1997, the Board held thirteen (13) meetings (in person,
telephonically or by written consent). No director attended (whether in person,
telephonically or by written consent) less than 75% of the total number of the
meetings of the Board and meetings of the committee of the Board on which he
served. The Board has five committees: the Executive Committee, the Audit
Committee, the Compensation Committee, the Stock Incentive Plan Committee and
the Pricing Committee.
The Board does not have a nominating committee or a committee
performing the functions of a nominating committee. Although there are no formal
procedures for stockholders to recommend
10
<PAGE>
nominations, the Board will consider recommendations from stockholders, which
should be addressed to Jordan E. Ritter, the Company's General Counsel, at the
Company's address set forth above.
The Executive Committee presently consists of Messrs. Guericke, Marcus,
Randlett and Hartman. The Executive Committee has such authority as is delegated
by the Board, including the authority to execute certain contracts and
agreements with unaffiliated parties, except that the Executive Committee does
not have the power to declare dividends or other distributions on stock, elect
directors, issue stock other than in certain limited circumstances, recommend to
the stockholders any action which requires stockholder approval, amend the
Bylaws, or approve any merger or share exchange which does not require
stockholder approval. The Executive Committee met (in person, telephonically or
by written consent) fifteen (15) times during 1997.
The Audit Committee presently consists of Messrs. Brady, Hartman,
Martin, and Randlett. The Audit Committee recommends the appointment of a firm
of certified public accountants to audit the financial statements of the Company
for the fiscal year for which they are appointed, reviews audit reports, takes
such action as may be deemed appropriate with respect to such audit reports and
monitors the effectiveness of the audit effort, the Company's financial and
accounting organization and its system of internal accounting controls. The
Audit Committee met (in person, telephonically or by written consent) four times
during 1997.
The Compensation Committee presently consists of Messrs. Larson, Marcus
and Rabinovitch. The Compensation Committee establishes and reviews annually the
Company's general compensation policies applicable to the Company's executive
officers, reviews and approves the level of compensation of the Chief Executive
Officer and other executive officers of the Company, reviews and advises the
Board concerning the performance of the Chief Executive Officer and other
employees whose compensation is within the review jurisdiction of the
Compensation Committee, reviews and advises the Board concerning regional and
industry-wide compensation practices and trends, and recommends benefit plans
from time to time. The Compensation Committee met (in person, telephonically or
by written consent) three times during 1997.
The Stock Incentive Plan Committee presently consists of Messrs.
Larson, Martin and Rabinovitch. The Stock Incentive Plan Committee administers
the Essex Property Trust, Inc. 1994 Stock Incentive Plan, as amended (the "1994
Stock Incentive Plan"), and the Essex Property Trust, Inc. 1994 Employee Stock
Purchase Plan, including the authority to issue stock and grant and to amend
options thereunder, and to report to the Board regarding those plans from time
to time, or whenever called upon to do so. The Stock Incentive Plan Committee
met (in person, telephonically or by written consent) three times during 1997.
The Pricing Committee presently consists of Messrs. Guericke, Schall,
and Hartman. The Pricing Committee establishes the price at which the Company's
securities will be offered to the public in public offerings of the Company's
securities. The Pricing Committee met (in person, telephonically or by written
consent) twice during 1997.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee and the Stock Incentive Plan
Committee were formed in June 1994. No interlocking relationship existed in 1997
or presently exists between any member of the Company's Compensation Committee,
Stock Incentive Plan Committee or Board of Directors on the one hand and another
company's compensation committee, stock incentive plan committee or Board of
Directors on the other hand. Certain transactions and relationships between the
Company and certain of its officers and directors are set forth below in the
section titled "Certain Relationships and Related Transactions."
11
<PAGE>
Compensation of Directors
Each independent director, Messrs. Brady, Downs, Larson, Martin,
Rabinovitch, Randlett and Smith, receives a meeting fee of $500 for each Board
of Directors meeting attended. Such directors are also paid $500 for attending a
committee meeting if such meeting is not held on the same day as a meeting of
the Board of Directors. In addition to the $500 meeting fee, Mr. Smith received
a fee of $20,000 in 1997 for consulting services performed by Mr. Smith for the
Company.
Each independent director, upon joining the Board of Directors,
receives an automatic grant of an option to purchase 4,000 shares of Common
Stock at an exercise price equal to 100% of the fair market value of the Common
Stock at the date of the grant of such option pursuant to the Company's 1994
Stock Incentive Plan. In the event of a change in control of the Company, the
Board may unilaterally cancel a director option as of any date to the extent
then unexercised after advance written notice to each affected director.
In 1997, Mr. Millichap and each independent director, other than Mr.
Downs, who received his initial 4,000 share grant in December 1997, received a
grant of an option to purchase 2,500 shares of Common Stock at an exercise price
equal to 100% of the fair market value of the Common Stock at the date of the
grant of such option pursuant to the Company's 1994 Stock Incentive Plan. In
1997, Mr. Marcus, the Company's Chairman, received an option to purchase 20,000
shares of Common Stock at an exercise price equal to 100% of the fair market
value of the Common Stock at the date of the grant.
Relationships Among Directors or Executive Officers
There are no family relationships among any of the directors or
executive officers of the Company.
12
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table sets forth certain information concerning
compensation of the Company's Chief Executive Officer and the other executive
officer of the Company (collectively, the "Named Executive Officers") for the
years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation Awards
--------------------- ------------------------------------
Securities
Underlying
Bonus & Restricted Stock Stock Options/
Name and Position Year Salary ($) Awards($)(1) SARs (#)(2)
- ---------------------------------------- ---- ---------- ----------------- --------------
<S> <C> <C> <C> <C>
Keith R. Guericke...................... 1997 $225,000 -- 55,000
Vice Chairman of the Board, Chief 1996 100,000 $225,000 (3) --
Executive Officer and President 1995 100,000 -- --
Michael J. Schall...................... 1997 $190,000 -- 45,000
Director, Executive Vice President 1996 100,000 $165,000 (3) --
and Chief Financial Officer 1995 100,000 -- --
</TABLE>
- -------------------
(1) Represents phantom stock units which, upon vesting in full, over a
five-year period, can be exchanged into an equivalent number of Common
Stock shares, or at the Company's option, cash. Prior to vesting, the
holder receives cash payments equal in amount and payment date to
dividends paid on Common Stock.
(2) In 1997, stock options to acquire shares of Common Stock at an exercise
price of $34.25 per share were issued.
(3) Represents the value of phantom stock units granted on January 1, 1997
to Mr. Guericke and Mr. Schall. Each unit is deemed to be equivalent in
value to one share of Common Stock. The total value of the units is
determined by multiplying the closing price of the Company's Common
Stock on December 31, 1996, which was $29.375 per share, by 7,660 units
in the case of Mr. Guericke, and by 5,617 units in the case of Mr.
Schall.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in fiscal year 1997 under
Essex's 1994 Stock Incentive Plan, as amended. The table also lists potential
realizable values of such options on the basis of assumed annual compounded
stock appreciation values of 5% and 10% over the life of the options.
<TABLE>
<CAPTION>
Individual Option Grants
---------------------------------------------------------- Potential Realizable Value At
Number of % of Total Assumed Annual Rates of Stock
Securities Options Exercise Price Appreciation for Option
Underlying Granted to Price Per Term (3)
Options Employees in Share Expiration ------------------------------
Name and Position Grants (#)(1) Fiscal Year ($/Sh)(2) Date 5% 10%
- ---------------------- ------------ ------------ --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Keith R. Guericke....... 55,000 20% $34.25 10/31/07 $1,184,700 $3,002,450
Vice Chairman of
the Board, Chief
Executive Officer
and President
Michael J. Schall....... 45,000 16 $34.25 10/31/07 969,300 2,456,550
Director, Executive
Vice President, and
Chief Financial
Officer
</TABLE>
- -----------
(1) Twenty percent of such options become exercisable one year after grant
and an additional 20% becomes exercisable each year thereafter.
(2) Exercise price is 100% of the closing price of the stock on the date of
the option grant.
(3) The "potential realizable value" shown represents the potential gains
based on annual compounded stock price appreciation of 5 percent and 10
percent from the date of grant through the full ten-year option term,
net of exercise price, but before any taxes. The amounts represent
certain assumed rates of appreciation only based on the SEC rules.
Actual gains, if any, on stock option exercises are dependent on the
future performance of the Common Stock, overall market conditions and
the option holders' continued employment through the vesting period.
The amounts reflected on this table may not necessarily be achieved and
do not reflect the Company's estimate of future stock price growth.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
During the year ended December 31, 1997, the Company's Named Executive
Officers did not exercise any of their stock options. The following table sets
forth the number of shares of Common Stock covered by the stock options held by
each of the Named Executive Officers as of December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised In-
Underlying Unexercised the-Money Options at Fiscal
Options At Fiscal Year-End (#) Year-End ($) (1)
------------------------------- -------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Keith R. Guericke............. 33,000 77,000 $511,500 $383,000
Michael J. Schall............. 24,000 61,000 $372,000 $282,000
</TABLE>
- --------------------
(1) Based on the closing price of the Company's Common Stock as reported on
the New York Stock Exchange on December 31, 1997 of $35.00 per share.
15
<PAGE>
Compensation Committee Report on Executive Compensation
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the Performance Graph which follows shall not be deemed to be
incorporated by reference into any such filings.
The Company's Compensation Committee is responsible for developing,
administering and monitoring the compensation policies applicable to the
Company's executive officers. The Company's Stock Incentive Plan Committee
(collectively, with the Compensation Committee, the "Committees") is responsible
for the administration of the Company's 1994 Stock Incentive Plan, under which
grants may be made to executive officers and other key employees.
Executive Compensation Philosophy. The Committees believe that the
primary goal of the Company's executive compensation program should be related
to creating stockholder value. The Committee seeks to offer the Company's
executive officers competitive compensation opportunities based upon their
personal performance, the financial performance of the Company and their
contribution to that performance. The executive compensation program is designed
to attract and retain executive talent that contributes to the Company's
long-term success, to reward the achievement of the Company's short-term and
long-term strategic goals, to link executive officer compensation and
stockholder interests through equity-based plans, and to recognize and reward
individual contributions to Company performance. When setting executive officer
compensation, the Committees intend to evaluate annually the performance of the
Company and to compare the Company's performance and compensation structure with
those of other REITs and real estate companies engaged in activities similar to
those of the Company.
Key factors considered by the Compensation Committee in 1997 included
growth in funds from operations per share, progress in expanding the Company's
development program and success in the Company's ability to identify growing
markets consistent with its strategy, and the Company's success in acquiring
properties in those markets.
The Company's compensation program has three principal elements: base
salary, performance incentive bonuses and long-term incentive awards.
Base Salaries and Bonus. The base compensation for the Company's Named
Executive Officers in 1997 was set at an amount equal to the 1996 base
compensation, which had been established through negotiations between the
Company and each Named Executive Officer. The base salaries will be reviewed
annually and may be adjusted by the Compensation Committee in accordance with
certain criteria determined primarily on the basis of growth in revenues and
funds from operations per share of Common Stock, and on the basis of certain
other factors, which include (i) individual performance, (ii) the functions
performed by the executive officer, and (iii) changes in the compensation peer
group in which the Company competes for executive talent. Although the
Compensation Committee considers these factors in determining base salaries and
adjustments thereto, the Compensation Committee anticipates that the analysis
will be subjective rather than objective and the weight given such factors may
vary from individual to individual.
Long-Term Incentive Awards. The Stock Incentive Plan Committee grants
awards under the 1994 Stock Incentive Plan based on a number of factors,
including (i) the executive officer's or key employee's position in the Company,
(ii) his or her performance and responsibilities, (iii) the extent to which he
or she already holds an equity stake in the Company, (iv) equity participation
levels of comparable executives and key employees at other companies in the
compensation peer group, and (v) individual contribution to the success of the
Company's financial performance. However, the 1994 Stock Incentive Plan does not
provide a formulaic method for weighing these factors, and a decision to grant
an award is based primarily upon
16
<PAGE>
the Stock Incentive Plan Committee's subjective evaluation of the past as well
as the future anticipated performance and responsibilities of the individual in
question.
Deductibility of Compensation. Section 162(m) of the Internal Revenue
Code denies a deduction for compensation in excess of $1 million paid to certain
executive officers, unless certain performance, disclosure, and stockholder
approval requirements are met. Option grants under the Company's 1994 Stock
Incentive Plan are intended to qualify as "performance-based" compensation not
subject to the Section 162(m) deduction limitation. In addition, the Committees
believe that a substantial portion of the compensation program would be exempted
from the $1 million deduction limitation. The Committees' present intention is
to qualify, to the extent reasonable, the substantial portion of the executive
officers' compensation for deductibility under applicable tax laws. However, the
Committees reserve the right to design programs that recognize a full range of
performance criteria important to the Company's success, even where compensation
payable under such programs may not be deductible.
Chief Executive Officer Compensation. The base compensation of Keith R.
Guericke in 1997 was set at the same level of Mr. Guericke's 1996 base
compensation, which had been determined through negotiations between the Company
and Mr. Guericke, and reflected compensation for services performed as Chief
Executive Officer, as well as consideration for Mr. Guericke's entering into a
non-competition agreement with the Company. In 1997, Mr. Guericke received an
annual base salary of $100,000. The bonus and long-term incentive awards for Mr.
Guericke for 1997 were determined on the same general basis as discussed above
for the executive officers. In 1997, Mr. Guericke received a bonus of $125,000
and options to purchase 55,000 shares of Common Stock. Mr. Guericke's base
salary and awards of stock options will be reviewed by the Committees and
adjusted annually based on the criteria for all executive officers discussed
above.
COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
GEORGE M. MARCUS
ROBERT E. LARSON
ISSIE N. RABINOVITCH
STOCK INCENTIVE PLAN COMMITTEE
OF THE BOARD OF DIRECTORS
ROBERT E. LARSON
GARY P. MARTIN
ISSIE N. RABINOVITCH
17
<PAGE>
Stock Price Performance Graph
Trading of the Company's Common Stock commenced on June 7, 1994 and the
initial public offering price per share of the Common Stock on June 7, 1994 was
$19.50. The following stock price performance graph compares cumulative total
stockholder return on the Company's Common Stock from June 1994 through December
1997 to the cumulative total return on the Standard & Poor's 500 Stock Index
("S&P 500") and to the Equity REIT Total Return Index prepared by the National
Association of Real Estate Investment Trusts, Inc. ("NAREIT"). The stock price
performance graph assumes an investment of $100 in the Company's Common Stock,
the S&P 500, and in the NAREIT Equity REIT Total Return Index, on June 7, 1994.
The graph also assumes the reinvestment of all dividends.
IT SHOULD BE NOTED THAT THE FOLLOWING LINE GRAPH REPRESENTS HISTORICAL
STOCK PRICE PERFORMANCE AND IS NOT NECESSARILY INDICATIVE OF ANY FUTURE STOCK
PRICE PERFORMANCE.
<TABLE>
<CAPTION>
PERIOD ENDING
--------------------------------------------------------------------------------
INDEX 6/7/94 12/31/94 6/30/95 12/31/05 6/30/96 12/31/96 6/30/97 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESSEX PRPOERTY TRUST, INC. 100.00 81.87 103.09 114.66 133.28 188.15 211.66 236.69
S&P 500 100.00 101.86 122.44 140.13 154.26 172.17 207.65 229.62
NAREIT ALL EQUITY REIT INDEX 100.00 96.22 101.93 110.78 118.64 150.35 158.93 180.82
</TABLE>
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Marcus & Millichap Real Estate Investment Brokerage Company
The Marcus & Millichap Real Estate Investment Brokerage Company ("M&M
REIBC") is a commercial real estate brokerage firm that is a subsidiary of The
Marcus & Millichap Company ("M&M"). Mr. Marcus, the Chairman of the Company, is
the Chairman of M&M. For 1997, the Operating Partnership paid approximately
$590,000, for brokerage services rendered by M&M REIBC. Such fees are comparable
to the fees M&M REIBC generally charges for brokerage services.
In connection with the Company's 1994 initial public offering (the
"IPO"), M&M REIBC, Essex Portfolio, L.P. (the "Operating Partnership"), the
Company and Essex Management Corporation ("EMC") entered into an agreement (the
"Brokerage Agreement") that provides that if the Company or the Operating
Partnership enters into a transaction with M&M REIBC in which either of them or
a third party pays a brokerage commission to M&M REIBC, a percentage of such
commission, reflecting M&M REIBC's net profit, will be discounted or paid to
EMC. For brokerage commissions paid to M&M REIBC in 1997, an amount of $16,000
was determined to be payable to EMC pursuant to the Brokerage Agreement. In
accordance with the terms of the Brokerage Agreement, the Company submitted the
calculation of M&M REIBC's net profit, as defined in such Agreement, to the
Company's independent directors for their review.
In connection with the IPO, the Company, the Operating Partnership,
M&M, M&M REIBC and EMC also entered into an agreement, pursuant to which M&M
REIBC agreed to provide, for ten years, real estate transaction, trend and other
information to the Company and its direct and indirect subsidiaries, including
the Operating Partnership and EMC. In return for the right to receive such
information, the Company provided M&M, the parent company of M&M REIBC, a
one-time grant of options to purchase 220,000 shares of Common Stock at the
initial public offering price of $19.50 per share. The option is vesting at a
rate of 20% per year over five years beginning one year after the completion of
the IPO.
Pathways Loan
In connection with the IPO, the Operating Partnership repaid the
outstanding indebtedness on the Pathways property, which was contributed to the
Operating Partnership. In return for such repayment, the Operating Partnership
received a note in the amount of $4.8 million from the two partnerships that are
co-tenants with the Operating Partnership in the Pathways Property. The note
bears interest at 9.0% per annum, has a maturity date of June 2001 and is
secured by the co-tenants' interest in the Pathways Property. As of December 31,
1997, the principal balance outstanding under the note was $4,596,000 and no
accrued interest was due to the Operating Partnership.
M&M Lease and Property Management
In June 1994, M&M entered into an agreement with the Company to lease
16,384 square feet of space at the office building housing the Company's
headquarters (the "Headquarters Building") at a monthly rent of $45,844, subject
to an annual cost of living adjustment. The lease has an initial term of five
years, with four successive renewal options of five years each. Pursuant to such
lease, for fiscal year 1997, M&M paid the Company an aggregate net lease
payment, including common area maintenance expenses, of $709,000.
The Company, through the Operating Partnership, owns all of the
non-preferred voting preferred stock of EMC. During 1997, EMC received
approximately $221,000 for property and asset management services for properties
that are not owned by the Company but in which Mr. Marcus holds a partial
ownership interest. The fees charged by EMC with respect to such properties are
comparable to the fees it charges for providing property and asset management
services for other properties.
19
<PAGE>
Indebtedness of Management
On April 15, 1996, December 31, 1996 and December 31, 1997 the
Operating Partnership made loans to Keith Guericke, Vice Chairman of the Board,
Chief Executive Officer and President of the Company, in the amount of $75,000
each. Each loan bears interest at 8% per annum, noncompounded, and are due and
payable in full, together with all accrued interest, ten years after the date
the loans were made. The loans were made to Mr. Guericke to pay certain tax
liabilities related to Mr. Guericke's ownership of interests in the Operating
Partnership. During 1997, the largest amount of the aggregate indebtedness
outstanding under the loans was $225,000. As of the Record Date, the entire
principal amounts of both loans were outstanding.
On April 30, 1996, December 31, 1996 and December 31, 1997 the
Operating Partnership made loans to Michael J. Schall, Executive Vice President
and Chief Financial Officer of the Company, in the amount of $50,000 each. Each
loan bears interest at 8% per annum, noncompounded, and are due and payable in
full, together with all accrued interest, ten years after the date the loans
were made. The loans were made to Mr. Schall to pay certain tax liabilities
related to Mr. Schall's ownership of interests in the Operating Partnership.
During 1997, the largest amount of the aggregate indebtedness outstanding under
the loans was $150,000. As of the Record Date, the entire principal amounts of
both loans were outstanding.
Property Acquisition
Certain partnerships, in each of which the Operating Partnership is a
special limited partner, acquired Anchor Village Apartments, the Highridge
Apartments property and interests in a property that was sold, in May 1997, May
1997 and January 1998, respectively. Pursuant to such transactions, an aggregate
of 53,876 units of limited partnership interests in such partnerships were
issued to Mr. Marcus, the Company's Chairman, in consideration of his ownership
interests in such properties. Mr. Marcus, like other holders of units, has the
right to tender his units for redemption. Subject to certain conditions, the
Company may elect to deliver shares of its Common Stock on a one-for-one basis
(subject to adjustment in certain circumstances) for the tendered units. If the
Company elects not to issue shares for such units, the applicable partnership
would then redeem such units for cash.
In June 1997, the Company acquired the Villa Scandia property for a
purchase price of $5.2 million from an affiliate of the entities that own all of
the Company's outstanding Preferred Stock. See "Voting Securities and Principal
Holders." The transaction was negotiated on an arms-length basis.
20
<PAGE>
PROPOSAL NO. 2
ELECTION OF PREFERRED STOCK DIRECTOR
The Company's Charter provides that the Preferred Stockholders, voting
as a class, have the right to elect one member of the Board of Directors
annually, to serve until the next annual meeting of Stockholders and until the
director successor is duly elected and qualified.
At the 1997 Annual Meeting of Stockholders, Mr. Hartman was elected by
the Board to serve until the 1998 Annual Meeting of Stockholders. Mr. Hartman is
now standing for reelection to the Board.
At the Annual Meeting, the Preferred Stockholders will vote on electing
Mr. Hartman as the Preferred Stock Director. The Board believes that such
nominee will stand for election and will serve if elected as a director.
However, in the event that he is unable or unwilling to serve as a director at
the time of the Annual Meeting, the proxies may be voted for any substitute
nominee designated by the present Board or the proxy holders to fill such
vacancy.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT THE PREFERRED STOCKHOLDERS VOTE FOR
THE NOMINEE LISTED BELOW.
Certain information about the nominee is furnished below. For further
information regarding Mr. Hartman, see "Voting Securities and Principal Holders"
and "Proposal No. 1. Election of Common Stock Directors -- Directors and
Executive Officers."
Gregory J. Hartman, Director, is a Managing Principal of Westbrook Real
Estate Partners, LLC, a national real estate investment and management entity.
Prior to joining Westbrook, Mr. Hartman was a co-founder of Milestone Partners,
Ltd. and spent seven years with Morgan Stanley Realty. During Mr. Hartman's last
two years at Morgan Stanley Realty, he was in charge of that firm's Western U.S.
Real Estate Sales and Financing activities. Mr. Hartman is a member of the Urban
Land Institute and the University of California at Berkeley's Center for Real
Estate and Urban Economics. Mr. Hartman received his A.B. from Dartmouth College
in 1980 and an M.B.A. from the Stanford Graduate School of Business in 1984.
21
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
KPMG Peat Marwick LLP served as the Company's independent auditors for
the fiscal year ended December 31, 1997 and has been appointed by the Board to
continue as the Company's independent auditors for the fiscal year ending
December 31, 1998. In the event that ratification of this appointment of
auditors is not approved by the affirmative vote of a majority of the votes cast
on the matter, then the appointment of independent auditors will be reconsidered
by the Board. Unless marked to the contrary, proxies received will be voted FOR
ratification of the appointment of KPMG Peat Marwick LLP as the independent
auditors for the fiscal year ending December 31, 1998.
A representative of KPMG Peat Marwick LLP is expected to be present at
the Annual Meeting. The representative will have an opportunity to make a
statement and will be able to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE COMMON STOCKHOLDERS VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1998
OTHER MATTERS
Stockholder Proposals
To be considered for presentation at the annual meeting of the
Company's stockholders to be held in 1999, a Stockholder proposal must be
received by Jordan E. Ritter, General Counsel, Essex Property Trust, Inc., 925
East Meadow Drive, Palo Alto, California 94303, no later than November 30, 1998.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") and the New York Stock Exchange initial reports of
ownership and changes in ownership of the Company's Common Stock. Reporting
Persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) reports they file. To the Company's knowledge, based solely on
its review of the copies of such reports received, the Company believes that
during its fiscal year ending December 31, 1997, all Reporting Persons complied
with all applicable filing requirements, except Mr. Mark Mikl and Mr. George
Marcus. Mr. Mikl was late in filing one (1) report, a Form 4 regarding four
stock purchases of a total of 30 shares of Company Common Stock through the
Company's 401(k) plan. Mr. Marcus was late in filing one (1) report, a Form 4
regarding a single transaction, the purchase of 53,876 limited partnership units
which can be exchanged into Company Common Stock.
Mr. Mikl and Mr. Marcus both filed a Form 5.
Other Matters
The Board is not aware of any other matter to be presented to the
Annual Meeting. If any other business is properly brought before the Annual
Meeting, the persons named in the enclosed proxy will act thereon according to
their best judgment.
22
<PAGE>
It is important that the proxies be returned promptly and that your
shares be represented. Stockholders are urged to mark, date, execute and
promptly return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors
/s/ Keith R. Guericke
-------------------------------
Keith R. Guericke
Vice Chairman of the Board,
Chief Executive Officer and President
March 31, 1998
Palo Alto, California
23
<PAGE>
1321-PS-98
24
<PAGE>
EPT28 2F DETACH HERE
PROXY
ESSEX PROPERTY TRUST, INC.
925 EAST MEADOW DRIVE
PALO ALTO, CALIFORNIA 94303
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON APRIL 28, 1998
Keith R. Guericke, Michael J. Schall and Jordan E. Ritter (the
"Proxyholders"), or any of them, each with the power of substitution, are hereby
authorized to represent and vote the shares of the undersigned, with all the
powers which the undersigned would possess if personally present, at the Annual
Meeting of Stockholders of Essex Property Trust, Inc. (the "Company"), to be
held on Tuesday, April 28, 1998, at 10:00 a.m., local time, and any
adjournments or postponements thereof.
Election of three directors (or if the nominee is not available for
election, such substitute as the Board of Directors or the Proxyholders may
designate). Nominees: KEITH R. GUERICKE, ISSIE N. RABINOVITCH and THOMAS E.
RANDLETT.
SEE REVERSE SIDE: IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN AND DATE ON THE REVERSE SIDE. YOU NEED NOT
MARK ANY BOXES.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE>
THIS IS YOUR PROXY
YOUR VOTE IS IMPORTANT.
ESSEX PROPERTY TRUST, INC.
1997 ACHIEVEMENTS
. Increased our multifamily holdings by over 60 percent, ending the year
controlling 10,700 units balanced between our targeted West Coast
markets: Southern California, the San Francisco Bay Area, and the
Pacific Northwest.
. Commenced the development of six multifamily projects, comprised of
1,300 units.
. Recorded Funds From Operations ("FFO") of $2.54 per share for the year
ended December 31, 1997 -- 14 percent higher than 1996.
. Increased total market capitalization 72 percent to approximately $1
billion.
EPT28 7F DETACH HERE
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
DIRECTOR NOMINEES LISTED ON THE REVERSE SIDE AND FOR PROPOSAL 3.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER.
IF NO SUCH DIRECTIONS ARE INDICATED, THE PROXYHOLDERS WILL HAVE AUTHORITY TO
VOTE FOR THE ELECTION OF ALL DIRECTORS, AND FOR PROPOSAL 3. IN THEIR DISCRETION,
THE PROXYHOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE ANNUAL MEETING.
1. Election of Directors (see reverse):
[_] FOR [_] WITHHELD [_] FOR ALL NOMINEES
ALL FROM ALL EXCEPT AS NOTED
NOMINEES NOMINEES ABOVE
2. Proposal 2 is voted on by Preferred Stockholders only.
3. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public auditors for 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED REPLY ENVELOPE.
Please sign exactly as your name appears herein. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
Signature: Date: Signature: Date:
------------------ ----- ------------------ ------
