<PAGE>
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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
[X]Definitive Proxy Statement Commission Only (as Permitted by
[_]Definitive Additional Materials Rule 14a-6(e)(2))
[_]Soliciting Material Pursuant to (S)240.14a-11(c) or (S)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):
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(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.
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[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
-----------------------------------------------------------------------------
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
ESSEX PROPERTY TRUST, INC.
925 East Meadow Drive
Palo Alto, California 94303
April 6, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 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 27, 1999, 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 27, 1999
The 1999 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
27, 1999, 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 four
Class II directors of the Company to serve until the 2002 Annual Meeting of
Stockholders and until their successors are elected and qualified: David W.
Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith, Jr.;
2. Election, by the holders of the Preferred Stock, of the following
Class I director to serve until the 2000 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, 1999; 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, 1999 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
April 6, 1999
<PAGE>
Mailed To Stockholders On Or About April 6, 1999
ESSEX PROPERTY TRUST, INC.
925 E. 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 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
1999 Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be
held on April 27, 1999, 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, 1999 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 16,742,616 shares of Common Stock and 1,512,500 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.
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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
of Common Stock
Percentage of Shares Outstanding and
Amount and Percentage of of Common Stock Operating Partnership
Nature of Class Outstanding and Interests and Shares
Name and Business Address Beneficial of Shares Operating Partnership of Preferred Stock
of Beneficial Owner Ownership(1)(2) Outstanding(3) Interests(4) (5)
- ------------------------- --------------- -------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Common Stock
George M. Marcus(6)(7)... 1,953,187 10.6% 10.4% 9.5%
Chairman of the Board of
Directors
William A.
Millichap(6)(8)......... 794,491 4.6 4.2 3.9
Director
Keith R. Guericke(6)(9).. 180,553 1.1 * *
Vice Chairman of the
Board, Chief Executive
Officer and President
Michael J.
Schall(6)(10)........... 142,874 * * *
Director, Executive Vice
President and Chief
Financial Officer
David W. Brady(6)(11).... 7,500 * * *
Director
Anthony Downs(6)(12)..... 3,667 * * *
Director
Gregory J.
Hartman(6)(13)(21)...... 2,500 * * *
Director
Robert E. Larson(6)(13).. 7,500 * * *
Director
Gary P. Martin(6)(14) 7,500 * * *
Director
Issie N.
Rabinovitch(6)(15)...... 7,500 * * *
Director
Thomas E.
Randlett(6)(15)......... 21,187 * * *
Director
Willard H. Smith, Jr.
(6)(16)................. 6,167 * * *
Director
All directors and
executive officers
as a group
(12 persons)(17)........ 2,335,232 12.5 12.3 11.3
Cohen & Steers(18)....... 2,238,750 13.4 12.0 11.0
Morgan Stanley, Dean
Witter,
Discover & Co. (19)..... 1,567,650 9.4 8.4 7.7
AMVESCAP, PLC(20)........ 1,317,108 7.9 7.1 6.5
Tiger/Westbrook Real
Estate Fund, L.P., and
Tiger/Westbrook Real
Estate Co. L.P.
Investment Partnership,
L.P.(21)................ 1,789,471 9.8 8.8 8.8
Preferred Stock
Tiger/Westbrook Real
Estate Fund, L.P., and
Tiger/Westbrook Real
Estate Co. L.P.
Investment Partnership,
L.P.(21)................ 1,512,500 100% ** **
</TABLE>
- --------
* Less than 1%.
** Not Applicable
(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
3
<PAGE>
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 16,742,616 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 94304.
(7) Includes 1,145,885 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,
9,200 shares of Common Stock held by GMMS, 176,000 shares of Common Stock
subject to an option granted to M&M and exercisable within 60 days of the
Record Date, 14,987 shares of Common Stock held in The Marcus & Millichap
Company 401(k) Plan (the "M&M 401(k) Plan") 6,667 shares of Common Stock
subject to options that are exercisable within 60 days of the Record Date
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, 701,048 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, 9,200 shares of Common Stock held by GMMS, 176,000 shares of Common
Stock subject to an option granted to M&M and exercisable within 60 days
of the Record Date, 2,500 shares of Common Stock subject to options that
are exercisable within 60 days of the Record Date and 10,443 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,
701,048 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
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<PAGE>
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 exchange of all of the limited partnership interests in the
Operating Partnership held by GMMS and 9,200 shares of Common Stock held
by GMMS. Also includes 55,000 shares of Common Stock subject to options
that are exercisable within 60 days of the Record Date, 4,117 shares of
Common Stock held in the Essex Property Trust, Inc. 401(k) Plan (the
"Essex 401(k) Plan") and 19,668 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, 52,613
shares of Common Stock (including shares issuable upon conversion of
limited partnership interests). Mr. Guericke disclaims beneficial
ownership of 10,865 of such 52,613 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 exchange of all of the limited partnership interests in the
Operating Partnership held by GMMS and 9,200 shares of Common Stock held
by GMMS. Also includes 41,000 shares of Common Stock subject to options
that are exercisable within 60 days of the Record Date, 2,806 shares of
Common Stock held in the Essex 401(k) Plan, and 15,038 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 52,613 shares of Common Stock (including shares issuable upon exchange
of limited partnership interests). Mr. Schall disclaims beneficial
ownership of 41,748 of such 52,613 shares. Further includes 729 shares of
Common Stock held by Mr. Schall's three minor children.
(11) Includes 5,300 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(12) Includes 2,667 shares of Common stock subject to options that are
exercisable within 60 days of the Record Date.
(13) Includes 2,500 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(14) Includes 3,834 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(15) Includes 6,500 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date.
(16) Includes 5,167 shares of Common Stock subject to options that are
exercisable within 60 days of the Record Date. Mr. Smith is a director of
certain funds of Cohen & Steers Capital Management (see "Proposal No. 1.
Election of Directors") and he disclaims beneficial ownership of the
shares of Common Stock of the Company held by Cohen & Steers Capital
Management.
(17) Includes 1,654,336 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 320,834 shares of
Common Stock subject to options that are exercisable within 60 days of
the Record Date.
(18) As reported on Schedule 13G filed with the SEC on February 8, 1999. 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 2,005,300 shares and sole dispositive power
over 2,238,700 shares of Common Stock. Address: 757 Third Avenue, N.Y.,
N.Y. 10017.
(19) As reported on Schedule 13G filed with the SEC on February 8, 1999.
Morgan Stanley Dean Witter Investment Management, Inc. is a wholly owned
subsidiary of Morgan Stanley, Dean Witter & Co. Both entities are
investment advisors registered under Section 203 of the Investment
Advisors Act of 1940. Morgan Stanley, Dean Witter & Co. has the shared
power to vote and direct the vote of 1,147,000 shares
5
<PAGE>
and shared dispositive power over 1,567,650 shares. Morgan Stanley Dean
Witter Investment Management, Inc. has the shared power to vote and direct
the vote of 739,500 shares and shared dispositive power over 1,160,150
shares. Addresses: Morgan Stanley, Dean Witter & Co., 1585 Broadway, New
York, New York 10036. Morgan Stanley Dean Witter Investment Management,
Inc., 1221 Avenue of the Americas, New York, New York.
(20) As reported on Schedule 13G filed with the SEC on February 8, 1999.
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. These
subsidiaries have the shared power to vote and direct the vote of
1,317,108 shares and shared dispositive power over 1,317,108 shares.
Address: AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, England.
(21) The business address of such entities is c/o Westbrook Partners, LLC, 345
California Street, Suite 3450, San Francisco, California 94104. 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 1,730,857 shares of Common Stock. As of the Record
Date, 87,500 shares of Preferred Stock have been converted into 100,000
shares of Common Stock.
6
<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 2001, 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 1999, 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 four directors
(collectively, the "Common Stock Directors"): if elected, nominees David W.
Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith will serve as
Class II directors for three-year terms. The Class II directors will serve
until the Annual Meeting of Stockholders to be held in 2002 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.
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.
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 TriVida Corporation. He is
7
<PAGE>
also Chairman of the Board of Simpler Energy, Inc., 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.
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, Essex Property
Corporation, 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.
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.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE COMMON STOCKHOLDERS VOTE FOR
THE ELECTION OF ALL NOMINEES NAMED ABOVE.
8
<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....................................... 57 1994 2000
Chairman of the Board
William A. Millichap................................... 55 1994 2000
Director
Keith R. Guericke...................................... 50 1994 2001
Vice Chairman of the Board,
Chief Executive Officer and President
Michael J. Schall...................................... 41 1994 1999
Director, Executive Vice President and
Chief Financial Officer
David W. Brady......................................... 58 1994 1999
Director
Anthony Downs.......................................... 68 1996 2000
Director
Gregory J. Hartman..................................... 40 1996 1999
Director
Robert E. Larson....................................... 60 1994 1999
Director
Gary P. Martin......................................... 51 1994 2000
Director
Issie N. Rabinovitch................................... 53 1994 2001
Director
Thomas E. Randlett..................................... 56 1994 2001
Director
Willard H. Smith, Jr................................... 62 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 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 Essex Property Corporation 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.
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 &
9
<PAGE>
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.
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, 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 Essex Property
Corporation, 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.
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, the Urban
Institute and Penton Media, Inc.. 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.
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.
Gary P. Martin, Director, is Vice President and Chief Financial Officer of
Halo Data Devices, a supplier of data storage products for the disk drive
market. He 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.
10
<PAGE>
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. 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.
Meetings and Committees of the Board of Directors
During 1998, the Board held eight (8) 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 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) eight (8) times during 1998.
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)
twice during 1998.
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
11
<PAGE>
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) twice during 1998.
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) four (4) times during
1998.
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 did not meet during 1998.
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 1998 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."
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 $20,000 in 1998 for consulting services performed by Mr.
Smith for the Company.
Each independent director, upon joining the Board of Directors, receives an
automatic grant of an option to purchase 4,000 shares of Common Stock at an
exercise price equal to 100% of the fair market value of the Common Stock at
the date of the grant of such option pursuant to the Company's 1994 Stock
Incentive Plan. In the event of a change in control of the Company, the Board
may unilaterally cancel a director option as of any date to the extent then
unexercised after advance written notice to each affected director.
In 1998, Mr. Millichap and each independent director received a grant of an
option to purchase 2,500 shares of Common Stock at an exercise price equal to
100% of the fair market value of the Common Stock at the date of the grant of
such option pursuant to the Company's 1994 Stock Incentive Plan. In 1998, Mr.
Marcus, the Company's Chairman, received an option to purchase 2,500 shares of
Common Stock at an exercise price equal to 100% of the fair market value of
the Common Stock at the date of the grant.
Relationships Among Directors or Executive Officers
There are no family relationships among any of the directors or executive
officers of the Company.
12
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Compensation
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and the other executive officer of
the Company (collectively, the "Named Executive Officers") for the years ended
December 31, 1996, 1997 and 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual -----------------------------------------
Compensation Awards
-------------- -----------------------------------------
Restricted Securities
Stock Underlying Stock
Name and Position Year Salary($) Bonus($) Awards($)(1) Options/SARs(#)(2)
- ----------------- ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Keith R. Guericke....... 1998 $250,000 -- $200,000(3) --
Vice Chairman of the
Board, 1997 100,000 $125,000 150,000(4) 55,000
Chief Executive
Officer and President 1996 100,000 -- 225,000(5) --
Michael J. Schall....... 1998 $215,000 -- $150,000(3) --
Director, Executive
Vice President 1997 100,000 90,000 125,000(4) 45,000
and Chief Financial
Officer 1996 100,000 -- 165,000(5) --
</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 to Mr. Guericke and
Mr. Schall for the 1998 fiscal year. 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
as of the grant date by the number of units granted, which, in the case of
Mr. Guericke, was $28.50 per share as of a February 12, 1999 grant date,
by 7,018 units granted and, in the case of Mr. Schall, was $28.50 per
share as of a February 12, 1999 grant date, by 5,263 units granted.
(4) Represents the value of phantom stock units granted in 1998 to Mr.
Guericke and Mr. Schall for the 1997 fiscal year. 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 as of the grant date by the number of units granted, which,
in the case of Mr. Guericke, was $30.06 per share as of a December 16,
1998 grant date, by 4,990 units granted and, in the case of Mr. Schall,
was $30.06 per share as of a December 16, 1998 grant date, by 4,158 units
granted.
(5) 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.
OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options granted to the Named Executive Officers during
the fiscal year ended December 31, 1998.
13
<PAGE>
LONG-TERM INCENTIVE AWARDS
On February 12, 1999, the Company granted Phantom Stock Units for the 1998
fiscal year to Keith Guericke, Vice Chairman of the Board, Chief Executive
Officer and President, and Michael Schall, Director, Executive Vice President
and Chief Financial Officer.
<TABLE>
<CAPTION>
Number of Shares, Units Performance or Other Period
Name or Other Rights(#)(1) Until Maturation or Payout
---- ----------------------- ---------------------------
<S> <C> <C>
Keith R. Guericke........ 7,018 January 1, 2004
Michael J. Schall........ 5,263 January 1, 2004
</TABLE>
- --------
(1) Represents number of units granted under the Company's Phantom Stock Unit
Agreements to Mr. Guericke and Mr. Schall. The units granted to Messrs.
Guericke and Schall on February 12, 1999 were based on the closing price
for the Common Stock on the New York Stock Exchange on February 12, 1999,
which was $28.50 per share.
On December 16, 1998, Phantom Stock Units were granted by the Company for
the 1997 fiscal year to Messrs. Guericke and Schall.
<TABLE>
<CAPTION>
Number of Shares, Units Performance or Other Period
Name or Other Rights(#)(1) Until Maturation or Payout
---- ----------------------- ---------------------------
<S> <C> <C>
Keith R. Guericke........ 4,990 January 1, 2003
Michael J. Schall........ 4,158 January 1, 2003
</TABLE>
- --------
(1) Represents number of units granted under the Company's Phantom Stock Unit
Agreements to Mr. Guericke and Mr. Schall. The units granted to Messrs.
Guericke and Schall on December 16, 1998 were based on the closing price
for the Common Stock on the New York Stock Exchange on December 16, 1998,
which was $30.06 per share.
A "unit" or "share" of phantom stock does not represent or entitle the
recipient to any equity securities of the Company, but instead involves the
creation of an unfunded account for the recipient, the value of which is
measured by reference to the value of the Common Stock. The Phantom Stock
Units issued to Messrs. Guericke and Schall vest in installments in accordance
with the vesting schedule set forth in the Phantom Stock Unit Agreements such
that the Phantom Stock Units granted on February 12, 1999 will be fully vested
on January 1, 2004, and the Phantom Stock Units granted on December 16, 1998
will be fully vested on January 1, 2003. On or shortly after January 1, 2004,
in the case of the February 12, 1999 grants, and January 1, 2003, in the case
of the December 16, 1998 grants, the Company will issue to each of Messrs.
Guericke and Schall the number of shares of Common Stock (and fractions
thereof) equal to the number of Phantom Stock Units then represented under the
Phantom Stock Unit Agreements, or at the Company's option, an equivalent
amount in cash. In the event of a Change in Control (as defined in the Phantom
Stock Unit Agreements), the executive will be paid immediately prior to the
effective date of the Change in Control the shares of Common Stock (or
equivalent amount of cash, at the Company's option) represented by the number
of Phantom Stock Units then represented under the Phantom Stock Unit
Agreements.
The Company shall pay to each of Messrs. Guericke and Schall as of the
payment date of each cash dividend with respect to the Common Stock an amount
equal to the aggregate dividends payable with respect to the number of shares
of Common Stock that are then respectively represented under the Phantom Stock
Unit Agreements. If either Mr. Guericke or Mr. Schall terminates his
employment relationship with the Company voluntarily prior to January 1, 2004,
in the case of the February 12, 1999 grants, and January 1, 2003, in the case
of the December 16, 1998 grants, the executive will forfeit the Phantom Stock
Units issued under the Phantom Stock Unit Agreements that are not vested at
the time of termination. If the executive's termination is due to death,
disability (as defined in the Phantom Stock Unit Agreements), a material and
adverse change in the executive's position, duties, responsibilities or
status, or other involuntary termination of employment, the executive (or his
estate) shall be issued the shares of Common Stock or cash to be paid on
January 1, 2004, in the case of the February 12, 1999 grants, and on January
1, 2003, in the case of the December 16, 1998 grants, under the Phantom Stock
Unit Agreements.
14
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
During the year ended December 31, 1998, 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, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options At Fiscal Year-End (#) at Fiscal Year-End ($)(1)
----------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
Keith R. Guericke....... 55,000 55,000 $451,000 $112,750
Michael J. Schall....... 41,000 44,000 328,000 82,000
</TABLE>
- --------
(1) Based on the closing price of the Company's Common Stock as reported on
the New York Stock Exchange on December 31, 1998 of $29.75 per share.
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 1998 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 1998 was 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
15
<PAGE>
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 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 1998 was $250,000, which had been determined through negotiations
between the Company and Mr. Guericke. The long-term incentive award for Mr.
Guericke for 1998 was determined on the same general basis as discussed above
for long-term incentive award grants to executive officers. In 1998, Mr.
Guericke received phantom stock units valued at $200,000, which was determined
by multiplying the closing price of the Company's Common Stock as of the grant
date by the number of phantom stock units issued to Mr. Guericke. Mr.
Guericke's base salary and long-term incentive awards 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
16
<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 1998 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.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Period Ending
- -------------------------------------------------------------------------------
- ---------------------------------
Index 6/7/94 12/31/94 6/30/95 12/31/95 6/30/96 12/31/96 6/30/97 12/31/97 6/30/98 12/31/98
- -------------------------------------------------------------------------------
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Essex 100.00 81.87 103.09 114.66 133.28 188.15 211.66 236.69 215.84 214.07
Property
Trust,
Inc.
S&P 500 100.00 101.86 122.44 140.13 154.26 172.17 207.65 229.62 270.29 295.24
NAREIT All 100.00 95.45 100.70 109.98 118.29 151.00 159.99 182.94 173.88 152.53
Equity
REIT
Index
</TABLE>
17
<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. 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 1998, an amount of $12,960 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, 1998, the principal balance outstanding under the
note was $4,452,000 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
approximately 16,384 square feet of space at the office building housing the
Company's headquarters (the "Headquarters Building") at a monthly rent of
approximately $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 1998, M&M paid the
Company an aggregate net lease payment, including common area maintenance
expenses, of $833,424.
The Company, through the Operating Partnership, owns all of the non-
preferred voting preferred stock of EMC. During 1998, EMC received
approximately $160,057 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.
Indebtedness of Management
On April 15, 1996, December 31, 1996, December 31, 1997 and December 31,
1998 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
18
<PAGE>
loans were made to Mr. Guericke to pay certain tax liabilities related to Mr.
Guericke's ownership of interests in the Operating Partnership. During 1998,
the largest amount of the aggregate indebtedness outstanding under the loans
was $300,000. As of the Record Date, the entire principal amounts of all the
loans were outstanding.
On April 30, 1996, December 31, 1996, December 31, 1997 and December 31,
1998 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 1998, the largest amount of the aggregate indebtedness
outstanding under the loans was $200,000. As of the Record Date, the entire
principal amounts of all the loans were outstanding.
Non-Competition Agreement
In February 1999, the Company entered into an agreement with Mr. Marcus,
its Chairman, which replaces and terminates a non-competition agreement that
Mr. Marcus entered into in 1994 in connection with the Company's initial
public offering. Under the February 1999 agreement, Mr. Marcus must generally
give the company notice of any contract, which he or his affiliates enter
into, for the purchase of a multifamily property. If the Company has submitted
a written offer for the same property, then the Company at its option may
require Mr. Marcus to assign his or his affiliate's contract to the Company.
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 1998 Annual Meeting of Stockholders, Mr. Hartman was elected by the
Board to serve until the 1999 Annual Meeting of Stockholders. Mr. Hartman is
now standing for reelection to the Board.
At the Annual Meeting, the Preferred Stockholders will elect 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.
19
<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, 1998 and has been appointed by the Board to
continue as the Company's independent auditors for the fiscal year ending
December 31, 1999. 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, 1999.
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, 1999
OTHER MATTERS
Deadline for Receipt of Stockholder Proposals
Requirements for Stockholder Proposals to be Brought Before an Annual
Meeting. For stockholder proposals to be considered properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
therefor in writing to Jordan E. Ritter, the Secretary of the Company. To be
timely for the Company's 2000 Annual Meeting of Stockholders, a stockholder's
notice must be received by the Secretary at the principal executive offices of
the Company, no earlier than January 28, 2000 and no later than February 25,
2000. In the event that the date of the 2000 Annual Meeting is advanced to a
date before March 28, 2000 or delayed to a date after June 26, 2000, to be
timely, notice by the stockholder must be so delivered not earlier than the
90th day prior to the 2000 Annual Meeting and not later than the close of
business on the later of the 60th day prior to the 2000 Annual Meeting or the
tenth day following the day on which public announcement of the date of the
2000 Annual Meeting is first made. A stockholder's notice shall set forth (i)
as to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(ii) as to any other business that the stockholder proposes to bring before
the meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner and (y) the number of shares of each class of stock of the Company which
are owned beneficially and of record by such stockholder and such beneficial
owner.
Requirements for Stockholder Proposals to be Considered for Inclusion in
the Company's Proxy Materials. Stockholder proposals submitted pursuant to
Rule 14a-8 under the Exchange Act and intended to be presented at the
Company's 2000 Annual Meeting of Stockholders must be received by the Company
not later than December 10, 1999 in order to be considered for inclusion in
the Company's proxy materials for that meeting.
20
<PAGE>
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, 1998, all Reporting Persons
complied with all applicable filing requirements.
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.
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
April 6, 1999
Palo Alto, California
21
<PAGE>
1321-PS-99
<PAGE>
ESSEX PROPERTY TRUST, INC.
c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040
ESSEX PROPERTY TRUST, INC.
1998 Achievements
. Revenues and net operating income, reported on a same-property basis,
increased 8.1% and 12.3%, respectively. These growth rates were among
the highest in the multifamily-REIT sector.
. Dividends increased 11% in May 1998 while the Company maintained a
conservative dividend payout ratio of 68%.
. The Company acquired $156 million in multifamily properties concentrated
in the Northern and Southern California regions.
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 27, 1999
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 Properly Trust, Inc. (the "Company"), to be
held on Tuesday, April 27, 1999, at 10:00 a.m. local time, and any adjournments
or postponements thereof.
Election of four directors (or if the nominee is not available for election,
such substitute as the Board of Directors or the Proxyholders may designate).
Nominees: DAVID W. BRADY, ROBERT E. LARSON, MICHAEL J. SCHALL and WILLARD H.
SMITH, JR.
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 CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
[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
ALL FROM ALL
NOMINEES NOMINEES
[_] _______________________________________
For all nominees except as noted above
2. Proposal 2 is voted on by Preferred Stockholders only.
3. To ratify the appointment or KPMG Peat Marwick LLP as the Company's
independent public auditors for 1999.
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: _________
