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
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Glenborough Realty Trust Incorporated
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
( ) 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
<PAGE>
GLENBOROUGH REALTY TRUST
INCORPORATED
Notice Of Annual Meeting Of Stockholders
To Be Held May 14, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Glenborough Realty Trust Incorporated (the "Company") will
be held on Thursday, May 14, 1998 at 10:00 a.m. local time, at Hotel Sofitel,
223 Twin Dolphin Drive, Redwood City, California, to consider and vote upon the
following matters:
1. To elect two Class I Directors for terms ending in 1999, two Class II
Directors for terms ending in 2000, and two Class III Directors for terms ending
in 2001.
2. To ratify the retention of Arthur Andersen LLP as the Company's
independent auditors for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before the Annual
Meeting and at any postponements or adjournments thereof.
The foregoing items of business, including the nominees for directors,
are more fully described in the proxy statement which is attached and made part
of this Notice. The Board of Directors has fixed the close of business on March
23, 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.
All stockholders, whether or not they expect to attend the Annual
Meeting in person, are requested to complete, date and sign the enclosed form of
Proxy and return it promptly in the postage paid, return-addressed envelope
provided for that purpose. By returning your Proxy promptly you can help the
Company avoid the expense of follow-up mailings to ensure a quorum so that the
Annual Meeting can be held. Stockholders who attend the Annual Meeting may
revoke a prior proxy and vote in person as set forth in the Proxy Statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
/s/ ROBERT BATINOVICH
ROBERT BATINOVICH
Chairman and Chief Executive Officer
San Mateo, California
April 14, 1998
<PAGE>
Mailed to Stockholders on or about April 14, 1998
GLENBOROUGH REALTY TRUST
INCORPORATED
400 South El Camino Real, 11th Floor
San Mateo, California 94402-1708
--------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 14, 1998
--------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of the Company of proxies to be voted at
the Annual Meeting of Stockholders (the "Annual Meeting") of the Company to be
held at Hotel Sofitel, 223 Twin Dolphin Drive, Redwood City, California, on May
14, 1998 at 10:00 a.m. local time and at any and all postponements or
adjournments thereof.
Revocability of Proxies
Any Proxy may be revoked at any time prior to the exercise thereof by
submitting another Proxy bearing a later date or by giving written notice of
revocation to the Company at the Company's address indicated above (to the
attention of Janet Nelson) or by voting in person at the Annual Meeting. Any
notice of revocation sent to the Company must include the stockholder's name and
must be received prior to the Annual Meeting to be effective.
Solicitation and Voting of Proxies
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 beneficial owners of the
Company's Common Stock (as defined below). 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
stockholders entitled to cast a majority of all the votes entitled to be cast at
the Annual Meeting will constitute a quorum for the transaction of business at
the Annual Meeting. Holders of the Company's Common Stock, par value $0.001 per
share (the "Common Stock"), are entitled to vote at the Annual Meeting. The
close of business on March 23, 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 all matters to be voted upon at the Annual
Meeting. As of the Record Date, there were 31,549,256 shares of Common Stock
outstanding.
Stockholder votes will be tabulated by the person or persons appointed
by the Board to act as inspector 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 No.
2. Shares represented by a properly executed and delivered proxy will be voted
at the Annual Meeting and, when instructions have been given by the holder, will
be voted in accordance with those instructions. If no instructions are given,
the shares will be voted FOR the election of each of the six nominees for
director named to their respective Class below and FOR Proposal No. 2.
Page 1 of 16
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to the Company
regarding beneficial ownership of shares of Common Stock as of the Record Date
by (i) each director and each of the executive officers named in the executive
compensation table below, (ii) all directors and executive officers as a group,
and (iii) each person known by the Company to beneficially own more than 5% of
the Company's Common Stock. On January 28, 1998, the Company completed the
issuance and sale of 11,500,000 shares of its 7 3/4% Series A Convertible
Preferred Stock (the "Series A Preferred Stock"). Except as set forth below,
none of the directors and executive officers own any shares of the Company's
Series A Preferred Stock.
<TABLE>
<CAPTION>
Name and Business Address of Amount and Percentage of Percentage of Shares
Nature of Shares Outstanding, Operating
Beneficial Owner Beneficial Outstanding(2) Partnership Interests and
Ownership(1) Series A Preferred Stock(3)
- ---------------------------------------- ------------ --------------- ----------------------------
<S> <C> <C> <C>
Directors and Officers(4)
Robert Batinovich (5) 1,666,165 5.2% 3.9%
Andrew Batinovich (6) 306,791 1.0% *
Sandra L. Boyle (7) 5,982 * *
Stephen R. Saul 4,150 * *
Frank E. Austin (8) 9,487 * *
Richard C. Blum 2,000 * *
Patrick Foley 24,135 * *
Richard A. Magnuson 7,000 * *
Laura Wallace 7,900 * *
All directors and executive officers 2,039,640 6.4% 4.8%
as a group (11 persons) (9)
Greater than 5% Stockholders
FMR Corp. (10) 3,462,200 11.0% 8.1%
The Equitable Companies
Incorporated(11) 3,296,300 10.4% 7.7%
Lazard Freres & Co. LLC (12) 1,717,830 5.4% 4.0%
</TABLE>
- ------------------------------------------
* less than 1.0%.
(1) Certain of the officers hold or control, in the aggregate, limited
partnership interests representing approximately 21.6% of Glenborough
Partners, a California limited partnership ("Partners"), which holds
approximately a 2.2% interest in Glenborough Properties, L.P., a
California limited partnership (the "Operating Partnership"), in which
the Company has a 1% general partnership interest and approximately a
91.5% limited partnership interest, assuming no shares of Series A
Preferred Stock have been converted into shares of Common Stock. Such
officers, through their interest in Partners, share indirectly, with the
Company, in the net income or loss and any distributions of the
Operating Partnership. In addition, certain of the officers beneficially
own in the aggregate approximately 2% of the equity securities (in the
form of common stock) of Glenborough Corporation ("GC"), in which the
Company holds 95% of the equity securities (in the form of non-voting
preferred stock); GC holds approximately a 0.2% interest in the
Operating Partnership, assuming no shares of Series A Preferred Stock
have been converted into shares of Common Stock. Pursuant to the
partnership agreement of the Operating Partnership, Partners and GC hold
certain redemption rights under which their respective interests in the
Operating Partnership could at some point be redeemed in exchange for
shares of the Company's Common Stock.
(2) Assumes conversion of only the limited partnership interests in the
Operating Partnership owned by such owner, indirectly (through its
interest in Partners or GC) or directly, into shares of the Company's
Common Stock. Assumes only the exercise of options held by such owner
that are exercisable within 60 days of the Record Date, and only the
conversion of Series A Preferred Stock held by such owner. The total
number of shares outstanding used in calculating this percentage assumes
that (i) none of the other limited partnership interests are converted
into shares of the Company's Common Stock, (ii) options held by other
individuals are not exercised and (iii) no shares of Series A Preferred
Stock have been converted into shares of Common Stock except for shares
of Series A Preferred Stock held by such owner.
Page 2 of 16
<PAGE>
(3) Assumes conversion of all outstanding limited partnership interests in
the Operating Partnership (other than the limited partnership interests
owned by the Company) into shares of Common Stock, and the conversion of
all outstanding shares of Series A Preferred Stock into shares of Common
Stock.
(4) The business address of each director and officer is 400 South El Camino
Real, Suite 1100, San Mateo, California 94402-1708.
(5) Includes 350,000 shares of the Company's Common Stock that may be issued
upon exercise of currently exercisable stock options held by Robert
Batinovich. Includes 69,166 shares of the Company's Common Stock that
may be issued upon redemption of Robert Batinovich's interest in the
Operating Partnership. Includes 137,580 shares of the Company's Common
Stock that may be issued upon the redemption of Partners' interest in
the Operating Partnership, which represents Robert Batinovich's portion
of all shares of the Company's Common Stock that may be issued to
Partners upon such redemption. Includes 19,984 shares of the Company's
Common Stock which represents Robert Batinovich's portion of all shares
of the Company's Common Stock that is owned by Partners. Excludes 54,627
shares of the Company's Common Stock held by S.S. Rainbow, a California
limited partnership ("S.S. Rainbow") in which Robert Batinovich's adult
son, Andrew Batinovich, is general partner, and his daughter, Angela
Batinovich, is a limited partner, which represents Angela Batinovich's
portion of all shares of the Company's Common Stock held by S.S.
Rainbow. Also excludes, (i) 2,549 shares of the Company's Common Stock
that may be issued upon the redemption of Partners' interest in the
Operating Partnership, which represents Angela Batinovich's portion of
all shares of the Company's Common Stock that may be issued to Partners
upon such redemption; (ii) 370 shares of the Company's Common Stock
which represents Angela Batinovich's portion of all shares of the
Company's Common Stock that is owned by Partners; and (iii) 1,300 shares
of the Company's Common Stock, all of which are held by a trust as to
which Angela Batinovich is sole beneficiary and an independent third
party is trustee.
(6) Includes 5,712 shares of the Company's Common Stock that may be issued
upon the redemption of Partners' interest in the Operating Partnership,
which represents Andrew Batinovich's portion of all shares of the
Company's Common Stock that may be issued to Partners upon such
redemption. Includes 830 shares of the Company's Common Stock which
represents Andrew Batinovich's portion of all shares of the Company's
Common Stock that is owned by Partners. Also includes 110,357 shares of
the Company's Common Stock held by S.S. Rainbow in which Andrew
Batinovich is sole general partner and his sister, Angela Batinovich, is
a limited partner. Of the total shares held by S.S. Rainbow, Andrew
Batinovich's pro rata portion is 55,730 shares and Angela Batinovich's
pro rata portion is 54,627. Angela Batinovich's 54,627 shares
(beneficially owned through her interest in S.S. Rainbow) are not
attributed to Robert Batinovich (her father), but only to Andrew
Batinovich (the general partner of S.S. Rainbow) for purposes of this
table.
(7) Includes 333 shares of the Company's Common Stock that may be issued
upon the redemption of Partners' interest in the Operating Partnership,
which represents Sandra Boyle's portion of all shares of the Company's
Common Stock that may be issued to Partners upon such redemption.
Includes 48 shares of the Company's Common Stock which represents Sandra
Boyle's portion of all shares of the Company's Common Stock that is
owned by Partners. Also includes 601 shares of the Company's Common
Stock that may be issued upon the redemption of GC's interest in the
Operating Partnership, which represents Sandra Boyle's portion of all
shares of the Company's Common Stock that may be issued to GC upon such
redemption.
(8) Includes 466 shares of the Company's Common Stock that may be issued
upon the redemption of Partners' interest in the Operating Partnership,
which represents Frank Austin's portion of all shares of the Company's
Common Stock that may be issued to Partners upon such redemption.
Includes 68 shares of the Company's Common Stock which represents Frank
Austin's portion of all shares of the Company's Common Stock that is
owned by Partners. Also includes 601 shares of the Company's Common
Stock that may be issued upon the redemption of GC's interest in the
Operating Partnership, which represents Frank Austin's portion of all
shares of the Company's Common Stock that may be issued to GC upon such
redemption. Includes 152 shares of Common Stock issuable upon conversion
of 200 shares of the Company's Series A Preferred Stock.
(9) Includes: 214,458 shares of the Company's Common Stock that may be
issued upon the redemption of Mr. Batinovich's and Partners' interest in
the Operating Partnership, which includes all officers' and directors'
aggregate portion of all shares of the Company's Common Stock that may
be issued to Partners upon such redemption; 152 shares of the Company's
Common Stock that may be issued upon conversion of 200 shares of Series
A Preferred Stock; and 350,000 shares of the Company's Common Stock that
may be issued upon exercise of currently exercisable stock options.
(10) Share amount as reported on Schedule 13G filed with the Securities and
Exchange Commission ("SEC") and dated February 14, 1998. Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp.
("FMR") and an investment adviser registered
Page 3 of 16
<PAGE>
under Section 203 of the Investment Advisers Act of 1940 (the "Investment
Act"), is the beneficial owner of 3,462,200 shares of Common Stock as a
result of acting as investment adviser to various investment companies.
Edward C. Johnson 3d, FMR, through its control of Fidelity, and the Funds
each has sole power to dispose of the 3,462,200 shares owned by the
Funds. Neither FMR nor Edward C. Johnson 3d, Chairman of FMR, has the
sole power to vote or direct the voting of the shares owned directly by
the Fidelity Funds, which power resides with the Funds' Boards of
Trustees. Fidelity carries out the voting of the shares under written
guidelines established by the Funds' Boards of Trustees. Fidelity
Management Trust Company ("Fidelity Trust"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR and a bank
as defined in Section 3(a)(6) of the Securities Exchange Act of 1934, is
the beneficial owner of 476,100 shares of such Common Stock as a result
of its serving as investment manager of the institutional account(s).
Edward C. Johnson 3d and FMR, through its control of Fidelity Trust, each
has sole voting and dispositive power over 476,100 shares of Common Stock
owned by the institutional account(s) as reported above.
(11) Share amount as reported on Schedule 13G filed with the SEC and dated
March 10, 1998. Equitable Companies, Inc., 787 Seventh Ave., New York,
NY 10019. Includes (i) 15,000 shares owned by The Equitable Life
Assurance Society of the United States, a majority owned subsidiary of
The Equitable Companies Incorporated, which is deemed to have the shared
power to vote all of such shares and the sole power to dispose of all
such shares, (ii) 3,232,400 shares owned by Alliance Capital Management,
L.P., a subsidiary of The Equitable Companies Incorporated, which holds
such shares for investment advisory clients and is deemed to have the
sole power to vote of 1,250,200 shares and the sole to dispose of all
such shares, and (iii) 48,000 shares owned by Donaldson, Lufkin &
Jenrette Securities Corporation, a subsidiary of The Equitable Companies
Incorporated, which holds such shares for investment advisory clients
and is deemed to have the shared power to dispose of all such shares.
Five French mutual insurance companies, AXA Assurances I.A.R.D.
Mutuelle, AXA Assurances Vie Mutuelle, Alpha Assurances Vie Mutuelle,
and AXA Courtage Assurance Mutuelle, as a group, and AXA-UAP, a French
corporation, may each be deemed to be a parent company of The Equitable
Companies Incorporated, and may also be deemed to beneficially own such
shares.
(12) Share amount as reported on Schedule 13G filed with the SEC and dated
February 18, 1998. Lazard Freres & Co. LLC ("Lazard"), 30 Rockfeller
Plaza, New York, NY 10020, an investment adviser, is the beneficial
owner of 1,717,830 shares of Common Stock. Lazard has sole voting power
over 1,606,880 shares and the sole dispositive power over 1,717,830
shares.
Page 4 of 16
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board has determined it to be in the best interests of
the Company and the stockholders to amend the Company's Bylaws to provide for a
staggered Board of Directors. The Bylaws, as amended, divide the Company's Board
of Directors into three classes, each of which contains one-third of the number
of the members of the Board. Under the amended Bylaws, the members of each class
are elected for a term of three years and until their successors are elected and
qualified, with one class being elected by stockholder vote annually. The only
exception is this first election of directors to their respective Classes of the
staggered board. At this first election, Class I directors will be elected for
one year terms, Class II directors will be elected for two year terms and Class
III directors will be elected for three year terms. At subsequent Annual
Meetings, the class of directors whose term is then expiring will be filled with
directors elected to three-year terms.
The Company's Board of Directors currently consists of six directors.
The Board of Directors of the Company has nominated, and recommends for election
as directors, the six persons named below, all six of whom are currently serving
as directors of the Company, each to hold office as follows: Richard C. Blum and
Richard A. Magnuson as Class I directors with terms ending in 1999; Robert
Batinovich and Patrick Foley as Class II directors with terms ending in 2000;
and Andrew Batinovich and Laura Wallace as Class III directors with terms ending
in 2001. Unless authority is withheld or any nominee is unwilling or unable to
serve, which the Board does not expect, the persons named in the enclosed proxy
will vote such proxy for the election of such nominees. The Board of Directors
has no reason to believe that any nominee will be unable to serve. The
affirmative vote of a plurality of the shares of Common Stock present or
represented to vote at the Annual Meeting is necessary to elect each director
nominee. For purposes of the election of directors, abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the
result of the vote.
Information Regarding Director Nominees
Certain information about each of the director nominees is furnished
below:
Robert Batinovich has served as the Company's Chairman and Chief
Executive Officer since the Company began operations on December 31, 1995. Mr.
Batinovich also served as President of the Company since the Company began
Operations through September 1997. He also was the founder of Glenborough
Corporation and certain of its affiliates, and has been engaged in real estate
investment and management, and corporate finance, since 1970. He served as
President, Chief Executive Officer and Chairman of Glenborough Corporation from
its formation in 1978 until its consolidation and merger with the Company (the
"Consolidation") on December 31, 1995. Mr. Batinovich served as a member of the
California Public Utilities Commission from 1975 to 1979, serving as its
President the last three years. He is a member of the Board of Directors of the
Farr Company, a publicly held company that manufactures industrial filters. Mr.
Batinovich's business background includes seven years as an executive with
Norris Industries, and managing and/or owning manufacturing, vending and service
companies and a national bank, and providing investment consulting to businesses
and individuals. He has served on a number of governmental commissions and
participated in a variety of policy research efforts sponsored by government
bodies and universities.
Andrew Batinovich has served as director, Executive Vice President,
Chief Operating Officer and Chief Financial Officer of the Company since the
Company began operations on December 31, 1995 until September 1997 when he
became President and Chief Operating Officer of the Company. He also served as a
director of Glenborough Corporation prior to the Consolidation, was employed by
Glenborough Corporation from 1983 until the Consolidation and functioned as its
Chief Operating Officer and Chief Financial Officer since 1987. Mr. Batinovich
holds a California real estate broker's license and is a Member of the National
Advisory Council of Building Owners and Managers Association ("BOMA")
International. Prior to joining Glenborough, Mr. Batinovich was a lending
officer with the International Banking Group and the Corporate Real Estate
Division of Security Pacific National Bank. Mr. Batinovich has a B.A. in
International Finance from the American University of Paris.
Page 5 of 16
<PAGE>
Richard C. Blum was elected a director of the Company in January 1998.
Mr. Blum is chairman and president of Richard C. Blum & Associates, Inc., which
is the general partner of Richard C. Blum & Associates, L.P., a merchant banking
firm which acts as general partner for various investment partnerships. Mr. Blum
also serves as a director of URS Corporation (architectural and engineering
services) and CB Commercial Real Estate Group (formerly Coldwell Banker, a
holding company for various real estate enterprises). Mr. Blum also has served
as a director of Northwest Airlines Corporation since 1989.
Patrick Foley has served as director of the Company since January 11,
1996. He is also Chairman and Chief Executive Officer of DHL Corporation. Inc.,
and its major subsidiary, DHL Airways, positions he has held since 1988. Prior
to joining DHL, Mr. Foley was associated with the Hyatt Hotels Corporation
("Hyatt") for 26 years: in a variety of capacities, from 1962 to 1972; as
Executive Vice President for Operations, from 1972 to 1978; as President, from
1978 to 1984; as Chairman from 1984 to 1988; as Vice Chairman and later Chief
Executive Officer of Braniff Airlines, a Hyatt subsidiary, from 1984 to 1988.
Mr. Foley currently is a member of the boards of directors of Continental
Airlines, Inc., Foundation Health Systems, Inc., Del Monte Foods Corporation and
Flextronics International Ltd.
Richard A. Magnuson has served as director of the Company since January
11, 1996. He is also Managing Director at Nomura International, plc. ("Nomura"),
consultant to domestic and international Fortune 1000 companies. Mr. Magnuson
joined Nomura in 1997, prior to which he served as a director at Nomura
Securities International Inc. ("Nomura International"), a position he held since
March 1994. Before joining Nomura International, Mr. Magnuson was a director in
Real Estate Investment Banking at Merrill Lynch & Co. for five years. Mr.
Magnuson is an active member of the Urban Land Institute, the National
Association of Real Estate Investment Trusts, and the International Council of
Shopping Centers.
Laura Wallace has served as director of the Company since January 11,
1996. She is also Chief Investment Officer of the Public Employees Retirement
System of Nevada (the "System"), a position she has held since 1985 and to which
she was promoted after serving four years as Investment Analyst. The System
comprises 60,000 active members, 40,000 inactive members, and 15,000 benefit
recipients, with an investment portfolio of $10.2 billion. Prior to joining the
System, Ms. Wallace served from 1977 to 1980 as Manager of the Beaverton, Oregon
office of Safeco Title Insurance Company, and from 1975 to 1977 as Senior
Assistant Manager of the Beaverton office of Household Finance Corporation. Ms.
Wallace is a member of the executive council of the National Association of
State Investment Officers, of which she is past chairman; a member of the
National Council on Teacher Retirement; a member of the Advisory Board for the
Retired Senior Volunteer Program; past member of the Editorial Board of the
Institutional Real Estate Letter; and serves as guest lecturer at the University
of Nevada.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR THE ELECTION
OF EACH NOMINEE NAMED ABOVE
Page 6 of 16
<PAGE>
Directors and Executive Officers
The following table sets forth certain information as of the Record
Date with respect to the directors and the executive officers, including their
ages.
<TABLE>
<CAPTION>
Name Age Term Principal Position
Expires
- -------------------- ----- ------- -------------------------------------------------------------
<S> <C> <C> <C>
Robert Batinovich 61 1998 Chairman and Chief Executive Officer
Andrew Batinovich 39 1998 Director, President and Chief Operating Officer
Sandra L. Boyle 49 -- Executive Vice President
Stephen R. Saul 44 -- Executive Vice President and Chief Financial Officer
Frank E. Austin 50 -- Senior Vice President, General Counsel and Secretary
Terri Garnick 37 -- Senior Vice President, Chief Accounting Officer and Treasurer
Steve F. Hallsey 46 -- Senior Vice President, Commercial Property Management
Richard C. Blum 62 1998 Director
Patrick Foley 66 1998 Director
Richard A. Magnuson 40 1998 Director
Laura Wallace 44 1998 Director
</TABLE>
Biographical information concerning the director nominees is set forth
above under the caption "Proposal No. 1, Election of Directors." Biographical
information concerning the executive officers is set forth below.
Sandra L. Boyle has served as Executive Vice President of the Company
since September 1997, prior to which she served as Senior Vice President of the
Company since it began operations on December 31, 1995. Ms. Boyle has been
associated with Glenborough Corporation or its affiliated entities since 1984.
She was originally responsible for residential marketing. Her responsibilities
were gradually expanded to include residential leasing and management in 1985,
and commercial leasing and management in 1987. She was elected Vice President of
Glenborough Corporation in 1989. She currently supervises asset management,
property management and management information services for the Company. Ms.
Boyle holds a California real estate broker's license and a CPM designation, is
a past President of BOMA San Francisco, and is a member of the National Advisory
and Finance Committee of BOMA International, and the Board of Directors of BOMA
San Francisco and BOMA California.
Stephen R. Saul has served as Vice President of the Company since May
1996 and became the Company's Executive Vice President and Chief Financial
Officer in September 1997. He has served as Manager of Real Estate Finance since
joining Glenborough Corporation in April 1995. Prior to joining Glenborough
Corporation, Mr. Saul served for four years as President of KSA Financial
Corporation, a company which was based in Sacramento, California and which
originated equity and debt financing for real estate projects in Northern
California; he also served five years with Security Pacific National Bank and
five years with the development company of Harrington and Kulakoff. Mr. Saul has
a B.A. in Architecture and Urban Studies from Stanford University and an M.B.A.
from Harvard University.
Frank E. Austin has served as Senior Vice President, General Counsel
and Secretary of the Company since the Company began operations on December 31,
1995. Mr. Austin also served as a Vice President of Glenborough Corporation from
1985 until the completion of the Consolidation. He is a member of the State Bar
of California. Prior to joining Glenborough, Mr. Austin served for three years
as committee counsel in the California State Senate, three years with the law
firm of Neumiller & Beardslee, and four years at State Savings and Loan
Association and American Savings and Loan Association.
Terri Garnick has served as Senior Vice President, Chief Accounting
Officer and Treasurer of the Company since the Company began operations on
December 31, 1995. Ms. Garnick joined Glenborough Corporation in 1989, and
between that time and the completion of the Consolidation was responsible for
property
Page 7 of 16
<PAGE>
management, accounting, financial statements, audits, SEC reports, and tax
returns for partnerships under management of Glenborough Corporation and its
affiliates. Prior to joining Glenborough Corporation in 1989, Ms. Garnick was a
controller at August Financial Corporation from 1986 to 1989 and was a Senior
Accountant at Deloitte Haskins & Sells from 1983 to 1986. She is a Certified
Public Accountant.
Steve F. Hallsey joined the Company on January 12, 1998, as Senior Vice
President of Commercial Property Management. Prior to joining the Company, Mr.
Hallsey served for three years as President and Chief Operating Officer of
Western National Group, a national property management firm based in Irvine,
California; and for two years as President of the Harbor Group of Norfolk,
Virginia, which owned and operated a regional portfolio of commercial and
multifamily properties. He also served four years as a Senior Vice President of
Balcor Property Management and six years as Senior Executive Vice President of
Clark Financial Corporation, a regional property management firm based in Salt
Lake City, Utah. Mr. Hallsey serves on the boards of directors of the National
Multi Housing Counsel and the California Apartment Association, and is the
founder of the South Coast Apartment Association.
Board Meetings, Committees and Compensation
During the fiscal year ended December 31, 1997, the Board of Directors
held five meetings. All directors attended at least 75% of the aggregate number
of meetings of the Board of Directors and of the committees of the Board on
which they serve. The Board has an Audit Committee and the Compensation
Committee. The Audit Committee and the Compensation Committee, and their
respective membership, were established in January 1996. The Board does not
presently have a separate nominating committee, the function of which is handled
by the Board as a whole.
The Audit Committee. The Audit Committee consists of Laura Wallace and
Richard A. Magnuson. During the fiscal year ended December 31, 1997, the Audit
Committee met twice. The Audit Committee reviews with the Company's independent
accountants the annual reports received from such auditors; reviews with the
independent auditors the scope of the succeeding annual audit; nominates the
independent auditors to be selected each year by the Board; reviews consulting
services rendered by the Company's independent auditors and evaluates the
possible effect on the auditors' independence of performing such services;
ascertains the existence of adequate internal accounting and control systems;
and reviews with management and the Company's independent auditors current and
emerging accounting and financial reporting requirements and practices affecting
the Company.
The Compensation Committee. The Compensation Committee consists of
Patrick Foley, Laura Wallace and Richard A. Magnuson. During the fiscal year
ended December 31, 1997, the Compensation Committee met twice. The Compensation
Committee reviews the Company's compensation philosophy and programs and
determines compensation for the Company's executive officers. The Compensation
Committee administers the Company's 1996 Stock Incentive Plan. The Compensation
Committee also takes all independent action required under the federal
securities laws and the Internal Revenue Code on all matters pertaining to
compensation programs and policies (including employee incentive and benefits
programs), and reports to the Board concerning its actions.
Compensation. The Company pays an annual retainer fee of $20,000 to its
non-employee directors ("Independent Directors"). The Company also reimburses
Independent Directors for travel expenses incurred in connection with their
activities on behalf of the Company. In addition, each Independent Director
receives $500 for each committee meeting the director attends, with the chairman
of the respective committee receiving $1,000 for each committee meeting.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1997, Messrs. Foley and
Magnuson and Ms. Wallace, each of whom is an Independent Director, served on the
Compensation Committee of the Board of Directors. No interlocking relationship
presently exists between any member of the Compensation Committee and any member
of the Board of Directors or Compensation Committee of any other corporation.
Page 8 of 16
<PAGE>
Relationships Among Directors or Executive Officers
Robert Batinovich, the Company's Chairman and Chief Executive Officer,
is the father of Andrew Batinovich, the Company's director, President and Chief
Operating Officer. There are no other family relationships among any directors
and executive officers of the Company.
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation
of the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company (the "Named Executive Officers")
during the fiscal years ended December 31, 1996 and 1997. The Company began its
operations on December 31, 1995. No compensation was paid to any executive
officer of the Company for services rendered during 1995.
<TABLE>
<CAPTION>
Summary Compensation Table Long-term Compensation
-------------------------
Annual Compensation Awards
--------------------------- --------------------------
Salary ($) Bonus ($) Restricted Securities
Stock Underlying All Other
Name and Principal Position Year Award(s) ($) Options/SARs(#) Compensation ($)
----------------------------- ---------- ---------- -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Robert Batinovich
Chairman and 1997 $250,000 $150,000 -- 450,000(2) $16,354(8)
Chief Executive Officer 1996 250,000 150,000 -- -- 15,265(8)
Andrew Batinovich
Director, President and 1997 200,000 50,000 -- 80,000(2) 4,330(8)
Chief Operating Officer 1996 200,000 50,000 -- 250,000(3) 3,923(8)
Sandra L. Boyle 1997 190,000 76,000 -- 59,400(4) 15,195(9)
Executive Vice President 1996 185,000 -- $69,375(1) 75,000(3) 7,077(10)
Stephen R. Saul
Executive Vice President 1997 149,000 56,000 -- 45,000(5) 10,181(11)
and 1996 110,000 -- -- 40,000(6) 4,227(12)
Chief Financial Officer
Frank E. Austin
Senior Vice President, 1997 180,000 54,700 -- 32,800(7) 13,079(13)
General Counsel and 1996 178,398 -- 69,375(1) 50,000(6) 8,215(14)
Secretary
</TABLE>
(1) Represents the fair market value of 5,000 shares of restricted stock on
the date of grant (August 2, 1996), based upon the closing price of the
Company's Common Stock of $13.875. As of the Record Date, the fair market
value of the 5,000 shares of restricted stock was $147,813, based upon
the closing price of the Company's Common Stock of $29.5625 per share.
Twenty percent of restricted stock vests one year after grant and an
additional twenty percent vests each year thereafter.
(2) Represents nonqualified stock options granted in October 1997 at an
exercise price of $27.50.
(3) Incentive stock options were granted in August 1996 and November 1996
at an exercise price of $15.00.
(4) Comprises nonqualified stock options as follows: 15,000 options granted
in September 1997 at an exercise price of $30.00, 15,000 options granted
in September 1997 at an exercise price of $26.00, and 29,400 options
granted inOctober 1997 at an exercise price of $27.50.
(5) Comprises (i) incentive stock options as follows: 10,000 options granted
in March 1997 at an exercise price of $20.25, and 9,326 options granted
in September 1997 at an exercise price of $26.00; and (ii) nonqualified
stock options as follows: 674 options granted in September 1997 at an
exercise price of $26.00, 10,000 options granted
Page 9 of 16
<PAGE>
in September 1997 at an exercise price of $28.00, and 15,000 options
granted in October 1997 at an exercise price of $27.50.
(6) Represents incentive stock options granted in August 1996 at an exercise
price of $15.00.
(7) Comprises (i) incentive stock options as follows: 10,000 options granted
in September 1997 at an exercise price of $26.00; and (ii) nonqualified
stock options as follows: 5,000 options granted in September 1997 at an
exercise price of $30.00, and 17,800 options granted October 1997 at an
exercise price of $27.50.
(8) Represents amounts for health and life insurance policies whose premiums
are paid by the Company for the benefit of the executive officers
indicated.
(9) Includes an automobile allowance of $2,400, $4,739 for health and life
insurance policies whose premiums are paid by the Company and
contributions to the Company's Supplemental Retirement Plan of $8,056.
(10) Includes $4,302 for life insurance policies whose premiums are paid by
the Company and contributions to the Company's Supplemental Retirement
Plan of $2,775.
(11) Includes $3,811 for health and life insurance policies whose premiums are
paid by the Company and contributions to the Company's Supplemental
Retirement Plan of $6,370.
(12 Includes $3,403 for life insurance policies whose premiums are paid by
the Company and contributions to the Company's Supplemental Retirement
Plan of $824.
(13) Includes $6,041 for health and life insurance policies whose premiums are
paid by the Company and contributions to the Company's Supplemental
Retirement Plan of $7,038. (14) Includes $5,539 for life insurance
policies whose premiums are paid by the Company and contributions to the
Company's Supplemental Retirement Plan of $2,676.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers during the year ended December
31, 1997.
<TABLE>
<CAPTION>
Individual Option Grants
---------------------------------------------------------------------
Name Grant Number of Percent of Exercise Expiration Potential Realizable
Date Securities Total Price Per Date Value at Assumed Annual
Underlying Options/SARs Share Rates of
Options/SARs Granted to ($/Sh) Stock Price
Granted (#)(2) Employees in Appreciation
Fiscal Year For Option Term(1)
------------------------
5% ($) 10% ($)
- ------------------ ----------- --------------- ------------- ----------- ----------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert Batinovich 10/20/97 450,000(3) 49.88% $27.50(10) 10/20/07 $5,950,065 $16,804,603
Andrew Batinovich 10/20/97 80,000(4) 8.87% 27.50(10) 10/20/07 1,057,789 2,987,485
Sandra L. Boyle 9/10/97 15,000(5) 1.66% 26.00(11) 9/10/07 245,269 621,560
9/10/97 15,000(6) 1.66% 30.00(11) 9/10/07 185,269 561,560
10/30/97 29,400(4) 3.26% 27.50(12) 10/30/07 385,744 1,093,135
Stephen R. Saul 3/17/97 10,000(7) 1.11% 20.25(13) 3/17/07 127,351 322,733
9/10/97 10,000(8) 1.11% 26.00(11) 9/10/07 163,513 414,373
9/10/97 10,000(6) 1.11% 28.00(11) 9/10/07 143,513 394,373
10/30/97 15,000(4) 1.66% 27.50(12) 10/30/07 196,808 557,722
Frank E. Austin 9/10/97 10,000(9) 1.11% 26.00(11) 9/10/07 163,513 414,373
9/10/97 5,000(6) 0.55% 30.00(11) 9/10/07 61,756 187,187
10/30/97 17,800(4) 1.97% 27.50(12) 10/30/07 233,546 661,830
</TABLE>
(1) Potential realizable value is determined by applying an amount equal to
the fair market value on the date of grant to the stated annual
appreciation rate compounded annually for the remaining term of the
option, subtracting the exercise price at the end of the period and
multiplying the remaining number by the number of shares subject to the
option. Actual gains, if any, on stock option exercise and Common Stock
holdings are dependent upon a number of factors, including the future
Page 10 of 16
<PAGE>
performance of the Common Stock, overall stock market conditions, and the
timing of option exercises, if any. There can be no assurance that the
amounts reflected in this table will be achieved.
(2) Reflects options that have a ten-year term.
(3) 350,000 options vested immediately upon grant; 100,000 options vest in
October 2000.
(4) Vest in October 2000.
(5) Vest in September 2000.
(6) Vest in September 2002.
(7) Vesting, in number of options: 2,222 in March 2003, 4,938 in March
2004, and 2,840 in March 2005.
(8) Vesting, in number of options: 674 in September 2000, 1,634 in September
2005, and 3,846 in September 2006 and 2007.
(9) Vesting, in number of options: 239 in September 2004, 3,846 in September
2005 and 2006, and 2,069 in September 2007. (10) The closing price of the
Common Stock on October 20, 1997 was $25.00. (11) The closing price of
the Common Stock on September 10, 1997 was $26.00. (12) The closing price
of the Common Stock on October 30, 1997 was $24.9375. (13) The closing
price of the Common Stock on March 17, 1997 was $20.25.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
During the year ended December 31, 1997, the Named Executive Officers
did not exercise any of their stock options. The following table sets forth the
number of shares of Common Stock covered by the stock options held by the Named
Executive Officers as of December 31, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Year-End (#) Options at Year-End ($)(1)
------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert Batinovich 350,000 100,000 $743,750 $ 212,500
Andrew Batinovich 0 330,000 0 3,826,350
Sandra L. Boyle 0 134,400 0 1,207,584
Stephen R. Saul 0 85,000 0 762,875
Frank E. Austin 0 82,800 0 803,574
- ----------------------
</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 $29.625 per share,
minus the applicable exercise prices per share, multiplied by the number
of shares underlying the options.
Page 11 of 16
<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.
In January 1996, the Board of Directors established the Compensation
Committee of the Board of Directors (the "Compensation Committee"). The
Compensation Committee has responsibility for developing, administering and
monitoring the compensation policies applicable to the Company's executive
officers, including administering the Company's 1996 Stock Incentive Plan (the
"Stock Incentive Plan"), under which option grants and restricted stock grants
may be made to executive officers and other key employees.
Executive Compensation Philosophy
The Compensation Committee believes that the primary goal of the
Company's executive compensation program should be related to creating
stockholder value. The executive compensation policies of the Compensation
Committee are designed to provide incentives to create stockholder value by
attracting, retaining and motivating executive talent that contributes to the
Company's long-term success, by rewarding the achievement of the Company's
short-term and long-term strategic goals, by linking executive officer
compensation and stockholder interests through grants of awards under the Stock
Incentive Plan and by recognizing individual contributions to Company
performance. The Committee evaluates the performance of the Company and compares
it to REITs and real estate companies of similar size engaged in activities
similar to those of the Company. The compensation of the Company's Named
Executive Officers in 1997 consisted of base salaries, bonuses, stock options
and certain benefits.
The Compensation Committee reviews the available competitive data,
evaluates the particular needs of the Company, and evaluates each executive's
performance to arrive at a decision regarding compensation programs. In October
1997, the Compensation Committee retained the services of an independent
compensation consultant (the "Compensation Consultant") to assist the
Compensation Committee in its evaluation of the key elements of the Company's
compensation program. The Compensation Consultant provides advice to the
Compensation Committee with respect to competitive compensation in the market in
which the Company competes for executive talent and the reasonableness of the
current and proposed compensation levels. Base salaries and bonuses for 1997
were determined prior to retention of the Compensation Consultant and therefore
do not reflect the Compensation Consultant's analysis. The option grant made in
October 1997 to the Chief Executive Officer was, however, based on the
Compensation Consultant's analysis as well as the recommendation of the
Compensation Committee.
1997 Executive Compensation
For services performed in 1997, executive compensation consisted of
base salary and bonuses, and grants of stock options under the Stock Incentive
Plan. The restricted stock and stock options vest over time.
Base Salary and Bonuses. The base salaries for 1997 for Robert
Batinovich, the Company's Chief Executive Officer, and for Andrew Batinovich,
the Company's President and Chief Operating Officer, were established by
previously negotiated employment agreements by and among Robert Batinovich, the
Company, Glenborough Corporation ("GC"), and Glenborough Inland Realty
Corporation ("GIRC," which merged with GC effective June 30, 1997), and by and
among Andrew Batinovich, the Company, GC, GIRC and Glenborough Hotel Group
("GHG"). GC and GHG are associated companies in which the Company owns 100% of
the non-voting preferred stock of each company. These agreements also provided
for the award of certain bonuses if certain performance targets were met. These
employment agreements expired in December 1997 and new employment agreements
with terms consistent with the Compensation Committee's philosophy and policies
have been negotiated and consummated.
Employment Agreements. Pursuant to the new employment agreements,
Robert Batinovich and Andrew Batinovich receive an aggregate annual base salary
of $480,000 and $300,000, respectively, and each is eligible to participate in
the Company's employee benefit plans and executive compensation programs. Also,
under the new
Page 12 of 16
<PAGE>
employment agreements, each of Robert Batinovich and Andrew Batinovich is
entitled to annual contingent bonuses based on the attainment of certain
criteria tied to the Company's performance. Each agreement has a term of five
years, and thereafter may be extended in one-year increments. The employment
agreements also provide for certain payments of base salary, compensation and
benefits upon termination without cause and upon a change of control of the
Company.
Base salaries and bonuses for the Company's other executive officers
are determined primarily on the basis of the executive officer's responsibility,
qualification and experience, as well as the general salary practices of peer
companies among which the Company competes for executive talent. The Committee
reviews the base salaries of these executive officers annually 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. The weight that the
Compensation Committee places on such factors may vary from individual to
individual and necessarily involves subjective determinations of individual
performance.
Long-Term Incentive Compensation Awards. The Stock Incentive Plan
provides for grants to key executives and employees of the Company of (i) shares
of Common Stock of the Company, (ii) options or stock appreciation rights
("SARs") or similar rights, or (iii) any other security with the value derived
from the value of the Common Stock of the Company or other securities issued by
a related entity. The Compensation Committee may make grants under the Stock
Incentive Plan based on a number of factors, including (a) the executive
officer's or key employee's position in the Company, (b) his or her performance
and responsibilities, (c) the extent to which he or she already holds an equity
stake in the Company, and (d) contributions and anticipated contributions to the
success of the Company's financial performance. In addition, the size,
frequency, and type of long-term incentive grants are generally determined on
the basis of past granting practices, fair market value of the Company's stock,
tax consequences of the grant to the individual and the Company, accounting
impact, and the number of shares available for issuance. However, the plan does
not provide any formulaic method for weighing these factors, and a decision to
grant an award is based primarily upon the Compensation Committee's evaluation
of the past as well as the future anticipated performance and responsibilities
of each individual. The Compensation Committee may also consult with the
Compensation Consultant with respect to long-term incentives and other
compensation awards.
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 Stock Incentive Plan are intended to qualify
as "performance-based" compensation not subject to the Section 162(m) deduction
limitation. In addition, the Committee believes that a substantial portion of
the compensation program would be exempted from the $1 million deduction
limitation.
Chief Executive Officer Compensation
Salary, Insurance and Bonus. The compensation of Robert Batinovich, the
Company's Chief Executive Officer, for fiscal 1997 was determined through
previously negotiated employment agreements with the Company, GC and GIRC. In
1997, Mr. Batinovich received an annual base salary of $250,000 and an aggregate
of approximately $16,354 in health insurance and other benefits pursuant to the
employment agreements. Mr. Batinovich also received a bonus of $150,000, which
was contingent upon the attainment of certain performance thresholds set forth
in the employment agreements.
Long-Term Incentive Awards. Robert Batinovich did not receive any stock
options in 1996. In October 1997, the Compensation Consultant completed an
analysis of the appropriate option grant for Robert Batinovich. The factors
considered in making this analysis included: (i) Robert Batinovich had not
received an option grant since the Company went public in December 1995; (ii)
the Company had during this period granted options to its other executive
officers, (iii) the chief executive officers of comparable public companies
typically receive annual option grants and (iv) the Company's success in terms
of operations and stockholder value. The Compensation Consultant's analysis
determined the requisite number of shares subject to an option needed to put
Robert Batinovich in the same position had he received option grants at the mid-
to high-range of chief executive officers
Page 13 of 16
<PAGE>
of comparable companies, assuming the timing and terms of the option grants were
identical to the options granted to the other executive officers during 1996 and
1997. Based on the Compensation Consultant's analysis and consistent with the
Compensation Committee's policy of creating incentives to increase stockholder
value, Mr. Batinovich was granted an option to acquire 450,000 shares of Common
Stock, with an exercise price of $27.50 per share, which was $2.50 per share
above the then current market value of the Company's Common Stock.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Patrick Foley
Laura Wallace
Richard A. Magnuson
COMMON STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock from January 31, 1996 through December 31, 1997 to the
cumulative total return on the Standard and Poor's 500 Stock Index ("S&P 500")
and to the SNL Securities Custom Peer Group ("SNL Custom Peer Group"), which is
comprised of the following REITs: Colonial Properties Trust, Cousins Properties
Incorporated, MGI Properties, Pacific Gulf Properties, Pennsylvania Real Estate
Investment Trust and Washington Real Estate Investment Trust. The Company
believes such REITs are comparable in size and engaged in activities similar to
those of the Company. The graph assumes that the value of the investment in the
Company's Common Stock was $100 at January 31, 1996.
TOTAL STOCKHOLDER RETURN SHOWN ON THE FOLLOWING GRAPH IS NOT NECESSARILY
INDICATIVE OF FUTURE PERFORMANCE. TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS
BEFORE CONSIDERATION OF INCOME TAXES.
TOTAL RETURN PERFORMANCE
(GRAPHIC OMITTED)
(GRAPHIC OF CHART SHOWING INDEX VALUE COMPARISON)
Page 14 of 16
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Acquisitions from Related Parties
The Company may acquire other properties in which Glenborough Partners
or Robert and Andrew Batinovich or their families have an interest, although
presently there are no agreements or proposals to acquire such properties. The
Company's Board of Directors has adopted a policy that no acquisition of
properties from Glenborough Partners or Robert or Andrew Batinovich or their
immediate families or from other entities in which they have an interest will be
made without the Company first obtaining the approval of at least two-thirds of
the Company's Independent Directors.
In November 1997, the Operating Partnership acquired a 171,789
square-foot office/flex building in Eden Prairie, Minnesota ("Bryant Lake"),
from Outlook Income Fund 9, a limited partnership in which GC was managing
general partner. Robert Batinovich is co-general partner of Outlook Income Fund
9 and holds an indirect economic interest therein equal to an approximate 0.83%
limited partnership interest. Because of this affiliation, and consistent with
the Company's Board of Directors' policy, neither Robert Batinovich nor Andrew
Batinovich voted when the Board of Directors considered and acted to approve
this acquisition. The price paid for Bryant Lake equaled 100% of the appraised
value as determined by an independent appraiser. The total acquisition cost,
including capitalized costs, was approximately $9.4 million, comprising
approximately $4.6 million in the form of cash and the balance in the form of
assumption of debt.
In December 1997, the Operating Partnership issued approximately $14.1
million in the form of 433,361 partnership units in the Operating Partnership
and the Company issued 72,564 shares of Common Stock (based on an agreed per
unit and per share value of $27.869) to acquire all of the limited partnership
interests of GRC Airport Associates, a California limited partnership ("GRCAA").
GRCAA's sole asset consisted of one property that was sold to a third party in
February 1998 and generated net cash proceeds of approximately $14.1 million. By
virtue of interests held directly or indirectly in GRCAA, Robert Batinovich
received approximately $2.2 million of the consideration paid for the GRCAA
limited partnership interests in the form of partnership units in the Operating
Partnership. Consistent with the Company's Board of Directors' policy, neither
Robert Batinovich nor Andrew Batinovich voted when the Board of Directors
considered and acted to approve this transaction.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Arthur Andersen LLP to serve as independent
auditors of the Company for the fiscal year ending December 31, 1998. A
representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting and will have the opportunity to make a statement if the representative
desires to do so and will be available to respond to appropriate questions from
stockholders.
Although it is not required to do so, the Board is submitting its
selection of the Company's independent auditors for ratification by the
stockholders at the Meeting in order to ascertain the views of stockholders
regarding such selection. A majority of the votes cast at the Annual Meeting, if
a quorum is present, will be sufficient to ratify the selection of Arthur
Andersen LLP as the Company's independent auditors for the fiscal year ending
December 31, 1998. Whether the proposal is approved or defeated, the Board may
reconsider its selection at any time during the year if the Board determines
that such a change would be in the best interests of the Company and its
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP
AS THE COMPANY'S INDEPENDENT AUDITORS FOR
THE YEAR ENDING DECEMBER 31, 1998
Page 15 of 16
<PAGE>
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
requires the Company's directors and executive officers and persons who own more
than 10% of a registered class of the Company's equity securities ("Reporting
Persons") to file with the Securities and Exchange Commission (the "Commission")
reports of ownership and changes in ownership of equity securities of the
Company and to furnish the Company with copies of all such Section 16(a) forms
they file. The Exchange Act also requires that the Company disclose
delinquencies in filing such forms by Reporting Persons during and with respect
to its most recent fiscal year. Based solely on its review of the copies of such
reports received or written representations from certain Reporting Persons, the
Company believes that during the fiscal year ended December 31, 1997, all
Reporting Persons complied with all applicable filing requirements.
Stockholder Proposals at 1999 Annual Meeting. Any stockholder who
intends to submit a proposal at the 1999 Annual Meeting and who wishes to have
the proposal considered for inclusion in the proxy statement and form of proxy
for that meeting must, in addition to complying with the applicable laws and
regulations governing submission of such proposals, deliver the proposal to
Frank E. Austin at the Company for consideration no later than December 15,
1998.
Other Business. The Company is not aware of any business to be
presented for consideration at the Meeting other than that specified in the
Notice of Annual Meeting. If any other matters are properly presented at the
Meeting, it is the intention of the persons named in the enclosed Proxy to vote
in accordance with their best judgment.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS, WHETHER OR NOT
THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED
FOR THAT PURPOSE. BY RETURNING YOUR PROXY PROMPTLY YOU CAN HELP THE COMPANY
AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE MEETING
CAN BE HELD. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE A PRIOR PROXY AND
VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
/s/ ROBERT BATINOVICH
ROBERT BATINOVICH
Chairman and Chief Executive Officer
San Mateo, California
April 14, 1998
Page 16 of 16
<PAGE>
