[FEDERAL REALTY INVESTMENT TRUST LOGO APPEARS HERE]
March 28, 1996
Dear Shareholder:
Please accept my personal invitation to attend our Annual Meeting of
Shareholders on Thursday, May 2, 1996 at 10:00 a.m. This year's meeting will
be held at Woodmont Country Club, Rockville, Maryland.
The business to be conducted at the meeting is set forth in the formal
notice that follows. In addition, Management will provide a review of 1995
operating results and discuss the outlook for the future. After the formal
presentation, the Trustees and Management will be available to answer any
questions that you may have.
Your vote is important. I urge you to complete, sign and return the enclosed
proxy card.
I look forward to seeing you on May 2.
Sincerely,
/S/ Steven J. Guttman
Steven J. Guttman
President and
Chief Executive Officer
FEDERAL REALTY INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 2, 1996
To Our Shareholders:
The 1996 Annual Meeting of Shareholders of Federal Realty Investment Trust
("Trust") will be held at Woodmont Country Club, 1201 Rockville Pike,
Rockville, Maryland, on Thursday, May 2, 1996, at 10:00 a.m. for the purpose
of considering and acting upon the following:
1. The election of four Trustees to serve for the ensuing three years.
2. The transaction of such other business as may properly come before the
meeting or any adjournment.
Shareholders of record at the close of business on March 25, 1996 are
entitled to notice of and to vote at the Annual Meeting.
For the Trustees:
/s/ Catherine R. Mack
Catherine R. Mack
Vice President--General
Counsel and Secretary
PLEASE FILL OUT, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT IN THE
ACCOMPANYING POSTAGE PAID ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE MEETING.
YOU MAY REVOKE YOUR PROXY IN WRITING, OR AT THE ANNUAL MEETING IF YOU WISH TO
VOTE IN PERSON.
FEDERAL REALTY INVESTMENT TRUST
4800 HAMPDEN LANE, SUITE 500, BETHESDA, MARYLAND 20814
PROXY STATEMENT
MARCH 26, 1996
Proxies in the form enclosed are solicited by the Board of Trustees of
Federal Realty Investment Trust for use at the 1996 Annual Meeting of
Shareholders ("Annual Meeting") to be held at 10:00 a.m., Thursday, May 2,
1996, at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland. The
close of business on March 25, 1996 has been fixed as the record date for
determining shareholders entitled to notice of and to vote at the meeting. On
that date, the Trust had 32,226,431 common shares of beneficial interest
("Shares") outstanding, each of which is entitled to one vote. If the proxy in
the enclosed form is signed and returned, it will be voted as specified in the
proxy; if no specific voting instructions are indicated, the proxy will be
voted in favor of the four Trustees nominated and in the named proxies'
discretion as to other matters at the Annual Meeting. Any proxy may be revoked
by a shareholder at any time before it is voted by written notice, or by
attending the Annual Meeting and voting in person.
The presence, in person or by proxy, of a majority of the outstanding Shares
entitled to vote constitutes a quorum at the Annual Meeting. Trustees are
elected by the affirmative vote of the holders of a majority of the Shares
entitled to vote that are present, in person or by proxy, at the Annual
Meeting.
This Proxy Statement and an accompanying proxy are being mailed to
shareholders on or about March 28, 1996, together with the Trust's 1995 Annual
Report, which includes certified financial statements for the year ended
December 31, 1995. The Consolidated Balance Sheets as of December 31, 1995 and
1994 and the Consolidated Statements of Operations, the Consolidated
Statements of Shareholders' Equity, the Consolidated Statements of Cash Flows,
and the Notes to Consolidated Financial Statements (each of such Statements
being for the years ended December 31, 1995, 1994 and 1993), certified and
contained in the Trust's 1995 Annual Report, are incorporated herein by
reference to that Report.
OWNERSHIP OF SHARES BY CERTAIN BENEFICIAL OWNERS
To the Trust's knowledge, based upon a Schedule 13G filed with the
Securities and Exchange Commission ("SEC") as of January 3, 1996, beneficial
owners of 5% or more of the Trust's Shares are as follows:
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ----------------------- --------
Cohen & Steers 3,171,100 10.04%*
Capital Management, Inc.
757 Third Avenue
New York, N.Y. 10017
- --------
* Although Cohen & Steers Capital Management, Inc. reported that the number of
shares held of record by it constitutes 10.04% of the outstanding common
shares, such shareholding actually constituted 9.84% of the outstanding
common shares as of January 3, 1996. Cohen & Steers Capital Management, Inc.
has confirmed to the Trust such shares are not owned by one person and
therefore such ownership is not in violation of the Declaration of Trust.
PROPOSAL 1
ELECTION OF TRUSTEES
Pursuant to Section 2.2 of the Trust's Declaration of Trust, the Trustees
are divided into three classes serving three year terms. Four Trustees,
comprising one class of Trustees, are to be elected at the 1996 Annual
Meeting. Messrs. Samuel J. Gorlitz, Steven J. Guttman, Mark S. Ordan and Mr.
George L. Perry have been nominated for election as Trustees to hold office
until the 1999 Annual Meeting and until their successors have been elected and
shall qualify. Proxies may not be voted for more than four Trustees.
PRINCIPAL OCCUPATIONS
AND OTHER TRUSTEE TERM TO
NAME AGE DIRECTORSHIPS* SINCE EXPIRE
- ----------------------------------------------------------------------------------------
Samuel J. Gorlitz....... 78 Founder of the Trust; President, Gorlitz 1975 1999
Associates, real estate developers.
Steven J. Guttman....... 49 President and Chief Executive Officer of 1979 1999
the Trust; Trustee, International Council
of Shopping Centers; National Association
of Real Estate Investment Trusts Board of
Governors and Executive Committee.
Mark S. Ordan........... 36 Chairman, President and Chief Executive Of- 1999
ficer, Fresh Fields Markets, Inc., a
healthy foods supermarket.
George L. Perry......... 62 Senior Fellow, Brookings Institution; Di- 1993 1999
rector, State Farm Life Insurance Company;
Director, State Farm Mutual Automobile Com-
pany and various mutual funds managed by
the Dreyfus Corporation.
Terms of office of the six Trustees named below will continue until the
Annual Meeting in the years indicated.
PRINCIPAL OCCUPATIONS
AND OTHER TRUSTEE TERM TO
NAME AGE DIRECTORSHIPS* SINCE EXPIRE
- ----------------------------------------------------------------------------------------
Dennis L. Berman........ 45 General Partner, GDR Partnerships and 1989 1998
Vingarden Associates, builders/developers;
Berman Enterprises.
Kristin Gamble.......... 50 President, Flood, Gamble Associates, Inc., 1995 1998
an investment counseling firm; Director,
Ethan Allen Interiors, Inc., a furniture
manufacturer and retailer.
Donald H. Misner........ 61 Director of New Development of the Trust; 1978 1998
Past President, Misner Development; Co-
founder, Miami Project to Cure Paralysis.
A. Cornet de Ways 62 Director of SIPEF S.A., an international 1983 1997
Ruart.................. holding company principally of agricultural
interests; Director of Interbrew S.A.
Morton S. Lerner........ 68 Retired President and Chief Operating Offi- 1993 1997
cer of Lerner Shoes, Inc.; Director, Wacho-
via Bank.
Walter F. Loeb.......... 71 President, Loeb Associates, Inc., manage- 1991 1997
ment consulting firm. Publisher, Loeb Re-
--------
tail Letter; Director, InterTAN Inc., an
-----------
international electronics retailer; Direc-
tor, The Gymboree Corp.; Director, Roses
Stores, Inc.; Director, Mothers Work, Inc.;
Director, Wet Seal, a women's apparel re-
tailer; Retired Principal and Senior Retail
Analyst, Morgan Stanley & Co., Inc.
- --------
* The business histories set forth in these tables cover a five year period.
2
The Board of Trustees has an Audit Committee, comprised of Messrs. Berman,
Loeb and Perry, which independently reviews the Trust's financial statements
and coordinates its review with the Trust's independent public accountants.
The Audit Committee held four meetings in 1995. The Compensation Committee,
comprised of Mr. Cornet, Ms. Gamble and Mr. Perry, reviews and reports to the
Board on incentive plans and remuneration of officers. That committee held two
meetings in 1995. The Compensation Committee, administers the Trust's 1993
Long-Term Incentive Plan. During 1995 the Board of Trustees held eight
meetings. The Board of Trustees has no standing nominating committee.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE FOUR NOMINEES.
OWNERSHIP OF SHARES BY TRUSTEES AND OFFICERS
As of March 25, 1996, Trustees, nominee for Trustee and executive officers
as a group, and the Trustees, nominee for Trustee and named executive
officers, individually, beneficially owned the following Shares:
PERCENTAGE OF
NUMBER OF SHARES OUTSTANDING SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) OF THE TRUST
- --------------------------------------------------------------------------
Trustees and executive officers 2,006,927 6.22%
as a group (15 individuals)
Dennis L. Berman(2) 444,921 1.38%
A. Cornet de Ways Ruart(3) 26,474 under 1%
Kristin Gamble(4) 127,417 under 1%
Steven J. Guttman(5) 595,331 1.85%
Samuel J. Gorlitz(6) 146,528 under 1%
Ron D. Kaplan(7) 95,000 under 1%
Morton S. Lerner(8) 11,478 under 1%
Walter F. Loeb 16,090 under 1%
Donald H. Misner(9) 31,215 under 1%
Mary Jane Morrow(10) 132,095 under 1%
Mark S. Ordan 500 under 1%
George L. Perry(11) 10,697 under 1%
Hal A. Vasvari 155,141 under 1%
Robert S. Wennett 125,000 under 1%
- -------
(1) The number and percentage of Shares shown in this table reflect
beneficial ownership, determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934, including Shares which are not owned but as
to which options are outstanding and may be exercised within 60 days. Except
as noted in the following footnotes, each Trustee and named executive officer
has sole voting and investment power as to all Shares listed. Fractions are
rounded to the nearest full Share.
(2) Includes 422,375 Shares as to which Mr. Berman is Trustee under Voting
Trust Agreements for certain family members. Mr. Berman does not have
disposition rights with respect to these Shares. This number also includes
1,000 Shares owned by a partnership in which Mr. Berman is a general partner.
(3) Does not include 700 Shares owned by a corporation of which Mr. Cornet's
wife is a controlling shareholder.
(4) Includes 123,517 Shares as to which Ms. Gamble shares investment power
for clients. Includes 1,400 shares as to which Ms. Gamble is a Trustee of a
profit sharing plan, of which Ms. Gamble has a direct interest in 571 shares.
(5) Includes 12,000 Shares in trust as to which Mr. Guttman shares voting
and investment power with two other trustees, 12,899 Shares owned jointly with
his wife and 37,022 Shares held as custodian for minor children.
(6) Includes 22,100 Shares as to which Mr. Gorlitz shares voting and
investment power. Does not include 4,954 Shares as to which Mr. Gorlitz's wife
has sole voting and investment power.
(7) Does not include 1,461 Shares as to which Mr. Kaplan's wife has sole
voting and investment power.
(8) Does not include 2,500 Shares as to which Mr. Lerner's wife has sole
voting and investment power.
(9) Includes 574 Shares owned jointly as to which voting and investment
power is shared with Mr. Misner's wife.
(10) Includes 69 Shares held as custodian for minor children. Does not
include 148 shares as to which Ms. Morrow's mother has sole voting and
investment power.
(11) Does not include 300 Shares as to which Mr. Perry's wife has sole
voting and investment power.
3
REMUNERATION OF EXECUTIVE OFFICERS AND TRUSTEES
The following table sets forth the summary compensation of the Chief
Executive Officer and the four other most highly paid executive officers
("executive officers" or "named officers").
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ ------------
(A) (B) (C) (D) (E) (G) (I)
OTHER
ANNUAL ALL OTHER
SALARY COMPENSATION COMPENSATION
(A) BONUS (B) OPTIONS (D)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) (C) ($)
- ------------------------------------------------------------------------------------------------
Steven J. Guttman 1995 $500,000 $235,000 80,000 $214,000(E)
President 1994 500,000 120,000 -- 207,000(E)
& Chief Executive Officer 1993 496,000 200,000 80,000 18,000
Ron D. Kaplan 1995 190,000 85,000 45,000 130,000(F)
Vice President, Capital 1994 190,000 75,000 -- 130,000
Markets 1993 178,000 60,000 -- 76,000
Mary Jane Morrow 1995 200,000 75,000 45,000 62,000(E)
Senior Vice President, 1994 200,000 30,000 -- 67,000(E)
Finance & Treasurer 1993 193,000 50,000 40,000 24,000
Hal A. Vasvari 1995 225,000 150,000 75,000 69,000(E)
Executive Vice President, 1994 225,000 75,000 -- 74,000(E)
Chief Operating Officer 1993 223,000 125,000 40,000 31,000
Robert S. Wennett 1995 203,000 90,000 45,000 60,000(E)
Senior Vice President, 1994 200,000 60,000 -- 62,000(E)
Acquisitions 1993 190,000 100,000 40,000 13,000
- --------
(A) Amounts shown includes amounts deferred at the election of the named
officer pursuant to plans available to substantially all employees and
pursuant to a nonqualified deferred compensation plan available to all
officers.
(B) No named officer received perquisites or other personal benefits
aggregating the lesser of 10% of annual salary and bonus or $50,000.
(C) Option exercise price is equal to the fair market value of the Shares on
the date of grant.
(D) The amounts shown in this column for the last fiscal year include the
following: (i) Mr. Guttman: $5,000--Trust paid group term life insurance;
$4,000--Trust contribution to Section 401 (k) Plan and the deferred
compensation plan; $4,000--Trust paid annuity contract premium; and
$5,000--Trust paid long-term disability insurance premium; and $196,000--
deferred compensation from forgiveness of loans as described below in (E);
(ii) Mr. Kaplan: $500--Trust paid group term life insurance; $4,000--Trust
contribution to Section 401 (k) Plan and the deferred compensation plan;
$500--Trust paid long-term disability insurance premium; $125,000--
deferred compensation from forgiveness of loans as described below in (F);
(iii) Ms. Morrow: $1,000--group term life insurance premium; $4,000--Trust
contribution to Section 401 (k) Plan and the deferred compensation plan;
$3,000--Trust paid long-term disability insurance premium; and $54,000--
deferred compensation from forgiveness of loans as described below in (E);
(iv) Mr. Vasvari: $4,000--Trust paid group term life insurance; $4,000--
Trust contribution to Section 401 (k) Plan and the deferred compensation
plan; $7,000--Trust paid long-term disability insurance premium; and
$54,000--deferred compensation from forgiveness of loans as described
below in (E); (v) and Mr. Wennett: $1,000--Trust paid group term life
insurance premium; $4,000--Trust contribution to Section 401 (k) Plan and
the deferred compensation plan; and $55,000--deferred compensation from
forgiveness of loans as described below in (E).
4
(E) In either 1988 or 1989 restricted Share grants were made to the named
officer. Loans to facilitate the payment of taxes, either when the officer
elected to be taxed or upon vesting, were made to the named officer. The
loans are forgiven in three equal installments so long as the officer is
still employed by the Trust and such forgiveness is included in Column
(i). In 1991, the named officers, except Mr. Kaplan, were awarded the
opportunity to purchase Shares of the Trust and the Trust made available
loans for 100% of the purchase price. One half of the loan was originally
scheduled to be forgiven, by forgiving one-sixteenth each January 31, over
an 8 year period so long as the officer was employed by the Trust. The
Trust and the named officers, other than Mr. Wennett, have agreed to
modify the terms of the loan so that beginning in 1995 and each year
thereafter, there will be no forgiveness as of January 31 of each year if
Funds from Operations ("FFO") per Share increases by less than 5% during
the preceding fiscal year. If FFO per Share increases by 5% or more, one-
sixteenth of the loan will be forgiven. Beginning in 1996 and thereafter,
if FFO per Share increases by 10% or more and total return to shareholders
is 10% or greater during the fiscal year, one-eighth of the loan will be
forgiven on the following January 31. However, 25% of the original
principal amount of each loan is not subject to forgiveness by the Trust.
The loans, except Mr. Wennett's, were also modified during 1994 so that
they are due on January 31, 2004.
(F) On December 17, 1993, the Trust awarded Mr. Kaplan the opportunity to
purchase 40,000 Shares as of January 1, 1994 at the closing price on
December 31, 1993 ($25 per share). The Trust loaned Mr. Kaplan 100% of the
purchase price for a term of 12 years. Forgiveness of Mr. Kaplan's loan
is subject to the same performance measures described above in (E).
Trustees' fees are paid to Trustees other than Mr. Guttman. In accordance
with the provisions of the 1993 Long-Term Incentive Plan, Trustees' fees are
payable in cash or Shares or a combination of both, at the election of the
Trustee; the Trust issued Shares for 63% of the Trustees' fees paid in 1995.
The annual Trustee fee for 1995 was $25,000. Each Trustee was paid the fee
based on the number of months during the year he/she served as a Trustee. The
annual fee in 1995 for service on the Compensation Committee was $2,500 and
$3,000 for service as its Chairman. The annual fee in 1995 for service on the
Audit Committee was $2,000 and $2,500 for service as its Chairman. Committee
fees were also prorated based on the number of months of service. In
accordance with the 1993 Long-Term Incentive Plan, as of the date of the 1995
Annual Meeting of Shareholders, each nonemployee Trustee received an option to
purchase 2,500 Shares at an exercise price of $22.00. Mr. Misner also received
an option to purchase 2,500 shares at an exercise price of $22.00. Pursuant to
a consulting agreement, Mr. Gorlitz provides consulting services to the Trust
and is paid an annual consulting fee of $120,000.
EMPLOYMENT AGREEMENTS
Prior to 1994, the Trust had entered into employment agreements with its
executive officers which provided, among other things that: (a) the employee's
salary could not be decreased and is automatically increased on January 1 of
each year by 50% of any increase in the Consumer Price Index ("CPI") for the
prior year; and (b) the term of each agreement was three years to be
automatically renewed at the end of each month for an additional three years
unless either party notifies the other that it elects not to extend the term.
In December 1994, the Compensation Committee determined that it was in the
best interest of the Trust if the employment agreements of the executive
officers ceased renewing each month for an additional 3 year term. To achieve
this, the Compensation Committee offered to certain executive officers, other
than the President, the option to substitute a severance agreement for the
employment agreement or to continue with a fixed-term employment agreement.
Mr. Vasvari, Ms. Morrow and Mr. Kaplan each elected to substitute the
severance agreement for the employment agreement. Mr. Wennett did not
substitute a severance agreement for his employment agreement. At January 1,
1996, Mr. Wennett had an employment agreement with a 27 month term.
The severance agreements provide, among other things, that: (a) if the
employee is terminated without cause, he/she will be entitled to receive
salary payments for up to 18 months, depending upon length of service
5
and benefits for 9 months; and (b) if the employee voluntarily resigns, the
employee will receive salary payments and benefits for up to 6 months,
depending upon length of service. The employee also will receive the benefits
payable upon a termination without cause if his/her duties are materially
modified without his/her consent, the Trust moves the location of its
principal office outside the Washington, D.C. area, the Trust is merged into
or consolidated with another entity, or the employee's base salary is
decreased by 25%.
In 1989 and 1990, the Trust entered into agreements with Mr. Guttman, Ms.
Morrow, Mr. Vasvari and Mr. Wennett that provide that if any of these officers
leaves the employment of the Trust following a "change of control" (defined as
control of 35% or more of outstanding Shares of the Trust), each officer will
be entitled to receive a lump sum cash payment, to have health and welfare
benefits and executive privileges continued for a period following such
termination, to have all restrictions on the exercise or receipt of any stock
options or stock grants lapse, to accelerate forgiveness of Share purchase
loans and to have all Shares owned at termination be redeemed at a formula
price. Mr. Guttman's payment would be equal to 299% of his salary including
incentive compensation and his benefits and privileges would continue for
three years. Each of the other named officers would receive two times his/her
salary including incentive compensation and his/her benefits and privileges
would continue for two years.
AGGREGATED OPTION EXERCISES IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
The following table provides information on option exercises in 1995 by the
named executive officers and the value of each such officer's unexercised
options at December 31, 1995.
(A) (B) (C) (D) (E)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
SHARES ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE (#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------------------------------------
Steven J. Guttman....... -- -- 70,833 106,667 $21,951 $160,000
Ron D. Kaplan........... -- -- 4,419 49,419 -- 90,000
Mary Jane Morrow........ -- -- 35,788 58,334 11,524 90,000
Hal A. Vasvari.......... 39,788 88,334 30,524 150,000
Robert S. Wennett....... 244 $61 26,666 58,334 -- 90,000
- --------
(1) Based on $22.75 per Share closing price on the NYSE on December 31,
1995.
RETIREMENT AND DISABILITY PLANS
The Trust has a retirement and disability plan for Mr. Guttman, effective
since 1978. The agreement implementing the plan provides generally for an
annual payment after retirement at or after age 62, or at any time on
suffering a total and permanent disability, of $40,000. A lump-sum death
benefit of $40,000 will be paid to Mr. Guttman's estate. Mr. Guttman's plan
requires funding, and a $200,000 annuity contract was purchased to assist the
Trust in meeting this obligation.
The Trust has a retirement and disability plan for Mr. Gorlitz, effective
since 1978, and amended in 1988 and 1992 to revise the annual payment. The
plan provides for an annual consultation fee payment of $120,000, until notice
of retirement is given by either Mr. Gorlitz or the Trust, at which time Mr.
Gorlitz will receive an annual retirement payment of $75,000 plus adjustments
for changes in the Consumer Price Index that occur between June 1, 1988 and
the date of Mr. Gorlitz's retirement. Thereafter retirement payments are
adjusted annually for changes in the Consumer Price Index, except that no
annual adjustment may exceed 10%.
6
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
For 1995, as for prior years, the Compensation Committee was responsible for
determining the level of compensation paid to the Trust's executive officers,
subject to review and approval of the entire Board of Trustees. The
Compensation Committee is comprised entirely of nonemployee Trustees.
Philosophy. The members of the Compensation Committee believe that the
Trust's success is largely due to the efforts of its employees and, in
particular, the leadership exercised by its executive officers. Therefore, the
Compensation Committee believes that it is important to:
. Adopt compensation programs that enhance the Trust's ability to attract
and retain qualified executive officers while providing the financial
motivation appropriate to achieve continued high levels of Trust
performance.
. Adopt compensation programs that stress stock ownership and, thereby, tie
long term compensation to increases in shareholder value.
. Provide a mix of cash and stock based compensation programs that are
competitive with a select group of successful real estate investment
trusts and other successful national and regional firms that the members
of the Compensation Committee believe are comparable to the Trust.
. Adjust salary, bonuses and other compensation awards commensurate with
overall corporate results.
. Select compensation programs that emphasize teamwork, pay-for-performance
and overall corporate results.
The members of the Compensation Committee believe, however, that fixed
compensation formulas may not adequately reflect all aspects of the Trust's
and an individual executive officer's performance. Therefore, the Compensation
Committee has retained a high degree of flexibility in structuring the Trust's
compensation programs. This allows the Compensation Committee annually to
evaluate subjectively and reward each executive officer's individual
performance and contribution to the Trust's overall financial and operational
success.
The Compensation Committee has from time to time retained compensation
consultants to assist it in structuring the Trust's various compensatory
programs and determining the level of salary, bonus and other awards paid to
the Trust's executive officers. For a portion of 1995, the Compensation
Committee retained Compensation Resources, Inc. ("CRI") for this task.
1995 Salary and Bonus Compensation. Near the end of each year, the
Compensation Committee determines the salary to be paid to each executive
officer during the subsequent year and the bonus to be paid for the current
year. Sometimes, however, the Compensation Committee does not set salary or
bonus until early in the following year. The timing of these meetings allows
the Compensation Committee to review the Trust's activities during the entire
year and to collect and analyze competitive market data. This process was
utilized by the Compensation Committee in 1995.
Typically, the compensation committee establishes salaries after
consultation with CRI. CRI provided the Compensation Committee with aggregated
information regarding the total cash compensation paid to officers holding
similar positions in certain successful real estate investment trusts and
other national and regional companies that CRI and the Compensation Committee
have determined have comparable revenues, profitability and growth ("Survey
Group"). The particular companies within the Survey Group were selected
several years ago jointly by CRI and the then members of the Compensation
Committee. Some of these companies are included in the National Association of
Real Estate Investment Trust equity index.
Typically, CRI makes recommendations as to salary levels. At the request of
the Compensation Committee, Mr. Guttman also prepares recommendations
concerning salaries to be paid to executive officers, other than himself. Mr.
Guttman's recommendations are based upon his analysis of each executive
officers' performance
7
and the performance of the Trust as a whole. Among the performance factors
considered are the productivity of the leasing effort, the number and quality
of properties acquired, the increase in funds from operations, the financing
transactions completed, and the redevelopment and operation of Trust
properties ("Performance Factors"). Mr. Guttman subjectively weighs these and
other factors, based upon the responsibilities of each of the executive
officers.
In February 1996, CRI made recommendations as to 1996 salary levels and 1995
bonus awards. At the request of the Compensation Committee, Mr. Guttman also
made recommendations. In general, Mr. Guttman recommended that the executive
officers receive a salary increase equal to 5.8% of their present salary
levels, representing an increase in salary approximating 2 years of the
Consumer Price Index ("CPI"). Mr. Guttman recommended this increase in light
of the fact that the 1995 salaries of executive officers were held to the 1994
levels. A higher salary raise was recommended for Mr. Vasvari in light of his
new responsibilities and duties as the Chief Operating Officer of the Trust, a
position he assumed in 1994. Since Mr. Wennett, unlike the other executive
officers, received a 50% CPI increase in salary in 1995 (in accordance with
his employment agreement), Mr. Guttman recommended that he receive a CPI
increase in 1996. Since Mr. Guttman's 1995 salary also was held at its 1994
level, the Compensation Committee determined to also increase his salary by
the 5.8% increase. Mr. Guttman's, Mr. Vasvari's, Ms. Morrow's, Mr. Wennett's
and Mr. Kaplan's 1996 annual salaries are $529,000, $345,000, $211,600,
$208,437 and $201,020, respectively.
In February 1996, CRI and Mr. Guttman also made recommendations as to the
1995 bonus awards based upon the Performance Factors. The Compensation
Committee concluded that the executive officers should receive cash
compensation in recognition of the 9% increase in FFO per share over the 1994
level and the attainment of the Trust's other internal corporate performance
goals. CRI advised the Compensation Committee that the salary levels and bonus
awards were well within the range that CRI would recommend based upon the
total cash compensation paid to officers of the companies within the Survey
Group and in light of the Performance Factors.
The Compensation Committee strives to maintain the total compensation
package, for executive officers at or near the 70th to 75th percentiles of the
compensation paid by the Survey Group. The Compensation Committee believes
that the total compensation packages for executive officers for 1995 were
within this range. The Compensation Committee considers the Trust's overall
performance in setting salary and bonus levels for executive officers, as well
as the relative performance of the other companies in this Survey Group and
the compensation paid to their executives.
1993 Long-Term Incentive Plan ("1993 Plan"). The 1993 Plan was approved by
the shareholders at the Trust's 1993 Annual Meeting. The 1993 Plan allows the
Compensation Committee to make cash and stock-based awards to officers and
other key employees of the Trust (such as grants of stock options, stock
appreciation rights, restricted stock, performance awards and stock purchase
awards).
On February 15, 1995, the Compensation Committee granted stock options to
all of the executive officers of the Trust. The amount of these awards was set
for all executive officers (excluding Mr. Guttman) based upon recommendations
prepared by Mr. Guttman. In preparing his recommendations, Mr. Guttman
considered how many options had been previously awarded to each executive
officer, the level of 1994 bonus compensation, the 1995 salary levels and the
Trust's goal of more closely aligning management's interests with
shareholders. The Compensation Committee determined the number of options to
be granted to Mr. Guttman based upon these same factors. Options were not
granted to executive officers in February 1996.
Nonqualified Deferred Compensation Plan. In July 1994, upon recommendation
of the Compensation Committee, the Trust adopted a nonqualified deferred
compensation plan ("Plan") which permits key executives to voluntarily defer
all or a portion of their future salary and other cash compensation earned
from the Trust into accounts maintained by the Trust in accordance with the
rules of the Internal Revenue Code of 1986, as amended,
8
applicable to nonqualified pension plans. Deferral elections must be made by
December 15 specifying the portion of the compensation to be earned in the
succeeding year that is to be deferred. In 1995, the Trust matched
contributions made by certain participants at a rate of $0.50 for each $1.00
contributed up to $1,740.
In accordance with the rules applicable to nonqualified pension plans, it is
intended that all deferrals of compensation by Plan participants will result
in such deferrals not being currently taxable to such participants for federal
income tax purposes, but taxable only upon the distribution of such deferrals,
together with the earnings thereon, to such participants at their retirement,
death, disability or other termination of employment; or in the event of a
change of control. The Plan also is designed to permit the participants to
make the maximum permissible elective deferrals under Section 401(k) of the
Code to the Amended and Restated Federal Realty Investment Trust Savings and
Investment Plan, effective January 1, 1987, as amended.
The Compensation Committee has designated all of the executive officers as
eligible to participate in the Plan.
Deductibility of Compensation Paid in Excess of $1 Million. Section 162(m)
of the Internal Revenue Code of 1986, as amended ("Code"), limits the ability
of a public company, such as the Trust, to deduct, in 1994 and subsequent
years, compensation paid to an executive officer who is named in its "Summary
Compensation Table" in excess of $1 million per year unless certain conditions
are met. What the requirements are vary depending on the type of compensation
paid. It is not anticipated that any executive officer will be paid in excess
of $1 million in 1996. Therefore, the Committee does not believe that it is
necessary at this time to modify any of the Trust's compensatory programs as a
result of Section 162(m).
Kristin Gamble
A. Cornet de Ways Ruart
George L. Perry
9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Trust's Compensation Committee are A. Cornet de
Ways Ruart, Kristin Gamble and George L. Perry. Morton S. Lerner served as a
member of the Compensation Committee until May 10, 1995.
Donald H. Misner is a full time employee of the Trust at an annual salary of
$120,000. Mr. Misner was paid a bonus of $20,000 for 1995. On the date of the
1996 Annual Meeting, Mr. Misner will also be granted an option to purchase
2,500 Shares, the per Share exercise price of which will be the fair market
value of a Trust Share on the date of grant. This option is in lieu of the
option he is no longer eligible to receive as he is no longer a nonemployee
Trustee.
STOCK PRICE PERFORMANCE
The following stock price performance chart compares the Trust's performance
to the S&P 500 and the index of equity real estate investment trusts prepared
by the National Association of Real Estate Investment Trusts ("NAREIT").
Equity real estate investment trusts are defined as those which derive more
than 75% of their income from equity investments in real estate assets. The
NAREIT equity index includes all tax qualified real estate investment trusts
listed on the NYSE, American Stock Exchange or the NASDAQ National Market.
Stock price performance for the past five years is not necessarily indicative
of future results. All stock price performance includes the reinvestment of
dividends.
[LINE GRAPH APPEARS HER]
FRT NAREIT
MONTH/YEAR INDEX EQUITY S&P
Dec-90 100.00 100 100
Jan-91 123.09 112.27 104.42
Feb-91 116.85 114.06 111.9
Mar-91 129.33 123.96 114.56
Apr-91 138.22 126.85 114.88
May-91 143.67 127.73 119.8
Jun-91 137.31 123.41 114.32
Jul-91 148.29 124.49 119.67
Aug-91 142.73 123.97 122.49
Sep-91 144.58 126.34 120.48
Oct-91 143.69 125.01 122.09
Nov-91 132.35 123.55 117.16
Dec-91 142.74 129.42 130.55
Jan-92 156.92 137.45 128.12
Feb-92 161.77 137.22 129.76
Mar-92 164.66 135.68 127.22
Apr-92 166.66 134.76 130.92
May-92 165.67 138.73 131.63
Jun-92 167.64 136.85 129.72
Jul-92 177.46 143.51 134.95
Aug-92 180.45 145.44 132.22
Sep-92 197.40 149.23 133.74
Oct-92 197.51 149.77 134.22
Nov-92 185.36 152.77 138.75
Dec-92 202.58 156.16 140.56
Jan-93 202.61 166.08 141.59
Feb-93 221.12 176.28 143.5
Mar-93 227.30 189.64 146.59
Apr-93 227.24 180.61 142.99
May-93 226.20 177.59 146.86
Jun-93 223.07 183.68 147.34
Jul-93 229.33 186.86 146.65
Aug-93 232.51 191.44 152.23
Sep-93 252.59 200.29 151.11
Oct-93 233.49 195.47 154.18
Nov-93 226.00 185.28 152.73
Dec-93 214.21 185.37 154.6
Jan-94 209.83 190.54 159.78
Feb-94 242.44 198.61 155.47
Mar-94 214.18 191.08 148.71
Apr-94 217.58 194.14 150.64
May-94 222.00 198.62 153.10
Jun-94 226.41 194.67 149.31
Jul-94 223.10 194.21 154.26
Aug-94 209.65 194.21 160.53
Sep-94 191.71 190.15 156.67
Oct-94 193.11 183.82 160.25
Nov-94 191.97 177.74 154.37
Dec-94 188.54 190.91 156.63
Jan-95 194.47 186.55 160.7
Feb-95 196.80 190.49 166.93
Mar-95 197.97 189.66 171.87
Apr-95 193.39 189.61 176.88
May-95 201.70 197.63 183.86
Jun-95 205.26 200.66 188.18
Jul-95 210.15 204.22 194.45
Aug-95 211.35 206.41 194.98
Sep-95 225.85 209.63 203.14
Oct-95 199.17 204.72 202.43
Nov-95 216.39 206.69 211.34
Dec-95 223.76 218.04 215.25
10
CERTAIN TRANSACTIONS
Pursuant to the terms of stock option plans, from 1984 through 1995 officers
and key employees have exercised options and paid for some of the Shares by
issuance of notes to the Trust. Notes accepted pursuant to the 1983 or 1985
stock option plans were for a term of five years with interest payable
quarterly at the per annum rate that is either the lesser of (i) the Trust's
borrowing rate or (ii) the current indicated annual dividend rate on the
Shares acquired pursuant to the option divided by the purchase price of such
Shares. Notes accepted pursuant to the 1993 Long-Term Incentive Plan were for
a period of five years with interest payable quarterly at the per annum rate
that is the lesser of (i) the Trust's borrowing rate or (ii) the indicated
annual dividend rate on the date of exercise of the options divided by the
option price of such Shares. The stock option notes are secured by the Shares,
which will not be released until the notes are paid in full. In September 1995
the terms of the option loans were modified. The loans, which previously had a
five year term, may now have a term extending to the employee's or officer's
retirement date. Pursuant to the terms of a restrictive stock agreement, Mr.
Guttman borrowed $210,000, $105,000 of which was repaid in 1992. The remaining
balance of $105,000 is payable on April 15, 2001, with no interest. The note
is secured by 18,975 Shares. In connection with restricted Share grants, the
Trust has loaned officers funds with which to pay taxes on the Shares. The
notes, which total $4,092 as of March 25, 1996, bear interest at the lesser of
(i) the Trust's borrowing rate or (ii) the current indicated annual dividend
rate divided by the closing price of such Shares on the vesting date. The
loans are being forgiven prorata over three years if the officer is still
employed by the Trust.
In 1991, the Trust accepted notes from Trust officers in connection with the
1991 Share Purchase Plan for $5,359,922. The current balance of the notes is
$3,573,000. Up to 75% of the original principal balance of these loans may be
forgiven by the Trust if certain conditions are met. In connection with the
1991 Share Purchase Plan, the Trust has loaned officers $858,000 with which to
pay income taxes associated with the forgiveness. The interest rate on the
Share purchase loans and related tax loans is 9.39%. On January 1, 1994, the
Trust lent Mr. Kaplan $1,000,000 to purchase 40,000 Trust Shares. The current
balance is $812,500 and he has been loaned $75,000 with which to pay income
taxes associated with the forgiveness. Up to 75% of the original principal
balance of this loan may be forgiven by the Trust if certain conditions are
met. The interest rate on his share purchase loans is 6.24%.
The following table sets forth the indebtedness to the Trust of the officers
as of March 25, 1996:
MAXIMUM
OUTSTANDING CURRENT
DURING BALANCE
NAME TITLE 1995 OF NOTES
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Steven J. Guttman......... President and Chief $2,926,000 $2,544,000
Executive Officer
Ron D. Kaplan............. Vice President--Capital 1,705,000 1,592,000
Markets
Catherine R. Mack......... Vice President--General 363,000 333,000
Counsel and Secretary
Mary Jane Morrow.......... Senior Vice President-- 749,000 686,000
Finance and Treasurer
Hal A. Vasvari............ Executive Vice President-- 849,000 858,000
Chief Operating Officer
Cecily A. Ward............ Vice President--Controller 103,000 94,000
Robert S. Wennett......... Senior Vice President-- 965,000 902,000
Acquisitions
A retail women's clothing store owned by Mr. Guttman and his wife, which is
operated by Mr. Guttman's wife, leases space at one of the Trust's properties.
Terms of the lease were negotiated at arms length and reflected prevailing
market conditions. Total payments in 1995 for rent, operating expenses and
real estate taxes were $81,000. In connection with acquisitions, brokerage
commissions of $671,000 were paid to a company that is fifty percent owned by
a brother of the Trust's president. These commissions were paid pursuant to a
brokerage contract on terms comparable to terms contained in contracts which
the Trust has with brokers providing similar services in other geographic
areas. A grocery store chain for which Mr. Ordan serves as Chairman, President
and Chief Executive Officer leases space at four of the Trust's properties.
Terms of these leases were negotiated
11
at arms length and reflected prevailing market conditions. Total payments in
1995 for rent, operating expenses and real estate taxes were $1,878,000. From
time to time the Trustees may actively engage on their own behalf and as
agents for and advisors to others in real estate transactions, including
development and financing. The Trustees have agreed that they will not acquire
an interest in any property which meets the investment criteria of the Trust
without first offering the property to the Trust.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP has been selected as independent public accountants for
the Trust for the current year, and examined the Trust's financial statements
for the year ended December 31, 1995. Grant Thornton LLP also provided limited
reviews of the Trust's quarterly financial information and assisted in
connection with certain other filings with the Securities and Exchange
Commission.
A representative of Grant Thornton LLP will be present at the Annual Meeting
and will have the opportunity to make a statement and answer appropriate
questions from shareholders.
ANNUAL REPORT
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE MAILED
WITHOUT CHARGE TO SHAREHOLDERS UPON REQUEST. REQUESTS SHOULD BE ADDRESSED TO
THE TRUST, 4800 HAMPDEN LANE, SUITE 500, BETHESDA, MARYLAND 20814, ATTENTION:
MS. KATHY KLEIN, VICE PRESIDENT--CORPORATE COMMUNICATIONS. THE FORM 10-K
INCLUDES CERTAIN EXHIBITS, WHICH WILL BE PROVIDED ONLY UPON PAYMENT OF A FEE
COVERING THE TRUST'S REASONABLE EXPENSES.
SOLICITATION OF PROXIES, SHAREHOLDER PROPOSALS AND OTHER MATTERS
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, Trust officials may solicit proxies in
person and by telephone or telegraph, and may request brokerage houses and
other custodians, nominees and fiduciaries to forward soliciting materials to
the beneficial owners of Shares.
Proposals of shareholders intended to be presented at the 1997 Annual
Meeting must be received by the Trust no later than November 30, 1996 to be
considered for inclusion in the Trust's proxy statement and form of proxy
relating to such meeting.
The Trustees know of no other business to be presented at the 1996 Annual
Meeting. If other matters properly come before the meeting, the persons named
as proxies will vote on them in accordance with their best judgment.
You are urged to complete, sign, date and return your proxy promptly to make
certain your Shares will be voted at the 1996 Annual Meeting. For your
convenience in returning the proxy, an addressed envelope is enclosed,
requiring no additional postage if mailed in the United States.
For the Trustees,
/S/ Catherine R. Mack
Catherine R. Mack
Vice President--General
Counsel and Secretary
YOUR PROXY IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES.
PLEASE SIGN, DATE AND MAIL IT TODAY.
12
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PROXY
FEDERAL REALTY INVESTMENT TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned, a shareholder of Federal Realty Investment Trust (the
"Trust"), hereby constitutes and appoints THOMAS F. COONEY, ESQ., MARY JANE
MORROW and CECILY A. WARD, or any of them, as the true and lawful attorneys
and proxies of the undersigned, with full power of substitution, for and in
the name of the undersigned, to vote and otherwise act at the Annual Meeting
of Shareholders of the Trust to be held at Woodmont Country Club, 1201
Rockville Pike, Rockville, Maryland on Thursday, May 2, 1996 at 10:00 a.m., or
at any adjournment thereof, with respect to all of the Common Shares of
Beneficial Interest of the Trust which the undersigned would be entitled to
vote, with all the powers the undersigned would possess if personally present,
on the following matters.
The undersigned hereby ratifies and confirms all that the aforesaid
attorneys and proxies may do hereunder.
(TO BE SIGNED ON REVERSE SIDE)
----------------
SEE REVERSE SIDE
----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR +++ +
VOTES AS IN THIS + +
EXAMPLE. +
+++++++
This Proxy when properly executed will be voted as directed by the undersigned
shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR"
PROPOSAL 1.
FOR WITHHELD
1. Election of [ ] [ ] Samuel J. Gorlitz; 2. In their discretion,
Trustees: Steven J. Guttman; on any other matters
Mark S. Ordan; properly coming
George L. Perry before the meeting
or any adjournment
The Board of Trustees thereof.
unanimously recommends
a vote FOR the four
Nominees.
For all, except as otherwise indicated
(INSTRUCTION: TO WITHHOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S
NAME IN THE LIST.)
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
SIGNATURE(S) ________________________________________ DATE____________
NOTE: Please sign exactly as your name(s) appear(s) hereon. If the
shares are held jointly each party must sign. If the shareholder
named is a corporation, partnership or other association, please
sign its name and add your own name and title. When signing as
an attorney, executor, administrator, trustee, guardian or in
any other representative capacity, please also give your full
title or capacity.
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