SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Federal Realty Investment Trust
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(Name of Registrant as Specified in Its Charter)
Federal Realty Investment Trust
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14a.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
March 28, 1995
Dear Shareholder:
Please accept my personal invitation to attend our Annual Meeting of
Shareholders on Wednesday, May 10, 1995 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 1994 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 10.
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 10, 1995
To Our Shareholders:
The 1995 Annual Meeting of Shareholders of Federal Realty Investment Trust
("Trust") will be held at Woodmont Country Club, 1201 Rockville Pike,
Rockville, Maryland, on Wednesday, May 10, 1995, at 10:00 a.m. for the purpose
of considering and acting upon the following:
1. The election of three 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 27, 1995 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 28, 1995
Proxies in the form enclosed are solicited by the Board of Trustees of
Federal Realty Investment Trust for use at the 1995 Annual Meeting of
Shareholders ("Annual Meeting") to be held at 10:00 a.m., Wednesday, May 10,
1995, at Woodmont Country Club, 1201 Rockville Pike, Rockville, Maryland. The
close of business on March 27, 1995 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 31,666,980 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 three 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.
Votes cast "for" and "against" the Proposal will be tallied as indicated.
"Broker non-votes" (i.e., Shares held by brokers or nominees as to which
instructions have not been received from the beneficial owners or the persons
entitled to vote such Shares and the broker or nominee does not have
discretionary voting power under applicable New York Stock Exchange ("NYSE")
rules) are not counted and will have no effect on whether a Proposal is
adopted. Abstentions will be treated as Shares that are present and entitled to
vote for purposes of determining the presence of a quorum and the number of
votes necessary to adopt a Proposal. The vote of a shareholder who abstains
will have the same effect as if he or she had voted "against" a Proposal.
This Proxy Statement and an accompanying proxy are being mailed to
shareholders on or about March 29, 1995, together with the Trust's 1994 Annual
Report, which includes certified financial statements for the year ended
December 31, 1994. The Consolidated Balance Sheets as of December 31, 1994 and
1993 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, 1994, 1993 and 1992), certified and contained in
the Trust's 1994 Annual Report, are incorporated herein by reference to that
Report.
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. Three Trustees, comprising
one class of Trustees, are to be elected at the 1995 Annual Meeting. Mr. Dennis
L. Berman, Ms. Kristin Gamble and Mr. Donald H. Misner have been nominated for
election as Trustees to hold office until the 1998 Annual Meeting and until
their successors have been elected and shall qualify. Proxies may not be voted
for more than three Trustees.
PRINCIPAL OCCUPATIONS
AND OTHER TRUSTEE TERM TO
NAME AGE DIRECTORSHIPS SINCE EXPIRE
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Dennis L. Berman..... 44 General Partner, GDR Partnerships and 1989 1998
Vingarden Associates,
builders/developers; Berman Enter-
prises.
Kristin Gamble....... 49 President, Flood, Gamble Associates, 1998
Inc., an investment counseling firm;
Director, Ethan Allen Interiors,
Inc., a furniture retailer.
Donald H. Misner..... 60 Director of New Development of the 1978 1998
Trust; Past President, Misner Devel-
opment; Co-founder, Miami Project to
Cure Paralysis.
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
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Samuel J. Gorlitz....... 77 Founder of the Trust; President, 1975 1996
Gorlitz Associates, real estate de-
velopers.
Steven J. Guttman....... 48 President and Chief Executive Officer 1979 1996
of the Trust; Trustee, International
Council of Shopping Centers; National
Association of Real Estate Investment
Trusts Board of Governors and Execu-
tive Committee.
George L. Perry......... 61 Senior Fellow, Brookings Institution; 1993 1996
Director, State Farm Insurance Com-
pany and various mutual funds managed
by the Dreyfus Corporation.
A. Cornet de Ways Ruart 61 Director of SIPEF S.A., an interna- 1983 1997
tional holding company principally of
agricultural interests; Director of
Interbrew S.A.
Morton S. Lerner........ 67 Retired President and Chief Operating 1993 1997
Officer of Lerner Shoes, Inc.; Direc-
tor, Wachovia Bank.
Walter F. Loeb.......... 70 President, Loeb Associates, 1991 1997
management consulting firm.
Publisher, Loeb Retail Letter;
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Director, InterTAN Inc., an
international electronics retailer;
Director, ColorTile, Inc., a
retailer; Director, Wet Seal, a
women's apparel retailer; Retired
Principal and Senior Retail Analyst,
Morgan Stanley & Co., Inc..
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 1994. The Compensation Committee,
comprised of Messrs. Cornet, Lerner and Perry, reviews and reports to the Board
on incentive plans and remuneration of officers. That committee held four
meetings in 1994. The Compensation Committee, administers the Trust's 1993
Long-Term Incentive Plan. During 1994 the Board of Trustees held thirteen
meetings. The Board of Trustees has no standing nominating committee.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE THREE NOMINEES.
OWNERSHIP OF SHARES BY TRUSTEES AND OFFICERS
As of March 27, 1995, 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
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Trustees and executive officers 1,849,342 5.84%
as a group (15 individuals)
Dennis L. Berman(2) 453,256 1.43%
A. Cornet de Ways Ruart(3) 23,197 under 1%
Kristin Gamble(4) 141,567 under 1%
Steven J. Guttman(5) 540,063 1.71%
Samuel J. Gorlitz(6) 142,483 under 1%
Ron D. Kaplan(7) 75,581 under 1%
Arnold M. Kronstadt(8) 35,437 under 1%
Morton S. Lerner(9) 8,377 under 1%
Walter F. Loeb 11,940 under 1%
Donald H. Misner(10) 28,716 under 1%
Mary Jane Morrow(11) 103,209 under 1%
George L. Perry(12) 6,714 under 1%
Hal A. Vasvari 111,698 under 1%
Robert S. Wennett 96,666 under 1%
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(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 434,875 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 director.
(4) Includes 139,067 shares as to which Ms. Gamble shares investment power
for clients. Includes 257 shares as to which Ms. Gamble is a Trustee of a
profit sharing plan.
(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 1,359 Shares as to which Mr. Kaplan's wife has sole
voting and investment power.
(8) Does not include 3,568 Shares as to which Mr. Kronstadt's wife has sole
voting and investment power.
(9) Does not include 2,500 Shares as to which Mr. Lerner's wife has sole
voting and investment power.
(10) Includes 574 Shares owned jointly as to which voting and investment
power is shared with Mr. Misner's wife.
(11) Includes 52 Shares held as custodian for minor children. Does not
include 138 shares as to which Ms. Morrow's mother has sole voting and
investment power.
(12) 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
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(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) ($)
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Steven J. Guttman 1994 $500,000 $120,000 -- $207,000(E)
President 1993 496,000 200,000 80,000 18,000
& Chief Executive 1992 466,000 150,000 10,000 395,000(E)
Officer
Ron D. Kaplan(F) 1994 190,000 75,000 -- 130,000
Vice President, Capital 1993 178,000 60,000 -- 76,000
Markets 1992 -- -- -- --
Mary Jane Morrow 1994 200,000 30,000 -- 67,000(E)
Senior Vice President, 1993 193,000 50,000 40,000 24,000
Finance & Treasurer 1992 181,000 38,000 10,000 112,000(E)
Hal A. Vasvari 1994 225,000 75,000 -- 74,000(E)
Executive Vice 1993 223,000 125,000 40,000 31,000
President, 1992 208,000 75,000 10,000 116,000(E)
Chief Operating
Officer
Robert S. Wennett 1994 200,000 60,000 -- 62,000(E)
Senior Vice President, 1993 190,000 100,000 40,000 13,000
Acquisitions 1992 179,000 65,000 10,000 107,000(E)
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(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 $189,000--
deferred compensation from forgiveness of loans as described below in (E);
(ii) Mr. Kaplan: $1,000--Trust paid group term life insurance; $4,000--
Trust contribution to Section 401 (k) Plan and the deferred compensation
plan; $1,000--Trust paid long-term disability insurance premium; $124,000--
Trust reimbursement of relocation expenses; (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 $59,000--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 $59,000--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 $57,000--deferred compensation from forgiveness of loans as described
below in (E).
(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
4
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
preceding fiscal year, one-eighth of the loan will be forgiven. 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. One-eighth of the loan was forgiven
on January 31, 1995. Forgiveness of the remainder 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 62% of the Trustees' fees paid in 1994.
The annual Trustee fee for 1994 was $25,000. Each Trustee was paid the fee
based on the number of months during the year he served as a Trustee. The
annual fee in 1994 for service on the Compensation Committee was $2,500 and
$3,000 for service as its Chairman. The annual fee in 1994 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 1994 Annual
Meeting of Shareholders, each nonemployee Trustee received an option to
purchase 2,500 Shares at an exercise price of $24.88. Mr. Misner also received
an option to purchase 2,500 shares at an exercise price of $24.88. 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
In April 1989, the Trust entered into employment agreements with Steven J.
Guttman, Mary Jane Morrow and Hal A. Vasvari. In January 1992, the Trust
entered into an employment agreement with Robert S. Wennett. The employment
agreements provide that the employee's salary may 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 previous year. The Board may further
increase the salary at any time. The term of each agreement is 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.
The Trustees may terminate the agreement, if the employee is totally disabled
for at least six consecutive months and a severance payment is made to the
employee of compensation for the lesser period of one year or the remaining
term of the agreement, and may also terminate the agreement for "just cause"
without payment to the employee. The employee may terminate the agreement
without advance notice if his/her duties or responsibilities are materially
modified without his/her consent, if the Trust moves the location of its
principal office outside the Washington D.C. area, or if the Trust is merged or
consolidated with another entity. If any employee so terminates his/her
agreement, he/she is entitled to full compensation for the remaining term of
the agreement. The employee may also terminate the agreement upon at least six
months notice and in that case the Trust's obligations to pay compensation to
the employee ceases on the effective date of termination. The agreements are
automatically terminated upon an employee's death. In October 1992, the Trust
entered into an employment agreement with Mr. Kaplan for an initial term of
three years. The Trustees could have
5
terminated the agreement for "just cause" without payment to the employee. Mr.
Kaplan could have terminated the agreement on 60 days notice, provided,
however, if he terminated before two full years of service to the Trust, he
would have had to reimburse the Trust for 50% of any relocation expense paid to
him. Mr. Guttman's, Mr. Kaplan's, Ms. Morrow's, Mr. Vasvari's and Mr. Wennett's
current annual salaries are $500,000, $190,000, $200,000, $225,000, and
$202,765 respectively.
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, 1995, Mr.
Wennett had an employment agreement with a 39 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 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 April 1989, the Trust entered into agreements with Mr. Guttman, Ms.
Morrow, Mr. Vasvari and in January 1990 with 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 their
salary including incentive compensation and their benefits and privileges would
continue for two years.
AGGREGATED OPTION EXERCISES IN 1994 AND DECEMBER 31, 1994 OPTION VALUES
The following table provides information on option exercises in 1994 by the
named executive officers and the value of each such officer's unexercised
options at December 31, 1994.
(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....... -- -- 43,923 53,577 $ 1,200 $32
Ron D. Kaplan........... 31,162(2) $41,000 -- 8,838 -- --
Mary Jane Morrow........ -- -- 22,211 26,911 600 32
Hal A. Vasvari.......... -- -- 26,211 26,911 11,100 32
Robert S. Wennett....... 4,878 33,000 13,333 26,911 -- 32
- --------
(1) Based on $20.63 per Share the closing price on the NYSE on December 31,
1994.
(2) Mr. Kaplan purchased 22,324 of these shares pursuant to an exercise of a
nonqualified stock option issued under the Trust's 1983 stock option plan. Mr.
Kaplan received a loan to purchase these shares. The loan was approved by the
Board.
6
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 current annual payments.
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%.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
For 1994, 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 non-employee 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 1994, the Compensation
Committee retained Compensation Resources, Inc. ("CRI") for this task.
1994 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, as a result of delays in scheduling meetings or
because of other
7
issues being considered by the Compensation Committee, salary or bonus is not
set 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 1994, even though all of the executive
officers of the Trust (including Mr. Guttman) had entered into employment
agreements with the Trust. All but one of these agreements provided for a
salary increase on January 1 of each year equal to 50% of any increase in the
Consumer Price Index for the previous year. One employment agreement did not
contain a provision providing for automatic salary increases.
Salaries for 1994 were set 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 had 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 used for
comparative revenues, profitability and growth.
CRI made recommendations as to 1994 salary levels. At the request of the
Compensation Committee, Mr. Guttman also prepared recommendations concerning
1994 salaries to be paid to executive officers, other than himself. Mr.
Guttman's recommendations were based upon his analysis of each executive
officers' performance and the 1993 performance of the Trust as a whole. Among
the performance factors considered were 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
weighed these and other factors, based upon the responsibilities of each of the
executive officers.
CRI advised the Compensation Committee that the salary levels suggested by
Mr. Guttman were well within the range that CRI would recommend, based upon the
total cash compensation paid to officers of companies within the group
considered by the Compensation Committee and in light of the Trust's overall
performance.
Because the Trust met or exceeded internal targets for the Performance
Factors in 1993, the Compensation Committee determined to modestly increase the
salaries of the executive officers, including Mr. Guttman. Mr. Kaplan's and Mr.
Wennett's salary increase were slightly greater than that of the other
executive officers and resulted from the Compensation Committee's determination
that the Trust had benefitted from Mr. Kaplan's contribution to increasing the
unsecured lines of credit and Mr. Wennett's contribution to exceeding the
internal acquisition targets.
In 1994, the Compensation Committee conducted its own review of the total
cash compensation paid to officers holding similar positions in the Survey
Group. Following its review of this survey, the Compensation Committee
concluded that the Trust's compensation packages were, for the most part, in
keeping with industry practice. The Compensation Committee was concerned that
the executive officers' employment agreements, although appropriate when
originally entered into, could now be viewed as not in keeping with current
industry practice. Thus, the Compensation Committee offered its executive
officers the option to elect to substitute a severance agreement for his/her
employment agreement or to continue under an employment agreement with a fixed
term which will not automatically renew. As previously noted, one executive
officer retained his employment agreement, which agreement now has a fixed
term, and the other executive officers elected to substitute the severance
agreement for his/her employment agreement.
Salaries for 1995 and bonuses for 1994 were set after review of the
Compensation Committee's survey referenced above and review of the Trust's
performance. At the request of the Compensation Committee, Mr. Guttman
submitted recommendations for salary levels and bonuses for executive officers,
other than himself. These recommendations were based on Mr. Guttman's analysis
of each executive officer's performance and the performance of the Trust as a
whole, as compared with the Performance Factors and the Trust's internal
performance targets.
8
In 1994, the Trust's funds from operations increased by 6% over the 1993
level; this increase was somewhat lower than the internal goal. Also, the level
of property acquisitions was somewhat lower than internal targets. Thus, the
Compensation Committee determined to hold 1995 salaries for executive officers,
at 1994 levels, with the exception of Mr. Wennett, who elected to receive the
salary increase (50% of CPI) provided in his employment agreement. Mr. Guttman
waived the 50% of CPI increase provided in his employment agreement. Mr.
Guttman's, Mr. Vasvari's, Ms. Morrow's, Mr. Wennett's and Mr. Kaplan's 1995
annual salaries are $500,000, $225,000, $200,000, $202,765 and $190,000,
respectively.
With respect to bonus compensation, the Compensation Committee concluded that
the executive officers should receive cash compensation recognizing the
increase in funds from operations and the attainment of certain of the Trust's
other internal corporate performance goals. The Compensation Committee
concluded that these bonuses should reflect that not all of the Trust's
internal performance goals were met. Thus, executive officers, including the
President, but excluding Mr. Kaplan, received a bonus equal to 60% of his/her
1993 bonus. The Committee determined that Mr. Kaplan's performance justified a
bonus equal to 125% of his 1993 bonus. In reaching this determination, the
Compensation Committee considered his contribution to controlling certain fees
paid by the Trust in 1994.
The Compensation Committee strives to maintain the total compensation
package, (including dividends), 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 1994 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
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.
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, 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 1994, the Trust matched contributions made by 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
9
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 January 1, 1989.
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 1995. 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).
A. Cornet de Ways Ruart
Morton S. Lerner
George L. Perry
10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Trust's Compensation Committee are A. Cornet de
Ways Ruart, Morton S. Lerner and George L. Perry. Dennis L. Berman served as a
member of the Compensation Committee until May 4, 1994.
Mr. Misner is a full time employee of the Trust at an annual salary of
$120,000. On the date of the 1995 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.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FEDERAL REALTY TRUST,
S&P 500 INDEX AND NAREIT
[PERFORMANCE GRAPH APPEARS HERE]
FEDERAL
Measurement Period REALTY S&P
(Fiscal Year Covered) TRUST 500 INDEX NAREIT
- --------------------- ----------- --------- ---------
Measurement Pt-12/31/1989 $100.00 $100.00 $100.00
FYE 12/31/1990 $ 70.63 $ 96.83 $ 84.65
FYE 12/31/1991 $100.83 $126.41 $114.86
FYE 12/31/1992 $143.09 $136.1 $131.62
FYE 12/31/1993 $151.31 $149.7 $157.49
FYE 12/31/1994 $133.17 $151.66 $162.49
11
CERTAIN TRANSACTIONS
Pursuant to the terms of stock option plans, from 1984 through 1994 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 are 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 are 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. 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, 1996, 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 $31,142 as of March 27, 1995, 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
$3,931,000. 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 $715,000 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 $875,000 and he has been loaned $50,000 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 27, 1995:
MAXIMUM
OUTSTANDING CURRENT
DURING BALANCE
NAME TITLE 1994 OF NOTES
- --------------------------------------------------------------------------------
Steven J. Guttman......... President and Chief $3,090,000 $2,813,000
Executive Officer
Ron D. Kaplan............. Vice President--Capital 1,705,000 1,630,000
Markets
Catherine R. Mack......... Vice President--General 386,000 352,000
Counsel and Secretary
Mary Jane Morrow.......... Senior Vice President-- 789,000 721,000
Finance and Treasurer
Hal A. Vasvari............ Executive Vice President-- 889,000 821,000
Chief Operating Officer
Cecily A. Ward............ Vice President--Controller 107,000 98,000
Robert S. Wennett......... Senior Vice President-- 975,000 937,000
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 1994 for rent, operating expenses and real
estate taxes were $78,000. 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.
12
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, 1994. 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, 1994, 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 1996 Annual Meeting
must be received by the Trust no later than November 30, 1995 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 1995 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 1995 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.
13
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 Wednesday, May 10, 1995 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 Trustees: [_] [_]
Dennis L. Berman; Kristin Gamble; Donald H. Misner
The Board of Trustees unanimously recommends a vote FOR
the three 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.)
2. In their discretion, on any other matters properly coming
before the meeting or any adjournment thereof.
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SIGNATURE(S) DATE
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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 corpora-
tion, 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.
