Eligibility to receive these cash bonuses incentivizes such executive officers to strive to perform at their highest levels and further our interests and the interests of our stockholders. Mr. Rady and Mr. Gammieri dodid not currently participate in the incentive bonus plan or have a target bonus percentages,percentage in 2023, and as such, theirhis annual bonus are currentlywas entirely at the discretion of the Compensation Committee or executive management, respectively. Mr. Chamberlain was not eligible for an annual bonus for 2015 due to his termination of employment in September 2015.Committee.
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Same Store NOI Growth Rank / Performance Peer Group |
Retail | Office | Multifamily |
Acadia Realty Trust | Boston Properties, Inc. | Avalon Bay Communities, Inc. |
Saul Centers Inc. | Douglas Emmett Inc. | Essex Property Trust |
Equity One, Inc. | Hudson Pacific Properties | Equity Residential |
Federal Realty Investment Trust | Kilroy Realty Corporation | UDR, Inc. |
Retail Properties of the America, Inc. | Paramount Group, Inc. | Home Properties, Inc. |
Kimco Realty | Empire State Realty Trust, Inc. | Post Properties, Inc. |
Regency Centers Corporation | SL Green Realty Corp | Apartment Investment and Management |
Weingarten Realty Investors | | Camden Property Trust |
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FFO Multiple Rank / Performance Peer Group |
Federal Realty Investment Trust | Hudson Pacific Properties |
Boston Properties, Inc. | Acadia Realty Trust |
Paramount Group, Inc. | UDR, Inc. |
Essex Property Trust | Equity One, Inc. |
Avalon Bay Communities, Inc. | Prologis, Inc. |
Regency Centers Corporation | Douglas Emmett Inc. |
Equity Residential | Home Properties, Inc. |
The Macerich Company | Retail Properties of the America, Inc. |
Kilroy Realty Corporation | |
We have different peer groups for compensation comparisons and performance comparisons because our Compensation Committee believes that size (predominantly equity market capitalization) is a primary determinant of market pay levels. Therefore, our Compensation Committee limited the universe of companies from which we select compensation peers to be within a reasonable size range of our Company (i.e., from $1.5 billion to $3.0 billion in equity market capitalization). Size is not as critical a determinant of relative performance, and therefore we have selected performance peers from a broader universe of companies. Our Compensation Committee believes the performance peer groups set forth above (based primarily on the high quality, premier locations, total asset size and management) are a more proper benchmark against our Company's financial and operating performance than our compensation peer group, taking these constraints into account.
The Compensation Committee has the exclusive authority, in its reasonable discretion, to make proper adjustments and/or modifications to the foregoing calculations in the event that, among other things, any of the performance peer group companies do not report sufficient or timely data for proper comparison with the Company.
Individual Performance Measures for 2023. A portion of each of Messrs. Barton, Wyll and Wyll'sGammieri's annual bonus iswas determined in the sole discretion of the Compensation Committee in 2023 based on individual performance and the consideration of such other factors as the Compensation Committee determinesdetermined to be appropriate.appropriate, including an annual assessment of our progress on our ESG initiatives as described herein.
Determination of 20152023 Cash Bonus Amounts
The Compensation Committee determined the bonuses for Messrs. Rady, Barton, Wyll and Gammieri's bonusesGammieri based on the achievement of the established goals and its subjective performanceevaluation of each such executive officer's individual performance.performance, including, without limitation, such executive officer's contributions to the Company in furtherance of our ESG initiatives. For 2015, the Company's Consensus2023, our FFO per share was $1.87.$2.40, above the maximum level of the FFO range of $2.25 of FFO per share. As a result, the Company's Consensus FFO MultipleMessrs. Barton, Wyll and Gammieri's performance multiplier was 21.24x, in the 75th200% with respect to 85th percentile under the annual bonus plan, resulting in a payout of that portion of the corporate component of the annual bonuses atunder the 100% level. In addition, for 2015, the Company's same store NOI growth was in the top three of two of three asset classes among the incentivecash bonus plan peer companies, resulting in a payout of that portion of the corporate component of the annual bonuses at the 100% level. With2023.
Furthermore, with respect to the discretionary component of the annual bonuses in 2023, the Compensation Committee determined to award 150% of target level for each of Messrs. Barton, Wyll and Wyll with 93%Gammieri based on their significant contributions and 100%leadership to (a) the achievement of their target levels, respectively. As a result, Messrs. Bartonour operations and Wyll received an annual bonus equal to 96%financial performance as outlined in the executive summary on page 29 above, (b) the Significant Achievements outlined on page 42 below, and 100%(c) the advancement of their target bonus, respectively. The actual annual bonuses paidour ESG initiatives.
In regards to the assessment of our ESG initiatives, the Compensation Committee evaluated our named executive officers for 2015 are set forth belowleadership efforts in 2023 in regards to our diversity, equity, inclusion, employee training, reduction of waste and emissions and proper risk management, cybersecurity and regulatory controls and workforce health and safety matters, as well as quantitative data based on various ESG assessments and the "Summary Compensation Table."results of surveys submitted to GRESB, S&P Global and MetLife, to name a few.
Discretionary Bonus for Mr. Rady. The Compensation Committee determined to award Mr. Rady a discretionary bonus of $475,000$2.1 million for 2015.2023. Mr. Rady's discretionary cash bonus was determined by our Compensation Committee based on its consideration of the factors described above in connection with the determination of the bonuses for Messrs. Barton, Wyll and Gammieri under the annual incentive bonus plan for 2023 as well as Mr. Rady's (i) decisive leadership (ii) seamless transition to the role of our President and Chief Executive Officer in September 2015, and (iii) substantial contribution to the financialour finances and operational success
operations in 2023. Additionally, our Compensation Committee determined that Mr. Rady should be awarded a higher cash bonus than he otherwise would have received in light of the Company.fact that Mr. Rady was not awarded restricted stock grants in December 2023 due to ownership limitations in our charter that prevents Mr. Rady and his affiliates from beneficially or constructively owning more than 19.9% of our outstanding common stock. Note that if Mr. Rady had received an award of restricted stock grants at $2.25 million of target value (consistent with his stock award in December 2022), the aggregate grant-date fair value of such restricted stock awards granted to Mr. Rady would have been $2.69 million, computed in accordance with ASC Topic 718. Therefore, Mr. Rady's incremental cash bonus in 2023 was significantly less than the potential fair value of his stock award, had it been granted.
The actual annual bonuses paid to the named executive officers for 2023 are set forth below in the “Summary Compensation Table.”
Discretionary Bonus
2024 Annual Cash Incentives
For 2024, our Compensation Committee has established an annual incentive bonus plan for Mr.Messrs. Barton, Wyll and Gammieri consistent with the threshold, target and maximum bonuses described above for 2023, the weightings between corporate and individual performance in determining final annual bonus payouts and the performance measures described herein.
Corporate Performance Measure for 2024. Following consultation with Mr. Rady,The corporate financial measure that will determine the payout of the corporate component of the annual bonuses for Messrs. Barton, Wyll and Gammieri under the cash bonus plan in 2024 is FFO per share. The Compensation Committee has the exclusive authority, in its reasonable discretion, to determine the FFO per share for purposes of the corporate component of the annual bonuses for 2024 based on, among other things, the Company's internal forecast.
Individual Performance Measures for 2024. A portion of Messrs. Barton, Wyll and Gammieri's annual bonus will be determined in the sole discretion of the Compensation Committee determined to award Mr. Gammieri a discretionary bonus of $110,000 for 2015. Mr. Gammieri’s discretionary cash bonus was determined by the Compensation Committeein 2024 based on his significanttheir contributions to the achievement of our operations and leadership with respect tofinancial performance, as well as an assessment of the advancement of our development and construction activities in 2015.ESG initiatives.
Long-Term Equity Incentive Awards
Long-term equity incentives are provided to our named executive officers through grants of restricted stock by the Compensation Committee pursuant to the 2011Amended Equity Plan, as further described below. Subject to the terms of the 2011Amended Equity Plan, the Compensation Committee, as plan administrator, has the discretion to determine both the recipients of awards and the terms and provisions of such awards, including the applicable exercise or purchase price, expiration date, vesting schedule and terms of exercise. The 2011Amended Equity Plan is subject to certain limitations on the maximum number of shares granted or cash awards payable in any calendar year.
We intend that grants of long-term incentive awards will be designed to increase our named executive officers' stock ownership in our Company, to directly align employee compensation with the interests of our stockholders and to encourage actions that maximize long-term stockholder value. We expect that future grants of our long-term incentive awards will generally vest over several years, thereby providing an incentive for the grantee to remain with American Assets Trust, Inc. Dividends will be paid on the entirety of the grant from the date of the grant.us. We do not coordinate the timing of equity award grants with the release of material non-public information nor do we time the release of material non-public information for purposes of affecting the value of executive compensation.
2015 Long-Term Equity Incentive Awards. In December 2015, the Compensation Committee awarded each Additionally, we currently do not have outstanding time-based equity awards with any of our named executive officers an award of performance-based restricted shares ofemployees (except for our common stock. non-employee directors).
The Compensation Committee intends to makemakes annual awards of performance-based restricted shares to our named executive officers in December of each year. The purpose of the long-term incentive award program continues to be alignment of the interests of executives with the interests of the Company’sour stockholders, retention of executives and promotion of actions that result in long-term stockholder value creation.
2015 Performance-Based Awards. Under the long-term incentive award program implemented in 2014, Messrs. Rady, Barton, Wyll and Gammieri will be granted performance-based restricted stock awards on an annual basis, subject to the discretion and approval of the Compensation Committee. Pursuant to the restated employment agreements, it is theour intention of the Company that Messrs. Rady, Barton and Wyll will receive an annual award of performance-based restricted stock that will, together with base salary and target bonus opportunities, provide the executive with target total annual compensation at no less thancompetitive with the median of similarly-situatedsimilarly situated executive officers among the Company'sour then current compensation peer group in the reasonable discretion of the Compensation Committee. Each such annual restricted stock award will have an aggregate value at "target" performance levels and at "maximum" performance levels on the date of grant as follows (which amounts may be increased or decreased each year by the Compensation Committee based on its consideration of comparable compensation peer group data):
ANNUAL STOCK GRANT VALUES FOR NAMED EXECUTIVE OFFICERS
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Executive | | Annual Target Stock Grant Value | | Annual Maximum Stock Grant Value |
Ernest Rady (1) | | N/A | | N/A |
Robert F. Barton | | $1,050,000 | | $1,575,000 |
Adam Wyll | | $1,050,000 | | $1,575,000 |
Jerry Gammieri (2) | | $400,000 | | $600,000 |
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Executive | | Annual Target Stock Grant Value | | Annual Maximum Stock Grant Value |
Ernest Rady | | $1,000,000 | | $1,250,000 |
Robert F. Barton | | $500,000 | | $625,000 |
Adam Wyll | | $275,000 | | $343,750 |
Jerry Gammieri (1) | | N/A | | N/A |
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(1) | The Company has not established a formalized or contractual annual target stock grant for Mr. Gammieri. |
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(1) Mr. Rady was not awarded restricted stock grants in December 2023 due to ownership limits in our charter that prevents Mr. Rady and his affiliates from beneficially or constructively owning more than 19.9% of our outstanding common stock.
(2) We have not established a formalized or contractual annual target stock grant for Mr. Gammieri. Amounts in the table above for Mr. Gammieri were values determined by our Compensation Committee in 2023.
These “target” and “maximum” values are converted at the time of grant into a “target” and “maximum” number of shares, respectively, of restricted stock based on the fifty-day historical average closing price per share of our common stock as of the day preceding the grant date to our named executive officers and employees. As a result, the actual aggregate grant-date fair value of these awards, computed in accordance with ASC Topic 718, may differ from the target and maximum values reflected in the table above from year to year.
2023 Long-Term Equity Incentive Awards.
In December 2023, the Compensation Committee awarded each of our named executive officers an award of performance-based restricted shares of our common stock consistent with the methodology described below. The actual number of shares granted to each of the named executive officers in 20152023 is set forth in the table on page 2232 entitled "2015“2023 Restricted Stock Grants for Named Executive Officers."”
The restricted stock awards granted in December 2023 are eligible to vest over a three-year period based on the results of two performance-based measures:(1) our FFO per share for the FFO performance period and (2) our relative total shareholder return, or TSR performance, as compared to the S&P 600 Real Estate Index, over a one-year, two-year and three-year performance period ending November 30, 2024, 2025 and 2026.For purposes of the awards, the TSR calculation will take into account both stock price appreciation and dividends assuming all dividends are reinvested.Up to one-third of the shares of restricted stock granted in December 2023 may vest based on the performance-based measurements as of each of November 30, 2024, 2025 and 2026.
Our Compensation Committee determined to utilize the foregoing performance-based metrics in connection with the December 2023 grants because they believed that:
•FFO per share represents the key financial and operational performance metric that most REITs are measured by and for which our named executive officers are directly responsible, thereby creating a clear link between executive actions and corporate results.
•The S&P 600 Real Estate Index is a diversified real estate index comprised of 50 real estate companies in the S&P 600 (including the Company), of which 44 are equity REITs (like the Company) across most REIT property types (i.e., office, retail, multifamily and mixed-use/hospitality), which provides an appropriate comparison to our diversified portfolio (office, retail, multifamily and mixed-use/hospitality).
•The selected performance metrics of FFO per share and relative TSR are important to sustaining our long-term performance and are commonly used by other REITs to measure performance-based awards.
•Our performance-based restricted shares from years prior to 2021 (which were never modified) measured performance based on our TSR performance compared to the Bloomberg Shopping Center REIT Index, or BBRESHOP Index, which we no longer believe is an appropriate comparison index, as our retail portfolio comprised less than 26.5% of our net operating income in 2023, due, in large part, to our acquisitions of multiple office projects (approximately 1.3 million square feet for approximately $780 million since June 2019) and in-progress or recently completed development and redevelopment of additional office projects (approximately $220 million in estimated project costs).
For the shares of restricted stock awarded in December 2023, performance rankings corresponding to the vesting percentage for each of the three performance periods (one-year, two-year and three-year) are based on our “FFO Per Share” and our “Relative TSR Performance” as set forth in the following tables:
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Payout Level | FFO Per Share(1)(2) Performance for the FFO Performance Period(3) | FFO Performance Multiplier(4) |
Maximum | Top End of FFO Per Share Range in Budget or above | 150% |
Target | Mid-Point of FFO Per Share Range in Budget | 100% |
Threshold or below | Low End of FFO Per Share Range in Budget or below | 50% |
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(1) “FFO” means net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures, as calculated in accordance with the standards established by NAREIT and in a manner generally consistent with the FFO calculations set forth in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and/or any supplemental information filed in connection therewith.
(2) “FFO Per Share” means FFO per share (computed in accordance with GAAP), as calculated in accordance with the standards established by NAREIT and in a manner generally consistent with the FFO per share calculations set forth in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and/or any supplemental information filed in connection therewith.
(3) “FFO Performance Hurdles.Period” means the period beginning on January 1 and ending on December 31. Note that the Compensation Committee may use reasonable estimates for FFO (if available and as necessary) for the month of December (as of November 30) to effectuate vesting prior to calendar year-end, consistent with prior years.
(4) If the Company achieves FFO Per Share performance that falls between the foregoing levels, the FFO Performance Multiplier will be determined by linear interpolation between the applicable levels.
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Relative TSR Performance(1)(2) Relative to the S&P 600 Real Estate Index(3) for the TSR Performance Period(4) | TSR Performance Multiplier(5) |
+500 bps and above | FFO Performance Multiplier + 10% (but not to exceed 150%) |
Between +500 bps and -500 bps | FFO Performance Multiplier |
-500 bps and below | FFO Performance Multiplier - 10% (but not below 50%) |
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(1) “Relative TSR Performance” means the Company TSR less the S&P 600 Real Estate Index TSR, in each case for the applicable performance period, expressed in basis points.
(2) “Company TSR” means the Company’s compounded annual total shareholder return for the applicable performance period calculated in accordance with the total shareholder return calculation methodology used in the S&P 600 Real Estate Index (assuming the reinvestment of all dividends).
(3) “S&P 600 Real Estate Index” means the compounded annual total shareholder return for the S&P 600 Real Estate Index for the applicable performance period (assuming the reinvestment of all dividends).
(4) For purposes of the 2023 performance restricted stock awards, there are three “TSR Performance Periods.” The First TSR Performance Period means the period beginning on December 1, 2023 and ending on November 30, 2024. The Second TSR Performance Period means the period beginning on December 1, 2023 and ending on November 30, 2025. The Third TSR Performance Period means the period beginning on December 1, 2023 and ending on November 30, 2026.
(5) “TSR Performance Multiplier” means, for each performance period, the performance multiplier determined pursuant to the chart above based on the Company’s Relative TSR Performance relative to the S&P 600 Real Estate Index for the applicable performance period.
The Compensation Committee retains the discretion to adjust the FFO Performance Multiplier and TSR Performance Multiplier (either positively or negatively) to address events or circumstances that are extraordinary or unusual in nature or infrequent in occurrence or that otherwise have an unintended effect on the calculation of the FFO Performance Multiplier.
We expect to grant similar performance-based restricted stock awards in future fiscal years as provided in the restated employment agreements and on similar terms to those described above, although the Compensation Committee retains the discretion to adjust the amount of such awards and the vesting terms applicable to such awards.
Vesting of 2022 Performance Based Awards.
In December 2022, the Compensation Committee awarded each of our named executive officers an award of performance-based restricted shares of our common stock, which awards are structured substantially similar (except for the performance periods) to the description and table set forth under "2023 Long-Term Equity Incentive Awards" as described above. The restricted stock awards granted in December 2022 are eligible to vest based on (1) our FFO per share for the FFO performance period and (2) our relative TSR performance, as compared to the S&P 600 Real Estate Index, over a one-year, two-year and three-year performance period ending November 30, 2023, 2024 and 2025. Up to one-third of the shares of restricted stock maysubject to such award were eligible to vest on November 30th30, 2023.
The maximum, target and threshold levels of FFO per share range for 2023 established by the Compensation Committee for restricted stock awards granted in December 2022 were $2.25, $2.15 and $2.05, respectively.
For the 2023 performance period, the Company's FFO was $2.40 per share for calendar year 2023; and the Company's TSR was (24.84%) and the S&P 600 Real Estate Index TSR was (11.46%), in both cases, for the TSR performance period from December 1, 2022 to November 30, 2023.
As a result, the FFO Performance Multiplier was determined to be 150% and the TSR Performance Multiplier was determined to be “FFO Performance Multiplier - 10%”, which ultimately resulted in vesting of the tranche of the restricted stock awards granted in December 2022 eligible to vest based on 2023 performance at 140% of target level.
Vesting of 2021 Performance Based Awards
In December 2021, the Compensation Committee awarded each of our named executive officers an award of performance-based restricted shares of our common stock, which awards are structured substantially similar (except for the three years followingperformance periods) to the grant date (each a "measurement date")description and table set forth under "2023 Long-Term Equity Incentive Awards" as described above. The restricted stock awards granted in December 2021 are eligible to vest based on (1) our FFO per share for the Company's "FFO Multiple" rankingFFO performance period and (2) our relative TSR performance, as compared to itsthe S&P 600 Real Estate Index, over a one-year, two-year and three-year performance peer groupperiod ending November 30, 2022, 2023 and 2024. Up to one-third of the shares of restricted stock subject to such award was eligible to vest on such measurement date. "FFO Multiple" means a company's closing priceNovember 30, 2023.
The maximum, target and threshold levels of FFO per share on the applicable measurement date dividedrange for 2022 established by the company's "Consensus FFO" per share as of such measurement date. "Consensus FFO" means,Compensation Committee for eachrestricted stock awards granted in December 2021 were $2.14, $2.10 and $2.06, respectively.
For the measurement date for the performance-based restricted stock awards granted in 2021, the Company's FFO was $2.34 per share for calendar year 2022; and the Company's TSR was (34.45%) and the S&P 600 Real Estate Index TSR was (27.04%), in both cases, for the TSR performance period from December 1, 2021 to November 30, 2023.
As a result, the FFO Performance Multiplier was determined to be 150% and the TSR Performance Multiplier was determined to be “FFO Performance Multiplier - 10%”, which ultimately resulted in vesting of the eligible tranche of the restricted stock awards granted in December 2021 at 140% of target level.
Vesting of 2020 Performance Based Awards.
In December 2020, the Compensation Committee awarded each of the Company and the peer companies,our named executive officers an averageaward of performance-based restricted shares of our common stock. Each of the estimatesrestricted stock awards granted to our named executive officers in December 2020 were eligible to vest based on our TSR performance over a one-year, two-year and three-year performance period relative to the BBRESHOP Index. Up to one-third of FFO for the subsequent calendar year given by institutional analysts covering a company.shares of restricted stock subject to each such award was eligible to vest on November 30, 2023.
“Threshold,” “target” and “maximum”For the shares of restricted stock awarded in December 2020, performance levelsrankings corresponding to the vesting percentage for each measurement date were establishedbased on our “Relative TSR Performance” as follows:
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Relative FFO Multiple RankingTSR Performance(1)(2) Relative to the Bloomberg Shopping Center REIT Index(3) for the Performance Peer Group on Measurement DatePeriod(4) | | Restricted Share Vesting as a % of Target Shares Eligible to Vest on Applicable Measurement DateTSR Performance Multiplier(5) |
Above the 85th Percentile +500 bps and above | | 125%150% |
Above the 75th Percentile and At or Below the 85th Percentile +400 bps | 140% |
+300 bps | 130% |
+200 bps | 120% |
+100 bps | 110% |
0 bps | 100% |
Above the 60th Percentile and At or Below the 75th Percentile -100 bps | | 75%90% |
Below-200 bps
| 80% |
-300 bps | 70% |
-400 bps | 60% |
-499 bps | 50% |
-500 bps and below | Up to 50% as determined by the 60th Percentile | | 0%Compensation Committee in its reasonable discretion based on the Compensation Committee's qualitative assessment of overall Company and Participant performance during the Performance Period |
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As
(1) “Relative TSR Performance” means the Company TSR less the Bloomberg Shopping Center REIT Index TSR, in each case for the applicable performance period, expressed in basis points.
(2) “Company TSR” means the Company’s compounded annual total shareholder return for the applicable performance period calculated in accordance with the total shareholder return calculation methodology used in the BBRESHOP Index (and, for the avoidance of doubt, assuming the reinvestment of all dividends paid).
(3) “BBRESHOP Index TSR” means the compounded annual total shareholder return for the BBRESHOP Index for the applicable performance period (assuming the reinvestment of all dividends).
(4) For purposes of these performance restricted stock awards, there were three “performance periods.” By way of example, for the December 2020 awards, the “first performance period” means the period beginning on December 1, 2020 and ending on November 30, 2021. The “second performance period” means the period beginning on December 1, 2020 and ending on November 30, 2022. The “third performance period” means the period beginning on December 1, 2020 and ending on November 30, 2023.
(5) “TSR Performance Multiplier” means, for each performance period, the performance multiplier determined pursuant to the chart above based on the Company’s Relative TSR Performance relative to the BBRESHOP Index for the applicable performance period.
The Compensation Committee retained the discretion to adjust the TSR Performance Multiplier (either positively or negatively) to address events or circumstances that are extraordinary or unusual in nature or infrequent in occurrence or that otherwise have an unintended effect on the calculation of the TSR Performance Multiplier.
In addition, as noted in the charttable above, in the event our relative TSR performance was less than the threshold level of performance, up to 50% of the “target” number of shares may vest based on our Compensation Committee’s qualitative assessment of individual and Company performance for the applicable performance period. This equity formula did not guarantee any minimum vesting levels, as the assessment, including the qualitative component, was entirely based on individual and Company performance. In such regard, our Compensation Committee could have awarded less than 50% of target if warranted due to underperformance.
In December 2023, after review of our relative TSR performance compared to the Company’s FFO Multiple ranking isBBRESHOP Index TSR for the three-year performance period ending November 30, 2023 under the restricted stock awards granted in 2020, and after review of our significant achievements during 2023 as described below, our Compensation Committee applied its authority to provide for 50% vesting at target levels of such awards for the 60th percentileperformance period under each such award ending on November 30, 2023.
In making its determination to approve the vesting of itsa portion of such awards, the Compensation Committee took into account that such awards measured relative performance peer groupagainst the BBRESHOP Index. For the reasons discussed above, our Compensation Committee no longer believes that the BBRESHOP Index provides an appropriate metric for ameasurement of our TSR performance.
On November 30, 2023, the third measurement date nofor the performance-based restricted shares will vest with respectstock awards granted in 2020, the Company TSR was (21.30%) and the BBRESHOP Index TSR was 43.86% for the three-year performance period from December 1, 2020 to such measurement date. Any restricted shares which do not vest with respect to a measurement date will be forfeited. The performance peer group that will be used for purposes of determining the Company's FFO Multiple ranking is the same as the revised performance peer group used to assess annual bonuses as described on page 26 above.November 30, 2023.
For 2015, the Company's Consensus FFO per share was $1.87. As a result, the Company's Consensus FFO MultipleRelative TSR Performance was 21.24x, -500 bps or more below the BBRESHOP Index TSR for the applicable performance period.
Significant Achievements in 2023
In light of the Compensation Committee’s changed view of the relevance of the BBRESHOP Index to accurately measure our total shareholder return performance, the Compensation Committee determined to include a review of the changes in our strategy, focus and our overall performance in making its determination to use its discretion to vest a portion of these awards. Specifically, our Compensation Committee determined that (i) due to the COVID-19 pandemic, there were events or circumstances that they believed were extraordinary or unusual in nature or infrequent in occurrence and that otherwise had an unintended and unavoidable effect on the relative TSR calculations, (ii) our employee retention was more important than ever in light of the highly competitive labor market for experienced and/or specialized executive and employee talent in our target markets and (iii) the named executive officers provided meaningful contributions and leadership to us in 2023, including without limitation, as set forth in the 75thfiscal and operational 2023 results of the Company outlined in the executive summary above as well as the significant achievements set forth below:
•we achieved our highest funds from operations, or FFO, attributable to 85th percentile undercommon stock and units (both on an aggregate basis and per diluted share/unit) since our IPO in 2011 of $183.4 million, or $2.40 per diluted share/unit, in 2023, a 3% increase from the year ended December 31, 2022 (A reconciliation of net income to FFO is included on page 61 of our Annual Report on Form 10-K for the year ended December 31, 2023);
•our 6.6% compounded annual growth rate in our FFO per share from our IPO through December 31, 2023;
•we achieved our highest total revenue since our IPO of $441.2 million in 2023, a 4% increase from the year ended December 31, 2022;
•we achieved our highest net operating income, or NOI, since our IPO of $277.2 million in 2023, a 3% increase from the year ended December 31, 2022 (A reconciliation of NOI to net income is included on page 60 of our Annual Report on Form 10-K for the year ended December 31, 2023);
•we achieved our highest ever average monthly base rent per square foot for both our office portfolio and retail portfolio in the fourth quarter of 2023, and highest average monthly rent per unit for our multi-family portfolio in the third quarter of 2023.
•the strength of our balance sheet, including successfully closing, in January 2023, on an amended and restated term loan (increasing the fully-drawn borrowings from $150 million to $225 million and extending the maturity date from March
2023 to January 2025), and entering into a forward starting swap to fix the interest rates thereunder at 5.47% for the first year and 5.57% for the second year, subject to adjustments based on our consolidated leverage ratio;
•our multifamily portfolio realizing same-store cash NOI growth of 5.5% for the year ended December 31, 2023, as compared to the year ended December 31, 2022;
•our office portfolio comparable leasing spreads increasing approximately 2.4% and 10.8% on a cash basis and GAAP basis, respectively, for the year ended December 31, 2023;
•our retail portfolio comparable leasing spreads increasing approximately 6.5% and 15.4% on a cash basis and GAAP basis, respectively, for the year ended December 31, 2023;
•we paid out our highest total dividends per share since our IPO of $1.32 per share in 2023, an increase of 3% over our total dividend per share payout in 2022;
•we successfully settled litigation relating to certain building systems at our Hassalo on Eighth in which we received a net settlement payment of approximately $6.3 million;
•our maintaining our investment grade credit ratings from all three major U.S. rating agencies;
•our embedded contractual growth and cash flow in our portfolio in 2023 and beyond;
•as of December 31, 2023, we had liquidity of approximately $482.9 million comprised of approximately $82.9 million in cash and cash equivalents and $400 million of full availability on our revolving line of credit; and
•our named executive officers' ongoing leadership while navigating the ongoing macroeconomic conditions and challenges impacting the United States and global economies, including, without limitation, their continued efforts to fortify our long-term incentive award program, resultingliquidity and enhance leadership efforts with regard to our ESG and human capital initiatives (as described herein).
In light of each of the items above and in our executive summary, among others, the Compensation Committee determined to recognize (i) the individual efforts of the named executive officers and employees in light of the foregoing achievements, (ii) our overall success in spite of the challenges that 2023 and the COVID-19 pandemic previously presented and which had a direct impact on the sole metric (relative TSR) to which the vesting of the applicable tranche of the2020 restricted stock awards were tied and (iii) our desire to continue to promote the retention of our named executive officers and employees. As such, the Compensation Committee determined that our performance and the contributions of the named executive officers and employees in other areas and based on other achievements merited above, to exercise its authority under the terms of the awards to authorize vesting of the portion of the performance-based restricted stock awards granted in December 2020 that were scheduled to vest on November 30, 2023 at 50% of target levels, with the 100% level.remaining eligible but unvested restricted stock for such tranche to be automatically forfeited by the named executive officers and employees.
Summary of Vesting of Outstanding Awards. The following table lists the years in which the performance-based vesting restricted stock awards granted to our named executive officers may vest, commencing in January 2024. The shares subject to the performance-based restricted stock awards below represent the maximum number of shares subject to such awards that may vest (the table does not include shares that have vested prior to December 31, 2023), assuming the highest performance hurdles are achieved and all of the shares subject to such awards ultimately vest.
| | | | | | | | | | | | | | |
Executive | | Year | | Performance Vesting Restricted Stock |
Ernest Rady | | 2024 | | 71,238 |
| | 2025 | | 41,653 |
| | 2026 | | — |
Robert F. Barton | | 2024 | | 59,408 |
| | 2025 | | 46,259 |
| | 2026 | | 27,746 |
Adam Wyll | | 2024 | | 57,167 |
| | 2025 | | 45,333 |
| | 2026 | | 27,746 |
Jerry Gammieri | | 2024 | | 23,235 |
| | 2025 | | 17,975 |
| | 2026 | | 10,570 |
Accelerated Vesting of Restricted Stock Awards
In general, a recipient of a restricted stock award must be employed by or providing services to the Company on each applicable measurement date in order to vest in the portion of the award scheduled to vest with respect to such measurement date.
In the event a named executive officer's employment is terminated by reason of his death or disability prior to the end of the three-year performance period and prior to a change in control, he shall vest in the “maximum” number of shares granted to him, less any shares previously vested or forfeited under the award pursuant to its terms, on the date of termination.
In the event Messrs. Rady, Barton or Wyll's employment is terminated by reason of his termination by the Company without cause (as defined in the restated employment agreement) or his resignation for good reason (as defined in the restated employment agreement) prior to the end of the three-year performance period and prior to a change in control, he shall vest in (a) the “maximum” number of shares granted to him, less any shares previously vested or forfeited under the award pursuant to its terms, multiplied by (b) 50%, on the date of termination.terms. Mr. Gammieri is not currently entitled to accelerated vesting upon termination of employment prior to a change of control, other than by reason of death or disability, as described below.
In the event of a change in control, the named executive officer shall remain eligible to vest in the “maximum” number of shares granted to him (with respect to any performance period that has not yet been completed), less any shares previously vested or forfeited under the award pursuant to its terms, in equal installments on the measurement date(s) following the change in control, subject to accelerated vesting of such shares in the event of his termination of employment by reason of death, disability, or, for Messrs. Rady, Barton or Wyll, termination by the Company without cause or Messrs. Rady, Barton or Wyll's resignation for good reason, or death or disability after the date of such change in control.
The Company expects to grant similar performance-based restricted stock awards in future fiscal years as provided in the restated employment agreements and on similar terms to those described above, although the Compensation Committee retains the discretion to adjust the amount of such awards and the vesting terms applicable to such awards. All future stock awards to Mr. Gammieri are within the discretion of the Compensation Committee.
Summary of Vesting of Outstanding Awards. The following table lists the years in which the performance-based vesting restricted stock awards granted to our named executive officers may vest, commencing in January 2016. The shares subject to the performance-based restricted stock awards below represent the maximum number of shares subject to such awards that may vest (the table does not include shares that have vested as of December 31, 2015), assuming the highest performance hurdles are achieved and all of the shares subject to such awards ultimately vest.
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| | | | |
Executive | | Year | | Performance Vesting Restricted Stock |
Ernest Rady | | 2016 | | 19,533 |
| | 2017 | | 14,512 |
| | 2018 | | 10,130 |
Robert F. Barton | | 2016 | | 16,819 |
| | 2017 | | 10,542 |
| | 2018 | | 5,065 |
Adam Wyll | | 2016 | | 8,662 |
| | 2017 | | 5,524 |
| | 2018 | | 2,786 |
Jerry Gammieri | | 2016 | | 5,885 |
| | 2017 | | 3,690 |
| | 2018 | | 1,773 |
Other Benefits
We provide benefits such as medical, dental and life insurance and disability coverage for all of our employees, including our named executive officers. We also provide personal paid time off and other paid holidays to all employees, including the named executive officers. We believe that our employee benefit plans are an appropriate element of compensation and are necessary to attract and retain employees. We do not provide our named executive officers with significant perquisites, although we do provide Mr. Gammieri with a monthly auto allowance.perquisites.
401(k) Plan
We maintain a retirement savings plan (the “Plan”) under section 401(k) of the Internal Revenue Code of 1986, as amended, or the Code, to coverhelp our eligible employees.employees save for retirement. The Code allows eligible employees to defercontribute a portion of their compensation, within prescribed limits, to the Plan, on a pre-tax basis through(under our traditional Plan option) or on a post-tax basis (under our Roth Plan option). The Plan includes a discretionary Company “matching” program, whereby each year, we determine whether to match a certain portion of each employee’s Plan contributions tomade during the 401(k) plan.previous calendar year. We currentlytypically approve a Company match of 100% of each eligible participant'semployee’s Plan contributions within prescribedmade during the previous calendar year, up to a maximum amount of 5% of the employee’s eligible compensation (subject to other applicable limits with an amount equal to 100.0% of such participant's initial 5.0% of tax-deferred contributions. In addition, weset by the Code or other applicable laws). We reserve the right to make additional discretionary contributions on behalf of eligible participants.participants, or to not make matching contributions at any point in the future.
Insider Trading and Anti-Hedging Policies and Clawback
Our insider trading policies contain stringent restrictions on transactions in Companyour stock by executive officers, employees and directors. All trades by executive officers and directors must be pre-cleared with our General Counsel. Furthermore, no executive officer, employee or director may engage in any hedging transactions with respect to any equity securities of the Company held by them, whether vested or unvested, which includes the purchase of any financial instrument (including puts and call options) designed to directly hedge or offset any decrease in the market value of such equity securities.
WePledging Policy
Though our insider trading policies do not currently haveoutright prohibit pledging of our stock, our Audit Committee, as part of its risk oversight function, reviews all pledging activity on a quarterly basis to assess whether such pledges pose an undue risk to the Company.
Our Audit Committee implemented controls in 2022 as part of its risk oversight of pledging activity, including (i) requiring any “clawback” employee and/or other compensation recovery policy with respectdirector that desires to compensation that may have been paidpledge any of the Corporation's common stock to obtain the pre-approval of such pledge by the Audit Committee based on, the basis of incorrect financial results. Our board is currently evaluating implementing such policies to, among other things, remain compliant with the termsAudit Committee's review of such employee and/or directors financial liquidity and net worth and (ii) placing a limit on any such pledge to be no more than 7% of the Dodd-Frank Act and final rules and regulations promulgated byoutstanding common stock of the Securities and Exchange Commission.
2011 Equity Incentive Award PlanCorporation at any time.
We have adopted the 2011 Plan, which became effective immediately prior to the completion ofAdditionally, since our initial public offering. Ouroffering in January 2011, Plan provides for the grant tono directors, officers or employees and consultantsother than Mr. Rady have pledged any shares of our Companycommon stock; and our operating partnership (and their respective subsidiaries) and directors of our Company of stock options, restricted stock, stock appreciation rights, LTIP units, dividend equivalents, restricted stock units and other stock-based awards. Only employees of our Company and its qualifying subsidiaries are eligible to receive incentive stock options under our 2011 Plan. We have reserved a total of 4,054,411no shares of our common stock for issuancepreviously pledged by Mr. Rady have ever been foreclosed on.
Nevertheless, from December 31, 2023 through the date of the filing of this Proxy Statement, there were no outstanding pledges of our common stock by Mr. Rady, nor by any of our directors, officers or employees. To the best of our knowledge, none of such persons have a current intention to pledge any shares of our common stock in the foreseeable future.
Compensation Recovery Policy
We maintain a compensation recovery policy as required by Rule 10D-1 under the Exchange Act, as amended, and the listing standards of the NYSE pursuant to which we require reimbursement and/or cancellation of performance-based incentive compensation, including, without limitation, equity-based incentive compensation and non-equity incentive compensation, awarded to our officers under certain circumstances.
Stock Ownership Guidelines for Named Executive Officers
We maintain stock ownership guidelines for our named executed officers pursuant to which such named executive officers are required to maintain a level of ownership of equity (excluding unearned performance-based stock awards) in the 2011 Plan,Company equal to at least three times the base salary for Mr. Rady and at least two times the base salary for each of Messrs. Barton, Wyll and Gammieri, subject to certain adjustments as set forthlimited exceptions. Messrs. Rady, Barton, Wyll and Gammieri are currently in the 2011 Plan. As of December 31, 2015, 910,270 shares of restrictedcompliance with our stock had been granted (net of forfeitures) and 3,144,141 shares remained available for future grants under the 2011 Plan.
2015 Advisory Vote on the Compensation of Named Executive Officers
In April 2015, we provided stockholders an advisory vote to approve the compensation of ourownership guidelines. Any newly appointed named executive officers (the say-on-pay proposal). At our 2015 Annual Meetingwill be required to meet this requirement within three years of Stockholders, our stockholders overwhelmingly approved the compensation of our namedsuch appointment.
Stock Holding Requirements
Our stock ownership guidelines provide that, if an executive officers, with approximately 99%falls short of the votes cast in favorapplicable level of stock ownership, the executive is expected to hold (and not sell) at least 50% of the say-on-pay proposal. In evaluating ournet shares acquired upon exercise, vesting or payment, as the case may be, of any equity award granted by us to the executive. “Net shares” for this purpose means the total number of shares acquired by the executive compensation program,upon exercise, vesting or payment, as the Compensation Committee considered the resultscase may be, of the say-on-pay proposalaward, after reduction for shares having a fair market value equal to the exercise price of the award (in the case of a stock option) and numerous other factors as discussed in this Compensation Discussion and Analysis. Eachafter reduction for shares having a fair market value equal to the executive’s expected tax liability resulting from the exercise, vesting or payment of these factors informed the Compensation Committee’s decisions regarding the compensation of our named executive officers. The Compensation Committee will continue to monitor and assess our executive compensation program and consider the outcome of our say-on-pay votes when making future compensation decisions for our named executive officers.award.
Tax Deductibility of Executive Compensation
The Compensation Committee considersintends to consider, or otherwise rely on the Company and/or its external auditors guidance on, the anticipated tax treatment to the Company and the named executive officers in its review and establishment of compensation programs and payments. The deductibility of some types of compensation payments cancertain awards may depend upon the timing of the executive'snamed executive officer's vesting or exercise of previously granted rights. Furthermore, we must take into account our distributive share of the deduction for compensation paid to the named executive officers by a lower-tier operating partnership. In addition, because we qualify as a REIT under the Code, we generally are not subject to federal income taxes. Interpretations of and changes in applicable tax laws and regulations as well as other factors beyond the Compensation Committee's control also can affect deductibility of compensation. Section 162(m) ofAccordingly, the Code disallowsCompensation Committee has not adopted a tax deduction for any publicly held corporation for individualpolicy that all compensation of more than $1.0 million in any taxable year to certain executive officers other than compensation that is performance-based under a plan that is approved bymust be deductible and the stockholders and that meets certain other technical requirements. The Compensation Committee's general policy is to maintain flexibility in compensating named executive officers in a manner designed to promote varying corporate goals. In addition, we believe that we qualify as a REIT under the Code and generally are not subject to federal income taxes, provided that we distribute to our stockholders at least 90% of our taxable income each year. As a result, we do not expect that the payment of compensation that does not satisfy the requirements of Section 162(m) of the Code will have a material adverse federal income tax consequence to us, provided we continue to distribute at least 90% of our taxable income each year. Accordingly, the Compensation Committee has not adopted a policy that all compensation must be deductible.
Accounting Standards
ASC Topic 718, Compensation-Stock Compensation (referred to as ASC Topic 718 and formerly known as FASB 123R), requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of equity awards under our 2011Amended Equity Plan will be accounted for under ASC Topic 718. Our Compensation Committee will regularly consider the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity plans and programs. As accounting standards change, we may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.
Summary Compensation Table
The table below summarizes the total compensation paid or earned by each of our named executive officers for the fiscal years ended December 31, 2015,2023, December 31, 20142022 and December 31, 2013.2021.
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| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Fiscal Year | | Salary ($)(1) | | Bonus ($)(2) | | Stock Awards ($)(3) | | Option Awards ($) | | Non-Equity Incentive Plan Compensation ($)(4) | | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($)(5) | | All Other Compensation ($)(6) | | Total ($) |
Ernest S. Rady Chairman of the Board of Directors, President and Chief Executive Officer | | 2015 | | 255,000 |
| | 475,000 |
| | 643,269 |
| | — |
| | — |
| | — |
| | 27,216 |
| | 1,400,485 |
|
| | 2014 | | 259,616 |
| | 300,000 |
| | 928,470 |
| | — |
| | — |
| | — |
| | 12,018 |
| | 1,500,104 |
|
| | 2013 | | 250,000 |
| | 300,000 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 550,000 |
|
John Chamberlain Former President and Chief Executive Officer (7) | | 2015 | | 347,938 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,477,285 |
| | 2,825,223 |
|
| | 2014 | | 508,846 |
| | 306,250 |
| | 1,392,723 |
| | — |
| | 357,088 |
| | — |
| | 141,933 |
| | 2,706,840 |
|
| | 2013 | | 475,000 |
| | 296,875 |
| | — |
| | — |
| | 593,750 |
| | — |
| | 215,750 |
| | 1,581,375 |
|
Robert F. Barton Executive Vice President and Chief Financial Officer | | 2015 | | 367,200 |
| | 170,000 |
| | 321,641 |
| | — |
| | 183,600 |
| | — |
| | 71,038 |
| | 1,113,479 |
|
| | 2014 | | 373,846 |
| | 180,000 |
| | 1,160,631 |
| | — |
| | 209,880 |
| | — |
| | 132,058 |
| | 2,056,415 |
|
| | 2013 | | 350,000 |
| | 175,000 |
| | — |
| | — |
| | 350,000 |
| | — |
| | 186,178 |
| | 1,061,178 |
|
Adam Wyll Senior Vice President, General Counsel and Secretary | | 2015 | | 311,100 |
| | 108,885 |
| | 176,911 |
| | — |
| | 108,885 |
| | — |
| | 48,538 |
| | 754,319 |
|
| | 2014 | | 308,654 |
| | 106,750 |
| | 580,283 |
| | — |
| | 124,471 |
| | — |
| | 67,607 |
| | 1,187,765 |
|
| | 2013 | | 240,000 |
| | 60,000 |
| | — |
| | — |
| | 120,000 |
| | — |
| | 81,082 |
| | 501,082 |
|
Jerry Gammieri Vice President of Construction and Development | | 2015 | | 183,600 |
| | 110,000 |
| | 112,586 |
| | — |
| | — |
| | — |
| | 37,308 |
| | 443,494 |
|
| | 2014 | | 186,923 |
| | 96,604 |
| | 406,186 |
| | — |
| | — |
| | — |
| | 42,750 |
| | 732,463 |
|
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Name and Principal Position | | Fiscal Year | | Salary ($)(1) | | Cash Bonus ($)(2) | | Stock Awards ($)(3) | | Option Awards ($) | | Cash Non-Equity Incentive Plan Compensation ($)(4) | | Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) | | All Other Compensation ($)(5) | | Total ($) |
Ernest S. Rady Chairman of the Board and Chief Executive Officer | | 2023 | | 700,000 | | | 2,100,000 | | | 277,733 | | | — | | | — | | | — | | | 258,487 | | | 3,336,220 | |
| | 2022 | | 650,000 | | | 1,250,000 | | | 2,925,552 | | | — | | | — | | | — | | | 252,622 | | | 5,078,174 | |
| | 2021 | | 612,000 | | | 1,000,000 | | | 3,232,619 | | | — | | | — | | | — | | | 217,155 | | | 5,061,774 | |
Robert F. Barton Executive Vice President and Chief Financial Officer | | 2023 | | 515,000 | | | 386,250 | | | 1,395,956 | | | — | | | 515,000 | | | — | | | 191,776 | | | 3,003,982 | |
| | 2022 | | 475,000 | | | 356,250 | | | 1,330,737 | | | — | | | 475,000 | | | — | | | 156,392 | | | 2,793,379 | |
| | 2021 | | 447,681 | | | 223,841 | | | 1,494,378 | | | — | | | 447,681 | | | — | | | 152,427 | | | 2,766,008 | |
Adam Wyll President and Chief Operating Officer | | 2023 | | 500,000 | | | 375,000 | | | 1,368,168 | | | — | | | 500,000 | | | — | | | 185,571 | | | 2,928,739 | |
| | 2022 | | 425,000 | | | 318,750 | | | 1,223,029 | | | — | | | 425,000 | | | — | | | 182,573 | | | 2,574,352 | |
| | 2021 | | 382,500 | | | 162,563 | | | 1,261,681 | | | — | | | 325,125 | | | — | | | 131,690 | | | 2,263,559 | |
Jerry Gammieri Senior Vice President of Construction and Development | | 2023 | | 325,000 | | | 182,813 | | | 534,447 | | | — | | | 243,750 | | | — | | | 112,533 | | | 1,398,543 | |
| | 2022 | | 300,000 | | | 168,750 | | | 532,291 | | | — | | | 225,000 | | | — | | | 74,110 | | | 1,300,151 | |
| | 2021 | | 247,860 | | | 61,965 | | | 597,751 | | | — | | | 123,930 | | | — | | | 78,720 | | | 1,110,226 | |
____________
(1)Amounts may be more or less than previously disclosed base salary rates for each named executive officer solely due to timing and number of payroll periods within respective calendar years.
(2)Represents the discretionary portion of the annual cash bonuses payable to the named executive officers.
| |
(1) | Amounts may be more or less than previously disclosed base salary rates for each named executive officer solely due to timing and number of payroll periods within respective calendar years. |
| |
(2) | Represents the discretionary portion of the annual bonuses payable to the named executive officers. |
| |
(3) | (3)Amounts reflect the aggregate grant-date fair value of restricted stock awards granted to each of our named executive officers upon the date of such grants, computed in accordance with ASC Topic 718. We recognize compensation expense for these shares on a straight-line basis over the vesting period based on the fair value of the award on the date of grant. For information regarding the assumptions made in connection with the calculation of these amounts with respect to the restricted stock awards the vesting of which is time-based, please see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K. |
With respect to the restricted stock awards the vesting of which is performance-based,time-based, please see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K.
With respect to the restricted stock awards granted in 2021, 2022 and 2023, the quantitative performance objectives applicable to those awards are entirelyboth performance-based and market-based. We use a Monte Carlo simulation model to value these performance-based restricted stock awards based upon the then-probable outcome of the qualitative and quantitative performance objectives at the time of grant. Our model estimatesestimated the fair value of the restricted stock awards granted in December 2021, December 2022 and December 2023 based on our financial data and that of the MSCI US REITS&P 600 Real Estate Index. Based on the performance objectives and these capital markets assumptions, (A) the performance-based restricted stock awards granted in December 2023 were valued using the Monte Carlo model at an average of $29.96(i) $21.98 per share applied to the "target" share amounts for the March 2014December 2023 grants eligible to vest in November 2024, (ii) $22.66 per share applied to the "target" share amounts for the December 2023 grants eligible to vest in November 2025 and (iii) $23.32 per share applied to the "target" share amounts for the December 2023 grants eligible to vest in November 2026; (B) the performance-based restricted stock awards granted in December 2022 were valued using the Monte Carlo model at an average of (i) $27.79 per share applied to the "target" share amounts for the December 2022 grants eligible to vest in November 2023, (ii) $28.53 per share applied to the "target" share amounts for the December 2022 grants eligible to vest in November 2024 and (iii) $29.28 per share applied to the "target" share amounts for the December 2022 grants eligible to vest in November 2025; and (C) the performance-based restricted stock awards granted in December 2021 were valued using the Monte Carlo model at an average of $36.30(i) $36.41 per share applied to the "target" share amounts for the December 20142021 grants and an average of $21.17eligible to vest in November 2022, (ii) $37.13 per share applied to the "target" share amounts for the December 2015 grants.2021 grants eligible to vest in November 2023 and (iii) $37.75 per share applied to the "target" share amounts for the December 2021 grants eligible to vest in November 2024.
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(4) | Represents the portion of the annual bonuses payable to the named executive officers during 2013, 2014 and 2015 based on our financial and operating performance. |
| |
(5) | Represents above-market interest (interest in excess of 120% of the federal long-term rate) on compensation deferred on a basis that is not tax-qualified. For additional information regarding our executive deferred compensation plans, please see "Executive Deferred Compensation Plans" below. |
(6) For 2023, amounts also include the incremental grant date fair value resulting from the vesting in December 2023 of a portion of the restricted stock awards granted to the named executive officers in 2020, computed in accordance with ASC Topic 718, as follows: Mr. Rady, $277,733; Mr. Barton, $138,877; Mr. Wyll, $111,089; and Mr.Gammieri, $55,555.
For 2022, amounts also include the incremental grant date fair value resulting from the vesting in December 2022 of a portion of the restricted stock awards granted to the named executive officers in 2019 and 2020, computed in accordance with ASC Topic 718, as follows: Mr. Rady, $548,535; Mr. Barton, $274,281; Mr. Wyll, $219,398; and Mr.Gammieri, $109,712.
For 2021, amounts also include the incremental grant date fair value resulting from the vesting in December 2021 of a portion of the restricted stock awards granted to the named executive officers in 2018, 2019 and 2020, computed in accordance with ASC Topic 718, as follows: Mr. Rady, $1,037,683; Mr. Barton, $518,860; Mr. Wyll, $383,701; and Mr.Gammieri, $207,544.
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| December 2021 Awards - Portion Eligible to Vest in November of: | | December 2022 Awards - Portion Eligible to Vest in November of: | | December 2023 Awards - Portion Eligible to Vest in November of: |
| 2022 | 2023 | 2024 | | 2023 | 2024 | 2025 | | 2024 | 2025 | 2026 |
Expected Term | 1 year | 2 years | 3 years | | 1 year | 2 years | 3 years | | 1 year | 2 years | 3 years |
Risk-Free Rate | 0.27 | % | 0.68 | % | 0.98 | % | | 4.47 | % | 4.16 | % | 3.95 | % | | 5.05 | % | 4.68 | % | 4.43 | % |
Dividend Yield | 3.35 | % | 3.35 | % | 3.35 | % | | 4.74 | % | 4.74 | % | 4.74 | % | | 6.15 | % | 6.15 | % | 6.15 | % |
Volatility | 29.04 | % | 40.34 | % | 36.27 | % | | 30.00 | % | 30.13 | % | 38.40 | % | | 33.44 | % | 32.12 | % | 31.75 | % |
(4)Represents the portion of the annual cash bonuses payable to the named executive officers during 2021, 2022 and 2023 based on our financial and operating performance.
(5)All other compensation represents 401(k) matching contributions, dividends on unvested restricted stock (to the extent paid to comply with federal and state tax laws governing REITs) and accrued paid time off, or PTO pay-out and auto
allowance.pay-out. PTO pay-out represents accrued PTO, in which the executive received cash from the Companyus in return for a reduction of accrued PTO. Other compensation for 20152023 is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | 401(K) Matching Contributions ($) | | Dividends Paid on Restricted Stock ($) | | PTO Pay-out ($) | | Total All Other Compensation ($) |
Ernest S. Rady | | — | | | 258,487 | | | — | | | 258,487 | |
Robert F. Barton | | 22,500 | | | 144,516 | | | 24,760 | | | 191,776 | |
Adam Wyll | | 22,500 | | | 134,225 | | | 28,846 | | | 185,571 | |
Jerry Gammieri | | 16,500 | | | 57,283 | | | 38,750 | | | 112,533 | |
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| | | | | | | | | | | | | | | | | | |
Name | | 401(K) Matching Contributions ($) | | Dividends Paid on Unvested Stock ($) | | PTO Pay-out ($) | | Auto Allowance ($) | | Severance Payment ($) | | Total Other Compensation ($) |
Ernest S. Rady | | — |
| | 27,216 |
| | — |
| | — |
| | — |
| | 27,216 |
|
John Chamberlain | | — |
| | 24,259 |
| | 17,562 |
| | 4,500 |
| | 2,430,964 |
| | 2,477,285 |
|
Robert F. Barton | | 18,000 |
| | 28,323 |
| | 24,715 |
| | — |
| | — |
| | 71,038 |
|
Adam Wyll | | 13,250 |
| | 14,350 |
| | 20,938 |
| | — |
| | — |
| | 48,538 |
|
Jerry Gammieri | | 7,838 |
| | 9,912 |
| | 12,358 |
| | 7,200 |
| | — |
| | 37,308 |
|
| |
(7) | Effective September 14, 2015, John Chamberlain ceased serving as President and Chief Executive Officer of the Company and resigned from the Board of Directors of the Company. Amounts described in “All Other Compensation” include all severance charges relating to Mr. Chamberlain’s resignation, as described herein, including, without limitation, cash payments and approximate value of medical benefits. |
Grants of Plan-Based Awards
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2023 Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)(2) | | 2023 Estimated Future Payouts Under Equity Incentive Plan Awards (3) | | Grant Date Fair Value of Stock Awards (4) ($) |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold | | Target | | Maximum | |
Ernest S. Rady(2) | | 12/7/2023 | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Robert F. Barton | | — | | | — | | | 257,500 | | | 515,000 | | | — | | | — | | | — | | | — | |
| | 12/7/2023 | | | | | | | | — | | | 55,492 | | | 83,238 | | | 1,257,079 | |
Adam Wyll | | — | | | — | | | 250,000 | | | 500,000 | | | — | | | — | | | — | | | — | |
| | 12/7/2023 | | | | | | | | — | | | 55,492 | | | 83,238 | | | 1,257,079 | |
Jerry Gammieri | | — | | | — | | | 121,875 | | | 243,750 | | | — | | | — | | | — | | | — | |
| | 12/7/2023 | | | | | | | | — | | | 21,140 | | | 31,710 | | | 478,891 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 2015 Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)(2)
| | 2015 Estimated Future Payouts Under Equity Incentive Plan Awards (3)
| | Grant Date Fair Value of Stock Awards (4) ($) |
Name | | Grant Date | | Threshold ($) | | Target ($) | | Maximum ($) | | Threshold | | Target | | Maximum | |
Ernest S. Rady(2) | | 12/1/2015 | | — |
| | — |
| | — |
| | — |
| | 24,313 |
| | 30,391 |
| | 643,269 |
|
Robert F. Barton | | — |
| | — |
| | 183,600 |
| | 367,200 |
| | — |
| | — |
| | — |
| | — |
|
| | 12/1/2015 | | | | | | | | — |
| | 12,157 |
| | 15,196 |
| | 321,641 |
|
Adam Wyll | | — |
| | — |
| | 108,885 |
| | 217,770 |
| | — |
| | — |
| | — |
| | — |
|
| | 12/1/2015 | | | | | | | | — |
| | 6,686 |
| | 8,358 |
| | 176,911 |
|
Jerry Gammieri(2) | | 12/1/2015 | | — |
| | — |
| | — |
| | — |
| | 4,255 |
| | 5,319 |
| | 112,586 |
|
| |
(1)Represents the portion of the annual cash bonuses payable to the named executive officers during 2023 based on our financial and operating performance. See the “Summary Compensation Table” under the “Cash Bonus” and “Cash Non-Equity Incentive Plan” columns for the actual 2023 cash bonuses paid to the named executive officers. (2)In 2023, Mr. Rady did not participate in the incentive bonus plan or have a target bonus percentage, and as such, his annual bonus was entirely at the discretion of the Compensation Committee. Additionally, Mr. Rady was not awarded restricted stock grants in December 2023 because of ownership limits in our charter that prevent Mr. Rady and his affiliates from beneficially or constructively owning more than 19.9% of our outstanding common stock. (3)Consists of performance-based restricted stock awards granted on December 7, 2023, which are eligible to vest in substantially equal one-third tranches on November 30, 2024, November 30, 2025 and November 30, 2026, based on performance measurements relative to applicable performance objectives during the applicable performance periods, generally subject to continued service with the Company. These shares represent the “target” and the “maximum” number of shares subject to the restricted stock awards that may become eligible for vesting based on performance relative to the applicable performance objectives during the applicable performance periods. (4)Amounts reflect the aggregate grant-date fair value of restricted stock awards granted to each of our named executive officers upon the date of such grants, computed in accordance with ASC Topic 718. We recognize compensation expense for these shares on a straight-line basis over the vesting period based on the fair value of the award on the date of grant. For information regarding the assumptions made in connection with the calculation of these amounts with respect to the restricted stock awards the vesting of which is time-based, please see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K. (1)
| Represents the portion of the annual bonuses payable to the named executive officers during 2015 based on corporate performance. See the "Summary Compensation Table" under the "Non-Equity Incentive Plan Compensation" column for the actual 2015 bonuses paid to the named executive officers with respect to corporate performance. |
| |
(2) | Mr. Rady and Mr. Gammieri do not participate in the incentive bonus plan or have target bonus percentages, and as such, their annual bonus will be entirely at the discretion of the Compensation Committee or executive management, respectively. |
| |
(3) | Consists of performance-based restricted stock awards granted on December 1, 2015, which vests in three substantially equal installments on each of November 30, 2016, 2017 and 2018, generally subject to continued service with the Company. These shares represent the “target” and the “maximum” number of shares subject to the restricted stock awards that may become eligible for vesting based on performance relative to the applicable performance objectives during the applicable performance period. Dividends are paid on the entirety of the grant from the date of grant. |
| |
(4) | Amounts reflect the aggregate grant-date fair value of restricted stock awards granted to each of our named executive officers upon the date of such grants, computed in accordance with ASC Topic 718. We recognize compensation expense for these shares on a straight-line basis over the vesting period based on the fair value of the award on the date of grant. For information regarding the assumptions made in connection with the calculation of these amounts with respect to the restricted stock awards the vesting of which is time-based, please see Note 10 to our consolidated financial statements included in our Annual Report on Form 10-K. |
With respect to the restricted stock awards the vesting of which is performance-based, the quantitative performance objectives applicable to those awards are entirelyboth performance-based and market-based. We use a Monte Carlo simulation model to value these performance-based restricted stock awards based upon the then-probable outcome of the qualitative and quantitative performance objectives at the time of grant. Our model estimates the fair value of the restricted stock awards granted in December 2023 based on our financial data and that of the MSCI US REITS&P 600 Real Estate Index. Based on the performance objectives and these capital markets assumptions, the performance-based restricted stock awards granted in December 2023 were valued using the Monte Carlo model at an average of $21.17 per(i) $21.98 per share applied to the "target" share amounts for the December 2015 grants.2023 grants eligible to vest in November 2024, (ii) $22.66 per share applied to the “target” share amounts for the December 2023 grants eligible to vest in November 2025 and (iii) $23.32 per share applied to the “target” share amounts for the December 2023 grants eligible to vest in November 2026.
Outstanding Equity Awards at Fiscal Year-End
The table below provides information about outstanding equity awards for each of our named executive officers as of December 31, 2015.2023.
| | | Stock Awards | | | | Stock Awards |
Name | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) | Name | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1) |
Ernest S. Rady | 5,020 |
| (2) | $ | 192,517 |
| Ernest S. Rady | | | | 29,584 | | (2) | $ | 665,936 | |
| 8,764 |
| (3) | 336,099 |
| | | | 83,307 | | (3) | 1,875,241 | |
| 30,391 |
| (4) | 1,165,495 |
| | | | — | | (4) | — | |
Total | 44,175 |
| | $ | 1,694,111 |
| |
| | | | Total | 112,891 | | | 2,541,177 | |
| | | | | | | | | |
Robert F. Barton | 6,275 |
| (2) | $ | 240,646 |
| Robert F. Barton | | | | 13,149 | | (2) | $ | 295,984 | |
| 10,955 |
| (3) | 420,124 |
| | | | 37,026 | | (3) | 833,455 | |
| 15,196 |
| (4) | 582,767 |
| | | | 83,238 | | (4) | 1,873,687 | |
Total | 32,426 |
| | $ | 1,243,537 |
| |
| | | | Total | 133,413 | | | 3,003,126 | |
| | | | | | | | | |
Adam Wyll | 3,137 |
| (2) | $ | 120,304 |
| Adam Wyll | | | | 11,834 | | (2) | $ | 266,383 | |
| 5,477 |
| (3) | 210,043 |
| | | | 35,174 | | (3) | 791,767 | |
| 8,358 |
| (4) | 320,529 |
| | | | 83,238 | | (4) | 1,873,687 | |
Total | 16,972 |
| | $ | 650,876 |
| |
| | | | Total | 130,246 | | | 2,931,837 | |
| | | | | | | | | |
Jerry Gammieri | 2,195 |
| (2) | $ | 84,178 |
| Jerry Gammieri | | | | 5,260 | | (2) | $ | 118,403 | |
| 3,834 |
| (3) | 147,034 |
| | | | 14,810 | | (3) | 333,373 | |
| 5,319 |
| (4) | 203,984 |
| | | | 31,710 | | (4) | 713,792 | |
Total | 11,348 |
| | $ | 435,196 |
| |
| | | | Total | 51,780 | | | 1,165,568 | |
____________
| |
(1) | Market value has been calculated as the closing market price of our common stock at December 31, 2015, the last trading day of 2015, of $38.35, multiplied by the outstanding shares of unvested restricted stock for each named executive officer. |
| |
(2) | Consists of performance-based restricted stock granted on March 25, 2014, which vests in three substantially equal installments on each of November 30, 2014, 2015 and 2016, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting based on performance relative to the applicable performance objectives during the applicable performance period. Dividends are paid on the entirety of the grant from the date of grant. |
| |
(3) | Consists of performance-based restricted stock granted on December 1, 2014, which vests in three substantially equal installments on each of November 30, 2015, 2016 and 2017, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting based on performance relative to the applicable performance objectives during the applicable performance period. Dividends are paid on the entirety of the grant from the date of grant. |
| |
(4) | Consists of performance-based restricted stock granted on December 1, 2015, which vests in three substantially equal installments on each of November 30, 2016, 2017 and 2018, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting based on performance relative to the applicable performance objectives during the applicable performance period. Dividends are paid on the entirety of the grant from the date of grant. |
(1) Market value has been calculated as the closing market price of our common stock at December 29, 2023 the last trading day of 2023, of $22.51, multiplied by the outstanding shares of unvested restricted stock for each named executive officer.
(2) Consists of performance-based restricted stock granted on December 9, 2021, which are eligible to vest in substantially equal one-third tranches on November 30, 2022, November 30, 2023 and November 30, 2024, based on performance measurements relative to applicable performance objectives during the applicable performance periods, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting on November 30, 2024 based on performance relative to the applicable performance objectives during the applicable performance period.
(3) Consists of performance-based restricted stock granted on December 7, 2022, which are eligible to vest in substantially equal one-third tranches on November 30, 2023, November 30, 2024 and November 30, 2025, based on performance measurements relative to applicable performance objectives during the applicable performance periods, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting on November 30, 2024 and 2025 based on performance relative to the applicable performance objectives during the applicable performance period.
(4) Consists of performance-based restricted stock granted on December 7, 2023, which are eligible to vest in substantially equal one-third tranches on November 30, 2024, November 30, 2025 and November 30, 2026, based on performance measurements relative to applicable performance objectives during the applicable performance periods, generally subject to continued service with the Company. These shares represent the maximum number of shares subject to the restricted stock awards that may become eligible for vesting on November 30, 2024, 2025 and 2026 based on performance relative to the applicable performance objectives during the applicable performance period.
Stock Vested
The table below provides information about stock awards which vested for each of our named executive officers for the fiscal year ended December 31, 2015.2023.
| | | | | | | | | | | | | | |
| | Stock Awards Vested in 2023 |
Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
Ernest S. Rady | | 79,601 | | | 1,603,164 | |
Robert F. Barton | | 36,106 | | | 727,175 | |
Adam Wyll | | 32,705 | | | 658,679 | |
Jerry Gammieri | | 14,442 | | | 290,862 | |
|
| | | | | | |
| | Stock Awards Vested in 2015 |
Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) |
Ernest S. Rady | | 7,521 |
| | 299,411 |
|
Robert F. Barton | | 93,777 |
| | 4,117,169 |
|
Adam Wyll | | 32,826 |
| | 1,434,772 |
|
Jerry Gammieri | | 21,190 |
| | 925,019 |
|
Employment Agreements
Restated Employment Agreements
We have entered into restated employment agreements with Messrs. Rady, Barton and Wyll, effective as of March 25, 2014. We believe that the protections contained in these restated employment agreements help to ensure the day-to-day stability necessary to such executive officers to enable them to properly focus their attention on their duties and responsibilities with the Company and will provide security with regard to some of the most uncertain events relating to continued employment, thereby limiting concern and uncertainty and promoting productivity. The following is a summary of the material terms of the agreements.
Under the restated employment agreements, Mr. Rady reports directly to the Board, while the other executives report to Mr. Rady. The initial term of the restated employment agreements ended onOn each March 25, 2015, at which time the term of the restated employment agreements was automatically extended for one year. On each subsequent anniversary of March 25, 2015, the term of the restated employment agreements will automatically be extended for successive one yearone-year periods, unless earlier terminated. Pursuant to Mr. Rady's restated employment agreement, during the term of his employment, we will nominate him for election as a director.
Under the restated employment agreements, Messrs. Rady, Barton and Wyll receive annual base salaries in the amounts reflected above, which are subject to increase at the discretion of our Compensation Committee. In addition, Messrs. Rady, Barton and Wyll are each eligible to receive an annual cash performance bonus, the amount of which will be determined for Messrs. Rady, Barton and Wyll based on the attainment of objective and subjective performance criteria established by our Compensation Committee pursuant to our incentive cash bonus plan described above. The target bonuses for Messrs. Barton and Wyll are set forth above. Mr. Rady and Mr. Gammieri dodoes not currently participate in our incentive cash bonus plan; however, they arehe is eligible to receive a cash bonus entirely at the discretion of our Compensation Committee each year. In addition, the named executive officers are eligible to participate in customary health, welfare and fringe benefit plans, and will accrue up to five weeks of paid vacation per year.
Under the restated employment agreements, if Messrs. Rady, Barton or Wyll's employment is terminated by the Company without “cause” or by the executive for “good reason” (each, as defined in the restated employment agreements) then, in addition to accrued amounts and any earned but unpaid bonuses, such executive officers will be entitled to receive the following:
•a lump-sum payment in an amount equal to one times (one and one-half times in the case of Mr. Barton) the sum of (i) such executive officer's annual base salary then in effect, plus (ii) an amount equal to the average of the annual bonuses awarded to such executive officer for each of the three fiscal years prior to the date of termination; provided, however, that such payment multiple shall be two times the sum of the foregoing for each of such executive officers in the event of their respective termination within twelve months of a change of control;
•continued health coverage for a period of twelve months at the Companyour expense; and
•unless otherwise provided in an equity award agreement, accelerated vesting of 50% of such executive officer's outstanding equity awards held by such executive officer as of the termination date (which percentage shall be increased to 100% in the event such a termination occurs within twelve months following a change in control).
In the event that Messrs. Rady, Barton or Wyll's employment is terminated because the Company elects not to renew the term of the restated employment agreement, then such executive officer will be entitled to receive the same payments and benefits described
above for a termination without cause or for good reason. Such executive officer's right to receive the severance payments and benefits described above is subject to his delivery of an effective general release of claims in favor of the Company.
Upon a termination of employment by reason of death or disability, unless otherwise provided in an equity award agreement, such executive officer or his estate will be entitled to accelerated vesting of all outstanding equity awards held by such executive officer as of the termination date, in addition to accrued amounts and earned but unpaid bonuses.
Under the restated employment agreements, upon a change in control of the Company, Messrs. Rady, Barton and Wyll will be entitled to accelerated vesting of the executives' initial restricted stock grants made at the time of the Company's initial public offering such that the restricted stock will become fully vested and nonforfeitable.
The restated employment agreements also contain customary confidentiality and non-solicitation provisions.
Potential Payments Upon Termination or Change in Control
The table below reflects the amount of compensation that each of our named executive officers would be entitled to receive upon termination of such named executive officer's employment in certain circumstances or upon a change in control without a corresponding termination of such named executive officer's employment, in each case, pursuant to such named executive officer's restated employment agreements, as applicable.
The amounts shown assume that such termination or change in control was effective as of December 31, 2015,2023, and are only estimates of the amounts that would be paid out to such named executive officers upon termination of their employment or a change in control. The actual amounts to be paid out can only be determined at the time of such named executive officer's separation from the Company or a change in control.
As described herein, in the event of a change in control, the employment agreements with Messrs. Rady, Barton and Wyll provide for severance benefits on a “double-trigger” basis with certain severance benefits payable only upon termination of employment (which is, generally, termination without cause, resignation for good reason or non-renewal of the employment agreement by the Company), within twelve (12) months following the change in control.
In the event of a termination by the Company for cause or by the named executive officers without good reason, including a change in control, such named executive officer would not be entitled to any of the amounts reflected in the table.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Benefit | | Termination Without Cause, Resignation for Good Reason or Non-Renewal by Company (no Change in Control) | | Termination Without Cause, Resignation for Good Reason or Non-Renewal by Company Within 12 Months of Change in Control | | Death or Disability |
Ernest S. Rady | | Severance Payment (1) | | $ | 2,150,000 | | | $ | 4,300,000 | | | $ | — | |
| | Accelerated Equity Award Vesting (2) | | 2,541,176 | | | 2,541,176 | | | 2,541,176 | |
| | Medical Benefits (3) | | 26,046 | | | 26,046 | | | — | |
| | Total Value: | | $ | 4,717,222 | | | $ | 6,867,222 | | | $ | 2,541,176 | |
| | | | | | | | |
Robert F. Barton | | Severance Payment (1) | | $ | 1,974,511 | | | $ | 2,632,681 | | | $ | — | |
| | Accelerated Equity Award Vesting (2) | | 3,003,127 | | | 3,003,127 | | | 3,003,127 | |
| | Medical Benefits (3) | | 14,656 | | | 14,656 | | | — | |
| | Total Value: | | $ | 4,992,294 | | | $ | 5,650,464 | | | $ | 3,003,127 | |
| | | | | | | | |
Adam Wyll | | Severance Payment (1) | | $ | 1,202,146 | | | $ | 2,404,292 | | | $ | — | |
| | Accelerated Equity Award Vesting (2) | | 2,931,837 | | | 2,931,837 | | | 2,931,837 | |
| | Medical Benefits (3) | | 37,250 | | | 37,250 | | | — | |
| | Total Value: | | $ | 4,171,233 | | | $ | 5,373,379 | | | $ | 2,931,837 | |
| | | | | | | | |
Jerry Gammieri | | Severance Payment (1) | | $ | — | | | $ | — | | | $ | — | |
| | Accelerated Equity Award Vesting (2) | | — | | | — | | | 1,165,568 | |
| | Medical Benefits (3) | | — | | | — | | | — | |
| | Total Value: | | $ | — | | | $ | — | | | $ | 1,165,568 | |
| | | | | | | | |
Total Potential Payments Upon Termination or Change in Control | | $ | 13,880,749 | | | $ | 17,891,065 | | | $ | 9,641,708 | |
__________
(1) |
| | | | | | | | | | | | | | |
Name | | Benefit | | Termination Without Cause, Resignation for Good Reason or Non-Renewal by Company (no Change in Control) | | Termination Without Cause, Resignation for Good Reason or Non-Renewal by Company Within 12 Months of Change in Control | | Death or Disability |
Ernest S. Rady | | Severance Payment (1) | | $ | 613,333 |
| | $ | 1,226,667 |
| | $ | — |
|
| | Accelerated Equity Award Vesting (2) | | 847,056 |
| | 1,694,111 |
| | 1,694,111 |
|
| | Medical Benefits (3) | | 19,332 |
| | 19,332 |
| | — |
|
| | Total Value: | | $ | 1,479,721 |
| | $ | 2,940,110 |
| | $ | 1,694,111 |
|
| | | | | | | | |
Robert F. Barton | | Severance Payment (1) | | $ | 1,185,040 |
| | $ | 1,580,053 |
| | $ | — |
|
| | Accelerated Equity Award Vesting (2) | | 621,769 |
| | 1,243,537 |
| | 1,243,537 |
|
| | Medical Benefits (3) | | 20,401 |
| | 20,401 |
| | — |
|
| | Total Value: | | $ | 1,827,210 |
| | $ | 2,843,991 |
| | $ | 1,243,537 |
|
| | | | | | | | |
Adam Wyll | | Severance Payment (1) | | $ | 520,764 |
| | $ | 1,041,527 |
| | $ | — |
|
| | Accelerated Equity Award Vesting (2) | | 325,438 |
| | 650,876 |
| | 650,876 |
|
| | Medical Benefits (3) | | 26,673 |
| | 26,673 |
| | — |
|
| | Total Value: | | $ | 872,875 |
| | $ | 1,719,076 |
| | $ | 650,876 |
|
| | | | | | | | |
Jerry Gammieri | | Severance Payment (1) | | $ | — |
| | $ | — |
| | $ | — |
|
| | Accelerated Equity Award Vesting (2) | | — |
| | — |
| | 435,196 |
|
| | Medical Benefits (3) | | — |
| | — |
| | — |
|
| | Total Value: | | $ | — |
| | $ | — |
| | $ | 435,196 |
|
| | | | | | | | |
Total Potential Payments Upon Termination or Change in Control | | $ | 4,179,806 |
| | $ | 7,503,177 |
| | $ | 4,023,720 |
|
____________Pursuant to the terms of the restated employment agreements with Messrs. Rady, Barton and Wyll above, the severance payment is an amount equal to one times (one and one-half times in the case of Mr. Barton) the sum of (i) such executive officer's annual base salary then in effect, plus (ii) an amount equal to the average of the annual bonuses awarded to such executive officer for each of the three fiscal years prior to the date of termination; provided, however, that such payment multiple shall be two times the sum of the foregoing for each of such executive officers in the event of their respective termination within twelve months of a change of control. The calculations in the table are based on each such executive officer's annual base salary on December 31, 2023 and such executive's annual bonus for the preceding three years. The severance payment will be paid in a lump sum. Mr. Gammieri is not currently entitled to a severance payment upon termination of employment.
| |
(1) | Pursuant to the terms of the restated employment agreements with Messrs. Rady, Barton and Wyll above, the severance payment is an amount equal to one times (one and one-half times in the case of Mr. Barton) the sum of (i) such executive officer's annual base salary then in effect, plus (ii) an amount equal to the average of the annual bonuses awarded to such executive officer for each of the three fiscal years prior to the date of termination; provided, however, that such payment multiple shall be two times the sum of the foregoing for each of such executive officers in the event of their respective termination within twelve months of a change of control. The calculations in the table are based on each such executive officer's annual base salary on December 31, 2015 and such executive's annual bonus for the preceding three years. The severance payment will be paid in a lump sum. Mr. Gammieri is not currently entitled to a severance payment upon termination of employment prior to a change of control. |
| |
(2) | For purposes of this calculation, each named executive officer's total unvested shares of restricted stock that will vest upon such event on December 31, 2015, are multiplied by the closing market price of our common stock at December 31, 2015, of $38.35. Unless otherwise provided in an equity award agreement,(2)For purposes of this calculation, each named executive officer's total unvested shares of restricted stock that will vest upon such event on December 31, 2023, are multiplied by the closing market price of our common stock at December 29, 2023, of $22.51. Messrs. Rady, Barton and Wyll are entitled to receive accelerated vesting of 50% of such executive officer's outstanding equity awards held by such executive officer as of the termination date (which percentage shall be increased to 100% in the event such a termination occurs within twelve months following a change in control). Mr. Gammieri is entitled to accelerated vesting of 100% of his outstanding performance-based awards held upon death or disability, subject to the terms of his restricted stock awards. |
| |
(3) | This figure represents the amount needed to pay for health benefits for Messrs. Rady, Barton and Wyll and their respective eligible family members for 12 months following such executive officer's termination of employment at the same level as in effect immediately preceding his termination of employment. This amount is payable in cash in a lump sum. Mr. Gammieri is not currently entitled to Company-paid health benefits upon termination of employment, other than as required by law. |
Severance Payments
Effective September 14, 2015, John Chamberlain ceased serving as President and Chief Executive Officer of the Company and resigned from the Board of Directors of the Company. In connection with his separation from the Company, the Company and Mr. Chamberlain entered into a release agreement, pursuant to which Mr. Chamberlain was paid a lump sum cash separation payment in the amount of $2,402,242, continued health benefits at the Company's expense for a period of twelve months and accelerated vesting of 50%their outstanding equity awards as described in the equity award agreements and described in further detail above on page 50. Mr. Gammieri is entitled to accelerated vesting of 100% of his outstanding performance-based awards held upon death or disability (with such vesting applied to the “maximum” number of shares subject to each award), subject to the terms of his restricted stock awards (which resultedawards.
(3)This figure represents the amount needed to pay for health benefits for Messrs. Rady, Barton and Wyll and their respective eligible family members for 12 months following such executive officer's termination of employment at the same level as in effect immediately preceding his termination of employment. This amount is payable in cash in a totallump sum. Mr. Gammieri is not currently entitled to Company-paid health benefits upon termination of 17,390 shares vesting).employment, other than as required by law.
Risk Assessment of Compensation Program
In February 2016,2024, management assessed our compensation program for the purpose of reviewing and considering any risks presented by our compensation policies and practices that are likely to have a material adverse effect on us.
As part of that assessment, management reviewed the primary elements of our compensation program, including base salary, annual short-term incentive compensation, long-term incentive compensation and severance arrangements. Management's risk assessment included a review of the overall design of each primary element of our compensation program, and an analysis of the various design features, controls and approval rights in place with respect to compensation paid to management and other employees that mitigate potential risks to us that could arise from our compensation program.
Following the assessment, management determined that our compensation policies and practices did not create risks that were reasonably likely to have a material adverse effect on us and reported the results of the assessment to the Compensation Committee.
Equity Compensation Plan Information
The following table sets forth certain equity compensation plan information for the Company as of December 31, 2015.2023.
| | | | | | | | | | | | | | | | | | | | | | | |
Plan Category | | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) |
| | (a) | | (b) | | (c) | |
Equity compensation plans approved by security holders | | — | | — | | 1,965,554 | | (1) |
Equity compensation plans not approved by security holders | | N/A | | N/A | | N/A | |
Total | | — | | — | | 1,965,554 | | |
|
| | | | | | |
Plan Category | | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) |
| | (a) | | (b) | | (c) |
Equity compensation plans approved by security holders | | — | | — | | 3,144,141 |
Equity compensation plans not approved by security holders | | N/A | | N/A | | N/A |
Total | | — | | — | | 3,144,141 |
____________(1) Calculated by counting outstanding unvested performance-based restricted stock awards based on “maximum” performance levels.
Executive Deferred Compensation Plans
Our operating partnership has adopted the American Assets Trust Executive Deferral Plan V, or EDP V, and the American Assets Trust Executive Deferral Plan VI, or EDP VI. These plans were adopted by our operating partnership as successor plans to those deferred compensation plans maintained by American Assets, Inc.,AAI, in which certain employees of American Assets, Inc.,AAI, who were transferred to us in connection with our initial public offering, participated prior to our initial public offering. EDP V and EDP VI contain substantially the same terms and conditions as these predecessor plans. American Assets, Inc.AAI transferred the account balances under the predecessor plans to our operating partnership. These transferred account balances represent amounts deferred by certain employees prior to our initial public offering while they were employed by American Assets, Inc.AAI.
EDP V is a frozen plan, meaning that no additional deferrals or contributions will be made into the plan and all participants are 100% vested in their account balances under that plan. Participant accounts in EDP V are credited with earnings at a specified rate determined based on the participant's years of service. Participants in EDP V are entitled to receive a distribution from their account upon a separation from service, death, disability or retirement (as defined in EDP V). Distributions are generally paid in installments over a period of 15 years. In the event of a participant's disability, he or she will receive an annual disability benefit, equal to one and one-half times the amount of the greatest annual deferral amount by such participant. These disability benefitswhich will continue until the participant's death, the date he or she ceases to be disabled or the date he or she attains age sixty-five. If a participant dies before he or she retires, his or her successor will receive a death benefit equal to the greater of (i) the participant's then-existing account balance or (ii) ten times the amount of the greatest annual deferral amount by such participant, paid in a lump sum.balance. Participating employees may receive market returns on their deferred compensation amounts based on the performance of a variety of mutual fund-type investments or variable interest-rate products chosen by them. Mr. Barton is the only named executive officer who is a participant in EDP V.
EDP VI allows for deferrals by participants of up to 90% of base salary and up to 100% of bonuses and other cash or equity-based compensation approved by our compensation committee.Compensation Committee. For the 20152023 calendar year, participants in EDP VI were eligible to elect to defer base salary, bonuses and other cash compensation. There is no maximum dollar limit on the amount that may be deferred by a participant each year. Participants in EDP VI will elect to have the participant's account credited with earnings and investment gains
and losses by assuming that deferred amounts were invested in one or more hypothetical investment options selected by the participant. Participants are permitted to change their investment elections at any time. Our operating partnership may also make discretionary contributions to a participant's account under EDP VI, and which contributions will be subject to a seven-year vesting schedule. The participants are always 100% vested in the amount they defer and the earnings, gains and losses credited to their accounts. Participating employees may receive market returns on their deferred compensation amounts based on the performance of a variety of mutual fund-type investments chosen by them.
Participants in EDP VI are entitled to receive a distribution from their account upon a separation from service, a specified date, death, disability, retirement (as defined in EDP VI), or unforeseeable emergency that results in “severe financial hardship” that is consistent with the meaning of such term under sectionSection 409A of the Internal Revenue Code of 1986, as amended.Code. Distributions are in a lump sum or annual installments over a period of 5, 10 or 15 years based upon the participant's election as allowed under EDP VI. Mr.Messrs. Barton and Mr. Chamberlain wereWyll are the only named executive officers who participated in EDP VI during 2015.2023.
EDP V and EDP VI are unfunded obligations of our operating partnership, and participants are unsecured creditors of our operating partnership.
We summarize below information regarding the participation in our nonqualified deferred compensation plans by our named executive officers. None of our named executive officers received any payments of nonqualified deferred compensation during the year ended December 31, 2015.2023.
| | | | 2015 Nonqualified Deferred Compensation Under EDP V and EDP VI | | | 2023 Nonqualified Deferred Compensation Under EDP V and EDP VI |
Name | | Executive Contributions in 2015 ($) (1) | | Company Contributions in 2015 ($) | | Aggregate Earnings/(Losses) in 2015 ($) (2) | | Aggregate withdrawals/distributions in 2015 ($) | | Aggregate Balance at 12/31/15 ($) | Name | | Executive Contributions in 2023 ($) (1) | | Company Contributions in 2023 ($) | | Aggregate Earnings/(Losses) in 2023($) (2) | | Aggregate withdrawals/distributions in 2023 ($) | | Aggregate Balance at 12/31/23 ($) |
Ernest S. Rady | | — |
| | — |
| | — |
| | — |
| | — |
| Ernest S. Rady | | — | | | — | | | — | | | — | | | — | |
John Chamberlain | | 36,550 |
| | — |
| | (2,335 | ) | | 235,254 |
| | — |
| |
Robert F. Barton | | 44,365 |
| | — |
| | 23,028 |
| | — |
| | 421,546 |
| Robert F. Barton | | 109,000 | | | — | | | 78,826 | | | — | | | 1,417,381 | |
Adam Wyll | | — |
| | — |
| | — |
| | — |
| | — |
| Adam Wyll | | 16,000 | | | — | | | 2,437 | | | — | | | 45,607 | |
Jerry Gammieri | | — |
| | — |
| | — |
| | — |
| | — |
| Jerry Gammieri | | — | | | — | | | — | | | — | | | — | |
______________
(1)Executive contributions consist of deferrals of salary and bonus that also are reported as compensation in the Summary Compensation Table. However, timing differences between reporting bonus compensation in the Summary Compensation Table (which reports bonus amounts in the year for which they were earned) and related deferral dates (the date on which the bonuses would have been paid to the named executive officer) may in any year result in lesser or greater amounts reported as executive contributions in the accompanying table than the amounts that have been included in compensation reported in the Summary Compensation Table. Executive contributions in 2023 that are also included as 2023 salary and bonus compensation reported in the Summary Compensation Table total $109,000 for Mr. Barton and $16,000 for Mr. Wyll. All of the reported contributions were made under EDP VI, as EDP V is a frozen plan.
(2)Earnings/(losses) are measured as the difference in deferred account balances between the beginning and the end of the year minus executive and Company contributions during the year. Earnings/(losses) for 2023 were $78,826 for Mr. Barton (of which $9,596 were under EDP V and $69,230 were under EDP VI) and $2,437 for Mr. Wyll (all in EDP VI). These earnings are not reported in the Summary Compensation Table. None of such earnings were above-market interest.
CEO Pay Ratio Disclosure
As required by Section 953(b) of the Dodd-Frank Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the relationship of the annual total compensation of our employees and the annual total compensation of Ernest Rady, our Chairman and Chief Executive Officer. The pay ratio included in this information is a reasonable estimate calculated in a manner that is intended to be consistent with Item 402(u) of Regulation S-K.
For 2023, our last completed fiscal year:
▪the median of the annual total compensation of all employees of our Company (other than Mr. Rady) was $78,728; and
▪the annual total compensation of Mr. Rady, as reported in the Summary Compensation Table included elsewhere in this Proxy Statement, was $3,336,220.
Based on this information, for 2023, the ratio of the median of the total compensation of all employees of the Company (other than Mr. Rady) to the annual total compensation of Mr. Rady, our Chairman and Chief Executive Officer, was $3,336,220 to $78,728, or 42.4 times that of the median of the annual total compensation of all of our other employees.
We identified the median employee using total annual cash compensation for 2023 as the most appropriate measure of compensation, which was consistently applied to all employees as of December 31, 2023 (and other than Mr. Rady). We determined that, as of December 31, 2023, our employee population consisted of approximately 228 individuals (as reported in Item 1, Business, in our Annual Report on Form 10-K filed with the SEC on February 14, 2024). Our employee workforce consists of full-time and part-time employees. In identifying the median employee, we annualized the compensation of all full-time employees who were new hires in 2023 and on leave of absence in 2023. We did not make any cost-of-living adjustments in identifying the “median employee.”
With respect to the total annual compensation of the “median employee,” we identified and calculated the elements of such employee’s compensation for 2023 using the same methodology used to calculate Mr. Rady’s total annual compensation for 2023, as set forth in the Summary Compensation Table included in this Proxy Statement.
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
Our Chief Executive Officer is the principal executive officer (“PEO”), of the Company. The following table sets forth information concerning the compensation of our PEO and other named executive officers (“NEOs”), for each of the fiscal years ended December 31, 2020, 2021, 2022 and 2023, and our financial performance for each such fiscal year:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based on: | | | | |
Year | Summary Compensation Table Total for PEO ($) | Compensation Actually Paid to PEO ($)1
| Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($)1 | Total Shareholder Return ($)
| Peer Group Total Shareholder Return ($)2
| Net Income (in '000, $) | Funds From Operations (in '000, $) 3 | Funds From Operations/ share ($) 3 | Net Operating Income (in '000, $) 4 |
2023 | 3,336,220 | | 2,399,633 | | 2,443,755 | | 2,161,945 | | 58.01 | | 88.94 | | 64,690 | | 183,441 | | 2.40 | | 277,207 | |
2022 | 5,078,174 | | 3,901,391 | | 2,222,627 | | 1,796,637 | | 64.19 | | 82.81 | | 55,877 | | 179,215 | | 2.34 | | 270,215 | |
2021 | 5,061,774 | | 2,725,241 | | 2,046,598 | | 1,204,783 | | 87.17 | | 117.46 | | 36,593 | | 152,899 | | 2.00 | | 246,054 | |
2020 | 4,433,798 | | 1,281,379 | | 1,780,674 | | 711,366 | | 65.04 | | 90.01 | | 35,588 | | 143,880 | | 1.89 | | 223,454 | |
(1)The amounts reported in the “Compensation Actually Paid to PEO” and “Average Compensation Actually Paid to Non-PEO NEOs” columns do not reflect the actual compensation paid to or realized by our PEO or our non-PEO NEOs during each applicable year. The calculation of compensation actually paid for purposes of this table includes point-in-time fair values of stock awards and these values will fluctuate based on our stock price, various accounting valuation assumptions and projected performance related to our performance awards. See the Summary Compensation Table for certain other compensation of our PEO and our non-PEO NEOs for each applicable fiscal year and the Stock Vested table for the value realized by each of them upon the vesting of stock awards during 2023.
The following adjustments were made to the Summary Compensation Table “Total Compensation” for our PEO and our other named executive officers to derive the compensation actually paid to our PEO and the average compensation actually paid to our remaining named executive officers for the relevant fiscal year, as determined under SEC rules (and described below), which includes the individuals indicated in the table below for each fiscal year:
| | | | | | | | | | | | | | |
(1)Year | | PEO | | Non-PEO Named Executive contributions consist of deferrals of salaryOfficers |
2023 | | Ernest Rady | | Robert Barton, Adam Wyll and bonus that also are reported as compensation in the Summary Compensation Table. However, timing differences between reporting bonus compensation in the Summary Compensation Table (which reports bonus amounts in the year for which they were earned)Jerry Gammieri |
2022 | | Ernest Rady | | Robert Barton, Adam Wyll and related deferral dates (the date on which the bonuses would have been paid to the named executive officer) may in any year result in lesser or greater amounts reported as executive contributions in the accompanying table than the amounts that have been included in compensation reported in the Summary Compensation Table. Executive contributions in 2014 that are also included as 2015 salaryJerry Gammieri |
2021 | | Ernest Rady | | Robert Barton, Adam Wyll and bonus compensation reported in the Summary Compensation Table total $36,550 for Mr. ChamberlainJerry Gammieri |
2020 | | Ernest Rady | | Robert Barton, Adam Wyll and $44,365 for Mr. Barton. All of the reported contributions were made under EDP VI, as EDP V is a frozen plan.Jerry Gammieri |
Compensation actually paid to our PEO and the average for our non-PEO named executive officers represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, as adjusted as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2020 | | 2021 | | 2022 | | 2023 |
Adjustments | | PEO | Average Non-PEO NEOs | | PEO | Average Non-PEO NEOs | | PEO | Average Non-PEO NEOs | | PEO | Average Non-PEO NEOs |
Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | | $ | (2,845,667) | | $ | (1,034,350) | | | $ | (3,232,619) | | $ | (1,117,937) | | | $ | (2,925,552) | | $ | (1,028,686) | | | $ | (277,733) | | $ | (1,099,524) | |
Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End (a) | | 2,150,847 | | 788,645 | | | 2,303,804 | | 785,002 | | | 2,347,285 | | 817,236 | | | — | | 1,041,423 | |
Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End (b) | | (916,938) | | (323,846) | | | (726,799) | | (266,499) | | | (453,783) | | (168,387) | | | 262,057 | | 91,906 | |
Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date (c) | | (455,118) | | (138,002) | | | 274,592 | | 98,085 | | | 123,565 | | 52,222 | | | (690,100) | | (232,670) | |
Deduction of ASC 718 Fair Value of Awards Granted during Prior FY that were Forfeited during Applicable FY, determined as of Prior FY End | | (1,085,544) | | (361,754) | | | (955,511) | | (340,466) | | | (268,297) | | (98,376) | | | (230,811) | | (82,946) | |
Total Adjustments | | $ | (3,152,420) | | $ | (1,069,307) | | | $ | (2,336,533) | | $ | (841,815) | | | $ | (1,176,782) | | $ | (425,991) | | | $ | (936,587) | | $ | (281,811) | |
(a) The table below includes the Monte Carlo assumptions used to determine the fair value of the grants awarded during each applicable fiscal year and that remain unvested as of applicable fiscal year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2020 Awards - valuation assumptions as of December 31, 2020: | | 2021 Awards - valuation assumptions as of December 31, 2021: | | 2022 Awards - valuation assumptions as of December 31, 2022: | | 2023 Awards - valuation assumptions as of December 31, 2023: |
| Tranche 1 | Tranche 2 | Tranche 3 | | Tranche 1 | Tranche 2 | Tranche 3 | | Tranche 1 | Tranche 2 | Tranche 3 | | Tranche 1 | Tranche 2 | Tranche 3 |
Expected Term | 1 year | 2 years | 3 years | | 1 year | 2 years | 3 years | | 1 year | 2 years | 3 years | | 1 year | 2 years | 3 years |
Risk-Free Rate | 0.09 | % | 0.10 | % | 0.18 | % | | 0.37 | % | 0.72 | % | 0.97 | % | | 4.75 | % | 4.47 | % | 4.28 | % | | 4.82 | % | 4.40 | % | 4.15 | % |
Dividend Yield | 3.46 | % | 3.46 | % | 3.46 | % | | 3.20 | % | 3.20 | % | 3.20 | % | | 4.83 | % | 4.83 | % | 4.83 | % | | 5.86 | % | 5.86 | % | 5.86 | % |
Volatility | 53.87 | % | 44.89 | % | 41.35 | % | | 29.30 | % | 40.83 | % | 36.70 | % | | 29.15 | % | 29.29 | % | 37.68 | % | | 33.68 | % | 32.19 | % | 31.73 | % |
(b) The table below includes the Monte Carlo assumptions used to determine the change in fair value of awards that remained outstanding and unvested as of each applicable fiscal year end in the table above to the prior fiscal year end.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2018 Award | 2019 Award | 2019 Award | | 2019 Award | 2020 Award | 2020 Award | | 2020 Award | 2021 Award | 2021 Award | | 2021 Award | 2022 Award | 2022 Award |
| Tranche 3 | Tranche 2 | Tranche 3 | | Tranche 3 | Tranche 2 | Tranche 3 | | Tranche 3 | Tranche 2 | Tranche 3 | | Tranche 3 | Tranche 2 | Tranche 3 |
| Valuation assumptions based on prior fiscal year end |
| December 31, 2019 | | December 31, 2020 | | December 31, 2021 | | December 31, 2022 |
Expected Term | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years |
Risk-Free Rate | 1.62 | % | 1.62 | % | 1.64 | % | | 0.10 | % | 0.10 | % | 0.18 | % | | 0.72 | % | 0.72 | % | 0.97 | % | | 4.47 | % | 4.47 | % | 4.28 | % |
Dividend Yield | 2.61 | % | 2.61 | % | 2.61 | % | | 3.46 | % | 3.46 | % | 3.46 | % | | 3.20 | % | 3.20 | % | 3.20 | % | | 4.83 | % | 4.83 | % | 4.83 | % |
Volatility | 17.14 | % | 17.14 | % | 16.76 | % | | 44.89 | % | 44.89 | % | 41.35 | % | | 40.83 | % | 40.83 | % | 36.70 | % | | 29.29 | % | 29.29 | % | 37.68 | % |
| Valuation assumptions based on applicable fiscal year end |
| December 31, 2020 | | December 31, 2021 | | December 31, 2022 | | December 31, 2023 |
Expected Term | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years | | 2 years | 2 years | 3 years |
Risk-Free Rate | 0.10 | % | 0.10 | % | 0.18 | % | | 0.72 | % | 0.72 | % | 0.97 | % | | 4.47 | % | 4.47 | % | 4.28 | % | | 4.40 | % | 4.40 | % | 4.15 | % |
Dividend Yield | 3.46 | % | 3.46 | % | 3.46 | % | | 3.20 | % | 3.20 | % | 3.20 | % | | 4.83 | % | 4.83 | % | 4.83 | % | | 5.86 | % | 5.86 | % | 5.86 | % |
Volatility | 44.89 | % | 44.89 | % | 41.35 | % | | 40.83 | % | 40.83 | % | 36.70 | % | | 29.29 | % | 29.29 | % | 37.68 | % | | 32.19 | % | 32.19 | % | 31.73 | % |
(c) The table below includes the Monte Carlo assumptions used to determine the change in the fair value of awards that vested during each applicable fiscal year end in the table above from the prior fiscal year end. Fair value on the vesting date is based on the closing stock price on the measurement.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 Award | 2018 Award | 2019 Award | | 2018 Award | 2019 Award | 2020 Award | | 2019 Award | 2020 Award | 2021 Award | | 2020 Award | 2021 Award | 2022 Award |
| Tranche 3 | Tranche 2 | Tranche 1 | | Tranche 3 | Tranche 2 | Tranche 1 | | Tranche 3 | Tranche 2 | Tranche 1 | | Tranche 3 | Tranche 2 | Tranche 1 |
| Valuation assumptions based on prior fiscal year end |
| December 31, 2019 | | December 31, 2020 | | December 31, 2021 | | December 31, 2022 |
Expected Term | 1 year | 1 year | 1 year | | 1 year | 1 year | 1 year | | 1 year | 1 year | 1 year | | 1 year | 1 year | 1 year |
Risk-Free Rate | 1.70 | % | 1.70 | % | 1.70 | % | | 0.09 | % | 0.09 | % | 0.09 | % | | 0.37 | % | 0.37 | % | 0.37 | % | | 4.75 | % | 4.75 | % | 4.75 | % |
Dividend Yield | 2.61 | % | 2.61 | % | 2.61 | % | | 3.46 | % | 3.46 | % | 3.46 | % | | 3.20 | % | 3.20 | % | 3.20 | % | | 4.83 | % | 4.83 | % | 4.83 | % |
Volatility | 16.01 | % | 16.01 | % | 16.01 | % | | 53.87 | % | 53.87 | % | 53.87 | % | | 29.30 | % | 29.30 | % | 29.30 | % | | 29.15 | % | 29.15 | % | 29.15 | % |
(2)Represents the cumulative TSR (the “Peer Group TSR”) of the S&P 600 Real Estate Index.
(3)Although we use numerous financial and non-financial performance measures for the purpose of evaluating company performance for our executive compensation program, we have determined that FFO and FFO/share are the financial performance measures that in our assessment, represent the most important financial performance measures (that is not otherwise required to be disclosed in the table) used to link company performance and executive compensation for the most recently completed fiscal year. FFO, a non-GAAP measure, is therefore our Company Selected Measures. We calculate FFO in accordance with the standards established by NAREIT. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment losses, real estate related depreciation and amortization (excluding amortization of deferred financing costs) and after adjustments for unconsolidated partnerships and joint ventures. (A reconciliation of net income to FFO is included on page 61 of our Annual Report on Form 10-K for the year ended December 31, 2023.)
(4)While FFO and FFO/ share are our Company Selected Measures, as described in footnote (3) above, we have elected to present NOI as a supplemental measure in the table above, as NOI is also an important financial performance measure used by our Compensation Committee to link company performance and executive compensation for the most recently completed fiscal year. NOI is a non-GAAP measure. We define NOI as operating revenues (rental income, tenant reimbursements, lease termination fees, ground lease rental income and other property income) less property and related expenses (property expenses, ground lease expenses, property marketing costs, real estate taxes and insurance). NOI excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expense, other non-property income and losses, gains and losses from property dispositions, extraordinary items, tenant improvements and leasing commissions. (A reconciliation of NOI to net income is included on page 60 of our Annual Report on Form 10-K for the year ended December 31, 2023.
Pay Versus Performance Tabular List
We believe the following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our NEOs for the fiscal year ended December 31, 2023:
| | |
(2)Important Financial Performance Measures |
Earnings/(losses) are measured as the difference in deferred account balances between the beginning and the end of the year minus executive and Company contributions during the year. Earnings/(losses) for 2015 were ($2,335) for Mr. Chamberlain and $23,028 for Mr. Barton (of which $5,733 were under EDP V and $17,295 were under EDP VI). These earnings are not reported in the Summary Compensation Table. None of such earnings were above-market interest.Funds from Operations |
Funds from Operations per Share |
Net Operating Income |
For additional details regarding our most important financial performance measures, please see the sections titled “Executive Summary for 2023” and “Elements of Executive Officer Compensation” in our Compensation Discussion and Analysis (CD&A) elsewhere in this Proxy Statement.
Relationship Between Financial Performance Measures
The graphs below compare the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs, with (i) our cumulative TSR, (ii) our Peer Group TSR, (iii) our net income, (iv) our FFO and FFO/share, which are our Company Selected Measures and (v) our NOI in each case, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023.
The following graph compares the compensation actually paid to our PEO, the average of the compensation actually paid to our remaining NEOs with the TSR performance of our company stock and the TSR performance of our company stock with the TSR performance of the S&P 600 Real Estate Index. TSR amounts in the graph assume that $100 was invested beginning on December 31, 2019 and that all distributions or dividends were reinvested on a quarterly basis.
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs with net income.
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs with FFO.
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs with FFO/share.
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs with NOI.
STOCK OWNERSHIP
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of shares of our common stock and shares of common stock into which units are exchangeable as of April 1, 2016March 28, 2024 for (i) each person who is the beneficial owner of 5% or more of our outstanding common stock, (ii) each of our directors and named executive officers and (iii) all of our directors and named executive officers as a group. Each person named in the table has sole voting and investment power with respect to all of the shares of our common stock shown as beneficially owned by such person, except as otherwise set forth in the notes to the table. The extent to which a person will hold shares of common stock as opposed to units is set forth in the footnotes below.
The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. A stockholder is also deemed to be, as of any date, the beneficial owner of all securities that such stockholder has the right to acquire within 60 days after that date through (a) the exercise of any option, warrant or right, (b) the conversion of a security, (c) the power to revoke a trust, discretionary account or similar arrangement, or (d) the automatic termination of a trust, discretionary account or similar arrangement. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options or other rights (as set forth above) held by that person that are exercisable as of April 1, 2016March 28, 2024 or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated, the address of each named person is c/o American Assets Trust, Inc., 11455 El Camino Real,3420 Carmel Mountain Road, Suite 200,100, San Diego, California 92130.CA 92121.
|
| | | | | | | |
Name of Beneficial Owner | | Number of Shares and Units Beneficially Owned | | Percentage of All Shares (1) | | Percentage of All Shares and Units (2) |
American Assets, Inc. (3) | | 5,375,129 |
| | 10.64% | | 8.49% |
Ernest Rady Trust U/D/T March 10, 1983 (4) | | 20,861,126 |
| | 34.63% | | 32.95% |
Ernest S. Rady (5) | | 21,279,814 |
| | 35.33% | | 33.61% |
Robert F. Barton (6) | | 126,151 |
| | * | | * |
Adam Wyll (7) | | 55,068 |
| | * | | * |
Jerry Gammieri (8) | | 27,086 |
| | * | | * |
Duane A. Nelles (9) | | 68,533 |
| | * | | * |
Larry E. Finger (10) | | 8,032 |
| | * | | * |
Thomas S. Olinger (11) | | 7,532 |
| | * | | * |
Dr. Robert S. Sullivan (11) | | 7,532 |
| | * | | * |
The Vanguard Group (12) | | 5,476,236 |
| | 12.06% | | 8.65% |
BlackRock, Inc. (13) | | 4,068,020 |
| | 8.96% | | 6.43% |
Vanguard Specialized Funds - Vanguard REIT Index Fund (14) | | 2,423,956 |
| | 5.34% | | 3.83% |
All directors and named executive officers as a group (8 persons) | | 21,579,748 |
| | 35.82% | | 34.09% |
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Name of Beneficial Owner | | Number of Shares and Units Beneficially Owned | | Percentage of All Shares (1) | | Percentage of All Shares and Units (2) |
AAI (3) | | 7,376,603 | | | 11.18% | | 9.57% |
Ernest Rady Trust U/D/T March 10, 1983 (4) | | 26,329,577 | | | 34.77% | | 34.16% |
Ernest S. Rady (5) | | 27,618,628 | | | 36.47% | | 35.83% |
Robert F. Barton (6) | | 287,031 | | | * | | * |
Adam Wyll (7) | | 206,079 | | | * | | * |
Jerry Gammieri (8) | | 92,573 | | | * | | * |
Nina Tran (9) | | 5,401 | | | * | | * |
Thomas S. Olinger (10) | | 21,547 | | | * | | * |
Dr. Robert S. Sullivan (11) | | 19,759 | | | * | | * |
Joy L. Schaefer (12) | | 8,564 | | | * | | * |
The Vanguard Group (13) | | 7,351,522 | | | 12.07% | | 9.54% |
BlackRock, Inc. (14) | | 11,846,631 | | | 19.45% | | 15.37% |
State Street Corporation (15) | | 3,151,988 | | | 5.18% | | 4.09% |
All directors and executive officers as a group (8 persons) | | 28,259,582 | | | 37.32% | | 36.66% |
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(1) | * Less than 1.00%. (1)Based on current shares of our common stock outstanding (45,407,402 as of April 1, 2016). In addition, amounts for individuals assume that all common units held by the person are exchanged for shares of our common stock, and amounts for all directors, director nominees and named executive officers as a group assume all common units held by them are exchanged for shares of our common stock in each case, regardless of when such common units are currently exchangeable. The total number of shares of our common stock outstanding used in calculating this percentage assumes that none of the common units held by other persons are exchanged for shares of our common stock. |
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(2) | Assumes a total 45,407,402shares of our common stock and 17,899,516 common units, where units may be redeemed for cash or, at our option, exchanged for shares of our common stock.
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(3) | Includes 265,548 shares of our common stock and 5,107,577 common units held by American Assets, Inc., which is controlled by Ernest Rady Trust U/D/T March 10, 1983 or the Rady Trust and; 2,004 common units held by Western Insurance Holdings, Inc., which is controlled by American Assets, Inc. American Assets, Inc. disclaims beneficial ownership of such shares and common units, except to the extent of its pecuniary interest therein. |
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(4) | Includes (a) 4,971,016 shares of our common stock and 9,720,409 common units held by the Rady Trust; (b) 265,548 shares of our common stock and 5,107,577 common units held by American Assets, Inc., which is controlled by the Rady Trust; (c) 2,004 common units held by Western Insurance Holdings, Inc., which is controlled by American Assets, Inc.; (d) 594,572 shares of our common stock held by Insurance Company of the West, which is controlled by the Rady Trust; and (e) 200,000 shares of our common stock held by Explorer Insurance Company, which is controlled by the Rady Trust. The Rady Trust disclaims beneficial ownership of such shares and common units, except to the extent of its pecuniary interest therein. |
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(5) | Includes (a) 4,971,016 shares of our common stock and 9,720,409 common units held by the Rady Trust; (b) 27,000 shares of our common stock held by the Evelyn Shirley Rady Trust U/D/T March 10, 1983, for which Mr. Rady is the trustee; (c) 265,548 shares of our common stock and 5,107,577 common units held by American Assets, Inc., which is directly controlled by Mr. Rady; (d) 594,572 shares of our common stock held by Insurance Company of the West, which is directly controlled by Mr. Rady; (e) 200,000 shares of our common stock held by Explorer Insurance Company, which is directly controlled by Mr. Rady; (f) 2,004 common units held by Western Insurance Holdings, Inc., which is directly controlled by Mr. Rady; (g) 323,513 shares of our common stock held by the Rady Family Foundation, for which Mr. Rady is the trustee; (h) 24,000 shares of our common stock held by Ernest Rady IRA; and (i) 48,557 shares of restricted common stock granted to Mr. Rady pursuant to our 2011 Plan. Mr. Rady disclaims beneficial ownership of such shares and common units, except to the extent of his pecuniary interest therein. Additionally, as of April 1, 2016, Mr. Rady has pledged 2,240,000 shares of our common stock as collateral under a margin account for personal loan purposes. |
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(6) | Includes (a) 1,481 shares of our common stock held by the Robert and Katherine Barton Living Trust, for which Mr. Barton is a trustee and beneficiary, and as such is the beneficial owner of the shares held by such trust, (b) 92,244 shares of our common stock, and (c) 32,426 shares of restricted stock granted to Mr. Barton pursuant to our 2011 Plan. |
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(7) | Includes (a) 38,096 shares of our common stock and (b) 16,972 shares of restricted stock granted to Mr. Wyll pursuant to our 2011 Plan; |
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(8) | Includes (a) 15,738 shares of our common stock and (b) 11,348 shares of restricted stock granted to Mr. Gammieri pursuant to our 2011 Plan. |
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(9) | Includes (a) 1,678 shares of restricted stock granted pursuant to our 2011 Plan to Mr. Nelles as a non-employee director and (b) 66,855 shares of our common stock. 64,437 shares of our common stock (including shares purchased by Mr. Nelles and certain shares of restricted stock that has vested) are held by the Nelles Intervivos Trust dtd. 3/29/1976, for which Mr. Nelles is a co-trustee and beneficiary, and as such is the beneficial owner of the shares held by such trust. |
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(10) | Includes (a) 1,678 shares of restricted stock granted pursuant to our 2011 Plan to Mr. Finger as a non-employee director and (b) 6,354 shares of our common stock. |
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(11) | For each of Mr. Olinger and Dr. Sullivan, includes (a) 1,678 shares of restricted stock granted pursuant to our 2011 Plan to Mr. Olinger and Dr. Sullivan as non-employee directors, and (b) 5,854 shares of our common stock. |
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(12) | The Vanguard Group, Inc., in its capacity as investment adviser, may be deemed to beneficially own 5,476,236 shares of our common stock, which are held of record by subsidiaries and clients of The Vanguard Group. The Vanguard Group's address is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The foregoing information is based on The Vanguard Group, Inc.'s Schedule 13G/A filed with the SEC on February 10, 2016. |
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(13) | BlackRock, Inc. ("BlackRock"), a parent holding company, may be deemed to beneficially own 4,068,020 shares of our common stock, which are held of record by the following wholly owned subsidiaries of BlackRock: (a) BlackRock Advisors LLC, (b) BlackRock Asset Management Canada Limited, (c) BlackRock Asset Management Ireland Limited (d) BlackRock Asset Management North Asia Limited, (e) BlackRock Asset Management Schweiz AG, (f) BlackRock Fund Advisors, (g) BlackRock Fund Managers Ltd, (h) BlackRock Institutional Trust Company, N.A., (i) BlackRock International Limited, (j) BlackRock Investment Management (Australia) Limited, (k) BlackRock Investment Management (UK) Ltd, (l) BlackRock Investment Management, LLC, and (m) BlackRock Japan Co Ltd. BlackRock's address is 55 East 52nd Street, New York, NY 10055. The foregoing information is based on BlackRock's Schedule 13G/A filed with the SEC on January 25, 2016. |
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(14) | Vanguard Specialized Funds' address is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The foregoing information is based on Vanguard Specialized Funds' Schedule 13G/A filed with the SEC on February 9, 2016. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our named executive officers, directors and persons who own more than 10% of our common stock to file reportsoutstanding (60,894,491 as of ownershipMarch 28, 2024). In addition, amounts for individuals assume that all common units held by the person are exchanged for shares of our common stock, and changes in ownership with the SEC. SEC regulations require us to identify anyone who failed to file a required report or filed a late report during the most recent fiscal year. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no Forms 5 were requiredamounts for such persons, we believe that, during the fiscal year ended December 31, 2015, ourall directors, director nominees and named executive officers directorsas a group assume all common units held by them are exchanged for shares of our common stock in each case, regardless of when such common units are currently exchangeable. The total number of shares of our common stock outstanding used in calculating this percentage assumes that none of the common units held by other persons are exchanged for shares of our common stock.
(2)Assumes a total of 60,894,491shares of our common stock and 10% stockholders complied16,181,537 common units, where units may be redeemed for cash or, at our option, exchanged for shares of our common stock.
(3)Includes 2,267,022 shares of our common stock and 5,107,577 common units held by AAI, which is controlled by Ernest Rady Trust U/D/T March 10, 1983 or the Rady Trust, and 2,004 common units held by ICW Group Holdings, Inc. (formerly Western Insurance Holdings, Inc.), which is controlled by AAI. AAI. disclaims beneficial ownership of such shares and common units, except to the extent of its pecuniary interest therein.
(4)Includes (a) 7,757,229 shares of our common stock and 9,720,409 common units held by the Rady Trust; (b) 2,267,022 shares of our common stock and 5,107,577 common units held by AAI, which is controlled by the Rady Trust; (c) 2,004 common units held by ICW Group Holdings, Inc., which is controlled by AAI.; (d) 1,275,336 shares of our common stock held by Insurance Company of the West, which is controlled by the Rady Trust; and (e) 200,000 shares of our common stock held by Explorer Insurance Company, which is controlled by the Rady Trust. The Rady Trust disclaims beneficial ownership of such shares and common units, except to the extent of its pecuniary interest therein.
(5)Includes (a) 7,757,229 shares of our common stock and 9,720,409 common units held by the Rady Trust; (b) 100,459 shares of our common stock held by the Evelyn Shirley Rady Trust U/D/T March 10, 1983, for which Mr. Rady is the trustee; (c) 2,267,022 shares of our common stock and 5,107,577 common units held by AAI, which is directly controlled by Mr. Rady; (d) 1,275,336 shares of our common stock held by Insurance Company of the West, which is directly controlled by Mr. Rady; (e) 200,000 shares of our common stock held by Explorer Insurance Company, which is directly controlled by Mr. Rady; (f) 2,004 common units held by ICW Group Holdings, Inc., which is directly controlled by Mr. Rady; (g) 1,009,021 shares of our common stock held by the Rady Foundation, for which Mr. Rady is the trustee; (h) 66,680 shares of our common stock held by Ernest Rady IRA; and (i) 112,891 shares of restricted common stock granted to Mr. Rady pursuant to our Amended Equity Plan. Mr. Rady disclaims beneficial ownership of such shares and common units, except to the extent of his pecuniary interest therein.
(6)Includes (a) 153,618 shares of our common stock held by the Robert and Katherine Barton Living Trust, for which Mr. Barton is a trustee and beneficiary, and as such is the beneficial owner of the shares held by such trust and (b) 133,413 shares of restricted stock granted to Mr. Barton pursuant to our Amended Equity Plan.
(7)Includes (a) 75,833 shares of our common stock and (b) 130,246 shares of restricted stock granted to Mr. Wyll pursuant to our Amended Equity Plan;
(8)Includes (a) 40,793 shares of our common stock and (b) 51,780 shares of restricted stock granted to Mr. Gammieri pursuant to our Amended Equity Plan.
(9)Includes (a) 2,587 shares of restricted stock granted pursuant to our Amended Equity Plan to Ms. Tran as a non-employee director and (b) 2,814 shares of our common stock.
(10)Includes (a) 2,587 shares of restricted stock granted pursuant to our Amended Equity Plan to Mr. Olinger as a non-employee director and (b) 18,960 shares of our common stock.
(11)Includes (a) 2,587 shares of restricted stock granted pursuant to our Amended Equity Plan to Dr. Sullivan as a non-employee director and (b) 17,172 shares of our common stock.
(12)Includes (a) 2,587 shares of restricted stock granted pursuant to our Amended Equity Plan to Ms. Schaefer as a non-employee director and (b) 5,977 shares of our common stock.
(13)The Vanguard Group, Inc., in its capacity as investment adviser, may be deemed to beneficially own 7,351,522 shares of our common stock, which are held of record by subsidiaries and clients of The Vanguard Group. The address of the Vanguard Group, Inc. is 100 Vanguard Blvd., Malver, PA 19355. The foregoing information is based on The Vanguard Group, Inc.'s Schedule 13G/A filed with all Section 16(a) filing requirements applicablethe SEC on February 13, 2024.
(14)BlackRock, Inc. ("BlackRock"), a parent holding company, may be deemed to them.beneficially own 11,846,631 shares of our common stock, which are held of record by the following subsidiaries of BlackRock: (a) BlackRock (Netherlands) B.V., (b) BlackRock Advisors LLC, (c) BlackRock Asset Management Canada Limited, (d) BlackRock Asset Management Ireland Limited (e) BlackRock Investment Management (UK) Limited, (f) BlackRock Asset Management Schweiz AG, (g) BlackRock Financial Management, Inc., (h) BlackRock Fund Advisors (i) BlackRock Fund Managers Ltd, (j) BlackRock Institutional Trust Company, N.A., (k) BlackRock (Luxembourg) S.A., (l) BlackRock Investment Management (Australia) Limited, (m) BlackRock Japan Co., Ltd., (n) BlackRock Investment Management, LLC, and (o) Aperio Group, LLC. The address of BlackRock is 50 Hudson Yards, New York, NY 10001. The foregoing information is based on BlackRock's Schedule 13G/A filed with the SEC on January 19, 2024.
(15)State Street Corporation ("State Street"), a parent holding company, may be deemed to beneficially own 3,151,988 shares of our common stock, which are held of record by the following subsidiaries of State Street: (a) SSGA Funds Management, Inc., (b) State Street Global Advisors Europe Limited, (c) State Street Global Advisors Limited, (d) State Street Global Advisors, Australia, Limited and (e) State Street Global Advisors (Japan) Co., Ltd. The address of State Street is 1 Congress Street, Suite 1, Boston, MA 02114-2016. The foregoing information is based on State Street's Schedule 13G filed with the SEC on January 30, 2024.
RELATED-PARTY AND
OTHER TRANSACTIONS INVOLVING OUR OFFICERS AND DIRECTORS
We describe below transactions and series of similar transactions, during our last fiscal year, to which we were a party or will be a party, in which:
•the amounts involved exceeded or will exceed $120,000; and
•any of our directors, executive officers, holders of more than 5% of our outstanding common stock or any member of their immediate family had or will have a direct or indirect material interest.
Release of Guarantees
The Rady Trust and certain other affiliates of Mr. Rady were guarantors of approximately $879.0 million of indebtedness, in the aggregate, that was assumed by us upon completion of our initial public offering. The guarantees with respect to substantially all of this indebtedness are limited to losses incurred by the applicable lender arising from a borrower's fraud, intentional misrepresentation or other “bad acts,” a borrower's bankruptcy, a prohibited transfer under the loan documents or losses arising from a borrower's breach of certain environmental covenants. Except as set forth in the following sentence, in connection with this assumption, the Rady Trust and such other affiliates of Mr. Rady were all released from their guarantee obligations, and the operating partnership and/or the REIT became replacement guarantors, from the date of the initial public offering. With respect to the assumption of the indebtedness related to the Loma Palisades property, the operating partnership was required to become a guarantor of such obligations, but the lenders did not consent to the release of American Assets, Inc. from its guarantee of such indebtedness. The operating partnership has entered into an indemnity agreement with American Assets, Inc., pursuant to which the operating partnership is obligated to reimburse American Assets, Inc. for any amounts paid by it under such
guarantee with respect to the assumed Loma Palisades indebtedness.
Partnership Agreement
In connection with the completion of our initial public offering and certain formation transactions in which we engaged in connection with our initial public offering, or the Formation Transactions, we entered into an amended and restated partnership agreement with the various persons receiving common units in the Formation Transactions, including Mr. Rady, his affiliates and certain other executive officers of our Company.executive officers. As a result, these persons became limited partners of our operating partnership.
Pursuant to the partnership agreement, limited partners of our operating partnership and some assignees of limited partners have the right to require our operating partnership to redeem part or all of their common units for cash equal to the then-current market value of an equal number of shares of our common stock (determined in accordance with and subject to adjustment under the partnership agreement), or, at our election, to exchange their common units for shares of our common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of our stock set forth in our charter.
In addition, we may not, without prior limited partner approval, directly or indirectly transfer all or any portion of our interest in the operating partnership before the later of the death of Mr. Rady and the death of his wife, in connection with a merger, consolidation or other combination of our assets with another entity, a sale of all or substantially all of our assets, a reclassification, recapitalization or change in any outstanding shares of our stock or other outstanding equity interests or an issuance of shares of our stock, in any case that requires approval by our common stockholders.
Registration Rights
We entered into a registration rights agreement with the various persons who received shares of our common stock and/or common units in the Formation Transactions, including Mr. Rady, his affiliates, immediate family members and related trusts and certain of our executive officers. Pursuant to the registration rights agreement, we filed registration statements on Form S-3 covering the resale of the shares of our common stock issued in the Formation Transactions and the resale of the shares of our common stock issued or issuable, at our option, in exchange for common units issued in the Formation Transactions.
In addition, in connection with our filing a registration statement with respect to an underwritten offering for our own account, any of Mr. Rady and his affiliates, immediate family members and related trusts will have the right, subject to certain limitations, to register such number of shares of our common stock issued to him or her pursuant to the Formation Transactions as each such person requests.
Under certain circumstances, we are also required to undertake an underwritten offering upon the written request of holders of at least 10% in the aggregate of the securities originally issued in the Formation Transactions, provided the securities to be registered in such offering shall (i) have a market value of at least $25 million or (ii) shall represent all of the remaining securities acquired in the Formation Transactions by Mr. Rady and his affiliates, immediate family members and related trusts and such securities shall have a market value of at least $10 million, and provided further that we are not obligated to effect more than three such underwritten offerings. We agreed to pay all of the expenses relating to the securities registrations described above.
Tax Protection Agreement
We entered into a tax protection agreement with certain limited partners of our operating partnership, or the protected partners, including Mr. Rady and his affiliates. Under this agreement, our operating partnership will indemnify the protected partners for their tax liabilities (plus an additional amount equal to the taxes incurred as a result of such indemnity payment) attributable to their share of the built-in gain, as of the closing of the Formation Transactions, with respect to their interest in Carmel Country Plaza, Carmel Mountain Plaza, Del Monte Center, Loma Palisades, Lomas Santa Fe Plaza, Waikele Center or the ICW Plaza portion of Torrey Reserve Campus, which we collectively refer to as the tax protected properties, if the operating partnership, without the consent of Mr. Rady, disposes of any interest with respect to such properties in a taxable transaction during the shorter of the seven-year period after the closing of the Formation Transactions and the date on which 50% or more of the common units originally received by any such protected partner in the Formation Transactions have been sold, exchanged or otherwise disposed of by the protected partner, subject to certain exceptions and limitations. In addition, if during this period we fail to offer certain of the protected partners an opportunity to guarantee, in the aggregate, up to approximately $129.4 million of our outstanding indebtedness, or if we fail to make commercially reasonable efforts to provide such partners who continue to own more than 50% of the common units originally received by such partners in the Formation Transactions with an opportunity to guarantee debt after this period, we will be required to indemnify such partners against their resulting tax liabilities (plus an additional amount equal to the taxes they incur as a result of such indemnity payment). Notwithstanding the foregoing, the operating partnership's indemnification obligations under the tax protection agreement will terminate upon the later of the death of Mr. Rady and the death of his wife. Mr. Rady and his affiliates will have the opportunity to guarantee up to approximately $51.3 million of our outstanding indebtedness. Among other things, this opportunity to guarantee debt is intended to allow the protected partners to defer the recognition of gain in connection with the Formation Transactions. The sole and exclusive rights and remedies of any protected partner under the tax protection agreement shall be a claim against our operating partnership for such protected partner's tax liabilities as calculated in the tax protection agreement, and no protected partner shall be entitled to pursue a claim for specific performance or bring a claim against any person that acquires a protected party from our operating partnership in violation of the tax protection agreement.
Lease Agreement, Workers' Compensation Insurance and Private Placement with Insurance Company of the West
Insurance Company of the West, or ICW, which was founded by Mr. Rady and is controlled by him, is a major tenant at Torrey Reserve Campus. Mr. Rady currently serves as the chairman of the board of directors of ICW. Pursuant to a lease agreement with ICW, we received approximately $2.2 million in rent from ICW in 2015. Additionally, on July 1, 2015, we renewed our workers' compensation insurance policy with ICW. The policy premium is approximately $0.2 million for the period July 1, 2015 through July 1, 2016. Finally, on March 9, 2015, we entered into a common stock purchase agreement with Explorer Insurance Company (a subsidiary of ICW). The purchase agreement provided for the sale by us to Explorer Insurance Company, in a private placement, of 200,000 shares of common stock at a price of $40.54 per share, resulting in gross proceeds to us of approximately $8.1 million.
AAI Aviation, Inc.
We utilize aircraft services provided by AAI Aviation, Inc., or AAIA, an entity owned by American Assets, Inc. American Assets, Inc.AAI. AAI. is directly controlled by Mr. Rady. For the year ended December 31, 2015,2023, we incurred approximatelyapproximately $0.2 million of expenses related to aircraft services of AAIA or reimbursement to Mr. Rady (or his trust) for use of the aircraft owned by AAIA. These expenses are recorded as general and administrative expenses in our consolidated statements of comprehensive income.
Lease Agreement and Transition Services Agreement andwith American Assets, Inc.
OurDuring 2023, AAI, which was founded by Mr. Rady and is controlled by him, was a tenant at our Torrey Point property. Pursuant to such lease agreement with AAI, we received approximately $0.3 million in rent from AAI in 2023. Also, Ensight, Inc, or Ensight (formerly EDisability, LLC), an entity in which Mr. Rady is a board member and a majority shareholder, is a tenant at our Torrey Reserve Campus. Pursuant to a lease agreement with Ensight, we received approximately $0.1 million in rent from Ensight in 2023.
Additionally, our operating partnership has entered into a transition services agreement with American Assets, Inc.AAI pursuant to which it and American Assets, Inc.AAI have each agreed to provide the other with such services as the other shall reasonably request. Any party receiving services under this agreement shall reimburse the party providing such services for the fully loaded cost of providing such services and for any other actual and reasonable out of pocket expenses incurred in connection with providing such services. Either party may terminate this agreement upon 30-days' written notice.
Equity Incentive Award Plan
In connection with the Formation Transactions, we adopted a cash and equity-based incentive award plan for our directors, officers, employees and consultants. The material terms of such award plan are described above under “Compensation Discussion and Analysis — Elements of Executive Officer Compensation.”
REVIEW AND APPROVAL OF TRANSACTIONS WITH RELATED PERSONS
We have operated under our Code of Business Conduct and Ethics policy since our initial public offering in January 2011. As part of our Code of Business Conduct and Ethics, our directors and employees are expected to make business decisions and take actions based upon our best interests and not based upon personal relationships or benefits.
We have adopted a written policy regarding the review, approval and ratification of any related party transaction. Under this policy, our Audit Committee will review the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arm's-length dealings with an unrelated third party and the extent of the related party's interest in the transaction, and either approve or disapprove the related party transaction. Any related party transaction shall be consummated and shall continue only if the Audit Committee has approved or ratified the transaction in accordance with the guidelines set forth in the policy. For purposes of our policy, a “Related Party Transaction” is (i) a transaction, arrangement or relationship, including any indebtedness or guarantee of indebtedness, (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) were, are or will be a participant, and in which any Related Party (as defined below) had, has or will have a direct or indirect interest or (ii) any amendment or modification to such a transaction, arrangement or relationship, regardless of whether such transaction, arrangement or relationship has previously been approved in accordance with our policy. For purposes of this policy, a “Related Party” is:
•any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of the Company or a nominee to become a director of the Company;
•any person who is (or was) the beneficial owner of more than 5% of any class of our voting securities when the Related Party Transaction in question is (or was) expected to occur or exist;
•any immediate family member of any of the foregoing persons and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than 5% beneficial owner; and
•any firm, corporation or other entity in which any of the foregoing persons is employed or is a general partner or principal or serves in a similar position or in which such person has a 5% or greater beneficial ownership interest.
INCORPORATION BY REFERENCE
The Compensation Committee Report, the Audit Committee Report, reference to the independence of the Audit Committee members, portions of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015,2023, and any information included on our web site,website, included or described in the preceding pages are not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by us under the Exchange Act, except to the extent that we specifically incorporate such information by reference.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
Under the rules of the SEC, we are permitted to use a method of delivery often referred to as “householding.” Householding permits us to mail a single Notice of Internet Availability or Annual Report and Proxy Statement to any household in which two or more different stockholders reside and are members of the same household or in which one stockholder has multiple accounts. If we household materials for future meetings, then only one copy of our Notice of Internet Availability or Annual Report and Proxy Statement will be sent to multiple stockholders who share the same address and last name, unless we have received contrary instructions from one or more of those stockholders. In addition, we have been notified that certain intermediaries (i.e.(i.e., brokers, banks or other nominees) will household our Notice of Internet Availability or Annual Report and Proxy Statement for the Annual Meeting. For voting purposes, a separate proxy card will be included for each account that receives an Annual Report and Proxy Statement at the shared address. We will deliver promptly, upon oral or written request, a separate copy of the Notice of Internet Availability or Annual Report and Proxy Statement, as requested, to any stockholder at the same address. If you wish to receive a separate copy of the Notice of Internet Availability or Annual Report and Proxy Statement, or future Notices of Internet Availability, annual reports and proxy statements, then you may contact our Investor Relations Department by: (i) mail at American Assets Trust, Inc., Attention: Investor Relations, 11455 El Camino Real,Torrey Point, 3420 Carmel Mountain Road, Suite 200,100, San Diego, California 92130,CA 92121, (ii) telephone at (858) 350-2600, or (iii) e-mail at info@americanassets.com. You can also contact your broker, bank or other nominee to make a similarsimilar request. Stockholders sharing an address who now receive multiple copies of our Notice of Internet Availability or Annual Report and Proxy Statement may request delivery of a single copy by contacting us as indicated above, or by contacting their broker, bank or other nominee, provided the broker, bank or other nominee has elected to household proxy materials.
STOCKHOLDER PROPOSALS
20162024 Annual Meeting Proposals
Our Bylaws provide that nominations of individuals for election as directors and proposals of other business to be considered at an annual meeting of our stockholders may be made only pursuant to our notice of the meeting, by or at the direction of our Board or by a stockholder who was a stockholder of record both at the time the stockholder provides the notice required by our Bylaws and at the time of the annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or such other business and who has complied with the advance notice procedures set forth in, and provided the information and certifications required by, our Bylaws. We did not receive notice of any nominations or proposals to be made at the Annual Meeting within the time period required by our Bylaws and our Board does not know of any matters that may properly be presented at the Annual Meeting other than the proposals discussed in this Proxy Statement and any procedural matters relating to these proposals.
20172025 Annual Meeting Proposals
Stockholders who wish to have proposals considered for inclusion in the Proxy Statement and form of proxy for our 20172025 Annual Meeting pursuant to Rule 14a-8 under the Exchange Act must cause their proposals to be received in writing by our General Counsel at the address set forth on the first page of this Proxy Statement no later than December 17, 2016.6, 2024. Any proposal should be addressed to our General Counsel and may be included in next year's proxy materials only if such proposal complies with the rules and regulations promulgated by the SEC. Nothing in this section shall be deemed to require us to include in our Proxy Statement or our proxy relating to any annual meeting any stockholder proposal that does not meet all of the requirements for inclusion established by the SEC.
In addition, our Bylaws currently require that we be given advance written notice of nominations for election to our Board of Directors and other matters that stockholders wish to present for action at an annual meetingAnnual Meeting of stockholdersour Stockholders (other than matters included in our proxy materials in accordance with Rule 14a-8(e) under the Exchange Act). Our Secretary must receive such notice at the address set forth in the Introduction not later than December 17, 20166, 2024 and no earlier than November 17, 20166, 2024 for matters to be presented at the 2017 annual meeting2025 Annual Meeting of our stockholders.Stockholders. However, in the event that the 2017 annual meeting2025 Annual Meeting of our Stockholders is held before May 15, 20174, 2025 or after July 14, 2017,3, 2025, for notice by the stockholder to be timely it must be received not earlier than 150 days prior to the date of the 2017 annual meeting2025 Annual Meeting of our Stockholders and not later than 5:00 p.m., Eastern time, on the later of (i) 120 days prior to the date of the 2017 annual meeting2025 Annual Meeting of our Stockholders, as originally convened, and (ii) the tenth day following the day on which public disclosure of the date of such meeting was first made by the Company.
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the SEC’s universal proxy rules, stockholders who wish to solicit proxies in support of director nominees other than our proposed nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than April 4, 2025.
ANNUAL REPORT
We sent a Notice of Internet Availability and provided access to our Annual Report over the Internet to stockholders of record on or about April 15, 2016.5, 2024. The Annual Report does not constitute, and should not be considered, a part of this proxy solicitation material.
If any person who was a beneficial owner of our common stock on the record date for the Annual Meeting desires additional information, a copy of our Annual Report on Form 10-K will be furnished without charge upon receipt of a request identifying the person so requesting a report as a stockholder of American Assets Trust, Inc. at such date. Requests should be directed by (i) mail at American Assets Trust, Inc., Attention: Investor Relations, 11455 El Camino Real,Torrey Point, 3420 Carmel Mountain Road, Suite 200,100, San Diego, California 92130,CA 92121, (ii) telephone at (858) 350-2600, or (iii) e-mail at info@americanassets.com. In addition, on the Investor RelationsFinancial Reporting page of the Investors section of our web sitewebsite at www.americanassetstrust.com, you can obtain, free of charge, a copy of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we file such material electronically with, or furnish it to, the SEC.
OTHER MATTERS
Our Board of Directors knows of no other matters that may properly be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting or any adjournment or postponement of the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their discretion. It is important that the proxies be returned promptly and that you be represented. Stockholders are encouraged to authorize a proxy promptly by either electronically submitting a proxy or voting instruction card over the Internet or by telephone or by delivering to us or your broker a signed and dated proxy card.
By Order of the Board, of Directors,
Adam Wyll
Senior Vice President, General CounselChief Operating Officer and Secretary
San Diego, California
April 15, 20165, 2024
ANNUAL MEETING OF STOCKHOLDERS OF
AMERICAN ASSETS TRUST, INC.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder
Meeting to Bebe Held on June 14, 20163, 2024
The Notice of Annual Meeting, Proxy Statement, 20152023 Annual Report and other SEC filings are available at the Investor RelationsInvestors page ofon our corporate information web sitewebsite at www.americanassetstrust.com.
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.