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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(a) of the Securities
Exchange Act of 1934 (the "Exchange Act")
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMERICAN INDUSTRIAL PROPERTIES REIT
(Name of Registrant as Specified in Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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AMERICAN INDUSTRIAL PROPERTIES REIT
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1998
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TO THE SHAREHOLDERS OF AMERICAN INDUSTRIAL PROPERTIES REIT:
You are cordially invited to attend the Annual Meeting of Shareholders
of American Industrial Properties REIT (the "Trust") to be held at the Four
Seasons Resort and Club, 4150 North MacArthur Boulevard, Irving, Texas 75038,
on May 27, 1998, at 9:00 a.m. Dallas time for the following purposes:
1. To elect seven Trust Managers.
2. To ratify the selection of Ernst & Young LLP as independent
auditors for the fiscal year ending December 31, 1998.
3. To transact such other business as may properly come before
the Annual Meeting or any postponements or adjournments
thereof.
Only holders of record of Common Shares of Beneficial Interest of the
Trust on April 24, 1998 will be entitled to notice of, and to vote at, the
Annual Meeting or any postponements or adjournments thereof.
A copy of the Proxy Statement relating to the Annual Meeting
accompanies this Notice of Annual Meeting of Shareholders. Each shareholder is
urged to read the Proxy Statement in its entirety.
YOUR VOTE IS IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF COMMON SHARES YOU HOLD. YOU ARE INVITED TO ATTEND
THE ANNUAL MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO ATTEND, YOU MAY
ENSURE YOUR REPRESENTATION BY COMPLETING, SIGNING, DATING AND PROMPTLY
RETURNING THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. IF YOU ATTEND
THE ANNUAL MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
By Order of the Trust Managers
Marc A. Simpson
Secretary and Chief Financial Officer
6210 N. Beltline Road
Suite 170
Irving, Texas 75063
(972) 756-6000
April 23, 1998
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AMERICAN INDUSTRIAL PROPERTIES REIT
6210 N. BELTLINE ROAD
SUITE 170
IRVING, TEXAS 75063
(972) 756-6000
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1998
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This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Trust Managers of American Industrial Properties REIT, a
Texas real estate investment trust (the "Trust"), for use at the Annual Meeting
of Shareholders to be held at the Four Seasons Resort and Club, 4150 North
MacArthur Boulevard, Irving, Texas 75038 at 9:00 a.m. Dallas time on May 27,
1998. Accompanying this Proxy Statement is the Proxy for the Annual Meeting,
which you may use to indicate your vote as to each of the proposals described
in this Proxy Statement. This Proxy Statement and the accompanying Proxy are
first being mailed to shareholders on or about April 27, 1998. The Annual
Report outlining the Trust's operations for the year ended December 31, 1997 is
being mailed to shareholders together with this Proxy Statement.
The close of business on April 24, 1998 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Annual Meeting. As of the record date, the Trust had outstanding
11,103,013 common shares of beneficial interest, $0.10 par value (the "Common
Shares"), the only outstanding security of the Trust.
At the Annual Meeting, action will be taken to: (i) elect seven Trust
Managers to hold office until their successors, if any, are duly elected and
qualified at the next annual meeting of shareholders; (ii) ratify the selection
of Ernst & Young LLP as independent auditors for the Trust for the year ending
December 31, 1998 (the "1998 Fiscal Year"); and (iii) transact such other
business as may properly come before the Annual Meeting or any postponements or
adjournments thereof.
A shareholder is entitled to cast one vote for each Common Share held
on the record date on all matters to be considered at the Annual Meeting.
Cumulative voting for the election of Trust Managers is not authorized by the
Trust's Third Amended and Restated Declaration of Trust (the "Declaration of
Trust").
Shareholders are urged to sign the accompanying Proxy, and after
reviewing the information contained in this Proxy Statement, to return the
Proxy in the envelope enclosed for that purpose. Valid Proxies will be voted
at the Annual Meeting and at any adjournments thereof in the manner specified
therein. If no direction is given, but the Proxy is validly executed, such
Proxy will be voted FOR proposals one and two. IN THEIR DISCRETION, THE
PERSONS AUTHORIZED UNDER THE PROXIES WILL VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING.
A shareholder may revoke his, her or its Proxy at any time before it
is voted either by filing with the Secretary of the Trust at its principal
executive office a written notice of revocation, by submitting a duly executed
Proxy bearing a later date, or by attending the Annual Meeting and expressing a
desire to vote his, her or its Common Shares in person.
The holders of a majority of the Common Shares issued and outstanding
and entitled to vote, present in person or represented by Proxy (5,551,507
Common Shares), shall constitute a quorum for the transaction of business at
the Annual Meeting. If such quorum should not be present at the Annual
Meeting, the Annual Meeting may be adjourned from time to time without notice,
other than announcement at the Annual Meeting, until a quorum shall be present.
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Abstentions and broker non-votes (where a nominee holding Common
Shares for a beneficial owner has not received voting instructions from the
beneficial owner with respect to a particular matter and such nominee does not
possess or choose to exercise discretionary authority with respect thereto)
will be included in the determination of the number of Common Shares present at
the Annual meeting for quorum purposes. However, abstentions and broker
non-votes will not be treated as entitled to vote.
The expense of preparing, printing and mailing proxy materials to the
Trust's shareholders will be borne by the Trust. Proxies may also be solicited
personally or by telephone by officers and employees of the Trust, none of whom
will receive additional compensation therefor. In addition to mailing this
material to Trust shareholders, the Trust has asked banks and brokers to
forward copies to persons for whom they hold shares of the Trust and to request
authority for execution of the Proxies. The Trust will reimburse the banks and
brokers for their reasonable out-of-pocket expenses in doing so.
The Trust's principal executive offices are located at 6210 N.
Beltline Road, Suite 170, Irving, Texas 75063.
PROPOSAL ONE
ELECTION OF TRUST MANAGERS
The number of Trust Managers to be elected at the Annual Meeting is
seven. The election of Trust Managers requires the affirmative vote of a
majority of the outstanding Common Shares represented in person or by proxy at
the Annual Meeting. The term of each person elected as a Trust Manager will
continue until his successor is duly elected and qualified. Unless such
authority is withheld, it is the intention of the persons named in the enclosed
proxy to vote such proxy FOR the election of such seven nominees. All nominees
currently serve as Trust Managers of the Trust. Any current Trust Manager not
receiving the affirmative vote of a majority of the outstanding Common Shares
shall nevertheless remain a Trust Manager unless another proper nominee
receives the requisite vote. The following table sets forth the name, age and
year of election to the Board of Trust Managers of each person who is a nominee
for Trust Manager of the Trust.
NAME AGE TRUST MANAGER SINCE
------------------- --- -------------------
William H. Bricker 66 September 1985
T. Patrick Duncan 49 December 1996
Robert E. Giles 50 March 1996
Edward B. Kelley 57 December 1996
Stanley J. Kraska, Jr. 38 July 1997
Russell C. Platt 38 July 1997
Charles W. Wolcott 45 August 1993
The following information with respect to the principal occupation or
employment, other affiliations and business experience of each nominee during
the last five years has been furnished to the Trust by each such nominee:
William H. Bricker has served as a Trust Manager of the Trust since
September 1985. Mr. Bricker has served as President of DS Energy Services
Incorporated and has consulted in the energy field and on international trade
since 1987. In May 1987, Mr. Bricker retired as the Chairman and Chief
Executive Officer of Diamond Shamrock Corporation where he held various
management positions from 1969 through May 1987. Mr. Bricker is a director of
the LTV Corporation, the Eltech Systems Corporation and the National Paralysis
Foundation. He received his Bachelor of Science and Master of Science degrees
from Michigan State University.
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T. Patrick Duncan has served as a Trust Manager since December 1996,
when he was appointed as an independent Trust Manager at the request of USAA
Real Estate Company ("Realco") pursuant to the Share Purchase Agreement between
the Trust and Realco dated as of December 13, 1996 (the "Realco Share Purchase
Agreement"). Mr. Duncan joined Realco in November 1986 as Chief Financial
Officer. With over 24 years of experience, Mr. Duncan serves as Senior Vice
President of Real Estate Operations with responsibilities which include the
direction of all acquisitions, sales, management and leasing of real estate for
USAA-affiliated companies. Mr. Duncan received degrees from the University of
Arizona in Accounting and Finance. He is a Certified Public Accountant,
Certified Commercial Investment Manager, and holds a Texas Real Estate Broker's
License. Mr. Duncan is also a member of the Board of Directors of Meridian
Industrial Trust and a member of the Board of Directors of USAA Equity
Advisors, Inc.
Robert E. Giles has served as a Trust Manager since March 1996. Mr.
Giles is currently the owner and President of Robert E. Giles Interests, Inc.,
a real estate consulting and development firm based in Houston, Texas. Mr.
Giles also serves as President of Title Network, Ltd., a national title
insurance agency. Mr. Giles was a Vice President with the J.E. Roberts
Companies, Inc. from 1994 to 1995. From 1990 to 1994, Mr. Giles was President
and a Director of National Loan Bank, a publicly-held company created through
the merger of Chemical Bank and Texas Commerce Bank. Mr. Giles received his
Bachelor of Arts degree from University of Texas - Austin in 1970 and received
a Master of Arts degree from University of Texas - Arlington in 1973.
Edward B. Kelley has served as a Trust Manager since December 1996,
when he was appointed as an independent Trust Manager at the request of Realco
pursuant to the terms of the Realco Share Purchase Agreement. Mr. Kelley is
President of Realco. He joined Realco in April 1989 as Executive Vice
President and Chief Operating Officer before assuming his new title in August
1989. Mr. Kelley received his Bachelor of Business Administration degree from
St. Mary's University in 1964 and a Masters in Business Administration from
Southern Methodist University in 1967, and is a Member of the Appraisal
Institute (MAI). Mr. Kelley is a member of the Board of Directors of USAA
Equity Advisors, Inc.
Stanley J. Kraska, Jr. has served as a Trust Manager since July 1997,
when he was appointed as an independent Trust Manager at the request of
ABKB/LaSalle Securities Limited Partnership ("ABKB") and LaSalle Advisors
Capital Management, Inc. ("LaSalle Advisors") pursuant to the terms of the
Common Share Purchase Agreements between the Trust and ABKB (as agent for the
benefit of a particular client) dated as of July 3, 1997. Mr. Kraska has been
employed by ABKB or its affiliates since February 1988. He currently serves as
Managing Director, with responsibility for private placement investment. Mr.
Kraska graduated from Dartmouth College in 1982 with a Bachelor of Arts degree
and received a Master of Business Administration degree from Harvard University
in 1986.
Russell C. Platt has served as a Trust Manager since July 1997, when
he was appointed as an independent Trust Manager at the request of Morgan
Stanley Asset Management, Inc. ("MSAM") pursuant to the terms of the Common
Share Purchase Agreement dated as of June 20, 1997 among the Trust, MS Real
Estate Special Situations, Inc.("MSRE") and MSAM (as agent and attorney-in-fact
on behalf of certain clients). Mr. Platt joined Morgan Stanley in 1982. He is
a Managing Director of the Firm and has primary responsibility for managing the
real estate securities investment business for MSAM. MSAM manages
approximately $1.3 billion in real estate securities worldwide for
institutional and individual investors. He also serves as a member of the
Investment Committee of The Morgan Stanley Real Estate Fund, a privately held
limited partnership engaged in the acquisition of real estate assets,
portfolios and real estate operating companies with gross assets of
approximately $4 billion. He graduated from Williams College in 1982 with a
Bachelor of Arts in Economics and received a Master of Business Administration
from Harvard University in 1986. He is a member of the advisory boards of the
National Multi Housing Council, The Wharton Real Estate Center and the MIT
Center for Real Estate. He is also a member of The Urban Land Institute,
NAREIT and the Pension Real Estate Association.
Charles W. Wolcott currently serves as Trust Manager, President and
Chief Executive Officer. Mr. Wolcott was hired as the President and Chief
Executive Officer of the Trust in May 1993 and has served as a Trust Manager
since August 1993. Mr. Wolcott was President and Chief Executive Officer for
Trammell Crow Asset Services, a real estate asset and portfolio management
affiliate of Trammell Crow Company, from 1990 to 1992. He served as Vice
President and Chief Financial and Operating Officer of the Trust from 1988 to
1991. From 1988 to 1990, Mr. Wolcott was a partner in Trammell Crow Ventures
Operating Partnership. Prior to joining the Trammell Crow Company in 1984, Mr.
Wolcott was President of Wolcott Corporation, a firm engaged in the development
and management of commercial real estate properties.
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Mr. Wolcott graduated from the University of Texas at Austin in 1975 with a
Bachelor of Science degree and received a Master of Business Administration
degree from Harvard University in 1977.
The Trust Managers have no reason to believe that any of the nominees
will not serve if elected, but if any of them should become unavailable to
serve as a Trust Manager, and if the Trust Managers designate a substitute
nominee, the persons named in the accompanying Proxy will vote for the
substitute nominee designated by the Trust Managers, unless a contrary
instruction is given in the Proxy. The Trust Managers did not appoint a
nominating committee to nominate Trust Managers for election. No family
relationship exists among any of the Trust Managers or executive officers of
the Trust.
Pursuant to the terms of the Agreement by and among the Trust, USAA,
ABKB, LaSalle Advisors, MSAM and MSRE dated January 29, 1998, the Trust shall
nominate for election or re-election as Trust Manager at each annual meeting of
shareholders one nominee of MSAM and one nominee of ABKB, as agent and for the
benefit of particular clients. The Trust shall have no further obligation to
nominate MSAM's and ABKB's nominee, as applicable, at the time MSAM's or ABKB's
holdings, as applicable, of the Trust's Common Shares fall below 5% of the
Trust's issued and outstanding shares. Upon determining that a party has fallen
below the threshold, the Trust may require such party's nominee to immediately
resign or to not seek election at the next annual meeting of shareholders.
Pursuant to the terms of the Realco Share Purchase Agreement, Realco retains
the right to nominate an additional two Trust Managers to the Board of Trust
Managers. Pursuant to the terms of the Common Share Purchase Agreement
("Purchase Agreement") dated as of January 29, 1998 between the Trust and
Praedium II Industrial Associates LLC ("Praedium"), Praedium obtained full
observation rights with respect to the Trust's Board of Trust Managers
("Observation Rights"), including the right to obtain full and timely notice of
all meetings of the Board of Trust Managers and of each of its committees, to
obtain copies of all written and other materials disseminated to the Board of
Trust Managers and to designate a person to attend in person or by telephone
all meetings of the Board of Trust Managers or its committees. Praedium's
Observation Rights shall terminate upon the earlier of (i) the occurrence of
the Trust's annual meeting in 1999, or (ii) such time that Praedium owns less
than 50% of the Common Shares acquired pursuant to the terms of the Purchase
Agreement.
Nine regularly or special Trust Manager meetings were held during the
fiscal year ended December 31, 1997 (the "1997 Fiscal Year"). Messrs. Kelley,
Platt and Bigman attended fewer than 75% of the aggregate of the total number
of meetings of the Board of Trust Managers and the total number of meetings
held by all Trust Manager committees on which each of them served.
MANAGEMENT
EXECUTIVE OFFICERS
Set forth below is information regarding the names and ages of the
executive officers of the Trust, all positions held with the Trust by each
individual, and a description of the business experience of each individual for
at least the past five years.
NAME AGE TITLE
-------------------- --- -----------------------------------
Charles W. Wolcott 45 Trust Manager, President and Chief
Executive Officer
Lewis D. Friedland 38 Vice President and Chief
Investment Officer
Marc A. Simpson 43 Vice President and Chief Financial
Officer, Secretary and Treasurer
David B. Warner 39 Vice President-Real Estate
Operations
Information regarding the business experience of Mr. Wolcott is
provided under "Proposal One -- Election of Trust Managers."
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Lewis D. Friedland currently serves as Vice President and Chief
Investment Officer. He was hired as the Vice President and Chief Investment
Officer of the Trust in 1997. Prior to joining the Trust, Mr. Friedland was a
founding partner of Crimson Partners, an investment firm formed in 1992 that
engaged in the acquisition and development of real estate assets. Prior to
founding this firm, he was a Division Partner and Managing Director of Trammell
Crow Company where he was responsible for that firm's development, leasing, and
property management activities in Richmond, Va. Mr. Friedland graduated from
the Wharton School of the University of Pennsylvania in 1981 with a Bachelor of
Science Degree in Economics and received a Master of Business Administration
degree from Harvard University in 1985.
Marc A. Simpson currently serves as Vice President and Chief Financial
Officer, Secretary and Treasurer. Mr. Simpson was hired as the Vice President
and Chief Financial Officer, Secretary and Treasurer of the Trust in March
1994. From November 1989 through March 1994, Mr. Simpson was a Manager in the
Financial Advisory Services Group of Coopers & Lybrand L.L.P. Prior to that
time, he served as Controller of Pacific Realty Corporation, a real estate
development company. Mr. Simpson graduated with a Bachelor of Business
Administration from Midwestern State University in 1978, and received a Master
of Business Administration from Southern Methodist University in 1990.
David B. Warner currently serves as Vice President-Real Estate
Operations. Mr. Warner was hired as Vice President and Chief Operating Officer
of the Trust in May 1993. From 1989 through the date he accepted a position
with the Trust, Mr. Warner was a Trust Manager of the Equity Investment Group
for the Prudential Realty Group. From 1985 to 1989, he served in the Real
Estate Banking Group of NCNB Texas National Bank. Mr. Warner graduated from
the University of Texas at Austin in 1981 with a degree in finance and received
a Master of Business Administration from the same institution in 1984.
COMMITTEES OF THE TRUST MANAGERS
AUDIT COMMITTEE. The Audit Committee of the Trust Managers met three
times during the 1997 Fiscal Year. The Audit Committee reviews and approves
the scope and results of any outside audit of the Trust, and the fees therefor,
and makes recommendations to the Trust Managers or management concerning
auditing and accounting matters and the efficacy of the Trust's internal
control systems. The Audit Committee selects the Trust's independent auditors.
During the 1997 Fiscal Year, Messrs. Bricker, Kelley and Giles served on the
Audit Committee. Current members of the Audit Committee are Messrs. Bricker,
Kelley and Giles.
COMPENSATION COMMITTEE. The Compensation Committee met seven times
during the 1997 Fiscal Year. The Compensation Committee recommends to the
Board of Trust Managers guidelines for compensation and benefits of the
executive officers of the Trust based upon achievement of objectives and other
factors. The Compensation Committee is also responsible for acting upon all
matters concerning, and exercising such authority as is delegated to it under
the provisions of, any benefit, retirement or pension plan. During the 1997
Fiscal Year, Messrs. Bricker, Duncan and Giles served on the Compensation
Committee. Current members of the Compensation Committee are Messrs. Bricker,
Duncan and Giles.
INVESTMENT COMMITTEE. The Investment Committee was formed in 1997 and
consists of Messrs. Duncan, Giles, Kraska, Platt and Wolcott. The Investment
Committee reviews potential real property acquisitions and makes
recommendations to the Board of Trust Managers. The Investment Committee met
four times during 1997.
ELECTION OF TRUST MANAGERS AND EXECUTIVE OFFICERS
Trust Managers are elected at each annual meeting of the shareholders
of the Trust and remain in office until their successors have been duly elected
and qualified, or until their earlier death, resignation or removal. Executive
officers serve at the discretion of the Trust Managers.
EXECUTIVE AND TRUST MANAGER COMPENSATION
The following table summarizes the compensation paid by the Trust to
the executive officers of the Trust for the three years ended December 31,
1997:
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Bricker, Duncan
and Giles. No executive officer of the Trust served as a member of the
Compensation Committee or as a director of any other entity, one of whose
executive officers served on the Compensation Committee or as a Trust Manager
of the Company.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
NAME AND ALL OTHER UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- -------------------- ---- ------ ----- ------------ ------------
Charles W. Wolcott 1997 $ 202,500 $ 153,750 (1) $ 8,071 (4) 50,000
President and CEO 1996 195,000 100,000 (2) 8,039 (5)
1995 189,000 72,000 (3) 7,040 (6)
Lewis D. Friedland 1997 102,462 72,000 (1) 5,168 (4) 35,000
Vice President
and CIO(7)
Marc A. Simpson 1997 117,500 72,000 (1) 8,071 (4) 20,000
Vice President and 1996 110,000 55,000 (2) 8,039 (5)
CFO, Secretary and 1995 105,000 40,000 (3) 6,838 (6)
Treasurer
David B. Warner 1997 117,500 72,000 (1) 8,071 (4) 20,000
Vice President 1996 110,000 55,000 (2) 8,039 (5)
Real Estate Operations 1995 100,000 43,000 (3) 6,312 (6)
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(1) Represents bonus payments for 1997 paid in January 1998.
(2) Represents bonus payments for 1996 paid in January 1997.
(3) Represents bonus payments for 1995 paid in January 1996.
(4) Represents the Trust's contribution to the Retirement and Profit Sharing
Plan in January 1998.
(5) Represents the Trust's contribution to the Retirement and Profit Sharing
Plan in January 1997.
(6) Represents the Trust's contribution to the Retirement and Profit Sharing
Plan in January 1996.
(7) Hired in May 1997.
In March 1996, the Trust increased the annual fee paid its non-employee
Trust Managers to $40,000 plus $1,000 for each Trust Manager or committee
meeting attended in person. The Board of Trust Managers voted to reduce
their compensation effective July 1, 1997 to an annual retainer of $25,000 plus
$1,000 for each Trust Manager meeting attended in person, $500 for each Trust
Manager meeting attended via teleconference, $500 for each committee meeting
attended in person and $250 for each committee meeting attended via
teleconference. Additionally, the Trust Managers are reimbursed for their
expenses incurred in connection with their duties as Trust Managers. Each
non-employee Trust Manager has the right to receive his annual retainer in cash
and/or Common Shares. In addition to the annual fee, Mr. Bricker received
$19,000, Mr. Giles received $19,500, Mr. Kelley received $10,500, Mr. Duncan
received $19,500, Mr. Platt received $1,250, Mr. Bigman received $2,750 and Mr.
Kraska received $4,500 in 1997 for attendance at Board of Trust Managers and
committee meetings.
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OPTION GRANTS
The following table sets forth the share option grants made in the 1997
Fiscal Year to each of the Trust's executive officers. The table also sets
forth the potential realizable value that would exist for the options at the
end of their ten-year terms, assuming compound rates of stock appreciation of
5% and 10%. The actual future value of the options will depend on the market
value of the Company's Common Shares. All option exercise prices are based on
market price on the grant date.
OPTION GRANTS IN FISCAL YEAR 1997
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF SHARE PRICE
APPRECIATION AT END OF
TEN YEAR
INDIVIDUAL OPTION TERMS (1)
---------- ----------------
Number of % of Total
Shares Options
Underlying Granted to Exercise Price
Options Employees in Expiration
Name Granted (2) Fiscal 1997 Per Share Date 5% 10%
----- ------------ ----------- ---------- ---- -- ---
Charles W. Wolcott 50,000 40% $15.00 6/30/07 $471,671 $1,195,307
Lewis D. Friedland 35,000 28% 15.00 6/30/07 330,170 836,715
Marc A. Simpson 20,000 16% 15.00 6/30/07 188,668 478,123
David B. Warner 20,000 16% 15.00 6/30/07 188,668 478,123
- --------------------
(1) "Potential Realizable Value" is disclosed in response to Securities and
Exchange Commission rules, which require such disclosure for illustrative
purposes only, and is based on the difference between the potential market
value of shares issuable (based upon assumed appreciation rates) upon
exercise of such options and the exercise price of such options. The
values disclosed are not intended to be, and should not be interpreted as,
representations or projections of future value of the Company's shares or
of the share price.
(2) Share option grants vest in equal increments on their date of grant and on
each of the first four anniversaries of their date of grant.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information concerning the value of
the unexercised options as of December 31, 1997 held by the Trust's executive
officers. No options were exercised in the 1997 Fiscal Year by any of the
executive officers.
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AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND FISCAL 1997
YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/97 OPTIONS AT 12/31/97
------------------- -------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Charles W. Wolcott 10,000 40,000 (a) (a)
Lewis D. Friedland 7,000 28,000 (a) (a)
Marc A. Simpson 4,000 16,000 (a) (a)
David B. Warner 4,000 16,000 (a) (a)
(a) The Trust's share price at December 31, 1997 was $13.625, which is less
than any option exercise price (which are at $15.00 per share). Therefore,
the value of unexercised in-the-money options at December 31, 1997 is
zero.
EMPLOYMENT AGREEMENTS
On March 13, 1996, the Trust entered into Bonus and Severance Agreements
with each of Messrs. Wolcott, Simpson and Warner. The agreements are effective
through March 13, 1999. Effective as of May 12, 1997, the Trust entered into a
Bonus and Severance Agreement with Lewis D. Friedland, which is effective
through May 12, 2000. These agreements formalized the Trust's policy of
providing an annual incentive bonus based upon the achievement of certain
objectives established by the Compensation Committee. In addition, the
agreements generally provide that if the employee is terminated within one year
after a Change in Control (as defined), the employee will be entitled to
receive an amount equal to one times the employee's annual base salary,
continuation of health and welfare benefits for up to one year and the prorated
amount of any annual incentive bonus earned through the date of termination.
The Board of Trust Managers is currently contemplating making revisions to
these agreements.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
Compensation for the executive officers of the Trust is administered under
the direction of the Compensation Committee of the Trust Managers with all
recommendations of the Compensation Committee being subject to Board of Trust
Managers approval. The following is the Compensation Committee's report, in
its role as reviewer of the Trust's pay programs, on 1997 compensation
practices for the executive officers of the Trust. The report and the
performance graph that appears immediately after such report shall not be
deemed to be soliciting material or to be filed with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or incorporated by reference in any document so filed.
BASE SALARY. The Compensation Committee recommends base salaries for
executive officers by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for executive talent, including a comparison to base salaries for
comparable positions at other real estate investment trusts, to historical
levels of salary paid by the Trust, and to recommendations of independent
compensation consultants to the Trust. Salary adjustments are based on a
periodic evaluation of the performance of the Trust and of each executive
officer, and also take into account new responsibilities as well as changes in
the competitive marketplace. Mr. Wolcott, who has served as President and
Chief Executive Officer of the Trust since the commencement of his employment
with the Trust in May 1993, received a base salary of $205,000 for the 1997
Fiscal Year (Mr. Wolcott's base salary for the first quarter of 1997 was
$195,000 on an annualized basis). Mr. Warner, who currently serves as the Vice
President-Real Estate Operations of the Trust, received a base salary of
$120,000 for the 1997 Fiscal Year (Mr. Warner's base salary for the first
quarter of 1997 was $110,000 on an annualized basis). Mr. Simpson, who has
served as Secretary, Treasurer and Chief Financial Officer
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of the Trust since March 1994, received a base salary of $120,000 for the 1997
Fiscal Year (Mr. Simpson's base salary for the first quarter of 1997 was
$110,000 on an annualized basis). Mr. Friedland, who has served as Vice
President and Chief Investment Officer since he joined the Trust in May 1997,
received an annualized base salary of $160,000. The Compensation Committee was
advised by a compensation consultant from Deloitte & Touche LLP that base
compensation levels for the Trust for the 1997 Fiscal Year were below the REIT
industry as a whole, which was consistent with the Trust's desire to bring its
operating performance up to the standards of the REIT industry and to focus on
the incentive portion of compensation during a period of repositioning the
Trust's operations.
PERFORMANCE-BASED BONUS PLAN. Each year, in order to encourage the
accomplishment of the short-term goals of the Trust, the Compensation Committee
reviews and recommends a performance-based bonus plan for executive officers.
During the 1997 Fiscal Year, performance goals were established related to
capital committed and share price appreciation, in addition to discretionary
amounts. During the 1997 Fiscal Year, executive officers were eligible to
receive the following bonus amounts (on base salary) based upon achievement of
performance goals:
Other
Executive
Wolcott Officers
------- --------
Capital Committed 45% 36%
Stock Price Appreciation 25% 20%
Discretionary 30% 24%
With respect to the 1997 Fiscal Year, the Compensation Committee recommended,
and the Board of Trust Managers approved, a $153,750 bonus for Mr. Wolcott, and
a $72,000 bonus for each of Messrs. Warner, Simpson and Friedland.
OTHER COMPENSATION. Other compensation payable to the executive officers
of the Trust includes contributions to the Employee Retirement and Profit
Sharing Plan of the Trust and insurance premiums paid by the Trust under the
Trust's medical, dental, life and long-term disability plans.
1997 Compensation Committee,
William H. Bricker
Robert E. Giles
T. Patrick Duncan
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PERFORMANCE GRAPH
The rules and regulations of the Commission require the presentation of a
line graph comparing, over a period of five years, the cumulative total
shareholder return to a performance indicator of a broad equity market index
and either a nationally recognized industry index or a peer group index
constructed by the Trust. The chart below compares the performance of the
Common Shares with the performance of the Standard & Poors 500 Index and the
NAREIT Equity REIT Index. The comparison assumes $100 was invested on December
31, 1992 in the Common Shares and in each of the foregoing indices and assumes
reinvestment of dividends.
AMERICAN INDUSTRIAL PROPERTIES REIT
FIVE-YEAR CUMULATIVE TOTAL RETURN GRAPH
MEASUREMENT PERIOD (a)
(FISCAL YEAR COVERED) S&P 500 EQUITY REIT AIP REIT
DEC. 92 100.00 100.00 100.00
DEC. 93 109.99 119.65 120.41
DEC. 94 111.43 123.45 73.59
DEC. 95 153.13 142.30 109.05
DEC. 96 188.29 192.48 125.30
DEC. 97 251.13 231.47 151.75
(a) Total Return Index for Equity Real Estate Investment Trusts
(per National Association of Real Estate Investment Trusts, Inc.)
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of Common Shares by (i) each Trust Manager, (ii) the
Trust's Chief Executive Officer and each executive officer of the Trust, (iii)
all Trust Managers and executive officers of the Trust as a group, and (iv) to
the Trust's knowledge, by any person owning beneficially more than 5% of the
outstanding shares of such class, in each case at April 23, 1998. Except as
otherwise noted, each person named in the table has sole voting and investment
power with respect to all Common Shares shown as beneficially owned by such
person.
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP OF CLASS
---------------- ------------------------ --------
William H. Bricker . . . . . . . . . . . . . . . . 2,400(1) *
T. Patrick Duncan . . . . . . . . . . . . . . . . 600 *
Robert E. Giles . . . . . . . . . . . . . . . . . . 3,583(1) *
Edward B. Kelley . . . . . . . . . . . . . . . . . 1,000 *
Stanley J. Kraska, Jr. . . . . . . . . . . . . . . 2,788(1) *
Russell C. Platt . . . . . . . . . . . . . . . . . 2,797(1) *
Charles W. Wolcott . . . . . . . . . . . . . . . . 73,800(2) *
Lewis D. Friedland . . . . . . . . . . . . . . . . 30,000(3) *
Marc A. Simpson . . . . . . . . . . . . . . . . . . 17,800(4) *
David B. Warner . . . . . . . . . . . . . . . . . . 15,200(4) *
USAA Real Estate Company . . . . . . . . . . . . . 1,674,087(5) 15.08
8000 Robert F. McDermott Freeway
IH-10 West, Suite 600
San Antonio, Texas 78230-3884
Morgan Stanley, Dean Witter, Discover & Co.
The Morgan Stanley Real Estate Special Situations
Fund I, L.P.
The Morgan Stanley Real Estate Special Situations
Fund II, L.P.
Morgan Stanley Asset Management Inc. . . . . . . . 1,999,653(6) 18.01
1221 Avenue of the Americas
New York, New York 10020
ABKB/LaSalle Securities Limited Partnership and
LaSalle Advisors Capital Management, Inc. . . . . . 1,502,578(7) 13.53
100 East Pratt Street
Baltimore, MD 21202
Praedium II Industrial Associates LLC . . . . . . . 733,945 6.61
11 Madison Avenue
New York, New York 10010-3626
All Trust Managers and executive officers as a
group (11 persons) . . . . . . . . . . . . . . . 149,968(1)(2)(3)(4) 1.34
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* Ownership is less than 1% of outstanding Common Shares.
(1) Includes vested options to purchase 2,000 Common Shares.
(2) Includes vested options to purchase 50,000 Common Shares.
(3) Includes vested options to purchase 27,000 Common Shares.
(4) Includes vested options to purchase 14,000 Common Shares.
(5) Based upon the Schedule 13D filed jointly by United Services Automobile
Association ("USAA"), USAA Capital Corporation ("USAA CC"), Realco, USAA
Investors I, Inc. ("USAA I"), USAA Investors II, Inc. ("USAA II"), USAA
Properties III, Inc. ("USAA III") and USAA Properties IV, Inc. ("USAA IV")
on January 20, 1998, USAA is the sole stockholder of USAA CC; USAA CC is
the sole stockholder of Realco; Realco is the sole stockholder of each of
USAA I, USAA II, USAA III, and USAA IV. Realco owns directly 1,185,911
Common Shares, USAA I owns directly 96,020 Common Shares, USAA II owns
directly 191,563 Common Shares, USAA III owns directly 107, 634 Common
Shares, and USAA IV owns directly 92,959 Common Shares. Based upon these
relationships, USAA, USAA CC, and Realco have shared voting and
dispositive power over 1,674,087 Common Shares; USAA I has shared voting
and dispositive power over 96,020 Common Shares; USAA II has shared voting
and dispositive power over 191,563 Common Shares; USAA III has shared
voting and dispositive power over 107,634 Common Shares; and USAA IV has
shared voting and dispositive power over 92,959 Common Shares.
(6) Based upon the Schedule 13D filed jointly by Morgan Stanley, MSAM and
Morgan Stanley Real Estate Special Situations Fund II, L.P. on February
12, 1998 (the "MSAM Schedule 13D"), Morgan Stanley has sole voting and
dispositive power over 120,231 Common Shares and shared voting and
dispositive power over 1,879,422 Common Shares held by the investors for
whom MSAM acts as an investment advisor (the "MSAM Purchasers"). Pursuant
to separate investment management agreements between MSAM and MSRE, MSAM
has been granted voting and dispositive power with respect to the Common
Shares held by MSRE. MSAM has shared voting and dispositive power over
1,879,422 Common Shares held by the MSAM Purchasers and the Morgan Stanley
Real Estate Special Situations Fund II, L.P. has shared voting and
dispositive power over 652,415 of such Common Shares. Pursuant to separate
investment management agreements between MSAM and the MSAM Purchasers,
MSAM has been granted voting and dispositive power with respect to the
Common Shares held by each of the MSAM Purchasers.
(7) Based upon the Schedule 13D filed jointly by ABKB and LaSalle Advisors on
February 10, 1998, (i) ABKB has sole voting and dispositive power over
480,213 Common Shares and shared voting and dispositive power with respect
to 480,212 Common Shares; and (ii) LaSalle Advisors has shared dispositive
power with respect to 542,153 Common Shares.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3, 4 and 5 (and any amendments
thereto) furnished to the Trust with respect to the 1997 Fiscal Year or written
representations from certain reporting persons that no forms were required, no
person failed to disclose on a timely basis, as disclosed in such forms,
reports required by Section 16(a) of the Exchange Act.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
The shareholders are asked to ratify the appointment by the Trust Managers
of Ernst & Young LLP as the Trust's independent auditors for the fiscal year
ending December 31, 1998. The selection was based upon the recommendation of
the Audit Committee.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
to respond to appropriate questions from shareholders and to make a statement
if they desire.
SHAREHOLDER VOTE
The affirmative vote of the holders of a majority of the Common Shares
present in person or represented by proxy, and entitled to vote at the Annual
Meeting is required to adopt this proposal. The Trust Managers have
unanimously approved the proposal, subject to shareholder approval. Realco,
MSAM, ABKB, LaSalle Advisors, Praedium and management of
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the Trust have advised the Trust that they intend to vote their collective
5,940,063 Common Shares (53.5% of the outstanding Common Shares) in favor of
proposal two. See "Security Ownership of Certain Beneficial Owners and
Management."
RECOMMENDATION OF THE TRUST MANAGERS
THE TRUST MANAGERS UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS VOTE FOR
PROPOSAL TWO.
PROPOSALS BY SHAREHOLDERS
A proper proposal submitted by a shareholder for presentation at the
Trust's Annual Meeting to be held in 1999 and received at the Trust's principal
executive office no later than December 29, 1998 will be included in the Proxy
Statement and Proxy related to the Annual Meeting to be held in 1999.
OTHER MATTERS
The Trust Managers are aware of no other matter that will be presented for
action at the Annual Meeting. IF SUCH PROPOSALS OR ANY OTHER MATTERS REQUIRING
A VOTE OF THE SHAREHOLDERS PROPERLY COMES BEFORE THE ANNUAL MEETING, THE
PERSONS AUTHORIZED UNDER THE PROXIES WILL VOTE AND ACT ACCORDING TO THEIR BEST
JUDGMENT.
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AMERICAN INDUSTRIAL PROPERTIES REIT
The undersigned shareholder of American Industrial Properties REIT does
hereby nominate, constitute and appoint Charles W. Wolcott and Marc A. Simpson,
or either one of them, as Proxies, each with full power to appoint his
substitute, to represent and vote all of the Common Shares of Beneficial
Interest of American Industrial Properties REIT held of record by the
undersigned at the Annual Meeting of shareholders to be held at 9:00 a.m. Dallas
time on May 27, 1998, at the Four Seasons Resort and Club, 4150 North MacArthur
Boulevard, Irving, Texas, 75038, and at any adjournments thereof, as follows:
I. ELECTION OF TRUST MANAGERS
1. ELECTION OF TRUST MANAGERS
FOR all nominees listed below WITHHOLD AUTHORITY to vote for all
(except as marked below to the contrary) nominees listed below
[ ] [ ]
William H. Bricker, T. Patrick Duncan, Robert E. Giles, Edward B. Kelley,
Stanley J. Kraska, Jr., Russell C. Platt, Charles W. Wolcott (To withhold
authority to vote for any individual nominee, strike a line through that
nominee's name above.)
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT [ ] [ ] [ ]
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
FOR AGAINST ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other matters as may [ ] [ ] [ ]
properly come before the meeting or any adjournments thereof.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUST MANAGERS AND WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE
ABOVE. IF A CHOICE IS NOT INDICATED WITH RESPECT TO ITEMS (1) AND (2) ABOVE, THIS PROXY WILL BE VOTED "FOR" SUCH PROPOSALS.
THIS PROXY IS REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
Date: , 1998
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(Signature of Shareholder(s))
(Joint owners must sign. Please sign exactly as your name(s)
appear(s) on this card. When signing as attorney, trustee,
executor, administrator, guardian or corporate officer,
please give your full title.)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE.