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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Washington Real Estate Investment Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
March 18, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Washington Real Estate Investment Trust to be held on Tuesday, May 21, 2002. The
formal Notice of the meeting and a Proxy Statement describing the proposals to
be voted upon are enclosed.
Please read the Proxy Statement, then complete, sign and return your proxy
card in the enclosed envelope. Note that you may vote via telephone or the
Internet should you prefer. To do so, just follow the instructions on the
enclosed card.
Regardless of the number of shares you own, your vote is important.
Best Regards,
/s/ Edmund B. Cronin, Jr.
Edmund B. Cronin, Jr.
Chairman of the Board
WASHINGTON REAL ESTATE INVESTMENT TRUST
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the Shareholders (the "Annual Meeting") of the
Washington Real Estate Investment Trust (the "Trust" or "WRIT") will be held at
the Hyatt Regency Hotel, One Bethesda Metro Center, Bethesda, Maryland on
Tuesday, May 21, 2002 at 11:00 a.m., for the following purposes:
1. To elect two Trustees;
2. To transact such other business as may properly come before the meeting.
The Trustees have fixed the close of business on March 14, 2002 as the record
date for shares entitled to notice of and to vote at the Annual Meeting.
The Annual Report of the Trust, Proxy Statement and a Proxy Card are enclosed
with this Notice.
You are requested, whether or not you plan to be present at the Annual
Meeting, to sign and promptly return the Proxy Card in the enclosed business
reply envelope. Alternatively, you may vote by telephone or the Internet, if you
prefer. To do so, you should follow the instructions on the enclosed Proxy Card.
Parking at the Annual Meeting will be validated. Please bring your parking card
in to the Annual Meeting for validation.
Sincerely,
/s/ Laura M. Franklin
Laura M. Franklin
Corporate Secretary
March 18, 2002
WASHINGTON REAL ESTATE INVESTMENT TRUST
6110 Executive Boulevard, Suite 800
Rockville, Maryland 20852
PROXY STATEMENT
This Proxy Statement is furnished by the Trust's Board of Trustees (the
"Board") in connection with its solicitation of proxies for use at the Annual
Meeting of Shareholders on May 21, 2002 and at any and all adjournments thereof.
Mailing of this Proxy Statement will commence on or about March 18, 2002 to
shareholders of record as of March 14, 2002. All proxies will be voted in
accordance with the instructions contained therein, and if no instructions are
specified, the proxies will be voted in accordance with the recommendations of
the Board. Therefore, if no instructions are specified, the proxies will be
voted FOR the election of the two Trustee nominees listed. Abstentions and
broker non-votes (proxies that indicate that brokers or nominees have not
received instructions from the beneficial owner of shares) are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions are counted in tabulating the total number of votes
cast on proposals presented to shareholders, whereas broker non-votes are not
counted for purposes of determining the total number of votes cast. A Proxy on
the enclosed form may be revoked by the shareholder at any time prior to its
exercise at the Annual Meeting by submitting, to the Secretary of the Trust, a
duly executed Proxy bearing a later date or by attending the Annual Meeting and
orally withdrawing the Proxy.
The voting securities of the Trust consist of shares of beneficial
interest, $0.01 par value ("Shares"), of which 38,881,186 Shares were issued and
outstanding at the close of business on March 14, 2002. The Trust has no other
class of voting security. Each Share outstanding on March 14, 2002 will be
entitled to one vote. Shareholders do not have cumulative voting rights.
THE BOARD OF TRUSTEES AND MANAGEMENT
The Board of Trustees
The Board consists of seven Trustees divided into two classes of two
Trustees each and one class of three Trustees. The terms of the Trustees
continue until the Annual Meetings to be held in 2002, 2003 and 2004,
respectively, and until their respective successors are elected. At each Annual
Meeting, two or three Trustees are elected, subject to the limitations described
below, for a term of three years to succeed those Trustees whose terms expire at
such Annual Meeting. The Trust's By-Laws provide that no Trustee shall be
nominated as a Trustee after such person's 72nd birthday.
The Board held nine meetings in 2001. During 2001, each incumbent Trustee
attended more than 75% of the total number of Board and committee meetings he or
she was eligible to attend.
The Nominating Committee held one meeting in 2001. The nominating committee
makes recommendations to the Board for nominations of Trustees. The Committee
will consider recommendations received from shareholders for nominations for
Trustees to be elected at the 2003 Annual Meeting. Such recommendations must be
submitted in writing before December 21, 2002 accompanied by a written statement
setting forth the reasons the Trust would benefit from the election of such
nominee. Committee members are Messrs. Cronin, Derrick, Osnos and Ms. Williams.
The Audit Committee met nine times in 2001. The Audit Committee assists the
Board in discharging its responsibility of oversight, but the existence of the
Committee does not alter the responsibilities of the Trust's management and the
independent accountant with respect to the accounting and control functions and
financial statement presentation. For a more detailed description of the Audit
Committee's duties and responsibilities see the Audit Committee Report on page
10 of this Proxy Statement. Committee members are Messrs. Derrick, Kendall,
McDaniel, Osnos and Nason.
The Compensation Committee met twice during 2001. The Committee is
responsible for making recommendations to the Board with respect to compensation
decisions. Committee members are Messrs. Kendall, McDaniel, Nason and Ms.
Williams. See "Report on Executive Compensation" below.
The six non-officer Trustees of the Trust receive an annual retainer of
$18,000 plus a $1,000 per meeting fee for attending Board and committee
meetings. In addition, each non-officer Trustee receives an annual grant of
2,000 Share options and 400 unrestricted Shares. The Trust has approved a
non-qualified deferred compensation plan for the Trustees. The plan will allow
the
3
Trustees to defer a percentage of his or her cash compensation. Compensation
deferred will be credited with interest equal to the Trust's current cost of
funds. Upon the expiration of a Trustee's term, the compensation plus interest
can be paid in either a lump sum or in installments at the discretion of the
Trustee. Upon death, the beneficiary will receive a lump sum pay out. The plan
is unfunded and payments are to be made from general assets of the Trust.
During 2001, the Trust utilized the legal services of the law firm of Arent
Fox Kintner Plotkin & Kahn PLLC, of which Trustee David M. Osnos is a senior
member. The amount of fees paid to Arent Fox did not exceed 5% of that firm's
2001 gross revenues.
The following table sets forth the names and certain biographical
information concerning each of the current Trustees.
SERVED AS TERM
NAME PRINCIPAL OCCUPATION TRUSTEE SINCE AGE EXPIRES
- ---- -------------------- ------------- --- -------
Edmund B. Cronin, Jr. Chairman, President and Chief Executive Officer, WRIT 1994 65 2004
John P. McDaniel Chief Executive Officer, MedStar Health 1998 59 2004
David M. Osnos Senior member, Arent Fox Kintner Plotkin & 1987 70 2004
Kahn, PLLC
Clifford M. Kendall Director, Affiliated Computer Services, Inc. 1999 70 2002
Susan J. Williams Chief Executive Officer, Williams Aron & Associates 1999 61 2002
John M. Derrick, Jr. Chairman and Chief Executive Officer, Potomac Electric Power 1997 62 2003
Company
Charles T. Nason Chairman and Chief Executive Officer of Acacia Life 2000 56 2003
Insurance Company
Mr. Edmund B. Cronin, Jr. is Chairman, President and CEO of the Trust.
Prior to joining the Trust in 1994, Mr. Cronin, was President and CEO of H.G.
Smithy Company and its subsidiaries from 1976 to 1994, providing a full range of
corporate and institutional real estate services. Mr. Cronin is also a director
of the Potomac Electric Power Company (PEPCO), John J. Kirlin Companies
(mechanical contractors), Federal City Council, Economic Club of Washington and
Vice Chairman of the Board of Georgetown University Hospital.
Mr. John P. McDaniel serves as Chief Executive Officer of MedStar Health, a
multi-institutional, not-for-profit healthcare organization serving Washington
D.C., Maryland, Virginia and the mid-Atlantic region since its inception in
1982. Mr. McDaniel also serves on the Board of Directors of LifelinkMD. Mr.
McDaniel is a past Chairman of the Greater Washington Board of Trade, a member
of the Executive Committee of the Federal City Council, a member of the Board of
Directors of Thrivent Financial for Lutherans, the Maryland State Racing
Commission, and the Board of the Greater Baltimore Committee, a Fellow of the
American College of Healthcare Executives, Trustee of Georgetown University and
a member of the Economic Club of Washington.
Mr. David M. Osnos has been an attorney with Arent Fox Kintner Plotkin &
Kahn, PLLC (legal counsel to the Trust) since 1956. His principal areas of
practice include real estate, tax, securities, corporate, estate planning and
sports law. He is a director or trustee of numerous organizations including
EastGroup Properties (real estate investment trust), VSE Corporation
(engineering) and Washington Wizards Basketball Club.
Mr. Clifford M. Kendall is a director of Affiliated Computer Services, Inc.
(ACS), VSE Corporation and is Chairman of the Board of On-Site Sourcing, Inc.
Before the merger with ACS, Mr. Kendall served as Chairman and CEO of Computer
Data Systems, Inc. from 1971 to 1991 and as Chairman from 1991 to 1997. Mr.
Kendall was a past Chairman of the Board and Executive Committee for the High
Technology Council of Maryland. He is a director of the Montgomery County
Community Foundation and The Lighthouse. Mr. Kendall also serves on the Board of
Trustees of George Washington University and is a member of the Board of Regents
for the University System of Maryland. He is past Chairman of the Greater
Washington Board of Trade and has served as Chairman of the Montgomery/Prince
Georges County CEO Roundtable.
Ms. Susan J. Williams is Chief Executive Officer of Williams Aron &
Associates. Ms. Williams was Founding Partner and served as President of Bracy
Williams & Company, government and public affairs consultants from 1982 to 2001.
Ms. Williams' career includes public service most recently as Assistant
Secretary of Transportation. She also played a founding role in Project Head
Start. Ms. Williams is a past Chair of The Greater Washington Board of Trade.
She serves on the Board of Directors of the Henry L. Stimson Center, the
American Institute for Public Service, the Historical Society of Washington,
D.C., the National Aquarium in Baltimore, and the D.C. Agenda Project. She is
also a member of the Board that is preparing the Washington-Baltimore region's
bid to host the 2012 Olympic Games, the Economic Club of Washington, the Federal
City Council, Leadership Washington and the Advisory Board for George Mason
University.
Mr. John M. Derrick Jr. is Chairman and CEO of Potomac Electric Power
Company (PEPCO). He joined PEPCO in 1961 and
4
served as President/CEO from 1997 until his election to his present position in
1999. From 1992 until 1997, he served as President/COO. Mr. Derrick is a member
of the Institute of Electrical and Electronic Engineers, the National Society of
Professional Engineers, the Washington Society of Engineers and the Edison
Electric Institute. He is Chairman of the United States Energy Association, a
director with the United States Chamber of Commerce, a trustee of the Federal
City Council and Chairman of the Greater Washington Initiative. He is past
Chairman of the Maryland Chamber of Commerce and the Greater Washington Board of
Trade.
Mr. Charles T. Nason currently serves as Chairman and Chief Executive
Officer of Acacia Life Insurance Company (Acacia), as well as the Acacia Federal
Savings Bank, the Calvert Group, LTD, and the Advisors Group, all fully owned
Acacia subsidiaries. The Acacia Group is a Washington D.C. based financial
services organization with assets under management in excess of $10.0 billion.
Mr. Nason assumed the role of President and CEO of Acacia June 1, 1988 and was
elected Chairman of the Board of Directors July 1, 1989. Mr. Nason was elected
Chairman of the Board of Directors of the Insurance Marketplace Standards
Association for 2002. Mr. Nason is a member of The Greater Washington Boys and
Girls Clubs, The Greater Washington Research Center, The Greater Washington
Board of Trade, The Federal City Council and is a member of The Economic Club of
Washington. In addition, he is past Chairman of the Greater Washington Board of
Trade, a past Director of The American Council of Life Insurance and past
Trustee of Washington and Jefferson College.
The following table contains information regarding other executive officers
of the Trust. Such officers are elected annually by the Board and serve at the
Board's discretion.
NAME AGE POSITION
- ---- --- --------
George F. McKenzie 46 Senior Vice President, Real Estate
Brian J. Fitzgerald 40 Managing Director, Leasing
Laura M. Franklin 41 Managing Director, Accounting, Administration
and Corporate Secretary
Sara L. Grootwassink 34 Managing Director, Finance and Capital Markets
Kenneth C. Reed 49 Managing Director, Property Management
Thomas L. Regnell 45 Managing Director, Acquisition
Mr. George F. McKenzie joined the Trust in September 1996 and was elected
Senior Vice President, Real Estate in December 1997. From 1985 to 1996, Mr.
McKenzie served with the Prudential Realty Group, a subsidiary of Prudential
Insurance Company of America, most recently as Vice President, Investment &
Sales. Prior assignments included real estate finance originations and asset
management in the Mid-Atlantic region.
Mr. Brian J. Fitzgerald joined the Trust in January 1996 as Vice President,
Leasing. In 2001, Mr. Fitzgerald was named Managing Director, Leasing. From 1984
to 1993, Mr. Fitzgerald served as a commercial leasing broker with Smithy
Braedon Company. In 1993, he became a Vice President of H. G. Smithy Company,
with responsibilities for managing all agency leasing activities. From the date
of the merger of H. G. Smithy Commercial Management Group with Cushman &
Wakefield of Washington, D.C., Inc. in June 1994 until joining the Trust, Mr.
Fitzgerald managed institutional agency leasing activities at Cushman &
Wakefield, Inc. of Washington, D.C.
Ms. Laura M. Franklin, CPA, joined the Trust in August 1993 as Assistant
Vice President, Finance. In 1995 she was named Vice President, Chief Accounting
Officer and Corporate Secretary to the Trust. In 2001, Ms. Franklin was named
Managing Director, Accounting, Administration and Corporate Secretary. From 1984
to 1993, Ms. Franklin served with the public accounting firm of Reznick, Fedder
and Silverman, P.C. specializing in audit and tax services for real estate
clients.
Ms. Sara L. Grootwassink, CPA, CFA joined the Trust in December 2001 as
Managing Director, Finance and Capital Markets. From 1999 through 2001 Ms.
Grootwasink served as Vice President, Finance and Investor Relations at
Corporate Office Properties Trust and from 1998 through 1999 as Equity Analyst
at Johnston, Lemon & Co. Previously, Ms. Grootwassink served as Vice President
Commercial Real Estate at Riggs Bank, N.A. from 1996 through 1998.
Mr. Kenneth C. Reed joined the Trust as Vice President, Property Management
in June 1995. In 2001, Mr. Reed was named Managing Director, Property
Management. Mr. Reed served as President of CSN Management Corp. from 1988 to
1998. CSN managed WRIT's properties until its assets were purchased by WRIT in
1998.
Mr. Thomas L. Regnell joined the Trust as Vice President, Acquisitions in
January 1995. In 2001, Mr. Regnell was named Managing Director, Acquisitions.
From 1992 through 1994, Mr. Regnell served as an Investment (Acquisitions)
Officer with Federal Realty Investment Trust. Previously, Mr. Regnell was a Vice
President with Spaulding & Slye Company, a real estate development, brokerage
and management company.
There are no family relationships between any Trustee and/or executive
officer.
5
Ownership of Shares by Trustees and Executive Officers
The following table sets forth certain information concerning all Shares
beneficially owned as of March 14, 2002 by each Trustee, by the nominees for
Trustee, by each of the "Named Officers" (as defined in "Executive Compensation"
below) and by all Trustees and Executive Officers as a group. Unless otherwise
indicated, the voting and investment powers for the Shares listed are held
solely by the named holder and/or the holder's spouse.
PERCENTAGE
NAME SHARES OWNED(1) OF TOTAL
---- --------------- --------
Edmund B. Cronin, Jr 265,199 0.68%
John M. Derrick, Jr 11,000 0.03%
Larry E. Finger 81,705 0.21%
Brian J. Fitzgerald 100,131 0.26%
Clifford M. Kendall 15,000 0.04%
John P. McDaniel 13,240 0.03%
George F. McKenzie 177,843 0.46%
Charles T. Nason 12,639 0.03%
David M. Osnos 12,500 0.03%
Kenneth C. Reed 122,539 0.32%
Thomas L. Regnell 48,508 0.12%
Susan J. Williams 7,200 0.02%
All Trustees and Executive Officers as a group
(14 persons) 917,092 2.36%
(1) Includes Shares subject to options exercisable within 60 days, as follows:
Mr. Cronin, 186,035; Mr. Derrick, 4,000; Mr. Fitzgerald, 83,174; Mr.
Kendall, 2,000; Mr. McDaniel, 8,000; Mr. McKenzie; 157,644; Mr. Nason,
4,000; Mr. Osnos, 8,000; Mr. Reed, 79,026; Mr. Regnell, 28,205; Ms.
Williams, 6,000; and all Trustees and Executive Officers as a group,
593,061.
Ownership of Shares by Certain Beneficial Owners
The Trust, based upon a Schedule 13G dated February 14, 2002 filed with the
Securities and Exchange Commission, believes that the following person currently
beneficially owns more than five percent of the outstanding Shares.
PERCENTAGE
NAME SHARES OWNED OF TOTAL
---- ------------ --------
T. Rowe Price Associates, Inc. 2,180,600 (1) 5.60%
100 E. Pratt Street
Baltimore, Maryland 21202
(1) These securities are owned by various individual and institutional investors
which T. Rowe Price Associates, Inc. (Price Associates) serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities and
Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
EXECUTIVE COMPENSATION
Summary Compensation Table
The Summary Compensation Table shows the compensation awarded, earned or
paid during the past three years to the Trust's Chief Executive Officer, each of
the Trust's four other most highly compensated executive officers (the "Named
Officers") whose compensation exceeded $100,000 for the period(s) indicated and
an additional executive who would have met these requirements but ended
employment during the year.
6
SUMMARY COMPENSATION TABLE
ANNUAL CASH COMPENSATION LONG-TERM COMPENSATION
------------ ----------------------
SHARES OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED (1) GRANTED (2) COMPENSATION(3)
- --------------------------- ---- ------ ----- ----------- ----------- ---------------
Edmund B. Cronin, Jr., Trustee, 2001 $427,500 $278,144 2,526 72,830 $ 11,100
President and Chief Executive 2000 $415,000 $431,507 9,133 100,000 $ 8,100
Officer 1999 $405,000 $337,500 4,492 100,000 $ 4,800
Larry E. Finger, Senior Vice 2001 $201,321 $161,551 - - $225,125
President and Chief 2000 $241,000 $250,586 7,135 55,953 $107,607
Financial Officer (4) 1999 $235,000 $195,837 2,027 99,206 $ 4,800
Brian J. Fitzgerald, Managing 2001 $114,300 $185,328 331 21,494 $ 41,263
Director, Leasing 2000 $104,940 $135,653 2,583 24,951 $ 41,202
1999 $ 97,000 $136,690 369 40,652 $ 7,710
George F. McKenzie, Senior Vice 2001 $248,300 $161,551 1,141 32,901 $ 83,633
President, Real Estate 2000 $225,000 $233,949 6,205 52,283 $ 86,155
1999 $200,000 $166,670 1,726 84,431 $ 4,800
Thomas L. Regnell, Managing 2001 $184,600 $120,106 303 19,656 $ 46,208
Director, Acquisitions 2000 $169,600 $176,346 3,352 31,641 $ 48,896
1999 $156,000 $130,003 481 52,290 $ 4,680
Kenneth C. Reed, Managing 2001 $167,300 $108,850 275 17,814 $ 70,042
Director, Property Management 2000 $153,700 $159,813 3,031 28,675 $ 74,918
1999 $141,000 $117,502 434 47,831 $ 4,230
(1) Represents Share grants awarded on December 17, 2001, December 15, 2000
and December 17, 1999 in accordance with the Incentive Compensation
Plan approved by the Trustees in 1997. Share grants vest 20% per year
on the anniversary of the grant date.
(2) All options reflected in the table were granted under the Washington
Real Estate Investment Trust 1991 Stock Option Plan, as amended (the
"Stock Option Plan") and the 2001 Stock Option Plan ("New Stock Option
Plan") in accordance with the Incentive Compensation Plan approved by
the Trustees in 1997. Options granted under the Stock Option Plan and
the New Stock Option Plan vest 50% per year on the anniversary of the
grant date.
(3) Represents amounts contributed on the officers' behalf by the Trust to
its 401(k) plan, Split Dollar Life Insurance Plan and auto allowance.
The dollar value of the benefit of premiums paid for split dollar life
insurance policies projected on an actuarial basis are $91,124 for Mr.
Finger, $67,733 for Mr. McKenzie, $36,308 for Mr. Regnell, $60,142 for
Mr. Reed and $31,363 for Mr. Fitzgerald.
(4) Mr. Finger resigned from the Trust on October 15, 2001. As a part of
his separation he was a paid a severance equal to six months salary at
his pay rate on October 15, 2001. All of his restricted stock vested as
of the date of resignation, however, all non-vested options as of this
date were forfeited. The amount of such severance is included in "Other
Compensation" per the above table.
7
Options Grant Table
The following table shows the specified information with respect to options
granted to the Named Officers in 2001.
2001 OPTION GRANTS TABLE
NUMBER OF PERCENTAGE POTENTIAL REALIZABLE VALUE
SHARES OF TOTAL AT ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS SHARE PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE EXPIRATION (FULL 10-YEAR OPTION TERM)
NAME GRANTED (1) EMPLOYEES PRICE DATE --------------------------
- ----- ----------- --------- ----- ---- 5% 10%
Edmund B. Cronin, Jr.. 72,830 32.3% $24.845 12/17/2011 $1,137,961 $2,883,815
Larry E. Finger 0 0% $24.845 12/17/2011 $ - $ -
Brian J. Fitzgerald 21,494 9.5% $24.845 12/17/2011 $ 335,841 $ 851,088
George F. McKenzie 32,901 14.6% $24.845 12/17/2011 $ 514,074 $1,302,765
Thomas L. Regnell 19,656 8.7% $24.845 12/17/2011 $ 307,123 $ 778,309
Kenneth C. Reed 17,814 7.9% $24.845 12/17/2011 $ 278,342 $ 705,373
(1) Options become exercisable 50% after one year and 100% after two years.
68,805 of Mr. Cronin's options, 17,469 of Mr. Fitzgerald's options, 28,876
of Mr. McKenzie's options, 15,631 of Mr. Regnell's options and 13,789 of
Mr. Reed's options were granted as non-qualified stock options. See "Report
on Executive Compensation."
The dollar amounts under the 5% and 10% columns in the table above are the
result of calculations required by the rules of the Securities and Exchange
Commission ("SEC") and therefore are not intended to forecast possible future
appreciation in the price of the Shares, which would benefit all shareholders.
For example, in order for the Named Officers to realize the potential values set
forth in the 5% and 10% columns in the table above, the price per Share of the
Shares would have to be approximately $40.47 and $64.44, respectively, as of the
expiration date of the option. Actual gains, if any, on option exercises and
Share holdings are dependent on the future performance of the Shares and overall
stock market conditions.
Aggregated Option Exercises and Option Value Table
The following table shows information concerning the exercise of options
during 2001 by each of the Named Officers and the year-end value of unexercised
options.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED IN
UNEXERCISED OPTIONS THE MONEY OPTIONS AT
AT DECEMBER 31, 2001 DECEMBER 31,2001
-------------------- ----------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Edmund B. Cronin, Jr.. 187,461 $1,498,649 186,035 122,830 $1,539,918 $180,577
Larry E. Finger 147,048 $1,133,987 31,148 - $ 324,594 -
Brian J. Fitzgerald 5,955 $ 49,031 96,630 33,970 $ 794,228 $ 45,205
George F. McKenzie 11,131 $ 91,899 161,095 59,020 $1,339,470 $ 94,009
Thomas L. Regnell 78,130 $ 582,690 57,800 35,477 $ 472,685 $ 56,984
Kenneth C. Reed 55,399 $ 499,201 79,026 32,152 $ 611,212 $ 51,642
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The Board determined executive compensation for 2002. The Compensation
Committee, composed of Messrs. Kendall, McDaniel, Nason and Ms. Williams, was
responsible for making recommendations to the Board with respect to 2002
compensation decisions.
8
REPORT ON EXECUTIVE COMPENSATION
Executive Compensation Principles
The Trust's Executive Compensation Program is based on guiding principles
designed to align executive compensation and management incentives with Trust
values and objectives, business strategy and business financial performance. In
applying these principles, the Compensation Committee, based upon the
recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant, has established a
program designed to:
Attract and retain key executives critical to the long-term success of the
Trust.
Reward executives for long-term strategic management and the enhancement
of shareholder value.
Support a performance-oriented environment that rewards performance based upon
exceeding Trust operating performance goals.
Executive Compensation Program
For 2001, the Board, upon recommendation of the Compensation Committee,
adopted an Incentive Compensation Plan (the "Plan") based upon the
recommendations contained in the 1997 Board of Trustees and Executive
Compensation Review prepared by an independent consultant to align executive
compensation with Shareholder interests through salaries, cash bonuses, Share
grants and option grants tied to pre-set objective performance goals.
Under the Plan, salaries for the Trust's executive officers were set
based upon (i) a review of the compensation paid to similarly situated executive
officers employed by companies comprising the Morgan Stanley REIT Index; and
(ii) a subjective evaluation of each executive officer's performance throughout
the year. See "Executive Compensation -- Performance Graph" for additional
discussion regarding the Morgan Stanley REIT Index.
Cash bonuses would be paid only if the Trust's Funds From Operations
("FFO") per share grew by at least 5%. If this minimum threshold was achieved, a
bonus pool would be created as follows: 10% of the first 7% of the growth in FFO
per share times the average shares outstanding for the year, plus 20% of the
growth in FFO per share in excess of 7% times the average shares outstanding for
the year, would go into the bonus pool. Executive officers of the Trust and
selected senior and middle management share the bonus pool pro-rata based on
their salaries.
Long-term incentives are provided through the New Stock Option Plan and
Share Grant Plan. Managing Directors receive option grants with a value equal to
22.5% (36% for the Chief Executive Officer and 28% for the Senior Vice
Presidents) of their annual salary plus annual bonus ("Cash Compensation"). The
option value is based upon a Black Scholes model calculation. This value is
divided into 22.5% of the individual's Cash Compensation (36% for the Chief
Executive Officer and 28% for the Senior Vice Presidents), and the resulting
number is the number of Shares subject to the grant of an option for such year.
Notwithstanding the forgoing, the number of Share options which may be granted
to any individual is limited to 100,000 in any one year. Certain members of
middle management are also eligible to receive Share Options under the Stock
Option Plan. Executive officers are also eligible to receive Share grants
through the Share Grant Plan. Under the Share Grant Plan, Managing Directors
receive an award of Shares with a market value of 2.5% of the individual's Cash
Compensation (9% for the Chief Executive Officer and 7% for Senior Vice
Presidents) at the date of the award. Shares granted under the Share Grant Plan
vest 20% per year over five years and are restricted from transfer for five
years from the date of grant.
In 2000 the Trust approved a split dollar life insurance plan for senior
officers other than the Chief Executive Officer. The purpose of the plan is to
provide these officers with financial security in exchange for a career
commitment. It is intended that the Trust will recover its costs from the life
insurance policies at death prior to retirement, termination prior to
retirement, or retirement at age 65. It is intended that the executive can use
the cash values of the policy in excess of the Trust's interest. The Trust has a
security interest in the cash value and death benefit of each policy to the
extent of the sum of premium payments made by the Trust.
The Trust has approved a non-qualified deferred compensation plan for the
Chief Executive Officer. The plan will allow Mr. Cronin to defer a percentage of
his annual cash compensation (salary and bonus). Compensation deferred will be
credited with interest equal to the Trust's current cost of funds. As an
incentive, if Mr. Cronin should remain employed by the Trust until age 70, his
deferred compensation will be credited with an additional 2.5%. In the event of
Mr. Cronin's death or retirement prior to age 70, the compensation plus interest
can be paid in either a lump sum or in installments at the discretion of the
plan participant. The plan is unfunded and payments are to be made from general
assets of the Trust.
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The Board believes that compensation paid to the Trust's executive officers
is comparable to that paid by the companies comprising the Morgan Stanley REIT
Index.
Chief Executive Officer Compensation
Mr. Cronin's 2001 compensation consisted of his salary, bonus, Share Grants
and options based upon the Executive Compensation Program described above. Mr.
Cronin's salary was recommended by the Compensation Committee based upon (i) a
review of the compensation paid to chief executive officers employed by
companies comprising the Morgan Stanley REIT Index and (ii) a subjective
evaluation of Mr. Cronin's performance throughout the year. As described above
under the Plan, specific performance goals were not established for Mr. Cronin
during 2001 as relates to salary but were established for bonus and related
Share Grant and Share Option purposes. In general, the Morgan Stanley REIT Index
comparison and the subjective evaluation were weighted equally by the Board when
making the decision to set Mr. Cronin's 2001 salary at $427,500. The Board
believes that compensation paid to Mr. Cronin is comparable to compensation paid
to the chief executive officers of the companies comprising the Morgan Stanley
REIT Index.
OTHER MATTERS
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), a publicly held company such as the Trust will not be allowed a federal
income tax deduction for compensation paid to the chief executive officer or one
of the other four most highly compensated officers (other than the chief
executive officer) to the extent that compensation (including certain
stock-based compensation) paid to such officer exceeds $1 million in any fiscal
year, unless such compensation satisfies certain exceptions set forth in the
Code. The Board intends to evaluate elements of compensation in light of Section
162(m), but may enter into arrangements that do not satisfy such exceptions to
Section 162(m), as the Board determines to be appropriate.
THE COMPENSATION COMMITTEE
John P. McDaniel, Compensation Committee Chairman
Clifford M. Kendall , Compensation Committee Member
Charles T. Nason, Compensation Committee Member
Susan J. Williams, Compensation Committee Member
Performance Graph
Set forth below is a graph comparing the cumulative total
shareholder return on the Shares with the cumulative total return of companies
making up the Standard & Poor's 500 Stock Index and The Morgan Stanley REIT
Index. The Morgan Stanley REIT Index is a total-return index comprised of 115 of
the most actively traded real estate investment trusts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[LINE GRAPH APPEARS HERE WITH THE FOLLOWING PLOT POINTS:]
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
WRIT .................................. $100 $102 $121 $104 $175 $195
Morgan Stanley REIT Index ............. $100 $119 $ 99 $ 94 $119 $135
S&P ................................... $100 $133 $171 $208 $189 $166
AUDIT COMMITTEE REPORT
The Board maintains an Audit Committee comprised of five of the Trust's
outside Trustees. The Board and the Audit Committee believe that the Audit
Committee's current member composition satisfies Section 303 of the New York
Stock Exchange's (NYSE) listed company manual. In appointing Mr. Osnos to the
Audit Committee, the Board considered his relationship with the Trust's legal
counsel and determined in its business judgment that the relationship does not
interfere with his exercise of independent judgment. The Audit Committee held
nine meetings during 2001.
The Board has adopted a written Charter of the Audit Committee. The Audit
Committee oversees the Trust's financial process on behalf of the Board.
Management has the primary responsibility for the financial statements and the
reporting process including the systems of internal controls. The independent
auditors are responsible for expressing an opinion on the conformity of those
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financial statements with generally accepted accounting principles. In
fulfilling its oversight responsibilities, the Audit Committee reviewed the
audited financial statements in the Annual Report with management including a
discussion of the quality, and not just the acceptability, of the accounting
principles, the reasonableness of significant judgments and the clarity of
disclosures in the financial statements.
The Audit Committee discussed with the Trust's independent auditors the
overall scope and plans for their audit. The committee meets with the
independent auditors, with and without management present, to discuss the
results of their examination, their evaluation of the Trust's internal controls
and the overall quality of the Trust's financial reporting.
The Audit Committee reviewed with the independent auditors, Arthur Andersen
LLP, their judgments as to the quality, and not just the acceptability, of the
Trust's accounting principles and such other matters as are required to be
discussed with the committee under generally accepted auditing standards,
including Statement on Auditing Standards No. 61, "Communication with Audit
Committees." In addition, the Committee has discussed with the independent
auditors the auditors' independence from management and the Trust including the
matters in the written disclosures and the letter from the independent auditors
required by the Independence Standards Board, Standard No. 1, "Independence
Discussions with Audit Committees."
In February 2002, the Audit Committee met with Andersen's senior managers
about the current and potential future impact of Enron events and its
implications for WRIT. After in depth discussions, the Audit Committee
recommends the retention of Arthur Andersen as WRIT's independent auditors
unless there is a new definitive reason to sever this business relationship.
However, management of the Trust is currently working on contingency planning in
the event Arthur Andersen is unable to meet WRIT's business needs.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Trust's Annual Report on Form 10-K for
the year ended December 31, 2001 for filing with the Securities and Exchange
Commission. The Audit Committee has also recommended, and the Board has
approved, the selection of Arthur Andersen LLP as the Trust's independent
auditors.
THE AUDIT COMMITTEE
Clifford M. Kendall, Audit Committee Chairman
John M. Derrick, Jr., Audit Committee Member
John P. McDaniel, Audit Committee Member
Charles T. Nason, Audit Committee Member
David M. Osnos, Audit Committee Member
Principle Accounting Firm Fees
The following table sets forth the aggregate fees billed to the Trust for the
year ended December 31, 2001 by the Trust's principal accounting firm, Arthur
Andersen, LLP. The Audit Committee has considered whether the provision of
non-audit services is compatible with maintaining the principal accountant's
independence.
Audit Fees $173,500
Financial Information Systems
Design and Implementation Fees -0-
All Other Fees 185,113 (a)
--------
$358,613
(a) Includes fees for tax services, SEC filings, and other non-audit services.
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PROPOSAL 1:
ELECTION OF TRUSTEES
Mr. Clifford M. Kendall and Ms. Susan J. Williams stand for election as
Trustees at the Annual Meeting, to serve for three years. It is intended that
the proxies given to the persons named in the accompanying Proxy (unless
otherwise indicated on such Proxy) will be voted for the election of Mr.
Clifford M. Kendall and Ms. Susan J. Williams who currently serve as Trustees.
If a nominee becomes unable or unwilling to stand for election for any
reason not presently known or contemplated, the persons named in the enclosed
Proxy will have discretionary authority to vote pursuant to the Proxy for a
substitute nominee nominated by the Board. The election of Trustees requires the
affirmative vote of the holders of a majority of the shares voting at the Annual
Meeting either in person or by proxy.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
ELECTION OF MR. CLIFFORD M. KENDALL AND MS. SUSAN J. WILLIAMS
OTHER MATTERS
Independent Public Accountants
The firm of Arthur Andersen LLP served as the Trust's independent public
accountants for 2001. The Board has appointed Arthur Andersen LLP as the Trust's
independent public accountants for 2002. Representatives of Arthur Andersen LLP
are expected to attend the Annual Meeting, will be provided with an opportunity
to make a statement, should they desire to do so, and will be available to
respond to appropriate questions from the shareholders.
Securities Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Trustees and certain officers to file reports of changes in stock ownership with
the SEC and with the New York Stock Exchange, with copies to the Trust. Based
solely on a review of such copies, the Trust believes that all such filing
requirements have been met for the year ended December 31, 2001.
Expenses and Administration
The cost of this solicitation of proxies will be borne by the Trust. In
addition to the use of the mails, some of the officers and regular employees of
the Trust may solicit proxies by telephone or facsimile, will request brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
material to the beneficial owners of Shares held of record by such persons and
may also verify the accuracy of marked proxies by contacting record and
beneficial owners of Shares. The Trust will reimburse such persons for expenses
incurred in forwarding such soliciting material.
2003 Annual Meeting
Shareholders may present proposals to be considered for inclusion in the
Proxy Statement relating to the 2003 Annual Meeting, provided they are received
by the Trust no later than December 21, 2002 and are in compliance with
applicable laws and SEC regulations.
/s/ Laura M. Franklin
Laura M. Franklin
CORPORATE SECRETARY
March 18, 2002
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FRONT OF PROXY CARD
FOR WITHHELD
1. Election of two Trustees Nominees (for the terms
stated in the Proxy Statement):
For, Except vote withheld from the following
Nominee: Mr. Clifford M. Kendall
Mrs. Susan J. Williams
2. Such other matters as may come before the meeting. IF NO CHOICE IS SPECIFIED,
THIS PROXY WILL BE VOTED "FOR" THE NOMINATED TRUSTEES. PROXIES WILL BE VOTED AS
DIRECTED OR SPECIFIED.
PLEASE vote at once. It is important. Please mark your choice in black ink.
SIGNATURE _________________ DATE _________ SIGNATURE_________________
DATE______________________
NOTE: SIGNATURE(S) MUST CORRESPOND EXACTLY WITH NAME(S) AS IMPRINTED HEREON.
When signing as attorney, executor, administrator, trustee or guardian,
please give the full title as such and if the signer is a corporation,
please sign with the full corporate name by a duly authorized officer. If
shares are held in the name of more than one person, all named holders must
sign the proxy.
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REAR OF PROXY CARD:
WASHINGTON REAL ESTATE INVESTMENT TRUST
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS MAY 21, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned shareholder of Washington Real Estate Investment Trust
appoint Sara L. Grootwassink and Laura M. Franklin with full power of
substitution, as proxy to vote all shares of the undersigned in Washington Real
Estate Investment Trust at the Annual Meeting of Shareholders to be held on May
21, 2002, and at any adjournment thereof, with like effect and as if the
undersigned were personally present and voting upon the following matters:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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