Use these links to rapidly review the document
TABLE OF CONTENTS
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ Check the appropriate box:
| | | | |
Filed by the Registrantý☐
|
Filed by a Party other than the RegistrantoCheck the appropriate box: |
o |
| Preliminary Proxy Statement |
o☐
| | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
ý | ☒
| Definitive Proxy Statement |
o | ☐
| Definitive Additional Materials |
o | ☐
| Soliciting Material under §240.14a-12 |
| Investors Real Estate 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): | |
ý | ☒ | | | No fee required. | |
o | ☐ | | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |
| | | (1) | | (1) | | | Title of each class of securities to which transaction applies:
| |
| | | (2) | | | | | | |
| | | | | (2) | | | Aggregate number of securities to which transaction applies:
| |
| | | (3) | | | | | | |
| | | | | (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) | | | | | | |
| | | | | (4) | | | Proposed maximum aggregate value of transaction:
| |
| | | (5) | | | | | | |
| | | | | (5) | | | Total fee paid:
| |
o | | | | | | | | |
| | ☐ | | | Fee paid previously with preliminary materials. | |
o | ☐ | | | 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) | | | | | | |
| | | | | (1) | | | Amount Previously Paid:
| |
| | | (2) | | | | | | |
| | | | | (2) | | | Form, Schedule or Registration Statement No.:
| |
| | | (3) | | Filing Party:
| | | | |
| | | (4) | | (3) | | | Filing Party: | |
| | | | | | | | | |
| | | | | (4) | | | Date Filed:
| |
| | | | | | | | | |
Table of Contents
TABLE OF CONTENTS
INVESTORS REAL
ESTATE TRUST, DBA
CENTERSPACE
3100 10th St SW
P.O. Box 1988
Minot, ND 58702-1988
| | |
 | | INVESTORS REAL ESTATE TRUST
1400 31st Ave SW, Suite 60
P.O. Box 1988
Minot, ND 58702-1988
|
April 5, 2021
May 1, 2019
Dear Fellow Shareholders:
It is a pleasure to invite you to attend the
49th51st Annual Meeting of Shareholders (the
"2019“2021 Annual
Meeting"Meeting”) of Investors Real Estate Trust,
doing business as Centerspace (the
"Company"“Company”), to be held on
Thursday, June 13, 2019,Tuesday, May 18, 2021, at 9:00 a.m. Central Daylight
Time,Time. Due to the ongoing nature of the COVID-19 pandemic, the potential impact on the health and safety of our shareholders, employees, directors and other stakeholders, and any local restrictions on gathering that may be in place at
such time, we have determined that the
Company's offices located at 800 LaSalle Avenue, Suite 1600, Minneapolis, Minnesota 55402.2021 Annual Meeting will be a completely “virtual meeting” of shareholders. We also believe this virtual format is environmentally friendly and encourages increased participation by our shareholders. You will be able to attend the 2021 Annual Meeting, vote and submit your questions during the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/CSR2021 and entering the 16-digit control number included in our notice of Internet Availability of the Proxy Materials, on your proxy card or in the instructions that accompanied your proxy materials.
At the
20192021 Annual Meeting, you will be asked to vote on the following items:
1.The election of the eight nominees named in the Proxy Statement as trustees of the Company, each for a term of one year and until his or her successor is duly elected and qualified;
2.an advisory vote on executive compensation;
3.the ratification of Grant Thornton LLP as the Company's independent auditor for the fiscal year ending December 31, 2019; and
4.such other matters as may properly come before the 2019 Annual Meeting or any adjournment(s) or postponement(s) thereof.
1.
| the election of seven nominees named in the Proxy Statement as trustees of the Company, each to serve for a term of one year expiring at the 2022 Annual Meeting of Shareholders and until his or her successor is duly elected and qualified; |
2.
| an advisory vote on executive compensation (the “say-on-pay vote”); |
3.
| the approval of an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace; |
4.
| the approval of an amendment to the Amended and Restated 2015 Incentive Plan; |
5.
| the ratification of Grant Thornton LLP as the Company’s independent auditor for the year ending December 31, 2021; and |
6.
| such other matters as may properly come before the 2021 Annual Meeting or any adjournment(s) or postponement(s) thereof. |
The Board of Trustees recommends that you vote
to (1) elect the eight trustee nominees named in the Proxy Statement; (2) approve, on an advisory basis, the compensationfor each of
the Company's named executive officers, as disclosed in the Proxy Statement pursuant to the compensation disclosure rules of the Securities and Exchange Commission; and (3) ratify the appointment of Grant Thornton LLP as the Company's independent auditor for the fiscal year ending December 31, 2019.these proposals.
Information about the
20192021 Annual Meeting and the formal business to be acted on by our shareholders is included in the Notice of Annual Meeting and the Proxy Statement that follow. Our
20192021 proxy materials and Annual Report for the
eight-month transition periodyear ended December 31,
20182020 are available online at www.proxyvote.com.
On or about
May 1, 2019,April 5, 2021, we mailed
most of our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on: (1) how to access our Proxy Statement and Annual Report via the Internet and (2) how to vote. The notice also included instructions on how to receive a paper copy of the proxy materials. On or about
May 1, 2019,April 5, 2021, other shareholders, in accordance with their prior requests, were sent e-mail notifications containing instructions on how to access our proxy materials via the Internet and to vote, or have been mailed paper copies of our proxy materials and a proxy card or voting form.
Please refer to the Proxy Statement for details on the
20192021 Annual Meeting, including detailed information on each of the proposals to be voted on at the meeting. Your shareholder vote is important, and I encourage you to vote promptly.
| | | | | Sincerely, | |
| | | Sincerely,
INVESTORS REAL ESTATE TRUST | | Investors Real Estate Trust dba Centerspace | |
|
|
| | | |
| | | | | /s/ Mark O. Decker, Jr.
| |
| | | | | Mark O. Decker, Jr. | |
| | | | | President and Chief Executive Officer | |
TABLE OF CONTENTS
| | | | |
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
| | | 1 | |
PROXY STATEMENT
| | | 3 | |
PROPOSAL 1: ELECTION OF TRUSTEES
| | | 5 | |
Nominees
| | | 7 | |
CORPORATE GOVERNANCE AND BOARD MATTERS
| | | 15 | |
OTHER GOVERNANCE MATTERS
| | | 22 | |
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
| | | 25 | |
TRUSTEE COMPENSATION
| | | 26 | |
TRUSTEE COMPENSATION TABLE FOR THE 2018 TRANSITION PERIOD
| | | 27 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
| | | 28 | |
EXECUTIVE MANAGEMENT
| | | 31 | |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION
| | | 32 | |
COMPENSATION DISCUSSION AND ANALYSIS
| | | 33 | |
Compensation Committee Report
| | | 44 | |
EXECUTIVE OFFICER COMPENSATION TABLES
| | | 45 | |
Summary Compensation Table for the 2018 Transition Period
| | | 45 | |
Grants of Plan-Based Awards Table
| | | 47 | |
Outstanding Equity Awards at December 31, 2018
| | | 48 | |
Shares Vested
| | | 49 | |
Securities Authorized for Issuance Under Equity Compensation Plans
| | | 49 | |
Potential Payments Upon Termination or Change in Control
| | | 50 | |
CEO Pay Ratio
| | | 52 | |
Compensation Policies and Risk Management
| | | 52 | |
401(k) Plan
| | | 54 | |
Compensation Committee Interlocks and Insider Participation
| | | 54 | |
PROPOSAL 3: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
| | | 55 | |
ACCOUNTING AND AUDIT COMMITTEE MATTERS
| | | 56 | |
REPORT OF THE AUDIT COMMITTEE
| | | 57 | |
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
| | | 59 | |
SHAREHOLDER PROPOSALS AND NOMINATIONS
| | | 59 | |
SHAREHOLDERS WITH THE SAME LAST NAME AND ADDRESS
| | | 60 | |
COMMUNICATING WITH IRET
| | | 60 | |
OTHER MATTERS
| | | 61 | |
Table of Contents
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on
Thursday, June 13, 2019,Tuesday, May 18, 2021, at 9:00 a.m. CDT
Notice is hereby given that the
20192021 Annual Meeting of Shareholders (the
"2019“2021 Annual
Meeting"Meeting”) of Investors Real Estate Trust,
doing business as Centerspace (the
"Company"“Company”)
, will be held on
Thursday, June 13, 2019,Tuesday, May 18, 2021, at 9:00 a.m. Central Daylight Time,
at the Company's offices located at 800 LaSalle Avenue, Suite 1600, Minneapolis, Minnesota 55402,via webcast, for the following purposes:
1.To elect the eight nominees named in the Proxy Statement as trustees of the Company, each for a term of one year expiring at the 2020 Annual Meeting of Shareholders and until his or her successor is duly elected and qualified;
2.To hold an advisory vote on executive compensation (the "say on pay vote");
3.To ratify Grant Thornton LLP as the Company's independent auditor for the fiscal year ending December 31, 2019; and
4.To transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.
1.
| To elect seven nominees named in the Proxy Statement as trustees of the Company, each to serve for a term of one year expiring at the 2022 Annual Meeting of Shareholders and until his or her successor is duly elected and qualified; |
2.
| To hold an advisory vote on executive compensation (the “say-on-pay vote”); |
3.
| To approve an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace; |
4.
| To approve an amendment to the Amended and Restated 2015 Incentive Plan; |
5.
| To ratify Grant Thornton LLP as the Company’s independent auditor for the year ending December 31, 2021; and |
6.
| To transact such other business as may properly come before the 2021 Annual Meeting or any adjournment(s) or postponement(s) thereof. |
These items are described in more detail in the Proxy Statement. We have not received notice of any other matters that may properly be presented at the
20192021 Annual Meeting.
The
Company'sCompany’s Board of Trustees has fixed the close of business on
April 18, 2019March 22, 2021 as the record date for determining the shareholders entitled to receive notice of and to vote at the
20192021 Annual Meeting or any adjournment(s) or postponement(s) thereof.
Important Notice Regarding the Availability of Proxy Materials for the
Company's 2019Company’s 2021 Annual Meeting to be held on
June 13, 2019:May 18, 2021: The
20192021 Proxy Materials and Annual Report for the
transition periodyear ended December 31,
20182020 are available at www.proxyvote.com.
| | | |
| | | By Order of the Board of Trustees, | |
|
|
| | | |
| | | | | /s/ Anne Olson | |
| | | | | Anne Olson
General Counsel and Secretary | |
Minot, North Dakota
May 1, 2019
April 5, 2020
It is important that your shares be represented and voted at the 20192021 Annual Meeting. You can vote your shares by one of the following methods: (1) by Internet; (2) by telephone; (3) if you received your proxy materials by mail, by mailing your proxy card; or (4) in person atvirtually during the 20192021 Annual Meeting. Any proxy may be revoked in the manner described in the Proxy Statement at any time prior to its exercise at the 20192021 Annual Meeting.
Table of ContentsTABLE OF CONTENTS
This page has been intentionally left blank.
TABLE OF CONTENTS
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Table of ContentsTABLE OF CONTENTS
INVESTORS REAL ESTATE TRUST
1400 31st Avenue
DOING BUSINESS AS CENTERSPACE
3100 10th St SW Suite 60
P.O. Box 1988
Minot, ND 58702-1988
Telephone: (701) 837-4738
PROXY STATEMENT
May 1, 2019
Proxies are solicited by the Q&A FOR 2021 ANNUAL MEETING OF SHAREHOLDERS
The Board of Trustees (the "Board" or "Board of Trustees"(“Board”) of Investors Real Estate Trust (dba Centerspace), a North Dakota real estate investment trust (the "Company"(“we,” “us,” “our,” “Centerspace,” or the “Company”), for useis soliciting proxies to be used at the Company's 2019 Annual Meeting of Shareholders (the "Annual Meeting")of the Company to be held virtually on Thursday, June 13, 2019,Tuesday, May 18, 2021 at 9:00 a.m., Central Daylight Time, and any postponement(s) or adjournment(s) thereof (the “Annual Meeting”).
This proxy statement and the accompanying Notice and Form of Proxy are first being mailed or made available on the Internet to shareholders on or about April 5, 2021.
QUESTIONS AND ANSWERS ABOUT
THE PROXY MATERIALS AND THE ANNUAL MEETING
How is the Company distributing proxy materials?
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 18, 2021
Our Notice of Annual Meeting of Shareholders, the Proxy Statement, and the Company’s 2020 Annual Report are available on the following website: www.proxyvote.com
In accordance with Securities and Exchange Commission (“SEC”) rules, we have elected to mail our proxy materials to the record holders of our common shares while also furnishing our proxy materials to shareholders over the Internet, and we have instructed brokers, banks, and similar intermediary organizations to provide to the beneficial shareholders that hold their common shares in “street name” (other than beneficial shareholders who previously requested printed copy delivery) a Notice of Internet Availability of Proxy Materials containing instructions on how to access the proxy materials online (the “Notice”).
If you receive the Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the proxy materials. If you receive the Notice by mail and would like to receive a copy of our proxy materials, follow the instructions contained in the Notice about how you may request to receive a copy electronically or in printed form free of charge on a one-time or ongoing basis. We encourage shareholders to take advantage of the availability of the proxy materials on the Internet as we believe electronic delivery will expedite the receipt of materials while lowering costs and reducing the environmental impact of our Annual Meeting by reducing printing and mailing of materials.
In addition to this proxy statement, our proxy materials include our 2020 Annual Report, which includes our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Form 10-K”). Copies of the Form 10-K, as well as other periodic filings by the Company with the SEC, also are available in the Investor Relations section of our website (ir.centerspacehomes.com) under the tab “Financial Reporting.” The information included in our website is not incorporated herein by reference.
TABLE OF CONTENTS
How can I participate in the virtual 2021 Annual Meeting?
We will be hosting the 2021 Annual Meeting live via the Internet. Shareholders will be able to participate in the 2021 Annual Meeting online via live webcast. Provided below is the summary of the information that you will need to participate in the 2021 Annual Meeting.
Shareholders can participate in the 2021 Annual Meeting via live webcast over the Internet at www.virtualshareholdermeeting.com/CSR2021.
The 2021 Annual Meeting webcast begins at 9:00 a.m., Central Daylight Time. TheOn the day of the Annual Meeting, we recommend that you log into our virtual meeting at least 15 minutes prior to the scheduled start time to ensure that you can access the meeting.
You will need your 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials, to enter the 2021 Annual Meeting.
You may submit questions for the meeting in advance at www.proxyvote.com. Shareholders will also have the ability to vote and submit live questions during the Annual Meeting webcast at www.virtualshareholdermeeting.com/CSR2021. Questions related directly to the 2021 Annual Meeting will be heldanswered during our virtual meeting, subject to time constraints. Any questions pertinent to meeting matters that cannot be answered during the meeting due to time constraints will be available in the Investor Relations section of our website (ir.centerspacehomes.com). The questions and answers will be available as soon as practical after the meeting and will remain available until one week after the posting.
Instructions on how to attend and participate in the live webcast, including how to verify stock ownership and vote your shares electronically during the 2021 Annual Meeting, are available at www.virtualshareholdermeeting.com/CSR2021.
Webcast replay of the 2021 Annual Meeting will be available on our website (ir.centerspacehomes.com) as soon as practicable following the meeting.
How does COVID-19 impact the information contained in this Proxy Statement and the Company’s business?
Information contained in this Proxy Statement relates to 2020 performance and compensation, and reflects the impact of the COVID-19 pandemic on such performance and compensation for the year ended December 31, 2020.
During the year ended December 31, 2020, in order to minimize the impact of COVID-19 on our team, residents, and communities, we undertook the following measures (among others) from time to time and in accordance with applicable governmental regulations and restrictions:
We enacted social distancing practices for our team and within our communities in order to do our part to stop the spread of COVID-19, including encouraging residents to use electronic or phone communication when contacting our staff;
We closed and/or limited capacity in common amenity spaces, including on-site fitness centers, community rooms, swimming pools, resident coffee services, and conference facilities in an effort to support social distancing and comply with governmental regulations;
We implemented enhanced cleaning and disinfecting protocols at our communities;
We announced that maintenance requests would be completed for essential or emergency services only;
We required masks be worn in our offices;
We waived all fees associated with credit card payments;
We suspended eviction filings in accordance with government regulations;
We offered rental deferment payment plans to residents experiencing financial hardship; and
We offered flexible lease renewal terms.
TABLE OF CONTENTS
What proposals will be voted on at the Company's offices locatedAnnual Meeting?
We anticipate the following five proposals will be voted on at 800 LaSalle Avenue, Suite 1600, Minneapolis, Minnesota 55402. Only the holdersAnnual Meeting:
The election of recordseven trustees to serve until the 2022 annual meeting of shareholders and until their respective successors are duly elected and qualified;
The approval on a non-binding advisory basis of the Company's common sharescompensation paid to the Company’s named executive officers;
The approval of beneficial interest, no par value ("Shares"an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace;
The approval of an amendment to the Amended and Restated 2015 Incentive Plan; and
The ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021.
What are the Board’s recommendations?
Our Board unanimously recommends that you vote:
“FOR” the election of seven trustees to serve until the next annual meeting of shareholders and until their respective successors are duly elected and qualified (Proposal 1);
“FOR” the non-binding advisory approval of executive compensation (Proposal 2);
“FOR” the approval of an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace (Proposal 3);
“FOR” the approval of the amendment to the Amended and Restated 2015 Incentive Plan (Proposal 4); and
“FOR” the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021 (Proposal 5).
What happens if additional matters are presented at the Annual Meeting?
If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or "common shares")place (including, without limitation, for the purpose of soliciting additional proxies), the persons named as proxy holders, Mark O. Decker, Jr. or Anne Olson, will have discretion to vote on those matters in accordance with his, her or their best judgment. We do not currently anticipate that any other matters will be raised at the Annual Meeting.
Who is entitled to vote?
Shareholders of record at the close of business on April 18, 2019March 22, 2021 (the "Record Date"“Record Date”), are entitled to vote at the Annual Meeting. The holders of the Company's common units, 6.625% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, no par value, and Series D preferred units are not entitled to may vote at the Annual Meeting. As of the close of business on April 18, 2019, the Company had 11,768,444 Shares issued and outstanding, eachRecord Date, there were 13,219,845 of whichour common shares outstanding. Each common share is entitled to one vote on all matters being considered at the Annual Meeting.
What constitutes a quorum?
The presence at the Annual Meeting, virtually or by proxy, of the holders of thirty-three and one-third percent (33 1/3%) of all the votes entitled to be cast at the Annual Meeting on any matter will constitute a quorum. Both abstentions and broker non-votes (as discussed below under “What vote is required to approve each item?”) are counted for the purpose of determining the presence of a quorum.
What is the difference between holding shares as a registered shareholder and holding shares in street name?
If your common shares are owned directly in your name with our transfer agent, American Stock Transfer & Trust Company (“AST”), you are considered a registered holder of those common shares.
TABLE OF CONTENTS
If your common shares are held by a broker, bank, or nominee, you hold those common shares in street name. Your broker, bank, or other nominee will vote your common shares as you direct.
How do I vote?
Whether you hold shares as the shareholder of record or in street name, you may direct how your shares are voted without virtually attending the Annual Meeting. Even if you plan to virtually attend the Annual Meeting, we encourage you to vote in advance of the meeting in order to ensure that your vote is counted.
Shareholders of Record. As a shareholder of record, you may vote during the Annual Meeting webcast by visiting www.virtualshareholdermeeting.com/CSR2021and entering the 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials. Alternatively, you may vote by authorizing a proxy by completing, signing, and dating a proxy card and mailing it in the accompanying pre-addressed envelope in accordance with the instructions included on your proxy card.
Beneficial (“Street Name”) Shareholders. The broker, bank, or similar intermediary that holds your common shares in an account is considered to be the holder of record for purposes of voting at the meeting. As a beneficial owner, you have the right to direct the intermediary how to vote the common shares held in your account. You may vote by submitting voting instructions to your broker, bank, trustee, or other intermediary in accordance with the Notice, including by submitting a voting form provided to you by such intermediary. Alternatively, you may vote during the Annual Meeting webcast by visiting www.virtualshareholdermeeting.com/CSR2021 and entering the 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials. You can ensure your vote is cast at the meeting by completing, signing, dating, and returning your proxy card or voting form. Your vote will be cast in accordance with the instructions included on a properly signed and dated proxy card or voting form.
If you do not return a signed proxy card or voting form (or, if you are a beneficial owner, otherwise submit your vote in accordance with the instructions provided in the Notice) or virtually attend the Annual Meeting and vote, no vote will be cast on your behalf. The proxy card indicates on its face the number of common shares registered in your name on the Record Date, which corresponds to the number of votes you will be entitled to cast at the meeting on each proposal.
You are urged to follow the instructions on your proxy card or your Notice and voting form, as applicable, to indicate how your vote is to be cast. If you return your signed proxy but do not indicate your voting preferences, your common shares will be voted on your behalf as follows:
“FOR” the election of seven trustees to serve until the next annual meeting of shareholders and until their respective successors are duly elected and qualified (Proposal 1);
“FOR” the non-binding advisory approval of executive compensation (Proposal 2);
“FOR” the approval of an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace (Proposal 3);
“FOR” the approval of the amendment to the Amended and Restated 2015 Incentive Plan (Proposal 4); and
“FOR” the ratification of the appointment of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021 (Proposal 5).
Can I change my vote or revoke my proxy?
If you are a shareholder of record, you may revoke your proxy at any time prior to the vote at the Annual Meeting. Thirty-three and one-third percent (33-1/3%)If you submitted your proxy by mail, you must file with the Secretary of the Shares outstandingCompany a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later-dated proxy. Virtually attending the Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before the proxy is exercised or vote during the Annual Meeting webcast by visiting www.virtualshareholdermeeting.com/CSR2021 and entering the 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.
TABLE OF CONTENTS
If you are a beneficial owner, you may change your vote by submitting new voting instructions (including a voting form) to your broker, bank or nominee, or vote during the Annual Meeting webcast by visiting www.virtualshareholdermeeting.com/CSR2021 and entering the 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.
What vote is required to approve each item?
| | 1. Election of Trustees | | | For, against or abstain on each nominee | | | The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy | | | Same as Against Vote | | | No effect | |
| | | | | | | | | | | | | | | |
| | 2. Advisory vote to approve the Company’s executive compensation (say-on-pay) | | | For, against, or abstain | | | The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy | | | Same as Against Vote | | | No effect | |
| | | | | | | | | | | | | | | |
| | 3. Approval of an amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust of Investors Real Estate Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace | | | For, against, or abstain | | | The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy | | | Same as Against Vote | | | No effect | |
| | | | | | | | | | | | | | | |
| | 4. Approval of an amendment to the Amended and Restated 2015 Incentive Plan | | | For, against, or abstain | | | The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy | | | Same as Against Vote | | | No effect | |
| | | | | | | | | | | | | | | |
| | 5. Ratification of the Appointment of Grant Thornton LLP as the Company’s independent auditor for the year ending December 31, 2021 | | | For, against, or abstain | | | The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy | | | Same as Against Vote | | | Not applicable | |
(1)
| If you hold your shares in street name and do not provide voting instructions to the broker, bank or other nominee that holds your shares, the nominee has discretionary authority to vote on Proposal No. 5, but not for any of the other proposals. |
If your common shares are held in street name, and you do not instruct the broker as to how to vote these shares on Proposal 1, 2, 3 or 4, the broker may not exercise discretion to vote for or against those proposals. This would be a “broker non-vote,” and these shares will not be counted as having been voted on the
Record Date must be present in personapplicable proposal. With respect to Proposal 5, the broker may exercise its discretion to vote for or
represented by proxy to constitute a quorum.On September 20, 2018, our Board of Trustees approved a changeagainst that proposal in the Company's fiscal year-end to December 31, effectiveabsence of your instruction. Please instruct your bank or broker so your vote can be counted.
Is cumulative voting permitted for the fiscal year beginning on January 1, 2019. As a result, theelection of trustees?
No. The Company’s Declaration of Trust and Bylaws do not permit cumulative voting at any election of trustees.
TABLE OF CONTENTS
How are proxies solicited?
The Company
had an eight-month transition period ended December 31, 2018 (which we refer to herein as the "2018 transition period"). The information contained in our Transition Report on Form 10-KT, as well as in this Proxy Statement, reflects informationwill pay for the
2018 transition period.On December 27, 2018, the Company effected a 1-for-10 reverse split of its common shares. As a result, the share ownership information presented in this Proxy Statement has been restated to reflect the 1-for-10 reverse stock split.
The costexpenses of soliciting proxies will be borne by the Company.proxies. The Company has engaged Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902 ("(“Morrow Sodali"Sodali”), to assist with the solicitation of proxies. The Company will pay Morrow Sodali a fee of approximately $8,000 plus reimbursement of out-of-pocket expenses and disbursements currently estimated at an additional $6,000,(which we anticipate to be approximately $6,000), with the final amount of such disbursements depending on the level of services actually provided. Trustees, officers, and employees of the Company may, without additional compensation, solicit proxies by mail, email and/or telephone.
The Company is furnishing proxy materials to its shareholders primarily via the Internet. On or about May 1, 2019, the Company mailed to its shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access the Company's proxy materials, including this Proxy Statement and the Annual Report for the 2018 transition period, and how to vote through the Internet, by mail or in person. On or about May 1, 2019, certain shareholders, in accordance with their prior requests, were sent e-mail notifications of how to access the proxy materials and to vote or have been mailed paper copies of the Company's proxy materials and a proxy card or voting form.
Table of Contents
Internet distribution of the Company's proxy materials is designed to expedite receipt by shareholders, lower the cost of the Annual Meeting and conserve natural resources. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice of Internet Availability. If you have previously elected to receive the Company's proxy materials electronically, you In addition, we will, continue to receive these materials via e-mail unless you elect otherwise.
The Company willupon request, banks,reimburse brokerage houses and other institutions, nominees and fiduciaries to forward the proxy materials to the beneficial owners of Shares and to obtain authorization for the execution of proxies. The Company will, upon request, reimburse banks, brokerage houses and other institutions,custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation material to the beneficial owners of common shares.
What is householding?
The SEC has adopted rules that allow a company to deliver a single notice or set of proxy materials to an address shared by two or more of its shareholders. This method of delivery, known as “householding,” permits us to realize cost savings and reduces the amount of duplicate information shareholders receive. For notices sent to shareholders sharing a single address, we are sending only one set of proxy materials (or one Notice, if applicable) to that address unless we have received contrary instructions from a shareholder at that address. Any shareholders who object to, or wish to begin, householding or who wish to receive just one set of materials (rather than multiple copies) in forwardingthe future may notify the Secretary orally or in writing at the telephone number or address set forth herein. We will deliver promptly an individual copy of the proxy materials (or one Notice, if applicable) to any shareholder who revokes its consent to householding upon our receipt of such revocation.
How do I find out the voting results?
We will announce preliminary voting results at the Annual Meeting. We will disclose the final voting results in a Current Report on Form 8-K to be filed with the SEC on or before May 24, 2021. The Form 8-K will be available at our website (ir.centerspacehomes.com) under the tab “Financial Reporting—SEC Filings” and on the SEC’s website at http://www.sec.gov.
What do I need to do if I would like to attend the Annual Meeting?
You will be able to attend the 2021 Annual Meeting, vote and submit your questions during the Annual Meeting via live webcast by visiting www.virtualshareholdermeeting.com/CSR2021 and entering the 16-digit control number included in our notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.
What is the deadline for shareholder proposals for the 2022 Annual Meeting?
The deadline for submitting a shareholder proposal for inclusion in the proxy materials to be distributed by the beneficial owners. IfCompany in connection with the 2022 Annual Meeting of Shareholders pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is December 6, 2021 (120 days prior to the anniversary of the mailing date of this Proxy Statement). Such proposals must comply with SEC regulations under Rule 14a-8 of the Exchange Act regarding the inclusion of shareholder proposals in company-sponsored proxy materials.
In addition, our Bylaws contain additional advance notice requirements for shareholders who wish to present a proposal, including shareholder nominees for election to the Board, before an annual meeting of shareholders (and not pursuant to Rule 14a-8 of the Exchange Act). According to our Bylaws, nominations of individuals for election to our Board at an annual meeting and the proposal of other business to be considered by shareholders must be made not less than 90 days nor more than 120 days prior to the first anniversary of the date our proxy statement is released to shareholders for the prior year’s annual meeting. As a result, any notice given by or on behalf of a shareholder is a participantpursuant to these Bylaw provisions (and not pursuant to Rule 14a-8 of the Exchange Act) must be received no earlier than January 18, 2022 and no later than February 17, 2022. A shareholder’s notice must set forth the information required by our Bylaws with respect to each shareholder proposal.
All notices of proposals by shareholders, whether or not intended to be included in the
Company's Distribution Reinvestment and Share Purchase Plan (the "DRSP Plan"), theCompany’s proxy
represents a voting instruction asmaterials, should be sent to
the number of full Shares in such shareholder's DRSP Plan account, as well as any Shares held directly by the shareholder.You may vote your Shares at the Annual Meeting in person. To vote in person, you must attend the Annual Meeting and obtain and submit a ballot, which will be provided at the meeting.
If you cannot attend the Annual Meeting in person, or you wish to have your Shares voted by proxy even if you do attend the Annual Meeting, you may vote by duly authorized proxy over the Internet, by telephone, or by mail. In order to vote over the Internet, you must first go to www.proxyvote.com, have your Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form available and follow the instructions.
In order to vote by telephone, you must call 1-800-690-6903, have your Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form available and follow the instructions.
To vote by mail using a proxy card, you must sign, date, and mail the proxy card in the envelope provided. You may request a proxy card as instructed in the Notice of Internet Availability of Proxy Materials.
All properly executed or authorized proxies delivered pursuant to this solicitation and not revoked will be voted at the Annual Meeting as specified in such proxies. If no vote is specified on such a proxy, or no vote is specified as to a particular proposal, the Shares represented by such proxy as to such no vote will be votedFOR the election of each of the eight trustee nominees,FOR the advisory approval of executive compensation andFOR the ratification of the selection of Grant Thornton LLP as the Company's independent auditor for the fiscal year ending December 31, 2019. If other matters are properly presented for voting at the Annual Meeting, the persons named as proxies will vote on such matters in accordance with their best judgment. The Company has not received notice of other matters that may properly be presented for voting at the Annual Meeting.
If your shares are held in the name of a broker, you should receive a voting instruction form from your broker. Your broker will vote your shares in the manner you timely indicate pursuant to the voting instruction form. If you do not timely indicate your voting instructions to your broker, the broker will not be permitted to vote your shares at the Annual Meeting on Proposal 1 (election of trustees) and Proposal 2 (advisory vote on executive compensation) because such proposals are not routine matters under NYSE rules. However, your broker may, in its discretion, vote your shares on Proposal 3 (ratification of Grant Thornton LLP as the Company's independent auditor) if you do not timely indicate voting instructions on that proposal because the proposal is a routine matter under NYSE rules. Accordingly, if you hold shares in street name in a bank or brokerage account, it is critical that you cast your vote if you want it to count in the election of trustees and the advisory vote on executive compensation.
Table of Contents
Shares entitled to vote but which, at the direction of the beneficial owner, are not voted on one or more matters ("abstentions") will be counted for the purpose of determining whether there is a quorum for the transaction of business at the Annual Meeting. Shares held by brokers who do not have discretionary authority to vote on a particular matter and who have not received voting instructions from their customers (i.e., broker non-votes) are counted as present for the purpose of determining the existence of a quorum at the Annual Meeting.
The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy at the Annual Meeting, provided a quorum is present, is required to elect each of the eight trustee nominees (Proposal 1); to approve, on an advisory basis, executive compensation (Proposal 2); and to ratify the selection of Grant Thornton LLP as the Company's independent auditor (Proposal 3).
Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before polls close at the Annual Meeting by either: (1) delivering to Anne Olson, theInvestors Real Estate Trust, dba Centerspace, c/o Secretary, of the Company, a written notice of revocation or a duly executed proxy bearing a later date; (2) authorizing a subsequent proxy by telephone or through the designated Internet site; or (3) attending the Annual Meeting and voting in person. If your shares are held on your behalf by a broker, bank, or other nominee, you must contact them to receive instructions on how to revoke your proxy.
The Company's principal executive offices are located at 1400 31st Avenue3100 10th St SW, Suite 60,P.O. Box 1988, Minot, ND, 58702. The Company's telephone number is (701) 837-4738, and the facsimile number is (701) 838-7785.
58702-1988.
TABLE OF CONTENTS
PROPOSAL 1: ELECTION OF TRUSTEES
The Articles of Amendment and Third Restated Declaration of Trust of the Company,
as amended (the
"Declaration“Declaration of
Trust"Trust”) provide that the Board of Trustees
shallwill be composed of not less than five nor more than fifteen trustees. The Board currently consists of eight trustees.
On March 12, 2021, Terrance P. Maxwell notified the Board he was retiring and would not be standing for re-election. The Board determined that, concurrently with the conclusion of Mr. Maxwell’s term, the size of the Board shall be decreased to seven trustees.
Jeffrey P. Caira, Michael T. Dance, Mark O. Decker, Jr., Emily Nagle Green, Linda J. Hall,
Terrance P. Maxwell, John A. Schissel, and Mary J. Twinem have been nominated for election as trustees at the Annual Meeting, to serve for a term of one year expiring at the
20202022 Annual Meeting of Shareholders and until their successors are duly elected and qualified.
Jeffrey L. Miller served as a Trustee of the Company for 33 years until his retirement at the 2018 Annual Meeting. He served as a Trustee and as a member of the Capital Markets Committee from May 1, 2018 until his retirement at the 2018 Annual Meeting on September 18, 2018.
All of the nominees are presently serving as trustees of the Board and were recommended for nomination for re-election by the Nominating and Governance Committee of the Board, and such recommendations were adopted by the Board.
In the unanticipated event that any nominee should become unavailable for election, either the persons named as proxies on the proxy card will have discretionary authority to vote pursuant to the proxy card for a substitute nominee nominated by the Board or the Board, on the recommendation of the Nominating and Governance Committee, may reduce the size of the Board and number of nominees.
The charts below provide additional information regarding the proposed composition of our Board considering the nominees, including age of our trustees, trustee tenure, gender diversity, and Board independence:
The affirmative vote
of the holders of a majority of the
votes of the shareholderscommon shares present in person or by proxy at the Annual Meeting, provided a quorum is present, is required to elect each of the
eightseven trustee nominees.
The Board recommends that shareholders vote FOR Jeffrey P. Caira, Michael T. Dance, Mark O. Decker, Jr., Emily Nagle Green, Linda J. Hall, Terrance P. Maxwell, John A. Schissel,the election of the seven nominees named in the Proxy Statement as trustees of the Company, each to serve for a term of one year expiring at the 2022 Annual Meeting of Shareholders and Mary J. Twinem.until his or her successor is duly elected and qualified.
Table of ContentsTABLE OF CONTENTS
The following table sets forth the names of and biographical information regarding each of the nominees, including their age as of
May 1, 2019,December 31, 2020, principal occupation, the year they each first became a trustee, their current Board committee memberships and the experience, qualifications, attributes and skills that have led the Board to conclude that they should serve as a trustee of the Company.
| | Jeffery P. Caira Chair | | | Former Director—Co-Portfolio Manager with AEW Capital Management
Jeffrey P. Caira has served as a trustee of the Company since June 23, 2015, and as Chair of the Board since April 27, 2017. Mr. Caira has over 35 years of experience in the real estate industry. From 2003 to 2013, he served in various positions at AEW Capital Management, lastly as Director—Co-Portfolio Manager of the North American Diversified Strategy, a multi-billion dollar real estate securities portfolio, before retiring.
Prior to that, Mr. Caira served as a Vice President-Portfolio Manager and Senior Analyst for Pioneer Investment Management, Inc. from 2000 to 2003, managing the U.S. real estate sector fund; and Vice-President—Senior Equity Research Analyst for RBC Dain Rauscher, Inc. (formerly Tucker Anthony) from 1998 to 2000, covering equity REITs. Mr. Caira graduated from the University of Notre Dame with a BBA and holds an MBA from the Kellogg School of Management. He is a licensed real estate broker in the Commonwealth of Massachusetts.
Mr. Caira brings the following experience, qualifications, attributes, and skills to the Board: general business management, portfolio management, portfolio valuation and analysis of public securities and real estate, capital markets, investment banking, finance, strategic planning, property management and property acquisition experience from his over 35 years in the real estate industry; insight into governance and management best practices from over ten years of serving on boards of various non-profit organizations; and extensive business and personal contacts in the real estate and investment banking fields. | | | 63 | | | 2015 | | | Independent Chair
of the Board of
Trustees; Audit | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee
Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Jeffery P. Caira
Chair | | Independent Director (NYSE: IRET), Former Director — Co-Portfolio Manager with AEW Capital Management Jeffrey P. Caira has served as a trustee of the Company since June 23, 2015, and as Chair of the Board since April 27, 2017. Mr. Caira has over 30 years of experience in the real estate industry. From 2003 to 2013, he served in various positions at AEW Capital Management, lastly as Director — Co-Portfolio Manager of the North American Diversified Strategy, a multi-billion dollar real estate securities portfolio, before retiring. Prior to that, Mr. Caira served as a Vice President-Portfolio Manager and Senior Analyst for Pioneer Investment Management, Inc. from 2000 to 2003, managing the U.S. real estate sector fund; and Vice-President — Senior Equity Research Analyst for RBC Dain Rauscher, Inc. (formerly Tucker Anthony) from 1998 to 2000, covering equity REITs. Mr. Caira received a Bachelor's degree from the University of Notre Dame and an M.B.A. from the Kellogg School of Management. He is a licensed real estate broker in the Commonwealth of Massachusetts. Mr. Caira brings the following experience, qualifications, attributes, and skills to the Board: general business management, portfolio management, portfolio valuation and analysis of public securities and real estate, capital markets, investment banking, finance, strategic planning, property management and property acquisition experience from his over thirty years in the real estate industry; insight into governance and management best practices from over ten years of serving on boards of various non-profit organizations; and extensive business and personal contacts in the real estate and investment banking fields. | | 61 | | 2015 | | Chair of the Board of Trustees; Audit |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | Michael T. Dance | | | Former Chief Financial Officer of Essex Property Trust, Inc. (NYSE: ESS)
Michael T. Dance has served as a trustee of the Company since April 19, 2016. Mr. Dance has over 23 years of real estate industry experience and over 35 years of accounting and finance experience. From 2005 until he retired in late 2015, Mr. Dance served as Executive Vice President and Chief Financial Officer of Essex Property Trust, Inc., an S&P 500 company and publicly traded REIT that acquires, develops, redevelops, and manages multifamily residential properties in select West Coast markets. From 2002 to 2005, Mr. Dance was an independent consultant providing Sarbanes-Oxley compliance consultation and litigation support and served as an adjunct Professor for the University of California at Berkeley, Haas School of Business. Mr. Dance began his career at KPMG in 1978 and was a partner from 1990 to 2002. Mr. Dance received his Bachelor’s degree in Economics from California State University, East Bay, and is a Certified Public Accountant (retired).
Mr. Dance brings the following experience, qualifications, attributes and skills to the Board: general business management, corporate governance and finance and strategic planning experience from his executive-level position with a publicly traded REIT; real estate industry investment, development, acquisition, disposition, marketing, and management experience from his over 23 years in the real estate industry; accounting and public reporting experience; and extensive business and personal contacts in the real estate industry. | | | 64 | | | 2016 | | | Independent Trustee;
Audit, Compensation | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee
Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Michael T. Dance |
|
Independent Director (NYSE: IRET), Former Chief Financial Officer of Essex Property Trust, Inc. (NYSE: ESS)Michael T. Dance has served as a trustee of the Company since April 19, 2016. Mr. Dance has over 23 years of real estate industry experience and over 35 years of accounting and finance experience. From 2005 until he retired in late 2015, Mr. Dance served as Executive Vice President and Chief Financial Officer of Essex Property Trust, Inc., an S&P 500 company and publicly traded REIT that acquires, develops, redevelops, and manages multifamily residential properties in select West Coast markets. From 2002 to 2005, Mr. Dance was an independent consultant providing Sarbanes-Oxley compliance consultation and litigation support and served as an adjunct Professor for the University of California at Berkeley, Haas School of Business. Mr. Dance began his career at KPMG in 1978 and was a partner from 1990 to 2002. Mr. Dance received his Bachelor's degree in Economics from California State University, East Bay, and is a Certified Public Accountant (retired). Mr. Dance brings the following experience, qualifications, attributes and skills to the Board: general business management, corporate governance and finance and strategic planning experience from his executive-level position with a publicly traded REIT; real estate industry investment, development, acquisition, disposition, marketing, and management experience from his approximately 24 years in the real estate industry; accounting and public reporting experience; and extensive business and personal contacts in the real estate industry. |
|
62 |
|
2016 |
|
Audit (Chair) |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | Mark O. Decker. Jr. | | | President, Chief Executive Officer, and Chief Investment Officer of the Company
Independent Director of Alpine Income Property Trust, Inc. (NYSE: PINE)
Mark O. Decker, Jr. has served as a trustee of the Company since April 27, 2017, and has been employed by the Company since August 5, 2016. Mr. Decker has been the Company’s President and Chief Investment Officer since August 5, 2016 and was also appointed as the Company’s Chief Executive Officer on April 27, 2017. For the two decades prior to joining Centerspace, Mr. Decker was an investment banker and spent the majority of that time serving the real estate industry as a senior banker at several firms with a focus on growth and transformational transactions for public real estate owner/operators, lodging companies and real estate services firms. Immediately prior to joining our company Mr. Decker served as the Managing Director and U.S. Group Head of Real Estate Investment and Corporate Banking at BMO Capital Markets.
Mr. Decker received a Bachelor’s degree in History from the College of William & Mary. In addition, Mr. Decker is a Trustee for Alpine Income Property Trust (NYSE:PINE) and is actively involved with several industry groups including the National Multihousing Council, Urban Land Institute, and Nareit.
Mr. Decker brings the following experience, qualifications, attributes and skills to the Board: capital markets and strategic planning experience from his 16-year career as a real estate investment banker; familiarity with the various real estate markets in which the Company operates through his service as an executive with the Company; and extensive contacts through his years in the real estate and finance industries. | | | 45 | | | 2017 | | | Executive Trustee;
None | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee
Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Mark O. Decker. Jr. |
|
President, Chief Executive Officer, and Chief Investment Officer of the CompanyMark O. Decker, Jr. has served as a trustee of the Company since April 27, 2017, and has been employed by the Company since August 5, 2016. Mr. Decker has been the Company's President and Chief Investment Officer since August 5, 2016 and was also appointed as the Company's Chief Executive Officer on April 27, 2017. From 2011 to 2016, Mr. Decker served as the Managing Director and U.S. Group Head of Real Estate Investment and Corporate Banking at BMO Capital Markets, the North American-based investment banking subsidiary of the Canadian Bank of Montreal. Prior to that, he served as Managing Director with Morgan Keegan & Company, Inc., a brokerage firm and investment banking business, from February 2011 to September 2011, and worked with Robert W. Baird & Co. Incorporated, an employee-owned international wealth management, capital markets, private equity, and asset management firm with offices in the United States, Europe, and Asia, from 2004 to 2011, where he last served as Managing Director, Real Estate Banking. Mr. Decker received a Bachelor's degree in History from the College of William & Mary. Mr. Decker brings the following experience, qualifications, attributes and skills to the Board: capital markets and strategic planning experience from his 16-year career as a real estate investment banker; familiarity with the various real estate markets in which the Company operates through his service as an executive with the Company; and extensive contacts through his years in the real estate and finance industries. |
|
43 |
|
2017 |
|
None |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | Emily Nagle Green | | | Former CEO of Smart Lunches, Inc.
Independent Director of Casella Waste Systems (NASDAQ: CWST), Volta Networks, and privately-held Lee Kennedy Company
Emily Nagle Green has served as a trustee of the Company since February 15, 2018. Ms. Green has a wealth of experience leading companies that have developed innovative technologies for businesses and consumers alike. She has served as CEO for three separate companies, including Smart Lunches, Inc., a venture-backed start-up providing online ordering and delivery for school lunches, for which she served as CEO from 2012-2016 and raised four rounds of capital, helped to build an award-winning technology platform, and scaled the business to serve 300 schools in 9 states. Prior to that, she served as CEO for two private- equity-backed research firms from 2005-2011: Yankee Group and Cambridge Energy Research Associates (CERA). She also led consumer technology research at Forrester Research, Inc., where she built the then-largest consumer technology research panel, serving executives at dozens of Fortune 1000 firms seeking to meet consumer needs in a fast-changing technology environment. She also coaches first-time CEOs and is the author of “ANYWHERE: How Global Connectivity is Revolutionizing the Way We Do Business” (McGraw-Hill 2010). Ms. Green received a Bachelor’s degree in linguistics from Georgetown University and a Master’s degree in Artificial Intelligence and Computer Graphics from the University of Pennsylvania.
Ms. Green brings the following experience, qualifications, attributes and skills to the Board: executive leadership and management, general business management, application of technology, corporate governance, strategic planning experience from serving as CEO of three companies, and management best practices from her years of advising CEOs and boards of various companies and non-profit organizations. | | | 63 | | | 2018 | | | Independent Trustee;
Nominating and
Governance (Chair); | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Emily Nagle Green | | Independent Director (NASDAQ: CWST), (NYSE: IRET) and privately-held Lee Kennedy Company Emily Nagle Green has served as a trustee of the Company since February 15, 2018. Ms. Green has a wealth of experience leading companies that have developed innovative technologies for businesses and consumers alike. She has served as CEO for three separate companies, including Smart Lunches, Inc., a venture-backed start-up providing online ordering and delivery for school lunches, for which she helped to build an award-winning technology platform, and scaled the business to serve 300 schools in 9 states. Prior to that, she served as CEO for two private-equity-backed research firms: Yankee Group and Cambridge Energy Research Associates (CERA). She also led consumer technology research at Forrester Research, Inc., where she built the then-largest consumer technology research panel, serving executives at dozens of Fortune 1000 firms seeking to meet consumer needs in a fast-changing technology environment. She also coaches first-time CEOs and is the author of "ANYWHERE: How Global Connectivity is Revolutionizing the Way We Do Business" (McGraw-Hill 2010). Ms. Green received a Bachelor's degree in linguistics from Georgetown University and a Master's degree in Artificial Intelligence and Computer Graphics from the University of Pennsylvania. Ms. Green brings the following experience, qualifications, attributes and skills to the Board: executive leadership and management, general business management, application of technology, corporate governance, strategic planning experience from serving as CEO of three companies, and management best practices from her years of advising CEOs and boards of various companies and non-profit organizations. | | 61 | | 2018 | | Nominating and Governance (Chair); Compensation |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | Linda J. Hall | | | Entrepreneur-in-Residence, Carlson School of Management, University of Minnesota
Independent Director of DentaQuest
Linda J. Hall, Ph.D., has served as a trustee of the Company since September 21, 2011. Since 2008, Ms. Hall has been a volunteer Entrepreneur-in-Residence at the Carlson School of Management, University of Minnesota. Ms. Hall has more than 40 years of executive experience in the manufacturing and service sectors, including healthcare, venture capital financing, employee benefits, and teaching. During her career, she has launched 20 start-up companies as an executive, director, or consultant, including three inside $1 billion plus companies.
Ms. Hall also has 25 years of experience serving on the boards of privately-held and public reporting companies in the United States and Europe, including serving as the chair of compensation, compliance, governance, and nominating committees and as a member of audit committees. Ms. Hall currently serves on the boards of DentaQuest, Children’s Minnesota, and Martell Diagnostic Laboratories. She previously served on the boards of four publicly held companies: Amedisys (NASDAQ: AMED) from 2013 to 2019, Health Fitness Corporation (NASDAQ: HFIT) from 2001 until it was acquired in 2010, MTS Systems Corporation (NASDAQ: MTS) from 1995 to 2006, and August Technology (NASDAQ: AUGT) from 2002 until it was acquired in 2006. She also served on the Ascension Ventures board from 2011 to 2018, and previously served on the board of a privately-held European company, Laastari/ R Clinic, from 2010 to 2015. She is a Phi Beta Kappa graduate of the University of Michigan and received a master’s degree in Psychology from the University of Michigan, a master’s degree in Social Work from the University of Minnesota, and a Ph.D. in Education Administration from the University of Minnesota.
Ms. Hall brings the following experience, qualifications, attributes and skills to the Board: general business management, marketing strategy and strategic planning experience from her executive-level positions with public and private companies, and extensive experience with corporate governance and compensation practices from her service on numerous non-profit, private, and public company boards of directors. | | | 72 | | | 2011 | | | Independent Trustee;
Compensation
(Chair); Nominating
and Governance | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Linda J. Hall | | Independent Director (NYSE: IRET), (NASDAQ: AMED), Entrepreneur-in-Residence, Carlson School of Management, University of Minnesota Linda J. Hall, Ph.D., has served as a trustee of the Company since September 21, 2011. Since 2008, Ms. Hall has been a volunteer Entrepreneur-in-Residence at the Carlson School of Management, University of Minnesota. Ms. Hall retired from her CEO role after 38 years of executive experience in the manufacturing and service sectors, including healthcare, venture capital financing, employee benefits, and teaching. During her career, she has launched 14 start-up companies as an executive, director, or consultant, including three inside $1 billion plus companies. Ms. Hall also has 24 years of experience serving on the boards of privately-held and public reporting companies in the United States and Europe, including serving as the chair of compensation, compliance, governance, and nominating committees and as a member of audit committees. Ms. Hall currently serves on the boards of Amedisys (NASDAQ: AMED) and DentaQuest and served on the board of Ascension Ventures until December 31, 2018. She previously served on the boards of three publicly held companies: Health Fitness Corporation (NASDAQ: HFIT) from 2001 until it was acquired in 2010, MTS Systems Corporation (NASDAQ: MTS) from 1995 to 2006, and August Technology (NASDAQ: AUGT) from 2002 until it was acquired in 2006. She also previously served on the board of Laastari/R Clinic, a privately held European company, from 2010 to 2015. She is a Phi Beta Kappa graduate of the University of Michigan and received a Ph.D. from the University of Minnesota. Ms. Hall brings the following experience, qualifications, attributes and skills to the Board: general business management, healthcare industry, marketing strategy and strategic planning experience from her executive-level positions with public and private companies, and extensive experience with corporate governance and compensation practices from her service on numerous non-profit, private, and public company boards of directors. | | 70 | | 2011 | | Compensation (Chair); Nominating and Governance |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | John A. Schissel | | | President and Chief Financial Officer for Carr Properties, LLC, a privately held REIT
John A. Schissel has served as a trustee of the Company since April 19, 2016. He has over 30 years of experience collectively in the capital markets and as an executive for both public and private real estate company platforms. From December 2015 to the present, Mr. Schissel has served as the President and Chief Financial Officer for Carr Properties, LLC, a privately held REIT focused on the ownership, development, acquisition and management of best-in-class office properties in the Washington, DC and Boston, MA markets. In his role he oversees the Company’s Accounting, Finance, Human Resources, Operations, and Technology functions. Mr. Schissel served as the Executive Vice President and Chief Financial Officer of Invitation Homes, the nation’s largest owner and operator of single-family rental homes from 2014 to 2015; and Executive Vice President and Chief Financial Officer of BRE Properties, Inc., a NYSE listed multifamily REIT based on the West Coast, from 2009 to 2014. His career experience also includes serving in Wachovia Securities’ Real Estate Investment Banking Group. He received his Bachelor of Science degree in Business Administration with a concentration in finance from Georgetown University.
Mr. Schissel brings the following experience, qualifications, attributes and skills to the Board: corporate finance, capital markets, investment banking, executive management, and strategic planning experience; public company executive management, accounting, and reporting experience from serving as CFO of two publicly-traded REITs; real estate industry investment, development and management experience from his over 30 years in the real estate industry; and his extensive business and personal contacts in the real estate industry. | | | 54 | | | 2016 | | | Independent Trustee;
Compensation | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Terrance P. Maxwell | | Chief Financial Officer, Managing Director and member of the Executive Committee of Robert W. Baird & Co. Incorporated, Independent Director (NYSE: IRET) Terrance P. Maxwell has served as a trustee of the Company since November 6, 2013. Mr. Maxwell has been the Chief Financial Officer since March 2015 and a Managing Director and member of the Executive Committee since May 2014 of Robert W. Baird & Co. Incorporated ("Baird"), an employee-owned, international wealth management, capital markets, private equity and asset management firm with offices in the United States, Europe, and Asia. Prior to this, he had served in several positions at Baird, including Director of Corporate Development and Strategic Investment from May 2014 until March 2015 and head of Investment Banking from 1997 to 2006, and has served on the board of Baird and a number of Baird-affiliated companies. From March 2011 through May 2012, Mr. Maxwell provided management consulting services to and/or served on the board of Flatirons Solutions Corporation, a Baird private equity portfolio company. From August 2006 through May 2010, and again from August 2011 through May 2014, Mr. Maxwell was a Lecturer at the University of Wisconsin-Madison, where he taught courses on corporate financing, corporate restructuring, investment banking, and mergers and acquisitions. Currently, Mr. Maxwell is a member of the board of the Greenhouse Funds, an independent asset management company in which Baird has a strategic investment. Mr. Maxwell received an M.B.A. from the Kellogg School of Management at Northwestern University. Mr. Maxwell brings the following experience, qualifications, attributes and skills to the Board: general business management, capital markets, investment banking, finance and strategic planning experience from his over twenty years in investment banking at Baird; insight into governance and management best practices from his years of advising boards on strategic transactions and his experience as a director of various companies and non-profit organizations; and extensive business and personal contacts in the finance and investment banking fields. | | 58 | | 2013 | | Nominating and Governance |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | Mary J. Twinem | | | Former Executive Vice President and Chief Financial Officer of Buffalo Wild Wings, Inc.
Independent director of Valvoline, Inc. (NYSE: VVV) and Medica Holding Company, a multi state health insurance company.
Mary J. Twinem has served as a trustee of the Company since February 15, 2018. Ms. Twinem retired in 2016 after two decades as the Executive Vice President and Chief Financial Officer for Buffalo Wild Wings, Inc.
Ms. Twinem managed the functional areas of Financial Reporting, Financial Planning and Analysis, Information Systems, Investor Relations, Supply Chain and Philanthropy for Buffalo Wild Wings and its over 1,100 company-owned and franchised Buffalo Wild Wings, PizzaRev, and R Taco restaurants in the United States and 4 countries worldwide.
Ms. Twinem has over 30 years of experience in accounting, financial reporting, and income tax preparation, including seven years in public accounting where she assisted primarily small businesses. From 1989 to 1994, she worked for Dahlberg/Miracle-Ear, the manufacturer and franchisor of Miracle-Ear hearing aids, ultimately becoming the company's Controller. In 1995, Twinem joined Buffalo Wild Wings as Controller and was promoted to Chief Financial Officer in 1996. In Twinem's over 20 years with Buffalo Wild Wings, she established the financial framework to grow the company from 35 to over 1,100 restaurants, with system-wide revenue of $3.8 billion in 2016. She was instrumental in securing both debt and private equity financings, ultimately leading the company through one of the most successful Initial Public Offerings of 2003. Ms. Twinem was named one of the “Top Women in Finance” in Minnesota by the Finance and Commerce publication in 2004 and inducted into their Circle of Excellence in 2010, and was a 2009 finalist for “CFO of the Year” by Minneapolis-St. Paul Business Journal.
Ms. Twinem received a B.S. in Accounting from the University of Wisconsin-Platteville in 1982 and became a Certified Public Accountant in 1984. She serves on the board of directors of Medica Holdings Company, the non-profit family of companies that | | | 60 | | | 2018 | | | Independent Trustee;
Audit (Chair) | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
John A. Schissel | | President and Chief Financial Officer for Carr Properties, LLC, a privately held REIT John A. Schissel has served as a trustee of the Company since April 19, 2016. He has over 27 years of real estate industry, capital markets, and finance/accounting experience. From December 2015 to the present, Mr. Schissel has served as the President and Chief Financial Officer for Carr Properties, a privately held REIT focused on the ownership, development, acquisition and management of high-quality office properties in the Washington, DC and Boston, MA markets. Previously he had served as Chief Financial Officer and Executive Vice President of Carr Properties from 2004 until 2009. From 2014 through 2015, Mr. Schissel served as the Executive Vice President and Chief Financial Officer of Invitation Homes, the nation's largest owner and operator of single-family rental homes. From 2009 through 2014, Mr. Schissel served as Executive Vice President and Chief Financial Officer of BRE Properties, Inc., a West Coast multifamily REIT, until its acquisition by Essex Property Trust Inc. He received his Bachelor's degree in Business Administration with a concentration in finance from Georgetown University. Mr. Schissel brings the following experience, qualifications, attributes and skills to the Board: corporate finance, capital markets, investment banking, executive management, and strategic planning experience; public company executive management, accounting, and reporting experience from serving as CFO of two publicly-traded REITs; real estate industry investment, development, and management experience from his approximately 27 years in the real estate industry; and his extensive business and personal contacts in the real estate industry. | | 52 | | 2016 | | Compensation |
| | | | | | | | | |
Table of ContentsTABLE OF CONTENTS
| | | | | include Medica Health Plans, and serves as their audit committee chair. She was named to the board of directors and audit committee of Valvoline, Inc., a 150-year old brand that became a NYSE-listed public company in 2016, and serves as their compensation committee chair. She joined the board of trustees for Centerspace in February 2018 and serves as audit committee chair. She qualifies as an audit committee financial expert as defined for publicly-traded companies. She previously served on the non-profit boards of Hospitality Minnesota Education Foundation and the Boys & Girls Clubs of the Twin Cities.
Ms. Twinem brings the following experience, qualifications, attributes, and skills to the Board: general business management; financial planning and analysis; business-to-consumer insights; investor relations; and supply chain management. Ms. Twinem also brings public company financial reporting expertise and executive management experience gained from her more than 20 years of service as the CFO and as an executive officer of Buffalo Wild Wings. | | | | | | | | | | |
| | | | | | | | |
Nominee
| | Principal Occupation and Summary Biography
| | Age
| | Trustee Since
| | Board Committee
Membership
|
|---|
| | | | | | | | | |
Mary J. Twinem | | Independent director (NYSE: VVV), (NYSE: IRET), and Medica Holding Company, a multi-state health insurance company. Mary J. Twinem has served as a trustee of the Company since February 15, 2018. She has over 30 years of experience in accounting, financial reporting, financial planning and analysis, investor relations, and supply chain management. From 1996 until 2016, she served as Executive Vice President and Chief Financial Officer of Buffalo Wild Wings, Inc., a restaurant operations and franchising company, until her retirement. Prior to that position, she served as Controller of Buffalo Wild Wings in 1995. Ms. Twinem was named one of the "Top Women in Finance" in Minnesota by the Finance and Commerce publication in 2004 and was inducted into their Circle of Excellence in 2010. Ms. Twinem received a Bachelor's degree in accounting from the University of Wisconsin-Platteville and was a Certified Public Accountant (inactive). Ms. Twinem brings the following experience, qualifications, attributes, and skills to the Board: general business management; financial planning and analysis; business-to-consumer insights; investor relations; and supply chain management. Ms. Twinem also brings public company financial reporting expertise and executive management experience gained from her more than 20 years of service as the CFO and as an executive officer of Buffalo Wild Wings. | | 58 | | 2018 | | Audit |
| | | | | | | | | |
TABLE OF CONTENTS
Table of Contents
CORPORATE GOVERNANCE AND BOARD MATTERS
Centerspace’s management and Board of Trustees aspire to be good stewards of the shareholder investment entrusted to the Company. Sound corporate governance is critical to retaining the trust of investors and to the Company’s commitment to continue to operate with the highest standards of integrity. Certain highlights from the Company’s corporate governance policies and practices are set forth below. Our Governance Guidelines also can be found on our website at http://ir.centerspacehomes.com under “Corporate Overview—Corporate Governance.”
Supermajority Independent Board | | | Independent Standing Committees and
Lead Independent Director | | | | | |
Supermajority Independent Board | | | | Independent Standing Committees and Lead Independent Director | | | | Regular Access to and Involvement with
Management |
| | | | | | | | |
| The only member of management who serves on the Board is the Company'sCompany’s President and CEO. SevenSix of the eightseven nominees for the Board, or 87.5%85.7%, are independent. |
|
|
|
Only independent trustees serve on the standing committees, including Audit, Compensation, and Nominating and Governance. |
|
|
|
In addition to regular access to management during Board and committee meetings, the independent trustees have ongoing, direct access to members of management and to the Company'sCompany’s business. | |
Board Refreshment | | | Engaged Board | | | | Stockholder Engagement | |
Board Refreshment | | | | Engaged Board | | | | Stockholder Engagement |
| | | | | | | | |
Trustees of varying tenures and perspectives serve on the Board, with new trustees joining the Board every few years, including two new director nominees and one trustee retirement in calendar year 2018.several years. |
|
|
|
In addition to regular access to management, the independent trustees meet at least quarterly, including in executive session, and receive written updates from the CEO at least monthly. |
|
|
|
Under the direction of the Board, the Company regularly engages with shareholders on governance, pay, and business matters. |
|
|
|
|
|
|
|
|
|
| | | | | | | | |
| | | | | | | | |
| The Company prohibits trustees and executive officers from entering into pledging or hedging transactions involving Company securities and from holding Company securities in margin accounts or pledging such securities as collateral for loans. |
|
|
|
Since inception, the Company'sCompany’s trustees have been elected annually, and the Company requires its trustees to be elected by a majority of the votes cast. Trustees failing to get a majority of the votes cast are expected to tender their resignation.vote. |
|
|
|
The Company maintains a related party transaction policy to ensure that potential conflicts of interests are addressed and that the Company'sCompany’s decisions are based on considerations only in the best interests of the Company and its shareholders. | |
Risk Assessment | | | No Interlocking Directorships | | | | Term Limits | |
Risk Assessment | | | | No Interlocking Directorships | | | | Term Limits |
| | | | | | | | |
The Board conducts an annual risk assessment that focuses on the key risks facing the Company. |
|
|
|
No Company trustee or member of management serves on a Board or a compensation committee of a company at which a Company trustee is also an employee. |
|
|
|
Rather than impose arbitrary limits on service, the Company regularly (at least annually) reviews each trustee'strustee’s continued role on the Board and considers the need for periodic Board refreshment. | |
Regular Self-Evaluations | | | Mandatory Retirement | | | | | |
Non-Staggered Board | | | | Mandatory Retirement | | | | Separation of Chair and CEO | |
| | The Board and its committees conduct annual self-evaluations. | | | | | | | | |
All Company trustees have always been elected only to one-year terms. |
|
|
|
The Company'sCompany’s Governance Guidelines require that trustees must be less than 74 years of age upon the date of the annual meeting at which such trustee is elected or re-elected. |
|
|
|
The Company's general policy under itsCompany’s governance guidelines isprovide that the positions of Board Chair of the Board and CEO should be held by separate persons. The Board is led by an Independent Chair. | |
| | The Nominating & Governance Committee has oversight of the Company’s environmental, social and governance (ESG) initiatives. The Company is committed to creating a diverse, sustainable and environmentally responsible organization.
In May 2020, the Company published its inaugural ESG report, which can be found on our website at www.centerspacehomes.com. | | | In 2020, the Company provided more than $52,000 of financial support for over 25 organizations benefiting the communities in which we operate. During our Juneteenth fundraiser in June 2020, our Team Members donated over $14,000 to two Minneapolis charities. We also provided paid time off that allowed our team members to contribute over 648 volunteer hours in our communities. We and our team members overall donated more than $7,500 to Team Hope, our emergency fund for team members in need. | | | The Board and each standing committee reviews its charter annually, along with the Company’s Governance Guidelines, Code of Conduct, Code of Ethics for Senior Financial Officers, Insider Trading Policy, and Whistleblower Policy. | |
TABLE OF CONTENTS
Attendance at Board and Committee Meetings
All trustees are expected to attend each meeting of the Board and the committees on which they serve. During
the 2018 transition period,2020, the Board held
fourtwelve meetings, the Audit Committee held
fourfive meetings, the Compensation Committee held
fourseven meetings, and the Nominating and Governance Committee held
threefour meetings. No trustee nominee named in the Proxy Statement attended fewer than 75% of the meetings of the Board and the committees on which he or she served during the past
fiscal year.
Trustees are not required to attend the Annual Meeting, but the following Trustees attended the virtual 2020 Annual Meeting of Shareholders: Mr. Caira (Chair), Mr. Decker (CEO), Ms. Twinem, Ms. Green, Mr. Maxwell, and Mr. Schissel.
The Board of Trustees determined that each of Jeffrey P. Caira, Michael T. Dance, Emily Nagle Green, Linda J. Hall, Terrance P. Maxwell, John A. Schissel, and Mary J. Twinem qualified as an
"independent trustee"“independent trustee” in accordance with the NYSE listing standards (the
"Standards"“Standards”). Under the Standards, no trustee of the Company will qualify as independent unless the Board of Trustees has affirmatively determined that the trustee has no material relationship with the Company, either directly or as a
Table of Contents
partner, shareholder, or officer of an organization that has a relationship with the Company. The Standards specify certain relationships that are deemed to preclude a finding of independence, including, for example, employment by the Company or engaging in certain business dealings with the Company. In making these determinations, the Board reviewed and discussed information provided by the trustees and the Company with regard to each trustee'strustee’s business and personal activities as they may relate to the Company and the Company'sCompany’s management.
Each member of the Audit Committee qualifies as
"independent"“independent” under the Standards and the
NYSE's additionalNYSE’s enhanced standards for members of audit committees
and meets the special standards established by the Securities and Exchange Commission
("SEC"(“SEC”)
for members of audit committees.and the NYSE. Each member of the Compensation Committee qualifies as
"independent"“independent” under the
Standards and the NYSE's enhanced
standardstandards for members of compensation
committees.committees established by the SEC and the NYSE.
| | |
AGE OF TRUSTEES
 |
|
TRUSTEE TENURE
 |
GENDER DIVERSITY
 |
|
BOARD INDEPENDENCE
 |
Board Leadership Structure
As described above, the Chair of the Board, Mr. Caira, is an independent trustee under the Standards. Mr. Caira has served as Chair of the Board since April 27, 2017. The Board of Trustees believes thatAccording to our Governance Guidelines, the Company generally should maintain a Board leadership structure in which the roles of Chief Executive Officer and Chair of the Board are separate and the Chair of the Board is independent under the Standards. The Company's Governance Guidelines state that "the Board's general policy is that the positions of Chairman of the Board and Chief Executive Officer should be held by separate persons." The separation of offices allows the Chair of the Board to focus on management of Board matters and allows the Chief Executive Officer to focus his attention on managing the Company'sCompany’s business. Additionally, the Company believes the separation of offices ensures the objectivity of the Board in its management oversight role, specifically with respect to reviewing and assessing the Chief Executive Officer'sOfficer’s performance.
Table of Contents
Board Committees
The
Board currently has three standing committees
help the Board to more effectively direct and review the
Company'sCompany’s operations and strategic outlook. In addition, the committees allow management to respond timely to factors affecting the ongoing operations of the Company. Management regularly consults with committee chairs to review possible actions and seek counsel. Where appropriate, the Board delegates authority to committees (within specified parameters) to finalize the execution of various Board functions.
The Board has established the following standing committees: Audit, Compensation, and Nominating and Governance. The present members of these committees are indicated in the chart below. During the 2018 transition period, the Board met four times, the
TABLE OF CONTENTS
Audit Committee
met four times, the Compensation Committee met four times, and the Nominating and Governance Committee met three times. | | | | | | | | |
| |
| |
| |
| |
|
|---|
Committee |
| | | Key Responsibilities |
| | | Members |
Audit Committee | | | | •
Oversees the Company's accounting and financial reporting processes and audits of its financial statements, including the integrity of the financial statements.
•
Directly responsible for the appointment, compensation, and oversight of the independent auditors.
•
Reviews the scope and overall plans for, and results of, the annual audit and internal control over financial reporting.
| | | | Michael T. Dance (Chair)Jeffrey P. Caira
Mary J. Twinem
|
| | | | •
Reviews the responsibilities, staffing, budget, design, implementation, and results of the internal audit function.
| | | | |
| | | | •
Consults with management and the independent auditor with respect to the Company's processes for risk assessment and enterprise risk management.
| | | | |
| | | | •
Reviews and approves the Company's policy for the pre-approval of audit and permitted non-audit services by the independent auditors as well as any services provided pursuant to such policy.
| | | | |
| | | | •
Reviews and discusses with management and the independent auditor quarterly earnings releases prior to their issuance and quarterly reports on Form 10-Q and annual reports on Form 10-K prior to their filing.
| | | | |
| | | | •
Reviews with management the scope and effectiveness of the Company's disclosure controls and procedures.
| | | | |
| | | | •
Meets regularly with members of the Company's management and with the independent auditor, including periodic meetings in executive session.
| | | | |
| | | | | | | | |
Table of Contents
| | | | | | | | |
| |
| |
| |
| |
|
|---|
Committee |
| | | Key Responsibilities |
| | | Members |
Compensation Committee | | | | •
Provides for succession planning for the executive officers, with particular focus on CEO succession.
•
Oversees the goals and objectives of the Company's executive compensation plans.
•
Annually evaluates the performance of the CEO, including reviewing, setting, and approving goals and objectives for the CEO and, together with the other independent trustees, determines the CEO's compensation.
| | | | Linda J. Hall (Chair)
Emily N. Green
John A. Schissel
|
| | | | •
Annually reviews and approves the evaluation process for the CEO and the other executive officers and reviews the CEO's decisions with respect to compensation of the other executive officers.
| | | | |
| | | | •
Makes recommendations to the Board regarding incentive compensation plans and equity-based plans and approves any equity compensation.
| | | | |
| | | | •
Periodically reviews and approves any employment agreements, severance arrangements, or change in control agreements and provisions for the Company's executive officers.
| | | | |
| | | | •
Receives periodic reports on the Company's compensation programs, 401(k) plan options and matching contributions, and employee health care benefits.
| | | | |
| | | | •
Considers the results of shareholder advisory votes on executive compensation in connection with the review and approval of executive officer compensation.
| | | | |
| | | | •
Reviews and discusses the Compensation Discussion & Analysis and Compensation Committee Report with management.
| | | | |
| | | | •
Periodically reviews the goals and objectives of the Company's executive compensation plans.
| | | | |
| | | | •
Reviews peer groups and criteria for benchmarking used to assess performance and compensation levels for executive officers.
| | | | |
| | | | | | | | |
Table of Contents
| | | | | | | | |
| |
| |
| |
| |
|
|---|
Committee |
| | | Key Responsibilities |
| | | Members |
Nominating and Governance Committee | | | | •
Plans for Board refreshment and succession planning for directors and identifies, recruits, and interviews candidates to fill positions on the Board.
•
Identifies and recommends to the Board individuals qualified to serve on the Board.
•
Evaluates incumbent trustees to determine whether to recommend them to the Board as nominees for re-election.
| | | | Emily N. Green (Chair)Linda J. Hall
Terrance P. Maxwell
|
| | | | •
Focuses on Board composition and procedures and recommends measures to ensure that the Board reflects the appropriate balance of knowledge, experience, skills, and expertise.
| | | | |
| | | | •
Develops and periodically reviews a set of corporate governance principles applicable to the Company and its management.
| | | | |
| | | | •
Makes recommendations to the Board regarding the size and criteria for membership on the Board and committees.
| | | | |
| | | | •
Oversees a systematic annual evaluation of the Board, committees, and individual directors in an effort to continuously improve the function of the Board.
| | | | |
| | | | •
Considers corporate governance matters that may arise and develops appropriate recommendations.
| | | | |
Audit Committee
The Audit Committee is composed of three trustees, all of whom are independent under the Standards and as defined in the rules of the SEC and meet the NYSE's additional standards for members of the Audit Committee.independent. Information regarding the functions performed by the Audit Committee is set forth in the "Report of the Audit Committee," contained elsewhere in this Proxy Statement.below. The Audit Committee is governed by a written charter that has been approved by both the Audit Committee and the Board. The Audit Committee annually reviews and assesses the adequacy of its charter. The most recent review was performed at the Audit Committee meeting in December 2018.
The Board has determined that Mr. Dance,Ms. Twinem, the Chair of the Audit Committee, and Mr. Caira and Ms. Twinem,Mr. Dance, members of the Audit Committee, are all "audit“audit committee financial experts,"” as that term is defined in applicable SEC rules.
| | Audit Committee | | | • | | | Oversees the Company’s accounting and financial reporting processes and audits of its financial statements, including the integrity of the financial statements. | | | Mary J. Twinem (Chair)
Jeffrey P. Caira
Michael T. Dance | |
| | | | | | |
| | • | | | Directly responsible for the appointment, compensation, and oversight of the independent auditors. | |
| | | | | | |
| | • | | | Reviews the scope and overall plans for, and results of, the annual audit and internal control over financial reporting. | |
| | | | | | |
| | • | | | Reviews the responsibilities, staffing, budget, design, implementation, and results of the internal audit function. | |
| | | | | | |
| | • | | | Consults with management and the independent auditor with respect to the Company’s processes for risk assessment and enterprise risk management. | |
| | | | | | |
| | • | | | Reviews and approves the Company’s policy for the pre-approval of audit and permitted non-audit services by the independent auditors as well as any services provided pursuant to such policy. | |
| | | | | | |
| | • | | | Reviews and discusses with management and the independent auditor quarterly earnings releases prior to their issuance and quarterly reports on Form 10-Q and annual reports on Form 10-K prior to their filing. | |
| | | | | | |
| | • | | | Reviews with management the scope and effectiveness of the Company’s disclosure controls and procedures. | |
| | | | | | |
| | • | | | Meets regularly with members of the Company’s management and with the independent auditor, including periodic meetings in executive session. | |
TABLE OF CONTENTS
The Compensation Committee is composed of three trustees, all of whom are
independent underindependent. Information regarding the
Standards and meet the NYSE's enhanced standards for members offunctions performed by the Compensation
Committee. The Compensation Committee
recommends to the Company's independent trustees the compensation of the executive officers of the Company, approves the Company's management succession plan,
Table of Contents
recommends to the Board the compensation of Company trustees and attends to other matters relating to executive retention and compensation. For more information, see "Compensation Discussion and Analysis" contained elsewhere in this Proxy Statement.is set forth below. The Compensation Committee is governed by a written charter that has been approved by both the Compensation Committee and the Board. The Compensation Committee annually reviews and assesses the adequacy of its charter. The most recent review was performed at the Compensation Committee meeting in December 2018.
| | Compensation Committee | | | • | | | Provides for succession planning for the executive officers, with particular focus on CEO succession. | | | Linda J. Hall (Chair)
Michael T. Dance
John A. Schissel | |
| | | | | | |
| | • | | | Oversees the goals and objectives of the Company’s executive compensation plans. | |
| | | | | | |
| | • | | | Annually evaluates the performance of the CEO, including reviewing, setting, and approving goals and objectives for the CEO and, together with the other independent trustees, determines the CEO’s compensation. | |
| | | | | | |
| | • | | | Annually reviews and approves the evaluation process for the CEO and the other executive officers and reviews the CEO’s decisions with respect to compensation of the other executive officers. | |
| | | | | | |
| | • | | | Makes recommendations to the Board regarding incentive compensation plans and equity-based plans and approves any equity compensation. | |
| | | | | | |
| | • | | | Periodically reviews and approves any employment agreements, severance arrangements, or change in control agreements and provisions for the Company’s executive officers. | |
| | | | | | |
| | • | | | Receives periodic reports on the Company’s compensation programs, 401(k) plan options and matching contributions, and employee health care benefits. | |
| | | | | | |
| | • | | | Considers the results of shareholder advisory votes on executive compensation in connection with the review and approval of executive officer compensation. | |
| | | | | | |
| | • | | | Reviews and discusses the Compensation Discussion & Analysis and Compensation Committee Report with management. | |
| | | | | | |
| | • | | | Periodically reviews the goals and objectives of the Company’s executive compensation plans. | |
| | | | | | |
| | • | | | Reviews peer groups and criteria for benchmarking used to assess performance and compensation levels for executive officers | |
TABLE OF CONTENTS
Nominating and Governance Committee
The Nominating and Governance Committee is composed of three trustees. Thetrustees, all of whom are independent. Information regarding the functions performed by the Nominating and Governance Committee identifies individuals qualified to become Board members, recommends to the Board the nominees to stand for election and re-election to the Board, reviews the Company's governance policies and guidelines, and recommends changes to the Board and oversees the self-evaluation process for the Board and committees.is set forth below. The Nominating and Governance Committee is governed by a written charter that has been approved by both the Nominating and Governance Committee and the Board. The Nominating and Governance Committee annually reviews and assesses the adequacy of its charter.
| | Nominating and Governance Committee | | | • | | | Plans for Board refreshment and succession planning for directors and identifies, recruits, and interviews candidates to fill positions on the Board. | | | Emily N. Green (Chair)
Linda J. Hall
Terrance P. Maxwell | |
| | | | | | |
| | • | | | Identifies and recommends to the Board individuals qualified to serve on the Board. | |
| | | | | | |
| | • | | | Evaluates incumbent trustees to determine whether to recommend them to the Board as nominees for re-election. | |
| | | | | | |
| | • | | | Focuses on Board composition and procedures and recommends measures to ensure that the Board reflects the appropriate balance of knowledge, experience, skills, and expertise. | |
| | | | | | |
| | • | | | Develops and periodically reviews a set of corporate governance principles applicable to the Company and its management. | |
| | | | | | |
| | • | | | Makes recommendations to the Board regarding the size and criteria for membership on the Board and committees. | |
| | | | | | |
| | • | | | Oversees a systematic annual evaluation of the Board, committees, and individual directors in an effort to continuously improve the function of the Board. | |
| | | | | | |
| | • | | | Considers corporate governance matters that may arise and develops appropriate recommendations. | |
| | | | | | |
| | • | | | Oversees the Company’s efforts with respect to environmental, social and governance initiatives. | |
Trustee Nominations
The
most recent review was performed atNominating and Governance Committee is responsible for reviewing with the Board, on an annual basis, the requisite skills and characteristics of new Board members, as well as the composition of the Board as a whole. This assessment will include members’ independence, as well as consideration of other skills and characteristics that the Nominating and Governance Committee
meetingdeems appropriate, in
December 2018.the context of the needs of the Board.
In general, candidates for nomination to the Board are either suggested by Board members or Company employees or located by search firms engaged by the Committee. In accordance with the Company'sCompany’s Bylaws, the Nominating and Governance Committee will also consider trustee nominations from shareholders. Shareholders who wish to recommend individuals for consideration by the Nominating and Governance Committee to become nominees for election to the Board at an annual shareholder meeting may do so by submitting all the materials required under Article III, Section 6(B) of the Bylaws to the Company'sCompany’s Secretary at the following address: Investors Real Estate
TABLE OF CONTENTS
Trust,
1400 31st Avenuedba Centerspace, 3100 10th St SW,
Suite 60, P.O. Box 1988, Minot, ND 58702-1988. Submissions must be received by the Secretary no earlier than the close of business on the 120th day and no later than the close of business on the 90th day prior to the first anniversary of the preceding
year'syear’s annual meeting. However, if the Board increases the number of trustees to be elected at an annual meeting but there is no public announcement by the Trust naming all of the nominees for the increased number at least 100 days prior to the first anniversary of the preceding
year'syear’s annual meeting, then submissions, but only with respect to nominees for any new positions created by such increase,
shallwill also be considered timely if received by the Secretary no later than the close of business on the 10th day following the day on which such public announcement is first made by the Company. The Nominating and Governance Committee will not alter the manner in which it evaluates candidates, including consideration of the factors set forth in its charter, based on whether the candidate was recommended by a shareholder or was identified by other means.
In addition to the foregoing committees, the Company formerly had two other standing committees that were in existence until they were dissolved following the 2018 Annual Meeting in September 2018. These committees were the Capital Markets Committee and Executive Committee, each of which is described below.
Capital Markets Committee
The Capital Markets Committee, which was a standing committee composed of four trustees (Messrs. Schissel (Chair), Caira, Dance, and Miller) during the 2018 transition period, had the authority to act on behalf of the Board to evaluate and approve proposed transactions, including effecting loans, capital expenditures, and acquisitions and dispositions of property and other assets, as well as evaluating the Company's investments on a periodic basis. In September 2018, the Board
Table of Contents
determined to dissolve the Capital Markets Committee and revoke its charter. Going forward, to the extent necessary, the Board will address issues formerly addressed by the Capital Markets Committee.
Executive Committee
The Executive Committee, which was composed of two independent trustees (Mr. Caira and Ms. Green) and Mr. Decker during the 2018 transition period, had all of the powers of the Board with respect to the management and affairs of the Company, subject to limitations prescribed by the Board and by North Dakota law, between meetings of the Board when there is not sufficient time to present the action to the full Board at its next regularly scheduled meeting. In September 2018, the Board determined to dissolve the Executive Committee and revoke its charter.
The charters for the Audit, Compensation, and Nominating and Governance Committees and the Company'sCompany’s Governance Guidelines are posted on the Company'sCompany’s website at www.iretapartments.comir.centerspacehomes.com under the "Corporate Governance" heading of the "Investors" section.
“Corporate Overview—Corporate Governance.”
The Board holds regular executive sessions at which independent trustees meet without Company management or employees present. Executive sessions are held not fewer than four times per year, at each regularly scheduled Board meeting.
Policy Regarding Diversity
The Company does not have a formal policy regarding diversity of membership of the Board of Trustees. The Nominating and Governance Committee recognizes the value of having a Board that encompasses a broad range of skills, expertise, contacts, industry knowledge, and diversity of opinion. The Committee has not attempted to define
"diversity"“diversity” but seeks to establish a balanced Board with members whose skills, backgrounds, and experience are complementary and, together, cover the spectrum of areas that impact the
Company'sCompany’s business.
Board Role in Risk Oversight
Company management is responsible for the day-to-day management of risks the Company faces. The Board is actively involved in overseeing the
Company'sCompany’s risk management. The
Board'sBoard’s role in the
Company'sCompany’s risk oversight process includes receiving regular reports from members of executive management, which include consideration of operational, financial, legal, regulatory, information technology, and strategic risks facing the Company. The Board does not view risk in isolation, as risks are considered in virtually every business decision made and as part of the
Company'sCompany’s business strategy. Accordingly, the Board also works to oversee risk through its consideration and authorization of significant matters, such as major property acquisitions and dispositions; development projects; financing transactions; strategic operational initiatives such as the
Company'sCompany’s transition to multifamily property focus from diversified property types; the adoption of basic Company policies such as the
Company'sCompany’s Code of Conduct and Insider Trading Policy; and its oversight of
management'smanagement’s implementation of those initiatives. In addition, each of the
Company'sCompany’s Board committees considers risk within its area of responsibility, as follows:
The Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in areas of financial risk, internal controls, and compliance with legal and regulatory requirements. The Audit Committee interacts regularly in executive session with the Company'sCompany’s internal and independent auditors in carrying out these functions.
Table of Contents
•- The Compensation Committee oversees the
Company'sCompany’s compensation policies and practices to help ensure sound pay practices that do not cause compensation risks to arise that are reasonably likely to have a material adverse effect on the Company.
•
The Nominating and Governance Committee assists in oversight of the management of risks associated with Board organization, membership, and structure.
As a critical part of its risk management oversight role, the Board encourages full and open communication between management and the Board. Trustees are free to communicate directly with executive management. Executive management attends the regular meetings of the Board and is available to address any questions or concerns raised by the Board on risk management-related and other matters.
TABLE OF CONTENTS
Environmental, Social and Governance (ESG) The Company is committed to maintaining an organization that considers its impacts on the environment, our team members, the communities in which we operate, and diverse leadership following governance best practices. This commitment requires a long-term approach to strategy, and the Board includes ESG considerations in its planning. Board oversight of the Company’s ESG efforts is provided by the Nominating and Governance Committee, which approves annual goals related to ESG and receives regular updates from management and the Company’s ESG Committee (composed of cross-departmental representatives of the Company) on progress and issues facing the Company. As part of these goals, in 2020 the Company published its inaugural ESG Report, which can be found on our website at www.centerspacehomes.com.
The Company is focused on social responsibility as an employer, industry participant and provider of housing to our residents. In 2011, the Company started Team Hope, which is an internal resource providing financial support to our team members in times of emergency or other need. Financial support is provided through both commitments from the Company and donations from our team members. In 2020, Team Hope received over $7,500 in donations and provided more than 280 hours of paid time off to our team members in need. The key values of Service and One Team demonstrated by these commitments is also shown in our corporate sponsorship of more than $52,000 and over 648 volunteer hours in 2020 for non-profit and other organizations in the communities in which we operate.
The Company values and seeks to attract and maintain a workforce that is diverse, including diversity in, among other things, ethnicity, race, religion, culture, sex, sexual orientation, gender identity and expression. In 2019 and 2020, the Company has been placed on the prestigious Honor Roll for the Minnesota Census of Women in Corporate LeadershipOTHER GOVERNANCE MATTERS
compiled by St. Catherine University. The Honor Roll is comprised of a select group of Minnesota companies with 20 percent or more gender diversity in their executive ranks and on their board of directors.
Code of Conduct and Code of Ethics for Senior Financial Officers
The
Company'sCompany’s trustees, officers, and employees are required to comply with a Code of Conduct adopted by the Board. The Board adopted the Code of Conduct to codify and formalize certain of the
Company'sCompany’s long-standing policies and principles that help ensure its business is conducted in accordance with the highest standards of moral and ethical behavior. The Code of Conduct covers several areas of professional conduct, including conflicts of interest, insider trading, corporate opportunities, discrimination and confidential information, as well as requiring strict adherence to all laws and regulations applicable to the
Company'sCompany’s business. Employees are required to bring any violations and suspected violations of the Code of Conduct to the attention of the Company, through management, or Company legal counsel. Annually, the trustees and management sign acknowledgment forms attesting that they have read the Code of Conduct and understand their responsibilities under the Code of Conduct.
The Chief Executive Officer, Chief Financial Officer, and other senior financial officers performing similar functions are also subject to a Code of Ethics for Senior Financial Officers, adopted by the Board, which contains certain policies regarding financial records; periodic reporting, filings, and other communications with the SEC, other regulators, and the public; and compliance with applicable laws, rules, and regulations in the conduct of the
Company'sCompany’s business and financial reporting.
The Code of Conduct and Code of Ethics for Senior Financial Officers are posted on the
Company'sCompany’s website at
www.iretapartments.comir.centerspacehomes.com under
the "Corporate Governance" heading of the "Investors" section.“Corporate Governance — Corporate Overview.” The Company intends to disclose any future amendments to, or waivers of, the Code of Conduct and the Code of Ethics for Senior Financial Officers on its website promptly following the date of any amendment or waiver, or by other method required or permitted under NYSE rules.
Clawback Policy
The Company has an Executive Incentive Compensation Recoupment Policy, more commonly known as a clawback policy, which applies to all executive officers, senior vice presidents, and vice presidents who receive incentive compensation. Under this policy, if the Company restates its financial statements due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws, a person covered by the clawback policy will be required to reimburse or forfeit any incentive compensation received if such person engaged in fraud, intentional misconduct, or illegal behavior that caused or contributed to such restatement. The amount to be reimbursed or forfeited will be the amount of the incentive compensation paid or awarded to the person based on the erroneous financial data exceeding the amount that would have been paid based on restated results, as determined by the
Table of Contents
Board in its sole discretion. The Board will also determine the method for recouping such amounts and/or taking any other remedial and recovery action permitted by law. The policy applies to awards approved, awarded, or granted on or after the effective date of May 1, 2015. For more information on this policy, see "Compensation Discussion and Analysis — Clawback Policy" contained elsewhere in this Proxy Statement.
Equity Ownership and Retention Policy
Under the
Company'sCompany’s Policy Regarding Share Ownership and Retention, as originally adopted on July 1, 2015 and later amended on September 20, 2018 (the amended date being the
"Effective Date"“Effective Date”), all non-employee trustees are required to own common shares, including shares issued as compensation for Board service, equal to the following:
| |
| |
| |
| |
|
|---|
| | | | | | | | |
| | | | | | Required Ownership Multiple of Annual
Annual Base Cash Compensation
|
| |
| | | Non-Employee Trustees | | | | 4x | | |
| | Non-Employee Trustees | | | | 3x | | |
| | | | | | | | |
TABLE OF CONTENTS
Trustees are required to satisfy the ownership guidelines within five years following the later of (1) the Effective Date or (2) the date the Trustee was first elected or appointed to the Board. Once the Company certifies that a trustee has met the ownership requirement, future declines in common share value will not impact compliance as long as the trustee continues to own at least the same number of shares the trustee owned at the time the trustee achieved the required ownership level. In addition, trustees are required to retain at least 60% of the shares received as a result of any equity awards granted as compensation to the trustee by the Company until such time as the trustee is no longer a trustee of the Company.
The status of share ownership and retention is reviewed annually by the Compensation Committee to ensure compliance.
shares owned directly by the participant, participant'sparticipant’s spouse, and/or children;
•shares held in a revocable trust for the benefit of the participant, participant'sparticipant’s spouse, and/or children;
•shares owned by an entity in which the participant has or shares the power to vote or dispose of the shares;
•shares held in a retirement account owned by the participant or participant'sparticipant’s spouse; and
•shares pursuant to an equity award that are to vest within 12 months.
Shares do not include shares pursuant to performance awards that have not yet been earned. The Company intends that equity awards granted by the Company under its equity compensation plans will satisfy the ownership requirements.
Officers
Table of Contents
Senior Management
The Policy Regarding Share Ownership and Retention also applies to the Chief Executive Officer, Chief Financial Officer, any other executive vice presidents, any senior vice presidents, and any vice presidents of the Company. The ownership requirements are as follows:
| |
| |
| |
| |
|
|---|
| | | | | | | | | | |
| | | | | |
| Required Ownership
Multiple of Base Salary
|
| |
| | | | | | | | | | |
| | Chief Executive Officer | | | | | 5x | | |
| | | | | | | | 5x | |
| | | Chief Financial Officer | | | | | 2x | | |
| | | | | | | | 2x | |
| | | Other Executive Vice Presidents | | | | | 2x | | |
| | | | | | | | 2x | |
| | | Senior Vice Presidents | | | | | 1x | | |
| | | | | | | | 1x | |
| | | Vice Presidents | | | | | 0.5x | | |
| | | | | | | | 0.5x | |
Officers are required to satisfy the ownership guidelines within five years following the later of (1) the Effective Date or (2) the date the officer was first appointed or hired as an officer. Promotion to a new office resets the five-year period. Once the Company certifies that an officer has met the ownership requirement, future declines in common share value will not impact compliance as long as the officer continues to own at least the same number of shares the officer had when they achieved the required ownership level. In addition, officers are required to retain at least 60% of the net shares received as a result of any equity awards granted to the officer issued to them by the Company until the ownership requirement is reached, the officer ceases to be an applicable officer, or the officer ceases to be employed by the Company, whichever occurs first. For purposes of this policy,
"net shares"“net shares” are those vested shares that remain after shares are sold or withheld, as the case may be, to pay any applicable exercise price for the award and to satisfy any tax obligations arising in connection with the exercise, vesting, or payment of the award.
Failure to comply with this policy may result in the requirement that the
participantofficer retain 100% of net shares received as a result of any equity awards granted by the Company until the
participantofficer has reached the required ownership level. The Company may grant waivers of these requirements where compliance would place a severe hardship on
a participant, woldan officer, would prevent
a participantan officer from complying with a court order, or in other exceptional circumstances.
The status of share ownership and retention is reviewed annually by the Compensation Committee to ensure compliance.
Hedging and Pledging Policy
Under the Company's Policy Regarding Hedging and Pledging of Securities, the Company's executive officers, senior vice presidents, any designated Section 16 officers, and trustees are prohibited from: (1) directly or indirectly engaging in hedging or monetization transactions, through transactions in the Company's securities or through the use of financial instruments designed for such purpose; or (2) pledging the Company's securities as collateral for a loan, including through the use of traditional margin accounts with a broker.
Complaint Procedure
The Sarbanes-Oxley Act of 2002 requires companies to maintain procedures to receive, retain, and treat complaints received regarding accounting, internal accounting controls, or auditing matters and to allow for the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. The Company'sCompany’s Audit Committee has adopted a complaint procedure that requires the Company to forward to the Audit
TABLE OF CONTENTS
Committee any complaints that it has received regarding financial statement disclosures, accounting, internal accounting controls, or auditing matters.
Table of Contents
Any employee of the Company may submit, on a confidential, anonymous basis if the employee so chooses, any concerns on accounting, internal accounting controls, auditing matters, or violations of the Company'sCompany’s Code of Conduct or Code of Ethics for Senior Financial Officers. All such employee concerns may be reported by means of the Company'sCompany’s whistleblower hotline through Lighthouse Services, an independent provider that assists organizations to identify improper activity, or submitted in a sealed envelope to the Chair of the Audit Committee, in care of the Company'sCompany’s General Counsel, who will forward any such envelopes promptly and unopened. The Audit Committee will investigate any such complaints submitted.
Communications to the Board
The Board recommends that shareholders and other interested parties initiate any communications with the Board in writing. Shareholders and other interested parties may send written communications to the
full Board, the
Audit Committee,non-management trustees, any of the
Compensation and Nominating Committee,Committees, the Chair, or to any individual trustee c/o the Secretary, Investors Real Estate Trust,
1400 31st Avenuedba Centerspace, 3100 10th St SW,
Suite 60, P.O. Box 1988, Minot, ND 58702-1988, or via e-mail to
trustees@iret.com.trustees@centerspacehomes.com. All communications will be compiled by the Secretary and forwarded to the Board, the specified Board committee, or to individual trustees, as the case may be, not less frequently than monthly. This centralized process will assist the Board in reviewing and responding to communications in an appropriate manner. The name of any specific intended
boardBoard recipient should be noted in the communication.
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Related Party Transactions Policy
The Board has adopted
thea Related Party Transactions Policy, which sets forth the
Company'sCompany’s policies and procedures for the review, approval, or ratification of any related party transaction required to be reported in the
Company'sCompany’s filings with the SEC. The policy applies to any transaction, arrangement, or relationship or series of similar transactions, arrangements, or relationships in which the Company or any of its subsidiaries is a participant, the aggregate amount involved will or may be expected to exceed $120,000 in any
fiscal year
andin which a related party has or will have a direct or indirect interest (other than solely as a result of being a director or a less than
10 percent10% beneficial owner of another entity).
Related parties for this purpose include trustees, trustee nominees, officers, 5% shareholders, and their immediate family members and associated entities.
The Audit Committee must approve any related party transaction subject to this policy before commencement of the transaction. If it is not practicable to wait until the next Audit Committee meeting, the Chair of the Audit Committee has the delegated authority to pre-approve, or ratify, as applicable, any related party transaction in which the aggregate amount involved is expected to be less than $250,000. Related party transactions that are identified as such subsequent to their commencement will promptly be submitted to the Audit Committee or the Chair of the Audit Committee, which shall,will, if they determine it to be appropriate, ratify the transaction. The Audit Committee will annually review all ongoing related party transactions and assess whether they remain appropriate. Under the policy, the Audit Committee or its Chair shallwill approve only those related party transactions that are in, or are not inconsistent with, the best interests of the Company and its shareholders, as determined by the Committee or the Chair in good faith.
Since the beginning of 2020, there have been no transactions, and there currently are no proposed transactions, in excess of $120,000 between the Company and a related person, in which the related person had or will have a direct or indirect material interest.
TABLE OF CONTENTS
We structure compensation to attract and retain qualified non-management trustees and to further align the interests of non-management trustees with the interests of shareholders. The Compensation Committee annually reviews non-management trustee compensation trends and a competitive analysis of peer company practices prepared by the independent compensation consultant. The Compensation Committee makes recommendations to the Board of Trustees on compensation for our non-management trustees, including their retainers and annual equity awards.
Under the Company’s Policy Regarding Share Ownership and Retention, all non-management trustees are required to own common shares, including shares issued as compensation for Board service, equal to three times the non-management trustees’ annual base cash compensation. As of December 31, 2020, all non-management Trustees had met or exceeded these thresholds.
Trustees who are employees of the Company do not receive any separate compensation or other consideration, direct or indirect, for service as a trustee. During
the 2018 transition period,2020, non-management trustees
not employed by the Company received the following compensation:
| | BASE COMPENSATION | | | | | | | |
| | | | | Position: | | | | |
| | BASE COMPENSATION |
Compensation: | |
| | | All non-management trustees: | | | | | | |
| | Position: |
| | | Compensation: |
(1) Annual retainer of $40,000; | |
| | | | | | | | | |
| | All non-management trustees: | | | | (1) Annual cash fee of $40,000; | | |
| | | | | | | | |
| | | | | | (2) Reimbursement of actual travel expenses; and | | |
| | | | | | | | |
| | | | | | (3) A restricted stock unit ("RSU"(“RSU”) award for an aggregate number of common shares determined by dividing $40,000$60,000 by the average closing price per share for the twenty days immediately prior to May 1, 2018,19, 2020, which will vest if serving on July 20, 2019.May 19, 2021. However, if a trustee who had served as a trustee for more than one year retired before July 20, 2019,May 19, 2021, the RSU award would be prorated. If a trustee haswho had less than one year of continuous service departsdeparted the Board prior to July 20, 2019,May 19, 2021, all such shares shallwould be forfeited. | | |
| | | | | | | | |
| | ADDITIONAL COMPENSATION |
Each of these awards was granted under our Amended and Restated 2015 Incentive Plan. | |
| | | | | | | | | |
| | Position: |
| | | Compensation: |
ADDITIONAL COMPENSATION | |
| | | | | Position: | | | Compensation: | |
| | | Chair of the Board: | | | | $25,000 annual cash fee and $25,000 in RSUs | | |
| | | | | | $50,000 annual retainer and $50,000 in RSUs | | |
| | | Audit Committee Chair: | | | | $15,000 annual cash fee | | |
| | | | | | | $20,000 annual retainer | |
| | Capital Markets Committee Chair(1) | | | | $10,000 annual cash fee | | |
| | | | | | | | | |
| | Compensation Committee Chair: | | | | $10,000 annual cash fee | | |
| | | | | | $15,000 annual retainer | | |
| | | Nominating and Governance Committee Chair: | | | | $10,000 annual cash fee | | |
| | | | | | | $10,000 annual retainer | |
| | | Members of the Audit, Capital Markets(1), Compensation, and Nominating and Governance Committees: | | | | $6,500 annual cash fee for serving on each Committee | | |
| | | | | | | $10,000 for Audit committee members
$7,500 for Compensation committee members
$5,000 for Nominating and Governance committee members | |
(1)The Capital Markets Committee ("CMC") was dissolved as an official standing Board committee following its meeting in September 2018. Members of the CMC received $2,513, and the CMC Chair received $3,867, for serving on the CMC from May 1, 2018 until its dissolution in September 2018.
Table of ContentsTABLE OF CONTENTS
Trustee Compensation Table for the 2018 Transition Period
2020
The following table shows the total compensation paid to or earned by the individuals who served as
non-employee members of the Company's Board of Trusteesnon-management trustees for any part of the
eight-month transition periodyear ended December 31,
2018.2020.
Jeffrey P. Caira | | | 92,875 | | | 124,814 | | | 217,689 |
Michael T. Dance | | | 57,829 | | | 68,080 | | | 125,909 |
Emily Nagle Green | | | 54,488 | | | 68,080 | | | 122,568 |
Linda J. Hall | | | 59,125 | | | 68,080 | | | 127,205 |
Terrance P. Maxwell | | | 45,375 | | | 68,080 | | | 113,455 |
John A. Schissel | | | 47,250 | | | 68,080 | | | 115,330 |
Mary J. Twinem | | | 52,808 | | | 68,080 | | | 120,888 |
| | | | | | | | | | |
Name
| | Fees Earned or Paid in Cash(1)
($)
| | Share Awards(2)
($)
| | Total ($)
| |
|---|
| | | | | | | | | | | |
Jeffrey P. Caira | | | 50,180 | | | 65,606 | | | 115,786 | |
Michael T. Dance | | | 39,180 | | | 40,361 | | | 79,541 | |
Emily Nagle Green | | | 31,328 | | | 40,361 | | | 71,689 | |
Linda J. Hall | | | 40,164 | | | 40,361 | | | 80,525 | |
Terrance P. Maxwell | | | 33,497 | | | 40,361 | | | 73,858 | |
Jeffrey L. Miller | | | 21,909 | | | 15,598 | (3) | | 37,507 | |
John A. Schissel | | | 34,867 | | | 40,361 | | | 75,228 | |
Mary J. Twinem | | | 28,503 | | | 40,361 | | | 68,864 | |
(1)
| Includes: (i) annual retainers paid to each trustee and (ii) additional retainers paid to the Board Chair, Committee Chairs, and committee members. Does not include reimbursed expenses and dividend equivalents. |
(2)
| On May 19, 2020, each non-management trustee was granted 1,056 restricted stock units (“RSUs”) (based on $60,000 divided by the 20-day average closing price of a common share prior to May 19, 2020). The chair received an additional 880 RSUs (based on $50,000 divided by the 20-day average closing price of a common share prior to May 19, 2020). These awards will vest in full on May 19, 2021 for those trustees serving on the vesting date. The grant date fair value of the RSUs was $64.47 per RSU. |
(3)
| As of December 31, 2020, each independent trustee had 1,056 unvested RSUs and our chair, Jeffrey Caira, had an additional 880 unvested RSUs. |
(1)Includes: (i) annual fees and (ii) additional amounts paid to the Board Chair, Committee Chairs, and committee members. Does not include reimbursed expenses.26
(2)On July 20, 2018, each non-management trustee was granted 753 restricted stock units ("RSUs") pursuant to a trustee share award agreement, issued under the 2015 Incentive Plan, for services to be performed during the 2018 transition period (based on $40,000 divided by the 20-day average closing price prior to May 1, 2018). The awards will vest in full on July 20, 2019 for those trustees serving on the vesting date. The grant date fair value of the RSUs was $53.60 per RSU.
(3)On September 18, 2018, Mr. Miller retired from the Board. Upon his retirement, Mr. Miller received pro rata vesting of the 753 RSUs granted to trustees pursuant to a trustee share award agreement, with 291 RSUs vesting and 462 RSUs being forfeited.
Table of ContentsTABLE OF CONTENTS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of
December 31, 2018,March 22, 2021, the beneficial ownership of common
and preferred shares of the Company
and of limited partnership units ("Units") of IRET Properties, A North Dakota Limited Partnership ("IRET Properties"), which is the Company's operating partnership, by (1) each trustee and nominee for trustee of the Company, (2) the named executive officers of the Company, and (3) all trustees and named executive officers of the Company as a group. The amounts shown are based on information provided by the individuals named and Company records. Except as otherwise indicated, the persons listed have sole voting and investment power.
Mark O. Decker, Jr.
Chief Executive Officer, President, Chief Investment Officer & Trustee
| | | 32,367(3) | | | * |
John A. Kirchmann
Executive Vice President & Chief Financial Officer
| | | 14,762(4) | | | * |
Anne Olson
Executive Vice President, Chief Operating Officer, General Counsel &Secretary
| | | 6,478 | | | * |
Jeffrey P. Caira
Trustee & Chair of the Board
| | | 16,762 | | | * |
Michael T. Dance
Trustee
| | | 8,808 | | | * |
Terrance P. Maxwell
Trustee
| | | 7,095 | | | * |
Emily Nagle Green
Trustee
| | | 4,700 | | | * |
Linda J. Hall
Trustee
| | | 8,232 | | | * |
John. A. Schissel
Trustee
| | | 5,967 | | | * |
Mary J. Twinem
Trustee
| | | 4,790 | | | * |
Trustees and named executive officers as a group (10 individuals) | | | 109,961 | | | * |
*
| Represents less than 1% of common shares outstanding as of March 22, 2021. |
(1)
| Beneficial ownership is determined in accordance with rules of the SEC and includes voting or investment power with respect to securities. Securities “beneficially owned” by a person may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities as to which the person has or shares voting or investment power or has the option or right to acquire within 60 days of March 22, 2021. |
(2)
| Percentage of class is based on a total of 13,219,845 common shares outstanding as of March 22, 2021. |
(3)
| Includes 30,762 shares held directly, 1,525 shares held indirectly by his spouse’s IRA, and 20 shares held indirectly by each of his four children. |
(4)
| Includes 13,429 shares held directly, 1,020 shares held indirectly by his IRA and 313 shares held indirectly by his daughter’s IRA. |
| | | | | | | | | | | | | |
| |
| |
| | Percent of Class(3)
of Common
Shares and Units
As of
December 31,
2018,
| | Series C
Preferred Shares |
|---|
Name of Beneficial Owner(1)
| | Common
Shares
| | Units(2)
| | Number
| | % of
Total(4)
|
|---|
| | | | | | | | | | | | | | |
Mark O. Decker, Jr. | | | | | | | | | | | | | |
Chief Executive Officer, President, Chief Investment Officer & Trustee | | 19,011 | (5) | | 0 | | | * | | | 0 | | * |
John A. Kirchmann | | | | | | | | | | | | | |
Executive Vice President & Chief Financial Officer | | 9,052 | (6) | | 0 | | | * | | | 0 | | * |
Anne M. Olson | | | | | | | | | | | | | |
Executive Vice President, Chief Operating Officer, General Counsel & Secretary | | 975 | (7) | | 0 | | | * | | | 0 | | * |
Jeffrey P. Caira | | | | | | | | | | | | | |
Trustee & Chair of the Board | | 12,000 | (8) | | 0 | | | * | | | 0 | | * |
Michael T. Dance | | | | | | | | | | | | | |
Trustee | | 5,869 | (9)(10) | | 0 | | | * | | | 2,000 | | * |
Emily Nagle Green | | | | | | | | | | | | | |
Trustee | | 1,316 | (9) | | 0 | | | * | | | 0 | | * |
Linda J. Hall | | | | | | | | | | | | | |
Trustee | | 5,992 | (9) | | 0 | | | * | | | 0 | | * |
Terrance P. Maxwell | | | | | | | | | | | | | |
Trustee | | 4,156 | (9) | | 0 | | | * | | | 0 | | * |
John. A. Schissel | | | | | | | | | | | | | |
Trustee | | 3,028 | (9) | | 0 | | | * | | | 0 | | * |
Mary J. Twinem | | | | | | | | | | | | | |
Trustee | | 1,851 | (9) | | 0 | | | * | | | 0 | | * |
Trustees and named executive officers as a group(10 individuals) | | 63,030 | | | 0 | | | * | | | 2,000 | | * |
| | | ��� | | | | | | | | | | | |
*Represents less than 1% of class outstanding as of December 31, 2018.
(1)Beneficial ownership is determined in accordance with rules of the SEC and includes voting or investment power with respect to securities. Securities "beneficially owned" by a person may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities as to which the person has or shares voting or investment power or has the option or right to acquire within 60 days of December 31, 2018.
(2)The Units do not have voting rights, but following a minimum one-year holding period and the exercise by the holder of the holder's exchange right, the Units may be converted, at the option of the Company, into cash or common shares on a one-for-one basis.
(3)Percentage of class is based on a total of 11,942,372 common shares and 1,367,502 Units outstanding as of December 31, 2018.
(4)Percentage of total is based on a total of 4,118,460 Series C Preferred Shares outstanding as of December 31, 2018.
27
Table of ContentsTABLE OF CONTENTS
(5)Does not include: (i) 429 shares pursuant to the time-based LTIP award granted on August 8, 2016, which vests at the end of the day on May 1, 2019; (ii) 3,862 shares pursuant to the performance-based LTIP award granted on August 8, 2016, which shares will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2019; (iii) 1,023 shares pursuant to the signing share bonus granted on August 8, 2016, which vests at the end of the day August 8, 2019; (iv) 1,096 shares pursuant to a share award granted under the 2015 Incentive Plan on May 1, 2017, which vests as to 548 shares at the end of the day on each of May 1, 2019 and May 1, 2020; (v) 1,623 RSUs pursuant to the time-based LTIP award granted on June 21, 2017, which vests as to 811 RSUs at the end of the day on May 1, 2019 and 812 RSUs at the end of the day on May 1, 2020, (vi) 4,870 RSUs pursuant to the performance-based LTIP award granted on June 21, 2017, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2020, (vii) 2,634 RSUs pursuant to the time-based LTIP award granted on July 20, 2018 which vests as to 878 RSUs at the end of the day on each of July 20, 2019, April 30, 2020, and April 30, 2021, or (viii) 5,268 RSUs pursuant to the performance-based LTIP awards granted on July 20, 2018, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period ending April 30, 2021. All such awards are conditioned upon Mr. Decker remaining in the continuous employ of the Company or an affiliate through the applicable vesting date and/or performance period.
(6)Does not include: (i) 1,644 shares pursuant to the time-based LTIP award granted on April 30, 2017, which vests as to 822 shares at the end of the day on April 30, 2019 and April 30, 2020, (ii) 831 RSUs pursuant to the time-based LTIP award granted on June 21, 2017, which vests as to 416 RSUs at the end of the day on May 1, 2019 and 415 RSUs at the end of the day on May 1, 2020, (iii) 2,494 RSUs pursuant to the performance-based LTIP award granted on June 21, 2017, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2020, (iv) 1,349 RSUs pursuant to the time-based LTIP award granted on July 20, 2018, which vests as to 450 RSUs on July 20, 2019 and April 30, 2020 and 449 RSUs on April 30, 2021, or (v) 2,699 RSUs pursuant to the performance-based LTIP award granted on July 20, 2018, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2021. All such awards are conditioned upon Mr. Kirchmann remaining in the continuous employ of the Company or an affiliate through the applicable vesting date and/or performance period.
(7)Does not include: (i) 1,644 shares pursuant to the time-based LTIP award granted on April 30, 2017, which vests as to 822 shares at the end of the day on April 30, 2019 and April 30, 2020, (ii) 831 RSUs pursuant to the time-based LTIP award granted on June 21, 2017, which vests as to 416 RSUs at the end of the day on each May 1, 2019 and 415 RSUs at the end of the day on May 1, 2020, (iii) 2,494 RSUs pursuant to the performance-based LTIP award granted on June 21, 2017, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2020, (iv) 2,135 RSUs pursuant to the time-based LTIP award granted on July 20, 2018, which vests as to 712 RSUs on July 20, 2019 and April 30, 2020 and 711 RSUs on April 30, 2021, or (v) 4,271 RSUs pursuant to the performance-based LTIP award granted on July 20, 2018, which RSUs will be deemed earned and vested upon meeting certain performance goals through the performance period, ending April 30, 2021. All such awards are conditioned upon Ms. Olson remaining in the continuous employ of the Company or an affiliate through the applicable vesting date and/or performance period.
(8)Does not include 1,224 shares pursuant to the time-based awards granted on July 20, 2018, which vest on July 20, 2019.
(9)Does not include 753 shares pursuant to the time-based awards granted on July 20, 2018, which vest on July 20, 2019.
(10)Includes 2,500 shares held by the Dance Family Living Trust.
Table of Contents
Principal Shareholder Beneficial Ownership
The following table identifies each person or group believed by the Company to beneficially own, as of
December 31, 2018,March 22, 2021, more than five percent of the outstanding common shares of the
Company, the only class of security entitled to vote at the 2019 Annual Meeting.Company.
BlackRock, Inc.(3)
55 East 52nd Street, New York, NY 10055 | | | 2,317,729 | | | 17.50% |
The Vanguard Group, Inc.(4)
100 Vanguard Blvd, Malvern, PA 19355 | | | 1,982,422 | | | 15.00% |
Renaissance Technologies LLC(5)
800 Third Avenue, New York, NY 10022 | | | 680,532 | | | 5.10% |
| | | | |
Name and Address of Shareholder
| | Common Shares
Beneficially Owned
| | Percent of Class
|
|---|
| | | | | |
The Vanguard Group, Inc.(1) | | | | |
100 Vanguard Blvd, Malvern, PA 19355 | | 1,729,207 | | 14.44% |
BlackRock, Inc.(2) | | | | |
55 East 52nd Street, New York, NY 10055 | | 1,156,198 | | 9.70% |
(1)
| Beneficial ownership is determined in accordance with rules of the SEC and includes voting or investment power with respect to securities. Securities “beneficially owned” by a person may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities as to which the person has or shares voting or investment power or has the option or right to acquire within 60 days of March 22, 2021. |
(2)
| Percentage of class is based on a total of 13,219,845 common shares outstanding as of March 22, 2021. |
(3)
| Based solely on information of beneficial ownership as of December 31, 2021, included in a Schedule 13G filed on January 25, 2021. BlackRock, Inc. reports sole voting power with respect to 2,284,540 shares and sole dispositive power with respect to all 2,317,729 shares. |
(4)
| Based solely on information of beneficial ownership as of December 31, 2021, included in a Schedule 13G filed on February 10, 2021. The Vanguard Group, Inc. reports sole voting power with respect to 0 shares and sole dispositive power with respect to 1,930,111 shares. |
(5)
| Based solely on information of beneficial ownership as of December 31, 2021, included in a Schedule 13G filed on February 11, 2021. Renaissance Technologies LLC reports sole voting power with respect to 680,532 shares and sole dispositive power with respect to 680,532 shares. |
(1)Based on information of beneficial ownership as of December 31, 2018, included in a Schedule 13G filed on February 11, 2019. The Vanguard Group, Inc. reports sole voting power with respect to 21,747 shares and sole dispositive power with respect to 1,705,982 shares.28
(2)Based on information of beneficial ownership as of December 31, 2018, included in a Schedule 13G filed on February 26, 2019. BlackRock, Inc. reports sole voting power with respect to 1,118,122 shares and sole dispositive power with respect to all 1,156,198 shares.
Table of ContentsTABLE OF CONTENTS
INFORMATION ABOUT OUR EXECUTIVE MANAGEMENT
OFFICERS
Executive Officers and Certain Significant Employees of the Company
Set forth below are the names, ages and titles of each of the
Company'sCompany’s executive officers as of
March 31, 2019,April 5, 2021 as well as a summary of their backgrounds and business experience (other than the
Company'sCompany’s Chief Executive Officer, President, and Chief Investment Officer, Mr. Decker, whose biography is listed above under
"“Proposal 1: Election Of Trustees — of Trustees—Nominees"”).On June 25, 2018, Mr. Andrew Martin, the Company's former Executive Vice President — Property Operations, submitted his resignation. Mr. Martin is included in the Company's executive officer compensation tables below, and the terms of his severance are set forth under "Compensation Discussion and Analysis — Resignation and Severance Agreements" below. Other than Mr. Martin and the three executive officers listed below, the Company did not have any other executive officers during the 2018 transition period.
Name
| | Age
| | Title
|
|---|
| | | Age | | | Title | |
| Mark O. Decker, Jr. | | 43 | 45 | | | Chief Executive Officer, President, and Chief Investment Officer; Trustee | |
| John A. Kirchmann | | 53 | 56 | | | Executive Vice President and Chief Financial Officer | |
| Anne M. Olson | | 42 | 44 | | | Executive Vice President, Chief Operating Officer, General Counsel, and Secretary | |
John A. Kirchmann
has served as an Executive Vice President of the Company since April 30, 2017 and as the Chief Financial Officer since June 29, 2017. From 2011 to July 2016, Mr. Kirchmann served as Vice President of Operations Support at Essex Property Trust, a multifamily REIT (NYSE: ESS), where he was responsible for the oversight of revenue management and ancillary income, procurement, and other functions. From 2007 to 2011, he served as Corporate Controller & Corporate Treasurer at Essex, where he oversaw property and corporate accounting functions and treasury management, and re-engineered and implemented new technology and systems. Mr. Kirchmann was a private consultant from July 2016 to April 2017, where he provided executive accounting services to publicly traded companies, one of which was the Company. Mr. Kirchmann started his career as an accountant with KPMG LLC.LLP. He received his Bachelor'sBachelor’s degree in Business Administration with a Concentration in Accounting from Coe College and is a Certified Public Accountant (inactive).
Anne M. Olson has served as an Executive Vice President, and the General Counsel and Secretary of the Company since April 30, 2017, and as Chief Operating Officer since June 25, 2018. From 2011 to April 30, 2017, Ms. Olson was in the private practice of law, most recently as a partner with the law firm of Dorsey & Whitney LLP, in its Real Estate Practice Group, where she focused on real estate development and investments for REITs, private equity funds, and national developers and owners. Prior to 2011, she served as Director of Investment Operations and in-house counsel for Welsh Companies, LLC and its affiliates, which is a provider of commercial real estate services, providing leadership in the growth of its asset portfolio and development of a successful capital markets strategy. Ms. Olson began her legal career practicing real estate law at Dorsey & Whitney LLP. She received her Bachelor'sBachelor’s degree in English from Drake University and earned her J.D. with highest honors from Drake University Law School.
TABLE OF CONTENTS
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
("(“Dodd-Frank
Act"Act”), this Proposal 2, commonly known as a
"say on pay"“say-on-pay” proposal, provides the
Company'sCompany’s shareholders the opportunity to express their views on the compensation of the
Company'sCompany’s named executive officers by voting, on an advisory basis, on the compensation of the named executive officers as disclosed in this Proxy Statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of the named executive officers and the philosophy, policies, and practices described in this Proxy Statement.
Please review the section titled
"“Compensation Discussion and AnalysisAnalysis”" for details regarding the Company'sCompany’s executive compensation program, including the portion titled "“Executive Summary and Achievements for the 2018 Transition Period"2020” and "—“2020 Compensation Summary, for the 2018 Transition Period,”" which summarizes significant components of the Company'sCompany’s executive compensation program and actions taken by the Compensation Committee.The Company is asking its shareholders to indicate their support for the named executive
officers'officers’ compensation as described in this Proxy Statement. Accordingly, the Board recommends that shareholders vote in favor of the following resolution:
"
“RESOLVED, that the
Company'sCompany’s shareholders hereby approve, on an advisory basis, the compensation of the
Company'sCompany’s named executive officers as disclosed in the
Company'sCompany’s Proxy Statement for the
20192021 Annual Meeting of Shareholders, pursuant to the compensation disclosure rules of the Securities and Exchange Commission (Item 402 of Regulation S-K), including the Compensation Discussion and Analysis, compensation tables, and narrative discussion.
"”
As provided by the Dodd-Frank Act, the say-on-pay vote is advisory and therefore not binding on the Company, the Board, or the Compensation Committee. However, the Board and the Compensation Committee value the opinions of the shareholders, and to the extent there are a significant number of votes against the compensation of the named executive officers as disclosed in this Proxy Statement, the Board and Compensation Committee will consider the
shareholders'shareholders’ concerns and evaluate what actions are necessary to address those concerns.
Required Vote
This proposal requires the
The affirmative vote of a majority of the
votes cast byvoting power of the shareholders present in person or by proxy at the Annual Meeting, provided a quorum is present,
for approval.Proxies solicited by the Board will be voted FOR the approval ofis required to approve on an advisory basis the compensation of the named executive officers unless a contrary vote is specified.
as disclosed in this Proxy Statement.
The Board recommends that shareholders vote on an advisory basis FOR the approval of the compensation of the named executive officers as disclosed in this Proxy Statement pursuant to the compensation disclosure rules of the SEC.Statement.
Table of ContentsTABLE OF CONTENTS
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the material elements of compensation for the following individuals, collectively referred to as the “named executive officers”:
Mark O. Decker, Jr., Chief Executive Officer since April 27, 2017, and President and Chief Investment Officer since August 5, 2016;
Anne Olson, Chief Operating Officer since June 25, 2018, and Executive Vice President, General Counsel, and Secretary since April 30, 2017; and
John A. Kirchmann, Chief Financial Officer since June 29, 2017, and Executive Vice President since April 30, 2017.
The Company did not have any other executive officers during 2020.
Executive Summary and Achievements for 2020 2020 Performance
In assessing Company and management performance in 2020, we considered both the
2018 Transition PeriodPerformance Achievements forexecution of our planned strategy and the 2018 Transition Period
execution of a prompt plan of action in response to the unique circumstances caused by the COVID-19 pandemic and the resulting economic downturn. During the 2018 transition period,2020, the Company announced the following achievements:
Rebranded the Company as Centerspace to reflect both the transformation of the Company and its vision for the future.
Net loss per diluted share was $(0.15) for the year ended December 31, 2020, compared to earnings per diluted share of $6.00 for the year ended December 31, 2019.
Core FFO increased to $3.78 per diluted share compared to $3.72 per diluted share for the year ended December 31, 2019.
Total collections for the year ended December 31, 2020 were 99.1% of expected residential revenue compared to 99.6% for the year ended December 31, 2019, and total collections for the quarter ended December 31, 2020 were 98.6% compared to 99.7% for the same period of 2019.
Same-store year-over-year revenue growth of 2.1% driven by 1.7% growth in rental revenue and 0.4% growth in occupancy.
Same-store operating expenses increased 2.6% year-over-year with a decline of 2.9% in same-store controllable expenses, offset by an increase of 13.6% in same-store non-controllable expenses.
Same-store net operating income (“NOI”) growth of 1.8%.
Acquired two new apartment communities in the key growth markets of Minneapolis, Minnesota and Denver, Colorado, consisting of 647 homes, for an aggregate purchase price of $191.0 million.
Funded $18.5 million of multifamily residential property construction loans.
Acquired the remaining non-controlling ownership interest in 71 France, an apartment community located in Minneapolis, Minnesota, for $12.2 million.
Disposed of fivefour apartment communities, a commercial propertiesproperty, and three parcelsa parcel of unimproved land, establishingfor an aggregate sale price of $44.3 million.
Issued 829,078 common shares for total consideration, net of commissions and issuance costs, of approximately $59.2 million.
Repurchased and retired approximately 237,000 Series C preferred shares for an aggregate cost of $5.6 million or an average price per share of $23.75.
TABLE OF CONTENTS
FFO, Core FFO, Same-Store NOI, and Adjusted EBITDA are non-GAAP measures. For more information on their usage and presentation, and a base yearreconciliation to the most directly comparable GAAP measures, please refer to Appendix A.
As important as the achievements highlighted above was the Company’s response to the COVID-19 pandemic, which has had a significant impact on the global economy, the U.S. economy and the economies of the local markets in which we operate. For these and other reasons, similar to other rental landlords across the United States, we received requests for rent relief from a number of residents, experienced difficulties in collecting contractual rent and faced leasing challenges, particularly in the Company's multifamilyearly months of the pandemic. In addition, during 2020 our Minneapolis metropolitan market was impacted by social unrest. Amidst these challenges, we took proactive measures to strength our long-term business strategy and manage the impact of COVID-19 on our operations and liquidity, including the following:
Maintained regular, consistent communication with 98.2% of revenue being generated from apartment communitiesour residents and commercial tenants and provided assistance and worked through questions and concerns during the 2018 transition period.
•Re-organizeduncertain circumstances;Established parameters and a consistent review process for assistance in the form of residential rent deferrals and commercial abatements to determine the best course of action;
Took proactive measures to manage costs and expenses;
Continued to negotiate and execute lease renewals and new leases; and
Prioritized resident and employee safety by adapting our operations
repositioning both fieldto protect resident and
support teams to improve scalabilityemployees, including implementing remote work and
help the Company succeed in its mission of providing great homes for residents.
•Launched a "Rise By 5" margin expansion initiative, which led the Company to increase the margin on its same-store multifamily properties by 110 basis points between the eight-month period ended December 31, 2017social distancing and the eight-month period ended December 31, 2018 to 57.1%.
•Amended its unsecured credit facility, increasing the total lending commitment to $395 million, extending the term for an additional year, reducing interest rates at each level, and adding a new $75 million, 7-year term loan.
•Changed its fiscal year-end to December 31, effective for the fiscal year beginning January 1, 2019, thereby improving comparability of the Company's results with its peers.
•Gained access to a potentially larger investor pool and the attendant liquidity upon the completion of a 1-for-10 reverse stock split at the close of business on December 27, 2018.
•Delivered same-store Net Operating Income growth of 5.45% for the eight months ended December 31, 2018.other precautions.
2020 Compensation Summary
for the 2018 Transition Period The primary goal of the
Company'sCompany’s executive compensation program is to attract and retain highly qualified and experienced executive talent and align the interests of the executive officers with those of the shareholders. Below is a summary of
some of the key attributes that define the
Company'sCompany’s executive compensation program
approved for
the 2018 transition period.A significant portion of each executive officer'sofficer’s total compensation wasis at-risk and based on operating and share price performance.
•Long-termThe 2020 short-term incentive share awards, or LTIP awards, were based on forward-looking, three-year financial and share price performance and continuous employment during such period.program (the “2020 STIP”) included the following metrics:
•Under the LTIP for the 2018 transition period2020 long-term incentive program (the "2018 Transition Period LTIP"“2020 LTIP”), each executive officer received: (1) two-thirds
The stock option 2020 LTIP awards vest in equal installments on May 21, 2021, January 1, 2022, January 1, 2023, and January 1, 2024, if the officer remains in the continuous employ of the target LTIP award inCompany through each
TABLE OF CONTENTS
applicable vesting date. The named executive officers will realize no compensation under the stock options unless at the time of exercise the Company’s share price has increased over the share price at time of grant. Therefore, the stock options help to align executive pay with company share performance shares ("performance-based LTIP awards"); and (2) one-third into align the interests of our named executive officers with those of our shareholders.
The time-based restricted
shares ("time-based LTIP awards"share unit (“RSU(s)”)
. The performance-based LTIP awards are based on the
Table of Contents
There are no guaranteed minimum STIP or LTIP payouts.
•There are no guaranteed annual salary increases.
•Executive officers are subject to a clawback policy, a share ownership and retention policy, and a policy prohibiting hedging and pledging of the Company's securities.Company’s securities, as well as other Company policies described in the “Company Policies
•” section of this Compensation Discussion and Analysis.Change in control agreements entered into with executive officers contain
double triggerdouble-trigger language (i.e., a change of control and employment is terminated without cause or by the officer for good reason) and require conditions for payment.
In administering the 2018 Transition Period STIP and 2018 Transition Period LTIP, the
Executive Compensation Philosophy The Board
and Compensation Committee also took into account the Company's change in fiscal year-end from April 30 to December 31, which resulted in the eight-month transition period (May 1, 2018 through December 31, 2018) described in this Proxy Statement. As a result of the change in fiscal year-end, the Board and Compensation Committee reviewed the Company's executive compensation program and determined to:•Truncate the measurement period for the 2018 Transition Period STIP to December 31, 2018 from April 30, 2019, thereby resulting in an 8/12th (or 2/3rd) payout under the 2018 Transition Period STIP. In other words, participants would receive 2/3rd of what they typically would receive on an annual basis; and
•Maintain the terms of the 2018 Transition Period LTIP as initially adopted.
Due to the change in fiscal year-end and the resulting creation of an eight-month transition period, the base salary and 2018 Transition Period STIP payout information described in this Proxy Statement resulted in these participants receiving 2/3rd of the amounts they typically would receive in a twelve-month year.
Say-On-Pay Results and Consideration
Say-On-Pay Voting Results for Fiscal 2018
At the Company's 2018 Annual Meeting of Shareholders, the shareholders' advisory vote on executive compensation received the approval of approximately 96.3% of the votes cast on the proposal. The
Table of Contents
Compensation Committee believes that the result of the advisory vote is valuable in assessing its compensation decisions and considered the vote in reviewing and evaluating its executive compensation programs. The Compensation Committee also considered numerous other factors in evaluating the Company's executive compensation programs as discussed in this Proxy Statement, including its desire to continue to enhance the alignment of its executives and the shareholders. While each of these factors informed the Committee's decisions regarding the named executive officers' compensation, the Compensation Committee did not implement any changes to the Company's executive compensation programs as a result of the shareholder advisory vote.
Say-On-Frequency Voting Results
At the Company's 2017 Annual Meeting of Shareholders, a majority of the Company's shareholders voting on the non-binding advisory resolution on the frequency of holding future advisory votes on executive compensation chose in favor of holding an advisory vote on executive compensation every year. The Board considered the voting results on that proposal and adopted a policy providing for an annual advisory shareholder vote on the Company's executive compensation. The next required "say-on-frequency" advisory vote will occur at the Company's 2023 Annual Meeting of Shareholders.
Named Executive Officers
The following Compensation Discussion and Analysis describes the material elements of compensation for the following individuals, collectively referred to as the "named executive officers":
•Mark O. Decker, Jr., Chief Executive Officer since April 30, 2017, and President and Chief Investment Officer since August 8, 2016;
•Anne M. Olson, Executive Vice President, General Counsel, and Secretary since April 30, 2017, and Chief Operating Officer since June 25, 2018;
•John A. Kirchmann, Executive Vice President since April 30, 2017, and Chief Financial Officer since June 29, 2017; and
•Andrew Martin, Executive Vice President – Property Operations, until his resignation on June 25, 2018.
The Company did not have any other executive officers during the 2018 transition period.
Executive Compensation Philosophy
The Compensation Committee, composed entirely of trustees who are independent under the NYSE listing standards, operates under a written charter adopted on December 5, 2012, as amended on December 14, 2018, and is responsible for establishing the terms of the compensation of the Company's named executive officers. The Compensation Committee believes that the Company'sCompany’s compensation program for executive officers should:
attract and retain highly qualified executives;
•motivate these executives to improve the Company'sCompany’s financial position and increase shareholder value on an annual and long-term basis;
•target "total compensation"“total compensation” reflective of the Company'sCompany’s relative size compared to peers;
Table of Contents
•- promote management accountability for financial and operational performance;
•
provide a total compensation pay mix that includes both base salary, and both cash and equity incentive components; and
•promote teamwork and cooperation throughout the Company and within the management group.
The Compensation Committee applied this philosophy in establishing each of the elements of
the executive compensation
program for
the 2018 transition period.2020. The Compensation
Committee'sCommittee’s goal was to align executive compensation with measurable performance and to compare executive compensation with peers and industry-specific market data, in order to design an executive compensation program that would attract and retain talented executives, provide incentives to executives to achieve certain performance targets, and link executive compensation to shareholder results by rewarding competitive and superior performance.
Executive Officer Compensation Processes
The Compensation Committee meets in executive session without management present to discuss various compensation matters, including the compensation of the Chief Executive Officer. In addition, the Compensation Committee annually reviews all elements of executive compensation and benefit programs for reasonableness and cost-effectiveness.
Pursuant to the Company's Declaration of Trust, the Board may form and delegate the authority of the Compensation Committee to subcommittees composed entirely of independent trustees, when appropriate, to take any of the actions that the Compensation Committee is empowered to take. To date, the Board has not made provisions for the Compensation Committee to delegate any of its authority, except that the Company's CEO may grant stock awards, stock unit awards, and incentive awards to non-Section 16 officers under the terms of the 2015 Incentive Plan, provided that such awards shall not exceed 20,000 shares in any calendar year and that the CEO shall provide a report to the Compensation Committee not less than annually on any awards granted pursuant to this delegated authority.The Compensation Committee
has engaged Meridian Compensation Partners, LLC
("Meridian"(“Meridian”) as an independent consultant to advise the Compensation Committee on executive compensation
matters. During this engagement,matters during 2020. Meridian performed no other services for the
consultantCompany during 2020. Meridian also advised the Company on executive compensation matters in 2019 and in prior years. In August 2019, Meridian assisted in developing an appropriate peer group and conducted an analysis and peer comparison of total
compensation. The consultantcompensation for executives. Meridian was engaged directly by the Compensation Committee, although it periodically interacted with management to gather relevant data.
AtSince the time of
its engagement,
basedthe Compensation Committee annually assesses Meridian’s independence in accordance with the listing standards of the NYSE. Based on information from Meridian and the
confirmation of each of the trustees and executive officers
confirmingthat no business or personal relationships with Meridian
exist, the Compensation Committee concluded that
the consultantMeridian was independent from the Company and that
theMeridian’s work
of the consultant did not raise any
conflictconflicts of interest.
TABLE OF CONTENTS
Executive Compensation Peer Group
Consistent with its previous determination regarding executive officer compensation,
In 2019 the Compensation Committee,
determined thatwith the
compensationassistance of
executive officers should consist of a higher percentage of variable pay (i.e., incentive compensation) to fixed pay (i.e., base salary). The Compensation Committee furtherMeridian, determined that executive officer compensation should be
market-adjusted and established with reference tobenchmarked against a peer group of public
real estate investment trusts ("REITs")REITs based on similar asset focus, size in terms of assets,
and revenue and geographic
location.
Table of Contents
location (“Peer Group”) as the Company. No changes were made to the Peer Group in 2020. The peer group Meridian assisted in developing and used for comparison of total executive compensation, consisted of the following REITs (the "Peer Group"):
is identified below:
| | | | | |
• American Assets Trust Inc. •
Bluerock Residential Growth REIT, Inc.
•
EastGroup Properties, Inc.
•
Independence Realty Trust
•
Sun Communities, Inc.
| | | • Apartment and Investment Management Co. (AIMCO) | | | • Armada Hoffler Properties, Inc. | |
| | • Bluerock Residential Growth REIT, Inc | | | | | | • Education Camden Property Trust
| |
| | • Clipper Realty, Inc. | | | • EastGroup Properties, Inc. | | | • Equity LifeStyle Properties, Inc. | |
| | • Independence Realty Trust Inc.(1) | | | • Mid-America Apartment Communities, Inc. •
UDR, Inc.
| | | • Armada Hoffler Properties, NexPoint Residential Trust, Inc.
| |
| | • Camden Properties Trust
•
Equity LifeStyle Properties, Inc.
•
PS Business Parks, Inc. | | | | | | • UDR, Inc. | |
| | • UMH Properties, Inc. | | | • Washington Real Estate Investment GroupTrust | | | | |
(1)Education Realty Trust, Inc. was acquired by Greystar Real Estate Partners on September 20, 2018.
Based on comparisons with the Peer Group, the Compensation Committee determined that no base salary increases were appropriate at this time. In establishing the salaries of the executive officers, the Compensation Committee also considered internal equity among executive officers, individual and Company performance and cost to the Company.
In establishing incentive compensation for executive officers, the Compensation Committee reviewed the comparisons between the Company and the Peer Group as to the types of incentive awards utilized, structure of the incentive awards, and performance metrics utilized.
Role of Management in Executive Compensation Decisions
During
the 2018 transition period,2020, Company management was involved in the following executive compensation processes:
•the Chief Executive Officer, Chief Financial Officer, General Counsel, and Senior Vice President of Talent & Culture,
The executive officers, as requested by the Compensation Committee, developed orand oversaw the creation of written background and supporting materials on compensation for distribution to the Compensation Committee prior to its meetings.
•near the end of the 2018 transition period, meetings; andthe Chief Executive Officer and
a representative from Meridian provided the Compensation Committee with comments and recommendations regarding salary levels and salary increases for members of management, including the named executive officers (other than for the Chief Executive Officer).
Components of the Executive Compensation Program
The primary elements of the
Company'sCompany’s executive compensation program
for the 2018 transition period were:base salary;
•short- and short -term incentives;
long-term incentive awards;
•incentives;health and retirement programs; and
•executive benefits and perquisites.
Table of Contents
Base Salary
Base salaries for the named executive officers, including the CEO, are designed to compensate such individuals for their sustained performance. BaseThe Compensation Committee considered the following factors in establishing 2020 base salaries for the 2018 transition period were established by evaluatingof each executive officer: (i) the responsibilities of the position held, theand experience of the particular individual and the Compensation Committee's desire to achieveindividual; (ii) the appropriate mix between fixed compensation and incentive compensation. The Compensation Committee also reviewed salaries paid for comparable positions bycompensation; (iii) market data derived from the Peer Group as indicated above. Thefor comparable positions; (iv) internal equity among executive officers; (v) individual and Company performance; and (vi) cost to the Company. During 2020, the Company established the following base salaries offor its executive officers:
Mark O. Decker, Jr. | | | $470,000 | | | — |
Anne Olson | | | $360,000 | | | — |
John A. Kirchmann | | | $325,000 | | | — |
TABLE OF CONTENTS
Short-Term Incentive Awards
For 2020, the Company covered the named executive officers
are reviewed and adjusted on a fiscal year basis, based on, among other factors, the individual's performance over the past year, changes in the individual's responsibility and/or necessary adjustments to maintain base salaries that are competitive in view of prevailing wage rates and inflation, if any. | | | | |
Mark O. Decker, Jr. | | $ | 444,050 | |
John A. Kirchmann | | $ | 325,000 | |
Anne M. Olson(1) | | $ | 360,000 | |
(1)Ms. Olson's base salary was increased to $360,000 in June 2018.
Short-Term Incentive Awards
Theunder its short-term incentive program ("STIP"(“STIP”) for the 2018 transition period was developed under the 2015 Plan and is subject to the terms and limitations of the 2015 Plan.. The STIP was recommended by the Compensation Committee and approved by the independent trustees.
The objective of the STIP is to incentivize our named executive officers to achieve individual and company performance goals, which help to drive shareholder value.
Under the STIP, the
Company'sCompany’s named executive officers are provided the opportunity to earn
cash awards,
payable 100% in cash, based on the degree of attaining specified performance goals of the Company over a one-year performance period beginning on the first day of the fiscal year. The executive officers must be employed by the Company on the last day of the performance period, December 31,
2018,2020, to receive
theany earned cash award.
Target
2020 STIP
wasawards were based on a percentage of the named executive
officer'sofficer’s base
salary:•100%salary, as determined by the Compensation Committee after reviewing (i) the appropriate mix between fixed compensation and incentive compensation; (ii) market data derived from the Peer Group for Mr. Decker;comparable positions; (iii) internal equity among executive officers; (iv) individual and
•70% for Ms. Olson Company performance; and Mr. Kirchmann.
(v) cost to the Company. Target 2020 STIP awards based on a percentage of the named executive officer’s base salary were as follows:
Mr. Decker | | | 100% |
Ms. Olson | | | 80% |
Mr. Kirchmann | | | 70% |
Each named executive officer'sofficer’s total award opportunity under the STIP, stated as a percentage of base salary for "threshold," "target,"“threshold,” “target,” and "maximum"“maximum,” performance levels arewere 50%, 100%, and 150%, respectively. For
The Compensation Committee selected the
STIP awards:•70%following performance measures for the 2020 STIP: AFFO, same-store NOI growth, adjusted EBITDA margin, and strategic goals. The table below shows the relative weight of the award was based on achieving objectiveeach performance goals
•35% based on Adjusted FFO ("AFFO"); and
•35% based on Same Store NOI Growth; and
•30% was based on achieving subjective performance goals (including progress on execution of strategic plan and meeting individual personal goals).
measure: AFFO | | | 25% |
Same-Store NOI Growth | | | 35% |
Adjusted EBITDA Margin | | | 20% |
Strategic Goals | | | 20% |
Table of Contents
If achievement of an objective performance goal (i.e., AFFO, same-store NOI growth and adjusted EBITDA margin) falls between the threshold and target performance levels or between target and maximum performance levels, that portion of the award will be determined by linear interpolation. AFFO, and Same Storesame-store NOI growth, and adjusted EBITDA margin were calculated, and the strategic goals were determined, as follows:
same-store NOI growth and adjusted EBITDA margin are non-GAAP measures. For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, please refer to Appendix A.
The performance goals for all 2020 STIP performance metrics were set by the independent trustees within the first 90 days of the performance period, which began January 1, 2020, considering input from the full Board of Trustees and the Chief Executive Officer. Given the timing of the establishment of the goals, there was no consideration of the impact of the COVID-19 pandemic on the Company’s operations or financial condition in establishing the performance goals for the 2020 STIP.
AFFO
FFO, as defined by Nareit, is equal to a
REIT'sREIT’s net income or loss calculated in accordance with GAAP, excluding depreciation and amortization related to real estate, gains or losses from sales of certain real estate assets, gains and losses from a change in control, and impairment write-downs of certain real estate assets and investments. The portion of the
2018 Transition Period2020 STIP based on
AFFOadjusted FFO (“AFFO”) was computed by calculating the
Company'sCompany’s FFO for
the 2018 transition period2020 and then adjusting that number to:
exclude the impact of losses on extinguishment of debt, severance and transitioncertain casualty losses, rebranding costs, casualty loss write-offs, andon marketable securities, discount on redemption of preferred shares, stock-based compensation expense;expense, straight-line rent, 2020 STIP costs above target, and
• other miscellaneous items; andinclude same-store recurring capital expenditures.
TABLE OF CONTENTS
The
performanceCompensation Committee selected AFFO because growth in AFFO is a primary driver of shareholder value over a multi-year period and is a common measure used in the REIT industry. The following AFFO goals
for the AFFO performance metric were set
by the independent trustees within the first 90 daysfor measurement of
the performance period (taking into account input from the Board of Trustees and the Chief Executive Officer), and were as follows: threshold at $2.80, target at $2.85, and maximum at $2.95. Because these levels were established based on a twelve-month fiscal year, to determine whether the thresholds had been met, the Company calculated2020 AFFO
for the eight-month transition period and then annualized those results to obtain a comparable 12-month number.Below Threshold | | | Below $3.04 | | | — |
Threshold | | | $3.04 | | | 50% |
Target | | | $3.13-$3.19 | | | 100% |
Maximum | | | $3.28 | | | 150% |
(1)
| If achievement of the performance goal falls between the threshold and target performance levels or between target and maximum performance levels, that portion of the award will be determined by linear interpolation. |
Same-Store NOI GrowthSame-store NOI growth is calculated as the increase of same-store NOI over prior year same-store NOI.
NOI, as defined in the Company'sCompany’s filings with the SEC, is total real estate revenues less property operating expenses, including real estate tax expense. The performance goalsSame-store is a term that refers to apartment communities that are owned or in-service for this performance metric were set by the independent trustees within the first 90 dayssubstantially all of the performance period (taking into account input fromperiods being compared and, in the Boardcase of Trusteesnewly-constructed properties, have achieved a target level of physical occupancy of 90%. Same-store NOI growth for the 2020 STIP was calculated as the increase of current year same-store NOI over prior year same-store NOI.
Same-store NOI growth is a key financial metric for the Company that measures the Company’s ability to increase the revenue and the Chief Executive Officer), and were as follows: threshold at 2.20%, target at 3.75%, and maximum at 5.50%. Duemanage expenses relative to the change in fiscal year-end,prior year’s performance within a pool of same-store assets. The Company’s same-store NOI growth was calculatedtargets were based on the low-end, mid-point, and high-end of our disclosed guidance, as follows:
Below Threshold | | | Below 1.6% | | | — |
Threshold | | | 1.6% | | | 50% |
Target | | | 2.3%-2.5% | | | 100% |
Maximum | | | 3.1% | | | 150% |
(1)
| If achievement of the performance goal falls between the threshold and target performance levels or between target and maximum performance levels, that portion of the award will be determined by linear interpolation. |
Adjusted EBITDA Margin
Adjusted EBITDA, as defined in the Company’s filings with the SEC, is earnings before interest, taxes, depreciation, amortization, gain or loss on sale of real estate and other investments, gain or loss on extinguishment of debt, gain on litigation settlement, and gain or loss from involuntary conversion. Adjusted EBITDA margin is defined as adjusted EBITDA divided by comparingtotal real estate revenues. Adjusted EBITDA margin measures the resultsratio of revenue that remains available to service debt, pay for capital investments, and cover dividends after satisfying operating expenses, general and administrative expenses, property management expenses, and other expenses or losses required for the eight months ended December 31, 2018Company’s day to the resultsday operations.
The following adjusted EBITDA margin goals were set for
the eight months ended December 31, 2017.The table below summarizes the total STIP payout earned by the named executive officers for the eight months ended December 31, 2018.
measurement of 2020 adjusted EBITDA margin performance:
Below Threshold | | | Below 44.4% | | | — |
Threshold | | | 44.4% | | | 50% |
Target | | | 45.4%-47.4% | | | 100% |
Maximum | | | 48.4% | | | 150% |
| | | | | | | | | | | | | | | | |
Name
| | AFFO(1)
| | Same-Store
NOI Growth(2)
| | Individual and
Strategic Plan
Goals(3)
| | Total Payout
| | % of Target
| |
|---|
| | | | | | | | | | | | | | | | | |
Mark O. Decker, Jr. | | $ | 72,528 | | $ | 154,233 | | $ | 111,012 | | $ | 337,773 | | | 114 | % |
John A. Kirchmann | | $ | 37,158 | | $ | 79,018 | | $ | 56,875 | | $ | 173,051 | | | 114 | % |
Anne M. Olson | | $ | 41,160 | | $ | 87,528 | | $ | 63,000 | | $ | 191,688 | | | 114 | % |
(1)
| If achievement of the performance goal falls between the threshold and target performance levels or between target and maximum performance levels, that portion of the award will be determined by linear interpolation. |
TABLE OF CONTENTS
Strategic Goals
The Company generated AFFO of $2.82 per share/unit on an annualized basis during the transition period ended December 31, 2018, which exceeded the "threshold" level, with a 70% payout based on linear interpolation between the "threshold" and "target" levels.
(2)The Company's same-store NOI growth was 5.46% for the eight-month transition period ended December 31, 2018, which exceeded the "target" performance metric and resulted in a 149% payout.
(3)With respect to the individual and strategic plan goals relating to progress on execution of the strategic plan and meeting individual personal goals, the Compensation Committee with the approval of the
Table of Contents
independent trustees, determined that allestablished strategic goals for 2020 for each of the named executive officers, exceededMs. Olson and Messrs. Decker and Kirchmann. Following the subjective criteria of their STIP awards and resulted in a 125% payout.
Long-Term Incentive Awards
The long-term incentive awards are issued pursuant to the 2015 Plan and are subject to the terms and limitations of the 2015 Plan. The awards are evidenced by individual award agreements, which allowsperformance period (fiscal year 2020), the Compensation Committee analyzed each named executive officer’s performance of his or her specific goals and determined the flexibilityextent to make changes easily inwhich each had achieved such goals. In addition to the future to reflect best practices in the market and REIT industry.
On July 20, 2018,goals initially established, the Compensation Committee recommended, and the independent trustees approved, a new long-term incentive program for the 2018 transition period ("2018 Transition Period LTIP") under the 2015 Plan to be consistent with best practices in the market and align more closely with the Company's compensation program goals. As of July 20, 2018, 2018 Transition Period LTIP awards were granted to the named executive officers.
The 2018 Transition Period LTIP awards include:
•performance-based elements (67%); and
•time-based elements (33%).
The performance-based LTIP awards are based on the Company's total shareholder return ("TSR") compared to a market index. The time-based LTIP awards consist of time-based RSUs with a three-year vesting period.
Target LTIP was based on a percentage of the named executive officer's base salary:
•100% for Mr. Decker and Ms. Olson; and
•70% for Mr. Kirchmann.
To prepare the LTIP award agreements, the percentage of salary was then converted into a number of common shares based on the average closing price of the common shares for the 20 trading days prior to the grant date to determine the number of Target Shares. The performance period for the 2018 Transition Period LTIP performance-based awards extends from May 1, 2018 through April 30, 2021. The performance-based 2018 Transition Period LTIP awards are described in greater detail below.
The performance-based 2018 Transition Period LTIP awards are earned based on the Company's total shareholder return ("TSR") over a three-year period, ending on April 30, 2021, as compared to the TSRs of the constituent members of the MSCI U.S. REIT Index over the same measurement period, ranging from 0% up to 200% of the performance-based Target Shares based on threshold, target and maximum performance levels as set forth in the table below:
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | TSR Percentile for the Performance Period | | | | Number of Performance-Based Target Shares Earned | | |
| | | | | | | | | | | | |
| | Below Threshold | | | | Below 25th percentile | | | | None | | |
| | | | | | | | | | | | |
| | Threshold | | | | 25th percentile | | | | 25% of Performance-Based Target Shares | | |
| | | | | | | | | | | | |
| | Target | | | | 50th percentile | | | | 100% of Performance-Based Target Shares | | |
| | | | | | | | | | | | |
| | Maximum | | | | 75th percentile | | | | 200% of Performance-Based Target Shares | | |
| | | | | | | | | | | | |
Table of Contents
Company TSR is the compounded annual growth rate, expressed as a percentage (rounded to the nearest tenth of a percent (0.1%)) in the value of a share duringconsidered the performance period reflecting the appreciation/depreciation in the price per share and distributions paid on a share during the performance period, including the reinvestment of distributions. The Company TSR for the performance period will be calculated as follows:
1.the closing price of a share on the last day of such performance period (but using the average closing price for the 20 trading days ending on the last day of the performance period), plus distributions paid during such period, divided by
2.the closing price of a share on the first day of such performance period (but using the average closing price for the 20 trading days ending before the first day of the performance period).
If the performance period ends on account of a change in control, the Company TSR for the period from the most recent fiscal year-end to the change in control date will be annualized for purposes of calculating the Company TSR. The TSR of a constituent member of the MSCI U.S. REIT Index will be the TSR of such member, calculated in accordance with the methodology described above for Company TSR.
If achievement falls between two performance levels, then linear interpolation will be used to determine the number of earned shares. If theeach named executive officer remains in the continuous employlight of the Company or an affiliate from the date of grant until the end of the performance period, then the earned shares will fully vest at the end of the performance period. If the named executive officer's employment is terminated before the end of the performance period for either good reasonchallenges created by the officer, without cause by the Company, or upon the officer's death or disability (a "Qualifying Termination"), then a pro rata portionCOVID-19 pandemic.
Determination of
the earned shares will vest at the end of the performance period. If a change in control occurs before the end of the performance period, then a pro rata portion of the earned shares will vest on the change of control date.The time-based LTIP awards were granted at the target award level, or 100% of the Target Shares multiplied by 33%, and vest as to one-third of the shares on each of July 20, 2019, April 30, 2020, and April 30, 2021 if the named executive officer remains in the continuous employ of the Company or an affiliate through each of the applicable vesting dates. If the officer's employment is terminated due to death or disability before the last vesting date, then any shares that remain unvested will vest in full as of the date of such termination. If a change of control occurs before the last vesting date and the officer's employment is terminated in a Qualifying Termination as of the change of control date, or within twelve months of the change of control date, then any shares that remain unvested will vest in full as of the change in control date.
As of December 31, 2018, none of the shares under the time-based 2018 Transition Period LTIP awards granted to the named executive officers were fully vested in accordance with the terms of the award agreements. The performance periodCompensation for the performance-based 2018 Transition Period LTIP awards granted to the named executive officers is still in progress.
Information regarding the LTIP awards for fiscal years 2018 and 2017 are included in the proxy statements for the 2018 Annual Meeting and 2017 Annual Meeting, respectively.
Table of Contents
Health, Retirement and Other Benefits
In an effort to attract, retain and fairly compensate talented employees, the Company offers various benefit plans to its employees, including a 401(k) benefit plan, and health, life insurance, and disability plans. These benefit plans are part of the Company's broad-based employee benefits program, and none of these plans are offered to the named executive officers either exclusively or with terms different from those offered to other eligible Company employees.
Executive Benefits and Perquisites
As noted above, the Company's named executive officers are generally offered the same employee benefits and perquisites offered to all employees. In the 2018 transition period, the only benefits or perquisites offered to any named executive officer either exclusively or with terms different from those offered to other eligible Company employees were the following: the provision of a data plan to all named executive officers, in addition to the Company's standard cell phone plan for employees. The Company provides executive benefits and perquisites to retain executive talent. The total value of all perquisites received by any of the named executive officers in the 2018 transition period was less than $10,000.
Compensation Elements and Basis for Compensation of Named Executive Officers ("NEOs")
The components of the Company's executive compensation program (base salary, incentive awards, health, retirement, and other benefits, and executive benefits and perquisites) for the 2018 transition period are discussed above.
The key factors the Compensation Committee considered in setting or approving the compensation for the named executive officers are discussed below and include the nature, scope, and level of their respective responsibilities and their individual contribution to the
Company'sCompany’s operational and financial results. These factors were considered as a whole, and no one factor was determinative of an
executive's compensation, and they were based upon a subjective, non-formulaic and informal evaluation of senior executive performance by the Compensation Committee together with the CEO, as discussed above.executive’s compensation. Additionally, in the case of
seniornamed executive officers other than the CEO, the Compensation Committee
generally deferred toconsidered the recommendations of the CEO.
Basis for Compensation of the Chief Executive Officer. In evaluating Mr.
Decker's salary forDecker’s qualitative performance goals, the
eight months ended December 31, 2018 was based on an evaluation of those factors previously described and was approved by the Compensation Committee and the independent
trustees. Amongtrustees considered, among other factors, the
factors considered were the Company'sCompany’s ability to
strengthen its existing portfolio (including its completion of the transition todevelop and execute on a
multifamily REIT), enhancedstrategic plan, align organizational communication, and enhance operational proficiency
and growth (including achievement of certain budget forecasts and
occupancyfinancial metrics)
, and position as a growing multifamily REIT (including more than 90% NOI from multifamily properties at year-end and budgeted growth in FFO/AFFO). In addition, the CEO was evaluated for his ability to recruit, empower, and develop a high-performing team. These factors were considered as a whole, and no numerical weight was attributed to any particular factor.
The incentive awards granted to Mr. Decker for the 2018 transition period were granted based on the criteria and calculated in accordance with the formulas described above in the "Short-Term Incentive Awards" and "Long-Term Incentive Awards" section of this Compensation Discussion and Analysis. Basis for Compensation of Other Named Executive Officers.Officers The salaries for the NEOs, other than the CEO, for the eight months ended December 31, 2018, were based on the recommendations of the CEO following his evaluation of those factors previously described. In evaluating Mr. Kirchmann’s and
was approved byMs. Olson’s qualitative performance goals, the
Compensation Committee and the independent
trustees.trustees considered recommendations of the CEO. Among the
other factors considered were the
Company'sCompany’s ability to
strengthen its existing portfolio (including its completion of the transition todevelop and execute on a
Table of Contents
multifamily REIT), enhanced strategic plan, align organizational communication, enhance operational proficiency and balance sheet strength (including achievement of certain budget forecasts and occupancyfinancial metrics), and position as a growing multifamily REIT (including more than 90% NOI from multifamily properties at year-endenhance the customer experience through development of comprehensive initiatives in operations and budgeted growth in FFO/AFFO). These factors were considered as a whole,technology.
Achieved Performance and no numerical weight was attributed to any particular factor. Payouts
The incentive awards granted totable below summarizes the othertotal 2020 STIP payout earned by the named executive officers for the 2018 transition periodyear ended December 31, 2020.
Mark O. Decker, Jr. | | | $104,575 | | | $105,280 | | | $98,700 | | | $98,700 | | | $407,255 | | | 87% |
Anne Olson | | | $64,080 | | | $64,512 | | | $60,480 | | | $86,400 | | | $275,472 | | | 96% |
John A. Kirchmann | | | $50,619 | | | $50,960 | | | $47,775 | | | $52,235 | | | $201,679 | | | 89% |
(1)
| The Company generated AFFO of $3.11 per share/unit during the year ended December 31, 2020, with an 89% payout based on linear interpolation between the “threshold” of $3.04 and “target” of $3.13-$3.19. |
(2)
| The Company’s same-store NOI growth was 1.8% for the year ended December 31, 2020, with a 64% payout based on linear interpolation between the “below threshold” of 1.6% and “threshold” of 2.3%-2.5%. |
(3)
| The Company’s adjusted EBITDA margin was 47.5% for the year ended December 31, 2020, with a 105% payout based on linear interpolation between the “target” of 45.4%-47.4% and “maximum” of 48.4%. |
(4)
| With respect to the strategic goals, based on a number of factors including the achievement of individual qualitative objectives, the Compensation Committee, with the approval of the independent trustees, determined that (a) Mr. Decker earned a payout equal to 105%; (b) Ms. Olson earned a payout of 150%, and Mr. Kirchmann earned a payout equal to 115%. |
Long-Term Incentive Awards
In April 2020, the shareholders approved the Amended and Restated 2015 Incentive Plan to expand the types of awards that may be issued under the Plan to include not only stock awards, stock unit awards and incentive awards, but also stock options, including nonqualified stock options and incentive options, as well as stock appreciation rights. The long-term incentive awards are issued pursuant to the Amended and Restated 2015 Incentive Plan and are subject to the terms and limitations of such Plan. The awards are evidenced by individual award agreements, which allows the Compensation Committee the flexibility to make changes easily in the future to reflect best practices in the market and REIT industry.
TABLE OF CONTENTS
2020 LTIP
In March 2020, upon the recommendation of the Compensation Committee, the independent trustees approved the grant of time-based RSUs for named executive officers, but deferred decisions relating to the grant of any other long-term incentives given the economic uncertainty related to COVID-19. In May 2020, the Compensation Committee recommended, and the independent trustees approved the remaining portions of the LTIP, which when combined with the March time-based RSU grants, represented the following percentage of each named executive officer’s base salary:
Mr. Decker | | | 200% |
Ms. Olson | | | 125% |
Mr. Kirchmann | | | 100% |
The Compensation Committee considered the following factors in establishing 2020 LTIP awards as a percentage of base salary for each executive officer: (i) the appropriate mix between fixed compensation and incentive compensation; (ii) market data derived from the Peer Group for comparable positions; (iii) internal equity among executive officers; (iv) individual and Company performance; and (v) cost to the Company.
2020 Stock Options
Stock options comprised 67% of each named executive officer’s 2020 Target LTIP opportunity. The exercise price of each stock option is $66.36, which equals the grant date closing share price of our common stock. The options vest in equal installments on May 21, 2021, January 1, 2022, January 1, 2023, and January 1, 2024, subject to the named executive officer remaining in the continuous employ of the Company or an affiliate through each of the applicable vesting dates.
Stock options are exercisable for three (3) months after an officer terminates employment with the Company and all affiliates, unless such termination is due to the officer’s death or disability, in which case options are exercisable for twelve (12) months after the officer’s death or disability. However, the 2020 stock options may not be exercised after the options’ expiration date of May 21, 2030.
The named executive officers will realize no compensation under the stock option unless at the time of exercise the Company’s share price has increased over the share price at time of grant. Therefore, the time-based stock options help to align executive pay with company share performance and to align the interests of our named executive officers with those of our shareholders.
At the time the stock options were granted, basedCOVID-19 pandemic-related lockdowns were underway and there was considerable uncertainty making it a significant challenge to set 3-year goals for performance-based equity grant purposes. In this environment, the use of stock options instead of performance-based awards allowed the company to maintain alignment between long-term compensation and the interests of our shareholders. While the Compensation Committee intends to maintain stock options as part of its compensation structure, it anticipates that performance-based grants will remain the primary component of LTIP compensation once uncertainty from the pandemic subsides.
2020 Time-Based RSUs
Time-based RSUs comprised 33% of each named executive officer’s 2020 Target LTIP opportunity. The RSUs vest in equal installments on March 13, 2021, March 13, 2022, and March 12, 2023, subject to the criterianamed executive officer remaining in the continuous employ of the Company or an affiliate through each of the applicable vesting dates. If a named executive officer’s employment is terminated due to death or disability before the last vesting date, then any RSUs that remain unvested will vest in full as of the date of such termination. Upon vesting, each then vested RSU is settled and calculateddistributed in a single share of the Company’s common stock.
As of December 31, 2020, none of the shares under the time-based 2020 RSU awards granted to the named executive officers were vested in accordance with the formulas described above interms of the "Short-Term Incentive Awards"award agreements.
Health, Retirement and "Long-Term Incentive Awards" section of this Compensation DiscussionOther Benefits
In an effort to attract, retain and
Analysis. Resignation and Severance Agreements
On June 25, 2018,fairly compensate talented employees, the Company entered intooffers various benefit plans to its employees, including a severance agreement401(k) benefit plan, and release with Andrew Martin in connection with his resignation as Executive Vice President – Property Operations. Under this agreement, Mr. Martin received a lump sum severance paymenthealth, life insurance, and short and long-term disability plans.
TABLE OF CONTENTS
These benefit plans are part of $318,750, subject to applicable tax withholding and deductions as required by law. The severance calculation is based on 0.75x base salary, plus 0.75x target bonus. As of his resignation date, vesting accelerated on all 763 of Mr. Martin's outstanding time-based restricted shares of common stock, which were awarded under the Company's LTIP. All outstanding performance-based shares awarded to Mr. Martin under the LTIP will be forfeited. In addition, Mr. Martin will receive otherCompany’s broad-based employee benefits valued at $20,926, including 0.75xprogram, and none of his current annual premiumthese plans are offered to the named executive officers either exclusively or with terms different from those offered to other eligible Company employees.
Executive Perquisites
In 2020, the Company provided limited perquisites to our named executive officers, which included the following: cell phone, data plan and paid parking contracts. The Company provides perquisites to retain executive talent. The total value of all perquisites received by any of the named executive officers in 2020 was less than $10,000.
Say-On-Pay Results and Consideration Say-On-Pay Voting Results for the continuationYear ended December 31, 2020
At the Company’s 2020 Annual Meeting of
health benefits.Shareholders, shareholders approved of our executive compensation program by approximately 96.8% of the votes cast on the proposal. The Compensation Committee believes that the result of the advisory vote is valuable in assessing its compensation decisions and considered the vote in reviewing and evaluating its executive compensation programs. The Compensation Committee also considered numerous other factors in evaluating the Company’s executive compensation programs as discussed in this Proxy Statement, including its desire to continue to enhance the alignment of our named executive officers’ interests with those of our shareholders.
While each of these factors (among other things, including the uncertainty created by the COVID-19 pandemic) informed the Committee’s decisions regarding the named executive officers’ compensation, the Compensation Committee did not implement any changes to the Company’s executive compensation programs as a result of the shareholder advisory vote.
Say-On-Frequency Voting Results
At the Company’s 2017 Annual Meeting of Shareholders, a majority of the Company’s shareholders voted to hold an advisory vote on executive compensation every year. The Board considered the voting results on that proposal and adopted a policy providing for an annual advisory shareholder vote on the Company’s executive compensation. The next required “say-on-frequency” advisory vote will occur at the Company’s 2023 Annual Meeting of Shareholders.
The Company does not have any employment agreements with any of its executive officers.
The Company believes it is important to foster and maintain a culture that emphasizes integrity and accountability and that reinforces the
Company'sCompany’s pay-for-performance compensation philosophy. For this reason, the Company adopted the Executive Incentive Compensation Recoupment Policy, more commonly known as a clawback policy, effective May 1, 2015. This policy applies to all executive officers, vice presidents and senior vice presidents who receive incentive compensation, including annual cash bonuses and cash and equity awards under the current or future STIP and LTIP, which are based on achievement of specified financial performance metrics. The policy applies to such awards approved, awarded, or granted on or after the effective date of May 1, 2015.
The Board reviewed and updated the clawback policy in March 2020.
In the event the Company restates its financial statements due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws, a person covered by this clawback policy will be required to reimburse or forfeit any incentive compensation received if such person engaged in fraud, intentional misconduct, or illegal behavior that caused or contributed to such restatement. The amount to be reimbursed or forfeited will be the amount of the incentive compensation paid or awarded to the person based on the erroneous financial data exceeding the amount that would have been paid based on restated results, as determined by the Board in its sole discretion. The Board will also determine the method for recouping such amounts, which may include: (1) requiring reimbursement of cash incentive compensation previously paid to the person; (2) seeking recovery of any gain realized on the vesting, sale, or other disposition of any equity-based awards; (3) offsetting the recouped amount from
TABLE OF CONTENTS
any compensation otherwise owed by the Company to the person; (4) canceling outstanding vested or unvested equity awards made to the person; and/or (5) taking any other remedial and recovery action permitted by law.
The Company is not required to indemnify any covered executive from the reimbursement or forfeiture of incentive compensation sought or obtained pursuant to the clawback policy.
The Board has the sole discretion to decide whether it is appropriate to recoup the pre- or post-tax incentive compensation amount based on the person'sperson’s circumstances. However, actions taken to recover such incentive compensation under this policy will be effected in a manner that does not result in adverse tax consequences for the person under Section 409A of the Internal Revenue Code (the “Code”) and applicable rules and regulations. It is the Company'sCompany’s intention that this policy be interpreted in a manner consistent with the requirements of Section 10D of the Exchange Act.
Table of Contents
Change Inin Control Severance Agreements
The Company has entered into "double-trigger"“double-trigger” Change in Control Severance Agreements with the named executive officers, including Ms. Olson and Messrs. Decker and Kirchmann. The Company believes it is important to provide such officers assurances regarding the benefits that will be payable if a change in control occurs (first trigger)and andtheir employment with the Company and its affiliates is terminated without cause by the Company or terminated by the officer for good reason, as such terms are defined in the agreements (second trigger). Additional information regarding the terms of these Severance Agreements is described below under "Potential“Executive Compensation — Potential Payments Upon Termination or Change in Control – ChangeControl.”
Share Ownership and Retention
Our named executive officers are subject to the Company’s Policy Regarding Share Ownership and Retention. This policy requires that the Mssrs. Decker and Kirchmann and Ms. Olson, within five years of the later of (i) September 20, 2018 or (ii) the officer’s hire date, owns shares of the Company equal to the following:
| | Chief Executive Officer | | | 5x annual base salary | |
| | Chief Operating Officer, Chief Financial Officer | | | 2x annual base salary | |
The value of the Shares owned by a Participant is calculated as the number of Shares owned multiplied by the greater of (i) the closing per-Share price on the most recent trading date prior to the date of the determination, or (ii) the average closing per-Share price during the one-year trading period ending on the most recent trading date prior to the date of the determination.
Additionally, the named executive officers are required to retain an amount equal to 60% of the Net Shares received as a result of any equity awards granted to the Officer by the Company until the earlier of the time that (a) the applicable Ownership Guideline is reached, (b) the Officer is no longer employed by the Company, or (c) the Officer otherwise ceases to be an Officer. “Net Shares” are those vested Shares that remain after Shares are sold or withheld, as the case may be, to pay any applicable exercise price for the award and to satisfy any tax obligations arising in
Control Severance Agreements." Indemnification Agreements
connection with the exercise, vesting or payment of the award.
Hedging and Pledging of Company Securities
The Company has entered into an Indemnification Agreementadopted a Policy Regarding Hedging and Pledging of Securities. Under this policy, our named executive officers are prohibited from: (1) directly or indirectly engaging in hedging or monetization transactions, through transactions in the Company’s securities or through the use of financial instruments designed for such purpose; and/or (2) pledging the Company’s securities as collateral for a loan, including without limitation through the use of traditional margin accounts with eacha broker.
Consideration of Certain Tax Effects Section 162(m), as in effect prior to the enactment of the trustees,Tax Cuts and Jobs Act in December 2017 (the “2017 Tax Act”), generally disallowed a tax deduction to public companies for compensation of more than $1 million paid in any taxable year to each “covered employee,” consisting of the CEO and the three other highest paid executive officers senior vice presidents, and certain other officersemployed at the end of the Company. year (other than the CFO). Performance-based compensation was exempt from this deduction limitation if we met specified requirements set forth in the Code and applicable Treasury Regulations.
TABLE OF CONTENTS
The Company believes2017 Tax Act retained the $1 million deduction limit, but repealed the performance-based compensation exemption from the deduction limit and expanded the definition of “covered employees,” effective for taxable years beginning after December 31, 2017. “Covered employees” will now also include any person who served as CEO or CFO at any time during a taxable year, as well as any person who was ever identified as a covered employee in 2017 or any subsequent year. Consequently, compensation paid in 2018 and later years to our named executive officers in excess of $1 million will not be deductible unless it qualifies for transitional relief applicable to certain binding, written performance-based compensation arrangements that were in place as of November 2, 2017.
The Department of Treasury issued Proposed Section 162(m) Regulations (the “Proposed Regulations”) on December 17, 2019. These Proposed Regulations further clarified changes made by the 2017 Tax Act. Prior to attractthe issuance of the Proposed Regulations, compensation paid by the Operating Partnership owned by a REIT was not subject to the provisions of Section 162(m). Under the Proposed Regulations, a REIT’s distributive share of the compensation paid by the Operating Partnership would become subject to the Section 162(m) at the REIT level. These proposed regulations applied to tax years ending after December 20, 2019, other than compensation paid pursuant to a binding written contract in effect on December 20, 2019. On December 18, 2020, the Department of Treasury issued regulations (Final Regulations) conforming to and retain talented and experienced individualsfinalizing the Proposed Regulations published on December 17, 2019. The Final Regulations apply to serve ortax years ending after December 18, 2020.
The Compensation Committee intends to continue to servecomply with the requirements of Section 162(m) as trustees or officersit existed prior to enactment of the Company, and2017 Tax Act with respect to encourageperformance-based compensation in excess of $1 million payable under outstanding awards granted before November 2, 2017 under our LTIP, in order for them to take the business risks necessaryqualify for the success oftransitional relief. However, no assurance can be given that the Company, it is necessarycompensation associated with these awards will qualify for the Company contractuallytransitional relief, due to indemnify trusteesambiguities and officers and to assume for itself,uncertainties as to the fullest extent permitted by law, expensesapplication and damages relatedinterpretation of newly revised Section 162(m) and the requirements for the transitional relief.
The Compensation Committee continues to
claims against such trusteesbelieve that shareholder interests are best served if its discretion and
officersflexibility in
connection with their service to the Company.The agreements supplement the rights to indemnification, advancement of expensesstructuring and related rights providedawarding compensation is not restricted, even though some compensation awards were non-deductible in the Company's Declarationpast, and these and other types of Trust. The Agreements generally provide that the Company shall indemnify the indemniteesawards are expected to the fullest extent permitted by law, subject to certain exceptions, against judgments, penalties, fines, and amounts paid in settlement and all expenses actually and reasonably incurred by indemnitee in connection with their services as a trustee or officer and also provide rights to advancement of expenses and contribution. An agreement terminates the later of: (1) the date the indemnitee is no longer a trustee or employee of the Company; and (2) the date that indemnitee is no longer subject to any actual or possible proceeding, as definedbe non-deductible in the agreements.
future.
Compensation Committee Report
The Compensation Committee of the Board has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The Compensation Committee of the Board:
Linda J. Hall (Chair)
Michael T. Dance
John A. Schissel
TABLE OF CONTENTS
| | | | |
| | The Compensation Committee of the Board:
Linda J. Hall (Chair)
Emily N. Green
John A. Schissel | | |
Table of Contents
EXECUTIVE OFFICER COMPENSATION TABLES
Summary Compensation Table for the 2018 Transition Period
The table below summarizes the total compensation paid to or earned by the named executive officers serving during or atfor the endyears ended December 31, 2020 and December 31, 2019. In light of theour transition from an April 30 to a December 31 fiscal year-end in 2018, transition period, based onwe are also reporting total compensation received for the eight-month transition period ended December 31, 2018 and the full fiscal year prior to that transition period, the fiscal year ended April 30, 2018. For a narrative discussion of the compensation determinations that were made for 2020, please refer to the “Compensation Discussion and Analysis” section of this Proxy Statement.
Mark O. Decker, Jr
President, Chief Executive Officer and Chief Investment Officer
| | | | | | 2020 | | | 470,000 | | | 784,668 | | | 407,255 | | | 13,346(4) | | | 1,675,269 |
| | | | | 2019 | | | 465,010 | | | 570,519 | | | 560,476 | | | 13,750(4) | | | 1,609,755 |
| | Transition Period | | | 2018 | | | 300,470 | | | 445,146 | | | 337,773 | | | 16,575 | | | 1,099,964 |
| | Fiscal Year | | | 2018 | | | 444,050 | | | 592,793 | | | 509,769 | | | 201,599 | | | 1,748,211 |
J ohn A. Kirchmann
Executive Vice President and
Chief Financial Officer
| | | | | | 2020 | | | 325,000 | | | 271,283 | | | 201,679 | | | 13,558(4) | | | 811,520 |
| | | | | 2019 | | | 325,000 | | | 263,052 | | | 271,295 | | | 19,750 (4) | | | 879,097 |
| | Transition Period | | | 2018 | | | 220,033 | | | 228,038 | | | 173,051 | | | 16,069 | | | 637,191 |
| | Fiscal Year | | | 2018 | | | 325,000 | | | 399,383 | | | 238,240 | | | 40,029 | | | 1,002,652 |
Anne Olson(3)
Executive Vice President, Chief Operating Officer, General Counsel,
and Secretary
| | | | | | 2020 | | | 360,000 | | | 375,659 | | | 275,472 | | | 13,625(4) | | | 1,024,756 |
| | | | | 2019 | | | 360,000 | | | 364,193 | | | 300,510 | | | 13,750 (4) | | | 1,038,453 |
| | Transition Period | | | 2018 | | | 238,358 | | | 360,873 | | | 191,688 | | | 18,690 | | | 809,609 |
| | Fiscal Year | | | 2018 | | | 325,000 | | | 399,383 | | | 261,170 | | | 22,925 | | | 1,008,478 |
(1)
| The amounts included in this column for 2020 represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares and stock options awarded under 2020 LTIP awards. The time-based RSUs were granted on March 13, 2020 and the stock options were granted on May 21, 2020. Each applicable officer received two LTIP awards on the applicable grant date: (i) time-based RSUs which vest ratably over a three-year period provided the recipient is still employed with the Company (“time-based LTIP award”); and (ii) stock options which vest ratably over a four-year period provided the recipient is still employed with the Company (“stock options”). See the “Long-Term Incentive Awards – 2020 LTIP” section of the Compensation Discussion and Analysis section of this Proxy Statement for more information. |
(2)
| The amounts included in this column represent the cash awards earned under the referenced 2020 or 2019 fiscal year or 2018 transition period or fiscal year pursuant to the Company’s STIP, based on the 2020, 2019, or 2018 transition period or fiscal year performance. The awards were paid following the end of 2020, 2019, the 2018 transition period or applicable fiscal year. See the “Short-Term Incentive Awards” section of the Compensation Discussion and Analysis section of this Proxy Statement for more information. |
(3)
| Ms. Olson was promoted to Chief Operating Officer on June 25, 2018. |
(4)
| Consists of 401(k) company contributions. |
The charts set forth below show the percentages of compensation paid to the named executive officers in
the table below were either not employed or were not named executive officers of the Company prior to fiscal year 2017 (May 1, 2016 to April 30, 2017).2020 for base salary, LTIP share and stock option awards, STIP cash compensation, and all other compensation.
| | | | | | | | | | | | | | |
Name and Principal Position
| | Year
| | Salary
($)
| | Share
Awards(1)(2)(3)
($)
| | Non-equity
Incentive Plan
Compensation(4)
($)
| | All Other
Compensation(*)
($)
| | Total
($)
|
|---|
| | | | | | | | | | | | | | | |
Mark O. Decker, Jr.(5) | | Transition period 2018 | | 300,570 | | 445,146 | | | 337,773 | | | 16,575 | | 1,100,064 |
President, Chief Executive Officer and | | Fiscal year 2018 | | 444,050 | | 592,793(6) | | | 509,769 | | | 201,599 | | 1,748,211 |
Chief Investment Officer | | Fiscal year 2017 | | 281,058 | | 502,014(7) | | | 83,862 | | | 19,633 | | 886,567 |
John A. Kirchmann | | Transition period 2018 | | 220,033 | | 228,038 | | | 173,051 | | | 16,069 | | 637,191 |
Chief Financial Officer and Executive | | Fiscal year 2018 | | 325,000 | | 399,383(9) | | | 238,240 | | | 40,029 | | 1,002,652 |
Vice President | | | | | | | | | | | | | | |
Anne M. Olson(8) | | Transition period 2018 | | 238,358 | | 360,873 | | | 191,688 | | | 18,690 | | 809,609 |
Chief Operating Officer, Executive Vice | | Fiscal year 2018 | | 325,000 | | 399,383(9) | | | 261,170 | | | 22,925 | | 1,008,478 |
President, General Counsel, and Secretary | | | | | | | | | | | | | | |
Andrew Martin | | Transition period 2018 | | 39,406 | | — | | | — | | | 334,131 | | 373,537 |
Former Executive Vice President – | | Fiscal year 2018 | | 222,986 | | 170,812 | | | 183,400 | | | 21,770 | | 598,968 |
Property Operations | | Fiscal year 2017 | | 218,922 | | 143,536 | | | 65,677 | | | 15,277 | | 443,412 |
(1)The amounts included in this column for the 2018 transition period represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares awarded under 2018 Transition Period LTIP awards. Such LTIP awards were granted on July 20, 2018. Each applicable officer received two LTIP awards on the applicable grant date: (i) a time-based share award which vests ratably over a three-year period provided the recipient is still employed with the Company ("time-based LTIP award"); and (ii) a performance-based share award which vests based on achieving certain performance goals at the end of the performance period, or April 30, 2021, provided that the recipient is still employed with the Company ("performance-based LTIP award"). The grant date fair value for the performance-based LTIP awards were based on the target number of shares under the award. See the "Long-Term Incentive Awards – 2018 Transition Period LTIP" section of the Compensation Discussion and Analysis section of this Proxy Statement for more information.
(2)The amounts included in this column for fiscal year 2018 represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares awarded under 2018 LTIP awards. Such 2018 LTIP awards were granted on June 21, 2017, except as noted in footnote 5. Each applicable officer received three 2018 LTIP awards on the applicable grant date: (i) a time-based share award which vests ratably over a three-year period provided the recipient is still employed with the Company ("time-based LTIP award"); and (ii) two performance-based share awards which vest based on achieving certain performance goals at the end of the performance period, or April 30, 2020, provided that the recipient is still employed with the Company ("performance-based LTIP award"). The grant date fair value for the performance-based LTIP awards were based on the target number of shares under the award.
(3)The amounts included in this column for fiscal year 2017 represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares awarded under 2017 LTIP awards. Such 2017 LTIP awards were granted on June 22, 2016, except as noted in footnote 6. Each applicable officer received two 2017 LTIP awards on the applicable grant date: (i) a time-based share award which vests ratably over a three-year period provided the recipient is still employed with the Company ("time-based LTIP award"); and (ii) a performance-based share award which vests based on achieving certain performance goals at the end of the performance period, or April 30, 2019, provided that the recipient is still employed with the Company ("performance-based LTIP award"). The grant date fair value for the performance-based LTIP awards were based on the target number of shares under the award.
(4)The amounts included in this column represent the cash awards earned under the referenced 2018 transition period or fiscal year pursuant to the Company's STIP, based on the 2018 transition period or fiscal year performance. The awards were paid following the end of the 2018 transition period or applicable fiscal year. See the "Short-Term Incentive Awards" section of the Compensation Discussion and Analysis section of this Proxy Statement for more information.
(5)Mr. Decker was promoted to Chief Executive Officer on April 27, 2017.
Table of Contents
(6)On May 1, 2017, Mr. Decker received a time-based LTIP award. The amount of this award reflects the full grant date fair value, computed in accordance with ASC Topic 718. This award vests as to one-third of the shares on each May 1, 2018, May 1, 2019, and May 1, 2020, provided that the recipient is still employed with the Company.
(7)In addition to the time-based LTIP award and performance-based LTIP award granted on August 8, 2016, the amount includes a restricted share award granted on August 8, 2016 as a signing bonus when Mr. Decker joined the Company ("signing bonus award"). The amount of this award reflects the full grant date fair value, computed in accordance with ASC Topic 718. This award vests as to one-third of the shares on August 8, 2017 (the first year anniversary of the grant date), August 8, 2018, and August 8, 2019, provided that the recipient is still employed with the Company.
(8)Ms. Olson was promoted to Chief Operating Officer on June 25, 2018.
(9)In addition to the time-based LTIP award and performance-based LTIP award granted on June 21, 2017, on April 30, 2017, Mr. Kirchmann and Ms. Olson received a time-based LTIP award. The amount of this award reflects the full grant date fair value, computed in accordance with ASC 718. This award vests as to one-third on each of April 30, 2018, April 30, 2019, and April 30, 2020, provided that the recipient is still employed with the Company.
(*)All Other Compensation for the 2018 transition period and fiscal years ended April 30, 2018 and 2017 consists of the following:
| | | | | | | | | | | | | | | |
| | Years
| | 401(k)
Company
Contribution
($)
| | Health and
Dental Coverage
and HSA
Contributions
($)
| | Life Insurance &
Long-term
Disability Coverage
($)
| | Other
($)
| | Total
($)
|
|---|
| | | | | | | | | | | | | | | | |
Mark O. Decker, Jr. | | Transition period 2018 | | | 6,492 | | | 9,679 | | | 404 | | — | | 16,575 |
| | Fiscal year 2018 | | | 18,251 | | | 14,290 | | | 588 | | 168,470(1) | | 201,599 |
| | Fiscal year 2017 | | | 3,038 | | | 9,421 | | | 394 | | 6,780(2) | | 19,633 |
John A. Kirchmann | | Transition period 2018 | | | 8,438 | | | 7,227 | | | 404 | | — | | 16,069 |
| | Fiscal year 2018 | | | 8,438 | | | 10,967 | | | 588 | | 20,036(2) | | 40,029 |
Anne M. Olson | | Transition period 2018 | | | 8,598 | | | 9,688 | | | 404 | | — | | 18,690 |
| | Fiscal year 2018 | | | 8,438 | | | 13,899 | | | 588 | | — | | 22,925 |
Andrew Martin | | Transition period 2018 | | | 9,413 | | | 959 | | | 83 | | 323,676(3) | | 334,131 |
| | Fiscal year 2018 | | | 14,504 | | | 6,678 | | | 588 | | — | | 21,770 |
| | Fiscal year 2017 | | | 8,757 | | | 5,928 | | | 592 | | — | | 15,277 |
(1)Includes a retention bonus and relocation costs.(2)Relocation costs.(3)Consists of a lump sum cash severance payment of $318,750 and a cash payment of $4,926, equal to 9 months of monthly payments for the cost of continuation of health benefits, paid in connection with Mr. Martin's resignation.
Table of ContentsTABLE OF CONTENTS
Grants of Plan-Based Awards Table
The following table presents information regarding share awards
and incentive cash compensation granted to the named executive officers for performance during
the 2018 transition period,2020 under the
Company'sCompany’s Amended and Restated 2015 Incentive Plan.
Mark O. Decker, Jr. | | | STIP
| | | 235,000 | | | 470,000 | | | 705,000 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Time-Based RSUs | | | | | | | | | | | | 3/13/2020 | | | — | | | — | | | — | | | 4,148 | | | | | | | | | 296,458 |
| | Stock Options | | | | | | | | | | | | 5/21/2020 | | | — | | | — | | | — | | | | | | 67,293 | | | 66.36 | | | 488,211 |
John A. Kirchmann | | | STIP
| | | 113,750 | | | 227,500 | | | 341,250 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Time-Based RSUs | | | | | | | | | | | | 3/13/2020 | | | — | | | — | | | — | | | 1,434 | | | | | | | | | 102,488 |
| | Stock Options | | | | | | | | | | | | 5/21/2020 | | | — | | | — | | | — | | | | | | 23,266 | | | 66.36 | | | 168,795 |
Anne Olson | | | STIP
| | | 144,000 | | | 288,000 | | | 432,000 | | | | | | | | | | | | | | | | | | | | | | | | |
| | Time-Based RSUs | | | | | | | | | | | | 3/13/2020 | | | — | | | — | | | — | | | 1,986 | | | | | | | | | 141,939 |
| | Stock Options | | | | | | | | | | | | 5/21/2020 | | | — | | | — | | | — | | | | | | 32,215 | | | 66.36 | | | 233,720 |
(1)
| STIP awards for 2020 Performance: Includes the potential range of 2020 STIP cash awards as described in the Compensation Discussion and Analysis section of this Proxy Statement. The actual amount earned for 2020 performance is reported under the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table. |
(2)
| No Performance-based LTIP awards were granted in 2020. |
(3)
| Time-based LTIP awards granted on March 13, 2020, which vest ratably on each March 13, 2021, 2022, and 2023, provided that the recipient is still employed with the Company. See the “Long-Term Incentive Awards – 2020 LTIP” section of the Compensation Discussion and Analysis section of this Proxy Statement for more information. |
(4)
| Stock option LTIP awards granted on May 21, 2020, which vest ratably on each May 21, 2021, January 1, 2022, 2023, and 2024, provided that the recipient is still employed with the Company. See the “Long-Term Incentive Awards – 2020 LTIP” section of the Compensation Discussion and Analysis section of this Proxy Statement for more information. |
(5)
| The amounts included in this column represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares and stock options awarded under the Amended and Restated 2015 Incentive Plan. |
| | | | | | | | | | |
Name
| | Grant Date
| | All Other Share Awards:
No. of Shares
| | Grant-Date Fair
Value ($)(1)
| |
|---|
| | | | | | | | | | | |
Mark O. Decker, Jr. | | | 7/20/2018 | | | 2,634 | (2) | | 141,182 | |
| | | 7/20/2018 | | | 5,268 | (3) | | 303,964 | |
| | | 6/21/2017 | | | 2,435 | (4) | | 149,721 | |
| | | 6/21/2017 | | | 4,870 | (5) | | 345,212 | |
| | | 5/1/2017 | | | 1,645 | (6) | | 97,860 | |
| | | 8/8/2016 | | | 1,287 | (7) | | 84,582 | |
| | | 8/8/2016 | | | 3,068 | (8) | | 201,535 | |
| | | 8/8/2016 | | | 3,862 | (9) | | 215,897 | |
John A. Kirchmann | | | 7/20/2018 | | | 1,349 | (2) | | 72,306 | |
| | | 7/20/2018 | | | 2,699 | (3) | | 155,732 | |
| | | 6/21/2017 | | | 1,247 | (4) | | 76,710 | |
| | | 6/21/2017 | | | 2,494 | (5) | | 176,867 | |
| | | 4/30/2017 | | | 2,467 | (10) | | 145,806 | |
Anne Olson | | | 7/20/2018 | | | 2,135 | (2) | | 114,436 | |
| | | 7/20/2018 | | | 4,271 | (3) | | 246,437 | |
| | | 6/21/2017 | | | 1,247 | (4) | | 76,710 | |
| | | 6/21/2017 | | | 2,494 | (5) | | 176,867 | |
| | | 4/30/2017 | | | 2,467 | (10) | | 145,806 | |
(1)The amounts included in this column represent the full grant date fair value, computed in accordance with ASC Topic 718, of shares awarded under the 2015 Incentive Plan.
(2)Time-based LTIP awards granted on July 20, 2018, which vest ratably on each July 20, 2019, April 30, 2020, and April 30, 2021, provided that the recipient is still employed with the Company. See the "Long-Term Incentive Awards – 2018 Transition Period LTIP" section of the Compensation Discussion and Analysis section of this Proxy Statement for more information.
(3)Performance-based LTIP awards granted on July 20, 2018, which vest based on achieving certain performance goals at the end of the performance period, or April 30, 2021, provided that the recipient is still employed with the Company. The number of shares and grant date fair values for the performance-based LTIP awards are based on the target number of shares under the award. See the "Long-Term Incentive Awards – 2018 Transition Period LTIP" section of the Compensation Discussion and Analysis section of this Proxy Statement for more information.
(4)Time-based LTIP awards granted on June 21, 2017, which vest ratably on each June 21, 2018, May 1, 2019, and May 1, 2020, provided that the recipient is still employed with the Company.
(5)Performance-based LTIP awards granted on June 21, 2017, which vest based on achieving certain performance goals at the end of the performance period, or April 30, 2020, provided that the recipient is still employed with the Company. The number of shares and grant date fair values for the performance-based LTIP awards are based on the target number of shares under the award.
(6)Retention share award granted on May 1, 2017, which vests ratably on May 1, 2018, May 1, 2019, and May 1, 2020, provided that the recipient is still employed with the Company.
(7)Time-based LTIP awards granted on August 8, 2016, which vest ratably on August 8, 2017, May 1, 2018, and May 1, 2019, provided that the recipient is still employed with the Company.
(8)Signing bonus award granted on August 8, 2016, which vests ratably over a three-year period provided the recipient is still employed with the Company.
Table of Contents
(9)Performance-based LTIP awards granted on August 8, 2016, which vest based on achieving certain performance goals at the end of the performance period, or April 30, 2019, provided that the recipient is still employed with the Company. The number of shares and grant date fair values for the performance-based LTIP awards are based on the target number of shares under the award.
(10)Time-based LTIP awards granted on April 30, 2017, which vest ratably on April 30, 2018, April 30, 2019, and April 30, 2020 provided that the recipient is still employed with the Company.
Outstanding Equity Awards at December 31, 2018
2020
The following table presents information regarding share awards granted to each of the named executive officers under the Amended and Restated 2015 Incentive Plan which were outstanding at the end of the 2018 transition periodDecember 31, 2020 but had not yet been earned or vested. See "“Grants of Plan-Based Awards Table"” for more information.
Mark O. Decker, Jr. | | | 5/21/2020 | | | — | | | 67,293 | | | 66.36 | | | 5/21/2030 | | | — | | | — | | | — | | | — |
| | | 3/13/2020 | | | — | | | — | | | — | | | — | | | 4,148 | | | 293,015 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | 1,753 | | | 123,832 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,257 | | | 371,354 |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | 878 | | | 62,022 | | | — | | | — |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,268 | | | 372,132 |
John A. Kirchmann | | | 5/21/2020 | | | — | | | 23,266 | | | 66.36 | | | 5/21/2030 | | | — | | | — | | | — | | | — |
| | | 3/13/2020 | | | — | | | — | | | — | | | — | | | 1,434 | | | 101,298 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | 808 | | | 57,077 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,424 | | | 171,231 |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | 449 | | | 31,717 | | | — | | | — |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,699 | | | 190,657 |
TABLE OF CONTENTS
Anne Olson | | | 5/21/2020 | | | — | | | 32,215 | | | 66.36 | | | 5/21/2030 | | | — | | | — | | | — | | | — |
| | | 3/13/2020 | | | — | | | — | | | — | | | — | | | 1,986 | | | 140,291 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | 1,119 | | | 79,046 | | | — | | | — |
| | | 3/8/2019 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,356 | | | 237,068 |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | 712 | | | 50,296 | | | — | | | — |
| | | 7/20/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,271 | | | 301,703 |
(1)
| Stock option award which vests ratably over four years after the grant date. |
(2)
| Based on the closing market price per common share at December 31, 2020, which was $70.64. |
(3)
| Time-based LTIP award which vests ratably over three years after the grant date. |
(4)
| Performance-based LTIP award which vests based on achieving certain performance goals at the end of the three-year performance period. The number of shares and market value of unearned shares for such awards are based on the target number of shares under the award. |
| | | | | | | | | | |
| |
| | Share Awards | |
|---|
Name
| | Grant Date
| | Equity Incentive Plan Awards:
Number of Unearned Shares
That Have Not Vested(#)
| | Equity Incentive Plan Awards:
Market Value of Unearned Shares That
Have Not Vested ($)(1)
| |
|---|
| | | | | | | | | | | |
Mark O. Decker, Jr. | | | 7/20/2018 | | | 2,634 | (2) | | 129,250 | |
| | | 7/20/2018 | | | 5,268 | (3) | | 258,501 | |
| | | 6/21/2017 | | | 1,623 | (2) | | 79,641 | |
| | | 6/21/2017 | | | 2,435 | (3) | | 119,485 | |
| | | 6/21/2017 | | | 2,435 | (3) | | 119,485 | |
| | | 5/1/2017 | | | 1,096 | (2) | | 53,781 | |
| | | 8/8/2016 | | | 429 | (2) | | 21,051 | |
| | | 8/8/2016 | | | 3,862 | (3) | | 189,508 | |
| | | 8/8/2016 | | | 1,023 | (4) | | 50,199 | |
John A. Kirchmann | | | 7/20/2018 | | | 1,349 | (2) | | 66,195 | |
| | | 7/20/2018 | | | 2,699 | (3) | | 132,440 | |
| | | 6/21/2017 | | | 831 | (2) | | 40,777 | |
| | | 6/21/2017 | | | 1,247 | (3) | | 61,190 | |
| | | 6/21/2017 | | | 1,247 | (3) | | 61,190 | |
| | | 4/30/2017 | | | 1,644 | (4) | | 80,671 | |
Anne Olson | | | 7/20/2018 | | | 2,135 | (2) | | 104,764 | |
| | | 7/20/2018 | | | 4,271 | (3) | | 209,578 | |
| | | 6/21/2017 | | | 831 | (2) | | 40,777 | |
| | | 6/21/2017 | | | 1,247 | (3) | | 61,190 | |
| | | 6/21/2017 | | | 1,247 | (3) | | 61,190 | |
| | | 4/30/2017 | | | 1,644 | (4) | | 80,671 | |
(1)Based on the closing market price per common share at the end of the 2018 transition period, which was $49.07.(2)Time-based LTIP award.(3)Performance-based LTIP award. The number of shares and market value of unearned shares for such awards are based on the target number of shares under the award.(4)Signing bonus award upon joining the Company.
Table of Contents
Shares Vested
The following table presents information regarding share awards and RSUs granted to each of the named executive officers under the
Amended and Restated 2015 Incentive Plan which vested during
the 2018 transition period.2020. All shares were or became fully vested and unrestricted on December 31,
2018. The Company has not granted any share option awards to the named executive officers.2020.
Mark O. Decker Jr. | | | 6/21/2017 | | | 5/21/2020 | | | 4,627(1) | | | 307,048 |
| | | 6/21/2017 | | | 5/21/2020 | | | 1,972(1) | | | 130,862 |
| | | 5/1/2017 | | | 5/1/2020 | | | 548(2) | | | 32,732 |
| | | 6/21/2017 | | | 5/1/2020 | | | 812(3) | | | 48,501 |
| | | 7/20/2018 | | | 4/30/2020 | | | 878(4) | | | 54,989 |
| | | 3/8/2019 | | | 3/8/2020 | | | 876(5) | | | 66,392 |
| | | | | | Total | | | 9,713 | | | 640,524 |
John A. Kirchmann | | | 6/21/2017 | | | 5/21/2020 | | | 2,369(1) | | | 157,207 |
| | | 6/21/2017 | | | 5/21/2020 | | | 1,010(1) | | | 67,024 |
| | | 4/30/2017 | | | 4/30/2020 | | | 822(6) | | | 51,482 |
| | | 6/21/2017 | | | 5/1/2020 | | | 415(3) | | | 24,788 |
| | | 7/20/2018 | | | 4/30/2020 | | | 450(4) | | | 28,184 |
| | | 3/8/2019 | | | 3/8/2020 | | | 404(5) | | | 30,619 |
| | | | | | Total | | | 5,470 | | | 359,304 |
Anne Olson | | | 6/21/2017 | | | 5/21/2020 | | | 2,369(1) | | | 157,207 |
| | | 6/21/2017 | | | 5/21/2020 | | | 1,010(1) | | | 67,024 |
| | | 4/30/2017 | | | 4/30/2020 | | | 822(6) | | | 51,482 |
| | | 6/21/2017 | | | 5/1/2020 | | | 415(3) | | | 24,788 |
| | | 7/20/2018 | | | 4/30/2020 | | | 711(4) | | | 44,530 |
| | | 3/8/2019 | | | 3/8/2020 | | | 559(5) | | | 42,367 |
| | | | | | Total | | | 5,886 | | | 387,398 |
| | | | | | | | | |
| |
| |
| | Share Awards |
|---|
Name
| | Grant Date
| | Vest Date
| | Number of Shares
Acquired on Vesting (#)
| | Value Realized on Vesting
($)
|
|---|
| | | | | | | | | | |
Mark O. Decker, Jr. | | 8/8/2016 | | 8/8/2018 | | | 1,022 | (1) | 55,290 |
| | 8/8/2016 | | 5/1/2018 | | | 429 | (1) | 22,952 |
| | 5/1/2017 | | 5/1/2018 | | | 549 | (2) | 29,372 |
| | 6/21/2017 | | 6/21/2018 | | | 812 | (3) | 48,233 |
John A. Kirchmann | | 6/21/2017 | | 6/21/2018 | | | 416 | (3) | 24,710 |
Anne Olson | | 6/21/2017 | | 6/21/2018 | | | 416 | (3) | 24,710 |
(1)
| These shares consist of the performance-based LTIP awards granted on June 21, 2017. |
(2)
| These shares consist of one-third of the time-based LTIP awards granted on May 1, 2017. |
(3)
| These shares consist of one-third of the time-based LTIP awards granted on June 21, 2017. |
(4)
| These shares consist of one-third of the time-based LTIP awards granted on July 20, 2018. |
(5)
| These shares consist of one-third of the time-based LTIP awards granted on March 8, 2019. |
(1)These shares consist of one-third of the time-based LTIP awards granted on August 8, 2016.(2)These shares consist of one-third of the time-based LTIP awards granted on May 1, 2017.(3)These shares consist of one-third of the time-based LTIP awards granted on June 21, 2017.
TABLE OF CONTENTS
(6)
| These shares consist of one-third of the time-based LTIP awards granted on April 30, 2017. |
(7)
| Value realized equals the closing price of our common shares on the vesting date multiplied by the number of shares vested. |
Securities Authorized for Issuance Under Equity Compensation Plans
Plan Information
The following table provides information as of December 31, 20182020 regarding compensation plans (including individual compensation arrangements) under which the Company'sCompany’s common shares of beneficial interest are available for issuance:
Equity Compensation Plan Information
| | Equity compensation plans approved by security holders(1) | | | 190,870 | | | $66.36 | | | 564,716(2) | |
| | Equity compensation plans not approved by security holders | | | — | | | — | | | — | |
| | Total | | | 190,870 | | | $66.36 | | | 564,716(2) | |
(1)
| Consists of 51,822 outstanding RSUs and 139,048 stock options granted under the Amended and Restated 2015 Incentive Plan. |
(2)
| Includes shares available for issuance under the Amended and Restated 2015 Incentive Plan, as amended by the First Amendment proposed in this proxy statement. |
| | | | | | | | |
| Equity Compensation Plan Information | |
|---|
Plan category
| | Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights
(a)
| | Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
| | Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
(c)
| |
|---|
| | | | | | | | | |
Equity compensation plans approved by security holders(1) | | 0 | | 0 | | | 400,469 | (2) |
Equity compensation plans not approved by security holders | | 0 | | 0 | | | 0 | |
| | | | | | | | | |
Total | | 0 | | 0 | | | 400,469 | (2) |
| | | | | | | | | |
(1)The 2015 Incentive Plan was approved by shareholders on September 15, 2015.
(2)Common shares subject to share awards or share unit awards granted under the 2015 Incentive Plan that have been canceled, forfeited, expired, or otherwise terminated without the issuance of such common shares, or if any award is settle for cash, then the number of common shares not issued will be available again for issuance under the 2015 Incentive Plan. Therefore, the 145,448 common shares subject to the following forfeitures are available again for issuance under the 2015 Incentive Plan: (i) the one-year LTIP awards, two-year LTIP awards, and three-year LTIP awards granted on September 16, 2015, which awards were unearned as of April 30, 2016, April 30, 2017, and April 30, 2018, respectively, the end of the performance periods, or forfeited prior to the end of the performance periods upon resignation of the applicable recipient; (ii) the portions of the time-based LTIP awards granted on June 22, 2016, which were forfeited prior to the end of the performance period in connection with the resignation of the applicable recipient; (iii) the performance-based LTIP awards granted on June 22, 2016, which were forfeited prior to the end of the performance period in connection with the resignation of the applicable recipient; (iv) trustee share awards granted on June 22, 2016, which were forfeited prior to the end of the performance period in connection with the resignation of the applicable recipient; (v) trustee share awards granted on May 1, 2017, which were forfeited prior to the end of the performance period in connection with the resignation of the applicable recipient; and (vi) trustee shares awards granted on July 20, 2018, which were forfeited prior to the end of the performance period in connection with the retirement of the applicable recipient.
Table of Contents
Potential Payments Upon Termination or Change in Control
Employment Agreements
The Company has not entered into any employment agreements with its officers or employees.
Change in Control Severance Agreements
On June 19, 2018, the Company adopted a form of Change in Control Severance Agreements
("(“Change in Control
Agreements"Agreements”), and each of Mr. Decker, Mr. Kirchmann, and Ms. Olson have entered into a Change in Control Agreement with the Company. Under each agreement, an officer will receive severance payments and benefits if a change in control occurs and his or her employment with the Company and its affiliates is terminated
"without cause"“without cause” by the Company or terminated by the officer for
"good“good reason,
"” as such terms are defined in the agreements. Such payments and receipt of benefits are also contingent on the officer: (1) signing a release and waiver of all claims against the Company; and (2) complying with certain covenants during employment and after termination, including a non-compete provision for one year for Mr. Decker, the CEO at the time, and six months for the other executive officers; non-recruitment, or non-solicitation, provision; non-disparagement provision; and confidentiality agreement.
Under the agreements, severance benefits include:
a lump-sum severance payment equal to 2x for Mr. Decker (as CEO) and 1x for other executive officers the sum of
o- base salary
plus o- and the target annual cash
bonus
•bonus; outstanding non-vested share awards that vest based on continued employment immediately become vested;vest immediately; and
•outstanding non-vested, performance-based share awards that vest based on performance goals
will remain outstanding untilvest as though the
endtarget performance was achieved as of the
performance measurement period and become vested to the extent the performance goals are achieved.change in control date.
Executive officers are also entitled to reimbursement of certain health insurance coverage for up to 18 months and benefits under other Company plans and programs per the terms of such plans and programs. Executive officers would not receive any payment in the event of a termination without good reason by the officer or a termination for cause by the Company.
Under the Change in Control Severance Agreements, a “change in control” includes:
with certain exceptions, the acquisition, directly or indirectly, by any person or group of beneficial ownership of securities entitled to vote generally in the election of trustees of the Company that represent 35% or more of the combined voting power of the Company’s then-outstanding voting securities;
TABLE OF CONTENTS
individuals who, as of the effective date of this Plan, constitute the Board cease for any reason to constitute at least a majority of the Board;
the consummation by the Company of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction: which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent, directly or indirectly, at least 50% of the combined voting power of the successor entity’s outstanding voting securities immediately after the transaction; and after which no person or group beneficially owns voting securities representing 35% or more of the combined voting power of the successor entity; or
approval by the Company’s shareholders of a liquidation or dissolution of the Company.
The full definition of “change in control” is contained in the Amended and Restated 2015 Incentive Plan
of the Company.
Under the Change in Control Severance Agreements, “Cause” means (i) the Executive’s willful conduct that is demonstrably and materially injurious to the Company or an Affiliate, monetarily or otherwise; (ii) the Executive’s breach of certain covenants; (iii) the Executive’s breach of the Executive’s fiduciary duties to the Company or an Affiliate; (iv) the Executive’s conviction of any crime (or entering a plea of guilty or nolo contendre to any crime) constituting a felony; or (v) the Executive’s entering into an agreement or consent decree or being the subject of any regulatory order that in any of such cases prohibits the Executive from serving as an officer or director of a company that has publicly traded securities. A termination of the Executive will not be for “Cause” unless the decision to terminate the Executive is set forth in a resolution of the Board to that effect and which specifies the particulars thereof and that is approved by a majority of the members of the Board (exclusive of the Executive if the Executive is a member of the Board) adopted at a meeting called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive to be heard before the Board).
Under the Change in Control Severance Agreements, “Good Reason” means, without the express written consent of the Executive, (i) a change in the Executive’s position with the Company or an affiliate which results in a material diminution of the Executive’s authority, duties or responsibilities; (ii) a material reduction by the Company or an affiliate in the annual rate of the Executive’s base salary; (iii) a change in the location of the Executive’s principal office to a different place that is more than fifty miles from the Executive’s principal office immediately prior to such change; or (iv) the Company’s material breach of this Agreement. A reduction in the Executive’s rate of annual base pay is material if the rate of annual base salary on any date is less than ninety percent (90%) of the Executive’s highest rate of annual base pay as in effect on any date in the preceding thirty-six (36) months; provided, however, that a reduction in the Executive’s rate of annual base pay will be disregarded to the extent that the reduction is applied similarly to the Company’s other officers. Notwithstanding the two preceding sentences, a change in the Executive’s duties or responsibilities or a reduction in the annual rate of the Executive’s base salary in connection with the Executive’s termination of employment (for Cause, disability or retirement), will not constitute Good Reason and the Executive will not have Good Reason to resign solely because the Company does not have common stock or other securities that are publicly traded. A resignation by the Executive will not be with “Good Reason” unless the Executive gives the Company written notice specifying the event or condition that the Executive asserts constitutes Good Reason, the notice is given no more than ninety days after the occurrence of the event or initial existence of the condition that the Executive asserts constitutes Good Reason, and the Company has failed to remedy or cure the event or condition during the thirty-day period after such written notice is given to the Company.
Amended and Restated 2015 Incentive Plan
Under the Amended and Restated 2015 Incentive Plan (regardless of whether or not the Amendment is approved), in the event a change in control occurs (as defined under the 2015
Incentive Plan), the administrator may, at its discretion, require outstanding share
and option awards, share unit awards, and incentive awards be assumed by the surviving entity or replaced by a comparable substitute award of substantially equal value issued by the surviving entity.
If awards are not assumed or replaced with substitute awards, the administrator may provide that: (1) share or option awards become vested in full; (2) share unit awards become earned in full and paid in vested common shares; and (3) incentive awards become earned, in whole or in part, in accordance with the terms of the award. In addition, the administrator may provide that share unit awards and incentive awards be canceled and exchanged for payment in
TABLE OF CONTENTS
cash, common shares, or other securities received by the Company'sCompany’s shareholders in the change in control transaction equal to the price per share received by shareholders for each common share in the change in control transaction.
Table of Contents
The following table provides information about the estimated maximum amounts payable to those named executive officers who were serving in their positions at the Company as of December 31, 20182020 under various scenarios, assuming a change ofin control and/or termination had occurred on December 31, 2018.2020. The table below does not include payments or benefits that are not conditioned on termination or change in control, including accrued but unpaid vacation or other compensation, the cash amounts under outstanding STIP awards or number of vested shares under outstanding LTIP awards that otherwise would be payable to the named executive officer as of December 31, 2018.
2020.
Mark O. Decker, Jr. – President, Chief Executive Officer, and Chief Investment Officer
| | | | | | | | | |
By Company For Cause(3) | | | — | | | — | | | — |
By Company Without Cause | | | — | | | 766,883 | | | 766,883 |
Upon Death or Disability | | | — | | | 1,510,369 | | | 1,510,369 |
Upon Change in Control(4) | | | — | | | 766,883 | | | 766,883 |
Upon Change in Control and Termination(5) | | | 1,903,451(6) | | | 1,510,369 | | | 3,413,820 |
John A. Kirchmann – Executive Vice President and Chief Financial Officer
| | | | | | | | | |
By Company For Cause(3) | | | — | | | — | | | — |
By Company Without Cause | | | — | | | 289,671 | | | 289,671 |
Upon Death or Disability | | | — | | | 651,559 | | | 651,559 |
Upon a Change in Control(4) | | | — | | | 289,671 | | | 289,671 |
Upon Change in Control and Termination(5) | | | 569,941(6) | | | 651,559 | | | 1,221,500 |
Anne Olson – Executive Vice President — Chief Operating Officer, General Counsel, and Secretary
| | | | | | | | | |
By Company For Cause(3) | | | — | | | — | | | — |
By Company Without Cause | | | — | | | 407,513 | | | 407,513 |
Upon Death or Disability | | | — | | | 946,284 | | | 946,284 |
Upon Change in Control(4) | | | — | | | 407,513 | | | 407,513 |
Upon Change in Control and Termination(5) | | | 671,451(6) | | | 946,284 | | | 1,617,735 |
| | | | | | | |
Name and Termination Scenario
| | Cash Payment
($)(1)
| | Acceleration of Vesting
of Long-Term Equity
Incentive Awards
($)(2)
| |
|---|
| | | | | | | | |
Mark O. Decker, Jr. – President, Chief Executive Officer, and Chief Investment Officer | | | | | | | |
By Company For Cause(3) | | | 0 | | | 0 | |
By Company Without Cause | | | 0 | | | 333,921 | |
Upon Death or Disability | | | 0 | | | 1,020,901 | |
Upon Change in Control(4) | | | 0 | | | 333,921 | |
Upon Change in Control and Termination(5) | | | 1,900,333 | (6) | | 1,020,901 | |
John A. Kirchmann – Executive Vice President and Chief Financial Officer | | | | | | | |
By Company For Cause(3) | | | 0 | | | 0 | |
By Company Without Cause | | | 0 | | | 187,644 | |
Upon Death or Disability | | | 0 | | | 442,464 | |
Upon a Change in Control(4) | | | 0 | | | 187,644 | |
Upon Change in Control and Termination(5) | | | 567,083 | (6) | | 442,464 | |
Anne M. Olson – Executive Vice President — Chief Operating Officer, General Counsel, and Secretary | | | | | | | |
By Company For Cause(3) | | | 0 | | | 0 | |
By Company Without Cause | | | 0 | | | 262,213 | |
Upon Death or Disability | | | 0 | | | 558,171 | |
Upon Change in Control(4) | | | 0 | | | 226,213 | |
Upon Change in Control and Termination(5) | | | 632,262 | (6) | | 558,171 | |
(1)
| This column assumes that there was neither accrued but unpaid base compensation nor vacation time earned but unpaid as of December 31, 2020. |
(2)
| Amounts in this column reflect accelerated vesting of awards of restricted common shares, RSUs, and stock options under the LTIP awards that were outstanding at December 31, 2020. For purposes of this table, it is assumed that all the common shares under the performance-based LTIP awards have been earned and that the market value of a common share is $70.64, the closing market price per common share at the close of business on December 31, 2020. |
(3)
| No payments are made and no vesting occurs if the Company terminates the officer for “cause” as defined in the LTIP awards. |
(4)
| This reflects the occurrence of a change in control without termination, which would not trigger severance payments under the Change in Control Severance Agreement. |
(5)
| This reflects the occurrence of a change in control and the officer’s employment was terminated by the Company without cause or by the officer with good reason, thereby triggering severance payments under the Change in Control Severance Agreement, assuming that all conditions under such agreement had been met as of December 31, 2020. |
(6)
| Includes the reimbursement of health care benefits, estimated to be $23,451 for Mr. Decker, $17,441 for Mr. Kirchmann, and $23,451 for Ms. Olson, assuming the reimbursement is for the full 18-month period and based on monthly premiums in place as of December 31, 2020. |
(1)This column assumes that there was neither accrued but unpaid base compensation nor vacation time earned but unpaid as of December 31, 2018.47
(2)Amounts in this column reflect accelerated vesting of awards of restricted common shares under the LTIP awards that were outstanding at December 31, 2018. For purposes of this table, it is assumed that all the common shares under the performance-based LTIP awards have been earned and that the market value per restricted common share is $49.07, the closing market price per common share at the end of the 2018 transition period.
(3)No payments are made and no vesting occurs if the Company terminates the officer for "cause" as defined in the LTIP awards.
(4)This reflects the occurrence of a change in control without termination, which would not trigger severance payments under the Change in Control Severance Agreement.
(5)This reflects the occurrence of a change in control and the officer's employment was terminated by the Company without cause or by the officer with good reason, thereby triggering severance payments under the Change in Control Severance Agreement, assuming that all conditions under such agreement had been met as of December 31, 2018.
(6)Includes the reimbursement of health care benefits, estimated to be $20,333 for Mr. Decker, $14,583 for Mr. Kirchmann, and $20,262 for Ms. Olson, assuming the reimbursement is for the full 18-month period and based on monthly premiums in place as of December 31, 2018.
Table of ContentsTABLE OF CONTENTS
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, the Company is providing the following information regarding the ratio of the total compensation of its median employee for
the 2018 transition period2020 to the total compensation of Mark O. Decker, Jr., the
Company'sCompany’s President and Chief Executive Officer (the
"CEO"“CEO”), for
the 2018 transition period.2020. The Company considers the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements in Item 402(u) of Regulation S-K.
For the
eight-month transition periodyear ended December 31,
2018:the total compensation of the employee who represents the Company'sCompany’s median compensated employee (other than the CEO) was $28,419;$46,603; and
•the total compensation of the CEO, as reported in the Summary Compensation Table above, was
$1,100,064.$1,675,269.
Based on this information, for
the 2018 transition period,2020, the annual total compensation of our CEO was
39approximately 36 times the median total compensation of all of our employees (other than the CEO) for the
2018 transition period.year ended December 31, 2020.
Determining the Median Employee
Since the proxy statement for the
fiscal year ended
April 30, 2018December 31, 2019 (the
"2018 proxy statement"“2020 Proxy”), there has been no significant change in the
Company'sCompany’s employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. However, because the original median employee determined for the
20182019 proxy statement is no longer employed by the Company, the Company is using another employee whose compensation is substantially similar to the original median employee based on the compensation measure used to select the original median employee. For
the purposes of the pay ratio calculation, the
Company'sCompany’s employee population consists of
all full-time and part-time employees at all locations, including all temporary employees employed as of the measurement date, and compensation is based on actual wages and benefits paid, according to U.S. and local payroll records, using annualized compensation for all employees who were new hires.
Compensation Measure and Total Compensation of the Median Employee for
the 2018 Transition Period2020
With respect to the total compensation of the median employee for the
eight monthsyear ended December 31,
2018,2020, the Company calculated such
employee'semployee’s compensation for
the 2018 transition period2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
Total Compensation of the CEO for
the 2018 Transition Period2020
With respect to the total compensation of the CEO for the
eight monthsyear ended December 31,
2018,2020, the Company used the amount reported in the
"Total"“Total” column of the Summary Compensation Table for
the 2018 transition period2020 included in this Proxy Statement.
Any adjustments, estimates and assumptions used to calculate his total compensation are described in the footnotes to the Summary Compensation Table.
Compensation Policies and Risk Management
The Compensation Committee members evaluate the principal elements of executive and non-executive compensation to determine whether they encourage excessive risk-taking. While the Compensation Committee members focus on the compensation of the executive officers because risk-related decisions
Table of Contents
depend predominantly on their judgment, they also consider the compensation of other senior officers and employees operating in decision-making capacities. The Compensation Committee believes that because of the following there is a low likelihood that the Company'sCompany’s compensation policies and practices would encourage excessive risk-taking:
Compensation for certain executive officers is composed of various components: base salary, short-term incentive cash awards, and long-term incentive equity awards. The mix is designed to balance near-term performance improvement with sustainable long-term value creation.
•A significant percentage of compensation is equity-based, long-term compensation pursuant to LTIP awards. The use of RSUs and stock options encourages the Company'sCompany’s executive officers to focus on sustaining the Company'sCompany’s long-term performance because unvested awards could significantly decrease in value if the Company'sCompany’s business is not managed with long-term interests in mind.
TABLE OF CONTENTS
The STIP and LTIP awards granted in the 2018 transition period2020 utilize various performance goals. The STIP awards utilize the objective performance goals of Adjusted Funds From Operations ("AFFO")AFFO, same-store NOI growth and same-store NOI Growthadjusted EBITDA margin, as well as subjectivestrategic qualitative performance goals for progress on execution of the Company'sCompany’s strategic plan and meeting individual personal goals. The performance-based LTIP awards utilize the Company's TSR over a three-year period as compared to the TSRs of the constituent members of the MSCI U.S. REIT Index over the same period.granted in 2020 are time-based awards. The use of several performance goals as well as time-based LTIP awards was intentionally selected by the Compensation Committee with the goal of aligning executive compensation with long-term creation of shareholder value.
•The Amended and Restated 2015 Incentive Plan contains individual limitations on the maximum amount that may be granted or awarded in any calendar year to a participant, including under the STIP and LTIP awards. The Compensation Committee believes these limitations are currently set at appropriate maximum levels under the Amended and Restated 2015 Incentive Plan.
•The Company adopted an equity ownership and retention policy by which each executive and senior officer is required to maintain a multiple of his or her base salary in common shares. The multiples are 5x for the Chief Executive Officer, 2x for the other executive officers, 1x for senior vice presidents and 0.5x for vice presidents. In addition, the officers are required to retain 60% of the net shares received under equity awards until either the officer reaches the ownership required level, is no longer employed by the Company, or ceases to be an officer. This policy requires each executive officer to maintain a meaningful equity interest in the Company that could significantly decrease in value if the Company'sCompany’s business is not managed with long-term interest in mind.
•The Company adopted a "clawback"“clawback” policy by which, with respect to any incentive awards granted after May 1, 2015, the Board will have the right to recoup all or any portion of incentive awards granted based on the Company'sCompany’s financial statements if the person had engaged in fraud, intentional misconduct, or illegal behavior that caused or contributed to a material restatement of such financial statements.
•The Company adopted a policy prohibiting executive and senior officers from engaging in hedging or monetization transactions involving the Company'sCompany’s securities and from pledging the Company'sCompany’s securities as collateral for a loan, including through the use of traditional margin accounts with a broker.
Table of Contents
The Compensation Committee believes that this combination of factors encourages prudent management of the Company and discourages executive officers from taking risks that are not in the Company'sCompany’s long-term interest. Accordingly, the Compensation Committee believes the Company'sCompany’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.
The Company sponsors a defined contribution 401(k) retirement plan. Employees
18 and over
the age of 21 may participate in the
Company'sCompany’s 401(k) plan, except for collectively bargained employees, non-resident alien employees, and part-time/temporary/seasonal employees scheduled to work less than 1,000 hours of service within the plan year. Eligible employees can participate in the plan immediately upon hire,
butand are
not eligible for the employer match
until they have completed six months of service and are age 21.immediately. Employees participating in the 401(k) plan may contribute up to maximum levels established by the IRS. The Company currently matches, dollar-for-dollar, employee contributions to the 401(k) plan in an amount equal to up to 5% of the
eligible wages of each employee participating in the 401(k) plan.
Compensation Committee Interlocks and Insider Participation
During the 2018 transition period,2020, the following served as members of the Compensation Committee of the Board of Trustees, either for all or part of the 2018 transition period:Trustees: Ms. Linda J. Hall (Chair), Ms. Emily Nagle Green (served as a member of the Compensation Committee until May 19, 2020), Mr. Terrance P. Maxwell,Michael T. Dance (served as a member of the Compensation Committee beginning May 19, 2020) and Mr. John A. Schissel, andSchissel. Mr. Michael T. Dance was appointed as a member of the Compensation Committee in place of Ms. Emily Nagle Green.Green with effect from May 19, 2020. None of the members of the Compensation Committee currently is, or formerly was, an officer or employee of the Company. During the 2018 transition period,2020, none of the Company'sCompany’s executive officers served on the Compensation Committee or any similar committee of any other entity or served as a director for any other entity whose executive officers served on the Company'sCompany’s Compensation Committee.
TABLE OF CONTENTS
Table of Contents
PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE COMPANY’S ARTICLES OF AMENDMENT AND THIRD RESTATED DECLARATION OF TRUST, AS AMENDED, TO CHANGE THE NAME OF THE COMPANY FROM INVESTORS REAL ESTATE TRUST TO CENTERSPACE
Introduction
The Company is requesting that shareholders approve an amendment (the “Name Change Amendment”) to the Company’s Articles of Amendment and Third Restated Declaration of Trust, as amended (the “Declaration of Trust”). The Name Change Amendment was approved by the Board of Trustees on March 12, 2021, subject to shareholder approval. If this proposal is approved by the shareholders, it will change the name of the Company from Investors Real Estate Trust to Centerspace. Specifically, the Name Change Amendment would amend the first sentence of Section 1(a) of the Declaration of Trust as set forth below, with additions indicated by underlining and deletions by strike through:
The Trust governed by this Amended and Restated Declaration of Trust (as amended, supplemented or restated from time to time, this “Declaration of Trust”) is herein referred to as the “Trust” and shall be known by the name “Centerspace.”
Reasons for Name Change
On December 9, 2020, in connection with implementing a new brand platform to reflect the evolution of the company and its vision for the future, we adopted the “doing business” name “Centerspace.” The legal name of the Company has continued to be Investors Real Estate Trust. For marketing, branding, and trading purposes, the Company immediately began to refer to itself as Centerspace. The Company’s common shares of beneficial interest began trading on the New York Stock Exchange under the ticker symbol “CSR”, and its Series C Cumulative Redeemable Preferred Shares began trading under the ticker symbol “CSR PRC” on December 21, 2020. In addition, the CUSIP number identifying the shares of our common stock and the CUSIP number identifying the shares of our Series A Cumulative Redeemable Preferred Shares of Beneficial Interest have changed.
Although we adopted the new doing business name, a change in our legal, corporate name requires that we amend the Declaration of Trust to reflect that change in name.
Effects of Name Change
If the shareholders approve the proposed Name Change Amendment, it will become effective upon the filing of articles of amendment to the Declaration of Trust with the North Dakota Secretary of State. The article of amendment would be filed at some time after the Annual Meeting.
While the name change will cause us to incur certain modest costs, the Board believes that any potential costs associated with the name change will be minimal and will be outweighed by the benefits of the name change.
The name change will not have any effect on the rights of our existing shareholders. In addition, changing our name will not affect the validity or transferability of stock presently outstanding. Outstanding share certificates of the Company continue to be valid and will not be exchanged.
The forgoing summary of the material terms of the Name Change Amendment is qualified in its entirety by reference to the actual text of the Name Change Amendment, which is attached to this Proxy Statement as Appendix B.
Required Vote
The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy at the Annual Meeting, provided a quorum is present, is required to approve the amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace.
Vote Recommended
The Board recommends that shareholders vote FOR the amendment to the Company’s Articles of Amendment and Third Restated Declaration of Trust, as amended, to change the name of the Company from Investors Real Estate Trust to Centerspace.
TABLE OF CONTENTS
PROPOSAL 4: APPROVAL OF AN AMENDMENT TO THE AMENDED AND RESTATED 2015 INCENTIVE PLAN
Introduction
The Company is requesting that shareholders approve an amendment (the “Amendment”) to the Amended and Restated 2015 Incentive Plan (the “Amended and Restated 2015 Plan” or the “2015 Plan”). The Amendment was approved by the Board on March 12, 2021, subject to shareholder approval. If this proposal is approved by shareholders, it will increase the number of shares authorized and reserved for issuance by 350,000, increasing the amount from 425,000 to 775,000, subject to adjustment as provided therein.
The 2015 Plan is our only plan for providing equity incentive compensation to our employees and non-employee Trustees and is intended to promote the best interests of our Company and our shareholders by assisting the Company in recruiting and retaining key employees, members of the Board of Trustees and consultants, and encouraging such individuals to align their interests with those of the Company and its shareholders by enabling such individuals to participate in the future success of the Company. The Plan is intended to permit the grant of Stock Awards, Stock Unit Awards, Incentive Awards, Stock Options and SARs.
The Board of Trustees believes that approval of the Amendment will serve the interests of our Company and our shareholders by providing for a sufficient amount of shares reserved for issuance under the 2015 Plan, so that the Company can continue to grant awards to promote the Company’s long-term financial success; attract, motivate, and retain key talent; align employee and non-employee trustee interests with shareholder interests; link employee and non-employee trustee compensation to Company performance, and maintain a culture based on employee and non-employee director share ownership. Equity is a significant component of total compensation for many of our key employees.
If the 2015 Plan is not approved by shareholders at the 2021 Annual Meeting, equity awards will continue to be granted under the 2015 Plan as currently in effect to the extent shares authorized and reserved for issuance thereunder are available.
The following summary of the material terms of the Amendment and the Amended and Restated 2015 Incentive Plan is qualified in its entirety by reference to the actual text of these documents, which are respectively attached to this Proxy Statement as Appendix C and filed as Appendix B to our proxy statement for our 2020 annual meeting, filed with the SEC on April 6, 2020.
Required Vote
The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy at the Annual Meeting, provided a quorum is present, is required to approve the Amendment to the 2015 Plan.
Vote Recommended
The Board recommends that the shareholders vote FOR the approval of the Amendment to the 2015 Plan.
Material Terms of the Amendment
Share Authorization
The Amendment will increase the number of shares reserved for issuance under the Amended and Restated 2015 Plan by 350,000, increasing the authorized pool thereunder from 425,000 to 775,000, subject to adjustment as provided therein.
Specifically, the Amendment would amend the first sentence of Section 5.2 of the 2015 Plan as set forth below, with additions indicated by underlining and deletions by strike through:
The maximum aggregate number of shares of Common Stock that may be issued under this Plan is 775,000 shares.
Material Terms of the Amended and Restated 2015 Plan, as amended
Administration of the Amended and Restated 2015 Plan
The Amended and Restated 2015 Plan is administered by the Compensation Committee, except with respect to awards to non-employee trustees (i.e., a member of the Board who is not also an employee of the Company or an
TABLE OF CONTENTS
affiliate of the Company), in which case the plan is administered by the entire Board. References in this summary to the “Administrator” include the Compensation Committee and, with respect to awards made to non-employee trustees, the Board.
The Administrator has the authority to grant awards under the Plan, determine the eligible individuals who will receive awards, determine the type of awards granted, specify the terms and conditions that govern each award, and approve the number of common shares subject to any award.
Because awards under the 2015 Plan will be made at the Administrator’s discretion, except in the case of the awards previously granted under the 2015 Plan, the Company is unable to determine who will be selected to receive awards or the type, size or terms of the awards that may be granted under the 2015 Plan.
Eligibility
The following are eligible to receive award grants under the 2015 Plan: (1) employees of the Company, Centerspace, LP (formerly known as IRET Properties), or any of their affiliates; (2) any non-employee trustees of the Board; and (3) consultants who provide bona fide services to the Company, Centerspace LP, or any of their affiliates (other than in connection with the offer, sale, or promotion of Company securities) and are selected by the Administrator to receive an award.
Share Authorization
The maximum aggregate number of common shares that may be issued under the 2015 Plan prior to the Amendment is 425,000 common shares. As of March 22, 2021, of the 425,000 common shares authorized under the 2015 Plan, approximately 98,656 common shares remained available for awards. The Amendment would increase the maximum aggregate number of common shares that may be issued under the 2015 Plan to 775,000.
In connection with stock splits, stock dividends, recapitalizations and certain other events, the Board will make adjustments that it deems appropriate in the aggregate number of common shares that may be issued under the 2015 Plan, as well as the terms of outstanding awards and the per individual grant limitations. The shares available for grant under the 2015 Plan were adjusted to account for the Company’s 1-for-10 reverse stock split, which became effective on December 27, 2018.
If any share or option awards or share unit awards are forfeited, terminated, expired, canceled, surrendered, or settled in cash without the issuance of shares, the common shares subject to such awards, to the extent of the forfeiture, termination, expiration, cancellation, surrender or cash settlement, will again be available for awards under the Amended and Restated 2015 Plan. Any shares that are tendered or withheld from the settlement of an award to satisfy a tax withholding obligation under an award will not be available for future awards granted under the Amended and Restated 2015 Plan.
Individual Award Limitations
The 2015 Plan provides that no participant may be granted or awarded, in any calendar year: (1) share awards and share unit awards covering more than 100,000 common shares or (2) incentive awards that provide for a total payment (in cash or common shares) exceeding $7,500,000 of total value (calculating the value of any such awards based on the grant date fair value for financial reporting purposes). As to non-employee trustees, the individual limitations are lower. Under the 2015 Plan, no non-employee trustee may be granted or awarded, in any calendar year, awards exceeding $1,000,000 in total value (calculating the value of any such awards based on the grant date fair value for financial reporting purposes).
Types of Awards
The Administrator will have the authority to grant share awards, share unit awards, incentive awards, SARs, and stock options, including non-qualified stock options and ISOs, under the 2015 Plan. The 2015 Plan generally provides that no award will become fully earned or vested or its requirements fully satisfied before the first anniversary of the date of grant. However, the Administrator may accelerate the time of vesting or settlement of an award if the participant’s employment or service is terminated or if the award has been outstanding for at least one year. In addition, the Administrator may accelerate the time of vesting or settlement of awards of up to 30,000 common shares without regard to the one-year requirement.
TABLE OF CONTENTS
Awards may be granted alone, in addition to, in combination with or in substitution for, any other award granted under the 2015 Plan or any other compensation plan. Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the Administrator or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, common shares, other securities (but excluding promissory notes), other awards or other property, or any combination of these in a single payment, installments or on a deferred basis.
In addition, a participant may not sell or dispose of the shares acquired under an award except in compliance with the Company’s Policy Regarding Share Ownership and Retention, as the same may be subsequently amended or replaced by a similar policy.
Share Awards
The 2015 Plan provides for the grant of share awards. A share award is an award of common shares that will be subject to restrictions as the Committee determines on the date of grant and consistent with the terms of the 2015 Plan, including the vesting requirements described above. The vesting requirements and/or restrictions may be stated with reference to one or more performance objectives. The restrictions, if any, may lapse over a specified period of time or through the satisfaction of conditions, in installments or otherwise, as the Committee may determine.
A participant who receives a share award will have all the rights of a shareholder as to those shares underlying the award, including the rights to vote and receive distributions on the shares. However, if the stock award does not vest solely based on continued employment or service, distributions payable on the shares underlying the award will be paid when, and only to the extent that, the award vests. A participant will be prohibited from selling, transferring, pledging, exchanging, hypothecating or otherwise disposing of the shares underlying a share award until the award vests.
Share Unit Awards
The 2015 Plan provides for the grant of share unit awards. A share unit award is an award of share units, which represent the participant’s right to receive an equal number of common shares or an amount based on the value of the common shares, or a combination of both, when the requirements established by the Administrator, consistent with the terms of the 2015 Plan, including the vesting requirements described above, are satisfied.
The Administrator will determine the applicable performance period, the performance objective(s) , and such other conditions that apply to the share unit award on the date of grant. To the extent the performance objective(s) and other requirements are met, share unit awards will be earned and paid in cash, common shares, or a combination of both.
A participant who receives a share unit award will not have any rights of a shareholder as to any shares underlying the award until, and only to the extent that, the share unit award is earned and common shares are issued in payment of the award. However, the Administrator may, at the time the award is granted, provide a participant the right to receive distribution equivalents on the shares underlying the award. Distribution equivalents are payments equal to the ordinary cash distributions that would otherwise be paid on issued and outstanding common shares. The payment of distribution equivalents may be paid in cash, common shares, or a combination of both, and may be subject to such terms, conditions, restrictions and/or limitations as the Administrator may decide. However, if a share unit award does not vest solely based on continued employment or service, distribution equivalents payable on the award will be accumulated and paid, without interest, when, and only to the extent that, the share unit award vests.
Incentive Awards
The 2015 Plan also provides for the grant of incentive awards. An incentive award represents a participant’s right to earn a payment when the terms and conditions established by the Administrator at the time of grant, consistent with the terms of the 2015 Plan, including the vesting requirements described above, are satisfied.
The Administrator will determine the applicable terms and conditions applicable to the incentive award, which may include continued employment for a specified period, performance objective(s), or such other conditions determined by the Administrator. To the extent the terms and conditions are met, incentive awards will be earned and paid in cash, common shares or a combination of both.
A participant who receives an incentive award will not have any rights of a shareholder as to any shares underlying the award until, and only to the extent that, the incentive award is earned and common shares are issued in payment of the award.
TABLE OF CONTENTS
Stock Options
The 2015 Plan provides for the grant of stock options, which include both incentive stock options (“ISOs”) and non-qualified stock options. ISOs are awards that are designated as an ISO and that are intended to meet the requirements of Section 422 of the Code (or any successor provision). Non-qualified stock options are awards that are not intended to meet the requirements of Section 422 of the Code.
The Administrator will, on the grant date of the Award, designate participants to whom a stock option award is to be granted and will specify the number of common shares covered by the award as well as any terms, conditions and restrictions applicable to such award. The Administrator, on the grant date, will specify to what extent a stock option award will be earned upon the satisfaction of certain requirements as set forth in the award agreement. By way of example and not of limitation, the requirements may (i) postpone exercisability, vesting or both of the stock option award until the attainment of performance objectives prescribed by the Administrator, including objectives stated with respect to performance goals, or (ii) provide that the stock option award will be forfeited if the participant separates from the service of the Company and its affiliates before the expiration of a stated term. The period for determining whether such requirements are satisfied is at least one year.
The exercise price for a stock option award will be determined by the Administrator and will be specified in the award agreement evidencing such stock option award; however, the exercise price must be at least equal to 100% of the fair market value of a common share as of the stock option’s date of grant, except in the case of substitute awards (to the extent consistent with Code Section 409A and, in the case of ISOs, Code Section 424). Substitute awards are those granted upon the assumption of, or in substitution or exchange for, outstanding awards granted by the Company or other entity acquired by the Company or any affiliate or with which the Company or any affiliate combine.
The term of a stock option will be determined by the Administrator; however, no stock option will be exercisable later than the tenth anniversary of its date of grant. A stock option may be exercisable at such times and be subject to such restrictions and vesting conditions as the Administrator will in each instance approve, which terms and restrictions need not be the same for each grant or for each participant.
A stock option may be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Administrator, or by complying with any alternative procedures authorized by the Administrator, setting forth the number of common shares with respect to which the stock option is to be exercised, accompanied by full payment for the common shares. A condition of the issuance of the common shares as to which a stock option will be exercised will be the payment of the exercise price and any applicable withholding taxes. The exercise price of any exercised stock option will be payable to the Company in accordance with one of the following methods to the extent permitted under a participant’s applicable award agreement as determined by the Administrator in its discretion on the date of grant:
(a)
| In cash or its equivalent; |
(b)
| By tendering (either by actual delivery or by attestation) previously acquired common shares having an aggregate fair market value at the time of exercise equal to the exercise price; |
(c)
| By a cashless (broker-assisted) exercise; |
(d)
| By authorizing the Company to withhold shares of common stock otherwise issuable upon the exercise of the option having an aggregate fair market value at the time of exercise equal to the exercise price; |
(e)
| By any combination of (a), (b), (c) or (d); or |
(f)
| By any other method approved or accepted by the Administrator. |
A stock option granted in the form of an ISO to a participant will be subject to the following rules:
(a)
| An option will constitute an ISO only if the participant receiving the option is an employee and only if the employee is employed by the Company, or a parent or subsidiary corporation within the meaning of Code Section 424, and only to the extent that (i) it is so designated in the applicable award agreement and (ii) the aggregate fair market value (determined as of the stock option’s date of grant) of the common shares with respect to which ISOs held by the participant first become exercisable in any calendar year (under the Amended and Restated 2015 Plan and all other plans of the Company and its affiliates) does not exceed $100,000. To the extent a stock option granted to a participant exceeds this limit, the stock option will be treated as a non-qualified stock option. |
TABLE OF CONTENTS
(b)
| No participant may receive an ISO under the Amended and Restated 2015 Plan if, immediately after the grant of such Award, the participant would own shares possessing more than 10% of the total combined voting power of all classes of stock of the Company or an affiliate, unless (i) the exercise price for that ISO is at least 110% of the fair market value of the common shares subject to that ISO on the grant date and (ii) that stock option will expire no later than five years after its date of grant. |
(c)
| For purposes of continued service by a participant who has been granted an ISO, no approved leave of absence may exceed three months unless re-employment upon expiration of such leave is provided by statute or contract. If re-employment is not so provided, then on the date six months following the first day of such leave, any ISO held by the participant will cease to be treated as an ISO and will be treated for tax purposes as a non-qualified stock option. |
(d)
| If an ISO is exercised after the expiration of the exercise periods that apply for purposes of Code Section 422, such stock option will thereafter be treated as a non-qualified stock option. |
(e)
| Each participant awarded an ISO will notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any common shares acquired pursuant to the exercise of such ISO. A disqualifying disposition is any disposition (including any sale) of such common shares before the later of (i) two years after the date of grant of the ISO or (ii) one year after the date of exercise of the ISO. |
No participant will, as a result of receiving a stock option, have any rights as a shareholder of the Company until, and then only to the extent that, the participant exercises the stock option and common shares are issued upon such exercise to the participant. After a stock option is exercised and settled by the issuance of common shares, a participant will have all the rights of a shareholder as to such common shares.
A participant may not sell or dispose of the shares of common stock issued in settlement of a stock option except in compliance with the Company’s Policy Regarding Share Ownership and Retention, as may be subsequently amended or replaced by a similar policy, and no dividends or dividend equivalents will accrue on or be payable under a stock option.
Stock Appreciation Rights
The 2015 Plan provides for the grant of a Stock Appreciation Right, or “SAR,” which entitles the participant to receive cash or common shares equal in value to, or based on the value of, the amount by which the fair market value of a specified number of shares on the exercise date exceeds an exercise price established by the Administrator. The Administrator, on the grant date, will specify to what extent the SARs will be earned upon the satisfaction of certain requirements as set forth in the award agreement. By way of example and not of limitation, the requirements may (i) postpone exercisability, vesting, or both of the SARs until the attainment of performance objectives prescribed by the Administrator, including objectives stated with respect to performance goals, or (ii) provide that the SAR will be forfeited if the participant separates from the service of the Company and its affiliates before the expiration of a stated term. Except for certain exceptions as provided in the 2015 Plan, the period for determining whether such requirements are satisfied will be at least one year.
The grant price for each grant of a SAR will be determined by the Administrator and will be specified in the award agreement evidencing the SAR; however, the grant price must be at least equal to 100% of the fair market value of a common share as of the date of grant, except in the case of substitute awards. The term of a SAR will be established by the Administrator but will not exceed 10 years. A SAR will be exercisable at such times and be subject to such restrictions and vesting conditions as the Administrator will in each instance approve, which terms and restrictions need not be the same for each grant or for each participant.
Upon the exercise of a SAR, pursuant to a notice of exercise properly completed and submitted to the Company, a participant will be entitled to receive payment from the Company in an amount equal to the product of (a) and (b) below:
(a)
| The excess of the fair market value of a share on the date of exercise over the grant price. |
(b)
| The number of common shares with respect to which the SAR is exercised. |
Payment will be made in cash, shares or a combination thereof as provided for under the applicable award agreement.
No participant will, as a result of receiving a SAR, have any rights as a shareholder of the Company until, and then only to the extent that, the participant exercises the SAR and common shares are issued upon such exercise to the
TABLE OF CONTENTS
participant. After a SAR is exercised and settled by the issuance of common shares, a participant will have all the rights of a shareholder as to such common shares. A participant may not sell or dispose of the common shares issued in settlement of a SAR except in compliance with the Company’s Policy Regarding Share Ownership and Retention (or other similar or replacement policy). No dividends or dividend equivalents will accrue on or be payable under a SAR.
CEO Grants
The Administrator has delegated to the CEO the ability to grant share awards, share unit awards, and incentive awards to non-executive officers of the Company; however, such awards will not exceed 2,000 shares in any calendar year in the aggregate; and the CEO will provide a report to the Administrator not less than annually on any awards granted pursuant to this authority.
Change in Control
In the event a “change in control” occurs (as defined below), the Administrator may, at its discretion, require outstanding share awards, share unit awards, incentive awards, stock options, and SARs be assumed by the surviving entity or replaced by a comparable substitute award of substantially equal value issued by the surviving entity.
If awards are not assumed or replaced with substitute awards, the Administrator may provide that: (1) share awards become vested in full; (2) share unit awards become earned in full and paid in vested common shares; (3) incentive awards become earned, in whole or in part, in accordance with the terms of the award; and (4) stock options and SARs become earned in full in accordance with the terms of the award. In addition, the Administrator may provide that share unit awards and incentive awards be canceled and exchanged for payment in cash, common shares, or other securities received by the Company’s shareholders in the change in control transaction equal to the price per share received by shareholders for each common shares in the change in control transaction.
In summary, a “change in control” under the 2015 Plan occurs if:
a person, entity or group (with certain exceptions) acquires, in a transaction or series of transactions, the beneficial ownership of at least 35% of the Company’s combined voting power;
the Company engages in a merger, consolidation, reorganization or other business combination or sells or disposes of all or substantially all of the Company’s assets whereby the voting securities of the Company immediately prior to such transaction will not represent 50% or more of the combined voting power of the successor entity’s voting securities immediately after the transaction;
the Company’s shareholders approve a plan of liquidation or dissolution of the Company; or
individuals who, at the beginning of such period, constitute the Board, together with any new trustees whose nomination or election was approved by a majority of the trustees then on the Board (other than individuals who become trustees in connection with an election contest or third-party solicitation of proxies) cease for any reason to constitute a majority of the Board.
The Code has special rules that apply to “parachute payments,” which is compensation paid due to a change in control. This may include payments due to awards granted under the 2015 Plan, together with payments under other plans and agreements. If the total amount of parachute payments exceeds a safe harbor amount prescribed by the Code, the recipient will be liable for a 20% excise tax on that portion of the parachute payments which exceed the safe harbor amount, and the Company will not be allowed to claim a federal income tax deduction for such portion of the parachute payments.
The 2015 Plan provides that parachute payments will be reduced if, and only to the extent that, a reduction will allow a participant to receive a greater net after tax amount than a participant would receive otherwise. However, the benefits will not be reduced, and the participant will receive all of the parachute payments, if the participant will receive a greater after-tax benefit, taking into account the excise tax payable by the participant, by receiving all of the parachute payments. The 2015 Plan provides that these provisions do not apply to a participant who, under an agreement with the Company or the terms of another plan, is not permitted to receive parachute payments in excess of the safe harbor amount.
Return of Awards; Repayment
The 2015 Plan provides that all awards, and all payments under awards, are subject to any policy that the Company adopts requiring the return or repayment of benefits, i.e., a clawback policy. To the extent required by such policy,
TABLE OF CONTENTS
as in effect on the date the award is granted, the date of payment or the date the award became vested or earned, a participant will be required to return any award issued and repay any payment previously made with respect to an award.
Amendment; Termination
The 2015 Plan may be amended or terminated by the Board at any time. However, shareholder approval will be required if an amendment: (1) materially increases the aggregate number of shares that may be issued under the plan (other than adjustments permitted under the 2015 Plan); (2) materially increases the benefits accruing to participants under the plan; (3) materially changes the class of individuals eligible to become participants under the plan; or (4) is required to be approved by the shareholders under applicable law or by the New York Stock Exchange shareholder approval rules.
No amendment may, without the participant’s consent, adversely affect the rights of the participant under outstanding awards.
The 2015 Plan provides that no awards may be granted under the plan after June 23, 2025, although awards granted on or before such date will remain subject to their terms notwithstanding the expiration of the 2015 Plan.
Federal Tax Consequences
Grant of Options and SARs.The grant of a stock option or SAR is not expected to result in any taxable income to the recipient.
Exercise of Options and SARs.Upon exercising a non-qualified stock option, the optionee must recognize ordinary income equal to the excess of the fair market value of the shares of our common stock acquired on the date of exercise over the exercise price, and we generally will be entitled at that time to an income tax deduction for the same amount. The holder of an ISO generally will have no taxable income upon exercising the option (except that an alternative minimum tax liability may arise), and we will not be entitled to an income tax deduction. Upon exercising a SAR, the amount of any cash received and the fair market value on the exercise date of any shares of our common stock received are taxable to the recipient as ordinary income and generally are deductible by us.
Disposition of Shares Acquired Upon Exercise of Options and SARs.The tax consequence upon a disposition of shares acquired through the exercise of an option or SAR will depend on how long the shares have been held and whether the shares were acquired by exercising an ISO or by exercising a non-qualified stock option or SAR. Generally, there will be no tax consequence to us in connection with the disposition of shares acquired under an option or SAR, except that we may be entitled to an income tax deduction in the case of the disposition of shares acquired under an ISO, if the disposition occurs before the applicable ISO holding periods set forth in the Code have been satisfied.
Share Awards.Recipients of grants of restricted shares (including performance shares) generally will be required to include as taxable ordinary income the fair market value of the restricted shares at the time it is no longer subject to a substantial risk of forfeiture. However, an award holder who makes an 83(b) election within 30 days of the date of grant of the restricted share will incur taxable ordinary income on the date of grant equal to the fair market value of such shares of restricted share (determined without regard to forfeiture restrictions). With respect to the sale of shares after the forfeiture restrictions have expired, the holding period to determine whether the award recipient has long-term or short-term capital gain or loss generally begins when the restrictions expire, and the tax basis for such shares will generally be based on the fair market value of the shares on that date. However, if the award holder made an 83(b) election as described above, the holding period commences on the date of such election, and the tax basis will be equal to the fair market value of the shares on the date of the election (determined without regard to the forfeiture restrictions on the shares). In the case of restricted shares that vest solely based on continued employment, if the award permits dividends to be paid as and when dividends are declared on the underlying shares, such dividends will be taxed as ordinary income. In the case of performance share awards that permit dividends to accrue while the restricted share is subject to a substantial risk of forfeiture, such dividends will be paid if and when the underlying stock vests and will also be taxed as ordinary income. We generally will be entitled to an income tax deduction equal to amounts the award holder includes in ordinary income at the time of such income inclusion.
Share Unit Awards and Other Awards.Recipients of grants of restricted share units (including performance share units) will not incur any federal income tax liability at the time the awards are granted. Award holders will recognize ordinary income equal to (a) the amount of cash received under the terms of the award or, as applicable, (b) the fair
TABLE OF CONTENTS
market value of the shares received (determined as of the date of receipt) under the terms of the award. In the case of a restricted share unit award that vests based solely on continued employment or service, if such award permits the payment of dividend equivalent amounts as and when dividends are declared on the underlying shares, such dividend equivalent amounts will be taxed as ordinary income. In the case of a performance unit award, if such award permits dividend equivalent amounts to accrue while the award is subject to a substantial risk of forfeiture, such dividend equivalent amounts will be paid if and when the underlying share unit vests and will also be taxed as ordinary income. Cash or shares to be received pursuant to any other share-based award generally become payable when applicable forfeiture restrictions lapse; provided, however, that, if the terms of the award so provide, payment may be delayed until a later date to the extent permitted under applicable tax laws. We generally will be entitled to an income tax deduction for any amounts included by the award holder as ordinary income. For awards that are payable in shares, a participant’s tax basis is equal to the fair market value of the shares at the time the shares become payable. Upon the sale of the shares, appreciation (or depreciation) after the shares are paid is treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Income Tax Deduction and Limitations.Subject to the usual rules concerning reasonable compensation, including our obligation to withhold or otherwise collect certain income and payroll taxes, we generally will be entitled to a corresponding income tax deduction at the time a participant recognizes ordinary income from awards made under the Amended and Restated 2015 Plan. However, Section 162(m) of the Code prohibits publicly held corporations from deducting more than $1 million per year in compensation paid to certain named executive officers. The 2017 Tax Act, which was signed into law at the end of 2017, made significant changes to the deduction limit under Section 162(m), which became effective for taxable years beginning on and after January 1, 2018. The 2017 Tax Act eliminated the exception to the deduction limit for qualified performance-based compensation and broadened the application of the deduction limit to certain current and former executive officers who previously were exempt from such limit. Therefore, compensation paid to a covered executive annually under the Amended and Restated 2015 Plan in excess of $1 million generally will not be deductible.
Section 16 Delay.Special rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, shares received through exercise or payout of a non-qualified stock option, an ISO (for purposes of the AMT only), a SAR or a restricted share unit, and any restricted shares that vest, may be treated as restricted property for purposes of Section 83 of the Code if the recipient has had a non-exempt acquisition of common shares of the Company within the six months prior to the exercise, payout, or vesting. Accordingly, the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period unless a Section 83(b) election is made to recognize income as of the date the shares are received.
Parachute Tax.Any acceleration of the vesting or payment of awards under the 2015 Plan in the event of a “change in control” of the Company may cause part or all of the consideration involved to be treated as an “excess parachute payment” under the Code, which may subject the participant to a 20% excise tax and preclude deduction by the Company. See the discussion above under the section entitled “Change in Control.”
The preceding discussion is based on U.S. federal tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete description of the U.S. federal income tax aspects of the 2015 Plan. A participant may also be subject to state and local taxes in connection with the grant of awards under the 2015 Plan. The Company strongly encourages participants to consult with their individual tax advisors to determine the applicability of the tax rules in their personal circumstances to the awards granted to them under the 2015 Plan.
TABLE OF CONTENTS
PROPOSAL 5: RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The Audit Committee has approved the selection of Grant Thornton LLP
("(“Grant
Thornton"Thornton”) to serve as the
Company'sCompany’s independent
registered public accounting firmauditor for the
fiscal year ending December 31,
2019.2021.
As a matter of good corporate governance, the Audit Committee has determined to submit its selection to shareholders for ratification. If this selection of auditors is not ratified by the shareholders at the Annual Meeting, the Audit Committee will review its future selection of independent auditors.
The Company expects that representatives of Grant Thornton will be present at the Annual Meeting. The representatives will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
Required Vote
RequiredThis proposal requires the
The affirmative vote of a majority of the voting power of the shareholders present in person or by proxy
at the Annual Meeting, provided a quorum is present,
for approval.is required to ratify the selection of Grant Thornton as the Company’s independent auditor.
The Board recommends that you vote FOR the ratification of the selection of Grant Thornton as the Company'sCompany’s independent auditor for the fiscal year ending December 31, 2019.2021.
Table of ContentsTABLE OF CONTENTS
ACCOUNTING AND AUDIT COMMITTEE MATTERS
Fees Paid to the
Company'sCompany’s Independent
Registered Public Accounting FirmAuditor
The following table summarizes the aggregate fees incurred for the audit and other services provided by Grant Thornton for the 2018 transition period and for fiscal year 2018 (which was from May 1, 2017 through April 30, 2018).ended December 31, 2020. These amounts include reimbursed expenses. The Audit Committee approves in advance all fees paid to, and services provided by, the Company'sCompany’s independent registered public accounting firm. The Audit Committee has considered the services provided by Grant Thornton in the 2018 transition period2020 and has determined that all such services were compatible with maintaining Grant Thornton'sThornton’s independence.
Audit Fees | | | $586,000 | | | $526,500 |
Audit-Related Fees | | | 13,000 | | | 13,000 |
Tax Fees | | | — | | | — |
All Other Fees | | | — | | | — |
Total | | | $599,000 | | | $539,500 |
| | | | | | | |
| | 2018 Transition Period | | Fiscal Year 2018 | |
|---|
Audit Fees | | $ | 547,201 | | $ | 559,292 | |
Audit-Related Fees | | | — | | | 12,480 | |
Tax Fees | | | — | | | — | |
All Other Fees | | | — | | | 4,900 | |
| | | | | | | | |
Total | | $ | 547,201 | | $ | 576,672 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Audit Fees: This category includes the audit of the Company'sCompany’s annual financial statements, review of financial statements included in the Company'sCompany’s quarterly reports on Form 10-Q, and services that are normally provided by the independent accountantauditor in connection with regulatory filings, such as comfort letters and consents and assistance with and reviews of documents filed with the SEC.
Audit-Related Fees:
This category consists of assurance and related services provided by the independent accountantauditor that are reasonably related to the performance of the audit or review of the Company'sCompany’s financial statements and are not reported above under "Audit“Audit Fees."” The services for the fees disclosed under this category generally include fees for benefit plan audits.
Tax Fees:
This category consists of professional services rendered by the independent accountantauditor primarily in connection with the Company'sCompany’s tax compliance activities, including the preparation of tax returns and technical tax advice related to the preparation of tax returns.
All Other Fees: This category consists of fees for other permissible services that do not meet the above category descriptions. These fees ($0 in the 2018 transition period and $4,900 in fiscal year 2018) represent the annual charge to the Company for a web-based accounting research tool.
Table of ContentsTABLE OF CONTENTS
REPORT OF THE AUDIT COMMITTEE
The information contained in this report shall not be deemed to be
"soliciting material"“soliciting material” or to be
"filed"“filed” with the SEC, nor shall such information or report be deemed incorporated by reference into any future filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference in such filing.
The Audit Committee currently is composed of three independent trustees,
Michael T. DanceMary J. Twinem (Chair), Jeffrey P. Caira, and
Mary J. Twinem.Michael T. Dance. The Board has determined that each of the Audit Committee members meets the independence and experience requirements of the rules and regulations of the NYSE and SEC, as currently applicable to the Company.
Management is responsible for the financial reporting process, including the system of internal controls, for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States
("GAAP"(“GAAP”) and for
management'smanagement’s report on internal control over financial reporting. The
Company'sCompany’s independent registered public accounting firm, Grant Thornton LLP, is responsible for auditing the consolidated financial statements and expressing an opinion on the financial statements and the effectiveness of internal control over financial reporting. The Audit
Committee'sCommittee’s responsibility is to monitor and review these processes.
The Audit Committee meets at least quarterly and at such other times as it deems necessary or appropriate to carry out its responsibilities. In the course of fulfilling its oversight responsibilities, the Audit Committee met with both management and Grant Thornton LLP to review and discuss
annual and quarterlythe audited financial
statements and quarterly operating results prior to their issuance.statements. Management advised the Audit Committee that all financial statements were prepared in accordance with GAAP. The Audit Committee also discussed with Grant Thornton LLP matters required to be discussed pursuant to applicable Public Company Accounting Oversight Board
(“PCAOB”) standards, including the reasonableness of judgments and the clarity and completeness of financial disclosures.
In addition, the Audit Committee discussed with Grant Thornton LLP matters relating to its independence and has received from Grant Thornton LLP the written disclosures and letter required by applicable requirements of the
Public Company Accounting Oversight BoardPCAOB and the Commission regarding the independent
accountant'sauditor’s communications with the Audit Committee concerning independence.
The Audit Committee pre-approves all services provided by the independent auditor to the Company, and the related fees for such services, and has concluded that all such services provided in
the 2018 transition period2020 were compatible with the
auditors'auditors’ independence. See
"“Proposal 3:5: Ratification of Selection of Independent Auditor"” for more information regarding fees paid to the Company'sCompany’s independent auditors for services in the 2018 transition period2020 and fiscal year 2018.2019.
During
the 2018 transition period,2020, the Audit Committee continued to monitor and review the internal
auditor'sauditor’s ongoing testing of the effectiveness of the
Company'sCompany’s internal controls. The findings of the internal auditor were reported to the Audit Committee on a quarterly basis. Grant Thornton LLP, as part of its audit of the
Company'sCompany’s financial statements for
the 2018 transition period,2020, independently reviewed the
Company'sCompany’s internal controls.
On the basis of the reviews and discussions the Audit Committee has had with Grant Thornton LLP, the Company'sCompany’s internal auditor, and management, the Audit Committee recommended to the Board of Trustees that the Board approve the inclusion of the Company'sCompany’s audited financial statements in the Company's TransitionCompany’s Annual Report on Form 10-KT10-K for the fiscal year ended December 31, 20182020 for filing with the SEC.
Table of Contents
The Audit Committee has selectedappointed Grant Thornton LLP as the Company'sCompany’s independent registered public accounting firm for the fiscal year endingended December 31, 2019.2021. The Board of Trustees has concurred in that selectionappointment and has presented the matter to the shareholders of the Company for ratification.
Submitted by the Audit Committee of the Board:
Mary J. Twinem (Chair)
Jeffery P. Caira
Michael T. Dance
(Chair)Jeffrey P. CairaMary J. Twinem
Table of ContentsTABLE OF CONTENTS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires that the trustees and executive officers of the Company and holders of more than 10% of the Company's equity securities file with the SEC, within specified due dates, initial reports of beneficial ownership of the Company's equity securities on Form 3; reports of changes in ownership of the Company's equity securities on Form 4; and annual reports of changes in ownership of the Company's equity securities on Form 5. As a matter of practice, the Company's administrative staff assists the trustees and executive officers with these reporting requirements. The Company is required to disclose whether it has knowledge that any person required to file such reports may have failed to do so in a timely manner. Based solely on a review of Section 16(a) reports filed with the SEC either reflecting transactions that had occurred during fiscal year 2018 or had been filed during the 2018 transition period and on written representations from the Company's trustees and executive officers that no other reports were required during the 2018 transition period, the Company believes that all of the Section 16(a) reporting obligations for the 2018 transition year were met, except that Mark O. Decker, Jr., John A. Kirchmann, and Anne M. Olson untimely filed a report relating to the vesting of certain restricted stock units on a time-based vesting schedule, which vesting was reported by each individual on a Form 5 report filed on February 14, 2019.
SHAREHOLDER PROPOSALS AND TRUSTEE NOMINATIONS
The Company did not receive a request from any shareholder that a matter be submitted to a vote at the Annual Meeting or that a trustee nominee be included in this Proxy Statement.
Shareholders who wish to submit a shareholder proposal for inclusion in the Company'sCompany’s proxy statement and form of proxy for the 20202022 annual meeting of shareholders must comply with the requirements as to form and substance established by the SEC and set forth in Rule 14a-8 of the Exchange Act, including delivering the required materials to the Company'sCompany’s Secretary at the following address: Investors Real Estate Trust, 1400 31st Avenuedba Centerspace , 3100 10th St SW, Suite 60, P.O. Box 1988, Minot, ND 58702-1988, no later than by January 2, 2020December 6, 2021 (120 days prior to the anniversary of the mailing date of this Proxy Statement) in order to be included in the Company'sCompany’s proxy statement and form of proxy for such meeting pursuant to Rule 14a-8 of the Exchange Act.
Shareholders who wish to submit a shareholder proposal outside of the processes of Rule 14a-8 of the Exchange Act, but rather in compliance with Article III, Section 6(A) of the
Company'sCompany’s Bylaws, must comply with the requirements of the Bylaws, including delivering the required materials to the
Company'sCompany’s Secretary at the above address no earlier than the close of business on
February 14, 2020January 18, 2022 and no later than the close of business on
March 15, 2020.February 17, 2022. If such notice is received by the Company on or after
March 15, 2020,February 18, 2022, then such notice will be considered untimely. Shareholder proposals submitted in this manner will not be included in the
Company'sCompany’s proxy statement or form of proxy. The Company reserves the right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements.
Shareholders who wish to propose a trustee nominee for the 20202022 annual meeting of shareholders must comply with Article III, Section 6(B) of the Company'sCompany’s Bylaws, including delivering the required materials to the Company'sCompany’s Secretary at the following address: Investors Real Estate Trust, 1400 31st Avenuedba Centerspace, 3100 10th St SW, Suite 60, P.O. Box 1988, Minot, ND 58702-1988. SubmissionsNominations must be received by the Secretary no earlier than the close of business on February 14, 2020January 18, 2021 and no later than the close of business on March 15, 2020.February 17, 2022. Such shareholder nominations will not be included in the Company'sCompany’s proxy statement or form of proxy. For more information on recommending individuals for consideration as nominees to the Company'sCompany’s Board of Trustees, see the discussion under "“Corporate Governance and Board Matters — Board CommitteesMatters—Trustee Nominations."”
Table of ContentsTABLE OF CONTENTS
SHAREHOLDERS WITH THE SAME LAST NAME AND ADDRESS
HOUSEHOLDING OF PROXY MATERIALS
In accordance with notices that the Company sent to certain shareholders, the Company is sending only a single copy of its proxy materials or Notice of Availability of Proxy Materials, as applicable, to shareholders who share the same last name and address, unless they have notified the Company that they want to continue receiving multiple copies. This practice, known as
"householding,"“householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.
Householding for bank and brokerage accounts is limited to accounts within the same bank or brokerage firm. For example, if you and your spouse share the same last name and address, and you and your spouse each have two accounts containing the
Company'sCompany’s common shares at two different brokerage firms, your household will receive two copies of the
Company'sCompany’s proxy materials, one from each brokerage firm.
If you received a
householdedhouseholding mailing this year and you would like to have separate proxy materials mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to the Investor Relations Department by mail to Investor Relations, Investors Real Estate Trust,
1400 31st Avenuedba Centerspace, 3100 10th St SW,
Suite 60, P.O. Box 1988, Minot, ND 58702-1988, or by calling Investor Relations between 8:30 a.m. and 5:00 p.m. Central Time at
1-701-837-4738.1-701-837-7104. Similarly, you may also contact the Company if you received multiple copies of the proxy materials and would prefer to receive a single copy in the future.
COMMUNICATING WITH IRET
CENTERSPACE
If you would like to receive information about the Company, you may use one of the following methods:
1.The Company's Internet site, located at www.iretapartments.com, contains information about the Company and its properties. The "Investors" section of the site contains press releases, earnings releases, financial information, and stock quotes, as well as corporate governance information and links to the Company's SEC filings. This Proxy Statement and the Transition Report on Form 10-KT for the eight-month transition period ended December 31, 2018, are both available on www.iretapartments.com.
2.To have information such as the Company's latest quarterly or annual report mailed to you, please either call 1-701-837-4738 or send a request by email to "ir@iret.com" or by mail to: Investor Relations, Investors Real Estate Trust, 1400 31st Avenue SW, Suite 60, P.O. Box 1988, Minot, ND 58702-1988.
1.
| The Company’s Internet site, located at www.centerspacehomes.com, contains information about the Company and its properties. Our investors site, located at ir.centerspacehomes.com, contains press releases, earnings releases, financial information, and stock quotes, as well as corporate governance information and links to the Company’s SEC filings. This Proxy Statement and the Annual Report on Form 10-K for the year ended December 31, 2020, are both available on ir.centerspacehomes.com. |
2.
| To have information such as the Company’s latest quarterly or annual report mailed to you, please either call 1-701-837-7104 or send a request by email to “ir@centerspacehomes.com” or by mail to: Investor Relations, Investors Real Estate Trust, dba Centerspace, 3100 10th St SW, P.O. Box 1988, Minot, ND 58702-1988. |
If you would like to contact the Company, please call Investor Relations at 1-701-837-4738,1-701-837-7104, or send correspondence to: Investor Relations, Investors Real Estate Trust, 1400 31st Avenuedba Centerspace, 3100 10th St SW, Suite 60, P.O. Box 1988, Minot, ND 58702-1988.
Table of ContentsTABLE OF CONTENTS
It is not expected that any matters other than those described in this Proxy Statement will be brought before the Annual Meeting. If any other matters are properly presented at the meeting for action, the persons named in the accompanying proxy will vote upon them in accordance with their best judgment.
| | | |
| | | By Order of the Board of Trustees | |
|
|
| | | |
| | | | | /s/ Anne Olson | |
| | | | | Anne Olson | |
| | | | | Executive Vice President, Chief Operating Officer,
General Counsel, and Secretary | |
April 5, 2021
May 1, 2019
Upon written request of any shareholder entitled to receive this Proxy Statement, the Company will provide, without charge, a copy of its TransitionAnnual Report on Form 10-KT,10-K, including the consolidated financial statements, the notes thereto, and the financial statement schedules, as filed with the Securities and Exchange Commission. Any such request should be addressed to Anne Olson, Chief Operating Officer, General Counsel, and Secretary of the Company, at Investors Real Estate Trust, 1400 31st Avenuedba Centerspace, 3100 10th St SW, Suite 60, P.O. Box 1988, Minot, ND 58702-1988. This request must include a representation by the shareholder that as of April 18, 2018,March 22, 2021, the shareholder is entitled to vote at the Annual Meeting.
TABLE OF CONTENTS
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS
VOTE BY INTERNET - www.proxyvote.com Use(unaudited)
This release contains certain non-GAAP financial measures. The non-GAAP financial measures should not be considered a substitute for operating results determined in accordance with accounting principles generally accepted in the InternetUnited States of America (“GAAP”). The definitions and calculations of these non-GAAP financial measures, as calculated by us, may not be comparable to transmit your voting instructionsnon-GAAP financial measures reported by other REITs that do not define each of the non-GAAP financial measures exactly as we do.
We provide certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for electronic deliverythe entirety of information. Votethe periods being compared, and, in the case of newly-constructed properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net income. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how a fixed pool of our communities are performing year-over-year. We use this measure to assess whether or not we have been successful in increasing NOI, renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements.
Reconciliation of Operating Income (Loss) to Net Operating Income
Net operating income, or NOI, is a non-GAAP financial measure which we define as total real estate revenues less property operating expenses, including real estate taxes. We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by 11:59 P.M. ETdepreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
Operating income (loss) | | | $8,340 | | | $11,417 | | | $(3,307) | | | (27.0)% |
Adjustments:
| | | | | | | | | | | | |
Property management expenses | | | 5,801 | | | 6,186 | | | (385) | | | (6.2)% |
Casualty loss | | | 1,662 | | | 1,116 | | | 546 | | | 48.9% |
Depreciation and amortization | | | 75,593 | | | 74,271 | | | 1,322 | | | 1.8% |
General and administrative expenses | | | 13,440 | | | 14,450 | | | (1,010) | | | (7.0)% |
Net operating income | | | $104,836 | | | $107,440 | | | $(2,064) | | | (2.4)% |
Revenue
| | | | | | | | | | | | |
Same-store | | | $152,790 | | | $149,615 | | | $3,175 | | | 2.1% |
Non-same-store | | | 18,441 | | | 6,020 | | | 12,421 | | | 206.3% |
Other properties and dispositions | | | 6,763 | | | 30,120 | | | (23,357) | | | (77.5)% |
Total | | | 177,994 | | | 185,755 | | | (7,761) | | | (4.2)% |
Property operating expenses, including real estate taxes
| | | | | | | | | | | | |
Same-store | | | 63,227 | | | 61,622 | | | 1,605 | | | 2.6% |
Non-same-store | | | 6,817 | | | 2,287 | | | 4,530 | | | 198.1% |
Other properties and dispositions | | | 3,114 | | | 14,406 | | | (11,292) | | | (78.4)% |
Total | | | 73,158 | | | 78,315 | | | (5,157) | | | (6.6)% |
Net operating income
| | | | | | | | | | | | |
Same-store | | | 89,563 | | | 87,993 | | | 1,570 | | | 1.8% |
Non-same-store | | | 11,624 | | | 3,733 | | | 7,891 | | | 211.4% |
Other properties and dispositions | | | 3,649 | | | 15,714 | | | (12,065) | | | (76.8)% |
Total | | | $104,836 | | | $107,440 | | | $(2,064) | | | (2.4)% |
TABLE OF CONTENTS
Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds From Operations, Core Funds From Operations, and Adjusted Funds From Operations
We believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation does not assume that the value of real estate assets diminishes predictably over time as implied by the historical cost convention of GAAP and the recording of depreciation.
We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:
depreciation and amortization related to real estate;
gains and losses from the sale of certain real estate assets; and
impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
The exclusion in Nareit’s definition of FFO of impairment write- downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments and assists management and investors in comparing those operating results between periods.
Due to the limitations of the Nareit FFO definition, we have made certain interpretations in applying the definition. We believe that all such interpretations not specifically provided for in the Nareit definition are consistent with the definition. Nareit’s FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT’s main business are excluded from FFO, and a REIT has the option to exclude impairment write-downs of assets that are incidental to the main business.
While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, nor is it indicative of funds available to fund all cash needs, including our ability to service indebtedness or make distributions.
Core Funds from Operations (“Core FFO”) is FFO as adjusted for non-routine items or items not considered core to our business operations. By further adjusting for items that are not considered part of our core business operations, we believe that Core FFO provides investors with additional information to compare our core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income as an indication of financial performance, or as an alternative to cash flows from operations as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to service indebtedness or make distributions to shareholders. Core FFO is a non-GAAP and non-standardized measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.
Net (loss) income available to common shareholders | | | $(1,790) | | | $71,848 |
Adjustments:
| | | | | | |
Noncontrolling interests — Operating Partnership | | | (212) | | | 6,752 |
Depreciation and amortization | | | 75,593 | | | 74,271 |
Less depreciation — non real estate | | | (353) | | | (322) |
Less depreciation — partially owned entities | | | (379) | | | (2,059) |
Gain on sale of real estate | | | (25,503) | | | (97,624) |
FFO applicable to common shares and Units | | | $47,356 | | | $52,866 |
TABLE OF CONTENTS
Adjustments to Core FFO: Casualty loss write off | | | 749 | | | — |
Loss on extinguishment of debt | | | 23 | | | 2,360 |
Gain on litigation settlement | | | — | | | (6,586) |
Rebranding costs | | | 402 | | | — |
(Gain) loss on marketable securities | | | 3,378 | | | (113) |
(Discount) premium on redemption of preferred shares | | | (297) | | | — |
Core FFO applicable to common shares and Units | | | $51,611 | | | $48,527 |
FFO applicable to common shares and Units | | | $47,356 | | | $52,866 |
Dividends to preferred unitholders | | | 640 | | | 537 |
FFO applicable to common shares and Units — diluted | | | $47,996 | | | $53,403 |
Core FFO applicable to common shares and Units | | | $51,611 | | | $48,527 |
Dividends to preferred unitholders | | | 640 | | | 537 |
Core FFO applicable to common shares and Units — diluted | | | $52,251 | | | $49,064 |
Per Share Data
| | | | | | |
Earnings (loss) per share and unit — diluted | | | $(0.15) | | | $6.00 |
FFO per share and unit — diluted | | | $3.47 | | | $4.05 |
Core FFO per share and unit — diluted | | | $3.78 | | | $3.72 |
Weighted average shares and units — diluted | | | 13,835 | | | 13,182 |
Reconciliation of Net Income (Loss) Available to Common Shareholders to Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain or loss on 06/12/2019. Have your proxy cardsale of real estate and other investments, impairment of real estate investments, gain or loss on extinguishment of debt, gain on litigation settlement, and gain or loss from involuntary conversion. Adjusted EBITDA is a non-GAAP financial measure and should not be considered a substitute for operating results determined in hand when you accessaccordance with GAAP. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the web siteeffect of depreciation, financing costs, or non-operating gains and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERYlosses.
Net income (loss) attributable to controlling interests | | | $4,441 | | | $78,669 |
Adjustments:
| | | | | | |
Dividends to preferred unitholders | | | 640 | | | 537 |
Noncontrolling interests – Operating Partnership | | | (212) | | | 6,752 |
Income (loss) before noncontrolling interests – Operating Partnership | | | 4,869 | | | 85,958 |
Adjustments:
| | | | | | |
Interest expense | | | 27,334 | | | 29,461 |
Loss on extinguishment of debt | | | 23 | | | 2,360 |
Depreciation/amortization related to real estate investments | | | 75,215 | | | 72,213 |
Impairment of real estate investments | | | — | | | — |
Casualty loss (recovery) | | | 749 | | | — |
Interest income | | | (1,512) | | | (1,626) |
Gain (loss) on sale of real estate and other investments | | | (25,503) | | | (97,624) |
Gain on litigation settlement | | | — | | | (6,586) |
(Gain) loss on marketable securities | | | 3,378 | | | (113) |
Adjusted EBITDA | | | $84,553 | | | $84,043 |
TABLE OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.CONTENTS
FIRST AMENDMENT TO THE THIRD AMENDED AND RESTATED DECLARATION OF TRUST OF INVESTORS REAL ESTATE TRUST 1400 31st Ave SW SUITE 60 Minot, ND 58702-1988 VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone
[ ], 2021
Pursuant to
transmit your voting instructions. Vote by 11:59 P.M. ET on 06/12/2019. Have your proxy card in hand when you callArticle VI of the Third Amended and
then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The BoardRestated Declaration of
Trustees recommends you vote FOR the following: 1. ElectionTrust (the “Declaration of
Trustees Nominees Jeffrey P. Caira For 0 0 0 0 0 0 0 0 For 0 Against 0 0 0 0 0 0 0 0 Against 0 Abstain 0 0 0 0 0 0 0 0 Abstain 0 1A For 0 Against 0 Abstain 0 1B Michael T. Dance 3. RATIFICATION OF SELECTION OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019. 1C Mark O. Decker, Jr. 1D Emily Nagle Green NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 1E Linda J. Hall 1F Terrance P. Maxwell 1G John A. Schissel 1H Mary J. Twinem The BoardTrust”) of
Trustees recommends you vote FOR proposals 2 and 3. 2. ADVISORY VOTE ON EXECUTIVE COMPENSATION. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000422323_1 R1.0.1.18
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Annual Report are available at www.proxyvote.com The Investors Real Estate Trust, 49th Annual Meetinga North Dakota real estate investment trust (the “Trust”), the Trust hereby amends the Declaration of Shareholders willTrust as set forth below.
1.
| The first sentence of Section 1(a) of the Declaration of Trust is hereby deleted in its entirety and the following is substituted in lieu thereof: |
“The Trust governed by this Amended and Restated Declaration of Trust (as amended, supplemented or restated from time to time, this “Declaration of Trust”) is herein referred to as the “Trust” and shall be held on June 13, 2019, at 9:00 a.m. CDT atknown by the Company's offices located at 800 LaSalle Avenue, Suite 1600 Minneapolis, Minnesota 55402 This proxy is Solicited on Behalfname “Centerspace.”
2.
| Except as expressly amended herein, the Declaration of Trust shall remain in full force and effect. Any electronic signature to this First Amendment will be deemed the same as an original. This First Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts, and when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. |
[SIGNATURE PAGE FOLLOWS]
TABLE OF CONTENTS
IN WITNESS WHEREOF, the undersigned has executed this First Amendment as of the IRET Board of Trustees. The undersigned holder of Common Shares of Beneficial Interest ofdate first set forth above.
| | | | | TRUST: | |
| | | | | | | | | |
| | | | | Investors Real Estate Trust,
a North Dakota real estate investment trust | |
| | | | | | |
| | | | | By: | | | /s/ Anne Olson | |
| | | | | Name: Anne Olson | |
| | | | | Title: Executive Vice President, | |
| | | | | Chief Operating Officer, General Counsel and Secretary | |
TABLE OF CONTENTS
FIRST AMENDMENT TO INVESTORS REAL ESTATE TRUST
AMENDED AND RESTATED 2015 INCENTIVE PLAN
[ ], 2021
Pursuant to Article XV of the Amended and Restated 2015 Incentive Plan (the “Incentive Plan”) of Investors Real Estate Trust, a North Dakota Real Estate Investment Trust ("IRET"), hereby appoints Mark O. Decker, Jr. and Theodore C. Cadwell, Jr., and each of themreal estate investment trust (the "Representatives"“Company”), the true and lawful proxiesCompany hereby amends the Incentive Plan as set forth below.
1.
| The first sentence of Section 5.2 of the Incentive Plan is hereby deleted in its entirety and the following is substituted in lieu thereof: |
“The maximum aggregate number of shares of Common Stock that may be issued under this Plan is 775,000.”
2.
| Except as expressly amended herein, the Incentive Plan shall remain in full force and effect. Any electronic signature to this First Amendment will be deemed the same as an original. This First Amendment may be executed in any number of counterparts, by different parties hereto in separate counterparts, and when so executed and delivered, shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. |
[SIGNATURE PAGE FOLLOWS]
TABLE OF CONTENTS
IN WITNESS WHEREOF, the undersigned has executed this First Amendment as of the undersigned, with the full power of substitution, to vote on behalf of the undersigned all Common Shares of Beneficial interest of IRET which the undersigned is entitled to vote at the 2019 Annual Meeting of Shareholders of IRET to be held at 800 LaSalle Ave., Suite 1600, Minneapolis, Minnesota 55402, on June 13, 2019, at 9:00 a.m., CDT, or any adjournment thereof, in the manner hereafter indicated. In their discretion, the Representatives are authorized to vote upon such other matters as may properly come before the meeting. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN HEREIN, BUT IF SUCH INSTRUCTIONS ARE NOT MARKED HEREIN, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED FOR ELECTION AS TRUSTEES, FOR APPROVAL, ON AN ADVISORY BASIS,date first set forth above.
| | | | | COMPANY: | |
| | | | | | | | | |
| | | | | Investors Real Estate Trust,
a North Dakota real estate investment trust | |
| | | |
| | | | | | | | | |
| | | | | By: | | | /s/ Anne Olson | |
| | | | | Name: Anne Olson | |
| | | | | Title: Executive Vice President,
Chief Operating Officer, General Counsel and Secretary | |
