UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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| x | Definitive Proxy Statement |
| o | Definitive Additional Materials |
| o | Soliciting Material Pursuant to §240.14a-12 |
GRAMERCY PROPERTY TRUST INC.
(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):
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Dear Stockholder: May 16, 2014
You are invited to attend the annual meeting of stockholders of Gramercy Property Trust Inc. The meeting will be held on Thursday June 26, 2014 at 9:30 a.m., New York time. This year’s annual meeting will be a completely “virtual meeting” of stockholders. You will be able to attend the annual meeting, vote and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/GPT2014 and entering your 12-Digit Control Number.
The attached proxy statement, with the accompanying notice of the meeting, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully and to take part in the affairs of our company by voting on the matters described in the accompanying proxy statement. We hope that you will be able to attend the meeting at which, our directors and management team will be available to answer questions.
Your vote is important. Whether you plan to attend the meeting or not, please complete the enclosed proxy card and return it as promptly as possible or authorize your proxy via the Internet or by calling the toll-free telephone number. The enclosed proxy card contains instructions regarding all three methods of authorizing your proxy. If you attend the meeting, you may continue to have your shares of common stock voted as instructed in the proxy or you may electronically revoke your proxy at the meeting and vote your shares of common stock online. We look forward to your participation.
Sincerely,
/s/ GORDON F. DUGANGordon F. DuGan
Chief Executive Officer
ELECTRONIC AND TELEPHONE PROXY AUTHORIZATION
Gramercy Property Trust Inc.’s common stockholders of record on the close of business on April 24, 2014, the record date for the 2014 annual meeting of common stockholders may authorize their proxies by telephone or Internet by following the instructions on their proxy card. If you have any questions regarding how to authorize your proxy by telephone or by internet, please call Morrow & Co. LLC, the firm assisting Gramercy Property Trust Inc. with the solicitation of proxies, toll-free at (800) 607-0088.
GRAMERCY PROPERTY TRUST INC.
521 Fifth Avenue, 30th Floor
New York, New York 10175
NOTICE OF ANNUAL MEETING OF COMMON STOCKHOLDERS
TO BE HELD ON JUNE 26, 2014
The 2014 annual meeting of common stockholders of Gramercy Property Trust Inc., a Maryland corporation, will be held via live webcast at www.virtualshareholdermeeting.com/GPT2014 on Thursday, June 26, 2014 at 9:30 a.m., New York time. Please be sure to have your 12-Digit Control Number to join the meeting.
At the annual meeting, holders of our common stock will be asked to consider and vote upon the following proposals:
| 1. | To elect seven directors to serve until the 2015 annual meeting of stockholders and until their successors are duly elected and qualify; |
| 2. | To approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019; |
| 3. | To approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares; |
| 4. | To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014; |
| 5. | To approve, on an advisory basis, the compensation of our named executive officers; and |
| 6. | To act upon any other matters that may properly be brought before the annual meeting or any adjournments or postponements thereof. |
Any action may be taken on the foregoing matters at the annual meeting on the date specified above, or on any date or dates to which, by original or later adjournment, the annual meeting may be adjourned, or to which the annual meeting may be postponed.
Our Board of Directors has fixed the close of business on April 24, 2014, as the record date for determining the common stockholders entitled to notice of, and to vote at, the annual meeting, and at any adjournments or postponements thereof. Only common stockholders of record at the close of business on that date will be entitled to notice of, and to vote at, the annual meeting and at any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy, which is being solicited by our Board of Directors, and to mail it promptly in the enclosed postage-prepaid envelope or authorize your proxy via the Internet or by calling the toll-free number. The enclosed proxy card contains instructions regarding all three methods of authorizing your proxy. Any proxy may be revoked by delivery of a properly executed, later dated proxy. In addition, common stockholders of record who attend the virtual annual meeting may vote online, even if they have previously delivered a signed proxy.
By Order of our Board of Directors
/s/ EDWARD J. MATEY JR.Edward J. Matey Jr.
Secretary
Important Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on June 26, 2014.
This proxy statement and our 2013 annual report to stockholders are available
at http:www.proxyvote.com.
New York, New York
May 16, 2014
Whether or not you plan to attend the virtual meeting, please complete, sign, date and promptly return the enclosed proxy card in the postage-prepaid envelope provided or authorize your proxy by telephone or Internet following the instructions on your proxy card. For specific instructions on voting, please refer to the instructions on the proxy card or the information forwarded by your broker, bank or other holder of record. If you attend the virtual meeting, you may vote online even if you have previously signed and returned your proxy card. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote online during the virtual meeting, you must obtain a proxy issued in your name from such broker, bank or other nominee.
TABLE OF CONTENTS
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GRAMERCY PROPERTY TRUST INC.
521 Fifth Avenue, 30th Floor
New York, New York 10175
PROXY STATEMENT
FOR OUR 2014 ANNUAL MEETING OF COMMON STOCKHOLDERS
TO BE HELD ON JUNE 26, 2014
We are sending this proxy statement and the enclosed proxy card on or about May 16, 2014 to holders of our common stock on April 24, 2014 (the “Record Date”) in connection with the solicitation of proxies by the Board of Directors of Gramercy Property Trust Inc., a Maryland corporation, for use at the annual meeting of stockholders to be held on Thursday, June 26, 2014 at 9:30 a.m., New York time, via live webcast by visiting www.virtualshareholdermeeting.com/GPT2014, or at any postponement or adjournment of the annual meeting.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
What is the purpose of the annual meeting?
At the annual meeting, holders of our common stock will be asked to consider and vote upon:
| • | a proposal to elect seven directors to serve until the 2015 annual meeting of stockholders and until their successors are duly elected and qualify; |
| • | a proposal to approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019; |
| • | a proposal to approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares; |
| • | a proposal to ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014; |
| • | a proposal to approve, on an advisory basis, the compensation of our named executive officers; and |
| • | any other matters that may properly be brought before the annual meeting or at any adjournments or postponements thereof. |
Who is entitled to vote at the annual meeting?
If our records show that you were a holder of our common stock at the close of business on the Record Date, you are entitled to receive notice of the meeting and to vote the shares of common stock that you held on the Record Date even if you sell such shares after the Record Date. Each outstanding share of common stock entitles its holder to cast one vote for each matter to be voted upon. Stockholders do not have the right to cumulate votes in the election of directors.
What constitutes a quorum?
The presence, in person or by proxy, of common stockholders entitled to cast a majority of all of the votes entitled to be cast at the annual meeting on matters for which the common stockholders vote is necessary to constitute a quorum for the transaction of business at the meeting. As of the Record Date, there were 71,415,299 shares of common stock outstanding and entitled to vote at the annual meeting.
What is the difference between a stockholder of record and a beneficial owner of our common stock held in street name?
Stockholder of Record. If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“AST”), you are considered the stockholder of record with respect to those shares, and we sent the notice directly to you. If you requested printed copies of the proxy materials by mail, you will receive a proxy card.
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Beneficial Owner of Stock Held in Street Name. If your shares are held in an account at a broker, bank or other nominee, then you are the beneficial owner of those shares in “street name,” and the notice was forwarded to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares. As a beneficial owner, you have the right to instruct your broker, bank or other nominee on how to vote the shares held in your account. Those instructions are contained in a “vote instruction form.” If you request printed copies of the proxy materials by mail, you will receive a vote instruction form. Under applicable law and New York Stock Exchange (“NYSE”) rules and regulations, brokers have the discretion to vote on routine matters, including the ratification of the appointment of our independent registered public accounting firm. However, your broker does not have discretionary authority to vote on (i) the election of the directors, (ii) the proposal to approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019, (iii) the proposal to approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares, or (iv) the resolution to approve, on an advisory basis, of the compensation of our named executive officers, in each case, without instructions from you, in which case a broker “non-vote” will occur and your shares of common stock will not be voted on these matters at the annual meeting.
What vote is required to approve each proposal?
Proposal 1 — Election of Directors. The affirmative vote of a plurality of all of the common stock votes cast at the annual meeting at which a quorum is present is necessary for the election of the directors. For purposes of this vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of the vote for this proposal.
Proposal 2 — Approval of Certain issuances of our Common Stock upon Exchange of our 3.75% Exchangeable Senior Notes Due 2019. The affirmative vote of a majority of all of the votes cast at the annual meeting at which a quorum is present is required to approve this proposal. An abstention will have the effect of a vote against this proposal and broker non-votes will no effect on the results of the vote.
Proposal 3 — Approval of an Amendment to Our Charter to Increase the Number of Authorized Shares that we have Authority to Issue. The affirmative vote of two-thirds of our outstanding shares of common stock entitled to vote thereon is necessary to approve the amendment to our charter. For purposes of this vote, abstentions and broker non-votes will have the same effect as votes against the proposal.
Proposal 4 — Ratification of Appointment of Ernst & Young LLP. The affirmative vote of a majority of all of the common votes cast at the annual meeting at which a quorum is present is required for the ratification of our independent registered public accounting firm. For purposes of this vote, abstentions will not be counted as votes cast and will have no effect on the result of the vote for this proposal.
Proposal 5 — Advisory Vote Approving Execution Compensation. The affirmative vote of a majority of all of the common votes cast at the annual meeting at which a quorum is present is required for the resolution to approve, on an advisory basis, the compensation of our named executive officers. For purposes of this vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of the vote for this proposal.
Other Matters. If any other matter is properly submitted to the stockholders at the annual meeting, its adoption will require the affirmative vote of a majority of votes cast at the annual meeting. The board does not propose to conduct any business at the annual meeting other than as stated above.
None of the proposals, if approved, entitle any of the stockholders to appraisal rights under Maryland law.
How do I vote?
Voting Electronically at the Annual Meeting. If you are a registered stockholder and attend the annual meeting, you may vote electronically during the annual meeting at www.virtualshareholdermeeting.com/GPT2014 when you enter your 12-Digit Control Number. If your shares of common stock are held in street name and you wish to vote electronically at the annual meeting, you will need to obtain a “legal proxy” from the broker, bank or other nominee that holds your shares of common stock of record.
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Voting by Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares of common stock in your own name as a holder of record with our transfer agent, American Stock Transfer & Trust Company, LLC, you may instruct the proxy holders named in the enclosed proxy card how to vote your shares of common stock in one of the following ways:
| • | By Telephone. You may authorize a proxy to vote your shares by telephone by calling the toll-free number listed on your proxy card. Telephone proxy authorization is available 24 hours per day until 11:59 p.m., New York time, on June 25, 2014. When you call, please have your proxy card in hand, and you will receive a series of voice instructions which will allow you to authorize a proxy to vote your shares. You will be given the opportunity to confirm that your instructions have been properly recorded. IF YOU AUTHORIZE A PROXY BY TELEPHONE, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
| • | By Internet. You also have the option to authorize a proxy to vote your shares via the Internet. The website for Internet proxy authorization is printed on your proxy card. Internet proxy authorization is available 24 hours per day until 11:59 p.m., New York time, on June 25, 2014. As with telephone proxy authorization, you will be given the opportunity to confirm that your instructions have been properly recorded. IF YOU AUTHORIZE A PROXY VIA THE INTERNET, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
| • | By Mail. If you would like to authorize a proxy to vote your shares by mail, then please mark, sign and date your proxy card and return it promptly to Broadridge Financial Solutions, Inc., in the postage-paid envelope provided. |
Voting by Proxy for Shares Registered in Street Name. If your shares are held in street name, you must return the enclosed Voting Instruction Form in order to have your shares of common stock voted on all items at the annual meeting. Only your broker, bank or other nominee holder can vote your shares. If you do not return your voting instructions, the rules of the NYSE permit your broker to vote some, but not all, of the items that will be presented at the annual meeting. In order for your shares to be voted on all items you must return your voting instructions.
Please see the enclosed proxy card for further instructions on how to submit your vote. If you have any questions regarding how to authorize a proxy by telephone or by Internet, please call Morrow & Co. LLC, toll-free at (800) 607-0088.
Can I change my vote after I submit my proxy card?
If you authorize a proxy to vote your shares, you may revoke it at any time before it is voted by:
| • | filing a written notice revoking the proxy with our Secretary at our address; |
| • | properly signing and forwarding to us a proxy with a later date; or |
| • | electronically voting during the annual meeting at www.virtualshareholdermeeting.com/GPT2014 when you enter your 12-Digit Control Number. |
If you attend the virtual annual meeting, you may vote online whether or not you have previously given a proxy, but your presence (without further action) at the annual meeting will not constitute revocation of a previously given proxy. If you hold your shares through a bank, broker or other nominee holder, only they can revoke your proxy on your behalf.
How is my vote counted?
If you properly execute a proxy in the accompanying form or authorize your proxy to vote your shares electronically through the Internet or by telephone, and we receive your proxy authorization prior to voting at the annual meeting, the shares that the proxy represents will be voted in the manner specified on the proxy. If no specification is made, the common stock will be voted “FOR” the election of the nominees for the directors named in this proxy statement, “FOR” the proposal to approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019, “FOR” the proposal to approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares, “FOR” the ratification of our Audit Committee’s selection of Ernst & Young LLP
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as our independent registered public accounting firm for the fiscal year ending December 31, 2014, “FOR” the executive compensation advisory resolution and as recommended by our Board with regard to all other matters in its discretion. It is not anticipated that any matters other than those set forth in the proxy statement will be presented at the annual meeting. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders. In addition, no stockholder proposals or nominations were received on a timely basis, so no such matters may be brought to a vote at the annual meeting.
How does the Board recommend that I vote on each of the proposals?
The Board recommends that holders of our common stock vote:
| • | “FOR” Proposal 1: the election of Allan J. Baum, Gordon F. DuGan, Marc Holliday, Gregory F. Hughes, Jeffrey E. Kelter, Charles S. Laven and William H. Lenehan to serve on our Board of Directors as directors for a one-year term and until their successors are duly elected and qualify; |
| • | “FOR” Proposal 2: the proposal to approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019; |
| • | “FOR” Proposal 3: the proposal to approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares; |
| • | “FOR” Proposal 4: the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending on December 31, 2014; and |
| • | “FOR” Proposal 5: the resolution to approve, on an advisory basis, the compensation of our named executive officers. |
What other information should I review before voting?
For your review, our 2013 annual report, including financial statements for the fiscal year ended December 31, 2013, is being mailed to our common stockholders concurrently with the mailing of this proxy statement. You may also obtain, free of charge, a copy of our 2013 annual report on our website at www.gptreit.com. The information found on, or accessible through, our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document we file with or furnish to the Securities and Exchange Commission (the “SEC”). You may also obtain a copy of our Annual Report on Form 10-K, which contains additional information about us, free of charge, by directing your request in writing to Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175, Attention: Investor Relations. The 2013 annual report and the Annual Report on Form 10-K, however, are not part of the proxy solicitation material.
Who is soliciting my proxy?
This solicitation of proxies is made by and on behalf of our Board of Directors. We will pay the cost of the solicitation of proxies. We have retained Morrow & Co. LLC at an aggregate estimated cost of $4,000, plus out-of-pocket expenses, to assist in the solicitation of proxies. In addition to the solicitation of proxies by mail, our directors, officers and employees may solicit proxies personally or by telephone.
No person is authorized on our behalf to give any information or to make any representations with respect to the proposals other than the information and representations contained in this proxy statement, and, if given or made, such information and/or representations must not be relied upon as having been authorized and the delivery of this proxy statement shall, under no circumstances, create any implication that there has been no change in our affairs since the date hereof.
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PROPOSAL 1: ELECTION OF DIRECTORS
Our Board of Directors currently consists of seven members. Each of our directors serves a term that lasts until the next annual meeting of common stockholders and until their successor, if any, is duly elected or appointed and qualifies. Our directors are subject to annual election by holders of our common stock. Accordingly, our common stockholders will be asked to elect seven directors at our annual meeting.
At the annual meeting, seven directors will be elected by holders of our common stock to serve until the 2015 annual meeting and until their successors are duly elected and qualify. Our Nominating and Corporate Governance Committee has recommended Allan J. Baum, Gordon F. DuGan, Marc Holliday, Gregory F. Hughes, Jeffrey E. Kelter, Charles S. Laven and William H. Lenehan to our Board of Directors as nominees for election to serve as directors. Following the recommendation of our Nominating and Corporate Governance Committee, our Board of Directors has nominated Allan J. Baum, Gordon F. DuGan, Marc Holliday, Gregory F. Hughes, Jeffrey E. Kelter, Charles S. Laven and William H. Lenehan to serve as directors. The nominee directors listed below have consented to being named in this proxy statement and to serve as directors if elected.
Our Board of Directors anticipates that each nominee will serve, if elected, as a director. However, if a nominee is unable to stand for election, proxies voted in favor of such nominee will be voted for the election of such other person as our Nominating and Corporate Governance Committee may recommend to our Board of Directors.
We believe that each of our directors, including the director nominees, have the specific experience, qualifications, attributes, or skills necessary to serve as effective directors on our Board of Directors. A description of our process for identifying and evaluating director nominees, as well as our criteria for membership to our Board of Directors, is set forth under the heading “Corporate Governance Matters — Identification of Director Candidates.”
In addition to the above, our Board of Directors also considered specific qualifications and experiences, described in the biographical details of our directors and director nominees as set forth below.
Our Board of Directors unanimously recommends a vote “FOR” each nominee for election as a director.
Information Regarding the Nominee Directors
The following table and biographical descriptions set forth certain information with respect to the nominees for election as directors at the 2014 annual meeting of common stockholders, based upon information furnished by each director. Following biographical information for the director nominees, we have provided information regarding the specific experience, qualifications, attributes, or skills that have led us to determine that he should serve as a director on our Board of Directors.
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| Name | Age | Director Since | ||
| Nominee Directors |
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| Allan J. Baum | 58 | 2004 | ||
| Gordon F. DuGan | 47 | 2012 | ||
| Marc Holliday | 47 | 2004 | ||
| Gregory F. Hughes | 51 | 2012 | ||
| Jeffrey E. Kelter | 59 | 2004 | ||
| Charles S. Laven | 62 | 2004 | ||
| William H. Lenehan | 37 | 2012 |
Nominees for Election
Allan J. Baum. Mr. Baum has served as one of our directors since August 2004 and is currently the Chairman of the Board. Mr. Baum previously served as our Lead Independent Director from June 2012 until January 2014 and as Chairman of a special committee of our Board, and currently serves as a member of our Audit and Compensation Committees. Mr. Baum retired from Credit Suisse First Boston (“CSFB”) in 2002, where he was a Managing Director and head of the structured finance unit for commercial mortgage-backed
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securities. Prior to his ten years with CSFB, Mr. Baum served as a Vice President in the Real Estate Investment Bank of Citicorp, and held positions in the tax-exempt housing finance and taxable mortgage finance areas of Merrill Lynch, Pierce, Fenner & Smith Incorporated. Mr. Baum also currently serves as a director of Community Development Trust, a for-profit, mission-oriented real estate investment trust. He previously served as Vice President of the Commercial Mortgage Securities Association. In addition, Mr. Baum served as a director for National Consumer Cooperative Bank, and also served on its audit committee. Mr. Baum received a B.A. degree in Government/Urban Studies from Dartmouth College in 1978 and an M.B.A. in Finance from Columbia University Graduate School of Business in 1983. Mr. Baum’s qualifications to serve on our Board include his executive experience at CSFB and Citicorp, his relevant experience serving on the boards and audit committees for a real estate investment trust and a financial institution and his extensive experience of over 20 years in commercial real estate investment banking.
Gordon F. DuGan. Mr. DuGan has been our Chief Executive Officer and served as one of our directors since July 2012. Mr. DuGan has over 20 years of senior management experience in the real estate industry. From June 2011 to June 2012, he served as Global Head of Equity Real Estate for a wholly-owned subsidiary of Annaly Capital Management (NYSE: NLY), a mortgage REIT. From June 2010 to June 2011, Mr. DuGan served as Managing Partner of Northcliffe Asset Management (“Northcliffe”), which managed net leased commercial real estate on behalf of private investors. From May 2004 to July 2010, he was Chief Executive Officer of W. P. Carey & Co. LLC (NYSE: WPC) (“W. P. Carey”), a global investment firm with approximately $12.5 billion of assets under management, and regarded as a leading provider of net lease financing for corporate properties. Prior to that, Mr. DuGan served in various capacities with W.P. Carey, including as a director, as President and as Head of Investments. Mr. DuGan is a member of the Advisory Boards of India 2020 Limited, a private equity firm investing in India, and of the Innocence Project. Mr. DuGan received his B.S. degree in Economics from the Wharton School at the University of Pennsylvania. Mr. DuGan’s qualifications to serve on our Board include his extensive leadership skills and executive experience at the wholly-owned subsidiary of Annaly Capital Management, Northcliffe and W. P. Carey, and his prior board experience.
Marc Holliday. Mr. Holliday has served as one of our directors since August 2004 and was our President and Chief Executive Officer from August 2004 until October 2008. Mr. Holliday has served on a special committee of our Board and also served on our Investment Committee from August 2004 until June 2010. Mr. Holliday became our consultant from October 2008 until April 2009 after stepping down from his positions as our President and Chief Executive Officer in October 2008. Mr. Holliday is the Chief Executive Officer and a director of SL Green Realty Corp. (NYSE: SLG) or SL Green. He previously served as Chief Investment Officer and President of SL Green. Prior to joining SL Green, he was Managing Director and Head of Direct Originations for New York-based Capital Trust (NYSE: CT), a mezzanine finance company. While at Capital Trust, Mr. Holliday was in charge of originating direct principal investments for the firm, consisting of mezzanine debt, preferred equity and first mortgages. Mr. Holliday served in various management positions, including Senior Vice President at Capital Trust’s predecessor company, Victor Capital Group, a private real estate investment bank specializing in advisory services, investment management, and debt and equity placements. Mr. Holliday received a B.S. degree in Business and Finance from Lehigh University in 1988, and a M.S. degree in Real Estate Development from Columbia University in 1990. Mr. Holliday’s qualifications to serve on our Board include his extensive executive experience as Chief Executive Officer at SL Green, as our former President and Chief Executive Officer, his long-time leadership skills in various management positions of various companies, as well as his deep exposure in the real estate industry.
Gregory F. Hughes. Mr. Hughes has served as one of our directors since December 2012. He previously served as our Chief Credit Officer from 2004 to 2008. From November 2010 to present, Mr. Hughes has served as a Principal for Roscommon Capital Limited Partnership, a financial advisory and investment firm. Mr. Hughes also served as the Chief Operating Officer of SL Green from 2007 to 2010 and its Chief Financial Officer from 2004 to 2010, responsible for finance, capital markets, investor relations and administration. Prior to joining SL Green, Mr. Hughes was Managing Director and Chief Financial Officer of the private equity real estate group at JP Morgan Partners. Mr. Hughes was also a Partner and Chief Financial Officer of Fortress Investment Group, an investment and asset management firm, which managed a real estate
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private equity fund of approximately $900.0 million and a NYSE listed real estate investment trust with assets in excess of $1.3 billion. While at Fortress Investment Group, Mr. Hughes was actively involved in evaluating a broad range of real estate equity and structured finance investments and arranged various financings to facilitate acquisitions and fund recapitalizations. Mr. Hughes also served as Chief Financial Officer of Wellsford Residential Property Trust and Wellsford Real Properties, where he was responsible for the firm’s financial forecasting and reporting, treasury and accounting functions, capital markets and investor relations. While at Wellsford Residential Property Trust, Mr. Hughes was involved in numerous public and private debt and equity offerings and during his tenure Wellsford Residential Property Trust became one of the first real estate investment trusts to obtain an investment grade rating. Prior to that, Mr. Hughes worked at Kenneth Leventhal & Co., a public accounting firm specializing in real estate and financial services. Mr. Hughes received a B.S. degree in Accounting from the University of Maryland and is a Certified Public Accountant. Mr. Hughes’ qualifications to serve on our Board include his extensive experience serving as an officer for various public companies and his financial and accounting skills as a Certified Public Accountant.
Jeffrey E. Kelter. Mr. Kelter has served as one of our directors since August 2004. Mr. Kelter also serves as the Chairman of our Compensation Committee, as well as a member of our Nominating and Corporate Governance and Investment Committees. Mr. Kelter has also served on a special committee of our Board. Mr. Kelter has been a senior partner of KTR Capital Partners since 2004. Previously, Mr. Kelter was President and Chief Executive Officer and a trustee of Keystone Property Trust (“Keystone”), an industrial REIT. He has over 20 years of experience in all phases of commercial real estate including development and third-party management. Prior to forming Keystone, he served as President and Chief Executive Officer of Penn Square Properties, Inc. (“Penn Square”) in Philadelphia, Pennsylvania, a real estate company which he founded in 1982. At Penn Square, he developed, owned, managed and leased more than 4.5 million square feet of office and warehouse projects throughout the Pennsylvania and New Jersey markets. Mr. Kelter received a B.A. from Trinity College. Mr. Kelter’s qualifications to serve on our Board include his executive experience as President and Chief Executive Officer of Keystone and Penn Square, and his experience of over 20 years in commercial real estate.
Charles S. Laven. Mr. Laven has been one of our directors since August 2004. In addition, Mr. Laven is the Chairman of our Nominating and Corporate Governance Committee, as well as a member of our Audit and Compensation Committees. Mr. Laven has been the President of Forsyth Street Advisors LLC, a New York based company specializing in real estate finance and consulting, since July 2003. Previously, Mr. Laven was a partner of Hamilton, Rabinovitz, & Alschuler, Inc. (“HR&A”), a financial, policy and management consulting firm focusing on complex housing finance, real estate, economic development and strategic planning problems. Mr. Laven also served as principal of Caine Gressel Midgley Slater Incorporated and Charles Laven and Associates. Mr. Laven also currently serves as chairman of the Urban Homesteading Assistance Board and as a director for Citizens Housing and Planning Council. Mr. Laven holds a B.S. degree in Architectural Design from the Massachusetts Institute of Technology. Mr. Laven was a Loeb Fellow in Advanced Environmental Affairs at the Harvard University School of Design. Mr. Laven is an Adjunct Professor of Real Estate at Columbia University’s Graduate School of Architecture Planning and Preservation and has been a member of the faculty of Columbia University since 1981. Mr. Laven’s qualifications to serve on our Board include his extensive leadership skills and executive experience at Forsyth Street Advisers LLC and HR&A, his intellectual acumen as a Columbia faculty member and his prior board experience at various companies and organizations.
William H. Lenehan. Mr. Lenehan served as a director beginning in January 2012 pursuant to the then-existing rights of holders of our Series A Preferred Stock to elect one director to our Board. Effective January 13, 2014, concurrent with the payment of all accrued and unpaid dividends on our Series A Preferred Stock, Mr. Lenehan’s term as a preferred stock director ceased and he was re-appointed as a director of our company. He also has served as a special advisor to the board of Evoq Properties, Inc. since June 2012. From June 2011 to December 2011, Mr. Lenehan was the Interim Chief Executive Officer of MI Developments, Inc., a real estate operating company, and served as a member of the Board of Directors of MI Developments, Inc. and its Strategic Review Committee. From August 2001 to February 2011, Mr. Lenehan was an investment professional at Farallon Capital Management, L.L.C. in the real estate group, where he was involved with numerous private equity investments in the real estate sector, including office buildings,
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residential land, resort communities, mixed use properties and retail properties. Mr. Lenehan has served as a director and an audit committee member of Stratus Properties Inc. (NASDAQ: STRS), a real estate development company, since May 2012. Mr. Lenehan has a B.A. in economics and classics from Claremont McKenna College. Mr. Lenehan’s qualifications to serve on our Board include his extensive real estate investment and management experience and public company director experience.
Biographical Information Regarding Executive Officers Who Are Not Directors
Benjamin P. Harris. Mr. Harris has been our President since August 2012, and served as our Chief Investment Officer from July 2012 until August 2012. Mr. Harris served as the Head of U.S. Net Lease Investments for a wholly-owned subsidiary of Annaly Capital Management from June 2011 to June 2012 and has over 15 years of experience sourcing, underwriting and closing sale-leaseback and net lease transactions. Mr. Harris served as the Head of US Investments of Northcliffe from October 2010 to June 2011, and as Head of US Investments of W. P. Carey from September 2005 to October 2010. Mr. Harris previously served in various capacities at W.P. Carey from 1999 through 2010. Mr. Harris graduated from the University of King’s College and Dalhousie University in Canada. He is a CFA charter holder and a member of the New York Society of Securities Analysts. Mr. Harris is 39 years old.
Jon W. Clark. Mr. Clark has been our Chief Financial Officer and Treasurer since April 2009. He has also been our Chief Accounting Officer since March 2009. Prior to his election as our Chief Accounting Officer, Mr. Clark served as our Vice President and Controller from June 2007 until March 2009. Previously, Mr. Clark was a Director at BlackRock Financial Management where he managed the accounting and finance department for real estate debt products. During that time, Mr. Clark also served as Assistant Treasurer at Anthracite Capital, Inc., which was a publicly traded mortgage REIT that specialized in subordinate commercial mortgage-backed securities. Prior to joining BlackRock Financial Management, Mr. Clark was a Vice President at Cornerstone Properties, Inc. (acquired by Equity Office Properties in 2000) where he established its internal audit department. Mr. Clark is a Certified Public Accountant and obtained his public accountancy experience as a manager in the national real estate practices of Arthur Andersen LLP and BDO Seidman LLP. Mr. Clark holds a B.B.A. degree in Accountancy from Western Michigan University. Mr. Clark is 45 years old.
Edward J. Matey Jr. Mr. Matey has been our Executive Vice President and General Counsel since April 2009 and our Secretary since April 2013. From April 2008 until April 2009, Mr. Matey served as Senior Vice President and General Counsel of our Realty Division. Mr. Matey was Executive Vice President and General Counsel of American Financial Realty Trust from September 2002 until April 2008, when we acquired American Financial Realty Trust. Prior to that, he was a real estate attorney at Morgan, Lewis & Bockius LLP where he served as a partner from October 1991 to September 2002 and an associate from November 1986 to October 1991. Mr. Matey received his B.S. from Saint Joseph’s University and his J.D. from Villanova University School of Law. Mr. Matey is 60 years old.
Our Board of Directors and Its Committees
Our Board of Directors currently consists of seven members. Each of our directors serves for a term that lasts until the next annual meeting of common stockholders, and until their successor, if any, is duly elected or appointed and qualifies. Each of our directors are subject to annual election by holders of our common stock. Accordingly, our common stockholders will be asked to elect seven directors at our annual meeting.
Our Board of Directors has affirmatively determined that Messrs. Allan J. Baum, Jeffrey E. Kelter, Gregory F. Hughes, Charles S. Laven and William H. Lenehan, representing a majority of its members, are independent of our management, as such term is defined by the rules of the NYSE and the SEC. In determining director independence, our Board of Directors considers all relevant facts and circumstances, the NYSE listing standards, as well as our director independence criteria. Under the NYSE listing standards, no director qualifies as independent unless our Board of Directors affirmatively determines that the director has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. No arrangement or understanding exists between any director or executive officer and any other person or persons pursuant to which any director or executive officer was, or is, to be selected as a director or nominee.
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Our Board of Directors held seven meetings during fiscal year 2013. During fiscal year 2013, each of the directors then serving on our Board of Directors attended at least 75% aggregate of (i) the total number of meetings of our Board of Directors while they were on our Board of Directors and (ii) the total number of meetings of the committees of our Board of Directors on which directors served. In addition, our directors also met several times in strategic sessions to discuss our overall strategic business plan. The non-executive directors also regularly hold executive sessions in which our management does not participate. For a discussion of the leadership structure of our Board of Directors and its role in risk oversight, see “Corporate Governance Matters” in this proxy statement.
Audit Committee. We have a standing Audit Committee, consisting of Messrs. Hughes (Chairman), Baum and Laven, each of whom is “independent” within the meaning of the rules of the NYSE and the SEC and each of whom meet the financial literacy standard required by the rules of the NYSE. Our Board of Directors has determined that Mr. Gregory F. Hughes is an “audit committee financial expert” as defined in rules promulgated by the SEC under the Sarbanes-Oxley Act of 2002, as amended. Our Audit Committee is responsible for, among other things, engaging our independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of their audit engagement, approving professional services to be provided by the independent registered public accounting firm, reviewing the independence of the auditors, considering the range of audit and non-audit fees, reviewing the adequacy of our internal controls, accounting and reporting practices and assessing the quality and integrity of our consolidated financial statements. The function of our Audit Committee is oversight. Our management is responsible for the preparation, presentation and integrity of our financial statements and for the effectiveness of internal control over financial reporting. Management is responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. Our independent registered public accounting firm is responsible for planning and carrying out a proper audit of our annual financial statements, reviews of our quarterly financial statements prior to the filing of each Quarterly Report on Form 10-Q, annually auditing management’s assessment of the effectiveness of internal control over financial reporting and other procedures. Our Board of Directors has adopted a written charter for our Audit Committee, a copy of which is available on our website at www.gptreit.com. Additional information regarding the functions performed by our Audit Committee is set forth in the “Audit Committee Report” included in proxy statement. Our Audit Committee held seven meetings during fiscal year 2013.
Compensation Committee. We have a standing Compensation Committee, consisting of Messrs. Kelter (Chairman), Baum and Laven, each of whom is “independent” within the meaning of the rules of the NYSE. Our Compensation Committee is responsible for, among other things: (1) reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer and such other executive officers that may be designated by our Chief Executive Officer, evaluating the performance of such officers in light of such goals and objectives, and determining and approving the compensation of such officers based on these evaluations; (2) approving the compensation of our other executive officers; (3) recommending to our Board of Directors for approval the compensation of the non-employee directors; (4) administering the issuance of any award under our Amended and Restated 2004 Equity Incentive Plan (our “2004 Equity Incentive Plan”) and our 2012 Inducement Equity Incentive Plan; and (5) reviewing the Compensation Discussion and Analysis for inclusion in the 2014 Proxy Statement. Compensation decisions for our executive officers and directors are made by our Compensation Committee. Our Compensation Committee has retained FTI Consulting, Inc. (“FTI”) as our compensation consultant to provide it with relevant market data concerning the marketplace, our peer group and other compensation developments. See “Executive Compensation — Compensation Discussion and Analysis.” Our Board of Directors has adopted a written charter for our Compensation Committee, a copy of which is available on our website at www.gptreit.com. Our Compensation Committee held four meetings during fiscal year 2013.
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Nominating and Corporate Governance Committee. We have a standing Nominating and Corporate Governance Committee, consisting of Messrs. Laven (Chairman), Lenehan and Hughes, each of whom is “independent” within the meaning of the rules of the NYSE. Our Nominating and Corporate Governance Committee is responsible for, among other things, assisting our Board of Directors in identifying individuals qualified to become Board members, recommending to our Board of Directors the director nominees to be elected at each annual meeting of stockholders, recommending to our Board of Directors the directors to serve on each of our Board of Directors’ committees, developing and recommending to our Board of Directors the corporate governance principles and guidelines applicable to our company and directing our Board of Directors in an annual review of its performance. Our Board of Directors has adopted a written charter for our Nominating and Corporate Governance Committee, a copy of which is available on our website at www.gptreit.com. Our Nominating and Corporate Governance Committee held two meetings during fiscal year 2013.
Investment Committee. We have a standing Investment Committee currently consisting of Messrs. Lenehan (Chairman), DuGan and Kelter. All real estate investments, dispositions and financings must be approved by a committee consisting of our most senior officers, including the affirmative vote of our Chief Executive Officer. Real estate investments and dispositions at a loss (based on book value at the time of sale) having a transaction value greater than $20.0 million must also be approved by the Investment Committee of our Board of Directors. Our full Board of Directors must approve all such transactions having a value greater than $50.0 million. Additionally, the Investment Committee of our Board of Directors must approve non-recourse financings greater than $20.0 million and our full Board of Directors must approve all recourse financings, regardless of amount, and non-recourse financings greater than $50.0 million. Our Investment Committee held five meetings during fiscal year 2013.
Policy on Majority Voting
Our Board of Directors nominated all seven of its members to stand for re-election at the 2014 annual meeting. All nominees were elected as directors by stockholders at the 2013 annual meeting. All directors elected at the 2014 annual meeting will serve until the 2015 annual meeting and until their successors are elected and qualified.
Directors will be elected by a plurality of votes cast by shares entitled to vote at the meeting. However, under a policy adopted by our Board of Directors, if in an uncontested election more votes are “withheld” from a director than are voted “for” the director, he or she will be required to tender his or her resignation to the Board of Directors for consideration by the Nominating and Corporate Governance Committee within ten business days after certification of the vote. Under this policy, an “uncontested election” is an election in which the only nominees are persons nominated by the Board of Directors.
Our Nominating and Corporate Governance Committee (or, if votes were withheld from a majority of the members of the Nominating and Corporate Governance Committee, then a committee appointed by and from among disinterested, independent directors) will promptly consider the resignation and recommend to the Board of Directors whether to accept or reject the resignation within 60 days following the date of the stockholder meeting at which the election occurred. The director who submitted the resignation may not participate in the decision.
The Board of Directors will act on the recommendation by the Nomination and Corporate Governance Committee no later than 90 days after the date of the stockholder meeting at which the election occurred. We will disclose the Board of Directors’ decision in a Form 8-K filed with the SEC within four business days of the decision, and, if applicable, the Board of Directors’ reasons for rejecting the tendered resignation.
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Director Compensation
The following table* sets forth information regarding the compensation paid to, and the compensation expense we recognized with respect to, our non-executive directors during the fiscal year ended December 31, 2013:
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| Name | Fees Earned or Paid in Cash(1) ($) |
Stock Awards(2) ($) |
Option Awards(3) ($) |
All Other Compensation ($) | Total ($) |
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| Allan J. Baum | $ | 194,000 | $ | 4,575 | $ | 4,400 | $ | — | $ | 202,975 | ||||||||||
| Marc Holliday | $ | 129,000 | $ | 4,575 | $ | 4,400 | $ | — | $ | 137,975 | ||||||||||
| Gregory F. Hughes | $ | 142,500 | $ | 4,575 | $ | 4,400 | $ | — | $ | 151,475 | ||||||||||
| Jeffrey E. Kelter | $ | 145,500 | $ | 4,575 | $ | 4,400 | $ | — | $ | 154,475 | ||||||||||
| Charles S. Laven | $ | 147,500 | $ | 4,575 | $ | 4,400 | $ | — | $ | 156,475 | ||||||||||
| William H. Lenehan | $ | 135,000 | $ | 4,575 | $ | 4,400 | $ | — | $ | 143,975 | ||||||||||
| * | The columns for “Non-Equity Incentive Plan Compensation” and “Change in Pension Value and Nonqualified Deferred Compensation Earnings” have been omitted because they are not applicable. |
| (1) | Mr. Baum deferred $85,000 and each of Messrs. Kelter, Hughes, and Laven deferred $60,000 of his 2013 cash compensation pursuant to our Directors’ Deferral Program. Deferred compensation is comprised of 50% of annual fees earned and is credited in the form of phantom stock units. Mr. Baum received 21,149 and each of Messrs. Kelter, Hughes, and Laven received 14,929 phantom stock units, in connection with 2013 cash compensation each elected to defer. |
| (2) | Amounts shown do not reflect compensation actually received by the named director. Instead, the amounts shown are the aggregate grant date fair value of stock awards issued to the director as determined pursuant to Financial Accounting Standards Board’s Accounting Standards Codification Topic 718 “Compensation — Stock Compensation,” or FASB ASC Topic 718. The assumptions used to calculate the grant date value of such awards for are set forth under Notes 2 and 13 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. The shares of restricted stock held by each non-executive director as of December 31, 2013 were as follows: Mr. Baum — 3,000; Mr. Holliday — 3,000; Mr. Hughes — 1,500; Mr. Kelter — 3,000; Mr. Laven — 3,000 and Mr. Lenehan — 1,500. |
| (3) | Amounts shown do not reflect compensation actually received by the named director. Instead, the amounts shown are the aggregate grant date fair value of the option awards issued to the director as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the grant date value of such awards are set forth under Notes 2 and 13 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. The number of options held by to each non-executive director as of December 31, 2013 was as follows: Mr. Baum — 43,508; Mr. Holliday — 143,867; Mr. Lenehan — 5,000; Mr. Hughes — 5,000; Mr. Kelter — 43,508; and Mr. Laven — 43,508. |
During the fiscal year ended December 31, 2013, each non-executive director received a fee in the amount of $120,000. Each non-executive director also received $1,500 for each meeting of our Board of Directors or a committee of our Board of Directors that he attended. The annual fees payable to our non-executive directors are determined by our Compensation Committee. These fees are payable quarterly, half in cash and half in stock, with each non-executive director having the option to elect to take stock in lieu of cash, up to the full amount or to elect to defer all or part of the annual fee pursuant to our Directors’ Deferral Program, as described below. Any portion of the annual fee that a non-executive director elects to receive or defer in stock is made under our 2004 Equity Incentive Plan.
Each non-executive director who served as a chairman of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee received an additional fee of $10,000, $7,500 and $5,000, respectively, which fees are payable in cash, unless such chairman elects to defer all or part of such fees pursuant to our Directors’ Deferral Program. In addition, under our 2004 Equity Incentive Plan, each non-executive director is entitled to an annual grant of stock options to purchase 5,000 shares of common stock, which are priced at the close of business on the first business day in the year of grant, all of which vest on the date of grant. Each non-executive director was also entitled to an annual grant (reviewed on
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an annual basis) of 1,500 shares of restricted common stock pursuant to our 2004 Equity Incentive Plan, a third of which will vest on the first business day one year from the date of grant, and each of the following two-years, respectively, subject to the non-executive director being a member of our Board of Directors on the date such award is expected to vest. A non-executive director may elect to defer all or part of the annual stock grant pursuant to our Directors’ Deferral Program. In addition, we reimburse all directors for reasonable out-of-pocket expenses incurred in connection with their services on our Board of Directors. We reimbursed less than $14,789 for such expenses during 2013 in the aggregate.
On March 16, 2005, our Board of Directors adopted the Directors’ Deferral Program for non-executive directors. Our non-executive directors may elect to defer up to 100% of their annual cash retainer fees, chairman fees, committee meeting fees and annual stock grant under the Directors’ Deferral Program. Unless otherwise elected by a participant, fees deferred under the program shall be credited in the form of phantom shares. Distributions on vested phantom shares shall be made in cash or, if elected by the non-executive director, in shares of common stock. Phantom shares will be settled by the transfer to the non-executive director of one share of common stock for each phantom share, provided that our Compensation Committee at the time of the grant may provide that phantom shares may be settled (i) in cash at the applicable phantom share value, (ii) in cash or by transfer of shares of common stock as elected by the non-executive director or (iii) in cash or by transfer of shares of common stock as elected by us. Phantom shares will be settled on the first day of the month following the date on which the phantom shares vest, or at the election of the non-executive director, upon the earlier of such non-executive director’s termination of service, his death or change in control by us, as defined in the Directors’ Deferral Program.
Effective as of January 16, 2014, Allan J. Baum was appointed Chairman, as described on page 14 under “Corporate Governance Matters — Board of Directors Leadership Structure.” Mr. Baum had been our Lead Independent Director since 2012. In connection with Mr. Baum’s appointment as Chairman and Lead Independent Director prior to that, Mr. Baum is entitled to receive an additional annual retainer, separate from and in addition to fees payable to all independent directors, of $75,000 for 2012 and $50,000 for each year thereafter, payable 50% in the form of cash and 50% in the form of common stock, unless Mr. Baum elects to receive 100% of the additional annual retainer in the form of stock.
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PROPOSAL 2: APPROVAL OF CERTAIN ISSUANCES OF SHARES OF COMMON STOCK UPON
EXCHANGE OF OUR 3.75% EXCHANGEABLE SENIOR NOTES DUE 2019
In March 2014, GPT Property Trust LP, our Operating Partnership, issued an aggregate of $115.0 million principal amount of 3.75% Exchangeable Senior Notes due 2019 (the “Notes”). The Notes pay interest semi-annually at a rate of 3.75% per annum and are exchangeable, under certain circumstances, into cash, shares of our common stock, or a combination of cash and shares of our common stock, at our election, at an initial exchange rate of 161.1863 shares of common stock per $1,000 principal amount of Notes, which is equivalent to an initial exchange price of approximately $6.20 per share of common stock, subject to adjustment in certain circumstances.
As described further below, we are asking you to consider and vote upon this proposal to approve the issuance of our common stock upon exchange of the Notes in excess of the Aggregate Share Cap (defined below) to enable the Company to avoid being forced to make any cash payments upon exchange of the Notes and to instead have the flexibility to satisfy its exchange obligation fully in shares.
Since our common stock is listed on the NYSE, we are subject to the NYSE’s rules and regulations. Section 312.03(c) of the NYSE Listed Company Manual requires stockholder approval in certain circumstances prior to the issuance of common stock or securities convertible into or exercisable for common stock, in any transaction or series of related transactions if (1) the common stock has, or will have upon issuance, voting power equal to 20% or more of the voting power outstanding before the issuance of such stock or of securities convertible into or exercisable for common stock or (2) the number of shares of common stock to be issued is, or will upon issuance, equal 20% or more of the number of shares of common stock outstanding before the issuance of such stock or of securities convertible into or exercisable for common stock. Based on the number of shares of our common stock outstanding at the time we issued the Notes, we would only be permitted to issue up to 14,281,896 shares of common stock (the “Aggregate Share Cap”) upon exchange of the Notes, without first obtaining stockholder approval.
Since the maximum number of shares of our common stock that are potentially issuable upon the exchange of the Notes could, in certain circumstances, result in the issuance of an aggregate number of shares of our common stock that exceeds the Aggregate Share Cap, we agreed in the indenture governing the Notes that, unless we obtained stockholder approval of the issuance of shares of our common stock in excess of the Aggregate Share Cap, we would not deliver shares, or a combination of cash and shares, for exchange of any Note if such election would result in the issuance of more than 14,281,896 shares of our common stock (in the aggregate for the Notes taking into account all prior or concurrent Note exchanges), which is equal to 19.99% of our common stock outstanding at the time the Notes were initially issued.
If the stockholders approve the issuance of our common stock upon exchange of the Notes in excess of the Aggregate Share Cap, such exchange will result in additional dilution of the voting power of our existing stockholders. If stockholders do not approve of this proposal, the Notes will remain outstanding in accordance with their terms and the terms of the indenture pursuant to which they were issued, in which case we would not be permitted to use shares of common stock instead of cash to settle amounts in excess of the Aggregate Share Cap.
In order to enable the Company to avoid being forced to make any cash payments upon exchange of the Notes and to instead have the flexibility to satisfy its exchange obligation fully in shares, we are asking you to consider and vote upon this proposal to approve the issuance of our common stock upon exchange of the Notes in excess of the Aggregate Share Cap. While the Company does not currently know whether it will settle its exchange obligation fully in shares of common stock (or in a combination of cash and shares), if this Proposal 2 is approved, the Company would have the ability to determine at the time of the exchange the appropriate form of payment to be made, instead of being required to settle amounts in excess of the Aggregate Share Cap in cash, which could, depending on timing and circumstances, have a material adverse impact on the Company’s cash flow and liquidity. Approval of this proposal would give us the option, in our discretion, to settle the exchange of the Notes in full through the delivery of shares of our common stock.
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Description of the Notes
The Notes will mature on March 15, 2019. Our Operating Partnership will pay interest on the Notes at a rate of 3.75% in cash semi-annually, in arrears, on March 15 and on September 15 of each year, beginning on September 15, 2014. The Notes are fully and unconditionally guaranteed by Gramercy Property Trust Inc. on a senior unsecured basis.
Holders may exchange their Notes at their option on any day prior to the close of business on the scheduled trading day immediately preceding December 15, 2018 only under the following circumstances: (1) during any calendar quarter (and only during such calendar quarter) after the calendar quarter ending March 31, 2014, if the last reported sale price of our common stock was greater than 130% of the applicable exchange price in effect for each applicable trading day for 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter; (2) during the five business-day period after any five consecutive trading-day period (the “measurement period”) in which the trading price per note for each day of that measurement period was less than 98% of the product of the last reported sale price of our common stock and the applicable exchange rate on each such day; or (3) upon the occurrence of specified corporate events described in the indenture governing the Notes. The Notes will be exchangeable, regardless of the foregoing circumstances, at any time from, and including, December 15, 2018 through the second scheduled trading day immediately preceding the maturity date.
The initial exchange rate for the Notes is 161.1863 shares of common stock per $1,000 principal amount of Notes, equivalent to an initial exchange price of approximately $6.20 per share of common stock. The exchange rate will be subject to adjustment, but will not be adjusted for accrued and unpaid interest, if any. In addition, if an event constituting a fundamental change occurs, the Company will in some cases increase the exchange rate for a holder that elects to convert its Notes in connection with such fundamental change. Upon exchange, the Company will pay and/or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, together with cash in lieu of fractional shares.
Upon a fundamental change, subject to certain exceptions, holders may require the Company to repurchase some or all of their Notes for cash at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus any accrued and unpaid interest.
On or after March 20, 2017, in certain circumstances, the Operating Partnership may redeem all or part of the notes for cash at a price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption.
The terms of the Notes are complex. The foregoing summary of terms is general in nature and is qualified by reference to the full text of the agreements attached as exhibits to our Current Reports on Form 8-K filed with the U.S. Securities and Exchange Commission on March 21, 2014 and March 24, 2014 (collectively, the “8-Ks”). Stockholders desiring a more complete understanding of the terms of the indenture governing the Notes are urged to read the 8-Ks and the exhibits thereto.
Our Board of Directors unanimously recommends a vote “FOR” the approval of certain issuances of shares common stock upon exchange of our 3.75% exchangeable senior notes due 2019.
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PROPOSAL 3: APPROVAL OF AN AMENDMENT TO THE CHARTER INCREASING
TO 200,000,000 THE NUMBER OF SHARES OF COMMON STOCK
THE COMPANY IS AUTHORIZED TO ISSUE
The Board of Directors has deemed advisable and recommended an amendment to the Company’s charter increasing from 150,000,000 to 200,000,000 the number of shares of common stock the Company is authorized to issue and has directed that this Proposal be submitted for consideration at the annual meeting.
The Company is presently authorized to issue up to 200,000,000 shares of capital stock, consisting of 150,000,000 shares of common stock, 25,000,000 shares of preferred stock and 25,000,000 shares of excess stock. As of the Record Date, there were approximately 71,415,299 shares of common stock issued and outstanding and 20,043,918 shares of common stock reserved for issuance (which includes 14,287,896 shares reserved for the Aggregate Share Cap). This leaves only approximately 58,540,783 shares of common stock available for issuance. In addition, if Proposal 2 is approved by the stockholders, the Company will need to reserve additional shares of common stock issuable upon exchange of the Notes, further reducing the number of shares available for future issuance. As a result, the Company may not have a sufficient number of authorized shares available for issuance in the future for capital raising activities, acquisitions, share splits and other general corporate purposes.
The Board of Directors believes that it is in the best interests of the Company to increase the number of authorized shares of common stock. The increase in authorized shares will provide flexibility with respect to future transactions, including acquisitions of other businesses or properties where the Company would have the option to use its common stock as consideration (rather than cash), financing future growth, financing transactions, repayment of debt, providing equity incentives to employees, officers and directors and other general corporate purposes. The additional shares will enable the Company to act quickly as opportunities arise and avoid the time consuming and costly need to hold a special meeting of stockholders in every case. The Board of Directors believes that, in the future, occasions may arise where the time required to obtain stockholder approval might adversely delay the Company’s ability to enter into a desirable transaction or deny it the flexibility to facilitate the effective use of its securities. Therefore, the failure to approve the Proposal could, in effect, prevent the Company from continuing the pursuit of effective strategies to access capital in the public and private markets. Authorized but unissued shares of common stock may be used by the Company from time to time as appropriate and opportune situations arise.
Stockholders of the Company will not have any preemptive rights with respect to the additional shares being authorized. No further approval by stockholders would be necessary prior to the issuance of any additional shares of common stock, except as may be required by law or applicable NYSE rules. In certain circumstances, generally relating to the number of shares to be issued and the identity of the recipient, the rules of the NYSE require stockholder authorization in connection with the issuance of such additional shares. Subject to Maryland law and the rules of the New York Stock Exchange, the Board of Directors has the sole discretion to issue additional shares of common stock for such consideration as may be determined by the Board of Directors. The issuance of any additional shares of common stock may have the effect of diluting the percentage of stock ownership of present stockholders of the Company.
The Company has not proposed the increase to its authorized common stock with the intention of using the additional shares for anti-takeover purposes, although the Company could theoretically use the additional stock in the future to make it more difficult or to discourage an attempt to acquire control of the Company. As of this date, the Company is unaware of any pending or threatened effort to acquire control of the Company. Further, the submission of this Proposal is not part of any plan by the Board of Directors to engage in any transaction that would require the proposed increase.
If this Proposal is approved by the stockholders, the Company’s current charter will be amended to provide that the Company has the authority to issue up to 250,000,000 shares of capital stock, consisting of 200,000,000 shares of common stock, 25,000,000 shares of preferred stock and 25,000,000 shares of excess stock, each with a par value $0.001 per share. The Proposal does not change the number of authorized shares of preferred stock or excess stock.
The full text of the proposed amendment is attached hereto as Appendix A. If the stockholders approve the Proposal, the Articles of Amendment will be filed with the State Department of Assessments and Taxation
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of Maryland (the “SDAT”) and the amendment of the Company’s charter as described above will be effective upon the acceptance for record of the Articles of Amendment by the SDAT.
Vote Required
The affirmative vote of the holders of record of two-thirds of all votes entitled to be cast is necessary to approve the amendment of the charter increasing to 200,000,000 the number of shares of common stock the Company is authorized to issue.
Our Board of Directors unanimously recommends a vote “FOR” approval of the amendment of the charter increasing to 200,000,000 the number of shares of common stock the Company is authorized to issue.
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PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Our Audit Committee has selected the accounting firm of Ernst & Young LLP to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2014, subject to ratification of this appointment by our common stockholders. Stockholder ratification of the appointment of Ernst & Young LLP is not required by law, the NYSE or our organizational documents. However, as a matter of good corporate governance, our Board of Directors has elected to submit the appointment of Ernst & Young LLP to our common stockholders for ratification at the 2014 annual meeting. If our common stockholders fail to ratify the appointment of Ernst & Young LLP, our Audit Committee will reconsider the matter, taking into consideration the common stockholder vote on the ratification and the advisability of appointing a new independent registered public accounting firm prior to the completion of the 2014 audit and may decide to retain Ernst & Young LLP notwithstanding the vote. Ernst & Young LLP has served as our independent registered public accounting firm since our formation in April 2004 and is considered by our management to be well-qualified. Ernst & Young LLP has advised us that neither it nor any member thereof has any financial interest, direct or indirect, in us or any of our subsidiaries in any capacity.
A representative of Ernst & Young LLP will be present at the annual meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.
Fee Disclosure
Audit Fees
Fees for audit services totaled approximately $884,500 in 2013 and $1,849,098 in 2012, of which $108,000 and $145,000 was attributable to Sarbanes-Oxley 404 planning and testing in 2013 and 2012, respectively. Audit fees include fees associated with our annual audit and the reviews of our quarterly reports on Form 10-Q. In addition, audit fees include fees for services relating to other reporting requirements including those related to our acquisition, disposition and capital-raising activities. Audit fees also include fees for accounting research.
Audit-Related Fees
Fees for audit-related services totaled approximately $220,000 in 2013 and $10,000 in 2012. The audit-related services for 2013 principally included fees for comfort letters and consents in connection with our acquisition and capital-raising activities.
Tax Fees
Fees for tax compliance, tax advice and tax planning totaled approximately $153,500 in 2013 and $207,500 in 2012.
All Other Fees
We did not incur fees in 2013 and 2012 for other services not included above.
Our Audit Committee considers whether the provision by Ernst & Young LLP of the services that are required to be described under “All Other Fees” is compatible with maintaining Ernst & Young LLP’s independence from both management and our company.
Pre-Approval Policies and Procedures of Our Audit Committee
Our Audit Committee must pre-approve all audit services and permissible non-audit services provided by our independent registered public accounting firm, except for any de minimis non-audit services. Non-audit services are considered de minimis if: (1) the aggregate amount of all such non-audit services constitutes less than 5% of the total amount of revenues we paid to our independent registered public accounting firm during the fiscal year in which they are provided; (2) we did not recognize such services at the time of the engagement to be non-audit services; and (3) such services are promptly brought to our Audit Committee’s attention and approved prior to the completion of the audit by our Audit Committee or any of its member(s)
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who has authority to give such approval. Our Audit Committee may delegate to one or more of its members who is an independent director the authority to grant pre-approvals. All services provided by Ernst & Young LLP in 2013 were pre-approved by our Audit Committee.
Our Board of Directors unanimously recommends a vote “FOR” the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014.
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PROPOSAL 5: RESOLUTION TO APPROVE, ON AN ADVISORY BASIS,
THE COMPENSATION OF NAMED EXECUTIVE OFFICERS
As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are providing our common stockholders with the opportunity to vote to approve, on an advisory basis, the compensation of our named executive officers as disclosed in accordance with SEC rules in this proxy statement. This proposal is commonly known as a “Say-On-Pay” proposal. The compensation of our named executive officers as disclosed in this proxy statement includes the disclosures under “Executive Compensation — Compensation Discussion and Analysis,” the compensation tables and other narrative executive compensation disclosure in this proxy statement, as required by SEC rules.
In considering their vote, we encourage common stockholders to carefully review the information presented on our compensation policies and decisions regarding our executive officers, as disclosed in detail in this proxy statement under “Executive Compensation.” Our Board of Directors believes that our long-term success depends in large measure on the talents of our employees and, as described below under “Executive Compensation — Compensation Discussion and Analysis,” we, through our executive compensation programs, seek to maintain a total compensation package that provides fair, reasonable and competitive compensation for our executives while allowing us the flexibility to differentiate actual pay based on individual and organizational performance. Our Compensation Committee has designed our compensation program to (i) attract and retain talented individuals capable of performing at a high level in a market that remains highly competitive and who have the motivation, experience and skills necessary to lead our company effectively, (ii) provide performance-based compensation that creates a strong alignment of management and stockholder interest to create long-term stockholder value, (iii) motivate our executives to manage our business to meet and appropriately balance our short- and long-term objectives, (iv) hold executives accountable for their level of success in attaining specific goals set for them individually, (v) maintain flexibility and discretion to allow us to recognize the unique characteristics of our operations and strategy, and our prevailing business environment, as well as changing labor market dynamics, and (vi) achieve an appropriate risk-reward balance in our compensation programs that does not incentivize unnecessary or excessive risk taking.
Our Board of Directors has determined that the best way to allow common stockholders to vote on the compensation of our named executive officers is through the following resolution:
RESOLVED, that the common stockholders of Gramercy Property Trust Inc. (the “Company”) advise that they approve, on an advisory basis, the compensation of the Company’s named executive officers as disclosed in accordance with Securities and Exchange Commission rules in the Company’s proxy statement for the Company’s 2014 annual meeting of stockholders, including the disclosure under “Compensation Discussion and Analysis,” the compensation tables and other narrative executive compensation disclosure in the proxy statement relating to the Company’s 2014 annual meeting of stockholders.
This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers as disclosed in accordance with SEC rules in this proxy statement. Although this vote is advisory, our Board of Directors and the Compensation Committee value the opinions of our common stockholders and will consider the voting results as an additional tool to guide it when making future decisions regarding compensation of our named executive officers.
Our Board of Directors unanimously recommends a vote “FOR” the approval, on an advisory basis, of the compensation of our named executive officers as disclosed in accordance with SEC rules in this proxy statement, including the disclosure under “Compensation Discussion and Analysis,” the compensation tables and other narrative executive compensation disclosure in this proxy statement.
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AUDIT COMMITTEE REPORT
The following is a report by the Audit Committee of the Board of Directors of Gramercy Property Trust Inc. (the “Audit Committee”) regarding the responsibilities and functions of the Audit Committee. This report shall not be deemed to be incorporated by reference in any previous or future documents filed by us with the SEC) under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate this report by reference in any such document.
The Audit Committee oversees our financial reporting process on behalf of our Board of Directors, in accordance with the written charter of the Audit Committee. Management has the primary responsibility for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report on Form 10-K for the year ended December 31, 2013 with management, including discussions regarding critical accounting policies, other financial accounting and reporting principles and practices appropriate for us, the quality of such principles and practices, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Audit Committee reviewed and discussed with Ernst & Young LLP, our independent registered public accounting firm, who is responsible for auditing our financial statements and for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee under Statement on Auditing Standards No. 61, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee received the written disclosure and the letter from Ernst & Young LLP required by the Independence Standards Board Standard No. 1, as currently in effect, discussed with Ernst & Young LLP, their independence from both management and our company and considered the compatibility of Ernst & Young LLP’s provision of non-audit services to our company with their independence.
The Audit Committee discussed with Ernst & Young LLP the overall scope and plans for their audit. The Audit Committee met with Ernst & Young LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting, including off-balance sheet investments, and our compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to our Board of Directors (and our Board of Directors has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2013 for filing with the SEC.
Our Board of Directors has determined that each member of the Audit Committee is financially literate and has accounting or related financial management expertise, as such qualifications are defined under the rules of the NYSE. It also has determined that the Audit Committee has at least one “audit committee financial expert,” as defined in Item 407(d)(5) of SEC Regulation S-K, such expert being Mr. Gregory F. Hughes, and that he is “independent,” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.
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The Audit Committee held five meetings during fiscal year 2013 (including non-management director sessions after certain of these meetings) attended by each director then serving on the Audit Committee. The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting. The committee members rely, without independent investigation or verification, on the information provided to them and on the representations made by management and our independent registered public accounting firm. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s considerations and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with the standards of the Public Company Accounting Oversight Board (United States), that the financial statements are presented in accordance with accounting principles generally accepted in the United States or that Ernst & Young LLP is in fact “independent.”
Submitted by the Audit Committee
Gregory F. Hughes
Allan J. Baum
Charles S. Laven
April 29, 2014
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CORPORATE GOVERNANCE MATTERS
This section contains information about a variety of our corporate governance policies and practices. In this section, you will find information about how we are complying with the NYSE’s corporate governance rules that were approved by the SEC. We are committed to operating our business under strong and accountable corporate governance practices. Our Board of Directors reviews these guidelines and other aspects of our corporate governance periodically. You are encouraged to visit the corporate governance section of the “Investor Relations — Corporate Governance” page of our corporate website at www.gptreit.com to view or to obtain copies of our committee charters, code of business conduct and ethics, corporate governance principles and director independence standards. The information found on, or accessible through, our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document we file with or furnish to the SEC. You may also obtain, free of charge, a copy of the respective charters of our committees, code of business conduct and ethics, corporate governance principles and director independence standards by directing your request in writing to Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175-0003, Attention: Investor Relations. Additional information relating to the corporate governance of our company is also included in other sections of this proxy statement.
Corporate Governance Guidelines
Our Board of Directors has adopted Corporate Governance Guidelines that address significant issues of corporate governance and set forth procedures by which our Board of Directors carries out its responsibilities. Among the areas addressed by the Corporate Governance Guidelines are director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession, annual performance evaluation of our Board of Directors, management responsibilities and meeting procedures. These guidelines meet or exceed the listing standards adopted by the NYSE, on which our common stock is listed. Our Nominating and Corporate Governance Committee is responsible for assessing and periodically reviewing the adequacy of the Corporate Governance Guidelines and will recommend, as appropriate, proposed changes to our Board of Directors.
Board of Directors Leadership Structure
Our Board of Directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide independent oversight of management. It understands that there is no single, generally accepted approach to providing board leadership and that given the dynamic and competitive environment in which we operate, the right board leadership structure may vary as circumstances warrant.
Our Board of Directors consists of a majority of independent and non-executive directors and our Board of Directors has appointed Mr. Baum as Chairman, effective January 16, 2014, to coordinate the activities of our Board of Directors and to assure effective corporate governance in managing the affairs of our Board of Directors and us. Mr. Baum had been our lead independent director since 2012. These independent and non-executive directors, under the leadership and coordination of the Chairman, meet regularly in executive session without the presence of management or interested directors in order to promote discussion among the independent and non-executive directors and to assure independent oversight of management. Our Chairman (i) presides at all meetings of the independent directors and any Board of Directors meeting when the Chief Executive Officer is not present, including executive sessions of the independent and non-executive directors, (ii) approves and informs the Chief Executive Officer as to the quality and timeliness of information sent to our Board of Directors and the appropriateness of meeting agenda items, (iii) serves as the primary liaison between the independent and non-executive directors and the Chief Executive Officer, (iv) holds a principal role in the evaluation of our Board of Directors and the evaluation of the Chief Executive Officer, (v) recommends to our Board of Directors and its committees the hiring and retention of any consultants that report directly to our Board of Directors, (vi) responds directly to stockholder questions or inquiries directed to the Chairman or the independent and non-executive directors as a group, (vii) upon request and when appropriate, ensures he is available for direct communication with major stockholders, and (viii) performs other duties as our Board of Directors may from time to time delegate. In addition, our Board committees, which oversee critical matters such as the integrity of our financial statements, the compensation of executive management, and the development and implementation of corporate governance policies, each consist entirely
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of independent directors. Therefore, our Board of Directors believes that its majority independent composition and the strength of our independent and non-executive directors, under the leadership and coordination of the Chairman, provide effective corporate governance at our Board of Directors level and independent oversight of both our Board of Directors and our executive officers. The current leadership structure, when combined with the functioning of the independent and non-executive director component of our Board of Directors and our overall corporate governance structure, strikes an appropriate balance between strong and consistent leadership and independent oversight of our business and affairs. As part of its annual self-assessment, our Board of Directors will consider whether the current leadership structure continues to be optimal for us and our stockholders.
Board of Directors’ Role in Risk Oversight
Our Board of Directors is responsible for the oversight of our risk management. Our Board of Directors is involved in risk oversight through direct decision-making authority with respect to significant matters and the oversight of management by our Board of Directors and its committees. In particular, our Board of Directors administers its risk oversight function through (i) the review and discussion of regular periodic reports to our Board of Directors and its committees on topics relating to the risks that we face, including, among others, market conditions, tenant/borrower concentrations and credit worthiness, leasing activity and expirations, loan defaults and maturities, liquidity, compliance with debt covenants, management of debt maturities, access to debt and equity capital markets, existing and potential legal claims against us and various other legal, regulatory, accounting, and strategic matters relating to our business, (ii) the required approval by our Board of Directors (or a committee thereof) of significant transactions and other decisions, including, among others, acquisitions and dispositions of properties, originations and acquisitions of loans, new borrowings and the appointment and retention of our senior management, (iii) the direct oversight of specific areas of our business by the Compensation, Audit and Nominating and Corporate Governance Committees, and (iv) regular periodic reports from our auditors and other outside consultants regarding various areas of potential risk, including, among others, those relating to our qualification as a REIT for tax purposes and our internal control over financial reporting. Our Board of Directors also relies on management to bring significant matters impacting us to its attention.
Our Board of Directors oversees and monitors our risk management framework and actively reviews risks that may be material to us. As part of this oversight process, our Board of Directors regularly receives reports from management on areas of material risk to us. Our Board of Directors receives these reports from the appropriate sources within our company to enable it to understand our risk identification, risk management and risk mitigation strategies. To the extent applicable, our Board of Directors and its committees coordinate their risk oversight roles. Our Board of Directors recognizes that it is not possible to identify all of the risks that may affect us or to develop processes and controls to eliminate or mitigate their occurrence or effects. As part of its regular oversight of us, our Board of Directors interacts with and reviews reports from, among others, our executive officers, our chief compliance officer, our independent registered public accounting firm, our outside corporate counsel, our compensation consultant and a variety of other financial and other advisors, as appropriate, regarding risks faced by us and applicable risk controls. Our Board of Directors may, at any time and in its discretion, change the manner in which they conduct risk oversight. The goal of these processes is to achieve serious and thoughtful board-level attention to our risk management process and framework, the nature of the material risks we face and the adequacy of our risk management process and framework designed to respond to and mitigate these risks.
Director Independence
Our Corporate Governance Guidelines provide that a majority of the directors serving on our Board of Directors must be independent as required by the listing standards of the NYSE and the applicable rules promulgated by the SEC. In addition, our Board of Directors has adopted director independence standards, which are certain additional categorical standards to assist in making determinations with respect to the independence of directors. Our Board of Directors has affirmatively determined, based upon its review of all relevant facts and circumstances and after considering all applicable relationships, of which our Board of Directors had knowledge, between or among the directors and our company or our management (any such relationships, if any, are described in the section entitled “Certain Relationships and Related Transactions”), that each of the following directors and director nominees has no direct or indirect material relationship with
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us and is independent under the listing standards of the NYSE, the applicable rules promulgated by the SEC and our director independence standards: Messrs. Allan J. Baum, Jeffrey E. Kelter, Gregory F. Hughes, Charles S. Laven and William H. Lenehan.
Code of Business Conduct and Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics as required by the listing standards of the NYSE that applies to our directors and executive officers and our employees. The Code of Business Conduct and Ethics was designed to assist our directors and executive officers and our employees in complying with the law, in resolving moral and ethical issues that may arise and in complying with our policies and procedures. Among the areas addressed by the Code of Business Conduct and Ethics are compliance with applicable laws, conflicts of interest, use and protection of our company’s assets, confidentiality, communications with the public, accounting matters, records retention, fair dealing, discrimination and harassment and health and safety. A copy of the Code of Business Conduct and Ethics is accessible, free of charge at our website, www.gptreit.com. If we grant waivers from or make amendments to the Code of Business Conduct and Ethics that are required to be disclosed pursuant to the Exchange Act or applicable listing requirements, we will make those disclosures on our website within four business days following the date of such waiver or amendment.
Audit Committee Financial Expert
Our Board of Directors has determined that our Audit Committee has at least one “audit committee financial expert,” as defined in Item 407(d)(5) of SEC Regulation S-K, such expert being Gregory F. Hughes, and that he is “independent,” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act. Our Board of Directors has determined that Mr. Hughes is an “audit committee financial expert” as defined in rules promulgated by the SEC under the Sarbanes-Oxley Act of 2002, as amended.
Communications with Our Board of Directors
We have a process by which stockholders and/or other parties may communicate with our Board of Directors, our Chairman, our independent and non-executive directors as a group or our individual directors (including the independent and non-executive directors). Any such communications may be sent to our Board of Directors, our Chairman or any named individual director (including the independent and non-executive directors), by U.S. mail or overnight delivery and should be directed to the Secretary at Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175-0003, who will forward such communications on to the intended recipient or recipients. Our General Counsel will review each communication received in accordance with this process to determine whether the communication requires immediate action. These officers will forward all appropriate communications received, or a summary of such communications, to the appropriate member(s) of our Board of Directors. However, we reserve the right to disregard any communication that our General Counsel determine is unduly hostile, threatening or illegal, does not reasonably relate to us or our business, or is similarly inappropriate. These officers have the authority to disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. Any such communications may be made anonymously.
Whistleblowing and Whistleblower Protection Policy
Our Audit Committee has established procedures for (1) the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and (2) the confidential and anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. If you wish to contact our Audit Committee to report complaints or concerns relating to our financial reporting, you may do so in writing to the Chairman of our Audit Committee, c/o Secretary, Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175-0003. Any such communications may be made anonymously.
Director Attendance at Annual Meetings
We encourage members of our Board of Directors to attend each annual meeting of stockholders. Messrs. Baum, DuGan and Laven attended our annual meeting of stockholders held on June 25, 2013.
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Identification of Director Candidates
Our Nominating and Corporate Governance Committee assists our Board of Directors in identifying and reviewing director candidates to determine whether they qualify for membership on our Board of Directors and for recommending to our Board of Directors the director nominees to be considered for election at our annual meetings of stockholders.
Each director candidate must have (i) education and experience that provides knowledge of business, financial, governmental or legal matters that are relevant to our business or to our status as a publicly-owned company, (ii) a reputation for integrity, (iii) a reputation for exercising good business judgment and (iv) sufficient available time to be able to fulfill his or her responsibilities as a member of our Board of Directors and of any committees to which he or she may be appointed.
In making recommendations to our Board of Directors, our Nominating and Corporate Governance Committee considers such factors as it deems appropriate. These factors may include judgment, skill, diversity, education, experience with businesses and other organizations comparable to our company, the interplay of the candidate’s experience with the experience of other Board members, the candidate’s industry knowledge and experience, the ability of a nominee to devote sufficient time to our affairs, any actual or potential conflicts of interest and the extent to which the candidate generally would be a desirable addition to our Board of Directors and any of its committees. Attributes that our Nominating and Corporate Governance Committee consider include: (i) prior experience on our Board of Directors and other relevant board level experience; (ii) real estate industry experience; (iii) transactional experience, especially within the real estate industry; (iv) relevant experience in property operations; (v) financial expertise; (vi) legal and/or regulatory experience; (vii) knowledge of and experience with corporate governance matters; (viii) experience with executive compensation matters; and (ix) prior experience in risk management.
While we do not have a formal written diversity policy, our Nominating and Corporate Governance Committee considers diversity of race, ethnicity, gender, age, cultural background, professional experiences and expertise and education in evaluating director candidates for Board membership. We believe that considerations of diversity are, and will continue to be, an important component relating to the composition of our Board of Directors as multiple and varied points of view contribute to a more effective decision-making process.
When considering current directors for re-nomination to our Board of Directors, our Nominating and Corporate Governance Committee takes into account the performance of each director. Our Nominating and Corporate Governance committee also reviews the composition of our Board of Directors in light of the current challenges and needs of our Board of Directors and us, and determines whether it may be appropriate to add or remove individuals after considering, among other things, the need for audit committee expertise and issues of independence, judgment, age, skills, background and experience.
Our Nominating and Corporate Governance Committee may solicit and consider suggestions of our directors or management regarding possible nominees. Our Nominating and Corporate Governance Committee may also procure the services of outside sources or third parties to assist in the identification of director candidates.
Our Nominating and Corporate Governance Committee may consider director candidates recommended by our stockholders. Our Nominating and Corporate Governance Committee will apply the same standards in considering candidates submitted by stockholders as it does in evaluating candidates submitted by members of our Board of Directors. Any recommendations by stockholders should follow the procedures outlined under “Stockholder Proposals” in the 2014 Proxy Statement and should also provide the reasons supporting a candidate’s recommendation, the candidate’s qualifications and the candidate’s written consent to being considered as a director nominee. No director candidates were recommended by holders of our common stock for election at the 2014 annual meeting.
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Executive Sessions of Independent and Non-Executive Directors
In accordance with the Corporate Governance Guidelines, the independent and non-executive directors serving on our Board of Directors generally meet in executive session after each regularly scheduled meeting of our Board of Directors or our Audit Committee without the presence of any directors or other persons who are part of our management. The executive sessions regularly are chaired by our Chairman of the Board.
Disclosure Committee
We maintain a Disclosure Committee consisting of members of our executive management and senior staff. The purpose of the Disclosure Committee is to oversee our system of disclosure controls, assist and advise the Chief Executive Officer and Chief Financial Officer in making the required certifications in SEC reports and evaluate our company’s internal control function. The Disclosure Committee was established to bring together on a regular basis representatives from our core business lines and employees involved in the preparation of our financial statements to discuss any issues or matters of which the members are aware that should be considered for disclosure in our public SEC filings. The Disclosure Committee reports to our Chief Executive Officer and, as appropriate, to our Audit Committee. The Disclosure Committee meets quarterly and otherwise as needed.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to, and earned by, our named executive officers and places in perspective the data presented in the tables and narrative that follow.
Throughout this proxy statement, the individuals who served as our Chief Executive Officer, President, Chief Financial Officer, and Executive Vice President and General Counsel during our 2013 fiscal year are referred to as the “named executive officers,” or our “executives.”
Overview
Summary of Actions Taken During 2013
During 2013, we took the following actions related to our executive compensation and corporate governance policies:
| • | conducted a shareholder outreach program to solicit reactions to our executive compensation program; |
| • | adopted annual procedures to identify individual and corporate annual performance metrics to be used by our Compensation Committee to measure and quantify executive performance when determining annual incentive compensation bonuses; |
| • | adopted a policy to prohibit directors and officers from hedging, pledging and margining their shares of company stock; |
| • | adopted stock ownership guidelines for our chief executive officer and other executive officers based on a multiple of base salary; |
| • | adopted a stock ownership guidelines for our non-employee directors based on multiples of the annual cash retainer for our non-employee directors; and |
| • | adopted a majority voting policy in the election of directors. |
Our common stock experienced an increase of approximately 89% in 2013 and our common stock’s total shareholder return (“TSR”) was approximately 130% and 106% during the respective two and three year periods ended December 31, 2013. A chart illustrating our common stock’s TSR compared to the performance of Standard & Poor’s 500 Composite Index and the NAREIT All REIT index for a five year period, is presented below. This chart assumes $100 invested on January 1, 2008 and assumes the reinvestment of dividends.
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![[GRAPHIC MISSING]](v374823_chrt-lines.jpg)
In March 2014, we resumed payment of a dividend to our common stockholders after a hiatus of more than five years by declaring a quarterly dividend of $0.035 per common share for the first quarter of 2014. We also declared and paid a first quarter 2014 dividend to our Series A Preferred stockholders. In January 2014, we paid in full the accrued and unpaid dividends on our Series A Preferred Stock and began the timely payment of the quarterly preferred dividends beginning with the dividend due January 15, 2014.
Objectives of Our Compensation Program
As a fully-integrated, self-managed commercial real estate investment and asset management company, we operate in a highly competitive market. We seek to maintain a total compensation package that provides fair, reasonable and competitive compensation for our executives, while allowing us the flexibility to differentiate actual pay based on individual and organizational performance.
Our Compensation Committee, in consultation with our Chief Executive Officer and external compensation consultant, sets our compensation philosophy, which has been structured to achieve the following objectives:
| • | to attract and retain talented individuals capable of performing at a high level in a market that remains highly competitive and who have the motivation, experience and skills necessary to lead us effectively; |
| • | to provide performance-based compensation that creates a strong alignment of management and stockholder interest to create long-term stockholder value; |
| • | to motivate our executives to manage our business to meet and appropriately balance our short- and long-term objectives; |
| • | to hold executives accountable for their level of success in attaining specific goals set for them individually; |
| • | to maintain flexibility and discretion to allow us to recognize the unique characteristics of our operations and strategy, and our prevailing business environment, as well as changing labor market dynamics; and |
| • | to achieve an appropriate risk-reward balance in our compensation programs that does not incentivize unnecessary or excessive risk taking. |
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Based on these objectives, we place significant emphasis on annual and long-term performance-based incentive compensation, including base salaries, annual cash and equity incentives and long-term equity-based incentive awards, which are designed to reward our executives based on the achievement of predetermined company and individual goals.
Our Compensation Committee is committed to the ongoing review and evaluation of the executive officer compensation levels and program. It is our Compensation Committee’s view that compensation decisions are complex and best made after a deliberate review of company and individual performance, as well as industry compensation levels. Consistent with this view, our Compensation Committee annually assesses our performance within the context of the industry’s overall performance and internal performance standards and evaluates individual executive officer performance relative to the performance expectations for their respective position and role within our company. In addition, our Compensation Committee benchmarks from time to time the total compensation provided to our executive officers to industry-based compensation practices. While it is our Compensation Committee’s goal to provide compensation opportunities that reflect company and individual performance and that are competitive within industry standards, a specific target market position for executive officer pay levels has not been established.
Setting Executive Compensation
Our Compensation Committee determines compensation for our named executive officers and is comprised of three independent directors: Jeffrey E. Kelter (Chairman), Allan J. Baum and Charles S. Laven. Our Compensation Committee exercises independent discretion in respect of executive compensation matters and administers our 2004 Equity Incentive Plan and our 2012 Inducement Equity Incentive Plan (including reviewing and approving equity grants to our executives pursuant to these plans). Our Compensation Committee operates under a written charter adopted by our Board of Directors, a copy of which is available on our website at www.gptreit.com.
Our Compensation Committee has retained FTI Consulting, Inc. (“FTI”), an outside compensation consulting firm, to assist it in evaluating, formulating and benchmarking our compensation programs. FTI provides our Compensation Committee and Chief Executive Officer with relevant market data concerning the marketplace, our peer group and other compensation developments. FTI participates in our Compensation Committee meetings and meets with our named executive officers and certain of our directors. Our Compensation Committee has the authority to replace FTI or hire additional consultants at any time. It is important to understand that the compensation market data and ranges provide only a reference point for our Compensation Committee. Depending upon our business and individual performance results, a named executive officer’s total direct compensation may be within, below or above the market range for that position. FTI also provides additional professional services, including financial outsourcing and tax consulting services, to us and receives market-based compensation with respect to these services. In 2013, we paid approximately $15,891 to FTI in connection with such non-compensation based services.
Our Compensation Committee determines the total compensation and the allocation of such compensation among base salary, annual incentive awards and long-term incentive compensation as well as allocation of such items among cash and equity compensation for our Chief Executive Officer. With respect to the compensation of other named executive officers, our Compensation Committee solicits recommendations from our Chief Executive Officer regarding compensation and reviews his recommendations. We do not have a pre-established policy for the allocation between either cash and non-cash compensation or annual and long-term incentive compensation.
Our Compensation Committee met four times during 2013 to evaluate executive performance and to monitor market conditions in light of these goals and objectives, to solicit input from the compensation consultant on market practices and new developments and to review our compensation practices. During this decision making process, our Compensation Committee reviews tally sheets that detail each executive officer’s compensation history. The tally sheets help our Compensation Committee to track changes in an executive officer’s total direct compensation from year to year and to remain aware of the compensation historically paid to each executive officer. Ultimately, we rely upon our judgment about each of our named executive officers and not on formulas or short-term changes in business performance or our stock price. The key factors affecting our judgment are TSR, change in earnings and funds from operations, actual performance against the
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financial, operational and strategic goals we set at the beginning of the year, the nature and level of responsibility of each executive officer and the integrity and effort with which such executive officer conducts his responsibilities. Our Compensation Committee regularly reports to our Board of Directors.
What Our Compensation Program is Designed to Reward
Our Compensation Committee has designed our compensation program to (i) attract and retain talented individuals capable of performing at a high level in a market that remains highly competitive and who have the motivation, experience and skills necessary to lead our company effectively, (ii) provide performance-based compensation that creates a strong alignment of management and stockholder interest to create long-term stockholder value, (iii) motivate our executives to manage our business to meet and appropriately balance our short- and long-term objectives, (iv) hold executives accountable for their level of success in attaining specific goals set for them individually, (v) maintain flexibility and discretion to allow us to recognize the unique characteristics of our operations and strategy, and our prevailing business environment, as well as changing labor market dynamics, and (vi) achieve an appropriate risk-reward balance in our compensation programs that does not incentivize unnecessary or excessive risk taking. We expect to perform at the highest levels of the equity real estate investment trust (“REIT”) sectors. Our Compensation Committee rewards the achievement of our and the individual executive’s specific annual, long-term and strategic goals. Our Compensation Committee measures performance on an absolute basis against financial and other measures and on relative basis by comparing our performance against other equity REITs generally and against the REIT industries specifically. Comparative performance is an important metric since market conditions may affect the ability to meet specific performance criteria.
Role of Executive Officers in Compensation Decisions
Our Chief Executive Officer annually reviews the performance of each of the other named executive officers. He also considers the recommendations of the compensation consultant. Based on this review and input, our Chief Executive Officer makes compensation recommendations to our Compensation Committee for all named executive officers other than himself, including recommendations for performance targets, base salary adjustments, the discretionary components of our short-term cash incentive compensation, and long-term equity-based incentive awards. Our Compensation Committee considers these recommendations along with data and input provided by its other advisors. Our Compensation Committee retains full discretion to set all compensation for the named executive officers.
2013 Advisory Vote to Approve Executive Compensation
At our 2013 annual meeting of stockholders, which we held in June 2013, the advisory vote to approve executive compensation received the favorable support of our stockholders (approximately 90.03% of votes cast). Our Compensation Committee has interpreted this vote to mean that our stockholders were generally supportive of our executive compensation philosophy and programs, particularly as it relates to the compensation packages we granted in June 2012 to our new management team, which are heavily weighted with performance-based incentives.
Our Compensation Committee values the opinions of our common stockholders. During 2013 we took the following actions related to our executive compensation and corporate governance policies:
| • | conducted a shareholder outreach program to solicit reactions to our executive compensation program and corporate governance policies; |
| • | adopted a policy to prohibit directors and officers from hedging, pledging and margining their shares of company stock; |
| • | adopted stock ownership guidelines for our chief executive officer to be based on a multiple of base salary; |
| • | adopted stock ownership guidelines for our non-employee directors to be based on multiples of the annual retainer for our non-employee directors; and |
| • | adopted a majority voting policy in the election of directors. |
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Additionally, in April 2013 our Chief Executive Officer, Gordon F. DuGan, unilaterally and unconditionally waived his right to receive payment of the $200,000 balance of his 2012 signing bonus.
Measuring 2013 Performance
Gramercy was founded in 2004 as a specialty finance REIT focused on originating and acquiring loans and securities related to commercial and multifamily properties. In July 2012, following a strategic review, our Board announced a repositioning of Gramercy as an equity REIT focused on acquiring and managing income producing net leased real estate. To reflect this transformation, in April 2013 we changed our name from Gramercy Capital Corp. to Gramercy Property Trust Inc. and changed our ticker symbol to “GPT” on the New York Stock Exchange.
Company Repositioning Milestones
We have achieved a number of important milestones during 2013:
Sold Specialty Finance Business/Assets and Reduced Costs
| • | In March 2013, we sold our collateral management and sub-special servicing contracts for our three collateralized debt obligations, or CDOs, disposed of certain non-core legacy assets and exited the commercial real estate finance business; and, |
| • | We downsized our New York City headquarters office, closed one satellite property management office, reduced employee headcount, rebid our professional consulting and insurance contracts and reduced annual run rate management, general and administrative expenses, or MG&A expenses. |
Raised Capital and Repaid Accrued Preferred Stock Dividends
| • | In September 2013, we entered into a $100.0 million senior secured credit facility which was increased to $150.0 million in February 2014; |
| • | In October 2013, we issued and sold 11.5 million shares of our common stock in a private placement at a price of $4.11 per share, resulting in total net proceeds to us of approximately $45.5 million; |
| • | In December 2013, our Board declared, and in January 2014 we paid in full, the accrued and unpaid dividends on our Series A Cumulative Redeemable Preferred Stock, or Series A Preferred Stock, and began the timely payment of quarterly preferred dividends thereon beginning with the dividend due January 15, 2014, positioning us to re-commence dividends on our common stock; |
| • | Our Board declared a quarterly dividend, after a hiatus of more than five years, of $0.035 per share of common stock for the first quarter of 2014, payable on April 15, 2014 to holders of record as of the close of business on March 31, 2014; and |
| • | In March 2014, we completed a private offering of $115.0 million aggregate principal amount of the Operating Partnership’s 3.75% Exchangeable Senior Notes due 2019. The notes have an initial exchange price of approximately $6.20 per share of our common stock, exchangeable, under certain circumstances, for cash, for shares of our common stock or for a combination of cash and shares of the our common stock. The notes may be redeemed by us, in certain circumstances, on or after March 20, 2017. |
Assembled a High-Quality Net Leased Portfolio
As of December 31, 2013, we have acquired, directly or through joint ventures, a portfolio that consists of 107 industrial, office and specialty properties totaling approximately 7.8 million square feet. As of December 31, 2013, our portfolio has the following characteristics:
| • | 99.1% occupancy; |
| • | a weighted average remaining lease term of 11.7 years (based on annualized base rent); |
| • | 53.5% investment grade tenancy (includes subsidiaries of non-guarantor investment grade parent companies) (based on annualized base rent); |
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| • | Industrial portfolio comprised of 4.2 million aggregate rentable square feet with an average base rent per square foot of $5.33; |
| • | Office portfolio comprised of 3.4 million aggregate rentable square feet with an average base rent per square foot of $9.53 (including the properties we own through joint ventures); |
| • | Specialty asset portfolio of three improved sites comprised of 186 acres of land and 256 thousand aggregate rentable square feet of building space that we lease to a car auction services company, a bus depot and a rental car company; and |
| • | Top five tenants by annualized base rent include: Bank of America, N.A. or Bank of America, guaranteed by Bank of America Corp. (31%); Adesa Texas, Inc., guaranteed by KAR Holdings, Inc. (11%); EF Transit, Inc., guaranteed by Monarch Beverage Co., Inc. (6%); AMCOR Rigid Plastics USA, Inc., guaranteed by Amcor Limited (6%); and Preferred Freezer Services of Hialeah, LLC, guaranteed by Preferred Freezer Services, LLC (5%). Our lease with Preferred Freezer Services of Hialeah, LLC starts upon completion of construction of the facility currently expected in the second quarter of 2014. |
During the first quarter of 2014, we completed one acquisition:
| • | In February 2014, we acquired a 115 thousand square foot industrial property located in Des Plaines, Illinois for a purchase price of approximately $6.3 million. The property is leased to one tenant through October 2025. |
We did not make any equity award grants to our named executive officers in respect of their 2013 performance except for (i) the restricted stock and restricted stock unit grants made to our new management team under their employment contracts in June 2012 and (ii) restricted stock and restricted stock unit grants made to our Chief Financial Officer, Executive Vice President and General Counsel and certain other senior officers in March 2013. Seventy-five percent of all of these grants are subject to the achievement of performance based vesting hurdles over a five-year period. We also granted five-year performance-based LTIP units to our new management team in June 2012 and to our Chief Financial Officer, Executive Vice President and General Counsel and certain other senior officers on March 2013. For a more detailed description of these awards, see “— Employment and Noncompetition Agreements” below.
In addition, in May 2014, we made an equity award of 190,477 shares of restricted stock to our Chief Executive Officer, Gordon F. DuGan. The equity award was granted in recognition of Mr. DuGan’s exceptionally strong performance leading the Company in 2013, during which we achieved a number of important repositioning milestones, as reflected in the approximate 89% increase in the price of the Company’s common stock during 2013. The Compensation Committee approved the equity award to Mr. DuGan after consultation with FTI. For the purpose of retaining Mr. DuGan and rewarding him for a long-term commitment to the Company, the Compensation Committee structured the vesting schedule so that no shares vest until the fifth anniversary of the date of grant, at which time 100% of the shares of restricted stock vest, subject to Mr. DuGan’s continued employment. The shares of restricted stock are also subject to accelerated vesting in certain circumstances pursuant to Mr. DuGan's employment agreement.
Elements of Our Compensation Program and Why We Chose Each Element
Our executive compensation program has been structured to provide short- and long-term incentives that promote continuing improvements in our financial performance and return to our stockholders. The elements of our executive compensation are primarily comprised of three elements: annual base salary, annual incentive awards, which may include cash and equity bonuses, and long-term equity incentives:
Annual Base Salaries. Annual base salaries provide our named executive officers with a minimum level of compensation for services rendered during the fiscal year. For each of our named executive officers in 2013, annual base salaries were paid in accordance with the employment agreements between us and such named executive officers. Base salaries are reviewed annually, but are not automatically increased if we feel that incentive awards are more appropriate means of rewarding and incentivizing performance.
Annual Incentive Awards. Annual incentive awards are provided in the form of cash and equity bonuses designed to focus a named executive officer on achieving key corporate objectives (both individual and
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company-based), to motivate certain desired individual behaviors and to reward substantial achievement of these objectives and individual goals. While our Compensation Committee does not set fixed hurdles or “automatic triggers” that entitle our executive officers to formulaic bonuses, commencing in 2013, our Compensation Committee, in consultation with our Chief Executive Officer, did adopt specifically identified individual and corporate annual performance metrics to be used by our Compensation Committee to measure and quantify executive performance when determining annual incentive awards. For 2013, these metrics include, but are not limited to, (i) completion of identified corporate transactions, (ii) managing identified business units to specified levels of profitability, (iii) growing the company’s net operating income through the acquisition of net lease properties, (iv) achieving targeted reductions in our corporate management, general and administrative expenses, (v) achieving targeted adjusted FFO thresholds and (vi) achieving a targeted common stock equity capitalization for the company. Cash incentive bonuses and equity incentive awards are discretionary, thereby allowing for the opportunity for greater compensation when performance is superior and lower compensation when performance is less successful.
Long-Term Incentives. Long-term equity incentives have historically been provided to our named executive officers through the grant of restricted stock awards, stock options, LTIP Units or performance awards pursuant to our 2004 Equity Incentive Plan. The grant of equity awards links a named executive officer’s compensation and net worth directly to the performance of our stock price. This encourages our named executive officers to make decisions with an ownership mentality. The vesting provisions of these equity awards (generally two to four years) are designed to act as a retention device and to provide a strong incentive to the executives to increase stockholder value long after they performed the services in the year for which the equity awards were granted.
Our compensation program does not include any significant personal benefits or perquisites for our named executive officers beyond benefits offered to our employees generally. We do not maintain any retirement or pension plans for our named executive officers or other employees, other than our 401(k) plan that is available to our employees generally.
Our Compensation Committee has full authority to administer and interpret our 2004 Equity Incentive Plan and the 2012 Inducement Equity Incentive Plan, to authorize the granting of awards, to determine the eligibility of employees, directors, executive officers, advisors, consultants and other personnel, to determine the terms, provisions and conditions of each award, and to take any other actions and make all determinations that it deems necessary or appropriate in connection with our 2004 Equity Incentive Plan and the 2012 Inducement Equity Incentive Plan or the administration or interpretation thereof.
How Each Element and Our Decisions Regarding Each Element Fit Into Our Overall Compensation Objectives and Affect Decisions Regarding Other Elements
Our compensation program seeks to reward our named executive officers for superior performance, which is competitive with the compensation paid to named executive officers at other public REITs and other private commercial real estate investors in the New York City commercial real estate market, while closely aligning the interests of our named executive officers with the interests of our stockholders.
Our compensation structure for our Chief Executive Officer and President include (i) market-level base salaries, (ii) annual incentive compensation to be determined by the Compensation Committee in its sole discretion based upon the Compensation Committee’s determination of the executive’s level of accomplishment each year of identified individual and corporate goals and (iii) long-term incentive compensation in the form of restricted stock, restricted stock unit and LTIP unit grants. Significant elements of our Chief Executive Officer’s and President’s five-year employment contracts that were executed in June 2012 include the following:
| • | seventy-five percent of the equity awards granted to our new Chief Executive Officer and President are subject to the achievement of performance-based vesting hurdles based on absolute increases in our FFO or stock price during the five-year vesting period in addition to continued employment; |
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| • | the LTIP units granted to our new Chief Executive Officer and President require achievement of a minimum vesting hurdle of $5.00 per share (i.e., a 100% increase over our $2.50 per share price on June 29, 2012) and a maximum vesting hurdle of $9.00 per share (i.e., a 260% increase over our June 29, 2012 closing price) over the five-year term of the plan; |
| • | our Chief Executive Officer’s employment contract required him to purchase from us, and immediately prior to commencing as our Chief Executive Officer he did purchase, 1,000,000 shares of our common stock at market pricing using his personal funds without any reimbursement or other financial assistance from us; and |
| • | in April 2013, our Chief Executive Officer unilaterally and unconditionally waived his right to receive the $200,000 unpaid portion of his signing bonus to eliminate any notion that his compensation package included a “guaranteed” bonus component. |
Our Compensation Committee believes that the compensation packages granted to our new management team are competitive and comprehensive and that they create a strong alignment of management and stockholder interests.
Following the new management team’s completion of its strategic review of our legacy assets and operations, and our Board’s implementation of the decision to exit the real estate finance business, our Compensation Committee, in consultation with our Chief Executive Officer and the Compensation Committee’s external compensation consultant, expanded the long-term incentive compensation program designed for the new management team to include our Chief Financial Officer, Executive Vice President and General Counsel, and two other officers that will play a critical and on-going role in the successful execution of our new business strategy. In connection therewith, in March 2013 the Compensation Committee took the following actions:
| • | granted to our Chief Financial Officer, Jon W. Clark, Executive Vice President and General Counsel, Edward J. Matey Jr., and two other senior officers, restricted stock and restricted stock units, 75% of which vest over a five-year period subject to the achievement of performance-based vesting hurdles based on absolute increases in our FFO or stock price during the five-year vesting period in addition to continued employment; and |
| • | granted to Mr. Clark, Mr. Matey and two other senior officers LTIP units that vest over a five-year period subject to the same minimum and maximum vesting hurdles that apply to the LTIP units granted to the new management team. |
The Compensation Committee believes that granting predominantly performance-based long-term incentive compensation to our Chief Executive Officer and other senior officers who will play a critical and on-going role in the successful execution of our new business strategy is in the best interests of our stockholders and creates a strong alignment of management and stockholder interests.
Changes to Our Compensation Program in 2013
Jon W. Clark. In March 2013, we granted Jon W. Clark, our Chief Financial Officer, 25,000 time-vested restricted shares of our common stock (“RSAs”), 75,000 performance-based restricted stock units (“RSUs”) and $1.0 million maximum value LTIP units (“LTIP Units”). Mr. Clark’s equity awards will vest on the same schedule, in the same proportion, and on the same conditions as the equity awards for Messrs. DuGan and Harris as described below under “— Employment and Retention Agreements”, except that the stock increase vesting thresholds for Mr. Clark’s RSUs are somewhat higher than the thresholds for Messrs. DuGan and Harris to reflect the higher per share value of our stock in March 2013 as compared to July 1, 2012 and Mr. Clark’s time-vested RSAs and performance based RSUs are scheduled to vest on December 15th of each year as opposed to June 30th.
Edward J. Matey Jr. In March 2013, we granted Edward J. Matey Jr., our General Counsel, 25,000 time-vested RSAs, 75,000 performance-based RSUs and $1.0 million maximum value LTIP Units. Mr. Matey’s equity awards will vest on the same schedule, in the same proportion, and on the same conditions as the equity awards for Messrs. DuGan and Harris as described below under “— Employment and Retention Agreements”, except that the stock increase vesting thresholds for Mr. Matey’s RSUs are somewhat higher
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than the thresholds for Messrs. DuGan and Harris to reflect the higher per share value of our stock in March 2013 as compared to July 1, 2012 and Mr. Matey’s time-vested RSAs and performance based RSUs are scheduled to vest on December 15th of each year as opposed to June 30th.
No changes were made during 2013 to the compensation program for Gordon F. DuGan, our Chief Executive Officer, or Benjamin P. Harris, our President.
The terms of the LTIP Units awarded to Messrs. Clark and Matey under the 2012 Outperformance Plan are described below under “— Equity Compensation Plan Information — 2012 Outperformance Plan.”
Other Matters
Tax and Accounting Treatment. Our Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Section 162(m) limits the deductibility on our tax return of compensation over $1.0 million to any of our named executive officers unless, in general, the compensation is paid pursuant to a plan which is performance-related, non-discretionary and has been pre-approved by our stockholders. Our Compensation Committee’s policy with respect to Section 162(m) is to make every reasonable effort to ensure that compensation is deductible to the extent permitted while simultaneously providing our executives with appropriate compensation for their performance. We paid compensation to certain of our named executive officers during 2011, a portion of which may be nondeductible under the limitations set forth in Section 162(m). Our Compensation Committee may make compensation payments that are not fully deductible if in its judgment such payments are necessary to achieve the objectives of our compensation program.
We account for stock-based payments through our 2004 Equity Incentive Plan in accordance with the requirements of FASB ASC Topic 718.
Adjustments for Certain Items. Our Compensation Committee has not considered whether it would attempt to recover compensation awards or payments based on our financial performance where our financial statements are restated in a downward direction sufficient to reduce the amount of such awards or payments that should have been made or paid under applicable criteria.
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Other Policies
During 2013 we took the following actions related to our executive compensation and corporate governance policies:
| • | conducted a shareholder outreach program to solicit reactions to our executive compensation program and corporate governance policies; |
| • | adopted annual procedures specifically indentifying individual and corporate annual performance metrics to be used by our Compensation Committee to measure and quantify executive performance when determining annual incentive compensation bonuses; |
| • | adopted a policy to prohibit directors and officers from hedging, pledging and margining their shares of company stock; |
| • | adopted stock ownership guidelines for our chief executive officer to be based on a multiple of base salary; |
| • | adopted stock ownership guidelines for our non-employee directors to be based on multiples of the annual retainer for our non-employee directors; and |
| • | adopted a majority voting policy in the election of directors. |
Compensation Risk Assessment
Our Compensation Committee oversaw the performance of a risk assessment of our executive compensation programs to ascertain any potential material risks that may be created by the compensation program. Because performance-based incentives play a large role in our executive compensation program, it is important to ensure that these incentives do not result in our named executive officers taking actions that may conflict with our long term interests. Our Compensation Committee considered the findings of the assessment conducted internally and concluded that our compensation programs are designed and administered with the appropriate balance of risk and reward in relation to its overall business strategy and do not encourage executives to take unnecessary or excessive risks. Our Compensation Committee considered the following attributes of the program:
| • | the balance between short- and long-term incentives; |
| • | consideration of qualitative as well as quantitative performance factors in determining compensation payouts, including minimum and maximum performance thresholds, funding that is based on actual results measured against pre-approved financial and operational goals and metrics that are clearly defined in all plans; |
| • | the use of different types of equity compensation awards that provide a balance of incentives; |
| • | incentive compensation with a large stock component where value is best realized through long-term appreciation of stockholder value; and |
| • | incentive compensation components that are paid or vest over an extended period. |
Our Compensation Committee focuses primarily on the compensation of our named executive officers because risk-related decisions depend predominantly on their judgment. Our Compensation Committee believes that risks arising from our policies and practices for compensation of other employees are not reasonably likely to have a material adverse effect on us.
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Compensation Committee Report
The Compensation Committee (the “Compensation Committee”) of the Board of Directors of Gramercy Property Trust Inc. (the “Company”) 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 of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement.
Submitted by the Compensation Committee
Jeffrey E. Kelter (Chairman)
Allan J. Baum
Charles S. Laven
April 29, 2014
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Summary Compensation Table
The following table* sets forth information regarding the compensation paid to, and the compensation expense we recognized with respect to, our named executive officers during the fiscal year ended December 31, 2013.
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| Name And Principal Position | Year | Salary ($) |
Bonus ($) |
Stock Awards(1) | Option Awards(2) | Non-Equity Incentive Plan Compensation |
All Other Compensation(3) | Total | ||||||||||||||||||||||||
| Gordon F. DuGan Chief Executive Officer |
2013 | $ | 750,000 | $ | 200,000 | $ | — | $ | — | $ | — | $ | 7,500 | $ | 957,500 | |||||||||||||||||
| 2012 | 375,000 | 200,000 | 2,850,000 | — | — | — | 3,425,000 | |||||||||||||||||||||||||
| 2011 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Benjamin P. Harris President | 2013 | $ | 600,000 | $ | 500,000 | $ | — | $ | — | $ | — | $ | 7,650 | $ | 1,107,650 | |||||||||||||||||
| 2012 | 300,000 | 75,000 | 1,710,000 | — | — | — | 2,085,000 | |||||||||||||||||||||||||
| 2011 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| Jon W. Clark Chief Financial Officer |
2013 | $ | 300,000 | $ | 300,000 | $ | 514,500 | $ | — | $ | — | $ | 9,150 | $ | 1,123.650 | |||||||||||||||||
| 2012 | 275,000 | 300,000 | — | — | — | 16,500 | 591,500 | |||||||||||||||||||||||||
| 2011 | 275,000 | 325,000 | 165,000 | — | — | 7,350 | 772,350 | |||||||||||||||||||||||||
| Edward J. Matey Jr. Executive Vice President and General Counsel |
2013 | $ | 455,000 | $ | 125,000 | $ | 514,500 | $ | — | $ | — | $ | 9,150 | $ | 1,103,650 | |||||||||||||||||
| 2012 | 444,597 | 125,000 | — | — | — | 16,550 | 586,147 | |||||||||||||||||||||||||
| 2011 | 444,597 | 75,000 | 165,000 | — | — | 16,350 | 700,947 | |||||||||||||||||||||||||
| Michael G. Kavourias Former Executive Vice President and Chief Legal Officer |
2013 | $ | 103,654 | $ | 850,000 | $ | — | $ | — | $ | — | $ | 7,974 | $ | 961,628 | |||||||||||||||||
| 2012 | 385,000 | 750,000 | — | — | — | 7,500 | 1,142,500 | |||||||||||||||||||||||||
| 2011 | 385,000 | 600,000 | 275,000 | — | — | 7,350 | 1,267,350 | |||||||||||||||||||||||||
| * | The column for “Change in Pension Value and Nonqualified Deferred Compensation Earnings” has been omitted because it is not applicable. |
| (1) | Amounts shown do not reflect compensation actually received by the named executive officers. Instead, the amounts shown are the aggregate grant date fair value of restricted stock, restricted stock units awards and/or LTIP Units issued to the executives in 2013, 2012, and 2011, respectively, as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the grant date value of such awards for 2013, 2012, and 2011 are set forth under Notes 2 and 13 of the Notes to Consolidated Financial Statements included in our Annual Reports on Form 10-K for the years ended December 31, 2013, 2012, and 2011, which were filed with the SEC on March 17, 2014, March 18, 2013, and March 15, 2012, respectively. |
| (2) | No stock option awards were issued to the named executive officers in 2013, 2012, and 2011. |
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| (3) | The table below shows the components of this column. |
| (4) | Mr. Kavourias’s term of employment as our Executive Vice President and Chief Legal Officer ended March 29, 2013. |
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| Name | Year | 401(K) Matching Contributions(a) | Term Life Insurance Premiums(b) | Severance Payment(c) | Car Allowance(d) | Total “All Other Compensation” | ||||||||||||||||||
| Gordon F. DuGan | 2013 | $ | 7,500 | $ | — | $ | — | $ | — | $ | 7,500 | |||||||||||||
| Benjamin P. Harris | 2013 | 7,650 | — | — | — | 7,650 | ||||||||||||||||||
| Jon W. Clark | 2013 | 7,650 | — | — | 1,500 | 9,150 | ||||||||||||||||||
| Edward J. Matey Jr. | 2013 | 7,650 | — | — | 1,500 | 9,150 | ||||||||||||||||||
| Michael G. Kavourias | 2013 | — | — | 7,974 | — | 7,974 | ||||||||||||||||||
| Gordon F. DuGan | 2012 | — | — | — | — | — | ||||||||||||||||||
| Benjamin P. Harris | 2012 | — | — | — | — | — | ||||||||||||||||||
| Jon W. Clark | 2012 | 7,500 | — | — | 9,000 | 16,500 | ||||||||||||||||||
| Edward J. Matey Jr. | 2012 | 7,500 | — | — | 9,000 | 16,500 | ||||||||||||||||||
| Michael G. Kavourias | 2012 | 7,500 | — | — | — | 7,500 | ||||||||||||||||||
| Gordon F. DuGan | 2011 | — | — | — | — | — | ||||||||||||||||||
| Benjamin P. Harris | 2011 | — | — | — | — | — | ||||||||||||||||||
| Jon W. Clark | 2011 | 7,350 | — | — | — | 7,350 | ||||||||||||||||||
| Edward J. Matey Jr. | 2011 | 7,350 | — | — | 9,000 | 16,350 | ||||||||||||||||||
| Michael G. Kavourias | 2011 | 7,350 | — | — | — | 7,350 | ||||||||||||||||||
| (a) | Represents our company’s matching contributions with respect to amounts earned by the named executive officer under our 401(k) plan. Our 401(k) matching contributions are credited in the year subsequent to which employees make their contributions. Our 401(k) match is available to our employees generally. |
| (b) | Mr. DuGan’s employment contract provides for the reimbursement of certain term life insurance premiums. No amounts have been submitted to the company for reimbursement. |
| (c) | Represents accrued and unused vacation time paid on March 29, 2013 at the end of Mr. Kavourias’s term of employment. |
| (d) | Represents car allowance paid pursuant to Mr. Clark’s employment agreement and to Mr. Matey. Each of Mr. Clark and Mr. Matey elected to forgo receipt of a car allowance subsequent to March 2013. |
2013 Grants of Plan-Based Awards
The following table sets forth certain information with respect to each grant of an award made to a named executive officer in the fiscal year ended December 31, 2013.
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| Estimated Future Payouts Under Equity Incentive Plan Awards (#) | All Other Stock Awards; Number of Shares of Stock or Units (#) |
Grant Date Fair Value of Stock and Option Awards ($) |
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| Name | Grant Date |
Threshold ($/#) | Target ($/#) |
Maximum (#) |
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| Gordon F. DuGan | — | — | — | — | — | $ | — | |||||||||||||||||
| Benjamin P. Harris | — | — | — | — | — | $ | — | |||||||||||||||||
| Jon W. Clark | 3/12/2013 | — | — | 25,000 | — | $ | 106,750 | |||||||||||||||||
| 3/12/2013 | 15,000 | 75,000 | 75,000 | (1) | — | $ | 196,500 | |||||||||||||||||
| 3/12/2013 | $ | 200,000 | $ | 600,000 | $ | 1,000,000 | (2) | — | $ | 211,250 | ||||||||||||||
| Edward J. Matey Jr. | 3/12/2013 | — | — | 25,000 | — | $ | 106,750 | |||||||||||||||||
| 3/12/2013 | 15,000 | 75,000 | 75,000 | (1) | — | $ | 196,500 | |||||||||||||||||
| 3/12/2013 | $ | 200,000 | $ | 600,000 | $ | 1,000,000 | (2) | — | $ | 211,250 | ||||||||||||||
| (1) | Represents restricted stock units granted in to such executive, which are subject to vesting based on the |
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| achievement of performance-based vesting hurdles and continued employment over a five-year period. See “— Compensation Discussion & Analysis — how each element and our decisions regarding each element fit into our overall compensation objectives and affect decisions regarding other elements” for a description of these awards. The “Maximum ($/#)” column represents the maximum number of restricted stock units that could be earned. The “Target ($/#)” column represents the number of restricted stock units that would be earned if we achieved the same per year stock appreciation during the five-year vesting period as we did from the beginning of the vesting period through year-end 2013. The “Threshold ($/#)” column represents the number of restricted stock units that would be earned if the performance-based vesting hurdles were only achieved during the first year of the five-year vesting period. |
| (2) | Awards will be paid to each executive in LTIP Units with a value equal to the dollar amount earned by such executive under the plan. See “Compensation discussion and analysis–how each element and our decisions regarding each element fit into our overall compensation objectives and affect decisions regarding other elements” for a description of these awards. |
Outstanding Equity Awards at Fiscal Year-End 2013
The following table sets forth certain information with respect to all outstanding equity awards held by each named executive officer as of December 31, 2013.
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| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised (#) Unexercisable | Option Exercise Price ($) |
Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares or Units or Other Rights That Have Not Vested ($)(6) | ||||||||||||||||||||||||
| Gordon F. DuGan | 200,000 | (1) | $ | 1,150,000 | 1,208,696 | (1) | $ | 6,950,000 | ||||||||||||||||||||||||
| Benjamin P. Harris | 120,000 | (2) | $ | 690,000 | 725,217 | (2) | 4,170,000 | |||||||||||||||||||||||||
| Jon W. Clark | 20,000 | (3) | 115,000 | (3) | 90,870 | (3) | 522,500 | |||||||||||||||||||||||||
| 5,403 | (4) | — | $ | 26.82 | 6/25/2017 | |||||||||||||||||||||||||||
| 5,403 | (5) | — | $ | 22.5 | 12/31/2017 | |||||||||||||||||||||||||||
| Edward J. Matey Jr. | 20,000 | (3) | 115,000 | (3) | 90,870 | (3) | 522,500 | |||||||||||||||||||||||||
| (1) | Pursuant to Mr. DuGan’s employment agreement, we granted Mr. DuGan, 250,000 restricted shares of our common stock, 750,000 RSUs and an award under the 2012 Outperformance Plan on July 1, 2012. The restricted shares of common stock will vest in five equal installments on June 30, 2013 and each of the first four anniversaries of such date provided that Mr. DuGan remains employed by us through each such date. The RSUs are scheduled to vest in five equal installments on June 30, 2013 and each of the first four anniversaries of such date; provided that the RSUs will only vest if both (i) Mr. DuGan remains employed by us through the applicable vesting date and (ii) we achieve either a performance hurdle based on FFO during the prior year, with agreed upon adjustments, or a common stock price hurdle. |
| The award granted under the 2012 Outperformance Plan is subject to performance-based vesting hurdles based on our stock appreciation during a four-year performance period and, if the performance-based vesting is met under the 2012 Outperformance Plan, the awards will remain subject to vesting requirements based on continued employment, with 50% scheduled to vest on June 30, 2016 and 50% scheduled to vest on June 30, 2017 subject to continued employment through such dates. See “— 2012 Outperformance Plan” for a description of the terms of the 2012 Outperformance Plan. The amounts set forth in the Equity Incentive Plan Awards column above are based on the estimated number of RSUs and LTIP Units that will be earned if we achieve the same per year stock appreciation during the applicable performance period under the RSUs and 2012 Outperformance Plan as we did from the beginning of each performance period on July 1, 2012 through year-end 2012. |
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| (2) | In connection with Mr. Harris’ appointment, we granted Mr. Harris 150,000 restricted shares of our common stock, 450,000 RSUs and an award under the 2012 Outperformance Plan. Mr. Harris’ equity awards will vest on the same schedule, in the same proportion, and on the same conditions as the equity awards for Mr. DuGan, as described above. |
| (3) | In March 2013, we granted to each of Mr. Clark and Matey Jr., 25,000 time-vested RSAs, 75,000 performance-based RSUs and $1.0 million maximum value LTIP Units. These equity awards will vest on the same schedule, in the same proportion, and on the same conditions as the equity awards for Messrs. DuGan and Harris as described above, except that the stock increase vesting thresholds for Messrs. Clark and Matey’s RSUs are somewhat higher than the thresholds for Messrs. DuGan and Harris to reflect the higher per share value of our stock in March 2013 as compared to July 1, 2012 and Messrs. Clark and Matey’s time-vested RSAs and performance based RSUs are scheduled to vest on December 15th of each year as opposed to June 30th. |
| (4) | Includes an option award granted on June 28, 2007, which vested in three equal annual installments beginning on June 28, 2008. |
| (5) | Includes an option award granted on December 31, 2007, a third of which vested immediately upon grant and the remaining portion vested in two equal annual installments beginning on December 31, 2008. |
| (6) | Based on a price of $5.75 per share/unit, which was the closing price on the New York Stock Exchange of one share of our common stock on December 31, 2013. Assumes that the value of LTIP Units on a per unit basis is equal to the per share value of our common stock. |
Option Exercises and Stock Vested
The following table sets forth certain information with respect to the exercise of stock options, stock appreciation rights (“SARs”), and similar instruments, and the vesting of stock, including restricted stock, restricted stock units and similar instruments for each named executive officer during the fiscal year ended December 31, 2013.
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| Option Awards | Stock Awards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) |
Value Realized on Exercise(1) ($) |
Number of Shares Acquired on Vesting (#) |
Value Realized on Vesting(2) ($) |
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| Gordon F. DuGan | — | $ | — | 200,000 | $ | 900,000 | ||||||||||
| Benjamin P. Harris | — | $ | — | 120,000 | $ | 540,000 | ||||||||||
| Jon W. Clark | — | $ | — | 20,000 | $ | 105,600 | ||||||||||
| Edward J. Matey Jr. | — | $ | — | 20,000 | $ | 105,600 | ||||||||||
| (1) | Amounts reflect the difference between the exercise price of the option and the market price at the time of exercise. |
| (2) | Amounts reflect the market value of the stock on the day the stock vested. |
Pension Benefits
Our named executive officers received no benefits in fiscal year 2013 from us under defined pension or defined contribution plans. See “— Summary Compensation Table.”
Nonqualified Deferred Compensation
We do not have a nonqualified deferred compensation plan that provides for deferral of compensation on a basis that is not tax-qualified for our named executive officers.
Potential Payments upon Termination or Change in Control
General
We maintain employment agreements with Messrs. DuGan, Clark and Harris. This section discusses the amount of compensation payable to our named executive officers and current executive officers upon termination of the executive officer’s employment (i) by us with “Cause,” (ii) by the named executive officer without “Good Reason,” (iii) by us without “Cause,” (iv) by the named executive officer with “Good
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Reason,” (v) in the event of death or “Disability” of the named executive officer or (vi) in connection with a “Change-in-Control” of us (each, a “Triggering Event”) as described below. The following discussion assumes such termination was effective as of December 31, 2013 and estimates the amounts that would be paid out in such circumstances if the applicable agreement had then been in effect.
Employment and Retention Agreements
Each of Messrs. DuGan, Harris and Clark have entered into employment agreements with us. Illustrated below are the severance provisions associated with each Triggering Event discussed above.
Gordon F. DuGan. Mr. DuGan’s employment agreement has a term commencing on July 1, 2012 and ending on June 30, 2017, with an automatic renewal for a single one-year period unless either party delivers three months’ prior written notice of non-renewal under the agreement. The agreement provides for an annual salary of no less than $750,000 and such discretionary annual bonuses as we, in our sole discretion, may deem appropriate to reward Mr. DuGan for job performance. Mr. DuGan was originally entitled to receive a one-time signing bonus of $400,000, of which $200,000 was paid on July 1, 2012 and the remainder was to be payable in three equal installments on June 30, 2013, June 30, 2014 and June 30, 2015. However, in April 2013 Mr. DuGan agreed to forego the remainder of his signing bonus to determine the amount of his bonus in future years solely based on his and the Company’s performance. Pursuant to the agreement, Mr. DuGan was also granted 250,000 RSAs and 750,000 RSUs under the Gramercy Property Trust Inc. 2012 Inducement Equity Plan. The RSAs will vest in five equal installments beginning on June 30, 2013 and each of the next four anniversaries of such date provided that Mr. DuGan remains employed by us. Vesting of the RSUs is subject to the achievement of performance-based vesting hurdles based on absolute increases in our stock price or FFO during the five-year vesting period in addition to continued employment. Full vesting of the RSUs through achievement of the stock increase thresholds requires, in effect, a 100% increase of our per share stock price during the vesting period of our $2.50 per share price on June 29, 2012. The specific annual stock increase hurdles are as follows: June 30, 2013 — $3.00 per share, June 30, 2014 — $3.50 per share, June 30, 2015 — $4.00 per share, June 30, 2016 — $4.50 per share and June 30, 2017 — $5.00 per share, with each hurdle reduced by any per share common stock dividends that we declare after July 1, 2012. Full vesting of the RSUs through achievement of the FFO increase thresholds requires proportionately similar increases in our FFO levels during the vesting period. In the event that the performance hurdles are not met on a vesting date, the RSUs scheduled to vest on that vesting date may vest on a subsequent vesting date if the common stock price hurdle is met as of such subsequent vesting date or the FFO hurdles have been met on a cumulative basis through such subsequent vesting date. In the event of a Change-in-Control, the performance hurdles for the RSUs will be measured as of the date of the Change-in-Control and any RSUs with respect to which the performance hurdles are met will remain subject to vesting based on continued employment through the original vesting dates. Upon a Change-in-Control, the performance hurdles will be satisfied with respect to the greater of (i) a pro rata amount of the total RSUs based on the portion of the five-year vesting period that had elapsed if the FFO hurdle is met on a cumulative basis through the most recent quarter ended prior to the Change-in-Control or (ii) from 20% to 100% (in 20% increments) of the total RSUs based on the common stock price upon the Change-in-Control as compared to common stock price hurdles from $3.00 per share to $5.00 per share (in $0.50 increments).
Under the agreement, we are also obligated to maintain a life insurance policy for the benefit of Mr. DuGan’s beneficiaries in the face amount of $5,000,000, or if not available at reasonable rates, to self-insure Mr. DuGan up to the maximum cash severance payable under the agreement. If Mr. DuGan is terminated for any reason, under the agreement he will be subject to the following obligations: (i) noncompetition with us for 18 months (or 12 months if his employment is terminated due to a non-renewal of the term of employment by us, or six months if (A) his employment is terminated by us without Cause (as defined in Mr. DuGan’s employment agreement) for Good Reason (as defined in Mr. DuGan’s employment agreement) by Mr. DuGan after a Change-in-Control (as defined in Mr. DuGan’s employment agreement) or (B) Mr. DuGan’s employment is terminated upon or after the expiration of the one-year renewal term); (ii) non-solicitation of our employees for two-years; and (iii) non-disparagement of us and non-interference with our business for one year. The employment agreement also provides for the following payments and benefits to Mr. DuGan in connection with the termination of his employment with us:
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| • | Termination without Cause or with Good Reason. If Mr. DuGan’s employment is terminated by us without Cause or by Mr. DuGan with Good Reason, Mr. DuGan will receive the following payments and benefits. Mr. DuGan will receive a cash severance payment equal to two multiplied by the sum of (i) his average annual base salary in effect during the preceding 24 months (his “Prior Salary”), plus (ii) the highest annual cash bonus paid to Mr. DuGan during the three fiscal years prior to the date of termination (including any equity awarded as bonus), which amount shall be payable in 24 equal monthly installments; provided that, if Mr. DuGan is terminated by us without Cause by the non-renewal of the one year extension term, then Mr. DuGan shall instead receive the sum of his Prior Salary and his Prior Bonus as opposed to two times such amount. If the termination occurs in 2013 or a later year, we will pay to Mr. DuGan a prorated annual performance bonus based on his Prior Bonus (his “Prorated Annual Bonus”) for the year in which Mr. DuGan’s employment is terminated (and the prior year if such bonus had not yet been determined). Mr. DuGan will also receive a monthly cash payment for 24 months equal to the monthly cash payment that we would have paid to provide health insurance for Mr. DuGan. Mr. DuGan’s unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 24 months of Mr. DuGan’s termination will vest, provided that if such termination is in connection with or within 18 months following a Change-in-Control, then all such awards shall vest; (ii) if Mr. DuGan is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 40% of the initial RSU grant will vest; and (iii) if Mr. DuGan is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. Mr. DuGan’s receipt of these payments and benefits in connection with a termination without Cause or for Good Reason is subject to his execution of a general release of claims with our company. |
| • | Termination upon Death. If Mr. DuGan’s employment is terminated upon his death, Mr. DuGan’s estate will receive his Prorated Annual Bonus for the year in which Mr. DuGan’s employment is terminated (and the prior year if such bonus had not yet been determined). In addition, in the event of such a termination, Mr. DuGan’s unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of the termination date will vest; (ii) if the termination date occurs prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if the termination date occurs on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. Notwithstanding the foregoing, Mr. DuGan’s estate will only be entitled to receive such payments and benefits to the extent that their aggregate value together with the value of any other accelerated vesting of equity awards granted by our company exceeds the amount payable to Mr. DuGan’s beneficiaries under the life insurance policy, or self-insurance, maintained by us. |
| • | Termination upon Disability. If Mr. DuGan’s employment is terminated by us due to Mr. DuGan’s disability, Mr. DuGan will receive (i) a cash severance payment equal to the sum of his Prior Salary and his Prior Bonus, which will be payable in 24 equal monthly installments, (ii) if the termination date occurs during 2013 or a later year, his Prorated Annual Bonus for the year in which Mr. DuGan’s employment is terminated provided that the Prorated Annual Bonus shall be less the amount of any annual bonus, or advance thereof, previously paid for the applicable period, and (iii) a monthly cash payment for 12 months equal to the monthly cash payment that we would have paid to provide health insurance for Mr. DuGan. In addition, in the event of such a termination, Mr. DuGan’s unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of Mr. DuGan’s termination will vest; (ii) if Mr. DuGan is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if |
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| Mr. DuGan is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. Mr. DuGan’s receipt of these payments and benefits in connection with a termination upon disability is subject to his execution of a general release of claims with us. |
To the extent necessary to avoid the imposition of an additional tax under Section 409A of the Code, severance pay and benefits will be delayed until six months after termination, or death, whichever is earlier, during which time the payments will accrue interest at the rate of 5% per annum.
If any payments and benefits to be paid or provided to Mr. DuGan, whether under his employment agreement or otherwise, would be subject to “golden parachute” excise taxes under the Code, Mr. DuGan’s payments and benefits under his employment agreement will be reduced to the extent necessary to avoid such excise taxes, but only if such a reduction of pay or benefits would result in a greater after-tax benefit to Mr. DuGan.
The following table illustrates Mr. DuGan’s potential payment and other benefits upon termination of his employment or Change-in-Control of us.
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| Gordon F. DuGan | Base Salary |
Bonus | Medical and Welfare Benefits | Accelerated Equity(1) | Total | |||||||||||||||
| With Cause or Without Good Reason | — | — | — | — | — | |||||||||||||||
| Without Cause or with Good Reason | $ | 1,500,000 | $ | 400,000 | $ | 32,596 | $ | 2,300,000 | $ | 4,232,596 | ||||||||||
| Death | — | $ | 200,000 | — | $ | 1,150,000 | $ | 1,350,000 | ||||||||||||
| Disability | $ | 750,000 | $ | 200,000 | $ | 16,298 | $ | 1,150,000 | $ | 2,116,298 | ||||||||||
| Without Cause or with Good Reason |
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| Following Change-in-Control | $ | 1,500,000 | $ | 400,000 | $ | 32,596 | $ | 4,600,000 | $ | 6,532,595 | ||||||||||
| (1) | Upon a hypothetical termination on December 31, 2013, Mr. DuGan would have been entitled to (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 24 months of Mr. DuGan’s termination will vest, provided that if such termination is in connection with or within 18 months following a Change-in-Control, then all such awards shall vest; (ii) if Mr. DuGan is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 40% of the initial RSU grant will vest; and (iii) if Mr. DuGan is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. |
Benjamin P. Harris. Mr. Harris’ employment agreement has a term commencing on July 1, 2012 and ending on June 30, 2017, with an automatic renewal for a single one-year period unless either party delivers three months’ prior written notice of non-renewal under the agreement. The agreement provides for an annual salary of no less than $600,000, and such discretionary annual bonuses as we, in our sole discretion, may deem appropriate to reward Mr. Harris for job performance. Mr. Harris will also receive a one-time signing bonus of $150,000, of which $75,000 was paid on July 1, 2012 and the remainder payable in three equal installments on June 13, 2013, June 13, 2014 and June 13, 2015; provided that Mr. Harris remains employed by our company on each such date. Pursuant to the agreement, Mr. Harris was also granted 150,000 RSAs and 450,000 RSUs under the Gramercy Property Trust Inc. 2012 Inducement Equity Plan, which awards will vest on the same schedule, in the same proportion, and on the same conditions as the equity awards for Mr. DuGan described above.
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If Mr. Harris’ employment is terminated for any reason, under the agreement he will be subject to the following continuing obligations after termination: (i) noncompetition with us for 12 months (6 months if (A) employment is terminated without Cause by us or any successor or for Good Reason by Mr. Harris or (B) Mr. Harris’ employment is terminated upon or after the expiration of the one-year renewal term); (ii) nonsolicitation of our employees for two-years; and (iii) non-disparagement of us and non-interference with our business for one year. The employment agreement also provides for the following payments and benefits to Mr. Harris in connection with the termination of his employment with us:
| • | Termination without Cause or with Good Reason. If Mr. Harris’ employment is terminated by us without Cause or by Mr. Harris with Good Reason, Mr. Harris will receive the following payments and benefits. Mr. Harris will receive a cash severance payment equal to the sum (or, if such termination occurs in connection with or within 18 months of a Change-in-Control, 1.5 times the sum) of (i) his average annual base salary in effect during the preceding 24 months (his “Prior Salary”), plus (ii) the highest annual cash bonus paid to Mr. Harris during the three fiscal years prior to the date of termination (including any equity awarded as bonus), which amount shall be payable in 12 equal monthly installments. Mr. Harris will also receive any unpaid amount of his signing bonus and, if the termination occurs in 2013 or a later year, we will pay to Mr. Harris his Prorated Annual Bonus for the year in which Mr. Harris’ employment is terminated (and the prior year if such bonus had not yet been determined). Mr. Harris will also receive a monthly cash payment for 12 months equal to the monthly cash payment that we would have paid to provide health insurance for Mr. Harris. Mr. Harris’ unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of Mr. Harris’ termination will vest, provided that if such termination is in connection with or within 18 months following a Change-in-Control, then all such awards shall vest; (ii) if Mr. Harris is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if Mr. Harris is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. Mr. Harris’ receipt of these payments and benefits in connection with a termination without Cause or for Good Reason is subject to his execution of a general release of claims with our company. |
| • | Termination upon Death. If Mr. Harris’ employment is terminated upon his death, Mr. Harris’ estate will receive (i) any unpaid amount of his signing bonus, (ii) if the termination date occurs during 2014 or a later year, his Prorated Annual Bonus for the year in which Mr. Harris’ employment is terminated (and the prior year if such bonus had not yet been determined). In addition, in the event of such a termination, Mr. Harris’ unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of the termination date will vest; (ii) if the termination date occurs prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if the termination date occurs on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. |
| • | Termination upon Disability. If Mr. Harris’ employment is terminated by us due to Mr. Harris’ disability, Mr. Harris will receive (i) a cash severance payment equal to the sum of his Prior Salary and his Prior Bonus, which will be payable in 12 equal monthly installments, (ii) any unpaid amount of his signing bonus, (iii) if the termination date occurs during 2014 or a later year, his Prorated Annual Bonus for the year in which Mr. Harris’ employment is terminated provided that the Prorated Annual Bonus shall be less the amount of any annual bonus, or advance thereof, previously paid for the applicable period, and (iv) a monthly cash payment for 12 months equal to the monthly cash payment that we would have paid to provide health insurance for Mr. Harris. In addition, in the |
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| event of such a termination, Mr. Harris’ unvested equity awards will be treated as follows: (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of Mr. Harris’ termination will vest; (ii) if Mr. Harris is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if Mr. Harris is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. Mr. Harris’ receipt of these payments and benefits in connection with a termination upon disability is subject to his execution of a general release of claims with us. |
To the extent necessary to avoid the imposition of an additional tax under Section 409A of the Code, severance pay and benefits will be delayed until six months after termination, or death, whichever is earlier, during which time the payments will accrue interest at the rate of 5% per annum.
If any payments and benefits to be paid or provided to Mr. Harris, whether under his employment agreement or otherwise, would be subject to “golden parachute” excise taxes under the Code, Mr. Harris’ payments and benefits under his employment agreement will be reduced to the extent necessary to avoid such excise taxes, but only if such a reduction of pay or benefits would result in a greater after-tax benefit to Mr. Harris.
The following table illustrates Mr. Harris’ potential payment and other benefits upon termination of his employment or Change-in-Control of our company under his employment agreement.
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| Benjamin P. Harris | Base Salary |
Bonus | Medical and Welfare Benefits | Accelerated Equity(1) | Total | |||||||||||||||
| With Cause or Without Good Reason | — | — | — | — | — | |||||||||||||||
| Without Cause or with Good Reason | $ | 600,000 | $ | 550,000 | $ | 16,298 | $ | 690,000 | $ | 1,856,298 | ||||||||||
| Death | — | $ | 550,000 | — | $ | 690,000 | $ | 1,240,000 | ||||||||||||
| Disability | $ | 600,000 | $ | 550,000 | $ | 16,298 | $ | 690,000 | $ | 1,856,298 | ||||||||||
| Without Cause or with Good Reason |
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| Following Change-in-Control | $ | 900,000 | $ | 800,000 | $ | 16,298 | $ | 2,760,000 | $ | 4,476,298 | ||||||||||
| (1) | Upon a hypothetical termination on December 31, 2013, Mr. Harris would have been entitled to (i) all unvested equity awards (other than the awards of LTIP Units under the 2012 Outperformance Plan and RSUs referenced above and any other performance-based equity award) that would have otherwise vested within 12 months of Mr. Harris’ termination will vest, provided that if such termination is in connection with or within 18 months following a Change-in-Control, then all such awards shall vest; (ii) if Mr. Harris is terminated prior to any Change-in-Control, then unvested RSUs in an amount equal to 20% of the initial RSU grant will vest; and (iii) if Mr. Harris is terminated on or after a Change-in-Control, then unvested RSUs will be treated pursuant to clause (i) after giving effect to the measurement of performance-based hurdles under the terms of the RSUs as of the Change-in-Control. |
Jon W. Clark. Mr. Clark’s employment agreement, as amended, had an initial term ending on April 30, 2014, which automatically renewed for a successive one-year period and will continue to automatically renew for successive one-year periods after April 30, 2015, unless either party serves the required notice under the agreement. The agreement provides for an annual salary of $275,000 and such discretionary annual bonuses as we, in our sole discretion, may deem appropriate to reward Mr. Clark for job performance. The target annual bonus for 2012 and 2013 is at least $300,000. Mr. Clark is also entitled to a monthly car allowance of $750. However, Mr. Clark elected to forgo such car allowance subsequent to March 2013. If Mr. Clark is terminated for any reason prior to April 30, 2014, under the agreement he will be subject to the following obligations: (i) noncompetition with us for six months (or three months if his employment is terminated due to a non-renewal of the term of employment by us or for Cause (as defined in Mr. Clark’s employment agreement) not related to our business or if Mr. Clark terminates his employment after the payment of a discretionary bonus for any year in an amount less than $300,000); (ii) non-solicitation of our employees for two-years; and
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(iii) non-disparagement of us and non-interference with our business for one year. The employment agreement also provides for the following payments and benefits to Mr. Clark in connection with the termination of his employment with us:
| • | Termination with Cause or without Good Reason. If Mr. Clark’s employment is terminated by us with Cause or by Mr. Clark without Good Reason (as defined in Mr. Clark’s employment agreement), Mr. Clark shall be entitled to receive earned and accrued but unpaid base salary, but we shall have no further obligations following such termination. |
| • | Termination without Cause or with Good Reason. If Mr. Clark’s employment is terminated by us without Cause or by Mr. Clark for Good Reason, Mr. Clark will receive (i) earned and accrued but unpaid base salary, (ii) annual base salary for a period of six months following termination and (iii) a prorated annual bonus and an additional 6-month performance bonus, subject to certain formula. Mr. Clark will continue to receive his medical and welfare benefits for six months, and all of his unvested and unexercisable restricted stock, options or other equity-based awards that were granted as payment of a cash bonus, will fully vest or become exercisable on the date of termination. Mr. Clark will also have 12 months of additional vesting for his outstanding restricted stock, options or other equity-based awards and any then vested unexercised stock options will remain exercisable until the earlier of the expiration of their term or the second January 1 following the termination date. If such termination occurs in connection with or within 18 months after a Change-in-Control (as defined in Mr. Clark’s employment agreement), then Mr. Clark will be entitled to (i) a single lump-sum payment of an amount equal to (a) 12 months of annual base salary and (b) a prorated annual bonus and an additional 12-month performance bonus, subject to certain formula, and (ii) the other payments and benefits described above for a period of 12 months following termination |
| • | Termination upon Death. If Mr. Clark’s employment is terminated by us upon his death, his estate will receive (i) earned and accrued but unpaid base salary, (ii) any earned and accrued by unpaid base salary and (iii) a prorated annual bonus, subject to certain conditions. In addition, all of Mr. Clark’s unvested and unexercisable restricted stock, options or other equity-based awards that were granted as payment of a cash bonus will fully vest or become exercisable on the date of termination and he will be entitled to 12 months of additional vesting of his outstanding restricted stock, options or other equity-based awards and any then vested unexercised stock options will remain exercisable until the earlier of the expiration of their term or the second January 1 following the termination date. |
| • | Termination upon Disability. If Mr. Clark’s employment is terminated by us upon his Disability (as defined in Mr. Clark’s employment agreement), Mr. Clark will receive (i) annual base salary for a period of six months following termination and (ii) a prorated annual bonus and an additional six-month performance bonus, subject to certain conditions. Mr. Clark will continue to receive his medical and welfare benefits for six months, and all of his unvested and unexercisable restricted stock, options or other equity-based awards that were granted as payment of a cash bonus, will fully vest or become exercisable on the date of termination. Mr. Clark will also have 12 months of additional vesting for his outstanding restricted stock, options or other equity-based awards and any then vested unexercised stock options will remain exercisable until the earlier of the expiration of their term or the second January 1 following the termination date. |
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The following table illustrates Mr. Clark’s potential payments and other benefits upon termination of employment or Change-in-Control of our company under his employment agreement.
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| Jon W. Clark | Base Salary |
Bonus | Medical and Welfare Benefits | Accelerated Equity(1) | Total | |||||||||||||||
| With Cause or Without Good Reason | — | — | — | — | — | |||||||||||||||
| Without Cause or with Good Reason | $ | 150,000 | $ | 150,000 | $ | 9,096 | $ | 115,000 | $ | 424,096 | ||||||||||
| Death | — | $ | 150,000 | — | $ | 115,000 | $ | 265,000 | ||||||||||||
| Disability | $ | 150,000 | $ | 150,000 | $ | 9,096 | $ | 115,000 | $ | 424,096 | ||||||||||
| Without Cause or with Good Reason |
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| Following Change-in-Control | $ | 300,000 | $ | 300,000 | $ | 18,192 | $ | 115,000 | $ | 733,192 | ||||||||||
| (1) | Upon a hypothetical termination on December 31, 2013, Mr. Clark would have been entitled to 12 months of additional vesting of any outstanding time-based restricted stock. |
Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2013, relating to our equity compensation plans pursuant to which shares of our common stock or other equity securities may be granted from time to time.
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| Plan Category | (a) Number of securities to be issued upon exercise of outstanding options, warrants and rights |
(b) Weighted-average exercise price of outstanding options, warrants and rights |
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
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| Equity compensation plans approved by security holders(1) | 341,081 | $ | 14.70 | 2,070,416 | ||||||||
| Equity compensation plans not approved by security holders(2) | — | — | 500,000 | |||||||||
| Total | 341,081 | $ | 14.70 | 2,570,416 | ||||||||
| (1) | Includes information related to our 2004 Equity Incentive Plan. |
| (2) | Includes information related to our 2012 Inducement Equity Incentive Plan. |
Amended and Restated 2004 Equity Incentive Plan
Our Board of Directors adopted at the July 2004 meeting of our Board of Directors, and our common stockholders ratified, a long-term, ten-year compensation program, which was later amended and restated, for certain employees, directors, officers, advisors, consultants and other personnel, including any of our joint venture affiliates. Of the options or stock that have not been granted at the time of our initial public offering, our Compensation Committee shall have the right to make such awards in the form of equity incentive compensation on such terms as our Compensation Committee may deem appropriate. Our Compensation Committee has the authority to administer and interpret our 2004 Equity Incentive Plan, to authorize the granting of awards, to determine the eligibility of certain of our employees, directors, officers, advisors, consultants and other personnel and any of our joint venture affiliates to receive an award, to determine the number of shares of common stock to be converted by each award, to determine the terms, provisions and conditions of each award, to prescribe the form of instruments evidencing awards and to take any other actions and make all other determinations that it deems necessary or appropriate. Our Compensation Committee, in its discretion, may delegate to our Chief Executive Officer all or part of the Committee’s authority and duties with respect to awards; provided, however, that we may not delegate its authority and duties with respect to awards that have been, or will be, granted to our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel or President or any Executive Vice President.
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Subject to adjustment upon certain corporate transactions or events, up to a maximum of 6,250,000 shares, but not more than 10% of the common stock outstanding at the time of the grant, may be subject to stock options, restricted stock, phantom stock and dividend equivalent rights under our 2004 Equity Incentive Plan. The maximum number of shares of common stock that may underlie awards, other than options, to any eligible person in any one year, shall not exceed 200,000, to the extent such awards are intended to qualify as performance-based compensation under Section 162(m) of the Code, or 800,000, to the extent such awards are not intended to qualify as performance-based compensation under Section 162(m) of the Code. In addition, subject to adjustment upon certain corporate transactions or events, a participant may not receive options for more than 300,000 shares of our common stock in one year. Any common stock withheld or surrendered by plan participants in connection with the payment of an option exercise price or in connection with tax withholding will not count towards the share limitation and will be available for issuance under our 2004 Equity Incentive Plan. If an option or other award granted under our 2004 Equity Incentive Plan expires or terminates, the common stock subject to any portion of the award that expires or terminates without having been exercised or paid, as the case may be, will again become available for the issuance of additional awards. Unless our 2004 Equity Incentive Plan is previously terminated by our Board of Directors, no new award may be granted under our 2004 Equity Incentive Plan after the tenth anniversary of the date that such plan was initially approved by our Board of Directors. No award may be granted under our 2004 Equity Incentive Plan to any person who, assuming exercise of all options and payment of all awards held by such person, would own or be deemed to own more than 9.8% of our outstanding common stock. At December 31, 2013, approximately 2,070,416 shares of common stock were available for issuance under our 2004 Equity Incentive Plan.
2012 Inducement Equity Incentive Plan
In connection with the equity awards to be made to Messrs. DuGan and Harris, and Nicholas L. Pell, who joined us as a Managing Director, and in connection with our hiring of these executives, our Board of Directors adopted the Gramercy Property Trust Inc. 2012 Inducement Equity Incentive Plan as of June 7, 2012. Under the 2012 Inducement Equity Incentive Plan, we may grant equity awards for up to 4,500,000 shares of common stock pursuant to the employment inducement award exemption provided by Section 303A.08 of the NYSE Listed Company Manual. The 2012 Inducement Equity Incentive Plan permits us to issue a variety of equity awards, including stock options, restricted stock, phantom shares, dividend equivalent rights and other equity-based awards. The 2012 Inducement Equity Incentive Plan is administered by our Compensation Committee. The 2012 Inducement Equity Incentive Plan will terminate on the ten-year anniversary of our Board of Directors’ approval of the 2012 Inducement Equity Incentive Plan, provided our Board of Directors may terminate the 2012 Inducement Equity Incentive Plan at any time. All of the shares available under the 2012 Inducement Equity Incentive Plan were initially issued or reserved for issuance to Messrs. DuGan, Harris and Pell in connection with the equity awards made upon the commencement of their employment with us.
2012 Outperformance Plan
In connection with the hiring of Messrs. DuGan and Harris, our Board of Directors approved a new outperformance plan, the 2012 Outperformance Plan. Pursuant to the 2012 Outperformance Plan, these executives, in the aggregate, may earn up to a maximum dollar amount of LTIP Units based on our common stock price appreciation over a four-year performance period ending June 30, 2016. The amount of LTIP Units earned under the 2012 Outperformance Plan will range from 20% of the maximum amount if our common stock price equals a minimum hurdle of $5.00 per share (less any dividends paid during the performance period) to the maximum amount if our common stock price equals or exceeds $9.00 per share (less any dividends paid during the performance period) at the end of the performance period. The executives will not earn any LTIP Units under the 2012 Outperformance Plan to the extent that our common stock price is less than the minimum hurdle.
During the performance period, the executives may earn up to 12%, 24% and 36% of the maximum amount under the 2012 Outperformance Plan at the end of the first, second and third years, respectively, of the performance period if our common stock price has equaled or exceeded the stock price hurdles as of the end of such years. If the minimum stock price hurdle is met as of the end of any such year, the actual amount earned will range on a sliding scale from 20% of the maximum amount that may be earned as of such date (at
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the minimum stock price hurdle) to 100% of the maximum amount that may be earned as of such date (at the maximum stock price hurdle). Any LTIP Units earned under the 2012 Outperformance Plan will remain subject to vesting, with 50% of any LTIP Units earned vesting on June 30, 2016 and the remaining 50% vesting on June 30, 2017 based, in each case, on continued employment through the vesting date.
Upon the occurrence of a Change-in-Control at any time prior to the end of the performance period, the performance period will be shortened to end on the date of such Change-in-Control, performance will be measured based on the common stock price as of the Change-in-Control and all LTIP Units that are earned will vest as of such date. In the event of a Change-in-Control after the end of the performance period, all LTIP Units that had been previously earned will vest as of such date. If an executive’s employment is terminated by us without Cause, by the executive for Good Reason or upon death or disability prior to the end of the performance period, then for such executive performance will be measured as of the date of such termination and a prorated portion of the LTIP Units earned, if any, will vest based on the portion of the full five-year vesting period that such executive remained employed, plus 12 months, as a percentage of the full five-year vesting period. If an executive’s employment is terminated upon such circumstances after the end of the performance period, all of such executive’s unvested LTIP Units that had been previously earned will vest as of the date of such executive’s termination. The terms Cause, Good Reason and Change-in-Control are specifically defined (or referenced) in the award agreement under the 2012 Outperformance Plan.
Messrs. DuGan and Harris were granted awards under the 2012 Outperformance Plan in connection with their hiring pursuant to which they may earn up to $10.0 million and $6.0 million of LTIP Units, respectively. Additionally, in 2013, Messrs. Clark and Matey were granted an award under the 2012 outperformance plan pursuant to which each of Mr. Clark and Mr. Maety may earn up to $1.0 million of LTIP Units
LTIP Units are a class of limited partnership interests in our Operating Partnership that are structured to qualify as “profits interests” for federal income tax purposes. Accordingly, LTIP Units, initially, will not have full parity, on a per unit basis, with the Class A limited partnership interests in our Operating Partnership with respect to liquidating distributions. If a tax book-up event occurs, which generally includes the issuance of equity interests in us or our Operating Partnership and the occurrence of certain other events, at a time when our Operating Partnership’s assets have sufficiently appreciated, the LTIP Units will achieve full parity with the Class A limited partnership interests. To the extent the LTIP Units have achieved parity with the Class A limited partnership interests, the LTIP Units may be converted, subject to the satisfaction of the applicable vesting conditions, on a one-for-one basis into Class A limited partnership interests. Until LTIP Units have been earned under the 2012 Outperformance Plan, the executives will be entitled to receive non-liquidating distributions with respect to the LTIP Units underlying their awards under the 2012 Outperformance Plan on a per unit basis equal to 10% of the regular dividends per share paid on our common stock, if any. If and when LTIP Units are earned, the executives will be entitled to receive non-liquidating distributions with respect to the earned LTIP Units following the date on which the LTIP units are earned on a per unit basis equal to the dividends per share paid on our common stock.
Compensation Committee Interlocks and Insider Participation
There are no Compensation Committee interlocks and none of our employees participate on our Compensation Committee.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock, as of April 24, 2014, for (1) each person known to us to be the beneficial owner of more than 5% of our outstanding common stock based on the Schedule 13D, Schedule 13G, or any amendments thereto, filed with the SEC, (2) each of our directors and nominees for director, (3) each of our named executive officers who is not a director and (4) our directors, nominees for director and executive officers as a group. Except as otherwise described in the notes below, the following beneficial owners have sole voting power and sole investment power with respect to all shares of common stock set forth opposite their respective names.
In accordance with SEC rules, each listed person’s beneficial ownership includes:
| • | all shares the investor actually owns beneficially or of record; |
| • | all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund); and |
| • | all shares the investor has the right to acquire within 60 days (such as upon exercise of options that are currently vested or which are scheduled to vest within 60 days) after April 24, 2014. |
Unless otherwise indicated, all shares are owned directly and the indicated person has sole voting and investment power.
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| Name** | Amount And Nature of Beneficial Ownership of Common Stock | Percent of Total(1) | ||||||
| Gordon F. DuGan | 1,450,000 | 2.03 | % | |||||
| Marc Holliday | 428,758 | (2) | *% | |||||
| Allan J. Baum | 241,532 | (3) | *% | |||||
| Jeffrey E. Kelter | 230,793 | (4) | *% | |||||
| Charles S. Laven | 220,654 | (5) | *% | |||||
| Gregory F. Hughes | 33,445 | (6) | *% | |||||
| William H. Lenehan | 94,164 | (7) | *% | |||||
| Benjamin P. Harris | 316,000 | *% | ||||||
| Jon W. Clark | 113,306 | (8) | *% | |||||
| Edward J. Matey Jr. | 100,000 | *% | ||||||
| Michael G. Kavourias | — | (9) | *% | |||||
| All Directors and Executive Officers as a Group (11 Persons) | 3,228,652 | 4.52 | % | |||||
| BHR Capital LLC | 5,924,171 | (10) | 8.30 | % | ||||
| BlackRock Inc. | 4,276,615 | (11) | 5.99 | % | ||||
| * | Less than 1% of class. |
| ** | Unless otherwise indicated, the business address is 521 Fifth Avenue, 30th Floor, New York, NY 10175-0003. |
| (1) | As of April 24, 2014, 71,415,299 shares of common stock were outstanding. |
| (2) | Includes 148,867 shares of common stock issuable upon exercise of options. |
| (3) | Includes 48,508 shares of common stock issuable upon exercise of options and, 193,023 phantom units. |
| (4) | Includes 48,508 shares of common stock issuable upon exercise of options, 2,500 shares of restricted common stock and 179,786 phantom units. |
| (5) | Includes 48,508 shares of common stock issuable upon exercise of options, 1,500 shares purchased in the open market, 2,500 shares of restricted common stock and 168,146 phantom units. |
| (6) | Includes 10,000 shares of common stock issuable upon exercise of options and 23,444.59 phantom units. |
| (7) | Includes 10,000 shares of common stock issuable upon exercise of options and 44,664 phantom units. |
| (8) | Includes 10,806 shares of common stock issuable upon exercise of options. |
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| (9) | Mr. Kavourias’s term of employment as our Executive Vice President and Chief Legal Officer ended March 29, 2013. |
| (10) | The address for this stockholder is 545 Madison Avenue, 10th Floor, New York, NY 10022. Based solely on information contained in Schedule 13G filed on February 28, 2014, this shareholder has sole voting and dispositive power over these shares of common stock. |
| (11) | The address for this stockholder is 40 East 52nd Street, New York, NY 10022. Based solely on information contained in Schedule 13G filed on January 17, 2014, this shareholder has sole voting and dispositive power over these shares of common stock. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC and the NYSE. Officers, directors and persons who own more than 10% of a registered class of our equity securities are required to furnish us with copies of all Section 16(a) forms that they file. To our knowledge, based solely on review of the copies of such reports furnished to us, all Section 16(a) filing requirements applicable to our executive officers, directors and persons who own more than 10% of a registered class of our equity securities were filed on a timely basis in 2013, except for the following filings by certain of our directors: (1) Messrs. Baum, Kelter, Laven and Lenehan: late Form 4 filings on January 11, 2013, April 12, 2013 and July 19, 2013; (2) Mr. Holiday: late Form 4 filings on February 7, 2013, April 23, 2013 and August 6, 2013; and (3) Mr. Hughes: late Form 3 filing on January 23, 2013 and late Form 4 filings on January 15, 2013, April 12, 2013 and July 19, 2013.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(amounts in thousands)
Policies and Procedures With Respect to Related Party Transactions
It is the policy of our Board of Directors that all related party transactions (generally, transactions involving amounts exceeding $120 in which a related party (directors and executive officers or their immediate family members, or stockholders owning 5% of more of our outstanding stock)) shall be subject to approval or ratification in accordance with the following procedures.
Our Nominating and Corporate Governance Committee shall review the material facts of all related party transactions that require its approval and either approve or disapprove of the entry into the related party transaction, subject to some exceptions. If advance approval of a related party transaction is not feasible, then the related party transaction shall be considered and, if our Nominating and Corporate Governance Committee determines it to be appropriate, ratified at the next regularly scheduled meeting of our Nominating and Corporate Governance Committee. In determining whether to approve or ratify a related party transaction, our Nominating and Corporate Governance Committee will take into account, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
If a related party transaction will be ongoing, our Nominating and Corporate Governance Committee may establish guidelines for our management to follow in its ongoing dealings with the related party. Thereafter, our Nominating and Corporate Governance Committee, on at least an annual basis, shall review and assess ongoing relationships with the related party to see that they are in compliance with our Nominating and Corporate Governance Committee’s guidelines and that the related party transaction remains appropriate.
All related party transactions shall be disclosed in our applicable filings with the SEC as required under SEC rules.
SL Green Operating Partnership, L.P. and SL Green Interests in Gramercy Investments
The Chief Executive Officer of SL Green Realty Corp. (NYSE: SLG), or SL Green, is one of our directors. An affiliate of SL Green provided special servicing services with respect to a limited number of loans owned by our CDOs that were secured by properties in New York City, or in which we and SL Green were co-investors. For the years ended December 31, 2013, 2012 and 2011 we incurred expense of $0, $0 and $3,058, respectively, pursuant to the special servicing arrangement.
In June 2013, we signed a lease agreement with 521 Fifth Fee Owner LLC, an affiliate of SL Green, for new corporate office space located at 521 Fifth Avenue, 30th Floor, New York, New York. The lease commenced in September 2013, following the completion of certain improvements to the space. The lease is for approximately 6,580 square feet and carries a term of 10 years with rents of approximately $373 per annum for year one rising to $463 per annum in year ten. We commenced rent payments on December 30, 2013. For the year ended December 31, 2013, there were four months of rent abated at the commencement of the lease and as such we did not pay any rent under the lease for the year ended December 31, 2013.
From May 2005 through September 2013, we were party to a lease agreement with SLG Graybar Sublease LLC, an affiliate of SL Green, for our previous corporate offices at 420 Lexington Avenue, New York, New York. The lease was for approximately 7,300 square feet and carried an original term of 10 years with rents of approximately $249 per annum for year one rising to $315 per annum in year ten. In May and June 2009, we amended our lease with SLG Graybar Sublease LLC to increase the leased premises by approximately 2,260 square feet. The additional premises was leased on a co-terminus basis with the remainder of our leased premises and carried rents of approximately $103 per annum during the initial year and $123 per annum during the final lease year. On June 25, 2012, the lease was further amended to reduce the leased premises by approximately 600 square feet and to reduce rents by approximately $29 per annum during the initial year and $38 per annum during the final lease year. All other terms of the lease remained unchanged, except we obtained the right to cancel the lease with 90 days notice. For the years and ended December 31, 2013, 2012, and 2011 we paid $287, $361 and $307 under this lease, respectively. In
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April 2013, we gave notice that that we were cancelling the lease for our corporate offices at 420 Lexington Avenue. The lease agreement with SLG Graybar Sublease LLC was terminated in September 2013.
In September 2012, we recapitalized a portfolio of office buildings, which were part of the Gramercy Finance segment and owned within our CDOs, and located in Southern California, or the Southern California Office Portfolio, with an affiliate of SL Green and several other unrelated parties, through the contribution of an existing preferred equity investment to a newly formed joint venture. In January 2013, we sold our 10.6% interest in a joint venture of the Southern California Office Portfolio to an affiliate of SL Green for proceeds of $8,275 and recorded a gain on disposition to a director related entity of $1,317.
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OTHER MATTERS
Solicitation of Proxies
We will pay the cost of solicitation of proxies. In addition to the solicitation of proxies by mail, our directors, officers and employees may also solicit proxies personally or by telephone without additional compensation for such activities. We will also request persons, firms and corporations holding shares in their names or in the names of their nominees, which are beneficially owned by others, to send proxy materials to and obtain proxies from such beneficial owners. We will reimburse such holders for their reasonable expenses. In addition, we intend to utilize the proxy solicitation services of Morrow & Co. LLC at an aggregate estimated cost of $4,000 plus out-of-pocket expenses.
Stockholder Proposals
Stockholder proposals intended to be presented at the 2015 annual meeting of stockholders must be received by our Secretary no later than January 16, 2015 in order to be considered for inclusion in our proxy statement relating to the 2015 meeting pursuant to Rule 14a-8 under the Exchange Act.
For a proposal of a stockholder to be properly presented at the 2054 annual meeting of stockholders, other than a stockholder proposal included in the proxy statement pursuant to Rule 14a-8, such proposal must be received at our principal executive offices after December 28, 2014 and on or before April 12, 2015, unless the 2015 annual meeting of stockholders is scheduled to take place before June 19, 2014 or after August 25, 2014. Our Bylaws currently provide that any stockholder wishing to nominate a director or have a stockholder proposal, other than a stockholder proposal included in the proxy statement pursuant to Rule 14a-8, considered at an annual meeting must provide written notice of such nomination or proposal and appropriate supporting documentation, as set forth in our Bylaws, to us at our principal executive offices not less than 75 days nor more than 180 days prior to the anniversary of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is scheduled to be held more than seven calendar days prior, or more than 60 days subsequent, to the anniversary date, such nominations or proposals must be delivered to us not earlier than the 180th day prior to such meeting and not later than the close of business on the later of the 75th day prior to such annual meeting or the twentieth day following the earlier of the day on which public announcement of the meeting is first made or notice of the meeting is mailed to stockholders. Any such proposal should be mailed to our principal executive offices at: Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175, Attn: Edward J. Matey Jr., Secretary.
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (such as banks and brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are our stockholders will be “householding” our proxy materials. A single proxy statement will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the impacted stockholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify us, by calling (212) 297-1000 or by directing your written request to: Gramercy Property Trust Inc., 521 Fifth Avenue, 30th Floor, New York, New York 10175, Attn: Edward J. Matey Jr., Secretary. Stockholders who currently receive multiple copies of the proxy statement at their address and would like to request “householding” of their communications should contact their broker as specified above.
Other Matters
Our Board of Directors does not know of any matters other than those described in this proxy statement that will be presented for action at the annual meeting. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders.
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2013 Annual Report
Common stockholders are concurrently being furnished with a copy of our 2013 Annual Report and Form 10-K. Additional copies of the 2013 Annual Report and Form 10-K and of this proxy statement are available at www.proxyvote.com or by contacting Gramercy Property Trust Inc., Attn: Investor Relations, at 521 Fifth Avenue, 30th Floor, New York, New York, 10175, or call toll-free number: 1-800-579-1639, or email: sendmaterial@proxyvote.com. Copies will be furnished promptly at no additional expense.
By Order of our Board of Directors
/s/ EDWARD J. MATEY JR.Edward J. Matey Jr.
Secretary
New York, New York
May 16, 2014
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Appendix A
GRAMERCY PROPERTY TRUST INC.
ARTICLES OF AMENDMENT
Gramercy Property Trust Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Article VI, Section 1 of the Corporation’s charter (the “Charter”) is hereby amended in its entirety to read as follows:
Section 1. Authorized Shares. The Corporation has authority to issue a total of 250,000,000 shares of capital stock (par value $0.001 per share), consisting of 200,000,000 shares of Common Stock, $0.001 par value per share (“Common Stock”), 25,000,000 shares of Preferred Stock, $0.001 par value per share (“Preferred Stock”), and 25,000,000 shares of Excess Stock, $0.001 par value per share (“Excess Stock”). The Board of Directors may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of capital stock. The aggregate par value of all authorized shares of stock having par value is $250,000.
SECOND: This amendment to the Charter (“Amendment”) has been duly advised by the Board of Directors of the Corporation in the manner and by the vote required by law and approved by the requisite vote of the stockholders of the Corporation in the manner and by the vote required by law.
THIRD: Without giving effect to this Amendment, the Corporation has authority to issue 200,000,000 shares of capital stock (par value $0.001 per share), consisting of 150,000,000 shares of Common Stock, $0.001 par value per share, 25,000,000 shares of Preferred Stock, $0.001 par value per share, and 25,000,000 shares of Excess Stock, $0.001 par value per share. Upon giving effect to this Amendment, the Corporation will have authority to issue 250,000,000 shares of capital stock (par value $0.001 per share), consisting of 200,000,000 shares of Common Stock, $0.001 par value per share, 25,000,000 shares of Preferred Stock, $0.001 par value per share, and 25,000,000 shares of Excess Stock, $0.001 par value per share.
FOURTH: Without giving effect to this Amendment, the aggregate par value of all authorized shares is $200,000. Upon giving effect to this Amendment, the aggregate par value of all authorized shares will be $250,000.
FIFTH: This Amendment has not changed the information required by subsection (b)(2)(i) of Section 2-607 of the Maryland General Corporation Law.
SIXTH: The undersigned Chief Executive Officer of the Corporation acknowledges this Amendment to be the act of the Corporation, and, as to all matters or facts required to be verified under oath, that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and such statement is made under the penalties for perjury.
[Signature page follows]
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IN WITNESS WHEREOF, the Corporation has caused this Amendment to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Secretary on this day of , 2014.
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| ATTEST: | GRAMERCY PROPERTY TRUST INC. |
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Edward J. Matey Jr. Secretary |
Gordon F. DuGan Chief Executive Officer |
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521 Fifth Avenue, 30th Floor
NEW YORK, NY 10175
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF THE INTERNET OR TELEPHONE TO AUTHORIZE YOUR PROXY. BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
AUTHORIZE YOUR PROXY BY INTERNET — www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. New York time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY 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 authorize your proxy using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
AUTHORIZE YOUR PROXY BY PHONE — 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. New York time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.
AUTHORIZE YOUR PROXY 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.
If you authorize your proxy by Internet or by telephone, you do NOT need to mail back your proxy card. To authorize your proxy by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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| GRMRC1 | KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
GRAMERCY PROPERTY TRUST INC.
HOLDERS OF COMMON STOCK ONLY:
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| For All | Withhold All | For All Except | ||||||||||||
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2, 3, 4 and 5. | ||||||||||||||
| 1. To elect seven Directors to serve until the 2015 annual meeting of stockholders and until their successors are duly elected and qualify. | o | o | o | |||||||||||
| Nominees: 01) Allan J. Baum 02) Gordon F. DuGan 03) Marc Holliday 04) Gregory F. Hughes 05) Jeffrey E. Kelter 06) Charles S. Laven 07) William H. Lenehan |
To withhold authority to vote for any individual nominee, mark “For All Except” and write the number of the nominee on the line below. |
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Vote on Proposal
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| For | Against | Abstain | ||||||||||
| 2. To approve certain issuances of our common stock upon exchange of our 3.75% exchangeable senior notes due 2019. | o | o | o | |||||||||
| 3. To approve an amendment to the Company’s charter increasing the amount of common stock the Company is authorized to issue to 200,000,000 shares. | o | o | o | |||||||||
| 4. To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2014. | o | o | o | |||||||||
| 5. To approve, on an advisory basis, the compensation of our named executive officers. | o | o | o | |||||||||
| 6. To consider and act upon any other matters that may properly be brought before the annual meeting and any adjournments or postponements thereof. | o | o | o | |||||||||
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying notice of annual meeting of stockholders and the proxy statement with respect thereto, the terms of each of which are incorporated by reference, and our annual report to stockholders with respect to our 2013 fiscal year, and hereby revoke(s) any proxy or proxies heretofore given with respect to the meeting. This proxy may be revoked at any time before it is exercised.
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.
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| Signature [PLEASE SIGN WITHIN BOX] Date | Signature (Joint Owners) Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
GRAMERCY PROPERTY TRUST INC.
521 Fifth Avenue, 30th Floor
New York, New York 10175
Proxy for Annual Meeting of Common Stockholders to be held on June 26, 2014
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned common stockholder of Gramercy Property Trust Inc., a Maryland corporation (the “Corporation”), hereby constitutes and appoints Gordon F. DuGan and Edward J. Matey Jr. and either of them, as proxies of the undersigned, with full power of substitution, to attend the annual meeting of stockholders to be held via live webcast by visiting www.virtualshareholdermeeting.com/GPT2014, at 9:30 a.m., New York time, on June 26, 2014, and any adjournments or postponements thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast at such meeting and otherwise to represent the undersigned at the meeting with all powers possessed by the undersigned if personally present at the meeting.
When this proxy is properly executed, the votes entitled to be cast by the undersigned will be cast in the manner directed herein by the undersigned common stockholder(s). If this proxy is executed but no direction is given, the votes entitled to be cast, if any, by the undersigned common stockholder will be cast “FOR” each nominee of our Board of Directors listed in Proposal 1 and “FOR” Proposals 2, 3, 4 and 5. In their discretion, the proxies are each authorized to vote upon such other business as may properly come before the annual meeting and any adjournments or postponements thereof. A common stockholder wishing to vote in accordance with our Board of Directors’ recommendations need only sign and date this proxy and return it in the enclosed envelope.
Please authorize your proxy by signing on the other side and return promptly in the enclosed envelope.