DEF 14A 1 uht-def14a_20210602.htm DEF 14A uht-def14a_20210602.htm

 

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

 

Filed by the Registrant                                Filed by a party other than the Registrant  

Check the appropriate box:

 

 

Preliminary Proxy Statement

 

 

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

 

 

Definitive Proxy Statement

 

 

 

Definitive Additional Materials

 

 

 

Soliciting Material Under Rule 14a-12

Universal Health Realty Income Trust

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

 

 

 

 

 

No fee required.

 

 

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

 

 

(1)

 

Title of each class of securities to which transaction applies:

 

 

(2)

 

Aggregate number of securities to which transaction applies:

 

 

(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

 

Proposed maximum aggregate value of transaction:

 

 

(5)

 

Total fee paid:

 

Fee paid previously with preliminary materials.

 

 

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:

 

 

 

 

 

(1)

 

Amount previously paid:

 

 

(2)

 

Form, Schedule or Registration Statement No:

 

 

(3)

 

Filing party:

 

 

(4)

 

Date Filed:

 

 

 


 

 

 

 

April 20, 2021

Dear Shareholder:

You are cordially invited to attend the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) of Universal Health Realty Income Trust (the “Trust”) which will be held on Wednesday, June 2, 2021, beginning at 10:00 a.m. In light of the continuing public health impact of the novel coronavirus (COVID-19) outbreak and to support the health and well-being of our communities, employees, shareholders and other stakeholders, this year’s Annual Meeting will be conducted completely virtually, via a live audio webcast; there will be no physical meeting location.  You will be able to attend and participate in the Annual Meeting by visiting www.meetingcenter.io/207849190, where you will be able to listen to the meeting live, submit questions, and vote. The annual meeting is being held for the following purposes:

 

(1)

the election by our shareholders of two Class II Trustees, to serve for a term of three years, until the annual election of Trustees in the year 2024 or the election and qualification of their successors;

 

(2)

to conduct an advisory (nonbinding) vote to approve named executive officer compensation;

 

(3)

to ratify the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

 

(4)

to transact such other business as may properly come before the meeting or any adjournment thereof.

Detailed information concerning these matters is set forth in the Important Notice Regarding the Availability of Proxy Materials (the “Notice”) you received in the mail and in the attached Notice of Annual Meeting of Shareholders and Proxy Statement. We have elected to provide access to our Proxy Materials over the internet under the Securities and Exchange Commission’s “notice and access” rules. If you want more information, please see the Questions and Answers section of this Proxy Statement.

Your vote is important. Whether or not you plan to attend the meeting online, please either vote by telephone or internet or, if you received printed Proxy Materials and wish to vote by mail, by promptly signing and returning your proxy card in the enclosed envelope. Please review the instructions on each of your voting options described in this Proxy Statement as well as in the Notice you received in the mail. If you then attend and wish to vote your shares online, you still may do so. In addition to the matters noted above, we will discuss the business of the Trust and be available for your questions relating to the Trust.

 

 

Sincerely,

 

 

Alan B. Miller

Chairman of the Board,

Chief Executive Officer and President

 


 

 


 

 

UNIVERSAL CORPORATE CENTER

367 SOUTH GULPH ROAD

KING OF PRUSSIA, PENNSYLVANIA 19406

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

June 2, 2021

Notice is hereby given that the Annual Meeting (the “Annual Meeting”) of Shareholders of Universal Health Realty Income Trust (the “Trust”) will be held on Wednesday, June 2, 2021, beginning at 10:00 a.m.  The Annual Meeting will be held via live audio webcast available at www.meetingcenter.io/207849190 for the following purposes:

 

(1)

the election by our shareholders of two Class II Trustees, to serve for a term of three years, until the annual election of Trustees in the year 2024 or the election and qualification of their successors;

 

(2)

to conduct an advisory (nonbinding) vote to approve named executive officer compensation;

 

(3)

to ratify the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and

 

(4)

to transact such other business as may properly come before the meeting or any adjournment thereof.

You are entitled to vote at the Annual Meeting only if you were a shareholder at the close of business on April 8, 2021.

This year, out of an abundance of caution, to proactively deal with the continuing health impact of coronavirus disease, also known as COVID-19, and to mitigate risks to the health and well-being or our communities, employees, shareholders and other stakeholders, we will hold the Annual Meeting in a virtual only format, which will be conducted via live audio webcast. Shareholders will have an equal opportunity to participate at the Annual Meeting online regardless of their geographic location.


 

 


 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING ONLINE, PLEASE VOTE BY TELEPHONE OR INTERNET OR, IF YOU RECEIVED PRINTED PROXY MATERIALS AND WISH TO VOTE BY MAIL, MARK YOUR VOTES, THEN DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. YOU MAY REVOKE YOUR PROXY IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES ONLINE AT THE MEETING.

Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on Wednesday, June 2, 2021:

The Proxy Statement and Annual Report to Shareholders are available at

http://www.edocumentview.com/UHT

 

 

BY ORDER OF THE BOARD OF TRUSTEES

 

Cheryl K. Ramagano

Secretary

King of Prussia, Pennsylvania

April 20, 2021

 

 

 


 

 

 

Universal Corporate Center

367 South Gulph Road

King of Prussia, PA 19406

PROXY STATEMENT

QUESTIONS AND ANSWERS

1.

Q: Why am I receiving these materials?

 

A:

This Proxy Statement and enclosed forms of proxy (first mailed to shareholders who requested to receive printed Proxy Materials on or about April 20, 2021) are furnished in connection with the solicitation of proxies by our Board of Trustees for use at the Annual Meeting of Shareholders (the “Annual Meeting”), or at any adjournment thereof. A Notice Regarding the Availability of Proxy Materials was first mailed to all of our other shareholders beginning on or about April 20, 2021. The Annual Meeting will be held on Wednesday, June 2, 2021, beginning at 10:00 a.m.  The Annual Meeting will be accessible via live audiocast on the internet.  To participate at the Annual Meeting online, please visit www.meetingcenter.io/207849190 (password: UHT2021) and review the instructions under the Q&A entitled “How can I attend and vote at the online meeting?” below. As a shareholder, you are invited to attend the Annual Meeting online and are requested to vote on the items of business described in this Proxy Statement.

2.

Q: What is the purpose of the Annual Meeting?

 

A:

The Annual Meeting is being held for the following purposes: (1) elect two Class II Trustees, who will serve for a term of three years until the annual election of Trustees in the year 2024 or the election and qualification of their successors; (2) conduct an advisory (nonbinding) vote to approve named executive officer compensation; (3) ratify the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021; and (4) transact such other business as may properly be brought before the meeting or any adjournment thereof. We will also discuss our business and be available for your comments and discussion.

3.

Q: Why did Shareholders receive a notice in the mail regarding the internet availability of Proxy Materials instead of a full set of Proxy Materials?

 

A:

In accordance with “notice and access” rules adopted by the U.S. Securities and Exchange Commission, or SEC, we may furnish Proxy Materials, including this Proxy Statement and our Annual Report to Shareholders, to our shareholders by providing access to such documents on the internet instead of mailing printed copies. Most shareholders will not receive printed copies of the Proxy Materials unless they request them. Instead, the Notice, which was mailed to shareholders, will instruct you as to how you may access and review all of the Proxy Materials on the internet. Please visit www.edocumentview.com/UHT. The Notice also instructs you as to how you may submit your Proxy

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on the internet. If you would like to receive a paper or e-mail copy of our Proxy Materials, you should follow the instructions for requesting such materials in the Notice.    

 

4.

Q: Who may attend the Annual Meeting?

 

A:

All shareholders of record as of the close of business on April 8, 2021, or their duly appointed proxies, may attend the meeting online at www.meetingcenter.io/207849190 (password: UHT2021) and review the Q&A entitled “How can I attend and vote at the online meeting?” below.  

5.

Q: How can I attend and vote at the online meeting?

 

A:

We are sensitive to the public health and travel concerns our shareholders may have and the protocols that federal, state, and local governments may impose as it relates to the current, ongoing COVID-19 coronavirus pandemic. Therefore, the Annual Meeting will be a completely virtual meeting of shareholders, which will be conducted exclusively by a live webcast.  No physical meeting will be held.

 

For registered shareholders: If on the record date your shares were registered directly in your name with our transfer agent, Computershare Trust Company, N.A. (“Computershare”), then you are a shareholder of record (also known as a “record holder”). Shareholders of record at the close of business on the record date will be able to attend the Annual Meeting online, ask a question and vote by visiting www.meetingcenter.io/207849190 at the meeting date and time. We encourage you to access the Annual Meeting prior to the start time. Online access will begin at 9:45 a.m., Eastern Time. The two items of information needed to access the Special Meeting from the website are the following:

Username: the 15-digit control number located in the shaded bar on the proxy card

Meeting password: UHT2021

 

For beneficial owners: If on the record date your shares were not registered directly in your name with Computershare but instead held by an intermediary, such as a bank, broker or other nominee, then you are the beneficial owner of shares held in “street name”. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you must register in advance to attend the Annual Meeting, vote and submit questions. To register in advance and vote at the meeting you will need to obtain a legal proxy from the bank, broker or other nominee that holds your shares giving you the right to vote the shares. Once you have received a legal proxy form from your bank, broker or other nominee, forward the email with your name and the legal proxy attached or send a separate email with your name and legal proxy attached labeled “Legal Proxy” in the subject line to Computershare, at legalproxy@computershare.com. Requests for registration must be received no later than 5:00 p.m., Eastern Time, on May 28, 2021. You will then receive a confirmation of your registration, with a control number, by email from Computershare. At the time of the meeting, go to www.meetingcenter.io/207849190 and enter your control number and the meeting password, UHT2021, if requested. If you do not have your control number you may attend as a guest (non-shareholder) by going to www.meetingcenter.io/207849190 and entering the requested information. Please note that guest access in listen-only mode is also available, but you will not have the ability to ask questions or vote during the Annual Meeting.

 

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6.

Q: Do I need to register to attend the Annual Meeting virtually?

 

A:

Registration is only required if you are a beneficial owner as set forth above.

 

7.

Q: What if I have trouble accessing the Annual Meeting virtually?

 

A:

The virtual meeting platform is fully supported across browsers (MS Edge, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most up-to-date version of applicable software and plugins. Participants should ensure that they have a strong Wi-Fi connection wherever they intend to participate in the meeting. We encourage you to access the meeting prior to the start time. A link on the meeting page will provide further assistance should you need it, or you may call 1-888-724-2416.

8.

Q: Who is entitled to vote at the Annual Meeting?

 

A:

Only shareholders as of the close of business on April 8, 2021 are entitled to vote at the Annual Meeting. On that date, 13,772,095 shares of beneficial interest, par value $.01 per share, were outstanding.

9.

Q: Who is soliciting my vote?

 

A:

The principal solicitation of proxies is being made by our Board of Trustees by mail. Certain of our officers and employees and certain officers and employees of UHS of Delaware, Inc. (our “Advisor”), a wholly-owned subsidiary of Universal Health Services, Inc. (“UHS”), or its affiliates, none of whom will receive additional compensation therefor, may solicit proxies by telephone or other personal contact. We will bear the cost of the solicitation of the proxies, including postage, printing and handling and will reimburse the reasonable expenses of brokerage firms and others for forwarding material to beneficial owners of shares. In addition, we may retain a third-party proxy solicitation service, to assist in the solicitation of proxies who may solicit proxies personally, by telephone and by mail.

10.

Q: What items of business will be voted at the Annual Meeting?

 

A:

The items of business that will be voted are: the election of two Class II Trustees, who will serve for a term of three years until the annual election of Trustees in the year 2024 or the election and qualification of their successors; an advisory (nonbinding) vote to approve named executive officer compensation; and the ratification of the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021.

11.

Q: How does the Board of Trustees recommend that I vote?

 

A:

The Board of Trustees recommends that you vote your shares FOR the nominees for Class II Trustees (Proposal No. 1).

The Board of Trustees recommends that you vote your shares FOR the approval of our named executive officer compensation (Proposal No. 2).

The Board of Trustees recommends that you vote your shares FOR the ratification of the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021 (Proposal No. 3).

 

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12.

Q: How will voting on any other business be conducted?

 

A:

Other than the items of business described in this Proxy Statement, we know of no other business to be presented for action at the Annual Meeting. As for any other business that may properly come before the Annual Meeting, your signed proxy confers discretionary authority in the persons named therein. Those persons will vote or act in accordance with their best judgment.

13.

Q: What is the difference between a “shareholder of record” and a “street name” holder?

 

A:

These terms describe how your shares are held. If your shares are registered directly in your name with Computershare Trust Company, N.A., our transfer agent, you are a “shareholder of record.” If your shares are held in the name of a brokerage, bank, trust or other nominee as a custodian, you are a “street name” holder.

14.

Q: How do I vote my shares if I am a shareholder of record?

 

A:

For specific instructions on how to vote your shares, please refer to the instructions on the Notice Regarding the Availability of Proxy Materials you received in the mail or, if you received printed proxy materials, your enclosed proxy card. If you received printed proxy materials, you may vote by signing and dating each proxy card you receive and returning it in the enclosed prepaid envelope, or you may vote by telephone or internet. Unless otherwise indicated on the proxy, shares represented by any proxy will, if the proxy is properly executed and received by us prior to the Annual Meeting, be voted “FOR” the nominees for Trustee, “FOR” the approval of our named executive officer compensation, and “FOR” the ratification of the selection of KPMG LLP, as the Trust’s independent registered public accounting firm for the fiscal year ending December 31, 2021.  You may also vote by telephone or internet.

15.

Q: How do I vote by telephone or electronically?

 

A:

Instead of submitting your vote by mail on the enclosed proxy card (if you received printed proxy materials), your vote can be submitted by telephone or electronically, via the internet. Please refer to the specific instructions set forth on the Notice Regarding the Availability of Proxy Materials or, if you received printed Proxy Materials, on the enclosed proxy card. For security reasons, our electronic voting system has been designed to authenticate your identity as a shareholder.

16.

Q: How do I vote my shares if they are held in street name?

 

A:

If your shares are held in street name, your broker or other nominee will provide you with a form seeking instruction on how your shares should be voted.

17.

Q: Can I change or revoke my vote?

 

A:

Yes. Any proxy executed and returned to us is revocable by delivering a later signed and dated proxy or other written notice to our Secretary at any time prior to its exercise. Your proxy is also subject to revocation if you are present at the meeting and choose to vote in person.

18.

Q: How do I vote during the meeting?

 

A:

If you have not already voted your shares in advance as described above, provided you are a registered shareholder with a control number or a beneficial shareholder that has submitted a Legal Proxy and has received a control number from Computershare, you will also be able to vote your shares electronically

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during the Annual Meeting by clicking on the “Cast Your Vote” link on the Meeting Center site.  Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of or during the Annual Meeting by one of the methods described in the proxy materials.

19.

Q: How do I ask questions during the meeting?

 

A:

If you are attending the meeting as a shareholder of record or registered beneficial owner, questions can be submitted by accessing the meeting center at www.meetingcenter.io/207849190 entering your control number and meeting password, UHT2021, and clicking on the message icon in the upper right- hand corner of the page.  To return to the main page, click the “i” icon at the top of the screen. Please note that guest access is in listen-only mode and you will not have the ability to ask questions or vote during the Annual Meeting.

20.

Q: What are my voting choices and what is the vote required to approve each of the proposals?

 

A:

The following chart describes the proposals to be considered at the Annual Meeting, the voting choices for each proposal, the vote required to elect trustees and to adopt each other proposal, and the manner in which votes will be counted:

 

 

 

 

 

 

Item of Business

Voting Options

Votes Required for Approval

Abstentions

Signed But
Unmarked
Proxy Cards

Broker
Non-

Votes

Proposal 1: Election of Trustees

For or withhold vote in respect of each nominee.

The vote of a majority of all the votes cast at a meeting at which a quorum is present is necessary for the election of the Class II Trustees. A majority of the votes cast means that the number of shares voted “for” a Trustee’s election exceeds the number of shares “withheld” from that Trustee.

A nominee currently serving as a Trustee not receiving a majority of the votes cast will tender his or her resignation, promptly following certification of the shareholder vote, for consideration by the Nominating & Corporate Governance Committee.

Not applicable.

Count as
votes FOR.

No broker discretion
to vote.

Proposal 2: Advisory (Nonbinding) Vote on Named Executive Officer Compensation

For, against, or abstain.

Affirmative “FOR” vote of a majority of all of the votes cast at the meeting.

No effect on voting.

Count as votes FOR.

No broker discretion to vote.

Proposal 3: Ratification of Independent Registered Public Accounting Firm

For,

against, or abstain.

Affirmative “FOR” vote of a majority of all of the votes cast at the meeting.

No effect on voting.

Count as votes FOR.

Brokers have discretion to vote.

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21.

Q: What constitutes a “quorum”?

 

A:

The shareholders entitled to vote at the meeting representing a majority of the total number of votes authorized to be cast by shares of beneficial interest then outstanding and entitled to vote on any question present in person or by proxy shall constitute a quorum at any such meeting for action on such question. Proxies received but marked with instructions to withhold authority to vote or abstain from voting and broker non-votes will be included in the calculation of the number of shares to be considered present at the meeting.

22.

Q: What are our voting rights?

 

A:

Each share is entitled to one vote on the matters to be presented at the meeting.

23.

Q: Will my shares be voted if I do not sign and return my proxy card or do not vote by internet or telephone?

 

A:

If you are a registered shareholder and you do not sign and return your proxy card or do not vote by internet or telephone, your shares will not be voted at the Annual Meeting. If your shares are held in street name and you do not issue instructions to your broker, your broker may vote your shares at its discretion on routine matters, but may not vote your shares on non-routine matters.

Under the New York Stock Exchange rules, the proposals relating to the election of the Trustees and the advisory vote on our named executive officer compensation are deemed to be non-routine matters with respect to which brokers and nominees may not exercise their voting discretion without receiving instructions from the beneficial owner of the shares.

24.

Q: What is a “broker non-vote”?

 

A:

“Broker non-votes” are shares held by brokers or nominees which are present in person or represented by proxy, but which are not voted on a particular matter because instructions have not been received from the beneficial owner. Under the rules of the Financial Industry Regulatory Authority, member brokers generally may not vote shares held by them in street name for customers unless they are permitted to do so under the rules of any national securities exchange of which they are a member. Under the rules of the New York Stock Exchange, New York Stock Exchange-member brokers who hold shares in street name for their customers and have transmitted our proxy solicitation materials to their customers, but do not receive voting instructions from such customers, are not permitted to vote on non-routine matters.

Since the election of the Trustees and the advisory vote on named executive officer compensation are non-routine matters, a broker may not turn in a proxy card voting shares without receiving instructions from you.

25.

Q: What is the effect of a broker non-vote?

 

A:

Broker non-votes will be counted for the purpose of determining the presence or absence of a quorum but will not be considered present and entitled to vote on any matter for which a broker, bank or other nominee does not have authority. For the Annual Meeting, pursuant to the rules of the New York Stock Exchange, your broker, bank or other nominee will be permitted to vote for you without instruction only with respect to Proposal 3 regarding the ratification of KPMG LLP. A broker non-vote will not have any impact on the outcome of any other proposals.

 

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26.

Q: Who will count the votes?

 

A:

Our Secretary will count the votes and serve as inspector of elections.

27.

Q: When are shareholder proposals and trustee nominees due for the 2022 Annual Meeting?

 

A:

Shareholder Proposals Submitted Pursuant to SEC Rule 14a-8 for Inclusion in Next Year’s Proxy Statement. Shareholder proposals intended to be included in the proxy materials for the 2022 annual meeting of shareholders must be received by us no later than December 21, 2021.  Such proposals should be sent in writing by courier or certified mail to the Secretary of the Trust at 367 South Gulph Road, King of Prussia, PA 19406. Shareholder proposals that are sent to any other person or location or by any other means may not be received in a timely manner. The proposal will also need to comply with the SEC’s regulations under Rule 14a-8 regarding the inclusion of shareholder proposals in company sponsored proxy materials.

Trustee Nominations for Inclusion in Next Year’s Proxy Statement (Proxy Access). Our bylaws permit a shareholder, or group of up to 20 shareholders, owning 3% or more of the Trust’s outstanding common stock continuously for at least three years to nominate and include in the Trust’s proxy materials trustees constituting up to 20% of the board, provided that such nominating shareholder(s) and nominee(s) satisfy the requirements specified therein for a nomination pursuant to the proxy access provisions, including timely submission of a notice of such a nomination to the Secretary of the Trust at its principal executive office (no earlier than 150 days and no later than 120 days before the anniversary of the date that the Trust mailed its proxy statement for the previous year’s annual meeting of shareholders) that contains certain information specified in our bylaws. Any shareholder who wishes to use these procedures to nominate a candidate for election to the Board of Trustees for inclusion in the Trust’s proxy materials relating to the 2022 annual meeting of shareholders must satisfy the requirements specified in our bylaws and must provide written notice to the Secretary of the Trust at 367 South Gulph Road, King of Prussia, PA 19406, which must be received not earlier than November 21, 2021 and not later than December 21, 2021.  However, if our 2022 annual meeting of shareholders is held more than 30 days before or after June 2, 2022, then the Secretary must receive this notice by the later of the 150th day prior to such annual meeting and the tenth day following the date on which public announcement of the date of such meeting is first made by the Trust.

Other Shareholder Business for Presentation at Next Year’s Annual Meeting For a shareholder proposal that is not intended to be included in the proxy materials for the 2022 annual meeting of shareholders, or if you want to nominate a person for election as a trustee outside of the proxy access process described in the paragraph above, you must provide written notice to the Secretary of the Trust at 367 South Gulph Road, King of Prussia, PA 19406. The Secretary must receive this notice not earlier than February 2, 2022 and not later than March 4, 2022. However, if our 2022 annual meeting of shareholders is held more than 30 days before or more than 70 days after June 2, 2022, then the Secretary must receive this notice not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which we make a public announcement of the date of the meeting. The notice of a proposed item of business must provide information as required in our bylaws which, in general, require that the notice include for each matter a brief description of the matter to be brought before the meeting; the reasons for bringing the matter before the meeting; your name, address, and number of shares you own beneficially or of record of such shareholder; and any material interest you have in the proposal. The notice of a proposed trustee nomination must provide information and documentation as required in our bylaws which, in general, require that the notice of a trustee nomination include the information about the nominee that would be required to be disclosed in the

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solicitation of proxies for the election of a trustee under federal securities laws and the nominee’s written consent to be named in the proxy statement as a nominee and to serve as a trustee if elected. A copy of the bylaw requirements will be provided upon request to the Secretary at the address above.

28.

Q: Can I receive more than one set of Annual Meeting materials?

 

A:

If you share an address with another shareholder, each shareholder may not receive a separate copy of our Annual Report and Proxy Statement. We will promptly deliver a separate copy of either document to any shareholder upon written or oral request to our Secretary at Universal Health Realty Income Trust, Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania 19406, telephone (610) 265-0688. If you share an address with another shareholder and (i) would like to receive multiple copies of the Proxy Statement or Annual Report to Shareholders in the future, or (ii) if you are receiving multiple copies and would like to receive only one copy per household in the future, please contact your bank, broker, or other nominee record holder, or you may contact us at the above address and phone number.

29.

Q: How can I obtain additional information about Universal Health Realty Income Trust (the “Trust”)?

 

A:

Copies of our Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2020 and our other annual, quarterly and current reports we file with the Securities and Exchange Commission, and any amendments to those reports, are available free of charge on our website, which is located at http://www.uhrit.com. Copies of these reports will be sent without charge to any shareholder requesting such copies in writing to our Secretary at Universal Health Realty Income Trust, Universal Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania 19406. The information posted on our website is not incorporated into this Proxy Statement.

 

 

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 31, 2021, the number of shares and the percentage of our outstanding shares beneficially owned, within the meaning of Securities and Exchange Commission Rule 13d-3, (i) by each person who is known to us to own beneficially more than 5% of our shares; (ii) by each Trustee and Trustee nominee and each executive officer named in the Summary Compensation Table, and; (iii) by all Trustees and executive officers as a group. Except as otherwise specified, the named beneficial owner has sole voting and investment power. No shares are pledged as security by any of our Trustees or executive officers.

Name and Address of

Beneficial Owner(1)

 

Amount and Nature of

Beneficial Ownership

 

 

 

Percent of

Outstanding Shares

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc.

55 East 52nd Street

New York, NY 10055

 

 

2,280,984

 

(2)

 

 

16.56

%

 

 

 

 

 

 

 

 

 

 

Universal Health Services, Inc.

367 South Gulph Road

King of Prussia, PA 19406

 

 

787,543

 

 

 

 

5.72

%

 

 

 

 

 

 

 

 

 

 

The Vanguard Group, Inc.

100 Vanguard Blvd.

Malvern, PA 19355

 

 

2,085,286

 

(3)

 

 

15.14

%

 

 

 

 

 

 

 

 

 

 

Alan B. Miller

 

 

169,105

 

(4)(6)

 

 

1.2

%

 

 

 

 

 

 

 

 

 

 

Gayle L. Capozzalo

 

 

1,200

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Michael Allan Domb

 

 

3,400

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Robert F. McCadden

 

 

4,600

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Marc D. Miller

 

 

4,054

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

James P. Morey

 

 

800

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Charles F. Boyle

 

 

29,908

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Timothy J. Fowler

 

 

22,583

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

Cheryl K. Ramagano

 

 

32,115

 

(4)

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

All Trustees & executive officers as a group (9 persons)

 

 

267,765

 

(4)(6)

 

 

1.9

%

_

(1)

Unless otherwise shown, the address of each beneficial owner is c/o Universal Health Realty Income Trust, Universal Corporate Center, 367 South Gulph Road, King of Prussia, PA 19406.

(2)

These securities are held by Blackrock, Inc. and various of its affiliates. Blackrock, Inc. has sole power to vote with respect to 2,255,648 shares and sole power with respect to 2,280,984 shares to dispose or to direct the disposition of 2,280,984 shares. Information is based on Schedule 13G filed January 25, 2021.

(3)

These securities are held by The Vanguard Group, Inc and its subsidiaries. Information is based on Amendment No. 15 to Schedule 13G filed February 8, 2021. The Vanguard Group, Inc. reported that is has shared voting power with respect to 56,898 shares, sole dispositive power with respect to 2,018,896 shares and shared dispositive power with respect to 66,390 shares.

(4)

Includes restricted shares awarded during 2019 and 2020 which are scheduled to vest during 2021 and 2022, respectively. These shares are subject to

forfeiture and vesting pursuant to the terms and conditions set forth in the applicable restricted stock agreements.

(5)

Less than 1% of the outstanding shares.

(6)

Includes 42,000 shares of beneficial interest beneficially owned by the Alan B. Miller Family Foundation. Mr. Miller disclaims beneficial ownership of these securities.

9


Equity Compensation Plan Information

The table below provides information, as of December 31, 2020, concerning securities authorized for issuance under our equity compensation plans.

Equity Compensation Plan Information

Plan category

 

Number of securities

to be issued upon

exercise of outstanding

options, warrants and rights(a)

 

 

Weighted-average exercise

price of outstanding

options, warrants and rights(b)

 

 

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding column(c))

 

Equity compensation plans

   approved by security holders

 

 

 

 

 

 

 

 

57,960

 

Equity compensation plans not

   approved by security holders

 

 

 

 

 

 

 

 

 

TOTAL

 

 

 

 

 

 

 

 

57,960

 

 

The securities remaining available for future issuance under our equity compensation plan includes a 50,000 share increase in the number of shares that may be issued under the Plan, as approved by our shareholders on June 3, 2020.

 

 

 

10


 

PROPOSAL NO. 1

ELECTION OF TWO TRUSTEES

We were organized under the laws of the State of Maryland as a real estate investment trust on August 6, 1986. Pursuant to our Declaration of Trust, the Trustees have been divided into three classes, with staggered terms. The terms of the Trustees in Class II expire at this meeting, the terms of the Trustees in Class III will expire at the 2022 Annual Meeting and the terms of the Trustees in Class I will expire at the 2023 Annual Meeting. At each Annual Meeting, Trustees are elected for a term of three years to succeed those in the class whose term is expiring at such Annual Meeting.

The persons listed below include our Board of Trustees and nominees. The terms of the current Class II Trustees, Mr. Marc D. Miller and Ms. Gayle L. Capozzalo, expire at the 2021 Annual Meeting The nominees for the Class II Trustees are Marc D. Miller and Gayle L. Capozzalo. They have been nominated to be elected for a three-year term that expires at the 2024 Annual Meeting. The Trustees have no reason to believe that the nominees will be unavailable for election; however, if a nominee becomes unavailable for any reason, the shares represented by the proxy will be voted for the person, if any, who is designated by the Board of Trustees to replace the nominee. The nominees have consented to be named and have indicated their intent to serve if elected.

Pursuant to our Declaration of Trust, a majority of our Trustees must be “Independent Trustees” with each class of Trustees containing at least one Independent Trustee. The Declaration of Trust defines an “Independent Trustee” as a Trustee who is not an affiliate of UHS, the parent company of our Advisor, and does not perform any services for us, except as Trustee. The vote of a majority of all the votes cast at a meeting at which a quorum is present is necessary for the election of the Class II Trustees. A majority of the votes cast means that the number of shares voted “for” a Trustee’s election exceeds the number of shares “withheld” from that Trustee. A nominee currently serving as a Trustee not receiving a majority of the votes cast will tender his or her resignation, promptly following certification of the shareholder vote, for consideration by the Nominating & Corporate Governance Committee.

 


11


 

The following information is furnished with respect to the nominees for election as a Trustee and each member of the Board of Trustees whose term of office will continue after the meeting.

 

Name

 

Class of
Trustee

 

Age

 

Principal Occupation

During the Last Five Years

 

Trustee
Since

 

 

 

 

 

 

NOMINEES (TERMS

EXPIRING IN 2021)

 

 

 

 

 

Marc D. Miller

II

50

     Mr. Marc D. Miller appointed Chief Executive Officer of UHS in January, 2021 and continues to serve as President. Prior thereto, he served in various other capacities related to UHS’s acute care division since 2000. Mr. Marc D. Miller was elected to the UHS Board of Directors in May, 2006. He serves as a member of the Board of Directors of Premier, Inc. He is the son of Alan B. Miller, our Chairman of the Board, Chief Executive Officer and President; and Executive Chairman of the Board of Directors of UHS.

2008

Gayle L. Capozzalo*

II

71

     Ms. Capozzalo is the founder and leader of The Equity Collaborative, a not for profit collaborative of large healthcare systems. Ms. Capozzalo formerly served as Executive Vice President and Chief Strategy Officer of Yale New Haven Health from 1997 to 2018. Prior thereto, she served as Senior Vice President, Organizational Development at Sisters of Charity of the Incarnate Word Health Care System.

2018

12


Name

 

Class of
Trustee

 

Age

 

Principal Occupation

During the Last Five Years

 

Trustee
Since

 

TRUSTEES WHOSE TERMS

EXPIRE IN 2022    

 

 

 

 

Michael Allan Domb*

III

65

Mr. Domb is the owner of Allan Domb Real Estate, a multi-faceted real estate firm focused on the brokerage, development, investment and management of residential and commercial real estate in Philadelphia, Pennsylvania. In 2015, Mr. Domb was elected to serve the City of Philadelphia as a Councilman At-Large.

2017

James P. Morey*

III

53

Mr. Morey has served as the Executive Vice President, Chief Marketing and Brand Officer for Wawa, Inc. since January, 2017. Prior thereto, he held various roles at Wawa, including Chief Operations Officer, responsible for all of Store Operations, Real Estate and Supply Chain, as well as serving as Chief Financial Officer. Prior to joining Wawa, Mr. Morey was Group Vice President of Financial Strategy, Planning, Tax and Treasury for Bloomin’ Brands, and prior thereto held various financial and operational roles with McDonald’s Corporation.

2018

TRUSTEES WHOSE TERMS

EXPIRE IN 2023    

 

 

 

 

 

Alan B. Miller

I

83

     Mr. Alan B. Miller has served as our Chairman of the Board of Trustees and Chief Executive Officer since 1986 and our President since February, 2003. Mr. Alan B. Miller, who had previously served as the Chairman of the Board of Directors and Chief Executive Officer of UHS since its inception in 1978, was appointed Executive Chairman of the Board of Directors of UHS effective January 1, 2021. He is the Father of Marc D. Miller, a member of our Board of Trustees and Chief Executive Officer, President, and member of the Board of Directors of UHS.

1986

 

 

 

 

 

Robert F. McCadden*

I

63

     Mr. McCadden formerly served as Executive Vice President and Chief Financial Officer of Pennsylvania Real Estate Investment Trust from 2004 to 2019. Prior thereto, he served as audit partner of KPMG LLP.    

2013

 

*

Independent Trustee

13


THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEES AS TRUSTEE. ANY NOMINEE CURRENTLY SERVING AS A TRUSTEE IN AN ELECTION WHO RECEIVES A GREATER NUMBER OF VOTES “WITHHELD” HIS OR HER ELECTION THAN VOTES “FOR” SUCH ELECTION SHALL TENDER HIS OR HER RESIGNATION FOR CONSIDERATION BY THE NOMINATING & GOVERNANCE COMMITTEE.  

14


PROPOSAL NO. 2

ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION

Pursuant to rules of the Securities and Exchange Commission, we are asking you to approve, on an advisory (non-binding) basis, the compensation paid to our named executive officers as disclosed in the Compensation Discussion and Analysis below, the compensation tables below, and any related narrative discussion contained in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to express their views on the compensation paid to our named executive officers.

Say on Pay Voting Results

Our Say on Pay vote for the 2018 fiscal year, as tabulated at the June, 2019 annual meeting, received 65% support from our shareholders. At that time, our Board of Trustees viewed this vote as an indication that expanded engagement was needed to ensure we have a clear understanding of, and opportunity to respond to, our shareholders’ views on our compensation program and related disclosures.  In late 2019, after contacting our top 30 shareholders representing more than 54% of our outstanding shares (or more than 80% of the votes cast at the 2019 annual meeting), our management met by telephone or in-person with shareholders representing nearly 35% of our outstanding shares to provide an open forum to each shareholder to discuss and comment on any aspects of the Trust’s executive compensation program and related disclosures, as well as any other topic of interest to our shareholders

As a result of shareholder engagement, our Say on Pay vote for the 2019 fiscal year, as tabulated at the June, 2020 annual meeting, received 92% support from our shareholders.

What We Heard in Our Engagement and How We Responded

As a result of the feedback we received during our shareholder engagement, we made updates as described below.

 

What We Heard

How We Responded

Improve disclosure of the Advisory Fee calculation

Beginning with last year’s proxy, we have provided additional disclosure regarding the nature and computation of our Advisory Fee.

Enhance transparency of the executive compensation program of our Advisor

We have added new disclosure throughout the CD&A to enhance and supplement our disclosures as well as to describe the executive compensation program of our Advisor.

 

This disclosure includes computing the aggregate estimated named executive officer (“NEO”) compensation as the sum of the aggregate estimated NEO salary and incentive cash bonus allocations from UHS; plus the aggregate NEO stock-based compensation awarded directly by UHT.  

Convert restricted stock grants to performance based awards

Beginning in 2019, restricted share grants awarded by UHT were determined based upon performance metrics, as disclosed below in Long-Term Incentives.

 

15


 

Advisory Fee Calculation

 

Average Invested Real Estate Assets” for Advisory Fee calculation purposes exclude certain items from our consolidated balance sheet such as, among other things, accumulated depreciation, cash and cash equivalents, base and bonus rent receivables, deferred charges, and other assets.


16


 

Allocation of Advisory Fee + UHT Stock-Based Compensation Expense

 

 

As described more fully below, for estimation and analyses purposes, a portion of the Advisory Fee could be attributed to NEO compensation. We do not pay salary or other cash compensation to our NEOs. For illustrative purposes only, we estimated that $990,000 of the Advisory Fee for 2020 could be attributed to salaries ($887,000) and cash incentive bonus ($103,000) expense incurred by the Advisor in connection with the NEOs.

The chief element of our compensation program is the annual granting of long-term incentive awards, as discussed in greater detail below. On June 3, 2020, we granted shares of restricted stock to each of our NEOs which had an aggregate grant date value of $753,605. These shares vest on the second anniversary of the date of grant.  As discussed below in Executive Compensation Discussion and Analysis-Long-Term Incentives, the restricted share grants awarded in June, 2020 were determined based upon performance metrics which compared UHT’s 3-year average total shareholder return for 2017 through 2019 to the 3-year average total shareholder return for our peer group and the average for the NAREIT Index.  

17


The remainder of the Advisory Fee could be attributed to various other operating expenses incurred by the Advisor on our behalf including, but not limited to, salaries of other employees of the Advisor that routinely provide services on our behalf (approximately 22 individuals), benefits expense, lease and rental expense, salaries expense for additional employees of the Advisor that, from time-to-time, and as warranted, provide services on our behalf and all other general and administrative expenses.  

Elements of Compensation from our Advisor (UHS subsidiary) to our NEOs

UHS of Delaware, Inc. (the “Advisor”), a wholly-owned subsidiary of UHS, serves as Advisor to us under an advisory agreement dated December 24, 1986, and as amended and restated as of January 1, 2019 (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Advisor, among other things, provides administrative services to us and to conduct our day-to-day affairs. Our officers are all employees of the Advisor and although as of December 31, 2020 we had no salaried employees, our officers do typically receive annual stock-based compensation awards directly from UHT (as discussed below) in the form of performance based restricted stock. In special circumstances, if warranted and deemed appropriate by the Compensation Committee of our Board of Trustees, our officers may also receive special compensation awards in the form of restricted stock and/or cash bonuses.  There were no special compensation awards made in 2020, 2019 or 2018.

In return for the above-mentioned services, we pay an Advisory Fee to the Advisor. While each of our NEOs dedicates a significant portion of their time and effort to rendering services on our behalf, the Advisory Fee ($4.1 million for 2020) represents an extremely small portion of UHS’s pre-tax income (approximately 0.3% for 2020). The aggregate compensation our NEOs earned from UHS during 2020 exceeded our Advisory Fee. As a result, our Advisor does not directly attribute any portion of the NEOs’ compensation from the Advisor to services rendered on our behalf.  

Estimated salary and cash incentive bonus allocation assumptions:

Since, pursuant to the terms of the Advisory Agreement, the Advisory Fee is derived from our consolidated balance sheet, the nature of amount of the various underlying operating expenses incurred by the Advisor, including compensation paid to our named executive officers, is not determinable and not related to the amount of the Advisory Fee. However, for illustrative purposes only, based upon a calculation that includes certain assumptions and estimates related to the portion of time spent by each of our four named executive officers while directly providing services on our behalf, as well as certain other estimation assumptions, we estimate that an aggregate of $990,000 of our Advisory Fee for 2020 could be allocated to salaries and cash incentive bonus expense incurred by the Advisor in connection with those individuals as follows:

 

We estimate that $887,000 of our Advisory Fee for 2020 could be attributed to salaries expense incurred by the Advisor in connection with our four named executive officers. This estimate can vary substantially from year-to-year based upon the relative level of our acquisitions, divestitures and other business activities. The estimate is based upon a portion of the fixed salaries paid by the Advisor to of our named executive officers for services provided on our behalf.

 

In addition, we estimate that approximately $103,000 of our Advisory Fee for 2020 could be attributed to cash incentive bonus expense incurred by the Advisor in connection with our four named executive officers. The cash bonus estimation methodology is discussed below.  

Variable/incentive stock-based compensation assumptions:

The estimates above do not include any portion of variable/incentive stock-based compensation awarded by the Advisor to these individuals since, as discussed below, those awards made by the Advisor to each individual are entirely measured and based upon stock performance metrics related only to UHS. Therefore, no portion of the

18


variable/incentive stock-based compensation awarded by the Advisor to our named executive officers is attributable to services provided by those individuals on our behalf. Rather, the stock-based incentive compensation awarded to these individuals for their services rendered on behalf of UHT occurs in the form of performance based restricted stock grants awarded directly from UHT, as mentioned above, which had a grant date value of $753,605 for 2020.   

Enhanced Disclosure on Elements of Compensation from our Advisor to our NEOs in Response to Shareholder Engagement

The information below is provided as a result of our shareholder engagement initiative conducted in late 2019 during which our shareholders suggested information they may find useful in fully evaluating the Advisor’s executive compensation program for the purpose of making an informed decision related to the Say on Pay vote.  

In response to the feedback received, the Advisor has provided the information below in connection with the compensation it paid to our NEOs for 2020.  During the year, each of our four NEOs received, from our Advisor, a base salary, cash incentive bonus, incentive stock-based compensation awards, pension benefits and other compensation (if applicable).   

Pay Element

 

Aggregate paid by UHS

 

 

Estimated Compensation Attributed to UHT

 

 

Calculation Assumptions Used

Salary

 

$

2,854,000

 

 

$

887,000

 

 

Estimated portion of time spent by each of our four named executive officers while directly providing services on our behalf.

Cash Incentive Bonuses

 

$

1,208,000

 

 

$

103,000

 

 

See Note A. below.

Equity Awards (UHS)

 

$

10,333,000

 

 

$

 

 

Pursuant to Note B. below, these are grants made by UHS, not UHT.

Equity Awards (UHT)

 

N/A

 

 

$

754,000

 

 

These awards are made directly by UHT and reflect the reported grant date fair value.

Other

 

$

1,261,000

 

 

$

 

 

These payments primarily relate to insurance premiums and UHS-related pension benefits that are not attributable to services provided on our behalf.

Total

 

$

15,656,000

 

 

$

1,744,000

 

 

 

 

Note A.

 

o

The estimated pro rata portion of the cash incentive bonuses awarded by UHS, that for illustrative purposes can be attributable to UHT, was computed as follows:

 

Mr. Alan B. Miller’s cash incentive bonus consists of two components:

 

a target bonus awarded by UHS pursuant to its Executive Incentive Plan, if certain thresholds are met, based entirely upon UHS’s achievement of: (i) a specified range of target levels of adjusted net income attributable to UHS, and; (ii) a specified range of target levels of return on capital (adjusted net income attributable to UHS divided by quarterly average net capital) for the current year.

19


However, as a result of the COVID-19 pandemic and its material unfavorable impact on UHS’s results of operations for the year ended December 31, 2020, no cash incentive bonus was paid by UHS to Mr. Miller for 2020.

 

an annual contractually stipulated minimum bonus of $1.0 million as provided for in Mr. Miller’s 2013 employment agreement with UHS. Effective January 1, 2021, upon Mr. Miller’s transition to Executive Chairman of the Board of Directors of UHS, from Chairman of the Board and Chief Executive Officer of UHS previously, Mr. Miller entered into a new employment agreement with UHS pursuant to the terms of which there is no annual minimum contractually stipulated bonus.     

Since the majority of Mr. Miller’s cash incentive bonus from UHS is typically derived pursuant to a formula based upon UHS’s achievement of pre-established financial metrics, a negligible portion of his bonus was attributed to UHT for estimation purposes, based upon the extremely small portion of UHS’s pre-tax income that the $4.1 million Advisory Fee comprises.

 

Since the cash incentive bonuses awarded by UHS to Mr. Boyle and Ms. Ramagano are discretionary, the portion of their cash incentive bonuses attributed to UHT for estimation purposes was based upon the estimated portion of their time spent rendering services on our behalf. Factors considered by UHS in determining the amount of cash incentive bonuses awarded to Mr. Boyle and Ms. Ramagano include evaluation of individual performance during the year and, if applicable, UHS’s achievement of pre-established financial metrics.    

 

Since the cash incentive bonus awarded to Mr. Fowler from UHS is entirely based upon certain pre-established targets related solely to UHT, including return on investment of previous acquisitions and development projects, as well as transaction completion incentives, it was all attributed to UHT for estimation purposes.

Note B.

 

o

The stock-based compensation awarded by our Advisor during 2020 to Mr. Alan B. Miller, who is also an NEO of UHS, consisted of options to purchase shares of UHS’s Class B Common Stock that vest ratably over a 4-year period:

 

50% of the total award value was delivered in stock options with an exercise price equal to the grant date market price of UHS’s Class B Common Stock of $67.69 per share, and;

 

50% of the total award value was delivered in stock options with a premium exercise price of 110% of the grant date market price of UHS’s Class B Common Stock, or $74.46 per share.

 

 

o

The stock-based compensation awarded by our Advisor during 2020 to Messrs. Boyle and Fowler and Ms. Ramagano, none of whom are NEOs of UHS, consisted of:

 

75% of the total award value was delivered in options to purchase shares of UHS’s Class B Common Stock, that vest ratably over a 4-year period, at a grant date market price of $67.69, and;

20


 

25% of the total award value was delivered in shares of UHS restricted stock that vest ratably over a 4-year period.  

The aggregate compensation earned by our NEOs from the Advisor during 2020, as disclosed above, is for informational purposes only and not at all reflective of, or are based upon, amounts due from us to the Advisor.  

Our aggregate 2020 Advisory Fee paid to UHS was approximately $4.1 million. Pursuant to the terms of the Advisory Agreement, we are not liable for any additional amounts due to the Advisor for 2020, regardless of the compensation paid to our NEOs by the Advisor.  Since the Advisory Fee is derived from our consolidated balance sheet, the nature of amount of the various underlying operating expenses incurred by the Advisor, including compensation paid to our NEOs, does not impact the amount of the Advisory Fee.  

Elements of Compensation from UHT to our NEOs

Since we do not pay cash compensation in the form of annual base salaries to our NEOs, and typically do not pay cash bonuses, the chief element of our compensation program is the annual granting of long-term incentive awards.

On June 3, 2020, we granted shares of performance based restricted stock to each of our named executive officers which had an aggregate grant date value of $753,605 for the entire group. Threshold and target ranges of awards were developed for each NEO based on UHT’s relative performance to peers. The June, 2020 awards were made at target level for each NEO based upon UHT’s above average performance, as measured by UHT’s three-year average total shareholder return (“TSR”) for 2017 through 2019, as compared to the average TSR for the peer group and the average TSR for the NAREIT index. UHT’s TSR for the three-year period was 34.2% which outperformed the peer group average of 11.4% and the NAREIT index average of 9.9%.  

Comparison of Our Advisory Fee and Other General and Administrative Expenses to Selected Healthcare REIT Peer Group:

The Advisory Agreement with UHS is scheduled to expire on December 31st of each year.  However, it is renewable by us on an annual basis, subject to a determination by the independent members of our Board of Trustees that the Advisor’s performance has been satisfactory. As part of the annual review process, our Independent Trustees review the performance of our Advisor, as well as the performance of our NEOs.  The annual review process also includes a review and benchmarking of our operating cost structure to that of a selected peer group of other healthcare REITs.

Data prepared by us on an annual basis calculates the percentages of our aggregate operating cost structure (“Operating Expenses”) consisting of our Advisory Fee and other general and administrative expenses (we have no salaries, wages and benefits expense), to our revenues, net assets and gross assets. Those percentages, calculated utilizing our financial data, are then compared to the percentages of the Operating Expenses of a selected peer group of other healthcare REITs consisting of their general and administrative expenses, including salaries, wages and benefits expense, to their respective revenues, net assets and gross assets.  

 

Below is a table which reflects, for each period utilized in the analyses for 2020, 2019 and 2018, the aggregate of our Operating Expenses as percentages of our revenues, net assets and gross assets, as compared to comparable aggregate data for the selected healthcare REITs peer group.  

 

Companies included in the selected healthcare REIT peer group were Healthpeak Properties, Inc., Healthcare Realty Trust Incorporated, Healthcare Trust of America, Inc., LTC Properties, Inc., Medical Properties

21


Trust, Inc., National Health Investors Inc., Omega Healthcare Investors, Inc., Diversified Healthcare Trust, Ventas, Inc. and Welltower, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

Operating Expenses as Percentage of

 

 

Operating Expenses as Percentage of

 

 

Operating Expenses as Percentage of

 

 

 

Revenues

 

Net Assets

 

Gross Assets

 

 

Revenues

 

Net Assets

 

Gross Assets

 

 

Revenues

 

Net Assets

 

Gross Assets

 

UHT

 

 

7.3

%

 

1.3

%

 

1.0

%

 

 

6.9

%

 

1.2

%

 

0.9

%

 

 

6.8

%

 

1.1

%

 

0.9

%

Healthcare REIT peer group

 

 

6.7

%

 

1.0

%

 

0.8

%

 

 

7.3

%

 

1.1

%

 

0.9

%

 

 

7.4

%

 

1.0

%

 

0.9

%

Based upon the information outlined above, our Independent Trustees believe that the aggregate of our Advisory Fee and other general and administrative expenses are reasonable in comparison to the average general and administrative cost structures of the selected healthcare REIT peer group.

This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we are asking the shareholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the Trust’s shareholders approve, on an advisory basis, the compensation paid to the Trust’s named executive officers, as disclosed in the Trust’s proxy statement for the 2021 Annual Meeting of Shareholders, pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion contained in this Proxy Statement.”

Vote Required

The affirmative vote of a majority of all of the votes cast at a meeting at which a quorum is present is required for approval of the advisory vote on named executive officer compensation. For purposes of the vote on Proposal No. 2, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote, although they will be considered present for the purpose of determining the presence of a quorum.

 

The “say-on-pay” vote is advisory and will not be binding upon the Trust, the Board of Trustees or the Compensation Committee. However, the Compensation Committee will take into account the outcome of the vote when considering future named executive officer compensation arrangements.

THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE COMPENSATION PAID TO THE TRUST’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION DISCUSSION AND ANALYSIS, COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.

 

 

 

 

PROPOSAL NO. 3

22


RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

The Audit Committee of the Board has selected, and as a matter of good corporate governance, is requesting the ratification by the shareholders of the selection of KPMG LLP to serve as our independent registered public accountants for the year ending December 31, 2021. KPMG LLP has served as our independent registered public accountants since 2002. If a favorable vote is not obtained, the Audit Committee may reconsider the selection of KPMG LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of the Trust and its shareholders.

KPMG LLP representatives will attend the Annual Meeting and respond to questions where appropriate. Such representatives may make a statement at the Annual Meeting should they so desire.

Shareholder Approval

We are submitting the selection of the independent registered public accountants for shareholder ratification as a matter of good corporate governance. Ratification of the selection of the independent registered public accountants by the shareholders requires that the votes cast in favor of ratification exceed the votes cast opposing ratification. If a favorable vote is not obtained, the Audit Committee may reconsider the selection of KPMG LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may select different independent auditors if it subsequently determines that such a change would be in the best interest of the Trust and its shareholders. Unless marked to the contrary, proxies will be voted FOR the ratification of the selection of KPMG LLP as our independent registered public accountants.

THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021.

 

 

 

 

 

 

23


 

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Our Executive Officers

Alan B. Miller - Chairman of the Board, Chief Executive Officer and President. Mr. Miller has served as Chairman of the Board and our Chief Executive Officer since our inception in 1986 and was appointed President in February, 2003. Effective January 1, 2021, Mr. Miller was appointed Executive Chairman of the Board of Directors of UHS.  He had previously served as Chairman of the Board and Chief Executive Officer of UHS since its inception in 1978 through December 31, 2020.

Charles F. Boyle - Vice President and Chief Financial Officer.  Mr. Boyle has served as our Vice President and Chief Financial Officer since 2003 and had previously served as our Controller since 1991. Mr. Boyle has held various positions at UHS since 1983. He was appointed Senior Vice President of UHS in 2017 and continues to serve as its Controller. He had served as Vice President and Controller of UHS since 2003 and as its Assistant Vice President-Corporate Accounting since 1994.

Cheryl K. Ramagano – Vice President and Treasurer. Ms. Ramagano has served as our Vice President and Treasurer since 1992 and was appointed Secretary of the Trust in 2003. Ms. Ramagano has held various positions at UHS since 1983. She was appointed Senior Vice President of UHS in 2017 and continues to serve as its Treasurer. She had served as Vice President and Treasurer of UHS since 2003 and as its Assistant Treasurer since 1994.

Timothy J. Fowler - Vice President of Acquisition and Development. Mr. Fowler has served as our Vice President of Acquisition and Development since commencement of his employment with UHS in 1993.

Say on Pay Voting Results

Our Say on Pay vote for the 2018 fiscal year, as tabulated at the June, 2019 annual meeting, received 65% support from our shareholders. At that time, our Board of Trustees viewed this vote as an indication that expanded engagement was needed to ensure we have a clear understanding of, and opportunity to respond to, our shareholders’ views on our compensation program and related disclosures.  In late 2019, after contacting our top 30 shareholders representing more than 54% of our outstanding shares (or more than 80% of the votes cast at the 2019 annual meeting), our management met by telephone or in-person with shareholders representing nearly 35% of our outstanding shares to provide an open forum to each shareholder to discuss and comment on any aspects of the Trust’s executive compensation program and related disclosures, as well as any other topic of interest to our shareholders

As a result of shareholder engagement, our Say on Pay vote for the 2019 fiscal year, as tabulated at the June, 2020 annual meeting, received 92% support from our shareholders.

 

 

 

 

 

 

 

24


 

 

 

What We Heard in Our Engagement and How We Responded

As a result of the feedback we received during our shareholder engagement, we made updates as described below.

 

What We Heard

How We Responded

Improve disclosure of the Advisory Fee calculation

Beginning with last year’s proxy, we have provided additional disclosure regarding the nature and computation of our Advisory Fee.

Enhance transparency of the executive compensation program of our Advisor

We have added new disclosure throughout the CD&A to enhance and supplement our disclosures as well as to describe the executive compensation program of our Advisor.

 

This disclosure includes computing the aggregate estimated named executive officer (“NEO”) compensation as the sum of the aggregate estimated NEO salary and incentive cash bonus allocations from UHS; plus the aggregate NEO stock-based compensation awarded directly by UHT.  

Convert restricted stock grants to performance based awards

Beginning in 2019, restricted share grants awarded by UHT were determined based upon performance metrics, as disclosed below in Long-Term Incentives.

 

Advisory Fee Calculation

 

Average Invested Real Estate Assets” for Advisory Fee calculation purposes exclude certain items from our consolidated balance sheet such as, among other things, accumulated depreciation, cash and cash equivalents, base and bonus rent receivables, deferred charges, and other assets.


25


 

Allocation of Advisory Fee + UHT Stock-Based Compensation Expense

 

 

As described more fully below, for estimation and analyses purposes, a portion of the Advisory Fee could be attributed to NEO compensation. We do not pay salary or other cash compensation to our NEOs. For illustrative purposes only, we estimated that $990,000 of the Advisory Fee for 2020 could be attributed to salaries ($887,000) and cash incentive bonus ($103,000) expense incurred by the Advisor in connection with the NEOs.

The chief element of our compensation program is the annual granting of long-term incentive awards, as discussed in greater detail below. On June 3, 2020, we granted shares of restricted stock to each of our NEOs which had an aggregate grant date value of $753,605. These shares vest on the second anniversary of the date of grant.  As discussed below in Long-Term Incentives, the restricted share grants awarded in June, 2020 were determined based upon performance metrics which compared UHT’s 3-year average total shareholder return for 2017 through 2019 to the 3-year average total shareholder return for our peer group and the average for the NAREIT Index.  

26


The remainder of the Advisory Fee could be attributed to various other operating expenses incurred by the Advisor on our behalf including, but not limited to, salaries of other employees of the Advisor that routinely provide services on our behalf (approximately 22 individuals), benefits expense, lease and rental expense, salaries expense for additional employees of the Advisor that, from time-to-time, and as warranted, provide services on our behalf and all other general and administrative expenses.  

Elements of Compensation from our Advisor (UHS subsidiary) to our NEOs

UHS of Delaware, Inc. (the “Advisor”), a wholly-owned subsidiary of UHS, serves as Advisor to us under an advisory agreement dated December 24, 1986, and as amended and restated as of January 1, 2019 (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Advisor, among other things, provides administrative services to us and to conduct our day-to-day affairs. Our officers are all employees of the Advisor and although as of December 31, 2020 we had no salaried employees, our officers do typically receive annual stock-based compensation awards directly from UHT (as discussed below) in the form of performance based restricted stock. In special circumstances, if warranted and deemed appropriate by the Compensation Committee of our Board of Trustees, our officers may also receive special compensation awards in the form of restricted stock and/or cash bonuses.  There were no special compensation awards made in 2020, 2019 or 2018.

In return for the above-mentioned services, we pay an Advisory Fee to the Advisor. While each of our NEOs dedicates a significant portion of their time and effort to rendering services on our behalf, the Advisory Fee ($4.1 million for 2020) represents an extremely small portion of UHS’s pre-tax income (approximately 0.3% for 2020). The aggregate compensation our NEOs earned from UHS during 2020 exceeded our Advisory Fee. As a result, our Advisor does not directly attribute any portion of the NEOs’ compensation from the Advisor to services rendered on our behalf.  

Estimated salary and cash incentive bonus allocation assumptions:

Since, pursuant to the terms of the Advisory Agreement, the Advisory Fee is derived from our consolidated balance sheet, the nature of amount of the various underlying operating expenses incurred by the Advisor, including compensation paid to our named executive officers, is not determinable and not related to the amount of the Advisory Fee. However, for illustrative purposes only, based upon a calculation that includes certain assumptions and estimates related to the portion of time spent by each of our four named executive officers while directly providing services on our behalf, as well as certain other estimation assumptions, we estimate that an aggregate of $990,000 of our Advisory Fee for 2020 could be allocated to salaries and cash incentive bonus expense incurred by the Advisor in connection with those individuals as follows:

 

We estimate that $887,000 of our Advisory Fee for 2020 could be attributed to salaries expense incurred by the Advisor in connection with our four named executive officers. This estimate can vary substantially from year-to-year based upon the relative level of our acquisitions, divestitures and other business activities. The estimate is based upon a portion of the fixed salaries paid by the Advisor to of our named executive officers for services provided on our behalf.

 

In addition, we estimate that approximately $103,000 of our Advisory Fee for 2020 could be attributed to cash incentive bonus expense incurred by the Advisor in connection with our four named executive officers. The cash bonus estimation methodology is discussed below.  

Variable/incentive stock-based compensation assumptions:

The estimates above do not include any portion of variable/incentive stock-based compensation awarded by the Advisor to these individuals since, as discussed below, those awards made by the Advisor to each individual are entirely measured and based upon stock performance metrics related only to UHS. Therefore, no portion of the

27


variable/incentive stock-based compensation awarded by the Advisor to our named executive officers is attributable to services provided by those individuals on our behalf. Rather, the stock-based incentive compensation awarded to these individuals for their services rendered on behalf of UHT occurs in the form of performance based restricted stock grants awarded directly from UHT, as mentioned above, which had a grant date value of $753,605 for 2020.   

Enhanced Disclosure on Elements of Compensation from our Advisor to our NEOs in Response to Shareholder Engagement

The information below is provided as a result of our shareholder engagement initiative conducted in late 2019 during which our shareholders suggested information they may find useful in fully evaluating the Advisor’s executive compensation program for the purpose of making an informed decision related to the Say on Pay vote.  

In response to the feedback received, the Advisor has provided the information below in connection with the compensation it paid to our NEOs for 2020.  During the year, each of our four NEOs received, from our Advisor, a base salary, cash incentive bonus, incentive stock-based compensation awards, pension benefits and other compensation (if applicable).   

Pay Element

 

Aggregate paid by UHS

 

 

Estimated Compensation Attributed to UHT

 

 

Calculation Assumptions Used

Salary

 

$

2,854,000

 

 

$

887,000

 

 

Estimated portion of time spent by each of our four named executive officers while directly providing services on our behalf.

Cash Incentive Bonuses

 

$

1,208,000

 

 

$

103,000

 

 

See Note A. below.

Equity Awards (UHS)

 

$

10,333,000

 

 

$

 

 

Pursuant to Note B. below, these are grants made by UHS, not UHT.

Equity Awards (UHT)

 

N/A

 

 

$

754,000

 

 

These awards are made directly by UHT and reflect the reported grant date fair value.

Other

 

$

1,261,000

 

 

$

 

 

These payments primarily relate to insurance premiums and UHS-related pension benefits that are not attributable to services provided on our behalf.

Total

 

$

15,656,000

 

 

$

1,744,000

 

 

 

 

Note A.

 

o

The estimated pro rata portion of the cash incentive bonuses awarded by UHS, that for illustrative purposes can be attributable to UHT, was computed as follows:

 

Mr. Alan B. Miller’s cash incentive bonus consists of two components:

 

a target bonus awarded by UHS pursuant to its Executive Incentive Plan, if certain thresholds are met, based entirely upon UHS’s achievement of: (i) a specified range of target levels of adjusted net income attributable to UHS, and; (ii) a specified range of target levels of return on capital (adjusted net income attributable to UHS divided by quarterly average net capital) for the current year.

28


However, as a result of the COVID-19 pandemic and its material unfavorable impact on UHS’s results of operations for the year ended December 31, 2020, no cash incentive bonus was paid by UHS to Mr. Miller for 2020.

 

an annual contractually stipulated minimum bonus of $1.0 million as provided for in Mr. Miller’s 2013 employment agreement with UHS. Effective January 1, 2021, upon Mr. Miller’s transition to Executive Chairman of the Board of Directors of UHS, from Chairman of the Board and Chief Executive Officer of UHS previously, Mr. Miller entered into a new employment agreement with UHS pursuant to the terms of which there is no annual minimum contractually stipulated bonus.     

Since the majority of Mr. Miller’s cash incentive bonus from UHS is typically derived pursuant to a formula based upon UHS’s achievement of pre-established financial metrics, a negligible portion of his bonus was attributed to UHT for estimation purposes, based upon the extremely small portion of UHS’s pre-tax income that the $4.1 million Advisory Fee comprises.

 

Since the cash incentive bonuses awarded by UHS to Mr. Boyle and Ms. Ramagano are discretionary, the portion of their cash incentive bonuses attributed to UHT for estimation purposes was based upon the estimated portion of their time spent rendering services on our behalf. Factors considered by UHS in determining the amount of cash incentive bonuses awarded to Mr. Boyle and Ms. Ramagano include evaluation of individual performance during the year and, if applicable, UHS’s achievement of pre-established financial metrics.     

 

Since the cash incentive bonus awarded to Mr. Fowler from UHS is entirely based upon certain pre-established targets related solely to UHT, including return on investment of previous acquisitions and development projects, as well as transaction completion incentives, it was all attributed to UHT for estimation purposes.

Note B.

 

o

The stock-based compensation awarded by our Advisor during 2020 to Mr. Alan B. Miller, who is also an NEO of UHS, consisted of options to purchase shares of UHS’s Class B Common Stock that vest ratably over a 4-year period:

 

50% of the total award value was delivered in stock options with an exercise price equal to the grant date market price of UHS’s Class B Common Stock of $67.69 per share, and;

 

50% of the total award value was delivered in stock options with a premium exercise price of 110% of the grant date market price of UHS’s Class B Common Stock, or $74.46 per share.

 

 

o

The stock-based compensation awarded by our Advisor during 2020 to Messrs. Boyle and Fowler and Ms. Ramagano, none of whom are NEOs of UHS, consisted of:

 

75% of the total award value was delivered in options to purchase shares of UHS’s Class B Common Stock, that vest ratably over a 4-year period, at a grant date market price of $67.69, and;

29


 

25% of the total award value was delivered in shares of UHS restricted stock that vest ratably over a 4-year period.  

The aggregate compensation earned by our NEOs from the Advisor during 2020, as disclosed above, is for informational purposes only and not at all reflective of, or are based upon, amounts due from us to the Advisor.  

Our aggregate 2020 Advisory Fee paid to UHS was approximately $4.1 million. Pursuant to the terms of the Advisory Agreement, we are not liable for any additional amounts due to the Advisor for 2020, regardless of the compensation paid to our NEOs by the Advisor.  Since the Advisory Fee is derived from our consolidated balance sheet, the nature of amount of the various underlying operating expenses incurred by the Advisor, including compensation paid to our NEOs, does not impact the amount of the Advisory Fee.  

Elements of Compensation from UHT to our NEOs

Since we do not pay cash compensation in the form of annual base salaries to our NEOs, and typically do not pay cash bonuses, the chief element of our compensation program is the annual granting of long-term incentive awards.

On June 3, 2020, we granted shares of performance based restricted stock to each of our named executive officers which had an aggregate grant date value of $753,605 for the entire group. Threshold and target ranges of awards were developed for each NEO based on UHT’s relative performance to peers. The June, 2020 awards were made at target level for each NEO based upon UHT’s above average performance, as measured by UHT’s three-year average total shareholder return (“TSR”) for 2017 through 2019, as compared to the average TSR for the peer group and the average TSR for the NAREIT index. UHT’s TSR for the three-year period was 34.2% which outperformed the peer group average of 11.4% and the NAREIT index average of 9.9%.  

Comparison of Our Advisory Fee and Other General and Administrative Expenses to Selected Healthcare REIT Peer Group:

The Advisory Agreement with UHS is scheduled to expire on December 31st of each year.  However, it is renewable by us on an annual basis, subject to a determination by the independent members of our Board of Trustees that the Advisor’s performance has been satisfactory. As part of the annual review process, our Independent Trustees review the performance of our Advisor, as well as the performance of our NEOs.  The annual review process also includes a review and benchmarking of our operating cost structure to that of a selected peer group of other healthcare REITs.

Data prepared by us on an annual basis calculates the percentages of our aggregate operating cost structure (“Operating Expenses”) consisting of our Advisory Fee and other general and administrative expenses (we have no salaries, wages and benefits expense), to our revenues, net assets and gross assets. Those percentages, calculated utilizing our financial data, are then compared to the percentages of the Operating Expenses of a selected peer group of other healthcare REITs consisting of their general and administrative expenses, including salaries, wages and benefits expense, to their respective revenues, net assets and gross assets.  

 

Below is a table which reflects, for each period utilized in the analyses for 2020, 2019 and 2018, the aggregate of our Operating Expenses as percentages of our revenues, net assets and gross assets, as compared to comparable aggregate data for the selected healthcare REITs peer group.  

 

Companies included in the selected healthcare REIT peer group were Healthpeak Properties, Inc., Healthcare Realty Trust Incorporated, Healthcare Trust of America, Inc., LTC Properties, Inc., Medical Properties

30


Trust, Inc., National Health Investors Inc., Omega Healthcare Investors, Inc., Diversified Healthcare Trust, Ventas, Inc. and Welltower, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

 

 

 

 

 

 

2019

 

 

 

 

 

 

 

 

2018

 

 

 

 

 

 

Operating Expenses as Percentage of

 

 

Operating Expenses as Percentage of

 

 

Operating Expenses as Percentage of

 

 

 

Revenues

 

Net Assets

 

Gross Assets

 

 

Revenues

 

Net Assets

 

Gross Assets

 

 

Revenues

 

Net Assets

 

Gross Assets

 

UHT

 

 

7.3

%

 

1.3

%

 

1.0

%

 

 

6.9

%

 

1.2

%

 

0.9

%

 

 

6.8

%

 

1.1

%

 

0.9

%

Healthcare REIT peer group

 

 

6.7

%

 

1.0

%

 

0.8

%

 

 

7.3

%

 

1.1

%

 

0.9

%

 

 

7.4

%

 

1.0

%

 

0.9

%

Based upon the information outlined above, our Independent Trustees believe that the aggregate of our Advisory Fee and other general and administrative expenses are reasonable in comparison to the average general and administrative cost structures of the selected healthcare REIT peer group.

 

Compensation Philosophy and Objectives:

Our compensation program is aligned with our philosophy by practices that are regulatory compliant, financially sound and provide long-term value to shareholders and generally include the following:

 

Review of peer group market data

 

Performance discussion is included on incentive decisions

 

Practices are reviewed annually by our outside consultants

 

Do not provide values generally outside of current market practices

 

Do not offer excessive perquisites to our executives

In designing our stock-based compensation program for our named executive officers, we follow our belief that compensation should reflect the value created for shareholders while supporting our strategic business goals. Because of our management structure and advisory arrangement, historically, our compensation program has been basic. The Compensation Committee is guided by the following objectives:

 

Compensation should encourage increased shareholder value;

 

 

Compensation programs should support our short-term and long-term strategic business goals and objectives, and;

 

Compensation should motivate our executive officers and other personnel toward outstanding performance and reward them for contributions toward business goals.

These objectives govern the decision-making process with respect to the amount and type of compensation payable to our named executive officers and other personnel. The Compensation Committee reviews our compensation programs annually to ensure that these objectives continue to be met.

Elements of Compensation

In light of our management structure and advisory arrangement, we have historically provided limited compensation to our named executive officers and other personnel. The chief element of our compensation program is the periodic granting of long-term incentive awards. We typically do not pay cash compensation in the form of an annual base salary or cash bonuses to our named executive officers. All of our named executive officers are employees of UHS and, as such, are compensated by UHS.

31


The Compensation Committee believes that linking executive compensation to corporate performance results in a better alignment of compensation with corporate business goals and shareholder value. Long-term incentive awards are granted to motivate and encourage excellent service and to reward our named executive officers for their respective contributions. Long-term incentive compensation is based, in part, on our performance and the value received by shareholders. As we improve our performance, resulting in increased value to shareholders, our executives and other personnel are rewarded commensurately.

Compensation Setting Process:

Each year, the human resources personnel of our Advisor reviews general financial and compensation related information for companies identified as our peers. Such information includes a summary of revenues, assets, market capitalization and dividend yield. In addition, the stock-based compensation levels of our named executive officers are compared against those of comparable positions in other comparable companies. The compensation market data compiled by the human resources personnel of our Advisor is reviewed on an annual basis by our third-party consultant, Board Advisory, Inc., for accuracy and reasonableness.

In determining the amount of stock-based compensation awards granted to each of our named executive officers each year, the Compensation Committee considers our overall performance as compared to the peer group, our business activities conducted during the year, and an evaluation of each named executive officer’s individual performance. In addition, the Compensation Committee has traditionally relied upon the input and recommendations of our Chairman, President and Chief Executive Officer, Mr. Alan B. Miller, who reviews and advises the Compensation Committee with respect to our compensation programs, including the compensation arrangements for our named executive officers and other personnel other than himself. The Compensation Committee believes that Mr. Miller’s role as Chief Executive Officer of the Trust since its inception in 1986 provides a valuable resource to them. Mr. Miller attends Compensation Committee meetings by invitation, however, he does not have the right to vote on matters addressed by the Compensation Committee and he does not participate in the discussions with respect to his own compensation. Compensation for Mr. Miller is determined by the Compensation Committee and typically guidance and advice is requested from the human resources department of our Advisor.

In March, 2020, the Board of Trustees adopted an amendment to the Universal Health Realty Income Trust Amended and Restated 2007 Restricted Stock Plan (the “2007 Amended and Restated Plan”), which was approved by our shareholders in June, 2020. This stock plan was originally approved by our shareholders in June, 2007 and was subsequently amended and restated and approved by our shareholders in June, 2016. The 2007 Amended and Restated Plan is designed to implement our compensation objectives stated herein. The 2007 Amended and Restated Plan, is administered by the Compensation Committee, which has full authority in its discretion, from time to time, and at any time, to select those officers to whom awards will be granted, to determine the number of shares subject thereto, the times at which such awards shall be granted, the time at which the awards shall vest, and the terms and conditions of the agreements to be entered into by our officers and other personnel. Our Compensation Committee, in its sole discretion, requested guidance from a third-party compensation consulting firm with respect to the concepts and practices used for development of the original stock plan. The full Board of Trustees is responsible for administering incentive grants to our Independent Trustees. We do not have any plan to select grant dates for our named executive officers and trustees in coordination with the release of material non-public information.

The 2007 Amended and Restated Plan permits the granting of restricted shares of beneficial interest. The Compensation Committee believes restricted stock awards are more effective than stock options in achieving our compensation objectives, as restricted stock is subject to less market volatility and, depending on the total number of shares granted, is potentially less dilutive to our shares of beneficial interest. Recipients realize immediate

32


value as restricted stock awards vest, with the value increasing as our stock performance increases. Commencing in 2020, quarterly dividends applicable to unvested restricted stock awards are deferred and accumulated until the restricted stock becomes vested. Dividends applicable to restricted stock awards made prior to 2020 were paid on a current basis. The Compensation Committee believes that periodic grants of long term incentive awards to our named executive officers and other personnel will serve to motivate and encourage excellent service and reward them for their respective contributions. Further, the Compensation Committee believes that this will enhance shareholder value and support our business goals because such long-term incentive compensation is based, in part, on our performance and the value received by shareholders.

Commencing in 2019, the restricted stock grants issued to our named executive officers under the 2007 Amended and Restated Plan were performance based awards. Threshold and target ranges of awards were developed for each named executive officer based upon our relative performance to peers, as measured by our three-year average total shareholder return (“TSR”), as compared to the average TSR for the peer group and the average TSR for the NAREIT index. Vesting of restricted shares has historically been based upon continuing service. The Compensation Committee has the option to condition the vesting of a restricted stock award on the achievement of specified performance goals. Performance goals, if applicable, may be based on business criteria such as earnings per share, share price, total shareholder return, pre-tax profits, net earnings, return on equity or assets, revenues and funds from operations per share. Performance goals may be applied to an individual, the Trust and/or any one or more of our properties or other operating unit(s) as the Compensation Committee may designate. While attainment of the performance targets remains substantially uncertain, the Compensation Committee will be responsible for determining whether and the extent to which the performance goals have been attained and the amount of compensation, if any, that is payable as a result. The Compensation Committee must certify in writing prior to payment of the compensation that the performance goals and any other material terms of the award were in fact satisfied.

2020 Compensation:

Since we do not pay cash compensation in the form of annual base salaries to our named executive officers, and typically do not pay cash bonuses, the chief element of our compensation program is the periodic granting of long-term incentive awards.

 

Long-Term Incentives

On June 3, 2020, we granted shares of performance based restricted stock to each of our named executive officers which had an aggregate grant date value of $753,605 for the entire group. Threshold and target ranges of awards were developed for each named executive officer based on UHT’s relative performance to peers. The June, 2020 awards were made at target level for each name executive officer based upon UHT’s above average performance, as measured by UHT’s three-year average total shareholder return (“TSR”) for 2017 through 2019, as compared to the average TSR for the peer group and the average TSR for the NAREIT index. UHT’s TSR for the three-year period was 34.2% which outperformed the peer group average of 11.4% and the NAREIT index average of 9.9%.  

As discussed herein, the Compensation Committee believes that in the general absence of cash compensation, it is important to provide our named executive officers, including the Chief Executive Officer, an incentive to increase shareholder value by awarding equity based compensation. For a description of the long-term incentive awards granted to our named executive officers during 2020, you should read the Summary Compensation Table and the Grants of Plan-Based Awards Table included in this Proxy Statement.

In determining the number of shares of restricted stock granted to our named executive officers during 2020, our Compensation Committee reviewed competitive incentive pay and TSR data of a selected peer group.

33


Incentive pay data was prepared by the human resource personnel of our Advisor and reviewed for accuracy by our outside consultant. The data compared the compensation levels of our named executive officers against those of comparable positions in a selected peer group consisting of other advisor managed healthcare real estate investment trusts (“REITs”) in addition to peer companies of self-managed REITs with similar asset size and comparable dividend yield.  TSR was reviewed for peer companies of similar REITs in addition to the average TSR for the National Association of Real Estate Investment Trusts (NAREIT Index).

The companies in the advisor peer group, which had no salaried employees since they are managed pursuant to advisory or management agreements, consisted of Service Properties Trust (formerly Hospitality Properties Trust) and Diversified Properties Trust (formerly Senior Housing Properties Trust). Companies included in the self-managed and comparable asset and dividend yield peer group were Agree Realty Corp., Care Trust REIT, Community Healthcare Trust, Four Corners Properties Trust, Getty Realty Corp., Gladstone Commercial Corp., LTC Properties, Inc., Monmouth Real Estate Investment Corp., One Liberty Properties, Inc., Sotherly (formerly MHI Hospitality), Stratus Properties, UMH Properties, Inc., and Wheeler REIT.

The Compensation Committee also considered Mr. Alan Miller’s recommendations and took into account each named executive officer’s position, responsibilities and contribution to our financial performance as well as his or her contribution to our growth and productivity. In addition, historical internal practices for stock awards were also reviewed and used as a basis for determining individual award amounts.

During the period analyzed, it was difficult to compare to the Advisory peer group since one company’s market capitalization dropped 25% as compared to the prior year value, and the other company recently hired its chief financial officer. The value of the equity grant awarded in June, 2020 to our Chief Executive Officer and other named executive officers were below the 25th percentile of the self-managed and comparable asset and dividend yield peer group. The Compensation Committee believes that the compensation of our named executive officers during 2020 is reasonable in comparison to market rates based on the review of the compensation levels and TSR performance of the selected peer group.

We anticipate that the chief element of our compensation program will continue to be the periodic granting of long-term incentive awards issued pursuant to the terms of the 2007 Amended and Restated Plan. We do not intend to pay cash compensation in the form of an annual base salary to our named executive officers in 2021. The peer group and market data prepared by the human resource personnel of our Advisor during 2021 will be reviewed by our outside consultant for accuracy and reasonableness.

Rewards/Compensation Risk Analysis:

Since we typically pay no cash compensation and have historically had no incentive plans that are directly correlated to earnings, revenues or cash flows, we believe there were no excessive risks encouraged by the Trust’s stock-based compensation awards and that the awards do not produce compensation that have a material impact on the financial performance of the Trust.

Summary:

The foregoing discussion describes: (i) the compensation objectives and policies that were utilized with respect to our named executive officers and other personnel during 2020, and; (ii) our anticipated compensation program for 2021.

In the future, as the Compensation Committee continues to review each element of the executive compensation program with respect to our named executive officers and other personnel, the objectives of our executive compensation program, as well as the methods that the Compensation Committee utilizes to determine

34


both the types and amounts of compensation to award to our named executive officers and other personnel, may change.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management; and based on the review and discussions, the Compensation Committee recommended to the Board of Trustees that the Compensation Discussion and Analysis be included in the Trust’s Proxy Statement.

 

 

COMPENSATION COMMITTEE

Gayle L. Capozzalo, Chairperson

Robert F. McCadden

Michael Allan Domb

 

Compensation Committee Interlocks And Insider Participation

The Compensation Committee of the Board of Trustees is currently composed of Gayle L. Capozzalo, Robert F. McCadden and Michael Allan Domb. All of the members of the Compensation Committee are Independent Trustees and no member of the Compensation Committee or any person who served as a member of the Compensation Committee during any part of 2020 has ever been one of our officers or employees, nor has had any relationship with us that requires disclosure.

 

35


 

Summary Compensation Table

The following table sets forth information regarding compensation earned by our Chief Executive Officer, our Chief Financial Officer and the two other executive officers during the last three fiscal years. We have no other executive officers. We refer to these officers collectively as our named executive officers.

 

Name and principal position(1.)

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($)(2.)

 

 

Option

and

Dividend

Equivalent

Right

Awards

($)

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

Change in

Pension

Value and

Nonqualified

Deferred

Compensation

Earnings ($)

 

 

All

Other

Compensation

($)(3.)

 

 

Total

($)

 

Alan B. Miller,

 

2020

 

$

 

 

$

 

 

$

295,057

 

 

$

 

 

$

 

 

$

 

 

$

16,836

 

 

$

311,893

 

Chairman of the Board,

 

2019

 

 

 

 

 

 

 

 

256,932

 

 

 

 

 

 

 

 

 

 

 

 

16,423

 

 

 

273,355

 

Chief Executive Officer

and President

 

2018

 

 

 

 

 

 

 

 

188,399

 

 

 

 

 

 

 

 

 

 

 

 

15,512

 

 

 

203,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charles F. Boyle,

 

2020

 

$

 

 

$

 

 

$

171,230

 

 

$

 

 

$

 

 

$

 

 

$

9,770

 

 

$

181,000

 

Vice President and Chief

 

2019

 

 

 

 

 

 

 

 

149,105

 

 

 

 

 

 

 

 

 

 

 

 

9,480

 

 

 

158,585

 

Financial Officer

 

2018

 

 

 

 

 

 

 

 

109,333

 

 

 

 

 

 

 

 

 

 

 

 

8,751

 

 

 

118,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cheryl K. Ramagano,

 

2020

 

$

 

 

$

 

 

$

171,230

 

 

$

 

 

$

 

 

$

 

 

$

9,770

 

 

$

181,000

 

Vice President, Secretary

 

2019

 

 

 

 

 

 

 

 

149,105

 

 

 

 

 

 

 

 

 

 

 

 

9,480

 

 

 

158,585

 

and Treasurer

 

2018

 

 

 

 

 

 

 

 

109,333

 

 

 

 

 

 

 

 

 

 

 

 

8,751

 

 

 

118,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Timothy J. Fowler,

 

2020

 

$

 

 

$

 

 

$

116,088

 

 

$

 

 

$

 

 

$

 

 

$

6,624

 

 

$

122,712

 

Vice President,

 

2019

 

 

 

 

 

 

 

 

101,088

 

 

 

 

 

 

 

 

 

 

 

 

6,427

 

 

 

107,515

 

Acquisition and Development

 

2018

 

 

 

 

 

 

 

 

74,124

 

 

 

 

 

 

 

 

 

 

 

 

5,930

 

 

 

80,054

 

 

(1.)

Our officers are all employees of a wholly-owned subsidiary of UHS and do not receive salaries from us. We pay an annual advisory fee to UHS of Delaware, Inc. (the “Advisor”) pursuant to the Advisory Agreement, as amended, between the Advisor and us, whereby the Advisor manages our day-to-day affairs and provides certain other services to us. See additional information on our relationship with our Advisor included in this Proxy Statement.

(2.)

Represents grant date fair value ($96.74 per share for 2020, $84.24 per share for 2019 and $61.77 per share for 2018) for awards made during each year pursuant to the Universal Health Realty Income Trust Amended and Restated 2007 Restricted Stock Plan. Dividends declared by us were/are paid on a current basis with respect to outstanding shares of restricted stock issued during 2019 and 2018 and dividends declared by us are accrued and accumulated with respect to outstanding shares of restricted stock issued during 2020 and will be paid in the aggregate on the vesting date on shares that ultimately vest. Awards are scheduled to vest on the second anniversary of the grant date.

(3.)

Consists of dividends paid on unvested restricted stock issued during 2019 and 2018 and dividends deferred and accumulated on unvested restricted stock issued during 2020 which will be paid in the aggregate on the vesting date on shares that ultimately vest

36


Grants of Plan-Based Awards

The following table provides information regarding plan-based awards granted during fiscal year 2020 to our named executive officers.

 

 

 

 

 

Estimated Future

Payouts Under

Non-Equity

Incentive

Plan Awards

 

 

Estimated Future

Payouts Under

Equity Incentive

Plan Awards

 

 

All

Other

Stock

Awards:

Number of

 

 

All

Other

Option

Awards:

Number of

 

 

Exercise

or

Base

 

 

Closing

 

 

Grant

Date

Fair

 

Name

 

Approval

/Grant

Date

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Shares

of Stock

or Units

(1.) (#)

 

 

Securities

Underlying

Options

(#)

 

 

Price of

Option

Awards

($ / Sh)

 

 

Price on

Grant

Date

($ / Sh)

 

 

Value of

Stock

Awards

(2.) ($)

 

Alan B. Miller

 

6/3/2020

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

3,050

 

 

 

0

 

 

 

0

 

 

$

96.74

 

 

$

295,057

 

Charles F. Boyle

 

6/3/2020

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,770

 

 

 

0

 

 

 

0

 

 

$

96.74

 

 

$

171,230

 

Cheryl K. Ramagano

 

6/3/2020

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,770

 

 

 

0

 

 

 

0

 

 

$

96.74

 

 

$

171,230

 

Timothy J. Fowler

 

6/3/2020

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

1,200

 

 

 

0

 

 

 

0

 

 

$

96.74

 

 

$

116,088

 

 

(1.)

Performance-based restricted shares of beneficial interest issued under our 2007 Amended and Restated Restricted Stock Plan. These shares are scheduled to vest on June 3, 2022, the second anniversary date of the award. These shares are eligible for dividends, however, dividends declared by us will be deferred and accumulated prior to vesting and paid in the aggregate on the vesting date, on shares that ultimately vest.

(2.)

Represents the full grant date fair value for the restricted stock awards, as described in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

Outstanding Equity Awards at December 31, 2020

The following table provides information about the number of outstanding equity awards held by our named executive officers at December 31, 2020.

 

 

 

Option Awards (1.)

 

Stock Awards (2.)

 

Name

 

Number of

Securities

Underlying

Unexercised

Options (#)

 

 

Number of

Securities

Underlying

Unexercised

Options (#)

 

 

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

 

 

Option

Exercise

Price

 

Option

Expiration

 

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,

Units or

Other Rights

That Have

Not Vested

 

 

 

Exercisable

 

 

Unexercisable