DEF 14A of Essex Property Trust, Inc.
Filed Mar 28, 2024 · FY20230001140361-24-016195
Independence under NYSE Rules: Yes, all members
| ▪ | have no financial or personal ties to the Company (other than the director compensation and equity ownership described in this proxy statement); and |
Executive Officer Ownership Guidelines
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | Option Awards ($)(1) | Total ($) | | Keith R. Guericke | 84,000 | — | 155,000 | 239,000 | | Maria R. Hawthorne | 96,000 | 155,000 | — | 251,000 | | Amal M. Johnson | 109,000 | — | 155,000 | 264,000 | | Mary Kasaris | 119,000 | — | 155,000 | 274,000 | | Irving F. Lyons, III | 137,000 | — | 155,000 | 292,000 | | George M. Marcus | 90,000 | — | 285,000 | 375,000 | | Thomas E. Robinson | 101,000 | — | 155,000 | 256,000 | | Byron A. Scordelis | 95,000 | 155,000 | — | 250,000 |
Substantial Portion of Executive Compensation Tied to Performance
Substantial Portion of Executive Compensation Tied to Performance The Compensation Committee believes that a meaningful portion of executive pay should be based on the Company’s performance relative to its peers. Our target pay mix evidences this pay-for-performance philosophy and emphasizes the alignment of our executive officers’ interests with those of our stockholders. The executive compensation reported in the Summary Compensation Table for 2023 does not include the long-term incentive grants awarded to the executive officers in February 2024. As previously described, in 2023, the Compensation Committee decided that it was in the best interests of the Company and stockholders to move the grant date for the long-term incentive awards from December to February. As a result, the target pay mix for 2024 for our executive officers will reflect the long-term incentive awards, salary and performance-based annual bonus similar to the Company's historical practice. In 2023, approximately 67% of the total direct compensation for the CEO, and approximately 55% of the total direct compensation for the other NEO’s, was performance-based and not guaranteed. The named executive officer's target pay mix for 2023 is weighted more heavily towards short-term compensation than in the past due to the fact that they were not granted any performance and service based RSUs in 2023 due to the change in the granting schedule from December to February. The graphs below illustrate the compensation breakdown and the chart on page 40 explains how each element of compensation fits into the Company’s overall program.
Compensation Policies and Practices—Good Governance
| | Pay for Performance | The structure of our executive officer compensation program includes a balanced mix of cash and equity compensation with a strong emphasis on performance-based incentive awards promoting responsible growth and risk management. While no equity grants were made in 2023, equity grants will be reflected as a majority component of the 2024 compensation packages. | | | Executive Officer Compensation Peer Group Review | The competitiveness of our executive officer compensation program is assessed by comparison to the median of a group of peer companies that are comparable to us. | | | Independent Compensation Committee | Our Compensation Committee is comprised solely of independent directors. | | | Maintain an Anti-Hedging Policy | We maintain programs that strictly limit the ability of our executive officers and non-employee directors to pledge our securities and prohibit any hedging of our securities. | | | Executive Officer and Director Stock Ownership Guidelines | We maintain meaningful stock ownership guidelines for our executive officers and non-employee directors that promote a long-term stockholder perspective. | | | Compensation Policies and Practices Review | Our Compensation Committee annually considers and assesses the potential risks of our compensation policies and practices for all employees. | | | Compensation Recovery Policy | Our Compensation Recovery Policy requires the recovery of erroneously awarded incentive compensation to our executive officers in the event of a financial restatement, as required by NYSE listing standards, and in other circumstances. |
Compensation Policies and Practices—Good Governance
| | No Employment Agreements | We have not entered into individual employment agreements with our executive officers. | | | No Tax Gross-Ups | We do not provide our executive officers with tax gross-ups. | | | No Single-Trigger Severance | We do not provide for “single-trigger” severance payments upon a change in control. | | | No Excessive Perquisites | Our executive officers receive limited perquisites and other personal benefits that are not otherwise generally available to all of our employees. |
Response to 2023 Say on Pay Results
Response to 2023 Say on Pay Results We currently submit an advisory vote to approve our named executive officer compensation to our stockholders on an annual basis. At our 2023 annual meeting, holders of approximately 94% of the votes cast voted “for” the advisory proposal. As illustrated by the graph below, over the past five years, on average, holders of approximately 95% of the votes cast voted “for” this advisory proposal. We believe the strong, continued support for our compensation program in 2023 and in past years reflects the strong alignment between our named executive officer compensation and performance. In addition to considering the results of the stockholder vote, the Compensation Committee also considered the positive views on our compensation structure expressed by our stockholders during our investor relations outreach throughout the year, as discussed in our Stockholder Engagement section on page 29, in continuing to apply the same principles in determining the amounts and types of executive compensation, the Compensation Committee did not implement substantial changes, other than the introduction of performance stock units tied to Core FFO performance goals, the elimination of options and DIP RSUs to simplify the compensation structure and moving the grant date of the long-term incentive awards from December to February as previously described.
How Executive Compensation Decisions are Made
Dodd-Frank Act and the requirements of the NYSE listing standards, the Compensation Committee determined, and Mercer affirmed in its representations to the Compensation Committee, that Mercer meets the requirements to be considered independent. The Compensation Committee reassesses the independence of its advisers at least annually. In addition to the information and analysis provided by Mercer, the Compensation Committee also considered the publicly filed information of our peers (among other factors) in making 2023 compensation decisions with respect to the named executive officers. Mercer concluded that the total target compensation of the named executive officers, including target long-term incentive opportunities, is well-below the median compensation of the Company’s peers. While the Compensation Committee determines the Company’s overall compensation philosophy and sets the compensation for the Company’s CEO and other executive officers, it looks to the CEO to make recommendations with respect to both overall compensation policies and specific compensation decisions. For each fiscal year, the Company’s CEO recommends to the Compensation Committee the levels of base salary, targeted annual bonus and long-term equity for the executive officers other than herself, within the elements of compensation otherwise established by the Compensation Committee. The Compensation Committee also annually reviews and approves goals for each fiscal year for specific executive officers. Such goals may include company-wide, business unit and individual goals. Following the conclusion of each fiscal year, the Compensation Committee reviews actual performance against goals and, in consultation with the CEO and as discussed further below, sets the actual bonuses to be paid to the executive officers. The CEO also provides the Compensation Committee with her perspective on the performance of the Company’s executive officers as well as a self-assessment of her own performance. The Compensation Committee establishes the compensation package for the CEO. The Company’s Chief Financial Officer also attends the Compensation Committee’s meetings to provide perspective on the competitive landscape and the needs of the business and to discuss potential new elements for the executive officer’s compensation packages. Peer Group. In consultation with Mercer, for the 2023 peer group, the Company chose to make two adjustments to the peer group from 2022. American Homes 4 Rent and Regency Centers Corporation were added to the peer group, and Public Storage and Realty Income Corporation were removed from the peer group. These changes were made to better align the peer group with the Company’s asset size, property type, and geographic footprint. The peer group for 2023 included the following 14 equity REITs.
How Executive Compensation Decisions are Made
In fiscal year 2023, the Compensation Committee considered the peer group information prepared by Mercer pursuant to a 2023 benchmarking analysis (the “2023 Mercer Analysis”) in determining overall compensation levels. The 2023 Mercer Analysis concluded that the overall target compensation for all of the named executive officers were well below the median of the peer group. The CEO target compensation was in the bottom 20% of the peer group but the Compensation Committee chose not to make any adjustments to her base salary or target annual bonus for 2023, other than the increase in connection with her promotion to the position of CEO upon Mr. Schall’s retirement from that role. The Compensation Committee also did not increase the base salaries or target annual bonuses for the named executive officers for 2023 as compared to 2022, other than for the CAO, who took on increased management responsibility in 2023 and whose total target compensation was in the bottom third of the peer group based on the 2023 Mercer Analysis.
Summary Compensation Table
Summary Compensation Table The following table summarizes compensation information for our named executive officers for our year ended December 31, 2023, which we refer to as “2023”, our year ended December 31, 2022, which we refer to as “2022”, and our year ended December 31, 2021, which we refer to as “2021”.
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Non-Equity Incentive Plan Compensation ($)(1) | Stock Awards ($)(2) | Option Awards ($)(2) | All Other Compensation ($)(3) | Total ($) | | Angela L. Kleiman CEO and President | 2023 | 862,500 | — | 2,166,325 | — | — | 47,823 | 3,076,648 | | | 2022 | 750,000 | — | 1,340,000 | 2,900,134 | 550,006 | 30,958 | 5,571,098 | | | 2021 | 750,000 | — | 1,400,000 | 1,515,295 | 335,022 | 38,437 | 4,038,754 | | Michael J. Schall Former CEO and President | 2023 | 600,000 | — | 2,116,381 | — | — | 25,635 | 2,742,016 | | | 2022 | 900,000 | — | 2,553,200 | 275,086 | 295,015 | 30,923 | 4,054,224 | | | 2021 | 900,000 | — | 2,500,000 | 3,075,200 | 675,004 | 32,864 | 7,183,068 | | Barb M. Pak CFO and EVP | 2023 | 650,000 | — | 998,882 | — | — | 35,655 | 1,684,537 | | | 2022 | 650,000 | — | 1,272,000 | 985,180 | 215,010 | 47,248 | 3,169,438 | | | 2021 | 650,000 | — | 1,090,000 | 985,088 | 215,014 | 40,530 | 2,980,632 | | Anne Morrison CAO, General Counsel and EVP | 2023 | 495,000 | — | 749,162 | — | — | 44,170 | 1,288,332 | | | 2022 | 450,000 | — | 578,000 | 900,138 | 175,008 | 25,507 | 2,128,653 | | Adam W. Berry Former CIO and EVP | 2023 | 391,346 | — | — | — | — | 961,918 | 1,353,264 | | | 2022 | 550,000 | — | 755,200 | 650,093 | 150,004 | 39,326 | 2,144,623 | | | 2021 | 550,000 | — | 920,000 | 820,176 | 180,001 | 35,763 | 2,505,940 |
Summary Compensation Table
| (1) Represents cash annual incentive awards under the Company’s annual bonus program. In 2022, Ms. Pak elected to receive 1,164 fully vested shares of our common stock in lieu of $250,000 of the annual bonus payable to her for 2022. These shares were granted to her on December 9, 2022 at a value of $214.79 per share as they were fully vested at the time of the award. |
Summary Compensation Table
| (2) These dollar amounts reflect the aggregate grant date fair value calculated in accordance with FASB ASC Topic 718 for the awards granted for the year indicated. With respect to awards, the vesting of which is subject to performance conditions, the grant date fair value of these awards is based on the probable outcome of the performance conditions, which is also the maximum value assuming the highest level of performance, calculated in accordance with ASC Topic 718. Assumptions used in determining the grant date fair value of the awards can be found in Note 14 of the Notes to Consolidated Financial Statements in the Company’s 2023 Form 10-K. These dollar amounts do not represent payments actually received by the named executive officers. |
Summary Compensation Table
| (3) For 2023, these amounts include amounts paid by the Company to the 401(k) accounts of the named executive officers, all Company contributions paid for benefits received under non-discriminatory benefit plans available to all employees during 2023, the named executive officers’ respective perquisites limited to Company provided leased automobiles or automobile allowances, and payments of life insurance premiums, for Ms. Kleiman, Mr. Schall, Ms. Pak, Ms. Morrison, and Mr. Berry, respectively. Also, for 2023, includes severance payout of $507,692 and a prorated target bonus for 2023 of $435,000 for Mr. Berry, and $9,072 in continued subsidized health benefits following his termination of employment. The total cost of the medical benefits paid by the Company on behalf of Ms. Morrison and Ms. Pak was $27,003. |
Summary Compensation Table
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Grants of Plan-Based Awards for 2023
Grants of Plan-Based Awards for 2023 The following table shows all plan-based awards which Essex granted to the named executive officers during 2023.
Grants of Plan-Based Awards for 2023
| Name | Grant Date | Estimated Future Payouts Under Non- Equity Incentive Plan Awards Target ($) | Estimated Future Payouts Under Non- Equity Incentive Plan Awards Maximum ($) | Estimated Future Payouts Under Equity Incentive Plan Awards Maximum ($) | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Options Awards ($) | | Angela L. Kleiman | — | 1,735,000 | 2,602,500 | — | — | — | — | — | | Michael J. Schall | — | 1,695,000 | 2,542,500 | — | — | — | — | — | | Barb M. Pak | — | 800,000 | 1,200,000 | — | — | — | — | — | | Anne Morrison | — | 600,000 | 900,000 | — | — | — | — | — | | Adam W. Berry | — | 650,000 | 975,000 | — | — | — | — | — |
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table shows all outstanding equity awards held by the named executive officers as of December 31, 2023:
Outstanding Equity Awards at December 31, 2023
| Name | Grant Date | Option Awards | | | | Stock Awards | | | | | | | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | Exercisable | Unexercisable | | | | | | | | Angela L. Kleiman | 12/9/2022 | 8,080 | 16,160(1) | 214.79 | 12/8/2031 | | | | | | | 12/9/2022 | | | | | — | — | 7,854(2) | 1,947,321 | | | 12/9/2022 | | | | | — | — | 16,120(3) | 3,996,793 | | | 11/30/2021 | 9,593 | 4,798(4) | 339.44 | 11/29/2031 | | | | | | | 11/30/2021 | | | | | — | — | 5,279(5) | 1,308,875 | | | 11/30/2021 | | | | | — | — | 3,009(6) | 746,051 | | | 12/2/2020 | 12,615 | —(7) | 248.70 | 12/1/2030 | | | | | | | 12/4/2019 | 16,113 | —(8) | 311.43 | 12/3/2029 | | | | | | | 12/6/2018 | 14,694 | —(9) | 265.68 | 12/6/2028 | | | | | | Michael J. Schall | 12/9/2022 | 4,334 | 8,668(1) | 214.79 | 12/8/2031 | | | | | | | 12/9/2022 | | | | | — | — | 2,274(2) | 563,816 | | | 11/30/2021 | 19,329 | 9,666(4) | 339.44 | 11/29/2031 | | | | | | | 11/30/2021 | | | | | — | — | 10,803(5) | 2,678,496 | | | 11/30/2021 | | | | | — | — | 6,017(6) | 1,491,855 | | | 12/2/2020 | 24,259 | —(7) | 248.70 | 12/1/2030 | | | | | | | 12/4/2019 | 35,749 | —(8) | 311.43 | 12/3/2029 | | | | | | | 12/6/2018 | 31,264 | —(9) | 265.68 | 12/6/2028 | | | | | | | 12/8/2016 | 1,368 | —(10) | 219.22 | 12/8/2026 | | | | | | Barb M. Pak | 12/9/2022 | 3,159 | 6,317(1) | 214.79 | 12/8/2031 | | | | | | | 12/9/2022 | | | | | — | — | 3,514(2) | 871,261 | | | 12/9/2022 | | | | | — | — | 4,630(3) | 1,147,962 | | | 11/30/2021 | 6,157 | 3,079(4) | 339.44 | 11/29/2031 | | | | | | | 11/30/2021 | | | | | — | — | 3,063(5) | 759,440 | | | 11/30/2021 | | | | | — | — | 2,325(6) | 576,461 | | | 12/2/2020 | 10,513 | —(7) | 248.70 | 12/1/2030 | | | | | | | 12/4/2019 | 5,473 | —(8) | 311.43 | 12/3/2029 | | | | |
Outstanding Equity Awards at December 31, 2023
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Outstanding Equity Awards at December 31, 2023
| Name | Grant Date | Option Awards | | | | Stock Awards | | | | | | | Number of Securities Underlying Unexercised Options (#) | Number of Securities Underlying Unexercised Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | | | Exercisable | Unexercisable | | | | | | | | Anne Morrison | 12/9/2022 | 2,571 | 5,142(1) | 214.79 | 12/8/2031 | | | | | | | 12/9/2022 | | | | | — | — | 3,514(2) | 871,261 | | | 12/9/2022 | | | | | — | — | 3,927(3) | 973,660 | | | 11/30/2021 | 2,147 | —(4) | 339.44 | 11/29/2031 | | | | | | | 11/30/2021 | | | | | — | — | 411(5) | 101,903 | | | 11/30/2021 | | | | | — | — | 1,368(6) | 339,182 | | | 12/2/2020 | 4,044 | —(7) | 248.70 | 12/1/2030 | | | | | | | 12/4/2019 | 1,314 | —(8) | 311.43 | 12/3/2029 | | | | | | Adam W. Berry | 12/9/2022 | 6,611 | —(1) | 214.79 | 12/8/2031 | | | | | | | 12/9/2022 | | | | | — | — | 3,514(2) | 871,261 | | | 12/9/2022 | | | | | — | — | 1,860(3) | 461,168 | | | 11/30/2021 | 7,732 | —(4) | 339.44 | 11/29/2031 | | | | | | | 11/30/2021 | | | | | — | — | 2,161(5) | 535,798 | | | 11/30/2021 | | | | | — | — | 2,325(6) | 576,461 | | | 12/2/2020 | 6,470 | —(7) | 248.70 | 12/1/2030 | | | | | | | 12/4/2019 | 10,071 | —(8) | 311.43 | 12/3/2029 | | | | | | | 12/6/2018 | 10,005 | —(9) | 265.68 | 12/6/2028 | | | | |
Outstanding Equity Awards at December 31, 2023
| (1) 1/3rd of these options vested on December 9, 2023 and the remaining options will vest on each of the next two anniversaries thereafter, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
| (2) For all named executive officers, represents the number of DIP RSUs that would become earned at the end of the three-year performance period (December 9, 2022 - December 9, 2025), assuming the maximum number of DIP RSUs becomes eligible to be earned at the end of the one-year performance period based on the DIP Performance Metric (December 31, 2023), and assuming the maximum performance in respect of the three-year performance period with respect to the TSR Goals. DIP RSUs generally become eligible to be earned based on a percentage of gain or purchase price for the disposition of certain assets of the Company’s real estate portfolio during the calendar year following the year in which such DIP RSUs are granted and are earned based, in part, on Essex’s percentile rank of total stockholder return compared to the total stockholder return of the NAREIT Apartment Index during the three-year performance period, and, in part, on Essex’s absolute total stockholder return during the three-year performance period, as determined by the Compensation Committee based on the specified performance criteria. These units were granted as follows: 7,854 for Ms. Kleiman, 2,274 for Mr. Schall, 3,514 for Ms. Pak, 3,514 for Ms. Morrison, and 3,514 for Mr. Berry. |
Outstanding Equity Awards at December 31, 2023
| (3) For all named executive officers, represents the number of Performance and Service RSUs that would become earned and vested at the end of the performance period (December 9, 2022 - December 9, 2025), assuming maximum performance. Performance and Service RSUs are subject to both performance-based vesting and service-based vesting. The number of Performance and Service RSUs that are earned and vest is determined based, in part, on Essex’s percentile rank of total stockholder return compared to the total stockholder return of the NAREIT Apartment Index during the three-year performance period, and, in part, on Essex’s absolute total stockholder return during the three-year performance period, as determined by the Compensation Committee based on the specified performance criteria, generally subject to continued employment through the three-year performance period. These units were granted as follows: 16,120 for Ms. Kleiman, 0 for Mr. Schall, 4,630 for Ms. Pak, 3,927 for Ms. Morrison, and 1,860 for Mr. Berry. |
Outstanding Equity Awards at December 31, 2023
| (4) 2/3rd of these options vested on November 30, 2022 and 2023, and the remaining 1/3rd of these options will vest on November 30, 2024, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
| (5) For all named executive officers, represents the number of Performance and Service RSUs that would become earned and vested at the end of the performance period (November 30, 2021 - December 1, 2024), assuming maximum performance. Performance and Service RSUs are subject to both performance-based vesting and service-based vesting. The number of Performance and Service RSUs that are earned and vest is determined based, in part, on Essex’s percentile rank of total stockholder return compared to the total stockholder return of the NAREIT Apartment Index during the three-year performance period, and, in part, on Essex’s absolute total stockholder return during the three-year performance period, as determined by the Compensation Committee based on the specified performance criteria, generally subject to continued employment through the three-year performance period. These units were granted as follows: 5,279 for Ms. Kleiman, 10,803 for Mr. Schall, 3,063 for Ms. Pak, 411 for Ms. Morrison, and 2,161 for Mr. Berry. |
Outstanding Equity Awards at December 31, 2023
| (6) For all named executive officers, represents the number of DIP RSUs that would become earned at the end of the three-year performance period (November 30, 2021 - December 1, 2024), assuming the maximum number of DIP RSUs becomes eligible to be earned at the end of the one-year performance period based on the DIP Performance Metric (December 31, 2022), and assuming the maximum performance in respect of the three-year performance period. DIP RSUs generally become eligible to be earned based on a percentage of gain or purchase price for the disposition of certain assets of the Company’s real estate portfolio during the calendar year following the year in which such DIP RSUs are granted and are earned based, in part, on Essex’s percentile rank of total stockholder return compared to the total stockholder return of the NAREIT Apartment Index during the three-year performance period, and, in part, on Essex’s absolute total stockholder return during the three-year performance period, as determined by the Compensation Committee based on the specified performance criteria. These units were granted as follows: 3,009 for Ms. Kleiman, 6,017 for Mr. Schall, 2,325 for Ms. Pak, 1,368 for Ms. Morrison, and 2,325 for Mr. Berry. |
Outstanding Equity Awards at December 31, 2023
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Outstanding Equity Awards at December 31, 2023
| (7) 1/3rd of these options vested on December 2, 2021, 2022, and 2023, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
| (8) 1/3rd of these options vested on December 4, 2020, 2021 and 2022, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
| (9) 1/3rd of these options vested on December 6, 2019, 2020 and 2021, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
| (10) 1/3rd of these options vested on December 8, 2017, 2018 and 2019, generally subject to continued employment through each such vesting date. The options are also subject to a cap on appreciation of $100 per share. |
Outstanding Equity Awards at December 31, 2023
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Option Exercises and Stock Vested for 2023
Option Exercises and Stock Vested for 2023 The following table shows for 2023 the number of shares acquired upon exercise of option awards and the vesting of stock awards and the value realized upon such exercise and vesting.
Option Exercises and Stock Vested for 2023
| | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Angela L. Kleiman | — | — | 4,881 | 1,097,493 | | Michael J. Schall | — | — | 12,586 | 2,829,962 | | Barb M. Pak | — | — | 3,680 | 827,448 | | Anne Morrison | — | — | 2,036 | 457,795 | | Adam W. Berry | — | — | 2,809 | 631,604 |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation Our executive officers are currently eligible to participate in the Essex Portfolio, L.P. 2021 Deferred Compensation Plan, which is referred to herein as the “2021 deferred compensation plan.” The 2021 deferred compensation plan, which was adopted on January 1, 2021, replaced an older plan to comply with Section 409A of the Code. Under the deferred compensation plan, eligible employees, which include the executive officers of the Company, may elect in accordance with plan procedures to defer up to 25% of their base salary and up to 50% of their cash bonus (and other cash compensation) in any year, in each case, after taking into effect reductions due to income and payroll tax withholding and contributions to benefits plans. The Company does not currently make company matching contributions, although the plan allows the Company to make discretionary contributions. Deferral elections under the 2021 deferred compensation plan must generally be made by December 15th of the calendar year proceeding the calendar year in which the compensation that is to be deferred is scheduled to be earned. Distributions of the deferred accounts under the 2021 deferred compensation plan are made on the earliest of (1) the participant’s “separation from service,” as defined in the plan, (2) a “change in control,” as defined in the plan or (3) a date specified by the participant at the time the deferral election was made. The distributions are payable in a lump sum, except that a participant may elect a payout of amounts exceeding $150,000 as of the distribution date over a period of 5, 10 or 15 annual installments. Distributions under the 2021 deferred compensation plan payable to a “key employee” (as defined in the plan) in connection with a separation from service will be delayed for six months (to the extent required to comply with Section 409A of the Code). Under the plans, the earnings in an officer’s account are based on investment earnings (or losses) equal to the actual net investment earning or losses experienced by the investment selected by the participant. Accordingly, any earnings are based solely upon the investment allocations directed by the officer. The Company does not make these investment decisions or guarantee any particular rate of return or other benefit under the plan. Under the investment policies of the plans, and subject to administrative approval, investments may be directed by the officer in any securities generally available and traded on U.S. public markets. However, the plan prohibits investments such as derivative securities, securities issued by Essex, tax-exempt securities, foreign securities not listed on the NYSE, securities determined by the administrator to be illiquid, securities purchased on margin, and a number of other categories intended to limit the permitted investments to securities regularly and publicly traded in the U.S. market. The plans do not impose specific limitations on the frequency of investment selections or changes in investments.
Nonqualified Deferred Compensation
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Nonqualified Deferred Compensation
Although each participant’s account is wholly unfunded, the investments selected by the officer are purchased by Essex in and for its own account, which account is maintained by the Company with a brokerage firm, and the return on the deferral account is derived solely from these purchased investments directed by the officer. The plan administrator will not monitor a participant’s investment instructions, but it may require the participant to liquidate an investment that is determined to be inconsistent with the plan’s investment policy, other plan provisions, or Essex’s brokerage account agreement. The following table provides information concerning compensation deferred under the prior deferred compensation plan and the 2021 deferred compensation plan by the named executive officers as of December 31, 2023.
Nonqualified Deferred Compensation
| Name | Executive Contributions in 2023 ($)(1) | Registrant Contributions in 2023 ($) | Aggregate Earnings/(Losses) in 2023 ($) | Aggregate Withdrawals/ Distributions ($) | Aggregate Balance as of December 31, 2023 ($) | | Angela L. Kleiman | 214,183 | — | 403,235 | — | 2,796,856 | | Michael J. Schall | 152,928 | — | 1,125,480 | — | 7,625,974 | | Barb M. Pak | — | — | 30,854 | — | 189,931 | | Anne Morrison | — | — | — | — | — | | Adam W. Berry | — | — | 135,502 | — | 916,868 |
Nonqualified Deferred Compensation
| (1) All contributions in this column are also included as compensation to the named executive officers in the Salary and Non-Equity Incentive Plan Compensation columns of the Summary Compensation Table. |
Potential Payments upon Termination or Change of Control
Potential Payments upon Termination or Change of Control
Severance Payments and Benefits
| Name | Payment for 2X Annual Salary/Bonus ($) | 24 months of benefits ($)(1) | Value of Accelerated Equity Awards (including LTIP Units) ($) | Total ($)(2) | | Angela L. Kleiman | 7,603,534 | 50,600 | 3,636,442 | 11,290,576 | | Michael J. Schall | — | — | 1,180,176 | 1,180,176 | | Barb M. Pak | 4,238,352 | 50,600 | 1,227,698 | 5,516,650 | | Anne Morrison | 2,683,097 | 50,600 | 853,532 | 3,587,229 |
Severance Payments and Benefits
| (2) The total does not include: (i) available balances under the nonqualified deferred compensation plan table preceding this table, (ii) any amounts due for accrued but unpaid wages under applicable law or under generally available benefit plans such as our 401(k) plan, at the time of any employment termination, or (iii) the proceeds of insurance policies paid by insurance companies in the event of death or disability. |
Pay Versus Performance Table
Pay Versus Performance Table The following table sets forth information concerning the compensation of our named executive officers (“NEOs”) for each of the fiscal years ended December 31, 2020, 2021, 2022 and 2023, and our financial performance for each such fiscal year:
Pay Versus Performance Table
| | | | | | | | Value of Initial Fixed $100 Investment Based on: | | | | | Year | Summary Compen- sation Table Total for PEO (Schall) ($) | Summary Compen- sation Table Total for PEO (Kleiman) ($) | Compen- sation Actually Paid to PEO (Schall) ($)(1) | Compen- sation Actually Paid to PEO (Kleiman) ($)(1) | Average Summary Compensation Table Total for Non-PEO NEOs ($) | Average Compensation Actually Paid to Non-PEO NEOs ($)(1)(2) | Total Stockholder Return ($) | Peer Group Total Stockholder Return ($)(3) | Net Income ($) | Core FFO per Diluted Share ($)(4) | | 2023 | 2,742,016 | 3,076,648 | 5,829,702 | 6,234,794 | 1,442,044 | 2,620,160 | 94.75 | 99.78 | 430,708,000 | 15.03 | | 2022 | 4,054,224 | — | (4,363,421) | — | 3,253,453 | 1,039,588 | 77.69 | 94.26 | 432,985,000 | 14.51 | | 2021 | 7,183,068 | — | 8,887,546 | — | 3,175,109 | 3,773,473 | 124.82 | 138.51 | 515,691,000 | 12.49 | | 2020 | 6,555,744 | — | 3,753,088 | — | 2,479,685 | 1,285,043 | 81.92 | 84.66 | 599,332,000 | 12.82 |
Pay Versus Performance Table
| (1) Amounts represent compensation actually paid to our CEOs and the average compensation actually paid to our remaining NEOs for the relevant fiscal year, as determined under SEC rules (and described below), which includes the individuals indicated in the table below for each fiscal year: |
Pay Versus Performance Table
| Year | PEO | Non-PEO NEOs | | 2023 | Michael J. Schall and Angela L. Kleiman | Barb M. Pak, Adam W. Berry and Anne Morrison | | 2022 | Michael J. Schall | Angela L. Kleiman, Barb M. Pak, Adam W. Berry and Anne Morrison | | 2021 | Michael J. Schall | Angela L. Kleiman, Barb M. Pak and Adam W. Berry | | 2020 | Michael J. Schall | Angela L. Kleiman, Adam W. Berry and John F. Burkart |
Pay Versus Performance Table
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Pay Versus Performance Table
Compensation actually paid to our NEOs represents the “Total” compensation reported in the Summary Compensation Table for the applicable fiscal year, as adjusted as follows:
Pay Versus Performance Table
| | 2020 | | 2021 | | 2022 | | 2023 | | | | Adjustments | PEO | Average Non-PEO NEOs | PEO | Average Non-PEO NEOs | PEO | Average Non-PEO NEOs | PEO (Schall) | PEO (Kleiman) | Average Non-PEO NEOs | | Deduction for Amounts Reported under the “Stock Awards” and “Option Awards” Columns in the Summary Compensation Table for Applicable FY | (4,000,354) | (1,186,948) | (3,750,204) | (1,350,199) | (570,101) | (1,631,393) | — | — | — | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Remain Unvested as of Applicable FY End, determined as of Applicable FY End | 3,681,004 | 788,870 | 3,830,188 | 1,379,019 | 578,898 | 1,696,781 | — | — | — | | Increase based on ASC 718 Fair Value of Awards Granted during Applicable FY that Vested during Applicable FY, determined as of Vesting Date | — | 252,800 | — | — | — | — | — | — | — | | Increase/deduction for Awards Granted during Prior FY that were Outstanding and Unvested as of Applicable FY End, determined based on change in ASC 718 Fair Value from Prior FY End to Applicable FY End | (1,592,337) | (699,110) | 1,444,302 | 470,461 | (5,812,145) | (1,611,345) | 1,441,309 | 2,498,234 | 824,875 | | Increase/deduction for Awards Granted during Prior FY that Vested During Applicable FY, determined based on change in ASC 718 Fair Value from Prior FY End to Vesting Date | (890,969) | (426,543) | 180,192 | 99,083 | (2,614,297) | (667,908) | 1,646,377 | 659,912 | 353,241 | | Increase based on Incremental Fair Value of Options/SARs Modified during Applicable FY | — | 76,289 | — | — | — | — | — | — | — | | Total Adjustments | (2,802,656) | (1,194,642) | 1,704,478 | 598,364 | (8,417,645) | (2,213,865) | 3,087,686 | 3,158,146 | 1,178,116 |
Pay Versus Performance Table
| (2) Fair value or change in fair value, as applicable, of equity awards in the “Compensation Actually Paid” columns was determined by reference to (i) for market-based awards, the fair value calculated by a Monte Carlo simulation model as of the applicable year-end dates, which utilizes multiple input variables, including expected volatility of our stock price and other assumptions appropriate for determining fair value, to estimate the probability of satisfying the performance objective established for the award, including the expected volatility of our stock price relative to the applicable comparative index and a risk-free interest rate and (ii) for stock options, a Black Scholes value as of the applicable year-end or vesting dates. For additional information on the assumptions used to calculate the valuation of the awards, see the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and prior fiscal years. |
Pay Versus Performance Table
| (3) For the relevant fiscal year, represents the cumulative TSR (the “Peer Group TSR”) of the NAREIT Apartment Index. |
Pay Versus Performance Table
| (4) Core Funds from Operations (“Core FFO”) and Core FFO per diluted share are non-GAAP measures. Funds from Operations (“FFO”) is a financial measure that is commonly used in the REIT industry. The Company presents FFO and FFO excluding non-core items, or Core FFO, as supplemental operating performance measures. In calculating FFO, the Company follows the definition for this FFO published by NAREIT, which is the leading REIT industry association. The Company believes that, under the NAREIT FFO definition, the two most significant adjustments made to net income are (i) the exclusion of historical cost depreciation and (ii) the exclusion of gains and losses from the sale of previously depreciated properties. For a discussion of the calculation of Core FFO and Core FFO per share-diluted and reconciliations to the most directly comparable measures under U.S. GAAP, see Appendix A. |
Pay Versus Performance Table
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Narrative Disclosure to Pay Versus Performance Table
Narrative Disclosure to Pay Versus Performance Table Relationship Between Financial Performance Measures The graphs below compare the compensation actually paid to our CEO and the average of the compensation actually paid to our remaining NEOs, with (i) our cumulative TSR, (ii) our Peer Group TSR, (iii) our net income, and (iv) our Core FFO per diluted share, in each case, for the fiscal years ended December 31, 2020, 2021, 2022 and 2023. TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.
Narrative Disclosure to Pay Versus Performance Table
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Narrative Disclosure to Pay Versus Performance Table
Pay Versus Performance Tabular List We believe the following performance measures represent the most important financial performance measures used by us to link compensation actually paid to our named executive officers for the fiscal year ended December 31, 2023:
Narrative Disclosure to Pay Versus Performance Table
| 1. | Core FFO; |
Narrative Disclosure to Pay Versus Performance Table
| 2. | Core FFO per diluted share; and |
Narrative Disclosure to Pay Versus Performance Table
| 3. | Same-property NOI |
Narrative Disclosure to Pay Versus Performance Table
For additional details regarding our most important financial performance measures, please see the sections titled “Executive Summary” and “Overview of Named Executive Officer Compensation Program” in our Compensation Discussion and Analysis (CD&A) elsewhere in this proxy statement. For a discussion of the calculation of Core FFO, Core FFO per share-diluted, EBITDAre, net-debt-to-EBITDAre, NOI and same-property NOI and reconciliations to the most directly comparable measures under U.S. GAAP, see Appendix A.
Narrative Disclosure to Pay Versus Performance Table
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Narrative Disclosure to Pay Versus Performance Table
Equity Compensation Plans The following table summarizes share and exercise price information about our equity compensation plans as of December 31, 2023.
Narrative Disclosure to Pay Versus Performance Table
| Plan Category | Number of Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants and Rights (#) | Weighted Average Exercise Price for Outstanding Options, Warrants and Rights ($) | Securities Remaining Available for Future Issuance Under Plan (#) | | Equity compensation plans approved by security holders: Stock Incentive Plans | 628,449(1) | 273.51(2) | 2,027,663(3) | | Equity compensation plans not approved by security holders | N/A | N/A | N/A | | Total | 628,449 | | 2,027,663 |
Narrative Disclosure to Pay Versus Performance Table
| (1) Number of securities to be issued includes 97,637 LTIP Units granted in 2013 and 2014 but excludes 101,701 shares of unvested restricted stock. |
Narrative Disclosure to Pay Versus Performance Table
| (2) This weighted average price amount applies only to options granted under the Company’s 1994, 2004 and 2013 plans. |
Narrative Disclosure to Pay Versus Performance Table
| (3) Includes 500,000 shares available for future issuance under our 2013 Employee Stock Purchase Plan (the “ESPP”) and 698,366 shares available for future issuance under our 2013 Stock Award and Incentive Compensation Plan. No options have been granted, and no shares of Common Stock have been purchased, under the ESPP. This plan has not been implemented by the Company. |
Narrative Disclosure to Pay Versus Performance Table
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Narrative Disclosure to Pay Versus Performance Table
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of our median employee to the annualized total compensation of Angela L. Kleiman, our Chief Executive Officer and President (our “CEO”). During 2023, two individuals served as CEO. On April 1, 2023, Ms. Kleiman succeeded Michael J. Schall as CEO in accordance with the Company's CEO succession plan. We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements Item 402(u) of Regulation S-K. For 2023, our last completed fiscal year:
Narrative Disclosure to Pay Versus Performance Table
| ▪ | the annual total compensation of the employee who represents our median compensated employee (other than our CEO) was $93,662; |
Narrative Disclosure to Pay Versus Performance Table
| ▪ | the annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $3,076,648; and |
Narrative Disclosure to Pay Versus Performance Table
| ▪ | the annualized total compensation of our CEO, pursuant to the method described below, was $3,420,056. |
Narrative Disclosure to Pay Versus Performance Table
Based on this information, for 2023, the annualized total compensation of our CEO was approximately 36.5 times the median of the annual total compensation of all of our employees (other than our CEO).