DEF 14A of LXP Industrial Trust
Filed Apr 8, 2024 · FY20230001539497-24-000782
PROPOSAL NO. 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| T. WILSON EGLIN Age: 59 Trustee Since 1994 | As LXP’s Chief Executive Officer, Mr. Eglin provides our Board of Trustees with extensive experience in net-lease and industrial real estate investing, real estate operations and capital markets. Experience and Expertise: ● CEO/Operations: Has led LXP as the Chief Executive Officer since January 2003 and served as the Chief Operating Officer of LXP from October 1993 to December 2010. ● Capital Markets: Significant capital markets experience through strategic transactions and overseeing LXP’s equity and debt capital raising efforts throughout the last 30 years. ● Strategic Planning: Has steered LXP through various cycles of growth and was the chief architect of our transition from a diversified net lease real estate investment trust (“REIT”) to an industrial-focused REIT. ● Commercial Real Estate: More than three decades of experience in commercial real estate investment, including underwriting, acquisitions, large portfolio transactions, dispositions and leasing. ● Investor Relations: Expertise gained through focus on investor relations and corporate financial communications throughout his career as the primary spokesperson for LXP. Career Highlights: ● Chairman of LXP Industrial Trust since April 2019 ● Chief Executive Officer of LXP Industrial Trust since January 2003 ● President of LXP Industrial Trust since April 1996 ● Executive Vice President of LXP Industrial Trust from October 1993 to April 1996 ● Chief Operating Officer of LXP Industrial Trust from October 1993 to December 2010 ● Previously a Trustee and the Chair of the Finance Committee of Connecticut College | | LAWRENCE L. GRAY Age: 59 Trustee Since 2015 Committee Experience: Compensation Nominating & ESG | Mr. Gray provides our Board of Trustees with extensive real estate investment and development, capital markets and corporate finance experience. Experience and Expertise: ● CEO/Operations: Leadership and operational experience gained through his more than a decade-long tenure as Chief Executive Officer of a private real estate company for over 13 years. ● Capital Markets: Deep capital markets background through investment banking experience as a Managing Director of Wachovia Corporation where he led capital markets transactions for REITs and other real estate companies. At Wachovia, he had direct responsibility for the Real Estate Investment Banking, Corporate Banking, Private Equity, Homebuilder Finance and Structured Finance groups. ● Strategic Planning: Significant expertise developed through his investment banking roles serving as an advisor to boards of directors on equity, debt and mergers/acquisition transactions. In addition, as Chairman of a private real estate company, Mr. Gray has strategic planning experience through various market cycles. ● Commercial Real Estate: More than three decades of experience in commercial real estate investment as an investment banker and CEO of GrayCo, Inc. Career Highlights: ● Chairman and Chief Executive Officer of GrayCo, Inc., a private real estate company that owns and manages apartment communities, master planned community investments and timberlands located throughout the Southeast region of the U.S.; serving as Chief Executive Officer since 2010 and Chairman since 2016 ● Managing Director of Wachovia Corporation from 1997 to 2009 ● Real estate investment banking groups at J.P. Morgan and Morgan Stanley prior to 1997 |
PROPOSAL NO. 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| DERRICK JOHNSON Age: 54 Trustee since 2022 Committee Experience: Audit and Cyber Risk Nominating and ESG | Mr. Johnson has extensive experience in strategy, marketing, business development, finance and operations, specifically logistical operations, within organizations ranging from startups to Fortune 50 companies, providing our Board of Trustees with related insight. Experience and Expertise: ● Logistics: Deep logistics background having spent most of his career in the logistic sector, including over 20 years at United Parcel Service (UPS). ● Operations: Significant operations experience through operational roles at UPS and Agiliti, a medical equipment management and services company. ● Strategic Planning: Transformational leader with strategic experience at organizations ranging from early-stage startups to Fortune 50 corporations. ● Corporate Finance and Financial Analysis: Expertise formed through banking and management consulting roles and solidified through senior roles at other publicly-traded companies. Career Highlights: ● Senior Vice President of Operations (since March 2021) and Chief Operating Officer (since May 2023) at Agiliti, a medical equipment management and services company ● Former President of Southeast at United Parcel Service (UPS), holding a variety of strategic and operational roles for over 20 years ● Member of the Georgia Commission on Freight and Logistics ● Previously, Mr. Johnson was an Associate of Fixed Income Sales at Citigroup and an Associate at Oliver Wyman (formerly Mercer Management Consulting) | | CLAIRE A. KOENEMAN Age: 54 Trustee since 2015 Committee Experience: Compensation Nominating and ESG | Ms. Koeneman has spent many years as a corporate governance expert and strategic advisor to CEOs and boards of directors on all types of communications. She provides our Board of Trustees with extensive public and investor relations knowledge. Experience and Expertise: ● Investor Relations: Strong expertise in investor relations having spent her entire career in the public/investor relations and communications sector, specifically transactions, corporate, financial and crisis communications. ● Risk Management: Significant risk management expertise as an advisor to Fortune 50 companies on crisis communications. ● Strategic Planning: Established the leading REIT and real estate practice in the U.S. as President of the Financial Relations Board, an investor relations firm, gaining significant strategic planning experience. ● Corporate Responsibility: Recognized corporate responsibility expert. |
PROPOSAL NO. 3 RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
| | Career Highlights: ● EVP, Managing Director, Financial Communications at Ketchum, a global public relations and communications firm ● Senior positions at global public relations agencies, including GOLIN and Hill+Knowlton, as well as at Bully Pulpit Interactive, a boutique digital- first communications firm ● Previously president of Financial Relations Board (FRB), an investor relations firm where she established the leading REIT & real estate practice in the U.S. | | NANCY ELIZABETH NOE Age: 59 Trustee since 2021 Committee Experience: Nominating and ESG, Chair | Ms. Noe brings expertise in securities regulation, capital markets transactions and the governance of public companies to our Board of Trustees. Expertise and Experience: ● Legal: Over 30 years of experience as a practicing attorney focused on capital markets transactions, mergers/acquisitions, corporate governance and securities regulation. ● Corporate Responsibility: Deep expertise gained through advising companies on corporate governance best practices. ● Capital Markets: Significant experience with all aspects of structuring, negotiating and documenting various capital markets transactions. ● Strategic Planning: Spent many years as an advisor to public and private company boards of directors. Career Highlights: ● Chair of the Board of Trustees of Agnes Scott College ● Former Partner of Paul Hastings LLP, a global law firm, from February 2001 until February 2021 and Chair of the Corporate Department from February 2010 until February 2020 | | HOWARD ROTH Age: 67 Trustee since 2017 Committee Experience: Audit and Cyber Risk, Chair | Mr. Roth provides our Board of Trustees with extensive public accounting experience, including knowledge of tax laws applicable to real estate companies, generally accepted accounting principles and public company reporting requirements. Experience and Expertise: ● Audit and REIT Tax: Audit and REIT tax expertise gained through 40 years as a certified public accountant at “Big Four” accounting firms and predecessor firms. ● Strategic Planning: Strong experience gained as advisory board member to companies in various industries. ● Commercial Real Estate: Entire career spent focused on real estate companies, including leading the global real estate, hospitality and construction group at Ernst & Young LLP. ● Risk Management: Deep risk management expertise as a partner in a “big four” accounting firm. As a practice group head, he implemented services for the assurance, tax and regulatory environments and digital solutions focused on cybersecurity and data analytics. Career Highlights: ● Principal of HSR Advisors, a consulting firm that provides strategic and financial advice ● Venture Partner of Blu Venture Investors, a venture capital fund focused on early stage cybersecurity, healthtech, and B2B SaaS. |
Partner Organizations
| Actions | Performance | | ● Strive to implement best governance practices, mindful of the concerns of our shareholders. ● Increase our ESG+R transparency and disclosure by providing regular ESG updates to shareholders and other stakeholders and aligning with appropriate reporting to frameworks and industry groups, including GRESB, SASB, GRI and TCFD. ● Monitor compliance with applicable benchmarking and disclosure legislation, including utility data reporting, audit and retro-commissioning requirements and GHG emission laws. ● Ensure employees operate in accordance with the highest ethical standards and maintain the policies outlined in our Code of Business Conduct and Ethics. | ● Updated and publicly disclosed our Code of Business Conduct and Ethics, which includes a whistleblower policy, and provide annual training to all employees. ● Performed enterprise risk assessments and management succession planning. ○ Placed 3rd in U.S. Industrial Distribution/Warehouse Listed peer group. ○ Achieved a Real Estate Benchmark score of 74, a five-point increase compared to 2022. ○ Received Public Disclosure Score of 96 (A), above the comparison group and global group average, and placed first in U.S. Industrial Peer Group. ● Published 2022 Corporate Responsibility Report, aligned with GRI, SASB, SDGs and TCFD. ● Maintained a Stakeholder Engagement Policy to disclose our process when working with our key stakeholders, including investors, property management teams and tenants. ● Continued to support the UN Women’s Empowerment Principles and the CEO Action for Diversity & Inclusion. ● Conducted annual ESG+R training for asset managers. |
Partner Organizations
| RESILIENCE | | | We believe that our resilience to climate change-related physical and transition risks is critical to our long-term success. | | | Actions | Performance | | ● Align our resilience program with the Task Force on Climate- Related Financial Disclosures (“TCFD”) framework. ● Evaluate physical and transition climate-related risks as part of our acquisition due diligence process. ● Utilize climate analytics metrics to (1) identify physical risk exposure across the portfolio, (2) identify high risk assets and (3) implement mitigation measures and emergency preparedness plans. ● Assess transition risks and opportunities arising from the shift to a low-carbon economy, including market, reputation, policy, legal and technology risk and opportunities. | ● Engaged a third-party consultant to conduct ESG+R assessments on all acquisitions. ● Continued to be a supporter of the TCFD reporting framework. ● Engaged a climate analytics firm to evaluate physical risk due to climate change across the portfolio. |
Partner Organizations
| What we do: | What we don’t do: | | We pay for performance We disclose our compensation programs with transparency We assess compensation risk We use an independent compensation consultant We use competitor and size-based peer groups We require hold periods and have minimum share ownership guidelines We have a robust clawback policy | We do not provide tax gross-up payments We do not have excessive severance arrangements or single-trigger change in control severance payments We do not encourage unnecessary or excessive risk taking as a result of our compensation policies We do not guarantee compensation or uncapped bonus payments We do not allow for repricing of stock options. We do not allow hedging or pledging of our stock |
Independent Compensation Consultant
Independent Compensation Consultant During 2023, the Compensation Committee retained Ferguson Partners Consulting, L.P., a nationally known executive compensation and benefits consulting firm, which we refer to as FPC. Other than reviewing and advising the Compensation Committee with respect to executive and trustee compensation, FPC does not provide any non-executive compensation or other services for us. As a result, FPC is an independent compensation consultant. Management does not retain any executive compensation consultant. Peer Group Benchmarking Analysis. We are always competing for the best talent with our direct industry peers and with the broader market. Accordingly, the Compensation Committee regularly reviews the market data, pay practices and ranges of our “peer” companies and the broader market to ensure that we continue to offer a relevant and competitive executive pay program each year. Throughout this Compensation Discussion and Analysis, we refer to two distinct peer groups, as described below, which were recommended by FPC and approved by the Chair of the Compensation Committee in 2023.
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| ● | Competitor Peer Group. For 2023, this group consisted of 11 public REITs, which are either (1) our competitors for industrial property acquisitions and tenants in the single-tenant industrial space or (2) owners of a portfolio of primarily net-leased assets. The companies included in this peer group are as follows: |
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| Broadstone Net Lease, Inc. | EastGroup Properties, Inc. | Essential Properties Realty Trust, Inc. | | First Industrial Realty Trust Inc. | Getty Realty Corp. | NNN REIT, Inc. | | Rexford Industrial Realty, Inc. | STAG Industrial, Inc. | Spirit Realty Capital, Inc. | | Terreno Realty Corporation | W.P. Carey Inc. | |
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This competitor peer group helped the Compensation Committee understand how each named executive officer’s total compensation compares with the total compensation for reasonably similar positions at our most direct REIT competitors.
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| ● | Size Peer Group. For 2023 this group consisted of 20 public REITs, which operate across multiple asset classes and are similar in size to our total capitalization. The total capitalization range for this peer group was $2.95 billion to $5.6 billion as of October 31, 2023. Our total capitalization was at approximately the 36th percentile ($4.0 billion) of this peer group as of October 31, 2023. The companies included in this peer group are as follows: |
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| Acadia Realty Trust | American Assets Trust, Inc. | Apple Hospitality REIT, Inc. | | Broadstone Net Lease, Inc. | COPT Defense Properties | Empire State Realty Trust, Inc. | | Essential Properties Realty Trust, Inc. | Four Corners Property Trust, Inc. | JBG SMITH Properties | | National Health Investors, Inc. | Paramount Group, Inc. | Pebblebrook Hotel Trust | | Physicians Realty Trust | Retail Opportunity Investments Corp. | RLJ Lodging Trust | | Sabra Health Care REIT, Inc. | SITE Centers Corp. | Tanger Factory Outlet Centers, Inc. | | Urban Edge Properties | Veris Residential, Inc | |
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The size-based peer group helped the Compensation Committee compare our overall compensation practices against a broader mix of REITs to ensure that our compensation practices are reasonable due to the size of our organization. The Compensation Committee generally focuses on the average of the two peer groups, except in cases where such average is determined to be excessive in light of the circumstances. Although the two peer groups are comprised solely of REITs, we also compete for talent with other public and private companies in the locations where our employees reside. Therefore, we also consider other information regarding market trends in compensation in addition to the data derived from these peer group reviews. FPC prepared a compensation study for the Compensation Committee that contains:
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| ● | a summary of market findings; |
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| ● | high-level performance information and its impact on compensation trends within the real estate industry; |
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| ● | certain background information, including size and performance statistics for our company and the peer group constituents; and |
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| ● | the results of a competitive benchmarking analysis for our named executive officers and certain other employees on both an individual and aggregate basis. |
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Determining the Amount of Each Element of Compensation. The Compensation Committee reviews the performance of each of our named executive officers, including our Chief Executive Officer, on an annual basis. The Compensation Committee considers, among other things, (1) the scope of the individual’s responsibilities, including the demands and profile of the positions held by the individual, (2) the individual’s experience and tenure with us, (3) the individual’s performance and contribution to our performance, (4) our performance against annual objectives set forth in management’s business plan, and (5) competitive salaries. The Compensation Committee considers the results of compensation studies prepared for it by FPC and by industry and trade associations. Our Chief Executive Officer assists in the annual review of our other named executive officers and makes recommendations to the Compensation Committee. However, the Compensation Committee makes all determinations with respect to the actual compensation of our named executive officers, including our Chief Executive Officer. The independent compensation consultant provides the following services to the Compensation Committee:
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| ● | Management Data Collection: |
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| ○ | reviewing historical pay philosophy and practices; |
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| ○ | confirming the existing compensation philosophy; and |
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| ○ | reviewing the Chief Executive Officer’s recommendations. |
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| ● | Compensation Guidance and Commentary: |
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| ○ | providing initial thoughts and reactions to the Chief Executive Officer’s recommendations given current market practices and performance; |
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| ○ | providing thoughts and perspectives on the broader REIT market, from a compensation perspective, based on ongoing conversations with executives/board members and up-to-date compensation data; and |
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| ○ | providing a compensation study described above and recommendations regarding peer group data. |
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Compensation Risk Assessment The Compensation Committee does not believe our executive compensation programs encourage unnecessary or excessive risk taking for the following reasons:
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| ● | There are no guaranteed minimum payouts. |
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| ● | The annual cash incentive opportunity does not rely on total shareholder return ("TSR"). |
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| ● | The annual cash incentive opportunity is based on multiple operational performance metrics. |
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| ● | We use two adjusted/non-GAAP metrics in our compensation opportunities, but we regularly disclose these metrics, including reconciliations, and analysts and investors use these metrics to compare us to our peers. |
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| ● | The annual long-term incentive opportunity has a three-year performance period based on TSR relative to a competitor peer group and an index. |
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While we are focused on long-term shareholder value, the Compensation Committee believes that three-year vesting for share awards is an appropriate length of time due to the need to retain our executives and reward results. Furthermore, our Compensation Committee believes the overall amount of our long-term incentive awards is appropriate in relation to our executive compensation program. We also pay dividends currently on the time-based portion of our annual long-term incentive awards and dividends accrue on the performance-based portion of our annual long-term incentive awards and are paid upon, and to the extent of, vesting. Since we are a REIT, dividends are a necessary part of our business. Furthermore, all dividends are declared by our Board of Trustees and none of the dividends on long-term incentive awards are preferential. Accordingly, we do not believe that dividends are a risk in our compensation arrangements. We maintain a clawback policy, which complies with applicable NYSE rules. As mandated by such rules, if the Trust is required to prepare an accounting restatement of its GAAP financial statements, the Trust will recover any incentive compensation received by any covered person during the fiscal years pertaining to the restatement that was in excess of the amount that otherwise would have been paid, giving effect to the restated results. Pay for Performance. A significant portion of the total target compensation for our named executive officers is in the form of performance-based incentive compensation, with the only “fixed” or “guaranteed” compensation in the form of annual base salaries and time-based long-term incentive awards. In setting the pre-defined objective performance measures for the annual cash incentive target opportunity, multiple factors are considered, and the Compensation Committee believes the plan is balanced across our operations with reference to our business plan. For 2023, our executive compensation plan resulted in the following pay mix for the total target compensation: Recap of 2023 Executive Compensation Program. The 2023 executive compensation program consisted of (1) base salary, (2) annual cash incentive opportunity, and (3) annual long-term incentive opportunity. Base Salaries and Annual Cash Incentive Awards. Base salaries and annual cash incentive opportunity under the 2023 executive compensation program were as follows:
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| Officer | 2023 Base Salary | Threshold | | Target | | Maximum | | | T. Wilson Eglin | 825,000 | 56.25% | $464,063 | 112.5% | $928,125 | 225% | $1,856,250 | | Beth Boulerice | 465,000 | 50% | $232,500 | 100% | $465,000 | 200% | $930,000 | | Joseph S. Bonventre | 515,000 | 50% | $275,500 | 100% | $515,000 | 200% | $1,030,000 | | Brendan P. Mullinix | 460,000 | 50% | $230,000 | 100% | $460,000 | 200% | $920,000 | | James Dudley | 375,000 | 50% | $187,500 | 100% | $375,000 | 200% | $750,000 |
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Seventy percent (70%) of the annual cash incentive opportunity was based on pre-defined objective measures (from January 1, 2023 to December 31, 2023) and 30% was based on subjective measures. Objective Measures The following sets forth the pre-defined objective measures, the weighting and the rationale for each measure. In the first quarter of 2024, the Compensation Committee evaluated the Company’s performance on the objective and subjective measures and made the determinations as detailed below.
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| | Weighting | Target | Actual at 12/31/2023 | Determination | | Investments | 30% | | | Target | | Stabilized Development Square Feet | | 2.8 million | 1.93 million | | | Stabilized Development # of Buildings | | 6 | 3 | | | Stabilized Development Pre-Promote Yield | | >6.5% | >7% | |
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Rationale: Stabilization of our development pipeline was a primary part of our 2023 business plan. Result: We made meaningful progress on our development pipeline during 2023 and leased 1.93 million square feet over four leases. We stabilized three buildings and a portion of our two-building Tampa, Florida development project. Our stabilized development pre-promote yields continue to be strong and in excess of our original underwriting. Due to the equal weighting of each sub-metric, target was achieved.
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| | Weighting | Target | Actual at 12/31/2023 | Determination | | Dispositions | 5% | | | Threshold | | Non-Core/Other Volume | | $167 million | $120.5 million | |
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Rationale: Our 2023 disposition plan contemplated the sale of our remaining office/other properties other than the two office assets in Fort Mill, South Carolina (due to the lease expirations in 2024 for those assets) and the sale of certain industrial properties outside of our target markets, which would allow us to recycle out of non-core assets and into assets in our target markets, which we believe have better growth prospects. Result: We were able to recycle out of additional office assets and non-target market assets during 2023 and use the proceeds to fund our development pipeline.
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| | Weighting | Target | Actual at 12/31/2023 | Determination | | Portfolio Management | 30% | | | Target/Maximum | | Industrial Percent Leased | | 99% | 100% | | | Industrial Same-Store NOI Growth | | 4% | 4.1% | | | Warehouse/Distribution Leasing Spreads | | >25% | >30% | |
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Rationale: We believe that the embedded mark-to-mark opportunity in our portfolio is one of the main selling points with investors. We believe management should be appropriately incentivized to proactively renew leases or release spaces. We added industrial percent leased for 2023 as occupancy is a key metric that we and our investors review. Result: We had strong leasing activity in 2023, which led to 100% occupancy in our stabilized industrial portfolio, strong same-store NOI growth and raised Base and Cash Base rents by 52% and 37%, respectively, excluding fixed-rate renewals.
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| | Weighting | Target | Actual at 12/31/2023 | Determination | | Balance Sheet | 20% | | | Target | | Credit Rating | | Maintain current ratings | Maintained | | | Net Debt to Adjusted EBITDA Ratio | | 6.0x | 6.0x | |
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Rationale: Our strategy has been to maintain a strong balance sheet that can weather market cycles. Result: During 2023, we strengthened our balance sheet by effectively extending our debt maturities to 2027. Our credit ratings were unchanged over the course of 2023.
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| | Weighting | Target | Actual at 12/31/2023 | Determination | | ESG | 15% | | | Target/Maximum | | ISS Monthly Governance Score Average | | 2 | 1 | | | GRESB Real Estate Assessment Score compared to Peer Average | | 105% | 110% | | | Tenant satisfaction survey result compared to Kingsley Index | | 104% | 101% | | | Green Lease Leader | | Gold | Gold | | | Employee Satisfaction | | Neutral | Positive | |
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Rationale: Our ESG platform continues to expand and obtain recognition despite the properties in our portfolio primarily being subject to net leases where tenants are responsible for maintaining the buildings and are in control of their energy usage and environmental sustainability practices, and our ability to implement ESG initiatives throughout our portfolio is limited. We believe it is appropriate to hold management accountable for furthering ESG initiatives by incorporating ESG metrics into our executive compensation plans. For 2023, we selected five ESG metrics that are determined by third-party evaluators or survey results. Result: Our ESG program continued to expand in 2023 and management achieved strong results in almost all of the ESG metrics. With respect to the tenant satisfaction survey, management beat the index, but ended up below threshold. The determination of the objective measurements resulted in each named executive officer being entitled to 123.5% of the target objective portion of the 2023 annual incentive opportunity, which is up slightly from 120% for 2022. Subjective Measures With respect to the subjective portion of the annual cash incentive opportunity, the Compensation Committee made the following determinations:
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| Officer | Rationale | % of Target Subjective Portion | | T. Wilson Eglin Chairman, Chief Executive Officer and President | While Mr. Eglin’s subjective portion was less than target for 2023, the Compensation Committee, and the rest of the Board of Trustees, continue to believe that Mr. Eglin exceeded their expectations during a year with significant volatility in interest rates and the broader markets. Overall Strategy and Business Plan: ● Developed overall strategy and business plan. Overall Transaction Activity: ● Completed 6.8 million square feet of new leases and lease extensions, raising industrial Base and Cash Base Rents by 40.1% and 27.0%, respectively (52.3% and 37.3%, respectively, excluding fixed-rate renewals). ● Leased four development projects consisting of 1.9 million square feet in four target markets. ● Acquired one warehouse/distribution facility for $15.0 million. ● Committed to the construction of a 250,000 square foot industrial facility in the Columbus, Ohio market. ● Completed construction of seven warehouse/distribution facilities containing an aggregate of 4.2 million square feet in four target markets. ● Invested an aggregate of $122.1 million in development activities, including $85.8 million in ongoing development projects. Earnings Results: ● Generated Adjusted Company FFO of $0.70 per diluted share, which was at the high end of the initial range of $0.63 to $0.70 per share. ● Increased industrial same-store NOI by 4.1% in 2023 compared to 2022. Balance Sheet Strategy: ● Extended the $300.0 million term loan until January 31, 2027. ● Issued $300.0 million aggregate principal amount of 6.75% Senior Notes due 2028. ● Ended the year with net debt to Adjusted EBITDA of 6.0x. Investor Outreach: ● Held 123 meetings with potential shareholders and shareholders, including attending 10 investor conferences. ● Met with 54% of the holders of our common shares as of December 31, 2023. Overall Employee Satisfaction: ● Maintained over-all employee morale, evidenced by a positive rating on a third-party employee survey. The Compensation Committee continues to believe that Mr. Eglin’s strategic vision of an industrial focused, primarily single-tenant REIT in target markets with a strong development pipeline will lead to enhanced shareholder value throughout market cycles. Despite a positive total return in 2023, the Compensation Committee lowered the year-over-year percentage of target for Mr. Eglin’s cash bonus. | 75% |
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| Beth Boulerice Executive Vice President, Chief Financial Officer and Treasurer | During 2023 Ms. Boulerice oversaw all of our financial reporting, planning and analysis and balance sheet management. Quality & Efficiency of Financial Reporting: ● Our independent registered public accounting firm opined that our financial statements present fairly, in all material respects, our financial position as of December 31, 2023 in conformity with GAAP as set forth in our Annual Report on Form 10-K for the year ended December 31, 2023. ● Oversaw our financial planning and analysis team. ● Led our general and administrative budgeting process and efforts to manage expenses and was actively involved in our property budget committee. ● Oversaw our reporting process and was a member of our disclosure committee. Quality of internal controls: ● Oversaw compliance with the requirements of the Sarbanes-Oxley Act of 2002 and our internal controls over financial reporting, including managing those controls in a virtual environment; and ○ Our independent registered public accounting firm expressed an unqualified opinion on our internal controls over financial reporting as set forth in our Annual Report on Form 10-K for the year ended December 31, 2023. Balance Sheet Management: ● Led the extension of our $300.0 million term loan and the Senior Notes offering. ● Acted as primary liaison with credit rating agencies. Investor Outreach: ● Significant participation in our marketing efforts and preparation of our investor materials. | 110% | | Joseph S. Bonventre Executive Vice President, Chief Operating Officer, General Counsel and Secretary | During 2023, Mr. Bonventre oversaw our legal and operational activities. Legal Risk Management: ● Advised and guided our Board of Trustees on substantially all matters. ● Selected and monitored all outside counsel assignments. Efficiency of Operations: ● Oversaw our ESG efforts, including our submissions to reporting frameworks, as a member of our ESG Taskforce. ● Assisted in monitoring our general and administrative expenses and oversaw the management of our headcount. ● Actively participated in our diversity, equity and inclusion efforts as a member of the Diversity, Equity and Inclusion Committee. ● Oversaw our information technology initiatives, including our cybersecurity efforts. Quality of Disclosures and Reporting: ● Assisted with the preparation and review of our public disclosures and reporting. Was a member of our disclosure committee. | 90% |
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| | Mr. Bonventre assisted in the extension of our $300.0 term loan, our Senior Notes issuance and all of our leasing, investment and disposition activity and participated in meetings with our largest passive investors. | | | Brendan P. Mullinix Executive Vice President and Chief Investment Officer | During 2023, Mr. Mullinix oversaw our investment strategy and all our investment activity. Investment Quality & Volume: ● Led the purchase of an industrial asset for an aggregate cost of $15 million. ● Led the investment of $122.1 million in development activity. ● Led the disposition of four properties and a land parcel for an aggregate gross disposition price of $100.2 million. ● Oversaw the expansion of our development pipeline with the development start in Columbus, OH. ● Oversaw 1.9 million square feet of development leasing. Investor Outreach: ● Participated in substantially all of our marketing efforts. | 90% | | James Dudley Executive Vice President and Director of Asset Management | During 2023, Mr. Dudley oversaw our asset management, including direct involvement in all leasing activity. Leasing Activity: ● Oversaw 6.8 million square feet of industrial new leases and lease extensions. ● Oversaw 1.9 million square feet of development leasing. Property Operations: ● Oversaw our property operations group and the budgeting process as a member of the property budget committee. Investor Outreach: ● Participated in our marketing efforts. Mr. Dudley also assisted with investment and disposition activities and ESG activities. | 125% |
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Our Compensation Committee continues to believe that our named executive officers worked well as a team, but the lower subjective portion for our Chief Executive Officer, Chief Operating Officer and Chief Investment Officer in 2023 compared to 2022 generally reflects the low total shareholder return in 2023. The low total shareholder return in 2023 also impacted the payouts under the performance-based equity awards. The 2023 annual cash incentive awards and 2023 total cash compensation (base salary and annual cash incentive award) were as follows:
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| Officer | 2023 Award | % of Target Opportunity | Total Cash Compensation | | T. Wilson Eglin | $1,011,192 | 109% | $1,836,192 | | Beth Boulerice | $555,443 | 119% | $1,020,443 | | Joseph S. Bonventre | $584,268 | 113% | $1,099,268 | | Brendan P. Mullinix | $521,870 | 113% | $981,870 | | James Dudley | $464,813 | 124% | $839,813 |
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Annual Long-Term Incentive Award. The 2023 annual long-term incentive awards were as follows:
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| | Performance-Based Opportunity | | | | | | Officer | Threshold | Target | Maximum | Service-Based Award | Total Target Opportunity | | T. Wilson Eglin | $900,000 | $1,800,000 | $3,600,000 | $1,200,000 | $3,000,000 | | Beth Boulerice | $255,000 | $510,000 | $1,020,000 | $340,000 | $850,000 | | Joseph S. Bonventre | $375,000 | $750,000 | $1,500,000 | $500,000 | $1,250,000 | | Brendan P. Mullinix | $300,000 | $600,000 | $1,200,000 | $400,000 | $1,000,000 | | James Dudley | $180,000 | $360,000 | $720,000 | $240,000 | $600,000 |
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The 2023 annual long-term incentive awards consisted of a mix of performance-based non-vested shares and service-based non-vested shares. Vesting for performance-based non-vested shares is tied to our TSR relative to other REITs, which we think is more appropriate than absolute TSR. No performance-based shares are earned for results below the threshold level. Performance-Based Opportunity of Outstanding Long-Term Incentive Awards. The table below summarizes the results of the 2021 performance-based long-term incentive awards, which was completed at the end of 2023, and the performance to the end of 2023 for the outstanding 2022 and 2023 performance-based long-term incentive awards.
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| Grant Year (Performance Period) and Metrics | Metric Weighting | 2021 | 2022 | 2023 | 2024 | 2025 | Payout as % of Target | | 2021 Grant (Jan 2021-Dec 2023) | | | | | | | | | Relative TSR vs. Peer Group | 50% | Below Threshold Achieved | | | | | 0% | | Relative TSR vs. Index | 50% | Between Threshold and Target Achieved | | | | | 85% | | 2022 Grant (Jan 2022-Dec 2024) | | | | | | | | | Relative TSR vs. Peer Group | 50% | | Tracking at below Threshold | | | | 0% | | Relative TSR vs. Index | 50% | | Tracking at slightly above Threshold | | | | 56% | | 2023 Grant (Jan 2023-Dec 2025) | | | | | | | | | Relative TSR vs. Peer Group | 50% | | | Tracking at below Threshold | | | 0% | | Relative TSR vs. Index | 50% | | | Tracking at below Threshold | | | 0% |
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The following table shows the values reported based on the grant date value and the values realized based on the market value on January 2, 2024, which was the date of vesting, of the 2021 performance-based long-term incentive awards:
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| Officer | Grant Date Value | Market Value at Vesting | | T. Wilson Eglin | $2,136,552 | $670,423 | | Beth Boulerice | $316,532 | $99,319 | | Joseph S. Bonventre | $553,926 | $173,808 | | Brendan P. Mullinix | $474,795 | $148,979 | | James Dudley | $197,835 | $62,069 |
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Upon vesting, accrued dividends were also paid on the performance awards that vested. The actual payouts for the 2022 awards will be disclosed in the proxy statement for the 2025 Annual Meeting of Shareholders and the actual payouts for the 2023 awards will be disclosed in the proxy statement for the 2026 Annual Meeting of Shareholders. Correlation between CEO Compensation and Performance. A significant portion of our Chief Executive Officer’s compensation is long-term and equity-based. As a result, the amounts in the summary compensation table are not the same as realizable pay. Realizable pay includes Salary, Non-Equity Incentive Plan Compensation, Nonqualified Deferred Compensation Earnings and All Other Compensation from the Summary Compensation Table below for the applicable year and the value realized upon vesting of long-term incentive share awards for the applicable years. Our share awards consist of the following:
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| ● | Service-based equity awards: The grant date fair value of the award is based on the closing price of the common shares on the date of grant (or, if the date of grant was not a trading day, the last trading day prior to the date of grant) and does not reflect any time-based vesting conditions or service period even though it is not “realized” pay. |
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| ● | Performance-based equity awards: The grant date fair value of the award is determined using a Monte Carlo simulation model, which is an estimation of the value based on hypothetical models. However, if such performance is never achieved, the awards will not result in “realized” pay. |
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Reported pay is the Total amount in the Summary Compensation Table below, and realized pay is calculated by subtracting the Share Awards in the Summary Compensation Table from reported pay and adding the Value Realized on Vesting from the Option Exercises and Stock Vested table below. Elements of Compensation Program Applicable to Named Executive Officers for 2024. Base Salary. For 2024, the Compensation Committee approved increases in base salaries for our named executive officers as noted below to ensure base salaries, and, in certain situations, overall compensation, remains competitive and in line with their roles and responsibilities. Base salaries are as follows:
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| Officer | 2024 Base Salary | 2023 Base Salary | % Change | | T. Wilson Eglin | $840,000 | $825,000 | 2% | | Beth Boulerice | $485,000 | $465,000 | 4% | | Joseph S. Bonventre | $530,000 | $515,000 | 3% | | Brendan P. Mullinix | $475,000 | $460,000 | 3% | | James Dudley | $410,000 | $375,000 | 9% |
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Annual Cash Incentive Opportunity. The annual cash incentive opportunity for the 2024 executive compensation program for our named executive officers will be a percentage of base salary as follows:
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| Officer | Threshold | | Target | | Maximum | | | T. Wilson Eglin | 56.25% | $472,500 | 112.5% | $945,000 | 225% | $1,890,000 | | Beth Boulerice | 50% | $242,500 | 100% | $485,000 | 200% | $970,000 | | Joseph S. Bonventre | 50% | $265,000 | 100% | $530,000 | 200% | $1,060,000 | | Brendan P. Mullinix | 50% | $237,500 | 100% | $475,000 | 200% | $950,000 | | James Dudley | 50% | $205,000 | 100% | $410,000 | 200% | $820,000 |
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Our Chief Executive Officer’s target total cash compensation (base salary plus target annual cash incentive) of $1,785,000 is approximately 5% lower than the average of the median target total cash compensation in the two 2023 peer groups. Seventy percent of the annual cash incentive opportunity for our named executive officers will be determined by predefined objective performance measures based on our 2024 business plan for the period commencing January 1, 2024 and ending December 31, 2024. The following is a summary of the objective performance measures:
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| Item | Weighting | | Investment Performance | 35% | | Item Rationale: With our current cost of capital, investment activity is expected to continue to be muted in 2024. The sub-items continue to be leased development square footage, leased development number of projects and leased development pre-promote yield. Weighting is increased 5% from 2023. | | | Portfolio Management | 30% | | Item Rationale: The embedded mark-to-market opportunity in our portfolio remains critical to revenue growth. The sub-items continue to be percent leased, industrial same-store NOI and industrial leasing spreads. Weighting is the same as 2023. | | | Balance Sheet | 20% | | Item Rationale: Our balance sheet strategy has been to maintain a strong balance sheet that can weather market cycles. The sub-items continue to be net debt to adjusted EBITDA and credit ratings. Weighting is the same as 2023. | | | ESG | 15% | | Item Rationale: Our ESG platform continues to grow and obtain recognition. Four sub-items from 2023 will be the sub-items for 2024 and each are determined by a third-party. Weighting is the same as 2023. | |
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The target and actual amounts and the Compensation Committee’s determination of whether an item was met will be disclosed in the proxy statement for the 2025 Annual Meeting of Shareholders. The remaining 30% of the annual cash incentive will be based on subjective factors, similar to the factors discussed with respect to the 2023 Annual Cash Incentive Opportunity above. Long-Term Incentive Opportunity. The long-term incentive opportunity for the 2024 executive compensation program for our named executive officers is a long-term incentive award consisting of a mix of performance-based non-vested shares and service-based non-vested shares. Vesting for performance-based non-vested shares is tied to our TSR relative to other REITs, which we think is more appropriate than absolute TSR. The long-term incentive opportunity is as follows:
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| | Performance-Based Opportunity | | | Service-Based | Total Target | Change | | Officer | Threshold | Target | Maximum | Award | Opportunity | from 2023 | | T. Wilson Eglin | $1,020,000 | $2,040,000 | $4,080,000 | $1,360,000 | $3,400,000 | 13% | | Beth Boulerice | $270,000 | $540,000 | $1,080,000 | $360,000 | $900,000 | 6% | | Joseph S. Bonventre | $375,000 | $750,000 | $1,500,000 | $500,000 | $1,250,000 | 0% | | Brendan P. Mullinix | $315,000 | $630,000 | $1,260,000 | $420,000 | $1,050,000 | 5% | | James Dudley | $210,000 | $420,000 | $840,000 | $280,000 | $700,000 | 17% |
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The target long-term incentive opportunity for our Chief Executive Officer of $3,400,000 is essentially equal to the average of the median target long-term incentive award in the two peer groups, which we believe is in-line with market. The number of performance-based non-vested shares (calculated using maximum opportunity level for accounting purposes) and service-based non-vested shares granted and issued was based on the closing price of our common shares on January 5, 2024 (the date specified in the Compensation Committee’s approval), which was $9.61 per share; with the number of performance-based non-vested shares rounded to the nearest share and the number of service-based non-vested shares rounded up to the nearest 10 shares to avoid fractional shares when vesting. We expect to disclose the amount of performance-based non-vested shares that vest in our definitive proxy statement for the 2027 Annual Meeting of Shareholders. CEO 2024 Total Target Direct Compensation Companywide Retirement and Health and Welfare Benefits. In addition to the executive compensation programs outlined in this proxy statement, our named executive officers participate in retirement and health and welfare benefits that are available to all employees with no distinction made among any groups of employees other than as required by applicable tax rules. We do not believe that any of these benefits are excessive or above market. COMPENSATION TABLES Summary Compensation Table The following table sets forth summary information concerning the compensation earned by our named executive officers for the fiscal years ended December 31, 2023, 2022 and 2021.
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| Name and Principal Position | Fiscal Year | Salary ($)(1) | Bonus ($) | Share Awards ($)(2) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(3) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | All Other Compensation ($)(5) | Total ($) | | T. Wilson Eglin Chief Executive Officer and President | 2023 | 825,000 | — | 3,474,977 | — | 1,011,192 | 52,345 | 16,500 | 5,380,014 | | | 2022 | 800,000 | — | 3,444,528 | — | 972,000 | (670,019) | 15,250 | 5,231,778 | | | 2021 | 785,000 | — | 3,216,612 | — | 1,468,931 | 710,586 | 15,814 | 6,196,943 | | Beth Boulerice Executive Vice President, Chief Financial Officer and Treasurer | 2023 | 465,000 | — | 984,620 | — | 555,443 | — | 16,500 | 2,021,563 | | | 2022 | 440,000 | — | 689,024 | — | 501,600 | — | 15,250 | 1,645,874 | | | 2021 | 400,000 | — | 476,586 | — | 725,333 | — | 14,500 | 1,616,419 | | Joseph S. Bonventre Executive Vice President, Chief Operating Officer, General Counsel and Secretary | 2023 | 515,000 | — | 1,447,911 | — | 584,268 | — | 16,500 | 2,563,679 | | | 2022 | 500,000 | — | 1,435,283 | — | 570,000 | — | 15,250 | 2,520,533 | | | 2021 | 420,000 | — | 834,021 | — | 761,600 | — | 14,500 | 2,030,121 | | Brendan Mullinix Executive Vice President, and Chief Investment Officer | 2023 | 460,000 | — | 1,158,330 | — | 521,870 | — | 16,500 | 2,156,700 | | | 2022 | 440,000 | — | 918,553 | — | 501,600 | — | 15,250 | 1,875,403 | | | 2021 | 375,000 | — | 714,876 | — | 680,000 | — | 14,500 | 1,784,376 | | James Dudley Executive Vice President and Director of Asset Management | 2023 | 375,000 | — | 695,039 | — | 464,813 | — | 16,500 | 1,551,352 | | | 2022 | 350,000 | — | 551,138 | — | 451,500 | — | 15,250 | 1,367,888 |
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| (4) Non-qualified deferred compensation consists solely of a trust established for the benefit of Mr. Eglin, into which, in previous years, he had the option to place non-vested common share awards. Dividends on these shares are the same as all those paid on all common shares and are paid by us to the trust, which makes a corresponding distribution to the participant. Earnings consist of dividends and increase/decrease in market value of the common shares in the trust. None of the earnings were above- market. See “Non-Qualified Deferred Compensation,” below. |
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| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO | Average Summary Compensation Table Total for Non-PEO NEOs(2) | Average Compensation Actually Paid to Non-PEO NEOs | Value of Initial Fixed $100 Investment Based On: | | Net Income ($000s) | Company Selected Metric – Adjusted Company FFO ($000s)(4) | | | | | | | Total Shareholder Return | Peer Group Total Shareholder Return(3) | | | | 2023 | $5,380,014 | $3,519,916 | $2,073,324 | $1,605,010 | $104.33 | $113.74 | $35,923 | $206,191 | | 2022 | $5,231,778 | $(641,147) | $1,852,425 | $711,912 | $67.04 | $75.49 | $116,243 | $193,061 | | 2021 | $6,196,943 | $14,286,704 | $1,660,901 | $2,843,214 | $152.23 | $143.06 | $385,091 | $223,196 | | 2020 | $4,867,205 | $8,380,988 | $1,300,728 | $1,716,613 | $104.19 | $92.43 | $186,391 | $209,542 |
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| Name | Fees Earned or Paid in Cash ($) | Share Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | | Richard S. Frary(1) | 53,692 | 83,671 | — | — | — | — | 137,363 | | Lawrence L. Gray | 68,240 | 120,000 | — | — | — | — | 188,240 | | Arun Gupta | 66,760 | 120,000 | | | | | 186,760 | | Jamie Handwerker | 78,123 | 120,000 | — | — | — | — | 198,123 | | Derrick Johnson | 60,000 | 120,000 | | | | | 180,000 | | Claire A. Koeneman | 68,240 | 120,000 | — | — | — | — | 188,240 | | Nancy Elizabeth Noe | 66,760 | 120,000 | — | — | — | — | 186,760 | | Howard Roth | 80,000 | 120,000 | — | — | — | — | 200,000 |