DEF 14A of Essex Property Trust, Inc.
Filed Mar 28, 2025 · FY20240001558370-25-003997
PROPOSAL 1 Election of Directors
PROPOSAL 1 Election of Directors At the Annual Meeting, the following individuals are each nominated for election as directors to serve until the annual meeting of stockholders in 2026 and until their successors are duly elected and qualified: John V. Arabia, Keith R. Guericke, Anne B. Gust, Maria R. Hawthorne, Amal M. Johnson, Mary Kasaris, Angela L. Kleiman, Irving F. Lyons, III, and George M. Marcus. Each of the nominees is currently a director of the Company. Each of the nominees has consented, if elected as a director of the Company, to serve until his or her term expires. The Board believes that each such nominee will stand for election and will serve if elected as a director. However, in the event that any nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, the discretionary authority provided in the proxy will be exercised by the proxy holders to vote for a substitute or substitutes nominated by the Board, or the Board, on the recommendation of the Nominating Committee, may reduce the size of the Board and the number of nominees.
PROPOSAL 1 Election of Directors
| The Board unanimously recommends that the stockholders vote “FOR” the election of all nominees named above. |
PROPOSAL 1 Election of Directors
| 2025 PROXY STATEMENT | 17 |
Information Regarding 2025 Director Nominees
Information Regarding 2025 Director Nominees The following table and charts set forth information as of the Record Date with respect to the incumbent directors who are standing for re-election at the Annual Meeting. Effective as of May 13, 2025, the composition of the committees will be as shown below.
Information Regarding 2025 Director Nominees
| | | | Committee Memberships | | | | Director Nominees | Age | Director Since | Audit | Compensation | Nominating | | John V. Arabia INDEPENDENT Board Director | 55 | 2024 | | | | | Keith R. Guericke INDEPENDENT Vice Chairman of the Board | 76 | 1994 | | | | | Anne B. Gust INDEPENDENT Board Director | 66 | 2024 | | | | | Maria R. Hawthorne INDEPENDENT Board Director | 65 | 2020 | | | | | Amal M. Johnson INDEPENDENT Board Director | 72 | 2018 | | | | | Mary Kasaris INDEPENDENT Board Director | 69 | 2018 | | | | | Angela L. Kleiman NON-INDEPENDENT Chief Executive Officer and President | 54 | 2022 | | | | | Irving F. Lyons, III INDEPENDENT Lead Independent Director | 75 | 2014 | | | | | George M. Marcus INDEPENDENT Chairman of the Board | 83 | 1994 | | | |
Information Regarding 2025 Director Nominees
Member Chairperson
Information Regarding 2025 Director Nominees
| 18 | ESSEX PROPERTY TRUST, INC. |
Board Experience and Skills
Board Experience and Skills The following Experience and Skills Matrix summarizes the qualifications and experience of our nine director nominees. For additional information on our nominees, see “Proposal 1: Election of Directors” beginning on page 17.
Board Experience and Skills
| Skills Assessment | Mr. Arabia | Mr. Guericke | Ms. Gust | Ms. Hawthorne | Ms. Johnson | Ms. Kasaris | Ms. Kleiman | Mr. Lyons | Mr. Marcus | | Financial Expertise | • | • | | • | • | • | • | • | • | | Capital Markets Experience | • | • | | • | • | • | • | • | • | | Corporate Governance Expertise | • | • | • | • | • | | • | • | • | | Government Relations Experience | | • | • | • | | | • | • | • | | Public Company CEO Experience | • | • | | • | • | | • | • | • | | Real Estate Operations and/or Development | • | • | • | • | | • | • | • | • | | Strategic Planning and Oversight | • | • | | • | • | • | • | • | • | | Risk Management | • | | • | • | | • | • | | | | Technology, Cybersecurity and Innovation | | | | | • | | • | | | | Sustainability | • | | • | • | | | • | | | | Climate-Related Oversight | • | | | | | | • | | |
Board Experience and Skills
The charts presented below represent a snapshot of skills information regarding the proposed composition of the Board following the Annual Meeting, assuming the election of the nine director nominees.
Board Experience and Skills
| 2025 PROXY STATEMENT | 19 |
2025 Director Nominees
2025 Director Nominees Certain biographical information about the director nominees is furnished below, highlighting each director nominee’s specific experience, qualifications, attributes and skills that led the Board to the conclusion that each should serve as a director.
2025 Director Nominees
| | Experience & Education: ¾ Joined the Essex Board in January 2024 ¾ Served as President and Chief Executive Officer of Sunstone Hotel Investors, Inc. (NYSE: SHO) from 2015 to 2021, and previously served as President from 2013 to 2015 and Chief Financial Officer and EVP of Corporate Strategy from 2011 to 2013 ¾ Previously served as Managing Director of Green Street Advisors’ real estate research team after joining Green Street in 1997 ¾ Before Green Street, served as Consulting Manager at EY Kenneth Leventhal in the firm’s west coast lodging consulting practice ¾ Received a Bachelor of Science degree in Hotel Administration from Cornell University, earned his Certified Public Accountant certification from the State of Illinois and holds a Master of Business Administration in Real Estate/Accounting from the University of Southern California Memberships: ¾ Former Member, Board of Directors of Sunstone Hotel Investors, Inc. (NYSE: SHO) ¾ Former Member, Board of Directors and Investment and Oversight Committee, and Former Chair of the Nominating and Corporate Governance Committee of Education Realty Trust, Inc. (NYSE: EDR) Qualifications and Expertise Highlights: ¾ Extensive knowledge and experience in real estate development, management and hospitality |
2025 Director Nominees
| | Experience & Education: ¾ Vice Chairman of the Essex Board ¾ President and Chief Executive Officer of Essex from 1988 through 2010 ¾ Joined Essex’s predecessor in 1977 to focus on investment strategies and portfolio expansion ¾ Prepared Essex for its IPO in 1994 ¾ Began career with Kenneth Leventhal & Company, a CPA firm noted for its real estate expertise ¾ Bachelor of Science degree in Accounting from Southern Oregon College Memberships: ¾ Member, Board of Directors of Century Communities, Inc. (NYSE: CCS) ¾ Former Member, Nareit ¾ Former Member, Board of Directors of American Residential Properties, Inc. Qualifications and Expertise Highlights: ¾ Over 40 years with the Company and former CEO of Essex ¾ Extensive knowledge of the real estate industry ¾ Strong relationships with Essex’s executives and with executives and senior management at real estate companies throughout the United States |
2025 Director Nominees
| 20 | ESSEX PROPERTY TRUST, INC. |
2025 Director Nominees
| | Experience & Education: ¾ Joined the Essex Board in January 2024 ¾ Served as Special Counsel to the Governor of the State of California from 2011 to 2019, after serving as Special Counsel to the Attorney General of the State of California from 2007 to 2011 ¾ Served in various legal and management roles at The Gap, Inc. (NYSE: GPS) from 1991 to 2005, including as Executive Vice President and Chief Administrative Officer from 2000 to 2005 and prior to that, as General Counsel and Corporate Secretary ¾ Previously was an attorney at the law firms of Orrick, Herrington & Sutcliffe LLP and Brobeck, Phleger & Harrison LLP ¾ Received a Bachelor of Arts from Stanford University and earned a Juris Doctor degree from the University of Michigan Memberships: ¾ Former Member, Board of Directors of Jack in the Box Inc. (NASDAQ: JACK) Qualifications and Expertise Highlights: ¾ Extensive legal and administrative experience advising large corporations ¾ Strong experience with California legislative process |
2025 Director Nominees
| | Experience & Education: ¾ Joined Essex’s Board in March 2020 ¾ Previously held various positions of escalating responsibility at PS Business Parks since joining in 1994 until its acquisition by affiliates of Blackstone Real Estate in July 2022, including Interim Chief Operating Officer from January 2022 to July 2022, President and Chief Executive Officer from August 2015 through August 2020, Acting Chief Financial Officer from September 2017 to September 2018, and Chief Administrative Officer from July 2013 to August 2015 ¾ General Manager, Leasing Director and Property Manager at American Office Park Properties from 1988 to 1994 ¾ Received Bachelor of Arts degree in International Relations from Pomona College Memberships: ¾ Member, Board of Directors and Audit Committee Chair of ASGN, Incorporated (NYSE: ASGN) ¾ Member, Board of Trustees of Public Storage (NYSE: PSA) ¾ Former Member, Executive Board of Nareit Qualifications and Expertise Highlights: ¾ Extensive experience in management with publicly traded real estate companies |
2025 Director Nominees
| 2025 PROXY STATEMENT | 21 |
2025 Director Nominees
| | Experience & Education: ¾ Joined Essex’s Board in February 2018 ¾ Executive Chairperson of Author-it Software Corporation from March 2012 to October 2016 ¾ Chairperson of MarketTools, Inc. from August 2008 to January 2012 and Chief Executive Officer from March 2005 to August 2008 ¾ Venture Partner at ComVentures L.P. from April 2004 to March 2005 ¾ General Partner at Lightspeed Venture Partners from March 1999 to March 2004 ¾ Held various management positions at Baan Supply Chain Solutions and its affiliates, including: − President of Baan Supply Chain Solutions from January 1998 to December 1998 − President of Baan Affiliates from January 1997 to December 1997 − President of Baan Americas from October 1994 to December 1996 ¾ President of ASK Manufacturing Systems from August 1993 to July 1994 ¾ Held executive positions at IBM from 1977 to June 1993 ¾ Received Bachelor of Science degree in Mathematics from Montclair State University and studied computer science at Stevens Institute of Technology Graduate School of Engineering Memberships: ¾ Member, Board of Directors of Intuitive Surgical Inc. (NASDAQ: ISRG) ¾ Former Member, Board of Directors of CalAmp Corp. (NASDAQ: CAMP) ¾ Former Member, Board of Directors of Mellanox Technologies, Ltd. (acquired by Nvidia Corporation (NASDAQ: NVDA)) Qualifications and Expertise Highlights: ¾ Extensive knowledge of technology, management and operations in both public and private companies |
2025 Director Nominees
| | Experience & Education: ¾ Joined Essex’s Board in September 2018 ¾ Previously served as Senior Executive Managing Director at First Republic Bank from 2021 until 2023, which was acquired by JPMorgan Chase Bank in 2023, after serving as Regional Managing Director for the San Francisco Bay Area’s Peninsula/Silicon Valley Region from 1996 until 2021, and served on First Republic Bank’s Executive Loan Committee ¾ Held various positions at Bank of America, including Head of Private Banking in the Peninsula/Silicon Valley Region ¾ Holds a Master of Business Administration from Golden Gate University and a Bachelor of Science degree from the University of California, Berkeley Memberships & Honors: ¾ Former Member, Board of Directors of The Elios Charitable Foundation ¾ Honored as one of the 100 Most Influential Women in 2016 by the San Francisco Business Times Qualifications and Expertise Highlights: ¾ Significant experience in real estate, lending and finance matters |
2025 Director Nominees
| 22 | ESSEX PROPERTY TRUST, INC. |
2025 Director Nominees
| | Experience & Education: ¾ Chief Executive Officer and President of Essex ¾ Chief Operating Officer and Senior Executive Vice President of Essex from January 2021 to March 2023 ¾ Chief Financial Officer and Executive Vice President of Essex from October 2015 to December 2020 ¾ Prior to joining Essex in 2009, Ms. Kleiman was a Senior Equity Analyst and Vice President of Investor Relations at Security Capital, where she was responsible for over $2 billion of the firm’s REIT investments and all client communications. As a Vice President with J.P. Morgan Real Estate & Lodging Investment Banking Group, Ms. Kleiman advised senior management and boards in strategic business platforms and capital markets transactions. Ms. Kleiman began her career in real estate development management in 1991. ¾ Received Bachelor of Science degree from Northwestern University ¾ Received Master of Business Administration from Kellogg School of Management of Northwestern University Memberships: ¾ Member, Board of Directors of Rexford Industrial Realty, Inc. (NYSE: REXR) ¾ Member, Nareit ¾ Member, National Multifamily Housing Council Qualifications and Expertise Highlights: ¾ Extensive knowledge of investment, financial and operating matters of Essex ¾ Responsible for overall transaction management including leading negotiations of the merger agreement, pricing/valuations and joint venture equity originations in connection with the merger with BRE Properties, Inc., which was successfully completed in April 2014 ¾ Grew Essex’s Private Equity platform from $750 million to $3 billion in gross assets as head of the Private Equity Group of Essex ¾ Led transformation of Company balance sheet, achieving rating upgrades to BBB+ from S&P and Baa1 from Moody’s |
2025 Director Nominees
| | Experience & Education: ¾ Vice Chairman of Prologis, Inc. (NYSE: PLD) from 2001 through May 2006 ¾ Chief Investment Officer of Prologis, Inc. from March 1997 to December 2004 ¾ Former Managing Partner, King & Lyons, a San Francisco Bay Area industrial real estate development and management company ¾ Holds a Master in Business Administration from Stanford University and a Bachelor of Science in Industrial Engineering and Operations Research from the University of California at Berkeley Memberships: ¾ Lead Director, Board of Directors of Prologis, Inc. ¾ Former Member, Board of Directors of Equinix, Inc. (NASDAQ: EQIX) ¾ Former Member and Chairman, Board of Directors of BRE Properties, Inc. (acquired by Essex in 2014) Qualifications and Expertise Highlights: ¾ Management and investment experience with publicly traded real estate companies ¾ Extensive involvement in Bay Area real estate development and management |
2025 Director Nominees
| 2025 PROXY STATEMENT | 23 |
2025 Director Nominees
| | Experience & Education: ¾ Founder and Chairman of Essex and Essex’s predecessor ¾ Founded Greater Bay Bancorp with other original founders (acquired by Wells Fargo & Company in 2007) ¾ Founder of The Marcus & Millichap Company, the parent company of a diversified group of real estate service, investment and development firms including SummerHill Homes, Pacific Urban Investors, and Meridian ¾ Received Bachelor of Science degree in Economics from San Francisco State University ¾ Graduate of the Harvard Business School of Owners / Presidents Management Program and the Georgetown University Leadership Program Memberships & Honors: ¾ Chairman, Board of Directors of Marcus & Millichap Company ¾ Co-Chairman, Board of Directors of Marcus & Millichap, Inc. (NYSE: MMI) ¾ Member, Real Estate Roundtable of the University of California, Berkeley, Fisher Center for Real Estate & Urban Economics at the University of California, Berkeley and the Urban Land Institute ¾ Honored as Alumnus of Millennium by San Francisco State University in 1999, and received honorary doctorate degrees from San Francisco State University and American College of Greece ¾ Inducted into the Bay Area Council’s Business Hall of Fame in 2022 Qualifications and Expertise Highlights: ¾ Extensive knowledge of Essex as its Founder ¾ Brings outstanding leadership and vision to Essex ¾ Extensive knowledge of and network within the real estate industry |
2025 Director Nominees
| 24 | ESSEX PROPERTY TRUST, INC. |
Director Compensation
Director Compensation Under the Company’s director compensation program, each non-employee director of Essex was entitled to receive the following compensation under the Company’s director compensation program:
Director Compensation
| ¾ | An annual equity grant of RSUs with a grant value equal to $155,000 for directors (other than the Chairman) and $285,000 for the Chairman of the Board. The number of RSUs is determined by dividing the foregoing value by the closing stock price on the grant date. Such annual RSU grants fully vest one year after the grant date. |
Director Compensation
| ¾ | An annual cash retainer, paid quarterly, in the amount of $84,000 per year. |
Director Compensation
| ¾ | A fee for the Lead Independent Director of $25,000 per year. |
Director Compensation
| ¾ | A committee membership fee of $12,000 per year for members of the Audit Committee and $8,000 per year for members of the Nominating Committee and Compensation Committee. |
Director Compensation
| ¾ | A committee chairman fee for the Chair of the Nominating Committee of $20,000 per year, a committee chairman fee for the Chair of the Compensation Committee of $22,000 per year, and a committee chairman fee for the Chair of the Audit Committee of $32,000 per year. |
Director Compensation
The Compensation Committee and the Board periodically review the total compensation for non-employee directors by assessing the compensation at similarly sized real estate investment trusts, and the Board chose to make the following changes to our director compensation program effective for 2025: (i) a $15,000 increase in the annual equity grant of RSUs to $170,000 for directors (other than the Chairman), and $300,000 for the Chairman of the Board, (ii) the Audit Committee membership fee is increasing from $12,000 per year to $15,000 per year, and (iii) both the Compensation and Nomination & Corporate Governance Committee membership fee is increasing from $8,000 per year to $10,000 per year. Director Compensation Table.—The table below summarizes the compensation the Company paid to directors for the year ended December 31, 2024. Ms. Kleiman is not included in the table below because she did not receive any additional compensation for services provided as a director in 2024.
Director Compensation
| | Fees Earned or | | | | | Paid in Cash | Stock Awards | Total | | Name | ($) | ($)(1) | ($) | | John V. Arabia | 93,000 | 155,000 | 248,000 | | Keith R. Guericke | 84,000 | 155,000 | 239,000 | | Anne B. Gust | 99,000 | 155,000 | 254,000 | | Maria R. Hawthorne | 96,000 | 155,000 | 251,000 | | Amal M. Johnson | 114,000 | 155,000 | 269,000 | | Mary Kasaris | 124,000 | 155,000 | 279,000 | | Irving F. Lyons, III | 137,000 | 155,000 | 292,000 | | George M. Marcus | 90,000 | 285,000 | 375,000 |
Director Compensation
| (1) The assumptions used to calculate the value of the stock awards are set forth in Note 14 of the Notes to Consolidated Financial Statements in our Form 10-K for the year ended December 31, 2024, filed with the SEC on February 21, 2025 (the “2024 Form 10- K”). No options were awarded to our directors during 2024. As of December 31, 2024, each director had the following number of stock options (vested and unvested) then outstanding: John V. Arabia: 0 options; Keith R. Guericke: 15,723 options; Anne B. Gust: 0 options; Maria R. Hawthorne: 6,130 options; Amal M. Johnson: 15,258 options; Mary Kasaris: 17,608 options; Irving F. Lyons: 24,639 options; and George M. Marcus: 13,418 options, respectively. |
Director Compensation
| 2025 PROXY STATEMENT | 33 |
COMPENSATION DISCUSSION AND ANALYSIS
| Description of Individual Elements of Executive Officer Compensation | 45 | | Base Salaries | 45 | | Annual Bonuses | 45 | | 2024 Annual Corporate Target Bonuses | 47 | | 2024 Individual and Business Unit Goals | 47 | | Total Annual Bonus | 48 | | Long-Term Equity Incentives | 48 | | Other Benefits | 50 | | Tax and Accounting Considerations | 51 | | Policy on Hedging and Pledging Essex Equity Securities | 52 | | Compensation Committee Report | 53 | | Summary Compensation Table | 53 | | Grants of Plan-Based Awards for 2024 | 55 | | Outstanding Equity Awards at December 31, 2024 | 56 | | Option Exercises and Stock Vested for 2024 | 58 | | Nonqualified Deferred Compensation | 58 | | Potential Payments Upon Termination or Change in Control | 59 |
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Long-term awards with performance periods ended 2024 achieved 44% payout — The Compensation Committee believes that a meaningful portion of executive pay should be based on the Company’s performance relative to its peers. The Company’s long-term restricted stock unit (“RSU”) incentive awards that vest based on performance (the “Performance RSUs”) granted in 2021 included two types of awards: (1) “Performance and Service RSUs” which were subject to performance vesting based on both the achievement of the Company’s total stockholder return (“TSR”) and the Company’s relative TSR against the Nareit Apartment Index during a three-year performance period (the “2021-2024 TSR Goals”), and (2) “DIP RSUs” which were subject to performance vesting based on both the 2021-2024 TSR Goals and the gain or purchase price for the disposition of certain assets of the Company’s real estate portfolio during the 2022 calendar year, as well as a one-year service based vesting condition. The Performance RSUs and DIP RSUs granted in 2021 achieved a 44% payout based on the Company’s performance as shown by the following performance matrix: |
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Total cash bonuses reflect corporate and individual performance during 2024 — For 2024, our named executive officers received above-target annual bonuses which equated to an average of 156% of target due to the achievement of substantially all of the individual and corporate goals, with the exception of one corporate goal. The Compensation Committee increased the target annual bonuses for the named executive officers for 2024 as compared to 2023, as the target compensation for the named executive officers was well below the 30th percentile of the peer group for all the executives based on the 2024 Mercer Analysis, as described in more detail in the “How Executive Compensation Decisions Are Made” section below. Additionally, the Compensation Committee increased the portion of the target annual bonuses based on non-discretionary corporate performance goals and decreased the portion of the target annual bonuses based on discretionary individual business unit goals in order to better align named executive officer bonus compensation with Company performance. The Company achieved all but one of its corporate performance goals for 2024. The annual corporate goals are described in more detail in the section titled: Description of Individual Elements of Named Executive Officer Compensation. |
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Performance-based incentives make up a significant portion of named executive officer compensation — For 2024, the percentage of executive target total compensation tied to long-term performance- and service-based incentive awards was 53% for our CEO, largely consistent with past practice and pay mix, and was 43% for our other three NEOs, largely due to Mr. Burns’ pay mix as a first year NEO. With respect to the equity awards granted to our executive officers in 2024, 85% of the long-term incentive awards are tied to performance metrics with the following two criteria: (1) 45% are tied to the achievement of the Company’s TSR relative to the Nareit Apartment Index during a three-year performance period (the “TSR Goals”) and (2) 40% are tied to the Company’s average achievement of Core FFO per diluted share (which is the Company’s primary earnings metric) over a three-year period comprised of fiscal years 2024, 2025 and 2026. The Compensation Committee will set Core FFO per diluted share goals each year with the final determination occurring after the final annual performance period ends (“Core FFO Goals”). In addition, 15% of the total awards granted to the executive officers were granted in the form of time-based RSUs that will vest over a period of three years from the grant date. The award structure is described in more detail in the “Description of Individual Elements of Named Executive Officer Compensation” section below. |
COMPENSATION DISCUSSION AND ANALYSIS
Historically, the executive officers have been awarded stock option awards and DIP RSUs. In order to simplify the compensation structure for our executive officers and to more closely align executive compensation with the Company's goals and objectives, the Compensation Committee eliminated stock option awards and DIP RSU awards for the February 2024 long-term incentive grants. 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 which is tied to shareholder value creation. Our target pay mix evidences this pay-for-performance philosophy and emphasizes the alignment of our executive officers’ interests with those of our stockholders. In 2024, approximately 80% of the total direct compensation for the CEO, and approximately 72% of the total direct compensation for the other NEO’s, was performance-based and not guaranteed. The graphs below illustrate the compensation breakdown and the chart on page 44 explains how each element of compensation fits into the Company’s overall program.
COMPENSATION DISCUSSION AND ANALYSIS
| WHAT WE DO: | | | | | 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. | | | 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 DISCUSSION AND ANALYSIS
| WHAT WE DON’T DO: | | | | | 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. |
COMPENSATION DISCUSSION AND ANALYSIS
| Attract, retain, and motivate executive officers through the overall design and mix of cash, equity, and short- and long-term compensation elements; | | Reward individual performance by tying significant portions of short-term compensation in the form of salary and annual bonus opportunity to achievement of business unit and individual performance goals; and | | Align the interests of executive officers with the interests of the Company’s stockholders by tying significant portions of short-term and long-term compensation, in the form of annual bonus and long-term equity-based awards, to increasing distributable cash flow to stockholders, and increasing the value of Common Stock based on both internal and external growth initiatives. |
COMPENSATION DISCUSSION AND ANALYSIS
In fiscal year 2024, the Compensation Committee retained Mercer as its independent compensation consultant to advise the Compensation Committee on the Company’s executive compensation. In compliance with SEC promulgated rules under the 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 2024 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 awards, was well-below the 30th percentile of the median compensation of the Company’s peers for all the executives. Overall, the Compensation Committee believes it is generally appropriate to be near the 50th percentile of the peer group of comparably sized companies against which Essex directly competes for business and executive talent. 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, the peer group for 2024 remained unchanged from 2023, and included the following 14 equity REITs. All peer companies are either in the rental housing business or have a significant presence on the West Coast. Essex ranks in the 60th percentile of the peer group based on total market capitalization.
COMPENSATION DISCUSSION AND ANALYSIS
In fiscal year 2024, the Compensation Committee considered the peer group information prepared by Mercer pursuant to a 2024 benchmarking analysis (the “2024 Mercer Analysis”) in determining overall compensation levels. The 2024 Mercer Analysis concluded that the overall target compensation of the named executive officers was well below the 30th percentile of the median of the peer group for all the executives. The Compensation Committee did not increase the base salaries for the named executive officers for 2024 as compared to 2023 (other than for the CAO, who received an immaterial increase of 1% due to increased responsibilities). However, the Compensation Committee increased the 2024 target individual and corporate bonuses for the named executive officers from the target bonuses set in 2023 in order to more closely align executive total compensation to the 50th percentile of the peer group.
COMPENSATION DISCUSSION AND ANALYSIS
Description of Individual Elements of Executive Officer Compensation Base Salaries None of the Company’s executive officers has an employment agreement. Base salaries are viewed as a customary element necessary to hire and retain executive officers. Base salary and any changes in base salary are based on views of individual retention and/or performance factors and market data at peer companies, without benchmarking. For 2024, the Compensation Committee established base salaries in light of these considerations as well as subjective assessments of individual performance, scope of responsibilities, expertise and experience, and the Company’s financial performance and condition. Other than for the CAO, who received an immaterial increase of 1% resulting from increased responsibilities, the Compensation Committee did not make any changes to base salaries for the named executive officer positions for 2024 as it believes that the base salaries are aligned with the Company’s peer group and are sufficient to attract and retain top talent.
COMPENSATION DISCUSSION AND ANALYSIS
Annual Bonuses Each executive officer is eligible to earn an annual cash bonus based on the achievement of the annual business plan approved by our Board and the meeting of performance goals during the year. The performance goals used for determining an officer’s annual bonus include discretionary and qualitative individual and business unit goals and non-discretionary and quantitative corporate performance goals as determined by the Compensation Committee and by the CEO in her recommendations to the Compensation Committee. Each year, a target bonus amount is established for each executive officer and is reviewed by the Compensation Committee. The Compensation Committee increased the 2024 target individual and corporate bonuses for the named executive officers from the bonuses set in 2023 in order to more closely align executive total compensation to the 50th percentile of the peer group. In addition, the Compensation Committee adjusted the target bonus structure for the named executive officers, increasing the portion of the annual bonus tied to non-discretionary corporate performance goals from 50% to 70%, and decreasing the portion of the annual bonus tied to discretionary individual and business unit goals from 50% to 30%, in order to increase the portion of the compensation attributable to quantifiable results achieved by the named executive officer. Each named executive officer had a maximum opportunity to earn 200% of target with respect to the portion of the annual bonus tied to non-discretionary corporate performance goals if specific performance levels exceed the corporate performance goals per the annual business plan. If specific performance levels fell below the threshold set for each goal, then the named executive officers would receive 0% of their bonus with respect to that particular goal. If the Company did not exceed thresholds for any goals then the named executive officers would receive no annual bonus. The discretionary portion of each named executive officer’s annual bonus that is tied to their individual and business unit goals is capped at 100% of the target bonus.
COMPENSATION DISCUSSION AND ANALYSIS
2024 Annual Corporate Target Bonuses The Company’s primary performance measures for purposes of the objective corporate component of the annual bonuses are Core FFO per diluted share and the growth in same-property NOI which the Company believes are strongly aligned with long-term shareholder value creation. The Board reviews the operating plans that include annual Core FFO per diluted share targets and expected NOI results. The target levels for the increase in Core FFO per diluted share from year to year are dependent on a number of factors, including expectations surrounding internal and external growth opportunities, general economic conditions, real estate fundamentals and other specific circumstances facing the Company in the coming year. The Compensation Committee also establishes Core FFO goals that are consistent with the annual business plan. In addition, there are two goals tied to the Company’s external growth initiatives that drive long-term value creation when implemented with disciplined capital allocation. For 2024, the specific corporate goals and thresholds were as follows:
COMPENSATION DISCUSSION AND ANALYSIS
The table below reflects the target bonus opportunity tied to achievement of the corporate performance objectives for each of our named executive officers for 2024, as well as the actual bonus paid with respect to the corporate goal component of the annual bonus.
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | Actual Cash | % of Target | | | Threshold | Target | Maximum | Bonus | Bonus | | Executive | ($) | ($) | ($) | ($) | Achieved | | Angela L. Kleiman, CEO and President | 945,000 | 1,890,000 | 3,780,000 | 3,402,000 | 180% | | Barb M. Pak, CFO and EVP | 455,000 | 910,000 | 1,820,000 | 1,638,000 | 180% | | Anne Morrison, CAO, General Counsel and EVP | 262,500 | 525,000 | 1,050,000 | 945,000 | 180% | | Rylan Burns, CIO and EVP | 275,625 | 551,250 | 1,102,500 | 992,250 | 180% | | Total | 1,938,125 | 3,876,250 | 7,752,500 | 6,977,250 | 180% |
COMPENSATION DISCUSSION AND ANALYSIS
All of the corporate goals exceeded the established range with the exception of the goal related to achieving the underwritten yields from acquisitions and stabilized developments for 2022 and 2023. The threshold performance for this goal was tied to achieving 95% of the proforma underwritten NOI yields, which was not achieved due to elevated delinquency caused by public policy and slow rent growth recovery post COVID. As a result, the Compensation Committee awarded the named executive officers an above-target annual bonus tied to corporate goals which equated to an average of 180% of the target bonus.
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | Actual Cash | % of Target | | | Threshold | Target | Maximum | Bonus | Bonus | | Executive | ($) | ($) | ($) | ($) | Achieved | | Angela L. Kleiman, CEO and President | 405,000 | 810,000 | 810,000 | 810,000 | 100% | | Barb M. Pak, CFO and EVP | 195,000 | 390,000 | 390,000 | 390,000 | 100% | | Anne Morrison, CAO, General Counsel and EVP | 112,500 | 225,000 | 225,000 | 225,000 | 100% | | Rylan Burns, CIO and EVP | 118,125 | 236,250 | 236,250 | 236,250 | 100% | | Total | 830,625 | 1,661,250 | 1,661,250 | 1,661,250 | 100% |
COMPENSATION DISCUSSION AND ANALYSIS
Total Annual Bonus The Compensation Committee believes that short-term incentive pay should appropriately reward management under the pay-for-performance philosophy and awarded the named executive officers above-target annual bonuses which equated to an average of 156% of target. Payments for bonuses compared to targets in 2024 were as follows:
COMPENSATION DISCUSSION AND ANALYSIS
| | | | | Total Actual | % of Target | | | Threshold | Target | Maximum | Incentive Bonus | Bonus | | Executive | ($) | ($) | ($) | ($)(1) | Achieved | | Angela L. Kleiman, CEO and President | 1,350,000 | 2,700,000 | 4,590,000 | 4,212,000 | 156% | | Barb M. Pak, CFO and EVP | 650,000 | 1,300,000 | 2,210,000 | 2,028,000 | 156% | | Anne Morrison, CAO, General Counsel and EVP | 375,000 | 750,000 | 1,275,000 | 1,170,000 | 156% | | Rylan Burns, CIO and EVP | 393,750 | 787,500 | 1,338,750 | 1,228,500 | 156% | | Total | 2,768,750 | 5,537,500 | 9,413,750 | 8,638,500 | 156% |
COMPENSATION DISCUSSION AND ANALYSIS
Long-Term Equity Incentives In fiscal year 2024, the Company’s equity compensation package for its named executive officers consisted of two different types of awards: restricted stock units (“RSUs”) subject to both service-based vesting and performance-based vesting and RSUs subject only to service-based vesting, in each case, granted under the Company’s stockholder-approved Incentive Award Plan. The Compensation Committee utilizes long-term incentive compensation to accomplish the following objectives:
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Align executive performance with long-term stockholder interests; |
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Minimize the cost of equity awards to the Company; and |
COMPENSATION DISCUSSION AND ANALYSIS
| ¾ | Provide competitive compensation package to attract and retain talent. |
COMPENSATION DISCUSSION AND ANALYSIS
Prior to 2024, the executive officers have been awarded stock option awards and "DIP RSUs". DIP RSUs were subject to performance vesting based on both (i) three-year TSR and relative TSR goals and (ii) the 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 the RSUs are granted. DIP RSUs were also subject to a one-year service-based vesting condition. In order to simplify the compensation structure for our executive officers and to more closely align executive compensation with the Company's goals and objectives, the Compensation Committee eliminated stock option awards and DIP RSU awards for the February 2024 long-term incentive grants. 2024 Performance-Vesting RSU Awards – 85% of total awards. The equity compensation packages granted in February 2024 consisted of two different types of performance vesting awards: 45% of the awards were RSUs subject to both service-based vesting and performance-based vesting tied to the achievement of the TSR Goals (the “TSR RSUs”) and 40% of the awards were RSUs subject to both service-based vesting and performance-based vesting tied to the achievement of the Core FFO Goals (the “Core FFO RSUs”), in each case, granted under the Company’s stockholder-approved Incentive Award Plan. RSUs are settled in shares of our Common Stock. The TSR RSUs granted to the executive officers in 2024 are subject to performance-based vesting tied to achievement of the Company’s TSR relative to the Nareit Apartment Index during the three-year performance period (February 8, 2024 – February 8, 2027). Threshold, target and maximum achievement levels for the TSR Goals were set by the Compensation Committee for the three-year performance period, and no TSR RSUs will be eligible to vest if TSR performance is below the established threshold level. The TSR RSUs are also subject to time-based vesting, at the rate of one-third of the TSR RSUs on each of the first through third anniversaries of the date of grant, based on continued employment through the applicable vesting date. The number of TSR RSUs actually earned will be determined by the Compensation Committee following the completion of the three-year performance period. The TSR RSUs are benchmarked to the Nareit Apartment Index, which is representative of REITs in the multifamily housing industry across the United States. The Compensation Committee believes that the peer group in the Nareit Apartment Index appropriately represents the Company’s operating performance and shareholder return against its direct competitors in the multifamily space.
COMPENSATION DISCUSSION AND ANALYSIS
| | | 0% RSUs | 50% RSUs | 100% RSUs | 150% RSUs | | TSR Metrics | Weight | Earned | Earned | Earned | Earned | | Relative TSR to Nareit Apartment Index | 45% | <-5.0% | -5.0% | 0% | +5.0% |
COMPENSATION DISCUSSION AND ANALYSIS
In the event the Company’s relative TSR is between two achievement levels, the percentage of TSR RSUs that is earned will be based on linear interpolation between the amounts set forth above. In the event the Company’s relative TSR underperforms the Nareit Apartment Index by more than 5.0%, no TSR RSUs will be earned. The Core FFO RSUs will be earned and vest based on average annual achievement relative to the Core FFO Goals over the three-year performance period (January 1, 2024 – December 31, 2026). The Core FFO Goals applicable to the Core FFO RSUs will be set annually at the start of each fiscal year. The Core FFO RSUs are also subject to service-based cliff vesting requiring continued employment through the entire performance period ending December 31, 2026. Each year the Compensation Committee will determine the Company’s achievement percentage for the Core FFO Goal for the applicable year and, following the end of the third annual performance period, the Compensation Committee will average the achievement percentage for each of the three years. Threshold, target and maximum achievement levels for Core FFO will be set by the Compensation Committee for each year in the three-year performance period, and no Core FFO RSUs will be eligible to vest for any annual performance period if Core FFO performance is below the established threshold level. The resulting three-year average performance achievement will be used to determine the total number of Core FFO RSUs earned. Performance against the Core FFO Goals for the Core FFO RSUs granted during 2024 will be determined by the Compensation Committee following the completion of the three-year performance period, using the following matrix:
COMPENSATION DISCUSSION AND ANALYSIS
| | | 0% RSUs | 50% RSUs | 100% RSUs | 150% RSUs | | Core FFO Metrics | Weight | Earned | Earned | Earned | Earned | | Core FFO per share | 40% | <-$14.86 | $14.86 | $15.06 | $15.26 |
COMPENSATION DISCUSSION AND ANALYSIS
In the event the Company’s Core FFO Goal achievement is between two achievement levels, the percentage of Core FFO RSUs that is earned will be based on linear interpolation between the various achievement levels. The RSUs earned based on achievement of the Core FFO Goals will vest at the end of the three-year period, subject to the executive’s continued employment through the last day of the three year service-vesting period. 2024 Service-Vesting RSU Awards – 15% of total awards. The executives were also granted service-vesting RSU awards that vest in three equal installments on each of the first three anniversaries of the grant date, subject to the executive’s continued service through each applicable vesting date. The Compensation Committee believes a small level of service-based shares are appropriate to enhance retention and equity ownership which align with shareholder value creation and the long-term strategic objectives of the Company. For a discussion of the accelerated vesting terms applicable to the long-term incentive awards granted to our executive officers, see “Potential Payments Upon Termination or Change in Control” on page 59. 2021 Performance- and Service-Vesting RSU and DIP RSU Award Payout. The Performance and Service RSU awards and the DIP RSU awards granted in 2021 were subject to performance vesting based on three-year TSR goals and goals based on our TSR relative to the Nareit Apartment Index for the three-year performance period ending December 1, 2024, and allowed each named executive officer to earn from 0% to 100% of target. Based on the absolute performance of our TSR and the relative performance of our TSR compared to the Nareit Apartment Index for this three-year performance period using linear interpolation and as more particularly shown in the performance matrix on page 38, this resulted in a payout of 44% for the 2021 Performance and Service RSU awards and DIP RSU awards.
COMPENSATION DISCUSSION AND ANALYSIS
Other Benefits Nonqualified Deferred Compensation. Named executive officers are currently permitted to make elections to defer up to 25% of their base salaries and 50% of their annual cash bonuses under the Company’s Deferred Compensation Plan. The Company believes that providing the named executive officers and other eligible employees with nonqualified deferred compensation opportunities is a cost-effective supplemental benefit that enables named executive officers to defer income tax on deferred salary and bonus payments, even though the Company also defers the related tax deduction. The Company makes no matching or other employer contributions to the plan. Additional information concerning this deferred compensation plan is set forth in the Nonqualified Deferred Compensation table and related text below. Retirement Benefits. Named executive officers are eligible to participate in the Essex tax-qualified 401(k) plan. The Company does not maintain any defined benefit, pension, or supplemental or “excess” retirement plans for the named executive officers. Severance and Other Benefits Upon Termination of Employment or Change of Control. Our named executive officers are eligible for severance benefits upon certain qualifying terminations, including in connection with a change in control, under the Essex Property Trust, Inc. Executive Severance Plan (the “Severance Plan”). We discuss the severance benefits for our named executive officers and the related quantitative disclosure based on assumed triggering events under the heading “Potential Payments upon Termination or Change of Control” on page 59. The Compensation Committee believes that the Severance Plan and the terms of the equity-based awards described above provide a reasonable level of continued economic benefit to the named executive officers if a change of control and/or qualifying termination event were to occur, are a reasonable balance to the at-will nature (and lack of fixed terms) of employment for the executive officers, and provide a reasonable level of incentive for the covered individuals to remain with the Company prior to any proposal or contemplation of, and during any negotiations for, a change of control. Generally, the existence of the Severance Plan, and the potential benefits to executive officers under it, does not affect the annual determination of an executive officer’s base salary, cash bonus or long-term incentive award grants. Life Insurance and Perquisites. The named executive officers receive automobile allowances, health and dental insurance, and payment of life insurance premiums, and are eligible to receive discounts on rental housing at Company properties and reimbursable education-related benefits on the same terms as other Company employees. Starting in September 2024, the Company discontinued the leased automobile program, insurance and DMV renewal for named executive officers. The Compensation Committee believes that the perquisites are comparable to those provided by comparable companies. Commencing in 2024, the named executive officers are also eligible for medical concierge services.
COMPENSATION DISCUSSION AND ANALYSIS
At any time during which a named executive officer is not in compliance with the ownership guidelines, he or she will be required to retain at least 75% of any “net shares” received through our equity compensation plans, including shares or units underlying vested and full-value equity awards (LTIP Units and RSUs) and options, assuming net settlement.
COMPENSATION DISCUSSION AND ANALYSIS
Policy on Hedging and Pledging Essex Equity Securities Directors and executive officers are not permitted to own financial instruments or participate in investment strategies that represent a direct hedge of the economic risk of owning our Common Stock or voting preferred stock, equity interests issued by our operating partnership, or securities that give the holder any rights to acquire any such stock or equity interests (collectively, “Essex equity securities”). Directors and executive officers are not permitted to pledge or otherwise use any Essex equity securities as collateral to secure any loan (collectively, a “pledge”) unless: (1) that transaction is first approved by the Board (not counting the vote of any director with a personal interest in the transaction) based on the committee’s determination that the pledge is not significant from a corporate governance standpoint, or (2) that transaction involves a pledge of Essex equity securities that results in such individual having pledged (counting pledged securities that are not Common Stock on an as exercised or converted basis, as the case may be) an amount of Essex equity securities not exceeding the greater of (x) 0.002 times the number of the issued and outstanding shares of Common Stock, or (y) 20% of such individual’s ownership of Essex equity securities. As more fully set forth in the policy, directors and executive officers are not permitted to pledge any equity compensation awards prior to the awards’ respective exercise, delivery or conversion into equity securities free of restriction under the applicable equity compensation plan. Compensation Recovery Policy. In accordance with Rule 10D-1 under the Exchange Act and the corresponding NYSE listing standards, we have adopted a policy, which is administered and overseen by the Compensation Committee, that provides for the mandatory recovery from current and former executive officers of incentive-based compensation that was erroneously awarded during the three years preceding the date the Company is required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. The amount required to be recovered is the excess of the amount of incentive-based compensation received over the amount that otherwise would have been received had it been determined based on the restated financial measure. Equity Grant Practices We do not grant equity awards in anticipation of the release of material, nonpublic information or time the release of material, nonpublic information based on equity award grant dates, vesting events, or sale events. In 2024, we discontinued granting stock option awards. During fiscal year 2024, we did not grant equity awards to our NEOs during the four business days prior to or the one business day following the filing of our periodic reports or the filing or furnishing of a Form 8-K that discloses material nonpublic information. We have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation for NEO grants in 2024.
Members of the 2024 Compensation Committee: Amal M. Johnson (Chair) Mary Kasaris Irving F. Lyons, III
| (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. |
Members of the 2024 Compensation Committee: Amal M. Johnson (Chair) Mary Kasaris Irving F. Lyons, III
| (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
Pay Versus Performance 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, 2023 and 2024, and our financial performance for each such fiscal year:
Pay Versus Performance
| | | | | | | | Value of Initial Fixed $100 | | | | | | | | | | | | Investment Based on: | | | | | | | | | | Average | Average | | | | | | | Summary | Summary | Compensation | Compensation | Summary | Compensation | | | | Core | | | Compensation | Compensation | Actually | Actually | Compensation | Actually | | Peer Group | | FFO | | | Table Total | Table Total | Paid to | Paid to | Table Total | Paid to | Total | Total | | Per | | | for PEO | for PEO | PEO | PEO | for Non-PEO | Non-PEO | Stockholder | Stockholder | Net | Diluted | | | (Schall) | (Kleiman) | (Schall) | (Kleiman) | NEOs | NEOs | Return | Return | Income | Share | | Year | ($) | ($) | ($)(1) | ($)(1) | ($) | ($)(1) (2) | ($) | ($)(3) | ($) | ($)(4) | | 2024 | — | 8,196,283 | — | 11,034,898 | 2,866,434 | 3,693,118 | 112.16 | 120.22 | 811,306,000 | 15.60 | | 2023 | 2,742,016 | 3,076,648 | 5,829,702 | 6,234,794 | 1,442,044 | 2,620,160 | 94.76 | 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
| (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
| Year | CEO | Non-CEO NEOs | | 2024 | Angela L. Kleiman | Barb M. Pak, Anne Morrison and Rylan Burns | | 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
| 62 | ESSEX PROPERTY TRUST, INC. |
Pay Versus Performance
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
| | 2020 | | 2021 | | 2022 | | 2023 | | | 2024 | | | | | Average | | Average | | Average | | | Average | | Average | | | | Non-PEO | | Non-PEO | | Non-PEO | PEO | PEO | Non-PEO | PEO | Non-PEO | | Adjustments | PEO | NEOs | PEO | NEOs | PEO | NEOs | (Schall) | (Kleiman) | NEOs | (Kleiman) | 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) | — | — | — | (3,034,560) | (807,016) | | 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 | — | — | — | 3,711,186 | 1,123,693 | | 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 | 1,750,811 | 385,600 | | 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 | 411,179 | 124,407 | | 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 | 2,838,616 | 826,684 |
Pay Versus Performance
| (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 year ended December 31, 2024 and prior fiscal years. |
Pay Versus Performance
| (3) For the relevant fiscal year, represents the cumulative TSR (the “Peer Group TSR”) of the Nareit Apartment Index. |
Pay Versus Performance
| (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 the National Association of Real Estate Investment Trusts (“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
| 2025 PROXY STATEMENT | 63 |
Pay Versus Performance
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, 2023 and 2024. TSR amounts reported in the graph assume an initial fixed investment of $100, and that all dividends, if any, were reinvested.
Pay Versus Performance
| 64 | ESSEX PROPERTY TRUST, INC. |
Pay Versus Performance
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, 2024: 1.Core FFO; 2.Core FFO per diluted share; and 3.Same-property NOI 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.
Pay Versus Performance
| 2025 PROXY STATEMENT | 65 |
CEO Pay Ratio
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”). 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 2024, our last completed fiscal year:
CEO Pay Ratio
| ¾ | the annual total compensation of the employee who represents our median compensated employee (other than our CEO) was $97,782; and |
CEO Pay Ratio
| ¾ | the annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $8,196,283. |
CEO Pay Ratio
Based on this information, for 2024, the annual total compensation of our CEO was approximately 83.8 times the median of the annual total compensation of all of our employees (other than our CEO). Determining the Median Employee Employee Population The Company used our employee population data as of October 28, 2024 as the reference date for identifying our median employee. As of such date, our employee population consisted of approximately 1,750 individuals, approximately 68.5% of which were hourly employees, and all of whom were located in the United States. For purposes of the pay ratio calculation our employee population consists of all full- and part-time employees at all locations (other than our CEO), including all temporary employees employed as of the measurement date. Methodology for Determining Our Median Employee To identify the median employee from our employee population, we used total base compensation plus all incentive pay as reflected in our payroll records. In identifying the median employee, we annualized the compensation of all permanent employees who were new-hires in 2024 and we did not make any cost-of-living adjustments. Compensation Measure and Annual Total Compensation of Median Employee With respect to the annual total compensation of the median employee, we calculated such employee’s compensation for 2024 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, plus, pursuant to SEC rules and to maintain consistency with the calculation of compensation for our CEO, we have elected to voluntarily include the value of benefits provided to our median employee under non-discriminatory benefit plans available to all employees during 2024, which includes, for this purpose, medical benefit premiums paid by the Company, educational reimbursement benefits and the value of employee discounts provided to the median employee during 2024. The value of these non-discriminatory benefits provided to our CEO during 2024 are also included in the annual total compensation of our CEO, as applicable, reported in our 2024 Summary Compensation Table above. Annual Total Compensation of CEO With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2024 Summary Compensation Table included in this proxy statement, which includes the value of benefits provided to our CEO under non-discriminatory benefit plans available to all employees during 2024. The CEO pay ratio is higher than in 2023 as a result of a previously discussed change in the timing of the annual awards to our executive officers commencing in 2024. Historically, annual long-term incentive award grants have been made in December. However, rather than making long-term incentive award grants for 2023 in December of 2023, the grant date was moved to February 8, 2024. Since no annual equity grants were made in 2023, this year’s Summary Compensation Table reflects CEO compensation that is higher than 2023, but otherwise in line with our historical practice.
CEO Pay Ratio
| 2025 PROXY STATEMENT | 67 |