ESSEX PROPERTY TRUST, INC.

 

Notice of Annual Meeting of Stockholders

To Be Held May 6, 2008

 

           The 2008 annual meeting of stockholders (the “Annual Meeting”) of Essex Property Trust, Inc., a Maryland corporation (the “Company”), will be held at the Stanford Park Hotel, 100 El Camino Real, Menlo Park, California 94025 on May 6, 2008 at 1:00 p.m., Pacific Daylight Time, to consider and vote upon the following proposals:

 

           1.   Election of the following four Class II directors of the Company to serve until the 2011 annual meeting of stockholders and until their successors are elected and qualified:  David W. Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith, Jr..

  

           2.   Ratification of the appointment of KPMG LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2008.

3.   To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

 

           The foregoing items of business, including the nominees for directors, are more fully described in the proxy statement which is attached and made a part of this notice.

 

           The Board of Directors has fixed the close of business on February 28, 2008 as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting and any adjournment or postponement thereof.

 

           Whether or not you expect to attend the Annual Meeting in person, you are urged to complete, sign, date and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope to ensure your representation and the presence of a quorum at the Annual Meeting. If you send in your proxy card and then decide to attend the Annual Meeting to vote your shares in person, you may still do so. Your proxy is revocable in accordance with the procedures set forth in the proxy statement. By Order of the Board of Directors,

/s/ Keith R. Guericke

Keith R. Guericke

Vice Chairman of the Board,

Chief Executive Officer and President

Palo Alto, California

April 1, 2008

 

ESSEX PROPERTY TRUST, INC.

925 East Meadow Drive

Palo Alto, California 94303

 

This Proxy Statement is furnished to the holders (the “Stockholders”) of the outstanding shares of Common Stock $0.0001 par value (the “Common Stock”) of Essex Property Trust, Inc., a Maryland corporation (the “Company”), in connection with the solicitation by the Company’s Board of Directors (the “Board”) of proxies in the accompanying form for use in voting at the 2008 annual meeting of Stockholders of the Company (the “Annual Meeting”) to be held on May 6, 2008 at 1:00 p.m., Pacific Daylight Time, at the Stanford Park Hotel, 100 El Camino Real, Menlo Park, California 94025 and any adjournment or postponement thereof.

 

This Proxy Statement and the accompanying proxy card are first being mailed to Stockholders on or about April 1, 2008.

 

Form of Proxy Card

 

This Proxy Statement is accompanied by a form of proxy card for use by Stockholders.

 

Revocability of Proxies

 

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is exercised by delivering to the Company (to the attention of Mr. Jordan E. Ritter) a written notice of revocation or a properly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person.

 

Solicitation and Voting Procedures

 

The solicitation of proxies will be conducted by mail and the Company will bear all attendant costs. These costs will include the expense of preparing and mailing proxy materials for the Annual Meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the Annual Meeting to the Stockholders.

 

The Company may use the services of Corporate Investor Communications, Inc. to assist in soliciting proxies and, in such event, the Company expects to pay approximately $10,000 for such services. The Company may conduct further solicitation personally, telephonically or by facsimile through its officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation.

 

The presence at the Annual Meeting, either in person or by proxy, of Stockholders holding a majority of the shares of Common Stock outstanding on the Record Date (as defined below) will constitute a quorum for the purposes of approving Proposals 1 and 2 at the Annual Meeting. The close of business on February 28, 2008 has been fixed as the record date (the “Record Date”) for determining the Stockholders entitled to notice of and to vote at the Annual Meeting. Each share of Common Stock outstanding on the Record Date is entitled to one vote on Proposals 1 and 2. As of the Record Date, there were 25,517,154 shares of Common Stock outstanding.

Shares of Common Stock represented by proxies that reflect abstentions or “broker non-votes” (i.e., shares held by a broker or nominee which are represented at the Annual Meeting but with respect to which such broker or nominee is not empowered to vote on a particular proposal) will be counted as shares that are present and entitled to vote for purposes of determining the presence of a quorum. The affirmative vote of a plurality of the shares of Common Stock present in person or by proxy and entitled to vote is required to elect directors. Accordingly, abstentions or broker non-votes as to the election of directors will not affect Proposal 1, the election of the candidates receiving the most votes. Approval of Proposal 2 requires the affirmative vote of a majority of the shares of Common Stock who are present or represented by proxy and entitled to vote at the Annual Meeting. For purposes of the vote on Proposal 2, abstentions will have the same effect as a vote against such Proposal and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote on such Proposal.

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Stockholder votes will be tabulated by the persons appointed by the Board to act as inspectors of election for the Annual Meeting. The New York Stock Exchange permits member organizations to give proxies, whether or not instructions have been received from beneficial owners, to vote as to Proposal 1, the election of directors, and also on matters of the type contained in Proposal 2. The shares of Common Stock represented by properly executed proxy cards will be voted at the Annual Meeting as indicated or, if no instruction is given, in favor of Proposals 1 and 2. The Company does not presently know of any other business which may come before the Annual Meeting.

 

(1)

Mr. Marcus, certain officers and directors of the Company and certain other entities and investors own limited partnership interests in Essex Portfolio, L.P., a California limited partnership (the “Operating Partnership”), which presently aggregate to approximately a 9.2% limited partnership interest. The Company presently has approximately 90.8% general partnership interest in the Operating Partnership. The limited partners of the Operating Partnership share with the Company, as general partner, in the net income or loss and any distributions of the Operating Partnership. Pursuant to the partnership agreement of the Operating Partnership, limited partnership interests can be exchanged into shares of the Company’s Common Stock.

 

(2)

With respect to shares of Common Stock, assumes exchange of the limited partnership interests in the Operating Partnership and in other partnerships held by such person, if any, into shares of the Company’s Common Stock. The total number of shares outstanding used in calculating this percentage assumes that none of the limited partnership interests or vested options held by other persons are exchanged or converted into shares of the Company’s Common Stock and is based on 25,517,154 shares of the Company’s Common Stock outstanding as of the Record Date.

 

(3)

Assumes exchange of all outstanding limited partnership interests (including non-forfeitable Series Z and Series Z-1 Incentive Units) in the Operating Partnership for shares of the Company’s Common Stock, which would result in an additional 2,524,305 outstanding shares of Common Stock. Assumes that none of the interests in partnerships (such as DownREITs), other than the Operating Partnership, held by other persons are exchanged into shares of Common Stock, and that none of the vested stock options held by other persons are converted into shares of Common Stock.

 

(4)	The business address of such person is 925 East Meadow Drive, Palo Alto, California 94303.

 

(5)

Includes 1,147,488 shares of Common Stock that may be issued upon the exchange of all of Mr. Marcus’ limited partnership interests in the Operating Partnership and in certain other partnerships and 301,194 shares and 15,941 shares of Common Stock that may be issued upon the exchange of all the limited partnership interests in the Operating Partnership held by The Marcus & Millichap Company (“TMMC”) and Essex Portfolio Management Company (“EPMC”), respectively. As of the Record Date, Mr. Marcus had pledged to a commercial bank 1,063,056 units of limited partnership interests in the Operating Partnership. Also includes 155,000 shares of Common Stock held by TMMC, 25,750 shares of Common Stock held in The Marcus & Millichap Company 401(k) Plan (the “TMMC 401(k) Plan”) and 4,000 shares of Common Stock held by Mr. Marcus’ children. Mr. Marcus is a principal stockholder of each of TMMC and EPMC and may be deemed to own beneficially, and to share the voting and dispositive power of, 472,435 shares of Common Stock (including shares issuable upon exchange of limited partnership interests). Mr. Marcus disclaims beneficial ownership of (i) all shares, options and limited partnership interests held by TMMC, and (ii) 6,376 shares of Common Stock that may be issued upon conversion of limited partnership interests held by EPMC.

 

(6)

Includes 73,099 shares of Common Stock that may be issued upon the exchange of all of Mr. Millichap’s limited partnership interests in the Operating Partnership and 15,941 shares of Common Stock that may be issued upon the exchange of all of the limited partnership interests in the Operating Partnership held by EPMC.  Includes 22,500 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date, and 19,497 shares of Common Stock held in the TMMC 401(k) Plan. Mr. Millichap disclaims beneficial ownership of 9,565 of the 15,941 shares of Common Stock that may be issued upon conversion of limited partnership interests held by EPMC.

 

(7)

Includes 82,564 shares of Common Stock that may be issued upon the exchange of all of Mr. Guericke’s limited partnership interests in the Operating Partnership. Also includes 5,598 shares of Common Stock held in the Essex Property Trust, Inc. 401(k) Plan (the “Essex 401(k) Plan”), and 32,753 shares that may be issued in exchange for non-forfeitable Series Z and Series Z-1 Incentive Units.  Excludes 17,722 shares of Common Stock issuable upon satisfying certain requirements of the Series Z and Series Z-1 Incentive Units.

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(8)

Includes 35,354 shares of Common Stock that may be issued upon the exchange of all of Mr. Schall’s limited partnership interests in the Operating Partnership. Also includes 504 shares of Common Stock held in the Essex 401(k) Plan, and 28,782 shares that may be issued in exchange for non-forfeitable Series Z and Series Z-1 Incentive Units. Further includes 860 shares of Common Stock held by Mr. Schall’s three children.  Excludes 15,943 shares of Common Stock issuable upon satisfying certain requirements of the Series Z and Series Z-1 Incentive Units.

 

(9)

Includes 4,333 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date and 7,500 shares that may be issued in exchange for non-forfeitable Series Z-1 Incentive Units.  Excludes 7,500 shares of Common Stock issuable upon satisfying certain requirements of the Series Z-1 Incentive Units.

 

(10)

Includes 2,457 shares of Common Stock that may be issued upon the exchange of all of Mr. Eudy’s limited partnership interests in the Operating Partnership. Also includes 1,585 shares of Common Stock held in the Essex 401(k) Plan and 24,230 shares that may be issued in exchange for non-forfeitable Series Z and Series Z-1 Incentive Units. Excludes 13,471 shares of Common Stock issuable upon satisfying certain requirements of the Series Z and Series Z-1 Incentive Units.

 

(11)

Includes 18,425 shares of Common Stock that may be issued upon the exchange of all of Mr. Zimmerman’s limited partnership interests in the Operating Partnership and certain other partnerships. Also includes 24,230 shares that may be issued in exchange for non-forfeitable Series Z and Series Z-1 Incentive Units. Excludes 13,471 shares of Common Stock issuable upon satisfying certain requirements of the Series Z and Series Z-1 Incentive Units.

 

(12)	Includes 7,000 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date.

 

(13)	Includes 20,000 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date.

 

(14)	Includes 20,000 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date.

 

(15)	Includes 12,500 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date.

 

(16)	Includes 17,000 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date.

 

(17)

Includes 22,500 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date. Mr. Smith is a director of certain funds of Cohen & Steers and he disclaims beneficial ownership of the shares of Common Stock of the Company held by Cohen & Steers Capital Management, which are not set forth in the above table.

 

(18)

Includes 1,697,689 shares of Common Stock that may be issued upon the exchange of all of the executive officers’ and directors’ limited partnership interests in the Operating Partnership and certain other partnerships and 144,092 shares of Common Stock subject to options that are exercisable within 60 days of the Record Date. Also, includes 117,495 shares that may be issued in exchange for non-forfeitable Series Z and Series Z-1 Incentive Units. Excludes 68,107 shares of Common Stock issuable upon satisfying the requirements of the Series Z and Series Z-1 Incentive Units.

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(19)	As reported on Schedule 13G, filed February 13, 2008, Invesco Ltd. and its subsidiaries have the sole power to vote and direct the vote of 1,997,364 shares and sole dispositive power over 1,997,364 shares. The address of Invesco is 1360 Peachtree Street NE, Atlanta, GA 30309.

 

(20)

As reported on Schedule 13G, filed February 15, 2008, LaSalle Investment Management (Securities) L.P. has the sole power to vote and direct the vote of 1,893,962 shares and sole dispositive power over 1,893,962 shares.  The address of LaSalle Investment Management (Securities) L.P. is 200 East Randolph Drive Chicago, Illinois  60601.

 

(21)

As reported on Schedule 13G, filed February 14, 2008, Morgan Stanley has the shared power to vote and direct the vote of 220 shares, has the sole power to vote and direct the vote of 1,083,117 shares and sole dispositive power over 1,721,217 shares; and Morgan Stanley Investment Management, Inc. has the shared power to vote and direct the vote of 220 shares, has the sole power to vote and direct the vote of 833,143 shares and sole dispositive power over 1,379,812 shares. Addresses: Morgan Stanley, 1585 Broadway, New York, NY 10036; Morgan Stanley Investment Management, Inc., 522 Fifth Avenue, New York, NY 10036.

 

(22)

As reported on Schedule 13G, filed February 5, 2008, Barclays Global Investors (Deutschland) AG has the sole power to vote or to direct the vote of 1,273,603 shares and sole dispositive power over 1,672,325 shares; Barclays Global Investors, NA has the sole power to vote and direct the vote of 489,653 shares and sole dispositive power over 653,047 shares and Barclays Global Fund Advisors has the sole power to vote and direct the vote of 765,925 shares and sole dispositive power over 975,488 shares.  The address of Barclays Global Investors (Deutschland) AG is Apianstrasse 6, D-85774, Unterföhring, Germany and the address of the other Barclays entities is 45 Fremont Street, San Francisco, CA 94105.

 

(23)	As reported on Schedule 13G, filed February 14, 2008, The Vanguard Group, Inc. has the sole power to vote and direct the vote of 9,146 shares and sole dispositive power over 1,626,087 shares. The address for The Vanguard Group, Inc. is 100 Vanguard Boulevard, Malbern, PA 19355.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

The Company’s Charter divides the Company’s directors into three classes. The members of each class of directors serve staggered three-year terms. The Board presently has the following ten directors: Keith R. Guericke, Issie N. Rabinovitch and Thomas E. Randlett who are classified as Class I directors; David W. Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith, Jr. who are classified as Class II directors; and George M. Marcus, Gary P. Martin, and William A. Millichap who are classified as Class III directors. The terms of each of the current Class I, Class II and Class III directors expire at the annual meetings of stockholders to be held in 2010, 2008 and 2009, respectively, and upon such directors’ respective successors being elected and qualified or until any such directors’ earlier resignation or removal.

At the Annual Meeting, the Stockholders will elect four directors: if elected, nominees David W. Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith, Jr. will serve as Class II directors for three-year terms. All of the nominees are currently directors of the Company, and each of the nominees named below has consented, if elected as a director of the Company, to serve until his term expires. The Class II directors will serve until the annual meeting of stockholders to be held in 2011 and until such directors’ respective successors are elected and qualified or until such directors’ earlier resignation or removal. The Board believes that each such nominee will stand for election and will serve if elected as a director. However, in the event any nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, the proxies may be voted for the balance of those nominees named and for any substitute nominee designated by the present Board or the proxy holders to fill such vacancy, or for the balance of those nominees named without nomination of a substitute, or the Board may be reduced in accordance with the Bylaws of the Company.

 

The affirmative vote of a plurality of the shares of Common Stock present in person or by proxy and entitled to vote at the Annual Meeting, assuming a quorum is present, is necessary for the election of a director. For purposes of the election of directors, abstentions and other shares not voted will not be counted as votes cast and will have no effect on the result of the vote.

 

Certain information about David W. Brady, Robert E. Larson, Michael J. Schall and Willard H. Smith, Jr., the Class II director nominees, is furnished below.

 

David W. Brady, Director, holds the Bowen H. and Janice Arthur McCoy endowed chair at Stanford University Graduate School of Business and is a professor of political science in Stanford University School of Humanities and Sciences since 1988. Dr. Brady served as an associate Dean for academic affairs at the Graduate School of Business from 1996 until 2000, and continues to teach corporate ethics in both MBA and executive education. He is a Deputy Director at the Hoover Institution and senior fellow by courtesy at the Institute for International Studies, both on the Stanford campus. He was a member of the advisory council for the Kansai Silicon Valley Venture Forum in Japan.

Dr. Robert E. Larson, Director, has been a General Partner of the Woodside Fund, a venture capital firm based in the Silicon Valley of Northern California, since 1983. Dr. Larson currently serves as a director of APX, Inc., Azaire Networks, Inc., and NCE Pharmaceuticals. Prior to 1983, Dr. Larson was founder, director and President of Systems Control, Inc. and was employed by IBM Corporation, Hughes Aircraft Company and SRI International. He was a Consulting Professor at Stanford University from 1973 to 1988 and President of the International Institute of Electrical and Electronics Engineers (IEEE) in 1982. Dr. Larson received his Bachelor of Science Degree from M.I.T. in 1960, and his Master’s and Doctorate degrees from Stanford University in 1961 and 1964, respectively, all in Electrical Engineering.

Michael J. Schall, Director, is the Senior Executive Vice President and Chief Operating Officer of the Company and is responsible for the strategic planning and executive supervision of Essex’s property operations, redevelopment and co-investment programs. From 1993 to 2005, Mr. Schall was Essex’s Chief Financial Officer, responsible for the organization’s financial and administrative matters. He joined The Marcus & Millichap Company

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in 1986. He was also the Chief Financial Officer of Essex’s predecessor, Essex Property Corporation. From 1982 to 1986, Mr. Schall was the Director of Finance for Churchill International, a technology-oriented venture capital company. From 1979 to 1982, Mr. Schall was employed in the audit department of Ernst & Whinney, where he specialized in the real estate and financial services industries. Mr. Schall received a Bachelor of Science degree from the University of San Francisco in 1979. Mr. Schall is a Certified Public Accountant and is a member of NAREIT, the National Multi Housing Council and AICPA.

Willard H. Smith, Jr., Director, was employed at Merrill Lynch & Co. from 1979 through 1995, and served as Managing Director since 1983 in their Equity Capital Markets Division. From 1992 through 1995, Mr. Smith’s primary focus was the REIT industry. His duties as Managing Director at Merrill Lynch included evaluating companies’ capital structure and equity requirements, placing offerings with Merrill Lynch’s retail and institutional client base, and assessing the market’s demand for potential equity security offerings. Mr. Smith sits on the boards of Cohen & Steers family of mutual funds, Realty Income Corporation, and Crest Net Lease, Inc. Prior to joining Merrill Lynch & Co., Mr. Smith worked at F. Eberstadt & Company from 1971 to 1979. Mr. Smith received his Bachelor of Science degree in Business Administration 1959, and Bachelor of Science degree in Industrial Engineering in 1960 from the University of North Dakota.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS

THAT THE STOCKHOLDERS VOTE FOR

THE ELECTION OF ALL NOMINEES NAMED ABOVE

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The following table sets forth information as of the Record Date with respect to the directors and executive officers, including their ages.

Name and Position		Age		First Elected		Term Expires
George M. Marcus    Chairman of the Board		66		1994		2009
William A. Millichap    Director		64		1994		2009
Keith R. Guericke    Vice Chairman of the Board, Chief Executive Officer and President		59		1994		2010
Michael J. Schall    Director, Senior Executive Vice President and Chief Operating Officer		50		1994		2008
Michael T. Dance    Executive Vice President and Chief Financial Officer		51		—		—
John D. Eudy Executive Vice President-Development		53		—		—
Craig K. Zimmerman    Executive Vice President-Acquisitions		57		—		—
David W. Brady    Director		67		1994		2008
Robert E. Larson    Director		69		1994		2008
Gary P. Martin    Director		60		1994		2009
Issie N. Rabinovitch    Director		62		1994		2010
Thomas E. Randlett    Director		65		1994		2010
Willard H. Smith, Jr.    Director		71		1996		2008

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Biographical information concerning the Class II director nominees is set forth above under the caption “Proposal No. 1 Election of Directors.” Biographical information concerning other directors of the Company and the executive officers of the Company (some of whom are also directors) is set forth below.

George M. Marcus is the founder and has been the Chairman of Essex Property Corporation (predecessor to Essex Property Trust, Inc.) and The Marcus & Millichap Company since their inception in 1971. The Marcus & Millichap Company is the parent company of a diversified group of real estate service, investment and development firms. Mr. Marcus was one of the original founders of Greater Bay Bancorp, a publicly held financial institution, and served on its board of directors until the company was sold in 2007.  Included among Mr. Marcus’ professional memberships are the Board of Regents of the University of California, the Real Estate Roundtable, the Policy Advisory Board of the University of California at Berkeley — Center for Real Estate and Urban Economics, as well as numerous other professional and community organizations.  He graduated with a Bachelor of Science degree in Economics from San Francisco State University; he was honored as Alumnus of the Millennium in 1999. Mr. Marcus is also a graduate of the Harvard Business School of Owners / Presidents Management Program and the Georgetown University Leadership Program.

William A. Millichap is the Chairman of Marcus & Millichap Real Estate Brokerage Company. From 1984 to 2000, he was the President of The Marcus & Millichap Company and Marcus & Millichap Real Estate Investment Brokerage Company.  Mr. Millichap joined G.M. Marcus & Company in 1971 as one of its first sales associates and became a regional manager in 1974. In 1976, he became a principal, and the name of the company was subsequently changed to The Marcus & Millichap Company.  Mr. Millichap became Executive Vice President and President of The Marcus & Millichap Company in 1978 and 1984, respectively.  Mr. Millichap is a member of the International Council of Shopping Centers and the National Venture Capital Association, and serves on the Board of Directors of the National Multi-Housing Council. Mr. Millichap is also on the Board of Directors of Loopnet (LOOP, Nasdaq).  In addition, Mr. Millichap is a member of the Board of Directors of numerous privately held companies.  Mr. Millichap received a Bachelor of Science degree in Economics from the University of Maryland in 1965.  Prior to becoming affiliated with Mr. Marcus in 1971, he served as an officer in the United States Navy.

 

Keith R. Guericke, Director, has held the position of President and Chief Executive Officer of the Company since 1988. Mr. Guericke joined the Company’s predecessor, Essex Property Corporation, in 1977 to focus on investment strategies and portfolio expansion.  Mr. Guericke prepared the Company for its IPO in 1994, and has since significantly increased the Company’s multifamily portfolio in supply-constrained markets along the West Coast. Mr. Guericke is a member of the National Association of Real Estate Investment Trusts, the National Multi-Housing Council, and several local apartment industry groups. Prior to joining Essex, Mr. Guericke began his career with Kenneth Leventhal & Company, a CPA firm noted for its real estate expertise.  Mr. Guericke received his Bachelor of Science degree in Accounting from Southern Oregon College in 1971.  

Michael T. Dance, has been the Company’s Executive Vice President and Chief Financial Officer since February, 2005. From September 2002 to February 2005, Mr. Dance provided accounting research, consulting, and litigation support services, while teaching as an adjunct Professor for the University of California at Berkeley, HAAS School of Business.  Michael Dance began his career at Peat, Marwick, Mitchell & Co. in 1978.  From 1990 to 2002, he was a partner with KPMG LLP, where he worked with clients in the real estate, construction, health care and technology industries.  He received a Bachelor of Arts degree in Economics from California State University, East Bay in 1978. Mr. Dance is a CPA and member of the AICPA and CSCPA.

John D. Eudy is responsible for development activities, from the point of acquisition through construction and stabilization. Mr. Eudy joined the Company’s predecessor, Essex Property Corporation, in 1985.  While at the Company, Mr. Eudy has been responsible for numerous activities including arranging of financing, due diligence, asset management and asset disposition.  Prior to joining the Company, Mr. Eudy was a Vice President in the Commercial Real Estate Investment Group of Crocker National Bank from 1980 to 1985 and Home Federal Savings from 1977 to 1980.  He received a Bachelor of Science degree in Finance from San Diego State University in 1977 and is a graduate of the University of Southern California’s Management Leadership School. Mr. Eudy is a member

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of the Urban Land Institute and NAREIT. Mr. Eudy also serves on the Board of Directors of Silvergate Bank in San Diego, which specializes in secured real estate lending.

Craig K. Zimmerman is responsible for acquisition activities.  Mr. Zimmerman joined the Company’s predecessor, Essex Property Corporation, in 1984 and was primarily responsible for the acquisition of multifamily residential properties.  Prior to joining the Company, Mr. Zimmerman was the Vice President of Acquisitions with Prometheus Development Company, a national real estate developer and a principal in Zimmerman Properties. From 1975 through 1978, Mr. Zimmerman worked as a real estate acquisitions specialist for American Equities Corporation. He received a Bachelor of Arts degree in Rhetoric from the University of California at Berkeley in 1974.

Gary P. Martin, a private investor, was the Vice President and Chief Financial Officer of Mobile Smart, a semiconductor company serving the automotive industry for the period from September 2000 to July 2002. From April 1998 to August 2000, he served as Vice President and Chief Financial Officer of Halo Data Devices, a supplier of data storage products for the disk drive market. Mr. Martin served from August 1995 to January 1998 as Vice President of Finance and Chief Financial Officer of 3Dfx Interactive, Inc. Prior to this position, from September 1993 to July 1995, he served as Vice President of Finance and the Chief Financial Officer for MiniStor Peripherals Corporation, a supplier of data storage products for the mobile computer market.  From 1985 to 1993, he was Senior Vice President of Finance and Administration for Chips and Technologies, Inc., where he also developed joint business ventures within the Soviet Union.  From 1983 to 1984, Mr. Martin was Vice President of Finance and Chief Financial Officer for Starstruck, Inc., a company involved in space development through private enterprise. In addition, Mr. Martin was one of the earliest employees at Apple Computer, Inc., where he held both corporate and European controller positions during the period from 1977 to 1983.  Prior to working at Apple Computer, Inc., from 1971 to 1977, he worked for Aero Air Freight and National Semiconductor. He received a Bachelor of Science degree in Accounting from San Jose State University in 1971.

Issie N. Rabinovitch, Director, is a partner at Cheyenne Capital, a venture capital firm. He was the Chief Executive Officer of Mainsail Networks, a telecommunications company in 2000 and 2001. Prior to joining Cheyenne Capital, Mr. Rabinovitch served from 1991 to 1994 as President and Chief Executive Officer of Micro Power Systems, Inc., a company engaged in the designing, manufacturing and marketing of multiple semiconductor products. From 1985 to 1991, Mr. Rabinovitch was President of Berkeley International Capital Corporation, a venture capital firm.  From 1983 to 1985, Mr. Rabinovitch was President of Crowntek Software International, a software development and distribution company. Before joining Crowntek, he was employed by the Xerox Corporation in various management roles.  Mr. Rabinovitch received a Bachelor of Science degree from McGill University in 1967 and a Master’s of Business Administration degree from Harvard University in 1970.

Thomas E. Randlett, Director, is a certified public accountant and has been engaged as a director at the Law & Economics Consulting Group, Inc. since 1992.  Mr. Randlett’s professional specialties include the real estate and construction, financial institutions and transportation industries. Prior to joining the Law & Economics Consulting Group, Mr. Randlett was a managing partner and senior real estate specialist for Peat Marwick Main & Company in Northern California, where he had been employed since 1966, and then a consultant at the New York branch of Midland Bank from 1989 to 1990.  He served on the board of directors of Greater Bay Bancorp, a publicly held financial institution, from 2005 until the company was sold in 2007.  He is a former member of the Policy Advisory Board, School of Real Estate and Urban Economics, University of California at Berkeley and a current member of the American Institute of Certified Public Accountants (“AICPA”), National Association of Real Estate Investment Trusts (“NAREIT”) and California Society of Certified Public Accountants (“CSCPA”). He received a Bachelor of Arts degree from Princeton University in 1966.

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BOARD AND CORPORATE GOVERNANCE MATTERS

 

Meetings of the Board of Directors

 

During 2007, the Board held six meetings (in person, telephonically or by written consent).  Each director attended (whether in person, telephonically or by written consent) at least 75% of the total number of the meetings of the Board and meetings of each committee of the Board on which he served.  In 2007, the Board had five committees: the Executive Committee, the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Pricing Committee.

 

The members of the committees during fiscal 2007 are identified in the following table:

Compensation Committee Report

 

    This report is not deemed to be soliciting material, filed with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, except to the extent that Essex specifically incorporates it by reference into a document filed with the SEC.

 

    The Compensation Committee reviewed and discussed the above Compensation Discussion and Analysis (CD&A) with the Company’s management. Based on the review and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the CD&A be included in this proxy statement.

Members of the Compensation Committee

Robert E. Larson

George M. Marcus

Issie N. Rabinovitch

 

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SUMMARY COMPENSATION TABLE

 

The following table summarizes compensation information for our named executive officers for our fiscal year ended December 31, 2007, which we refer to as “2007”, and for our fiscal year ended December 31, 2006, which we refer to as “2006.”

Name and Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards ($) (1)	Option Awards ($) (2)	All Other Compensation ($) (3)	Total ($)
Keith R. Guericke Vice Chairman of the Board, Chief Executive Officer and President	2007	$350,000	$500,000	$200,918	_	$15,340	$1,066,258
	2006	350,000	775,000	194,634	_	16,082	1,335,716
Michael J. Schall Director, Senior Executive Vice President and Chief Operating Officer	2007	295,000	500,000	179,114	_	12,622	986,735
	2006	295,000	650,000	172,830	_	14,204	1,132,034
Michael T. Dance Executive Vice President and Chief Financial Officer	2007	225,000	350,000	88,784	$14,252	10,555	688,591
	2006	200,000	250,000	82,500	14,252	10,911	557,663
John D. Eudy Executive Vice President- Development	2007	300,000	400,000	151,833	_	13,518	865,351
	2006	300,000	300,000	146,549	_	14,042	785,591
Craig K. Zimmerman Executive Vice President- Acquisitions	2007	300,000	400,000	151,833	_	13,491	865,324
	2006	300,000	300,000	146,549	_	13,759	760,308

(1) These dollar amounts reflect the compensation expenses recognized by Essex in the year indicated for financial statement reporting purposes in accordance with FAS 123R for stock awards made to the named executive officers in or before that year. Therefore, these amounts do not represent payments actually received by the officers.

·	The assumptions used to calculate the value of the awards are set forth in Note 14 of the Consolidated Financial Statements in our Form 10-Ks for the years ended December 31, 2007 and 2006.
·	These stock awards consist of (i), for 2007, LTIP Units awarded under the Essex 2007 Outperformance Plan and (ii), for 2007 and 2006, Series Z and Series Z-1 Incentive Units.  See “2007 Outperformance Plan” and “Series Z and Series Z-1 Incentive Units” below.

(2) These dollar amounts reflect the compensation expenses recognized by our company in the year indicated for financial statement reporting purposes in accordance with FAS 123R for option awards made to the named executive officers in or before that year. Therefore, these amounts do not represent payments actually received by the officers.  The assumptions used to calculate the value of the awards are set forth in Note 14 of the Consolidated Financial Statements in our Form 10-Ks for the years ended December 31, 2007 and 2006.

(3) For 2007, these amounts include the named executive officers’ respective perquisites limited to individual automobile allowances, automobile insurance, annual California Department of Motor Vehicle renewals, and

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payments of life insurance premiums of ($390, $390, $312, $312, and $312), for Keith R Guericke, Michael J. Schall, Michael T. Dance, John D. Eudy, and Craig K. Zimmerman, respectively.

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GRANTS OF PLAN-BASED AWARDS

 

The following table sets forth certain information with respect to each grant of an award made to a named executive officer in the year ended December 31, 2007.

 

Name	Grant Date	Estimated Future Payouts Under Equity Incentive Plan Awards(1)			All Other Stock Awards; Number of Shares of Stock or Units (#)	All Other Option Awards; Number of Securities Underlying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Equity Awards(5) ($)
		Threshold (#)(2)	Target (#)	Maximum (#)(3), (4)
Guericke	12/04/2007	---	---	$1,885,000	---	---	---	$456,000
Schall	12/04/2007	---	---	1,885,000	---	---	---	456,000
Dance	12/04/2007	---	---	1,885,000	---	---	---	456,000
Eudy	12/04/2007	---	---	1,885,000	---	---	---	456,000
Zimmerman	12/04/2007	---	---	1,885,000	---	---	---	456,000

 

(1)           Under the Essex 2007 Outperformance Plan, the named executive officers received awards that are designated as a specified percentage of the aggregate performance pool.  Such pool is 10% of the amount by which the Company’s total return to shareholder for the applicable three year performance period exceeds 30%, subject to an aggregate maximum pool of $25 million.  Awards have been made in the form of LTIP Units, which are partnership units in the Essex operating partnership, that are exchangeable on a one-for-one basis into common units in the Essex operating partnership to the extent the LTIP Units become vested.  Such common units are exchangeable for shares of the Essex common stock on a one-for-one basis.

 

(2)           The LTIP Unit awards under the 2007 Outperformance Plan vest and become payable only upon the attainment of certain targets as described in footnote (3) below and do not provide for any minimum guaranteed payment.

 

(3)           Under the 2007 Outperformance Plan, after the three year performance period the amount of the outperformance pool will be determined.  If the 30% performance benchmark is achieved, the pool will be allocated among participants in accordance with the percentage specified in their award agreement.  For officers, the LTIP Units will vest in three equal installments on December 4, 2010 and the two anniversaries thereafter.

 

(4)           Based on achieving the maximum aggregate pool amount of $25 million, each named executive officer will receive 7.5% of such pool, to be issued in the form of LTIP Units, as set forth in their LTIP Award agreements.

 

(5)           Represents the full grant date fair value calculated in accordance with FAS 123R as determined by an independent appraisal.  The FAS 123R valuation assumptions can be found in Note 14 of the Consolidated Financial Statements for the year ended December 31, 2007.

 

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 2007 OUTPERFORMANCE PLAN

 

On December 4, 2007, our Board approved a long-term compensation program (the “2007 Outperformance Plan”) for certain members of senior management. The purpose of the 2007 Outperformance Plan is to further align the interests of our stockholders with those of management by encouraging our senior officers to “outperform” and to create stockholder value in excess of industry expectations in a “pay for performance” structure.  Non-employee board members also participate in our 2007 Outperformance Plan in lieu of receiving, during the Plan’s performance period, their annual stock option grants.

Under the 2007 Outperformance Plan, award recipients share in a “performance pool” if our total return to stockholders for the period from December 4, 2007 (measured based on the closing price of the Company's common stock on December 4, 2007) through December 3, 2010 exceeds a return of 30%.  The size of the pool is 10% of the outperformance amount in excess of the 30% benchmark, subject to an aggregate maximum award of $25 million.  This maximum award will be reduced by the amount of any forfeited awards.  In the event the potential performance pool reaches the maximum aggregate award between June 4, 2010 and December 3, 2010 and remains at that level or higher for 30 consecutive days, the performance period will end early and the performance pool will be formed on the last day of such 30-day period, but the participants will nonetheless be subject to the time-based vesting requirements described below.

Each participant’s award under the 2007 Outperformance Plan has been designated as a specified percentage of the aggregate performance pool.  Assuming the 30% benchmark is achieved, the pool will be allocated among the participants in accordance with the percentage specified in each participant’s award agreement.  Individual awards will be made in the form of newly created LTIP Units, which are partnership units of the Essex operating partnership, that are exchangeable for common units of the Essex operating partnership, on a one-for-one basis to the extent the LTIP Units become vested.  Such common units are exchangeable for shares of our common stock on a one-for-one basis.  Any shares of our common stock, which are ultimately issued in connection with the 2007 Outperformance Plan, will be issued pursuant to our 2004 Stock Incentive Plan.  LTIP Units will be granted prior to the determination of the performance pool; however, they will only vest upon satisfaction of performance and time vesting thresholds and will not be entitled to distributions until after the benchmark is achieved.  Distributions on LTIP Units will equal the distributions payable on each common unit of the Essex operating partnership on a per unit basis.

In the case of awards granted to senior officers, if the benchmark is achieved, the LTIP Units will vest in three substantially equal installments on December 4, 2010 and on each of the first two anniversaries thereafter, based on the officer’s continued employment through the applicable vesting date.  In the case of awards granted to non-employee directors, such awards will vest in full on December 4, 2010 if the benchmark is achieved and only to the extent the board members have continued to serve through such date.

In the event of a change of control of our company  prior to the establishment of the performance pool, the performance period will be shortened to end on a date immediately prior to such event and the cumulative stockholder return benchmark will be adjusted on a pro rata basis.  The performance pool will be formed as described above if the adjusted benchmark target is achieved, and the awards will become fully vested at such time.

SERIES Z AND SERIES Z-1 INCENTIVE UNITS

 

The Company has adopted an incentive program involving the issuance of Series Z Incentive Units (“Series Z Incentive Units”) and Series Z-1 Incentive Units (“Series Z-1 Incentive Units”) of limited partnership interest in the Operating Partnership. This program is intended to further the Company’s objective of long-term growth in funds from operations per share by providing long-term incentives to those key employees of the Company who will be largely responsible for the achievement of such long-term growth. The Series Z Incentive Units and Series Z-1 Incentive Units are a means to link compensation to targeted levels of growth in funds from operations per share.

The issuance of Series Z Incentive Units and Series Z-1 Incentive Units is administered by the Company’s Compensation Committee. Participants in the program are senior management and key employees of the Company. The Compensation Committee has the authority to select participants and determine the awards to be made to each participant.

 

The Series Z Incentive Units program authorized up to 200,000 Series Z Incentive Units to be issued. On June 28, 2001, the Operating Partnership issued all 200,000 Series Z Incentive Units to eleven senior executives of the Company in exchange for a capital commitment of $1.00 per Series Z Incentive Unit. No further Series Z Incentive Units may be issued.

 

The Series Z-1 Incentive Units program authorizes the issuance of up to 400,000 Series Z-1 Incentive Units. In June 2004, the Operating Partnership issued 95,953 Series Z-1 Incentive Units to 14 senior executives of the Company in exchange for a capital commitment of $1.00 per Unit. In 2005, the Operating Partnership issued 116,999 Series Z-1 Incentive Units to sixteen senior executives of the Company for cash or a capital commitment of $1.00 per unit. In 2007, no Series Z-1 Incentive Units were issued.

 

Upon certain triggering events, the Series Z and Series Z-1 Incentive Units will automatically convert into common units of limited partnership interest in the Operating Partnership based on a conversion ratio that may increase over time upon satisfaction of specific conditions. Common units of the Operating Partnership are exchangeable on a one-for-one basis into shares of the Company’s Common Stock. Upon initial issuance of the Series Z and Z-1 Incentive Units, the conversion ratio of these incentive units into common units is generally set at zero. Thereafter, the conversion ratio will increase by up to 10% (up to 20% in certain circumstances in the year following their initial issuance) on January 1 of each year for each participating executive who remains employed by the Company if the Company has met a specified “funds from operations” per share target, or such other target as the Compensation Committee deems appropriate, for the prior year, up to a maximum conversion ratio of 100%. On February 28, 2008, with respect to incentive units held by current officers, the conversion ratio of the Series Z Incentive Units was 75% and the conversion ratio of the Series Z-1 Incentive Units ranged from 40% to 60%.

 

The Series Z and Series Z-1 Incentive Units will automatically convert into common units of the Operating Partnership (i) if the conversion ratio reaches the maximum level of 100%, (ii) if none of the participating executives remain employed by the Company, (iii) if the Company dissolves or is liquidated, or (iv) at the latest, on January 1, 2016 in the case of Series Z Incentive Units and June 2019 in the case of Series Z-1 Incentive Units. In certain change of control situations, the participating executives will also be given the option to convert their units at the then-effective conversion ratio. In addition, the Operating Partnership has the option to redeem Series Z and Series Z-1 Incentive Units held by any executive whose employment has been terminated for any reason and the obligation to redeem any such units following the death of the holder. In such event, the Operating Partnership will redeem the units for, at its option, either common units of the Operating Partnership or shares of the Company’s Common Stock based on the then-effective conversion ratio.

 

The Series Z and Series Z-1 Incentive Units are entitled to participate in regular quarterly distributions paid out by the Operating Partnership. As of February 28, 2008, with respect to incentive units held by current officers, each Series Z Incentive Unit was entitled to receive 75% of the distribution received by each common unit of the Operating Partnership and the Series Z-1 Incentive Units were entitled to receive a percentage ranging from 40% to

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60% of such distribution. Over time the distribution percentages of the Series Z and Z-1 Incentive Units may increase, generally based on satisfaction of the same conditions as increases in the conversion ratio.

 

EXECUTIVE SEVERANCE PLAN

We discuss our executive severance plan and related quantitative disclosure based on assumed triggering events below under the heading “Potential Payments Upon Termination Or Change-In-Control.”

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FORM 10-K ANNUAL REPORT

 

UPON WRITTEN REQUEST TO NICOLE CULBERTSON, INVESTOR RELATIONS SPECIALIST, ESSEX PROPERTY TRUST, INC., 925 EAST MEADOW DRIVE, PALO ALTO, CALIFORNIA 94303, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED A COPY OF THE ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FILED THEREWITH. A COPY OF THE ANNUAL REPORT ON FORM 10-K IS ALSO AVAILABLE, FREE OF CHARGE, ON OUR WEBSITE, WHICH IS HTTP://WWW.ESSEXPROPERTYTRUST.COM.

 

By Order of the Board of Directors

Keith R. Guericke

Vice Chairman of the Board,

Chief Executive Officer and President

April 1, 2008

Palo Alto, California

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