UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant x Filed by a party other than the registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| x | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
LaSalle Hotel Properties
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box.):
| x | No fee required |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated, and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2), and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number or the form or schedule and the date of its filing. |
| (1) | Amount previously paid: |
| (2) | Form, schedule, or registration statement no.: |
| (3) | Filing party: |
| (4) | Date filed: |
On March 17, 2009, LaSalle Hotel Properties posted an investor presentation with its other proxy materials in connection with the 2009 Annual Meeting of Shareholders. The presentation can be viewed online at www.viewmaterial.com/LHO. A copy of the presentation is attached hereto.
 2009 Equity
Incentive Plan and the Compensation Committee’s Compensation Philosophy * * * * |
 1
The Equity Plan The Equity Plan The Board recommends approval of the 2009 Equity Incentive Plan as it is critical in
hiring and maintaining high quality employees, while providing alignment of management’s interest with those of shareholders The 1998 Equity Incentive Plan expired in the second half of 2008, so no equity grants
were made in 2008 for 2009 compensation The absence of an equity incentive plan will require an increase in cash payments to employees to maintain competitive pay structure, contrary to the Company’s current financial
plan to maximize financial liquidity The 2009 Equity Incentive Plan would have 1.8 million shares or 6% Shareholder Value
Transfer which is consistent with similar proposals from the Company’s peer group The Company’s historical 3-year average burn rate is .71%, significantly lower
than the RiskMetrics Group’s recommended limit of 2.05% for its peer group (GIC 4040) The annual increase in CEO compensation in 2008 from 2007 was more than 50% tied to
performance based compensation, and of the equity grants issued, more than 50% were performance based awards (this does not include change in compensation related to the succession plan put in
place by the Board in June 2008) The plan does not allow for any re-pricing of options The plan does not include a liberal definition of change in control The plan places an individual award limit of 500,000 shares that may be granted during any one fiscal year |
 2
Historical Equity Grants Historical Equity Grants The company has been judicious in the award of equity compensation as reflected in its
reasonable overhang, which is 5.92% on a fully diluted shares outstanding
basis and 6.30% on basic shares outstanding basis. The Company’s run rate for grant activity (1) (including grants related to succession planning) has been less than 1% in each of the past three fiscal years: (1) Grant activity does not include performance shares as none have been earned.
The Company awarded 31,490 shares, 45,376 shares and 212,500 shares in
2006, 2007 and 2008 respectively. The time based awards vest over a 3-5
year period The performance based awards were based on a 3-year
measurement period with additional vesting of 0-2 years after the awards
were earned The performance measurements for the performance awards
historically have been: 40% based on total return performance versus the
NAREIT Equity Index with the Company’s performance in at least the top
60% to earn any shares 40% based on total return performance versus the
Company’s peer set (consisting of 6 competitors) with the
Company’s performance to be in at least the top 60% to earn any shares 20% based on the Company’s total return performance with a Company total return
performance over the 3-year measurement period of at least 22.5% to
earn any shares Full Value Awards granted Shares Outstanding Run Rate Fiscal Year 2008 338,370 40,172,942 0.84% Fiscal Year 2007 55,390 40,113,388 0.14% Fiscal Year 2006 174,739 39,667,917 0.44% |
 3
Company’s Long-term Performance Company’s Long-term Performance The Company was the top performing REIT of all REITs (over 100 REITS existed at
that time) in 2004 regardless of sector based on total return for 2004 The Company had the highest total shareholder return versus its peers from the
Company’s IPO in 1998 through December 31, 2008 The Company had the highest total shareholder return versus its peers over the 5 year
period ending December 31, 2008 The Company outperformed both S&P 500 and NASDAQ in total return since its IPO through December 31, 2008 and approximately the same as the Russell 2000 The Company had a total return above the average for its peers over the 3 year period
ending December 31, 2008 The Company had a total return above the average for its peers over the year ending
December 31, 2008 |
 4
Committee’s Philosophy on Named Executive’s Compensation Committee’s Philosophy on Named Executive’s Compensation Total compensation package should promote pay for performance
and be competitive to attract and retain top-level
executives Equity compensation is critical in attracting and retaining
superior executives and creating alignment of their interests with that of shareholders Compensation package should be: Payable over a longer period than one year Depend on the Company’s performance relative to other REITs Depend on total compensation paid by REITs similar to the Company by size or by
industry Depend on total shareholder return The majority of total compensation should be directly linked to relative performance
basis and actual performance of the Company Compensation and performance of executives should be evaluated on
the basis of the Company’s long-term performance in conjunction with current year performance The Compensation Committee has the sole authority to hire or fire compensation
consultants Stock ownership guidelines CEO -– 5x salary COO and CFO — 3x salary |
 5
CEO Compensation CEO Compensation In 2006, the Committee had Towers Perrin prepare a report of CEO compensation for the Company’s peers and other REITS of similar enterprise value and make package structure recommendations Target Compensation Salary 24% Target Bonus (can receive 0-200% of target) 24% Performance based on FFO per share versus budget, FFO per share versus peers and
MBOs Time-Based Stock Award 25% Normal vesting over 3 years Performance-Based Stock Award (can receive 0-200% of target) 27% Performance based on total return versus REIT Equity Index, peers and absolute return
for the Company over a 3-year period |
 6
Current CEO Current CEO Jon Bortz has served as CEO for the Company since it went public in 1998 The Board and Compensation Committee believe that Jon Bortz has done a superior job in directing the Company since it went public Named CEO of the Year based on pay-for-performance in 2007 by HVS Ranked as 4 th best REIT CEO in 2007 out of all REIT CEOs regardless of sector by Institutional Investor Magazine based on survey of REIT analysts and investors Member of the Executive Committee and Chair of the Audit Committee for the NAREIT
Board of Governors Total target compensation has historically been below the mean and median compensation for CEOs of hotel REITs based on NAREIT’s Annual Compensation Survey |
 7
Succession Plan Succession Plan In the second quarter of 2008, the Board and Compensation Committee put in place a
succession plan in light of Jon Bortz’s desire to retire from his current role of CEO The Board and Compensation Committee believe that with a Company of less than 30 employees the CEO position is critical to the success of the Company and an orderly transition of
the CEO role is an absolute necessity The Board and the Compensation Committee had a strong desire to maintain continuity of
the current management team and to have a successful transition of the role of CEO to Michael Barnello, the COO of the Company since it went public in 1998 The Board and the Compensation Committee preferred to have a 2-year time period for
the transition, to increase the preparation of Michael Barnello for his new role To incent and pay Jon Bortz to remain with the Company through the transition period, the Compensation Committee (with Board approval) increased his cash compensation and
provided him a one-time additional equity grant of 100,000 shares
Though the mix of shares (75,000 time based and 25,000 performance based, both have
3-year cliff vesting requirement) related to the transition plan was a
deviation from the normal policy of having more shares come from performance
based shares, the Board and Compensation Committee believed it was prudent
to provide the shares in this mix to provide better assurance that Jon Bortz remained with the Company through the transition period Details of the transition plan and related compensation changes are provided in the
Company’s 2009 Proxy Statement and Current Reports on Form 8-K
filed at the time the succession plan was put in place
|