REIT Execs Did Well During ’09, Notes SMG Survey
- Aug 24, 2010
Dees Stribling, Contributing Editor
New York–In an indication that the REIT industry is faring somewhat better than real estate as a whole, total compensation levels within the REIT realm, including multifamily specialists, increased in 2009 by a median of 3 percent to 15 percent, depending on employee level. That was the finding of FTI Schonbraun McCann Group (SMG), the real estate advisory business of FTI Consulting Inc., which conducted the 2010 CoMP Survey of 45 public and private real estate companies across all sectors of the real estate industry earlier this month (the survey did not break the data down by specific property types, however).
The survey did reveal significant swings in compensation levels from 2007 through 2009. Many real estate companies have been trying to balance liquidity and dilution concerns while also trying to retain employees and keep them motivated during these difficult economic times. It’s been a tough balancing act, but on the whole REITs seem to have been better at it.
Time-based restricted stock continues to be the predominant equity compensation vehicle for REITs, with about 80 percent of REITs granting such shares. However, stock options (used by 34 percent of REITs) and performance-based restricted stock (used by 31 percent of REITS) have grown more prevalent in recent years.
The larger compensation increases were generally paid to employees at higher levels within the organization, including members of executive and senior management, the survey notes. By contrast, most employees experienced no changes or limited increases in base salaries, with overall increases of about 2.5 percent at the median for those receiving increases in both 2009 and 2010.
Specifically, the study found that the larger increases in compensation were attributable to rebounds in stock prices–REIT stock prices generally did well in 2010–and companies implementing performance-based equity programs. Lower-level employees, including middle management and other professional staff members, typically experienced more moderate increases as their compensation is more heavily weighted towards base salary and moderate cash bonuses and therefore varies less year over year.
This pattern is expected to continue. “For 2010 and 2011, REITs, including those in the multi-housing sector, are still dealing with limited salary budget increases and bonus pools,” Anthony R. Saitta, managing director of SMG, tells MHN. “Generally, companies will allocate their limited resources by either distributing bonuses fairly evenly throughout the company, which often results in little variance between high and low performers, or allocating the majority of bonuses to their top performers and key employees, which is often the preferred approach for retention and motivation purposes.”
Additionally, Saitta points out, more REITs these days have incorporated discretion into their annual cash bonus plans, “thereby creating an opportunity to reward top performers based on more subjective performance criteria,” he says.