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Real Estate Advisory SMG
August 23, 2010: Total compensation levels within the REIT industry increased in 2009 by a median of 3-15%, depending on employee level. The larger increases were generally paid to employees at higher levels within the organization, including members of executive and senior management. FTI Schonbraun McCann Group (“SMG”), the real estate advisory business of FTI Consulting, Inc., conducted the 2010 CoMP Survey of 45 public and private real estate companies across all sectors of the real estate industry in August 2010.
According to Larry Portal, senior managing director and co-head of SMG’s executive compensation group, “Our study revealed 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. In 2010/2011, we expect to see fewer companies experiencing drastic compensation adjustments such as 20% increases or 20% decreases as people become more comfortable with current economic conditions. We also expect to continue to see notable increases through the utilization of performance-based shares, and while there is a current compensation/grant date value associated with such awards, the actual value realized by recipients will ultimately depend on sustained company performance.”
Specifically, the study found that the larger increases in compensation of approximately 10-15% were primarily attributed to rebounds in stock prices and companies implementing performance-based equity programs. Lower level employees, including middle management and other professional staff members, typically experienced more moderate increases of 3-10% as their compensation is more heavily weighted towards base salary and moderate cash bonuses and, therefore, varies less year over year.
Other key findings of the SMG study were:
* Most employees experienced no changes or limited increases in base salaries, with overall increases of approximately 2.5% at the median for those receiving increases in both 2009 and 2010.
* Salary budgets in 2011 are not expected to increase substantially, with estimated increases in the 2.8-3.0% range, although more employees can expect to receive a raise in 2010 with approximately 85-90% of employees forecasted to receive increases in 2011.
* Participating companies paid out bonuses at approximately 90-95% of target depending on the employee group. This represents a significant increase over 2008 payouts with bonuses representing 75% of targeted amounts, at the median.
* Time-based restricted stock continues to be the predominant equity compensation vehicle for REITs, with approximately 80% of REITs granting such shares. However, stock options (used by 34% of REITs) and performance-based restricted stock (used by 31% of REITS) have grown more prevalent in recent years.
Mr. Portal noted, “It will be interesting to see how the impact of the Dodd-Frank Act and say-on-pay will ultimately play out. While these mandates more directly impact executive compensation arrangements, we have seen how changes in the compensation structure and levels for executives can have a trickle-down effect on employees throughout an organization. Ultimately, that may mean more performance-based equity awards for all employees.”
About FTI Schonbraun McCann Group
FTI Schonbraun McCann Group (SMG) is a global consulting firm dedicated to creating integrated financial, tax and real estate solutions for clients having underlying value in real estate operations and assets. SMG provides a broad range of advisory services and represents leading public and private real estate entities, including owners/developers, financial institutions, investment banks, opportunity funds, insurance companies, hedge funds and pension advisors who are challenged by today’s changing market conditions. FTI Schonbraun McCann Group is the real estate advisory business of FTI Consulting, Inc.
SOURCE FTI Schonbraun McCann Group
This is a blog post for Real Estate Professionals, Investors, Landlord, Property Manager, and Property Management Companies. New Reit Compensation Survey Reports Increases in Total Compensation of 3-15 percent in 2009, Says FTI Schonbraun McCann Group is brought to you by SimplifyEm Pay Rent Online and Property Management SoftwareYou might also want to read:
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