Business Management
Corporate Profiles
Jun 24, 2009
By: Suzann D. Silverman, Editor-in-Chief
While Wall Street executives took excessive bonuses even while their companies were failing and the government has since received flak for not curtailing this enough, public real estate companies have been much more controlled when it comes to executive compensation, according to a study by FPL Associates L.P.
The study, FPL’s seventh annual Top 100 Real Estate Compensation Analysis of the 100 largest publicly traded real estate companies, found that executive base salaries rose just 0.3 percent year-over-year, while cash bonuses declined by 15.5 percent over 2007 levels. New or annual equity grants were worth about 26.6 percent less than those from the year before, while total remuneration was 18.8 percent less. The study evaluated compensation for CEOs, COOs, CFOs and general counsels.
While it is difficult to measure whether any particular groups of companies showed the greatest tendency to curtail compensation because performance and situations vary so widely, there were a number of significant such decisions, noted Jeremy Banoff, managing director of FPL Associates. CB Richard Ellis Inc., for instance, reduced both salaries and bonus opportunities for its executives, while Equity One and Glimcher Realty Trust also reduced salaries, another very large REIT’s executives voluntarily reduced their bonus eligibility from 60 percent of earnings to 40 percent and still another firm opted against automatic salary bumps for its executives.
Such decisions were not "unique or great," Banoff observed, but they are the more noteworthy because they came at a time when REIT performance was close to that of the S&P 500 and well above that of other indices. In other words, at a time when real estate companies had reason to compensate better than other industries—operating with much smaller staffs--overall executive compensation was reduced by almost 19 percent and CEO compensation down even more—by 24 percent.
That said, executives did not do badly. Thirty-eight percent of companies increased their cash bonus payouts, often due to out-performance on a relative basis. And in many cases executives were awarded a higher number of stock options or shares.
Drawing on more in-depth studies, such as a recently completed study for NAREIT that evaluates 93 positions, Banoff pointed to another significant shift in the current economy: After several years of high demand for transactional roles, including developers and acquisitions and investment talent, “now it’s a complete reversal.” The focus is now on property managers and asset managers. But this hasn’t resulted in significant compensation bumps for those positions. “Property managers still have their job; a developer may not,” Banoff observed.
Still another shift is back to real estate expertise in the CFO position, following several years of efforts to add Wall Street or public company expertise rather than real estate background in the general counsel or CFO position. With the return of a distressed asset market, veterans of the last cycle are now in demand.
Click here for Jeremy Banoff’s further discussion of study findings.
By: Suzann D. Silverman, Editor-in-Chief
While Wall Street executives took excessive bonuses even while their companies were failing and the government has since received flak for not curtailing this enough, public real estate companies have been much more controlled when it comes to executive compensation, according to a study by FPL Associates L.P.
The study, FPL’s seventh annual Top 100 Real Estate Compensation Analysis of the 100 largest publicly traded real estate companies, found that executive base salaries rose just 0.3 percent year-over-year, while cash bonuses declined by 15.5 percent over 2007 levels. New or annual equity grants were worth about 26.6 percent less than those from the year before, while total remuneration was 18.8 percent less. The study evaluated compensation for CEOs, COOs, CFOs and general counsels.
While it is difficult to measure whether any particular groups of companies showed the greatest tendency to curtail compensation because performance and situations vary so widely, there were a number of significant such decisions, noted Jeremy Banoff, managing director of FPL Associates. CB Richard Ellis Inc., for instance, reduced both salaries and bonus opportunities for its executives, while Equity One and Glimcher Realty Trust also reduced salaries, another very large REIT’s executives voluntarily reduced their bonus eligibility from 60 percent of earnings to 40 percent and still another firm opted against automatic salary bumps for its executives.
Such decisions were not "unique or great," Banoff observed, but they are the more noteworthy because they came at a time when REIT performance was close to that of the S&P 500 and well above that of other indices. In other words, at a time when real estate companies had reason to compensate better than other industries—operating with much smaller staffs--overall executive compensation was reduced by almost 19 percent and CEO compensation down even more—by 24 percent.
That said, executives did not do badly. Thirty-eight percent of companies increased their cash bonus payouts, often due to out-performance on a relative basis. And in many cases executives were awarded a higher number of stock options or shares.
Drawing on more in-depth studies, such as a recently completed study for NAREIT that evaluates 93 positions, Banoff pointed to another significant shift in the current economy: After several years of high demand for transactional roles, including developers and acquisitions and investment talent, “now it’s a complete reversal.” The focus is now on property managers and asset managers. But this hasn’t resulted in significant compensation bumps for those positions. “Property managers still have their job; a developer may not,” Banoff observed.
Still another shift is back to real estate expertise in the CFO position, following several years of efforts to add Wall Street or public company expertise rather than real estate background in the general counsel or CFO position. With the return of a distressed asset market, veterans of the last cycle are now in demand.
Click here for Jeremy Banoff’s further discussion of study findings.
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