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REIT Executive Pay Surpasses Pre-Recession Levels

The strong performance of real estate investment trusts (REITs) since the recession has buoyed executive compensation at those firms to levels not seen since before the economic crash of 2007, according to Baltimore-based researcher FTI Consulting.

The median total compensation for REIT CEOs and CFOs increased by 14% in 2010 from 2009, researchers found, while median compensation for REIT executives as a whole increased by 13%. Adjustments to CEO pay ranged from flat or no change from the previous year to increases as high as 32%.

That brings the median compensation for REIT officers to a level that is 5% to 10% above the pre-recession pay level of 2007, according to FTI.

But with investors wielding power to veto compensation plans through say-on-pay voting, REIT directors have been careful to tie executive compensation to performance.

“The vast majority of REITs received shareholder approval on their say-on-pay votes in 2011, and by a fairly wide margin,” says Anthony Saitta, managing director and co-head of the real estate solutions group at FTI.

“In year-end 2010 decision making, REIT boards were mindful of the upcoming votes and made the right call by continuing to tie pay to company performance and by providing the bulk of increases through incentive compensation, whether paid in cash or in equity,” says Saitta. In June, Saitta co-headed an FTI team that studied compensation practices at 117 REITs across all sectors of the commercial real estate industry.

Top CEO pay soars

Among the 20 highest-paid REIT CEOs, total compensation increased 83.6% on average from the previous year, according to a June 6 report by SNL Financial. That equates to about $9.6 million per CEO for those top earners in 2010, up from an average of $5.2 million in 2009. SNL studied a different group of REITs than FTI for its research.

SL Green Realty Corp. posted the highest CEO compensation for 2010, paying $24.8 million to its chief executive, Marc Holliday. That’s up 117.6% from the prior year, according to SNL. David Simon, chairman and CEO of Simon Property Group Inc., garnered the second-highest total compensation at $24.6 million, up 430% from $4.6 million the previous year.

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