Total REIT Compensation Increased As Much As 15 Percent Last Year, Says FTI Consulting

Share Article

New REIT Comp Survey shows compensation amounts gave returned to pre-recession levels.

News Image
As the additional disclosure items under the Dodd-Frank Act, in particular the internal pay equity ratio, are implemented, it will be interesting to see the effects on compensation programs and levels throughout the organization.

Total compensation levels within the REIT industry increased in 2010 by a median of 3 percent to 15 percent, with the larger increases generally paid to executive and senior management, according to a just-released REIT executive compensation survey. Lower level employees, including middle management and other professional staff members, typically experienced more moderate increases of 3 percent to 8 percent. The Real Estate Solutions industry group of FTI Consulting, Inc. conducted the 2011 CoMP Survey of 43 public and private real estate companies across all sectors of the real estate industry in August 2011.

According to Anthony Saitta, managing director and co-head of the Real Estate Solutions industry group's executive compensation team at FTI Consulting, “In 2010, the real estate industry continued to rebound as fundamentals stabilized and companies had access to cash through both the equity and debt markets. As a result, compensation levels in the real estate industry were directly impacted, companies were better able to fund their bonus pools, and, for most employees, compensation levels returned to pre-recession amounts.

“Specifically, since equity compensation amounts increased significantly for senior executives in recent years, 2010 compensation adjustments primarily were driven by cash bonuses. Compensation for mid-level management, which has been more heavily weighted toward base salary and moderate cash bonuses, varied less year over year,” he explained.

Other key findings of the FTI survey were:

  • Most employees experienced limited increases in base salaries in recent years, with overall increases of approximately 2.7 percent at the median for those receiving increases in 2011. This is up slightly from 2.5 percent in 2010.
  • Salary budgets in 2012 are not expected to increase substantially, with estimated increases averaging 3.0 percent.
  • Participating companies paid out bonuses in 2010 at approximately 95 percent to 100 percent of target, depending on the employee group. This represents a moderate increase over 2009 payouts, with bonuses representing 92 percent of targeted amounts, at the median.
  • Time-based restricted stock continues to be the predominant equity compensation vehicle for REITs, with approximately 80 percent of REITs granting such shares. Stock options and performance-based restricted stock, however, have become more prevalent over the past couple of years, with approximately 30 percent and 34 percent, respectively, of REITs utilizing these equity vehicles.

Saitta added, “As the additional disclosure items under the Dodd-Frank Act, in particular the internal pay equity ratio, are implemented, it will be interesting to see the effects on compensation programs and levels throughout the organization. This ratio will not only provide employees with information on the CEO’s compensation package as compared with the rest of the company, but, more importantly, it will provide direct insight into compensation levels for the organization as a whole, especially if the pay of any one individual is disproportionately higher or lower than the median total compensation for all employees. This could significantly impact employee morale and may cause certain perception issues, especially for smaller organizations with fewer employees.”

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,700 employees located in 22 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. The company generated $1.4 billion in revenues during fiscal year 2010. More information can be found at http://www.fticonsulting.com.

###

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Nina Dietrich
Nina Dietrich LLC
(201) 493-8944
Email >
Visit website