WASHINGTON, DC—REIT executive compensation increased by a slightly greater margin in 2016 than the year prior, according to FTI Consulting's 2017 REIT Executive Compensation Trends study of pay practices at the 150 largest real estate trusts. However, while the average increase was greater—5%, compared to 3% in 2015—the range was narrower: 2% to 7% in '16, compared with 1% to 9% in '15.
If the range of pay increases has diminished, then the emphasis on linking those increases to performance continues to grow. FTI reports that 84% of REITs in the study now use performance-based equity, not including stock options, up from 82% the year prior and 34% in 2010. This past year, approximately 50% of equity awarded to REIT CEOs was allocated to performance shares based on grant date fair value.
“The continued trend of employing performance-based shares has made realizable compensation analyses increasingly important,” says Jarret Sues, a managing director in FTI's real estate & infrastructure industry group. “Due to the leverage often built into performance-based plans, the ultimate value realized may be significantly more (or less), depending on performance.”
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
