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REITs Turn Toward Pay-for-Performance

“The continued trend of employing performance-based shares has made realizable compensation analyses increasingly important,” says Jarret Sues with FTI Consulting.

By Paul Bubny | paulbubny | Updated on August 17, 2017

Jarret Sues of FTI Consulting “Companies have been taking a deeper dive into performance goals to understand how meaningful and achievable they are,” says FTI’s Jarret Sues.

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.

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