REITs Make Strides On Gender Diversity, But Long Road Ahead on Racial Progress

Reflecting the seismic shift on race relations that swept across the nation this summer, Ferguson Partners expanded its annual study of diversity at REITs this year to include an evaluation of how much Black leadership can be found in executive suites and on boards. 

Presented in a new report, the research shows there’s work to be done. About 3.7% of all REIT boards included in the study were led by Black directors. A slight improvement was seen on S&P 500 REIT boards, where approximately 4.9% of directors were black. However, over the past 12 months, just one new Black director was hired across all S&P 500 REITs.

Written by Jeremy I. Banoff, executive chairman of Ferguson, the third annual report also once again studied gender diversity at REITs. For the third straight year, half of newly elected, non-employee REIT directors were female, prompting Banoff to declare the parity “a long-term trend” in “2020 REIT Diversity Across Boards and Executives.”

Further, fewer than 6% of REITs have zero female representation, a notable dip from the 9.2% in that category last year. In fact, 52 REIT boards now have three or more female directors. That represents a more than 67% increase from 2018 to this year in the number of REIT boards with such a claim.

But REITs have a long way to go to achieve racial equality. Across 141 S&P 500 REIT Executives, there is just one Black named executive officer: Troy E. McHenry, EVP, chief legal officer, general counsel and corporate secretary, Healthpeak Properties. Diversity at the top tier of an organization is critical, according to five executives who discussed the matter during interviews with Ferguson Partners.

The participants were James B. Connor, Duke Realty Corp.; Thomas Baltimore Jr., Park Hotels and Resorts; Sumit Roy, Realty Income Corp., Leslie Hale, RLJ Lodging Trust and Kenneth Bacon, Welltower Inc. and Arbor Realty Trust.

“You need to have diversity at all levels, but having it at the C-Suite level is the way to drive it through the organization as that person in the C-suite will help drive it directly and indirectly,” said one of the interviewees. “It also proves that the organization takes diversity seriously — when companies put people five layers below in charge of diversity, it doesn’t prove that they actually find it important.”

When asked what is the most important step REITs can take to promote diversity, the executive shared several ideas.

“Tie it to a sense of purpose and really invest in people,” said one of the participants. “It’s not just the initial hiring — you have to make sure they have a chance to grow, move up the corporate ladder, and retain.”

Another cut straight to the point. “Just get out and hire — you can’t tell me you can’t find a smart, hard working Black graduate from a reputable university.”