Executive Compensation at Publicly Traded Real Estate Companies Reaches Five-Year High

Jun 08, 2011, 15:53 ET from FPL Advisory Group

Survey Conducted by FPL Associates Reveals Executive Compensation At Top 100 Public Real Estate Companies Is Higher Than Pre-Recession Peak Levels, Mirroring Two-Year Upward Trend In Stock Performance

CHICAGO, June 8, 2011 /PRNewswire-USNewswire/ -- Executive compensation at the country's top 100 publicly traded real estate companies reached five-year highs for the performance year 2010, eclipsing pre-recession 2006 peak levels by 13 percent, according to FPL Associates' 9th annual in-depth review of (2011) public filings across the public real estate industry.

Annual median CEO total compensation at the largest public real estate companies was $3.4 million in 2010, just over 10 percent higher than the 2006 peak-level median total compensation of $3.1 million. Additionally, 2010 CEO compensation was 26 percent higher than the 2009 level of $2.7 million.  This represents the second consecutive year of solid gains in compensation of greater than 10 percent, and is commensurate with similar gains in total shareholder return (approximately 27% and 29% for 2009 and 2010, respectively). It should be noted that CEO compensation also decreased by double digits for two consecutive years during the downturn.

Having peaked in 2006, marking the third out of the preceding four years of 30% plus returns, total shareholder return for the 100 largest public real estate companies dropped by large double digits amounts across 2007 and 2008 in the depths of the recession.  

But 2010 capped two years of increases in both areas. Overall compensation for the top four positions – CEO, COO, CFO and General Counsel – was $7,650,000 in 2010, 21 percent higher than $6,309,000 in 2009. The 2009 figure was a near 15 percent increase over the prior year.  

And the 2010 total compensation for the four top executives was nearly 13 percent higher than the peak 2006 total compensation for all four of $6,790,000.

"Since the market downturn in late 2008, the top 100 firms posted total shareholder returns of 28% on a compounded, annualized basis, and compensation during this same period increased by 18 percent," said Jeremy Banoff, Senior Managing Director at FPL Associates.  

Banoff noted that two years of solid growth in compensation for executives at the top 100 public real estate companies is a reflection of strong increases in shareholder performance. Additionally, during the same time period, record equity capital raising has provided several opportunities for these firms, including the ability to clean up balance sheets and access capital for potential transactions.  

"According to our research, base salary increases were relatively small, while much of the growth was drawn from incentive-based compensation," said Vanessa Garza, Director at FPL Associates.

"Many performance criteria impact compensation; however, these trends accurately reflect a pay-for-performance rationale across the sector," Banoff said.

"While there remain weaknesses in the overall economy and in the commercial real estate sector, clearly these increases demonstrate that public real estate companies are delivering value to investors and that is being reflected in compensation to the senior executives," Banoff added.

SOURCE FPL Advisory Group