Real Estate Industry CEOs See Increased Long-Term Incentives as a Percent of Pay

Total compensation rose for real estate CEOs according to our year-over-year analysis of almost 400 public, private for-profit, and not-for-profit companies in Pearl Meyer’s 2020 Real Estate Compensation Survey, in which data is effective as of May 2020. Long-term incentives were on the rise as a percentage of total compensation.

Total compensation, which includes base salary, annual incentives/cash bonuses, and long-term incentives, such as restricted stock and stock options, increased by 2.7% at the median for chief executive officers. The analysis, based on real estate companies of all types, sizes, and geographic regions, revealed that base salaries increased by 1.3%, while annual incentives/cash bonuses decreased by 3.4% at the median. Long-term incentives, often the largest component of executive pay, primarily accounted for the increase in total compensation, with an average increase of 13.0%.

Looking at the differences between ownership, public real estate companies paid almost double the amount of private companies for base salary, and almost triple for annual incentives/cash bonuses. In 2020, long-term incentives accounted for 66.5% of CEO salaries, an increase of 5.6% from 2019. Public companies paid their CEOs just 7.8% more in long-term incentives, showing that private firms are surprisingly competitive with this component of pay, which is often designed to retain top-level talent.

Data differences between 2019 and 2020 also show that company size, by revenue, has an exponential effect on LTI values in CEO pay. In 2019 and 2020, LTI nearly doubled by revenue grouping, and in 2020, the correlation between LTI values and revenue grouping was almost linear. The graph below shows this correlation between company size and long-term incentives for CEOs, which is most commonly delivered in the form of stock options and restricted stock units (RSUs).

According to Jon Boba, a managing director at Pearl Meyer and expert on executive compensation in the real estate industry, there may be a reason we are seeing such a spike in long-term incentives for real estate executives. “We were not surprised to see real estate firms react to a short- to mid-term industry disruption due to COVID-19, with a pivot to a greater use of LTI grants and awards for their CEOs and other key senior executives. Long-term fundamentals remain bullish for multiple sectors within the real estate industry. Given the recent spike in demand for executive talent, forward-minded firms took measures in 2020 to ensure that their leadership remained engaged and incented to drive post-pandemic, longer-term performance and results.”

The full 2020 Real Estate Compensation Survey report serves as a valuable benchmarking resource to compare your company’s pay practices to the market. You’ll find detailed company information and compensation data for 162 positions broken out by ownership status, platform type, asset class, revenue, total capitalization/gross assets, assets under management, number of employees, and incumbent location.

For more information on purchasing a copy of the survey report, click here.