Real Estate Compensation
Our team at NFP Compensation Consulting (NFPCC, ) has built a strong reputation in the real estate industry as experts in developing strategic, customized compensation solutions. With more than 50 years of combined leadership experience and executives who have sat on both public and private commercial real estate company boards, NFPCC is positioned to provide clients with the most up-to-date trends affecting the industry. We understand the diverse real estate business models, ever-evolving regulatory environment, and the need to align compensation programs with the culture and philosophies of each unique organization.
For decades, NFP Compensation Consulting has provided strategy, governance, and compensation services to many companies within the real estate industry through comparative market data and compensation analysis. It’s key that real estate be viewed differently than other industries. For example – revenue, a key factor in determining compensation, can often be replaced by the value of assets a real estate company may have under control. Revenue isn’t always the essential variable in the real estate industry to accurately determine the size of the company. Another critical consideration in this sector is in regard to dealing with the tax code. REITs are required to pay out 90% of earnings as a dividend to maintain exemption from corporate taxes. With the real estate industry being such a recognizable force in the country it is important to consider a different viewpoint on how to provide services.
Additionally, the real estate industry has been one of the most affected by the COVID-19 pandemic and is currently facing unprecedented challenges. Among the hardest hit are the commercial, retail, and hospitality sectors. The sudden onset of remote work, the rise in online shopping, and capacity restrictions at restaurants and hotels have placed these sectors under tremendous strain and will likely leave a permanent impact. The residential sector has probably been the most resilient, however, the dramatic increase in the cost of construction materials and supply issues are definitely shaking things up. Companies are now left to adapt and be strategic in their decisions to survive and thrive in the current climate. Compensation and the ability to attract and retain the key talent necessary to lead during these times of distress are more critical than ever.
Below are some of the real estate companies NFPCC has worked with.
Diverse Service Suite for Real Estate Companies
- Compensation Philosophy Development
- Peer Group Development
- Executive Compensation Analysis
- Annual and Long-Term Incentive Plan Design
- Board of Director Compensation Analysis and Structure
- All Employee Compensation Analysis and Salary Grade Development
- Severance Benefit Design
- Employment Agreement Design
- Compensation Risk Assessment
- Merger and Acquisition Integration
- Investor Relations, Shareholder Engagement Strategy
- Succession Planning Design
- Retirement Compensation Design
- Compensation Discussion & Analysis Drafting and Review
Why Strategic Pay Matters
Compensation structures are dramatically evolving and therefore require greater strategic thought to stay in front of the market. NFPCC stays up to date on the latest compensation trends affecting the real estate market to keep our clients informed and strategically positioned to succeed. Below are a few facts and figures demonstrating current trends we’ve noticed from numerous board meetings.
- The pay mix, consisting of salary, cash bonus, and LTI has remained relatively unchanged – with LTI being the largest component of executive compensation.
- Data shows private firms are being competitive with their public company counterparts when it comes to LTI pay pointing to the need to ensure all components of compensation are present.
- Many sectors have experienced significant decreases in LTI values.
- Performance shares remain the primary vehicle for delivery of equity compensation, most often married with time-vested restricted stock.
- The most commonly used performance metric in the public real estate industry is absolute total shareholder return “TSR”.
- M&A activity in U.S. REITs is highly prevalent following a strong 2021 and 2022.
NFPCC Article: Compensation in the Real Estate Industry »