The Real Deal New York

REIT investors fight back against CEO pay plans

Investors reject compensation package for GGP’s Sandeep Mathrani

June 23, 2016 11:36AM

From left: Sandeep Mathrani and Marc Holliday

Real estate investment trust shareholders are turning up the heat on executive pay.

Shareholders at four REITs, including General Growth Properties, have rejected pay plans in nonbinding votes this year, the Wall Street Journal reported. That’s up from just one plan that was rejected last year

“The REIT industry as a whole has taken somewhat of a black eye because of a number of bad-acting, smaller companies that have not provided transparency at all,” said John Roe, directory of advisory at the corporate-governance consultancy ISS Corporate Solutions.

GGP’s investor vote came as a bit of a curveball because the company got approvals in the past three years.

ISS recommended a thumbs down on the vote this year for CEO Sandeep Mathrani, calling out “several problematic features” in his employment agreement that lead to an oversized 2015 pay package of $39.2 million compared to his peers.

Mathrani, the highest paid REIT executive, got an incentive of at least $2 million in 2015 and 2016 and a $25 million five-year equity retention grant. He also has an excise tax provision that gives executives extra incentive to do merger deals by increasing termination agreements.

GGP responded that Mathrani’s compensation for 2015 totaled $17.7 million if the retention grant were spread out over five years.

Investors at the North Carolina-based mortgage REIT Hatteras Financial Corporation, Florida’s Consolidated-Tomoka Land Company and the senior-citizen housing company Senior Housing Properties Trust also rejected pay plans this year.

ISS recommended investors vote against SL Green Realty’s compensation program for CEO Marc Holliday, who made $23 million last year, a 24 percent increase over 2014. Shareholders, however, approved the REIT’s compensation plan in early June.

CEOs of real estate firms on average received bigger raises last year compared to executives in other sectors, partly because their stock returns fared better than the broad stock indexes.

Shareholder returns from REITs climbed by 3 percent last year, whereas returns recorded in the S&P 500 dropped .7 percent and those in the Russell 3000 climbed only .5 percent over the same time period. CEOs of some 300 large publicly-traded firms saw their median pay drop 3.8 percent last year to $10.8 million, down from $11.2 million in 2014. [WSJ] – Rich Bockmann

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