When San Francisco’s iconic Transamerica Pyramid sold for $725 million in March, the German pension funds that bought the skyscraper lost more than $200 million on the deal. But Michael Shvo, the developer who oversaw the investment, walked away with nearly $80 million in fees.
For the syndicators who invested in apartment buildings with GVA Property Management, the company’s downward turn meant a loss of millions.
One now claims CEO Alan Stalcup charged thousands of dollars in excess fees at each property every month for years, totaling millions of dollars.
And in REIT-land, examples abound of CEOs who pocket eight-figure paychecks connected to metrics that their critics say have little to do with profit.
It’s standard practice for developers to charge a variety of fees on the projects they run, independent of any upside if the investment succeeds. But when those projects go colossally wrong — as many have in recent years — the mismatch between fees and investor losses tends to draw more scrutiny.
“You’re sort of seeing this resume,” said Patrice Derrington, a professor at New York University’s Schack Institute of Real Estate. “It happens a lot with private equity funds.”
Commercial real estate — with some tweaks and additions — generally follows the “2 and 20” structure that shapes compensation across financial industries like private equity, hedge funds and venture capital.
Sponsors earn a 2 percent fee on assets under management and then get 20 percent of the profits distributed as carried income. (In CRE, carried income is called the promote. The financial industry’s 2 percent management fee has in recent years been subject to more negotiation.)
Real estate can also tack on fees, often for construction and property management. The various charges are negotiated at the beginning of a deal. Sponsors with strong track records and access to the best deals have more leverage to negotiate better arrangements for themselves.
But this model can incentivize the wrong behavior, critics say, with sponsors gathering as many assets as they can manage in order to boost fees, over focusing on investors’ profits.
Derrington said that even if a project goes sideways, investors shouldn’t complain — they know what to expect from the outset.
“It’s a fee for a service. Sometimes the service doesn’t deliver what you want,” she said. “If you get a bad haircut, you still have to pay the hairdresser.”
Taking a haircut
The behind-the-scenes battles at the Transamerica tower between the German pension fund Bayerische Versorgungskammer, its partner Deutsche Finance America and Shvo have been brewing for years, and the deal closed with one last big controversy.
Shvo’s $79 million exit package, which represents nearly 11 percent of the sale price, was made up of several parts.
First, he got paid a termination fee for his asset management contract, which ran through 2028.
He also negotiated a buyout for a right of first offer he held on the property. Known as a ROFO, this is a provision that gives Shvo a right to match any offer to buy the building.
“If you get a bad haircut, you still have to pay the hairdresser.”
For limited partners like BVK, a ROFO can be a liability that constrains their options when selling a property. But they may still concede to it in order to get a deal.
In this case, it proved valuable for Shvo.
He also got paid a brokerage fee for representing both sides of the deal. That all added up to $34 million.
On top of that, BVK also paid Shvo $45 million in asset-, property- and construction-management fees, according to a lawsuit Deutsche Finance filed against the pension fund after the sale.
DFA, which argues it was denied similar payments it feels it’s owed, said the payout “reduc[ed] the ultimate investors’ share of the Transamerica Pyramid sale proceeds” and raises “grave questions about the disclosures and decisions around the Transamerica sale.”
Syndicating losses
Alan Stacup, the head of Austin-based GVA Property Management, became one of the faces of the Sun Belt multifamily syndication boom-and-bust cycle of the 2020s.
He raised money from wealthy individuals and bought a portfolio of fix-and-flip apartments that at its height totaled 30,000 units. But the playbook was derailed when interest rates rose, and now he’s down to about 5,000 apartments.
Many of those syndicators got wiped out.
One investor in November filed a lawsuit in Texas county court accusing Stalcup of cooking the books at his properties to boost their incomes. The machinations made the projects seem more attractive and upped the fees Stalcup charged, according to the lawsuit.
Those fees were 1.5 percent of revenue, 3.5 percent for management and 10 percent on construction.
The disgruntled investor — who put $11.3 million into 10 properties — stands to lose more than $15 million, they said.
Stalcup’s alleged mismanagement “resulted in substantial — and in many cases complete — losses to investors,” the lawsuit claims. The GVA CEO still got paid by “improperly overcharg[ing] fees by as much as thousands of dollars per property, per month over multiple years,” totaling millions of dollars.
In response, Stalcup denied the lawsuit’s allegations and said that he actually cut fees when the market turned, eliminating 100 percent of the construction management fees, deferring asset management fees and saving 40 percent on property management by replacing the in-house team with third-party managers.
He added that one investor out of more than 500 filed a lawsuit, which he believes is proof that investors understood that the contractual fees they agreed to pay are for work that happens whether the market goes up or whether it goes down.
“Even so, we voluntarily reduced fees across every category when performance declined,” Stalcup said. “And beyond that, I personally held 25 percent of the equity in every GVA deal. When investors lost money, I lost more than anyone else at the table. The alignment was there — contractually and personally.”
REIT-land
The pay-for-performance gap is more glaring in the public markets, where every dollar and cent of CEO compensation is disclosed.
Activist investor Jonathan Litt of Land & Buildings took this proxy season to highlight the disconnect between REIT performance and executive pay.
He identified nearly two dozen examples where CEOs of companies that underperformed their peers still received above-average pay packages.
“Twenty-one REIT CEOs have consistently underperformed their proxy peers, yet their executive compensation was rarely adjusted,” he wrote in an April white paper urging shareholders to vote against the compensation proposals at the companies’ upcoming shareholder meetings.
Litt called out companies like the warehouse giant Rexford Industrial Realty, where co-CEOs Howard Schwimmer and Michael Frankel earned a combined compensation of $51.8 million in 2025. That’s 456 percent above the average for their peer group, according to Litt, while Rexford’s shareholders saw their returns trail their peers’ by 21 percent over the past five years.
Rexford appointed a new CEO, Laura Clark, effective April 1 after activist investor Elliott Investment Management took a large stake in the company. Clark’s total 2026 compensation is $9.5 million.
Another in Litt’s crosshairs is Welltower, the $150 billion healthcare REIT headed by CEO Shankh Mitra.
Welltower’s stock isn’t exactly underperforming: Shareholder returns are up 30 percent since Mitra took over as CEO in October 2020. But the REIT’s board has proposed a compensation package that could be worth between $2.6 billion and $3.04 billion. Litt calls it is “one of the most egregiously management-friendly compensation structures in public REIT history” and said Mitra has done little to deserve it.
The investor activist’s argument is that Mitra inherited a best-in-class portfolio when he took over five and a half years ago. The stock was trading at the bottom of the Covid trough and essentially rode the market recovery.
Mitra, who on his April earnings call compared changes at Welltower to Netflix going from mailing DVDs to streaming, earns a salary of $100,000. But he’s entitled to $7.4 million a year in stock awards that Litt argues require either no hurdles to reach or ones that are designed to be easily met.
“The Netflix comparisons, thermodynamics metaphors, Newton’s law of gravitation, the Costco breakroom philosophy, the Charlie Munger quotes, these are the hallmarks of a CEO who has confused cyclical tailwinds with personal genius, in our view,“ Litt wrote.
There’s even a provision in the compensation plan that says firing Mitra for poor performance is considered “without cause,” which Litt says would award him about $500 million worth of shares. For that reason, Litt recommended selling the company.
A spokesperson for Welltower noted that since Mitra took over, the company’s market capitalization grew from roughly $24 billion to more than $140 billion, and shareholders got returns of over 320 percent since October 2020.
Those results “significantly outperform[ed] the S&P 500 and relevant REIT indices,” the spokesperson said, adding the new compensation plan “replaces virtually all other forms of compensation from 2026 through 2035 with an incentive structure that aligns senior leaders’ compensation with the multi-year creation of sustainable shareholder value.”
Hard questions
If not for the havoc wrought on commercial real estate over the past several years by the office crisis, rising interest rates and the wall of maturing mortgages, it’s possible that investors would happily ignore developers’ fat fees.
In profitable times, stakeholders tend to count the zeros on their checks on the way to the bank, rather than dwelling on expenses subtracted beforehand.
“I don’t think anyone complains when stock prices are up and everyone’s making money. That’s the time of the cycle when everyone eats the jumbo shrimp and drinks the good scotch,” said Joshua Kahr, founder of the training-and-consulting company Kahr Real Estate and a professor at Schack.
But when profits turn to losses, everyone wants to investigate.
“When times are bad, investors start to ask the hard questions,” Kahr added. “Why should I pay you for performance if I’m losing money?”