The Real Deal Miami

Top real estate executives compensated at twice stock performance

May 30, 2012 02:15PM

Annaly Capital Management CEO Michael Farrell

Compensation for top real estate executives is outpacing their companies’ respective stock performances by nearly double, the highest ratio in over a decade, according to a new study by Chicago compensation consultancy FPL Associates reported by the Wall Street Journal. In 2011, executives at the 100 largest public firms saw their total median compensation jump 14 percent to $8.65 million from 2010. Compare that to the median stock return for the studied real estate companies, which was only up 6 percent from 2010 to 2011.

“It was a great year for [real estate] executives from a compensation perspective,” Jeremy Banoff, FPL’s senior managing director, said. Compensation was calculated by adding base salaries, bonuses and values of long-term incentive awards at the time granted. The executives considered were chief executives, chief operating officers, chief financial officers and general counsels.

The study found that most of pay growth came in the form of bonuses and long-term incentive awards, which leaped up 24 percent to $4.65 million on average. But median base salaries also increased roughly 10 percent last year. Base salaries in most industries have held flat for years now and in real estate they have remained relatively flat from 2008 to 2010, so this 10 percent increase comes as the largest since 2002 when the study began.

The study named Annaly Capital Management CEO Michael Farrell the highest paid real estate executive with a compensation package worth $35 million in 2011. According to Daniel Furtado, an analyst at Jefferies & Co., shareholders are in general unconcerned about Farrell’s bonuses in light of Annaly’s low overhead. “Michael Farrell and the Annaly management team is the envy of the REIT space,” Furtado said. [WSJ]