The impact of COVID-19 has been drastic at many real estate investment trusts. Rents are not being paid in offices, malls, and other commercial real estate properties across the country. Many REITs have reduced or eliminated their dividends as cash flow began disappearing when the economy began to shut down to prevent the spread of the coronavirus.

The Impact on Real Estate Investment Trusts

The slowdown is not just hurting investors. A new study The Impact of COVID-19 on REIT Compensation by FPL Associates found that 27 publicly-traded REITs have announced salary reductions, with approximately 60% of these REITs also announcing reductions to director compensation. Pay cuts were about Median reductions are as follows: 50% for the CEO, 25% for other NEOs, and 25% for Directors.

The study also found that at least seven REITs have disclosed that 2020 incentive compensation payouts will rely more heavily on board discretion.

The hotel REITs have seen the most pay cuts with Malls and other retail REITs showing a lot of cutbacks as well.

FPL Associates pointed out that “2020 is not a business-as-usual year, and accordingly, executive compensation programs and decisions will need to be analyzed with a more thoughtful approach that balances competing priorities. On the one hand, boards will need to ensure that top talent is retained during these challenging times, and management (and directors) are rewarded for their significant time and effort successfully navigating through this crisis. On the other hand, earnings, cash flow, and stock prices may be negatively impacted and there is a growing expectation that good leadership means shared sacrifice.”

FPL was founded in 1989 and serves the human capital and organizational needs of the real estate and related industries. Today we serve clients across the globe in the real estate, hospitality and leisure, infrastructure, engineering and construction, and healthcare sectors from offices around the world.