The CEOs of the “Big Three” health care real estate investment trusts (REITs) all were among the 25 highest-paid U.S. equity REIT chief executives in 2014, with HCP Inc.’s Lauralee Martin leading the pack.
Martin, president and CEO of HCP (NYSE: HCP), took the No. 8 spot on the recently released rankings, compiled by business intelligence services firm SNL Financial.
In 2014, she received about $12.4 million in option-adjusted compensation, according to SNL. That was a 48% year-over-year increase, from $8.4 million in 2013. She received $832,832 in cash equivalent compensation in 2014, compared with $197,251 in 2013.
Cash equivalent compensation is the sum of base salary, cash bonus and other unclassified compensation, separate from stock and option awards and non-equity incentive compensation.
Compensation remained steady for Debra Cafaro, chairman and CEO of Ventas Inc. (NYSE: VTR). She took the No. 12 spot on the list, with option-adjusted compensation of roughly $10 million in 2014. That was a year-over-year change of 1.06%. Her cash equivalent compensation hovered around $1.1 million in both 2013 and 2014.
Thomas DeRosa, CEO and director of Health Care REIT Inc. (NYSE: HCN) —the largest non-provider senior living owner in the country — experienced the steepest year-over-year decrease in compensation among the top 25.
DeRosa’s option-adjusted compensation declined nearly 57%, from $18.9 million in 2013 to $8.1 million in 2014. His cash equivalent compensation in 2014 was about $686,000, compared to roughly $1 million a year prior. He ranked No. 18 on this year’s list.
HCN was the only member of the Big Three among the 10 largest U.S. equity REITs by market capitalization. Among that group of CEOs, DeRosa had the seventh-highest compensation in 2014, according to SNL. In 2014, HCN had a market cap of roughly $24.9 billion, while Ventas came in at $21.4 billion and HCP was at $20.2 billion, SNL data shows.
Overall, average compensation for the 25 highest-paid equity REIT CEOs increased 6.3% year over year, reaching nearly $11 million.
Next year, NorthStar Realty Finance Corp.’s (NYSE: NRF) chairman and CEO David Hamamoto could very well appear on the highest-paid list, SNL noted. NorthStar, a notable player in the senior living space, was not eligible for the most recent list because it was transitioning from a mortgage to an equity REIT in 2014. However, Hamamoto received $1.5 million in cash equivalent compensation, $10.1 million in non-equity incentive compensation and $48.7 million in stock awards in 2014.
Although the CEOs of high-performing REITs deserve high compensation, improvements could be made in REIT corporate governance to ensure that payment is commensurate with results, Stifel analyst John Guinee told SNL. If board members were paid less and had term limits and age caps, it would eliminate an “old-boys’ network” element that sometimes comes into play as company boards make decisions about executive pay, Guinee said.
Written by Tim Mullaney