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REIT CFO hiring landscape undergoing a seismic shift by Anthony J. LoPinto and Eric Moskowitz

November 2011 An analysis of more than 150 Chief Financial Officers at REITs shows that the industry is placing new emphasis on capital markets experience and diversity.

After three years of depressed activity, commercial real estate is gaining momentum. Transactions in the second quarter were more than double their level from a year earlier and quadruple the post-recession low of $12.9 billion in the first quarter of 2009, according to Real Capital. As a result, and because of more complicated transactions, real estate firms are reevaluating the role of the Chief Financial Officer (CFO). Korn/Ferry International recently completed an analysis of more than 150 CFOs at publicly-traded Real Estate Investment Trusts (REITs) across the United States. The goal of the study was to identify trends in the types of CFOs being hired, as well as changes in compensation. There were three main findings stemming from the Korn/Ferry study:

1. Capital markets backgrounds are increasingly appealing to REITs hiring financial officers, rather than the more traditional accounting.

2. Real estate firms are getting more diverse: a third of publiclyannounced CFO hires in the last year were women.

3. Total compensation is rising as real estate firms prioritize financial risk following the credit crisis and are seeking more seasoned candidates.


Accounting vs. capital markets Korn/Ferry’s analysis found two distinct groups of CFOs within the REIT industry—those who come from accounting, and those from capital markets. The accounting CFO is roughly fifty years old, male, has a CPA, began his career at a Big Four firm, was internally promoted into the role, and has been there nearly eight years. The capital markets CFO is about two years younger, male, has an MBA, was hired externally, and has been in his current role for roughly five years. Although the majority of REITs currently employ an accounting CFO, the difference in average tenure may indicate a shift in preferences toward a more capital markets-focused CFO. In fact, eleven of the last seventeen REIT CFOs hired came from a capital markets background. “REIT CFOs traditionally came from a Big Four accounting firm and worked their way up inside a company. But I can see how this trend towards capital markets is picking up because there are so many more structured products, joint ventures, and investment funds out there,” says Marshall Loeb, president and chief operating officer at Glimcher Realty Trust.

More women in REIT CFO jobs The study also indicates a noticeable uptick in the hiring of women as CFOs at REITs. Of those seventeen 2010-2011 hires, six have been women (35 percent). “We are increasingly seeing a shift to capital markets-oriented hires at REITs, but also are seeing a greater willingness to diversify the management teams and place women in a traditionally male-dominated role,” says Evelyn Infurna, a managing director in equity capital markets origination at Citi, who focuses on the REIT industry. Infurna, who was a senior real estate securities analyst at Moore Capital and vice president at Cornerstone Real Estate Advisers, says she welcomes this new progressive attitude towards diversity at real estate firms.

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Figure 1

Newly appointed REIT CFOs last 12 months CFO name

REIT Sector Age Gender Profile

Internal/ Start external hire Date

Diane Merdian

Redwood Trust Inc.

Mortgage

51

Female

Capital Markets

External

2010

Diane Morefield

Strategic Hotels & Resorts Inc.

Hotels

52

Female

Capital Markets

External

2010

Richard Hickson IV Parkway Properties Inc.

Office

35

Male

Capital Markets

Internal

2010

Steven Douglas

General Growth Properties

Retail

42

Male

Capital Markets

External

2010

Eve Chan

K-REIT Asia

Commercial

40

Female

Accounting

External

2010

Fredric Starker

New York Mortgage Trust Inc

Mortgage

59

Male

Accounting

External

2010

Steven Sherwyn

Care Investment Trust Inc. Health Care

49

Male

Capital Markets

External

2010

Gregg Adzema

Cousins Properties

Diversified

44

Male

Capital Markets

External

2010

James Mead

SL Green Realty Corp

Office

51

Male

Capital Markets

External

2010

Bruce Riggins

LaSalle Hotel Properties

Hotels

39

Male

Captial Markets

External

2011

Shereen Jones

Berkshire Income Realty

Apartments

50

Female

Capital Markets

External

2011

Timothy Schoen

HCP Inc.

Health Care

44

Male

Captial Markets

Internal

2011

Janna Connolly

The St. Joe Company

Developer

55

Female

Accounting

Internal

2011

Philip Mays

Cedar Shopping Centers Retail

-

Male

Accounting

External

2011

Debra Ann Hess

NorthStar Realty

Mortgage

47

Female

Capital Markets

External

2011

Michael Forsayeth

MI Developments

Industrial

56

Male

Accounting

External

2011

Matthew Murphy

DCT Industrial Trust

Industrial

47

Male

Accounting

Internal

2011

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The capital markets exposure also can be invaluable in a C-suite role, says Infurna. “The relationships that Wall Street executives can bring to these positions—and that flow of capital markets information—may be important in their new role. Hopefully that transfers into managing capital structures in a way that is beneficial to the companies and shareholders.” Non-recourse and recourse debt, leveraged term structures, and credit swaps are just a few examples of deals that may look more like something conceived at Goldman Sachs rather than as part of a straightforward commercial property sale. But they are becoming commonplace as real estate firms increasingly “hedge” their positions due to volatile markets. “The credit crisis, especially in real estate, really highlighted the need for a well-constructed and conceived balance sheet,” says Scott Craig, a vice president and portfolio manager at Eaton Vance, which invests in REITs.

Compensation ticks upward Since REITS are attracting Wall Street talent—which is notably pricier than accounting talent—it is not too surprising to discover that compensation is rising across the board, though apparently more for those with capital markets backgrounds. For instance, at Digital Realty Trust, A. William Stein, a CFO with a capital markets background, received a 19 percent bump in cash compensation and a 25 percent uptick in long-term pay, putting him in the top 10 percent of all REIT CFOs in terms of pay for 2010. “You can earn a lot more after five years at Morgan Stanley than you would at an accounting firm like Ernst & Young,” says Joseph Sorrentino, managing director of compensation consultants Steven Hall & Partners. “So that pushes compensation up once these individuals get to the CFO level.”

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Figure 2

Change in profiles of REIT CFOs from FY 2009 to FY 2010 Category Average market cap (in billions)

FY 2009 Accounting Capital Markets

FY 2010 Accounting Captial Markets

$1.48

$2.37

$2.62

$2.98

49.6

48.3

50.0

47.5

7.8

5.3

7.9

4.7

90% male

91.7% male

89.9% male

86.1% male

37.0%

55.6%

37.8%

62.8%

Cash compensation

$638,396

$786,264

$692,400

$822,500

Long-term incentive compensation

$252,818

$468,831

$398,500

$681,000

6.4%

19.4%

5.1%

7.0%

CPA

82.0%

25.0%

84.0%

30.9%

MBA

19.1%

58.3%

20.2%

57.1%

Big Four experience

65.5%

22.2%

64.2%

21.4%

93

36

98

43

Average age Average tenure of CFO (in years) Gender External hires

On board

Number of profiles*

*Profiles identified as mixed backgrounds were omitted from the study. Any REIT IPOs during 2009 are accounted for in 2010. One company de-listed in FY2010 and was omitted as well. Source: Steven Hall & Partners

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Anthony J. LoPinto is Senior Client Partner and Global Sector Leader, Real Estate for Korn/Ferry International. He also serves as the Office Managing Director for the Firm’s New York office.

Eric Moskowitz is Senior Director of Market Intelligence for Korn/Ferry’s Global Financial Market. He is also head of the North America Research and Knowledge Management team.

About The Korn/Ferry Institute The Korn/Ferry Institute generates forward-thinking research and viewpoints that illuminate how talent advances business strategy. Since its founding in 2008, the institute has published scores of articles, studies and books that explore global best practices in organizational leadership and human capital development.

About Korn/Ferry International Korn/Ferry International, with a presence throughout the Americas, Asia Pacific, Europe, the Middle East and Africa, is a premier global provider of talent management solutions. Based in Los Angeles, the firm delivers an array of solutions that help clients to attract, deploy, develop and reward their talent. Visit www.kornferry.com for more information on the Korn/Ferry International family of companies, and www.kornferryinstitute com for thought leadership, intellectual property and research.

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© 2011 The Korn/Ferry Institute

REIT CFO hiring landscape undergoing a seismic shift  

REIT CFO hiring landscape undergoing a seismic shift

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