BCGI, a real estate executive search firm, recently conducted a survey in conjunction with PERE’s CFO Forum, highlighting compensation and recruiting trends in the industry. The survey, which focused on North American real estate investment managers, polled a total of 55 respondents, all of whom invest in the private real estate markets. The majority of the respondents were chief financial officers, while chief operating officers, managing partners and investor relations professionals made up the remainder.
The survey covered total 2013 compensation for six positions: chief financial officer, controller, chief operating officer, head of asset management, head of transactions and head of investor relations. The survey also polled base salaries for both the CFO and controller roles, which found nearly 60 percent of CFOs earned between $200,000 and $350,000 and more than half of controllers earned $100,000 to $150,000.
The largest salary allocations for CFOs came at both ends of the pay scale. Twenty-five percent of chief financial officers collected total compensation, including long-term incentive plans, between $100,000 and $250,000 in 2013, while nearly 22 percent earned total compensation of more than $750,000. Almost 44 percent of CFOs received compensation between $100,000 and $350,000.
The size of the total compensation package was strongly correlated to a GP’s assets under management (AUM). For example, about 65 percent of CFOs at firms with less than $500 million of AUM garnered between $100,000 and $250,000, while nearly 50 percent of CFOs at companies with AUM exceeding $5 billion received compensation of more than $750,000. In addition, 90 percent of CFOs at the very top end of the pay scale also were entitled to carried interest, compared to half of those who earned less than $250,000. The survey also showed some correlation between compensation and the GP’s location, as none of the CFOs earnings less than $250,000 in 2013 were based in New York.
The survey showed a similar barbell effect for the total compensation of transaction heads. The largest salary allocation in this category was more than $750,000, accounting for more than one-quarter of respondents. This was followed by top deal professionals earning between $100,000 and $250,000, representing almost 20 percent of survey participants. All other salary ranges for heads of transactions each represented 5 percent to 10 percent of respondents.
Nearly three-quarters of controllers ranged between $100,000 and $300,000 in total compensation. In asset management, 44 percent of division heads commanded pay in that range, while 22 percent of executives collected more than $500,000. Meanwhile, 45 percent of heads of investor relations earned total compensation between $100,000 and $300,000, and 25 percent of senior professionals in that role garnered packages of more than $500,000. All of the highest-earning IR executives were employed at firms that managed more than $1 billion in assets.
In excess of 30 percent of participating firms had total AUM between $1 billion and $5 billion; more than 25 percent with $500 million to $1 billion; 20 percent with less than $500 million; and nearly 15 percent with more than $5 billion. Forty-six percent of respondents were based in major cities such as New York, Boston, San Francisco, Washington DC and Dallas.
The survey also studied the allocation of headcount and how firms are looking to grow. One-third of the respondents are operating at an even ratio between finance and investment professionals, with about half of the firms weighing heavier on the investment side.
In terms of operations, 80 percent of the firms are looking to add headcount during the second half of 2014. The departments witnessing the greatest demand for expansion are accounting, acquisitions, asset management and capital raising. Indeed, if the recent decision by New York State to ban the use of placement agents rolls to other jurisdictions, fund managers will rely more on internal staff, which coincides with recent demand for internal capital raisers.
While there’s a series of challenges and issues facing private real estate firms, the outlook is bright as managers seek to expand their teams through business development and operational channels. As headcount and AUM continue to grow, expect to see an increase in compensation across the board.
Neil Golub is a director with BCGI American Real Estate Executive Search and is based in New York. To learn more about this survey, email him at firstname.lastname@example.org.