Increases to CEO Compensation Might Be Put On Hold For Now at H&R Real Estate Investment Trust (TSE:HR.UN)

Simply Wall St
June 22, 2021

Share price growth at H&R Real Estate Investment Trust (TSE:HR.UN) has remained rather flat over the last few years and it may be because earnings has struggled to grow at all. The upcoming AGM on 29 June 2021 may be an opportunity for shareholders to bring up any concerns they may have for the board’s attention. One way that shareholders can influence managerial decisions is through voting on CEO and executive remuneration packages, which studies show could impact company performance. From the data that we gathered, we think that shareholders should hold off on a raise on CEO compensation until performance starts to show some improvement.

Check out our latest analysis for H&R Real Estate Investment Trust

Comparing H&R Real Estate Investment Trust's CEO Compensation With the industry

Our data indicates that H&R Real Estate Investment Trust has a market capitalization of CA$5.0b, and total annual CEO compensation was reported as CA$3.6m for the year to December 2020. That's slightly lower by 6.5% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$1.2m.

On examining similar-sized companies in the industry with market capitalizations between CA$2.5b and CA$7.9b, we discovered that the median CEO total compensation of that group was CA$2.5m. Hence, we can conclude that Tom Hofstedter is remunerated higher than the industry median. Moreover, Tom Hofstedter also holds CA$61m worth of H&R Real Estate Investment Trust stock directly under their own name, which reveals to us that they have a significant personal stake in the company.

Component20202019Proportion (2020)
Salary CA$1.2m CA$1.2m 33%
Other CA$2.4m CA$2.7m 67%
Total CompensationCA$3.6m CA$3.9m100%

Talking in terms of the industry, salary represented approximately 36% of total compensation out of all the companies we analyzed, while other remuneration made up 64% of the pie. H&R Real Estate Investment Trust is largely mirroring the industry average when it comes to the share a salary enjoys in overall compensation. If non-salary compensation dominates total pay, it's an indicator that the executive's salary is tied to company performance.

TSX:HR.UN CEO Compensation June 23rd 2021

A Look at H&R Real Estate Investment Trust's Growth Numbers

H&R Real Estate Investment Trust's funds from operations (FFO) deteriorated further this year coming in at-CA$16m at the last update, compared to last year's FFO of -CA$841k. It saw its revenue drop 1.7% over the last year.

Its a bit disappointing to see that the company has failed to grow its . This is compounded by the fact revenue is actually down on last year. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. Historical performance can sometimes be a good indicator on what's coming up next but if you want to peer into the company's future you might be interested in this free visualization of analyst forecasts.

Has H&R Real Estate Investment Trust Been A Good Investment?

H&R Real Estate Investment Trust has generated a total shareholder return of 0.02% over three years, so most shareholders wouldn't be too disappointed. Although, there's always room to improve. Accordingly, a proposal to increase CEO remuneration without seeing an improvement in shareholder returns might not be met favorably by most shareholders.

In Summary...

The lacklustre share price returns along with the lack of earnings growth makes us think that a strong rebound in the share price may be difficult. In the upcoming AGM, shareholders will get the opportunity to discuss any concerns with the board, including those related to CEO remuneration and assess if the board's plan will likely improve performance in the future.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. That's why we did our research, and identified 3 warning signs for H&R Real Estate Investment Trust (of which 2 are concerning!) that you should know about in order to have a holistic understanding of the stock.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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