What Can We Conclude About RioCan Real Estate Investment Trust’s (TSE:REI.UN) CEO Pay?

Ed Sonshine became the CEO of RioCan Real Estate Investment Trust (TSE:REI.UN) in 1993, and we think it’s a good time to look at the executive’s compensation against the backdrop of overall company performance. This analysis will also assess whether RioCan Real Estate Investment Trust pays its CEO appropriately, considering its funds from operations growth and total shareholder returns.

See our latest analysis for RioCan Real Estate Investment Trust

Comparing RioCan Real Estate Investment Trust’s CEO Compensation With the industry

According to our data, RioCan Real Estate Investment Trust has a market capitalization of CA$4.8b, and paid its CEO total annual compensation worth CA$6.2m over the year to December 2019. That’s a slightly lower by 8.0% over the previous year. While we always look at total compensation first, our analysis shows that the salary component is less, at CA$1.3m.

On examining similar-sized companies in the industry with market capitalizations between CA$2.6b and CA$8.4b, we discovered that the median CEO total compensation of that group was CA$3.9m. This suggests that Ed Sonshine is paid more than the median for the industry. Furthermore, Ed Sonshine directly owns CA$6.6m worth of shares in the company, implying that they are deeply invested in the company’s success.

Component20192018Proportion (2019)
Salary CA$1.3m CA$1.3m 21%
Other CA$4.9m CA$5.4m 79%
Total CompensationCA$6.2m CA$6.7m100%

On an industry level, roughly 33% of total compensation represents salary and 67% is other remuneration. RioCan Real Estate Investment Trust sets aside a smaller share of compensation for salary, in comparison to the overall industry. It’s important to note that a slant towards non-salary compensation suggests that total pay is tied to the company’s performance.

TSX:REI.UN CEO Compensation September 16th 2020

A Look at RioCan Real Estate Investment Trust’s Growth Numbers

RioCan Real Estate Investment Trust has reduced its funds from operations (FFO) by 1.1% per year over the last three years. In the last year, its revenue is down 1.3%.

A lack of FFO improvement is not good to see. And the impression is worse when you consider revenue is down year-on-year. It’s hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. 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 RioCan Real Estate Investment Trust Been A Good Investment?

With a three year total loss of 24% for the shareholders, RioCan Real Estate Investment Trust would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.

To Conclude…

As we noted earlier, RioCan Real Estate Investment Trust pays its CEO higher than the norm for similar-sized companies belonging to the same industry. This doesn’t look good against shareholder returns, which have been negative for the past three years. To make matters worse, FFO growth has also been negative during this period. Understandably, the company’s shareholders might have some questions about the CEO’s remuneration, given the disappointing performance.

It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company’s key performance areas. We identified 4 warning signs for RioCan Real Estate Investment Trust (1 is a bit concerning!) that you should be aware of before investing here.

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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