I was interested to read the various employee motivation and benefit schemes employed by companies in the Best Places to Work in Property 2018 list.
Thomas Schneider, co-founder and director, BrickVest
Commercial real estate fund managers and sponsors have enjoyed boom times in recent years courtesy of rising asset valuations and yield-hungry institutions increasing their capital allocations.
Growing competition from infrastructure managers has also added to the pressure felt by real estate sponsors to not only retain key employees tempted by big pay increases elsewhere but also incentivise them to deliver the type of returns promised to investors. Overcoming this problem has led to a rethink among sponsor firms on how to keep staff focused and happy.
One solution to emerge is the Employee Participation Fund (EPF), which has been developed by BrickVest and adopted by German commercial property specialist BEOS. The EPF provides BEOS employees with the opportunity to invest in existing BEOS real estate offerings alongside their institutional investors, ensuring that the interests of sponsors, employees and investors are totally aligned.
Traditional employee incentive plans differ from one country to another depending on the tax and social security arrangements. However, they usually fall into one of the following four categories: stock options, profit sharing, performance units and bonus pay. Each has its advantages and drawbacks but they share two things in common: first, employees remain employees rather than proper shareholders, even if they have access to profit sharing or can benefit from growth in the company’s valuation via stock options.
Second, these schemes are usually indirectly linked related to the projects or deals employees are working on. In contrast, EPFs introduce a new concept of ‘intrapreneur’, providing employees working for a large real estate company with the opportunity to take direct responsibility for, and benefit from, turning ideas into profitable outcomes whether in the form of new funds, investment strategies or services.
Until now, most employees haven’t had the opportunity to truly shape and participate in their employers’ business model, whose performance relies on successful, capital and debt-raising initiatives. Think of EPFs as a new high-performance fuel for the employee incentive engine.