This study shows real estate investment trusts' (REITs) characteristics and compensation incentives vary with compensation method. Formula-based compensation encourages advisors to generate cash from their assets, whereas discretion-based compensation encourages cash conservation. Consequently, dividend yields are 82 percent of formula REITs' total returns, but only 33 percent of discretion REITs'. Partly due to REITs switching from formula-based to discretion-based compensation, the number of discretion REITs has grown while the number of formula REITs has declined. Average formula REIT return performance is inferior and switches tend to follow a period of poor financial performance; performance improves after such changeovers.