Share-Based Compensation and Other Compensation Matters |
9 Months Ended | |||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation and Other Compensation Matters |
Share-Based Compensation and Other Compensation Matters
Performance Share Units (“PSUs”)
On March 1, 2016, our Board of Trustees granted 26,299 PSUs with an aggregate grant date fair value of $1.0 million to executives. The PSUs have a performance period beginning on January 1, 2016 and concluding on the earlier of December 31, 2018 or the date of: (1) termination by us without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event. The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:
If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles. At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested COPT common shares equal to the sum of:
If a performance period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the three-year performance period that has elapsed. If employment is terminated by the employee or by us for cause, all PSUs are forfeited. PSUs do not carry voting rights. We computed a grant date fair value of $38.21 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $23.90; expected volatility for COPT common shares of 20.4%; and a risk-free interest rate of 0.96%. We are recognizing the grant date fair value in connection with these PSU awards over the period commencing on March 1, 2016 and ending on December 31, 2018.
Based on COPT’s total shareholder return relative to its peer group of companies, for PSUs issued in 2014 and 2015, we made the following common share issuances in settlement of such PSUs during the nine months ended September 30, 2016:
Restricted Shares
During the nine months ended September 30, 2016, certain employees were granted a total of 206,487 restricted common shares with an aggregate grant date fair value of $5.0 million (weighted average of $24.31 per share). Restricted shares granted to employees vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employees remain employed by us. During the nine months ended September 30, 2016, forfeiture restrictions lapsed on 189,569 previously issued common shares; these shares had a weighted average grant date fair value of $27.52 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.7 million.
Deferred Share Awards
During the nine months ended September 30, 2016, nonemployee members of our Board of Trustees were granted a total of 24,944 deferred share awards with an aggregate grant date fair value of $671,000 ($26.89 per share). Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date elected by the Trustee (generally upon cessation of being a Trustee). During the nine months ended September 30, 2016, we issued 12,028 common shares in settlement of deferred share awards granted in 2015; these shares had a grant date fair value of $26.70 per share, and the aggregate intrinsic value of the shares on the settlement date was $322,000.
Executive Transition Costs
Our Board of Trustees appointed Stephen E. Budorick, our Executive Vice President and Chief Operating Officer since September 2011, to become our President and Chief Executive Officer effective May 12, 2016, the date of the Company’s 2016 Annual Meeting of Shareholders. On that date, Roger A. Waesche, Jr., our current President and Chief Executive Officer, left the Company to pursue other interests, and he was not nominated for reelection as a Trustee. The Board appointed Mr. Budorick to our Board of Trustees after the 2016 Annual Meeting of Shareholders. In addition, our Executive Vice President, Development & Construction Services, Wayne H. Lingafelter, and our Senior Vice President, General Counsel and Secretary, Karen M. Singer, departed the Company to pursue other interests effective March 31, 2016 and August 31, 2016, respectively. We recognized executive transition costs of approximately $6.0 million in the nine months ended September 30, 2016 primarily for termination benefits in connection with the departures of Mr. Waesche, Mr. Lingafelter and Ms. Singer.
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