Share-Based Compensation and Other Compensation Matters |
9 Months Ended | |||||||||||||||||||||||||||||
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Sep. 30, 2017 | ||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||
| Share-Based Compensation and Other Compensation Matters |
Share-Based Compensation and Other Compensation Matters
Performance-Based Share Units (“PSUs”)
On January 1, 2017, our Board of Trustees granted 36,525 PSUs with an aggregate grant date fair value of $1.4 million to our three executives (the “January Grants”). The PSUs have a performance period beginning on January 1, 2017 and concluding on the earlier of December 31, 2019 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.
On August 23, 2017, the January Grants were modified to include a provision that limits the earned PSUs payout percentage to 100% of the PSUs granted if COPT’s total shareholder return is negative during the performance period irrespective of its percentile rank in the peer group (the “Negative TSR Modifier”). In addition, as a result of the modification to the January Grants, on August 23, 2017, we augmented the January Grants by issuing an aggregate of 2,826 additional PSUs to the executives. Each of the PSU Certificates also includes the Negative TSR Modifier. The incremental award to the executives on August 23, 2017 resulting from these modifications totaled $12,000.
For the January Grants, we computed a grant date fair value of $38.43 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $31.22; expected volatility for COPT common shares of 19.0%; and a risk-free interest rate of 1.47%. For the award modification on August 23, 2017, we computed a pre-modification fair value of $49.66 per PSU and a post-modification fair value of $46.39 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $33.40; expected volatility for COPT common shares of 18.7%; and a risk-free interest rate of 1.36%.
We issued 9,763 common shares on February 7, 2017 to Mr. Stephen E. Budorick, our Chief Executive Officer, in settlement of PSUs issued in 2014, representing 100% of the target award for those PSUs.
Restricted Shares
During the nine months ended September 30, 2017, certain employees and non-employee members of our Board of Trustees were granted a total of 230,635 restricted common shares with an aggregate grant date fair value of $7.8 million (weighted average of $33.96 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. Restricted shares granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. During the nine months ended September 30, 2017, forfeiture restrictions lapsed on 148,401 previously issued common shares; these shares had a weighted average grant date fair value of $26.18 per share, and the aggregate intrinsic value of the shares on the vesting dates was $5.0 million.
Deferred Share Awards
During the nine months ended September 30, 2017, nonemployee members of our Board of Trustees were granted a total of 10,032 deferred share awards with an aggregate grant date fair value of $326,000 ($32.47 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, 2017, we issued 15,590 common shares in settlement of deferred share awards granted in 2016; these shares had a grant date fair value of $26.89 per share, and the aggregate intrinsic value of the shares on the settlement date was $508,000.
Options
During the nine months ended September 30, 2017, 5,000 options to purchase common shares (“options”) were exercised. The weighted average exercise price of these options was $29.98 per share, and the aggregate intrinsic value of the options exercised was $18,000.
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