Share-Based Compensation |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation | Share-Based Compensation Restricted Shares
During the nine months ended September 30, 2021, certain employees and non-employee members of our Board of Trustees (“Trustees”) were granted a total of 165,770 restricted common shares with an aggregate grant date fair value of $4.4 million (weighted average of $26.25 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 employee remains 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, 2021, forfeiture restrictions lapsed on 157,066 previously issued common shares; these shares had a weighted average grant date fair value of $25.88 per share, and the aggregate intrinsic value of the shares on the vesting dates was $4.1 million.
Performance Share Awards (“PSUs”)
We issued 93,824 common shares on February 3, 2021 to executives in settlement of PSUs granted in 2018, representing 200% of the target awards for those PSUs.
Profit Interest Units in COPLP (“PIUs”)
We granted two forms of PIUs: time-based PIUs (“TB-PIUs”); and performance-based PIUs (“PB-PIUs”). TB-PIUs are subject to forfeiture restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period (as described further below) and then settled in vested PIUs. Vested PIUs carry substantially the same rights to redemption and distributions as non-PIU common units.
TB-PIUs
During the nine months ended September 30, 2021, we granted 93,983 TB-PIUs with an aggregate grant date fair value of $2.5 million (weighted average of $26.16 per TB-PIU) to senior management team members and certain non-employee Trustees. TB-PIUs granted to senior management team members generally vest in equal annual increments over a three-year period beginning on the first anniversary of the date of grant provided that the employee remains employed by us. TB-PIUs granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. Prior to vesting, TB-PIUs carry substantially the same rights to distributions as non-PIU common units but carry no redemption rights. During the nine months ended September 30, 2021, forfeiture restrictions lapsed on 40,591 previously issued TB-PIUs; these TB-PIUs had a weighted average grant date fair value of $25.14 per unit, and the aggregate intrinsic value of the TB-PIUs on the vesting date was $1.1 million.
PB-PIUs
On January 1, 2021, we granted certain senior management team members 227,544 PB-PIUs with a three-year performance period concluding on the earlier of December 31, 2023 or the date of: (1) termination by us without cause, death or disability of the employee or constructive discharge of the employee (collectively, “qualified termination”); or (2) a sale event. The number of earned awards at the end of the performance period will be determined based on the percentile rank of COPT’s total shareholder return (“TSR”) 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 awards will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles. If COPT’s TSR during the measurement period is negative, the maximum number of earned awards will be limited to the target level payout percentage. During the performance period, PB-PIUs carry rights to distributions equal to 10% of the distribution rights of non-PIU common units but carry no redemption rights.
At the end of the performance period, we will settle the award by issuing vested PIUs equal to: the number of earned awards; and the excess, if any, of (1) the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date over (2) the aggregate distributions made on the PB-PIUs during the performance period, divided by the price of our common shares on the settlement date. If a performance period ends due to a sale event or qualified termination, the number of earned awards 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 PB-PIUs are forfeited.
These PB-PIU grants had an aggregate grant date fair value of $3.4 million ($30.03 per target-level award associated with the grants) which is being recognized over the performance period. The grant date fair value was computed using a Monte Carlo model that included the following assumptions: baseline common share value of $26.08; expected volatility for common shares of 34.7%; and a risk-free interest rate of 0.18%.
Deferred Share Awards During the nine months ended September 30, 2021, a non-employee Trustee was granted 3,416 deferred share awards with an aggregate grant date fair value of $93,000 ($27.12 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).
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