Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation

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Share-Based Compensation
3 Months Ended
Mar. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Share-Based Compensation
 
Performance Share Units (“PSUs”)
 
On March 6, 2014, our Board of Trustees granted 49,103 PSUs with an aggregate grant date fair value of $1.7 million to executives.  The PSUs have a performance period beginning on January 1, 2014 and concluding on the earlier of December 31, 2016 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:
Percentile Rank
 
Earned PSUs Payout %
75th or greater
 
200% of PSUs granted
50th or greater
 
100% of PSUs granted
25th
 
50% of PSUs granted
Below 25th
 
0% of PSUs granted


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:

the number of earned PSUs in settlement of the award plan; plus
the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.
 
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 $35.09 per PSU using a Monte Carlo model, which included assumptions of, among other things, the following: baseline common share value of $26.52; expected volatility for COPT common shares of 28.6%; and a risk-free interest rate of 0.66%.  We are recognizing the grant date fair value in connection with these PSU awards over the period commencing on March 6, 2014 and ending on December 31, 2016.
 
With regard to the PSUs granted to our executives in prior years that were outstanding as of December 31, 2013 as described in our 2013 Annual Report on Form 10-K:

the performance period for the PSUs granted to executives on March 3, 2011 ended on March 2, 2014. Based on COPT’s total shareholder return during the performance period relative to its peer group of companies, there was no payout value in connection with the termination of the PSUs; and
the PSUs granted to executives on March 1, 2012 and March 1, 2013 were outstanding as of March 31, 2014.

Restricted Shares
 
During the three months ended March 31, 2014, certain employees, as well as a nonemployee member of our Board of Trustees, were granted a total of 177,356 restricted shares with an aggregate grant date fair value of $4.7 million (weighted average of $26.63 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.  The grants of restricted shares to nonemployee Trustees vest on the first anniversary of the grant date provided that the Trustee remains in his or her position. During the three months ended March 31, 2014, forfeiture restrictions lapsed on 110,356 previously issued common shares; these shares had a weighted average grant date fair value of $29.52 per share, and the aggregate intrinsic value of the shares on the vesting dates was $2.9 million.
 
Options
 
During the three months ended March 31, 2014, 26,614 options to purchase common shares (“options”) were exercised.  The weighted average exercise price of these options was $21.34 per share, and the aggregate intrinsic value of the options exercised was $126,000.