Equity Incentive Plans

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

Equity Incentive Plan

All grants of common shares and options to purchase common shares were issued under the Company's 2007 Equity Incentive Plan prior to May 12, 2016 and under the 2016 Equity Incentive Plan on and after May 12, 2016. Under the 2016 Equity Incentive Plan, an aggregate of 1,950,000 common shares, options to purchase common shares and restricted share units, subject to adjustment in the event of certain capital events, may be granted. During the three months ended March 31, 2020, the Compensation and Human Capital Committee of the Board approved the 2020 Long Term Incentive Plan (2020 LTIP) as a sub-plan under the Company's 2016 Equity Incentive Plan. Under the 2020 LTIP, the Company awards performance shares and restricted shares to the Company's executive officers. At March 31, 2020, there were 817,143 shares available for grant under the 2016 Equity Incentive Plan.

Share Options

Share options have exercise prices equal to the fair market value of a common share at the date of grant. The options may be granted for any reasonable term, not to exceed 10 years. The Company generally issues new common shares upon option exercise. A summary of the Company’s share option activity and related information is as follows:



	Number of options		Option price per share					Weighted avg. exercise price
Outstanding at December 31, 2019	118,030		$	44.62	—	$	76.63	$	55.63
Exercised	(1,410	)	44.98		—	44.98		44.98
Granted	2,890		69.19		—	69.19		69.19
Outstanding at March 31, 2020	119,510		$	44.62	—	$	76.63	$	56.09

The weighted average fair value of options granted was $3.73 and $4.64 during the three months ended March 31, 2020 and 2019, respectively. The intrinsic value of share options exercised was $22 thousand and $2.5 million for the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes outstanding and exercisable options at March 31, 2020:



	Options outstanding						Options exercisable
Exercise price range	Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)		Options outstanding	Weighted avg. life remaining	Weighted avg. exercise price		Aggregate intrinsic value (in thousands)
$ 44.62 - 49.99	30,035	1.9					30,035	1.9
50.00 - 59.99	31,710	4.3					29,793	4.0
60.00 - 69.99	53,609	6.2					50,719	4.9
70.00 - 76.63	4,156	7.8					2,148	7.4
	119,510	4.7	$	56.09	$	—	112,695	3.9	$	55.41	$	—

Nonvested Shares

A summary of the Company’s nonvested share activity and related information is as follows:



	Number of shares		Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2019	509,338		$	67.88
Granted	211,549		69.09
Vested	(226,476	)	67.75
Forfeited	(1,317	)	68.38
Outstanding at March 31, 2020	493,094		$	68.45	1.56

The holders of nonvested shares have voting rights and receive dividends from the date of grant. The fair value of the nonvested shares that vested was $15.9 million and $22.1 million for the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, unamortized share-based compensation expense related to nonvested shares was $20.9 million.

Nonvested Performance Shares

A summary of the Company's nonvested performance share activity and related information is as follows:



	Number of Performance Shares
Outstanding at December 31, 2019	—
Granted	61,615
Vested	—
Forfeited	—
Outstanding at March 31, 2020	61,615

The number of common shares issuable upon settlement of the performance shares granted during the three months ended March 31, 2020 will be based upon the Company's achievement level relative to the following performance measures at December 31, 2022: 50% based upon the Company's Total Shareholder Return (TSR) relative to the TSRs of the Company's peer group companies, 25% based upon the Company's TSR relative to the TSRs of companies in the MSCI US REIT Index and 25% based upon the Company's Average Annual Growth in AFFO per share over the three-year performance period. The Company's achievement level relative to the performance measures is assigned a specific payout percentage which is multiplied by a target number of performance shares.

The performance shares based on relative TSR performance have market conditions and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of approximately $3.0 million. The estimated fair value is amortized to expense over the three-year vesting period, which ends on December 31, 2022. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition: risk-free interest rate of 1.4%, volatility factors in the expected market price of the Company's common shares of 18% and an expected life of three years. At March 31, 2020, unamortized share-based compensation expense related to nonvested performance shares was $2.7 million.

The performance shares based on growth in AFFO have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed. At March 31, 2020, achievement of the performance condition for the performance shares granted during the three months ended March 31, 2020 was deemed not probable.

The performance shares accrue dividend equivalents which are paid only if common shares are issued upon settlement of the performance shares. During the three months ended March 31, 2020, the Company accrued dividend equivalents expected to be paid on earned awards of $3 thousand.

Restricted Share Units

A summary of the Company’s restricted share unit activity and related information is as follows:



	Number of shares	Weighted avg. grant date fair value		Weighted avg. life remaining
Outstanding at December 31, 2019	26,236	$	77.54
Granted	—	—
Vested	—	—
Outstanding at March 31, 2020	26,236	$	77.54	0.17

The holders of restricted share units receive dividend equivalents from the date of grant. At March 31, 2020, unamortized share-based compensation expense related to restricted share units was $0.3 million.