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Equity Incentive Plan
12 Months Ended
Dec. 31, 2018
Equity Incentive Award Plan  
Equity Incentive Plan

12. Equity Incentive Plan

Our Board of Directors adopted and, with the approval of our stockholders, amended the 2010 Equity Incentive Plan (as amended, the “2010 Plan”) in 2013. The 2010 Plan is administered by the Compensation Committee of our Board of Directors. Awards issuable under the 2010 Plan include common stock, stock options, restricted stock, stock appreciation rights, dividend equivalents, Operating Partnership units and other incentive awards. We have reserved a total of 6,000,000 shares of our common stock for issuance pursuant to the 2010 Plan, which may be adjusted for changes in our capitalization and certain corporate transactions. To the extent that an award expires, terminates or lapses, or an award is settled in cash without the delivery of shares of common stock to the participant, then any unvested shares subject to the award will be available for future grant or sale under the 2010 Plan. Shares of restricted stock that are forfeited or repurchased by us pursuant to the 2010 Plan may again be awarded under the 2010 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2010 Plan.

As of December 31, 2018,  2,854,253 shares of our common stock were available for issuance pursuant to the 2010 Plan.

Stock Options

Stock option awards are granted with an exercise price equal to the closing market price of the Company’s common stock on the date of grant. The fair value of each option granted under the 2010 Plan is estimated on the date of grant using the Black‑Scholes option‑pricing model. The fair values are amortized on a straight‑line basis over the vesting periods. Stock options have not been granted since the year ended December 31, 2013.  The following table sets forth stock option activity under the 2010 Plan for the years ended December 31, 2018,  2017, and 2016: 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of
Shares Subject
to Option

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term

 

Aggregate
Intrinsic
Value

 

Options outstanding, December 31, 2015

 

340,210

 

$

21.77

 

5.8 years

 

$ 11.9 million

 

Granted

 

 —

 

 

 —

 

 

 

 

 

Exercised

 

(74,660)

 

 

17.27

 

 

 

$ 3.8 million

 

Forfeited

 

 —

 

 

 —

 

 

 

 

 

Expired

 

 —

 

 

 —

 

 

 

 

 

Options outstanding, December 31, 2016

 

265,550

 

$

22.96

 

5.0 years

 

$ 15.0 million

 

Granted

 

 —

 

 

 —

 

 

 

 

 

Exercised

 

(197,761)

 

 

24.37

 

 

 

$ 13.3 million

 

Forfeited

 

 —

 

 

 —

 

 

 

 

 

Expired

 

 —

 

 

 —

 

 

 

 

 

Options outstanding, December 31, 2017

 

67,789

 

$

19.12

 

3.4 years

 

$ 6.4 million

 

Granted

 

 —

 

 

 —

 

 

 

 

 

Exercised

 

(18,656)

 

 

16.63

 

 

 

$ 1.6 million

 

Forfeited

 

 —

 

 

 —

 

 

 

 

 

Expired

 

 —

 

 

 —

 

 

 

 

 

Options outstanding, December 31, 2018

 

49,133

 

$

20.06

 

2.6 years

 

$ 3.3 million

 

 

 

 

 

 

 

 

 

 

 

 

Exercisable at December 31,

 

 

 

 

 

 

 

 

 

 

2016

 

249,227

 

$

22.29

 

4.9 years

 

$ 14.2 million

 

2017

 

67,789

 

$

19.12

 

3.4 years

 

$ 6.4 million

 

2018

 

49,133

 

$

20.06

 

2.6 years

 

$ 3.3 million

 

 

As of December 31, 2017, all stock option awards were fully vested. No options were granted during the years ended December 31, 2018, 2017, or 2016. The following table sets forth the number of shares subject to options that were unvested as of December 31, 2017, and 2016, and the fair value of these options at the grant date:

 

 

 

 

 

 

 

 

    

Number of
Shares Subject
to Option

    

Weighted
Average Fair
Value at
Grant Date

 

Unvested balance, December 31, 2015

 

105,267

 

$

9.13

 

Granted

 

 —

 

 

 —

 

Forfeited

 

 —

 

 

 —

 

Vested

 

(88,944)

 

 

8.97

 

Unvested balance, December 31, 2016

 

16,323

 

$

9.99

 

Granted

 

 —

 

 

 —

 

Forfeited

 

 —

 

 

 —

 

Vested

 

(16,323)

 

 

9.99

 

Unvested balance, December 31, 2017

 

 —

 

$

 —

 

 

Restricted Stock Awards and Units

Restricted stock awards and restricted stock units, or RSUs, are granted with a fair value equal to the closing market price of the Company's common stock on the date of grant. The principal difference between restricted stock awards and RSUs is that RSUs are not shares of our common stock and do not have any of the rights or privileges thereof, including voting rights. On the applicable vesting date, the holder of an RSU becomes entitled to a share of common stock. The restricted stock awards and RSUs are amortized on a straight-line basis to expense over the vesting period.

The following table sets forth the number of unvested restricted stock awards and RSUs and the weighted-average fair value of these awards at the date of grant:

 

 

 

 

 

 

 

 

    

Restricted Stock
Awards and
Units

    

Weighted
Average Fair
Value at
Grant Date

 

Unvested balance, December 31, 2015

 

377,612

 

$

38.51

 

Granted

 

182,628

 

 

66.69

 

Forfeited

 

(37,383)

 

 

53.87

 

Vested

 

(199,216)

 

 

36.57

 

Unvested balance, December 31, 2016

 

323,641

 

$

53.84

 

Granted

 

139,788

 

 

85.79

 

Forfeited

 

(34,020)

 

 

64.00

 

Vested

 

(139,566)

 

 

44.31

 

Unvested balance, December 31, 2017

 

289,843

 

$

70.71

 

Granted

 

155,697

 

 

96.47

 

Forfeited

 

(36,546)

 

 

84.10

 

Vested

 

(124,115)

 

 

64.03

 

Unvested balance, December 31, 2018

 

284,879

 

$

85.98

 

 

As of December 31, 2018, total unearned compensation on restricted stock awards and RSUs was approximately $16.8 million, and the weighted-average vesting period was 2.3 years.

Performance Stock Awards

We grant long-term incentives to members of management in the form of performance-based restricted stock awards (“PSAs”) under the 2010 Plan. The number of PSAs earned is based on our achievement of relative total shareholder return (“TSR”) measured versus the MSCI US REIT Index over a three-year performance period and ranges between 25% and 175% of the target number of shares for PSAs granted in 2016, 2017, and 2018. The PSAs are granted at the maximum percentage of target and are retired annually to the extent we do not meet the maximum relative TSR performance threshold versus the MSCI US REIT Index. The PSAs are earned upon TSR achievement measured both annually and over the full three-year performance period. The PSAs have a service condition and will be released at the end of the three-year performance period, to the extent earned, provided that the holder continues to be employed or otherwise in service of the Company at the end of the three-year performance period. The PSAs are amortized on a straight-line basis to expense over the vesting period. Holders of the PSAs are entitled to dividends on the PSAs, which are accrued and paid in cash at the end of the three-year performance period.

 

 

 

 

 

 

The following table sets forth the number of unvested PSAs and the weighted-average fair value of these awards at the date of grant:

The following table sets forth the number of unvested PSAs and the weighted-average fair value of these awards at the date of grant:The following table sets forth the number of unvested PSAs and the weighted-average fair value of these awards at the date of grant:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Average Fair

 

 

 

Performance-Based Restricted Stock Awards

 

Value at Grant

 

 

    

Minimum

 

Maximum

    

Target

    

Date

 

Unvested balance, December 31, 2015

 

19,151

 

142,963

 

91,488

 

$

42.78

 

Granted

 

11,796

 

82,572

 

47,184

 

 

84.78

 

Performance adjustment (1)

 

29,256

 

 —

 

11,893

 

 

 —

 

Forfeited

 

(13,474)

 

(55,916)

 

(34,695)

 

 

69.12

 

Vested

 

(1,894)

 

(1,894)

 

(1,894)

 

 

42.17

 

Unvested balance, December 31, 2016

 

44,835

 

167,725

 

113,976

 

$

54.24

 

Granted

 

7,210

 

50,472

 

28,841

 

 

105.50

 

Performance adjustment (1)

 

62,841

 

 —

 

23,725

 

 

 —

 

Forfeited

 

(5,674)

 

(16,836)

 

(11,255)

 

 

79.09

 

Vested

 

(70,518)

 

(70,518)

 

(70,518)

 

 

25.89

 

Unvested balance, December 31, 2017

 

38,694

 

130,843

 

84,769

 

$

84.63

 

Granted

 

10,729

 

75,104

 

42,917

 

 

101.03

 

Performance adjustment (1)

 

33,403

 

 —

 

16,702

 

 

 —

 

Forfeited

 

 —

 

 —

 

 —

 

 

 —

 

Vested

 

(32,003)

 

(32,003)

 

(32,003)

 

 

61.22

 

Unvested balance, December 31, 2018

 

50,823

 

173,944

 

112,385

 

$

96.58

 


(1)

Includes the annual adjustment for the number of PSAs earned based on our achievement of relative TSR measured versus the MSCI US REIT Index for the applicable performance periods.

As of December 31, 2018, total unearned compensation on PSAs was approximately $4.5 million, and the weighted-average vesting period was 1.9 years. The fair value of each PSA award is estimated on the date of grant using a Monte Carlo simulation. The simulation requires assumptions for expected volatility, risk-free rate of return, and dividend yield. The following table summarizes the assumptions used to value the PSAs granted during the years ended December 31, 2018,  2017,  and 2016:

 

 

 

 

 

 

 

 

 

 

    

2018

    

2017

    

2016

    

Expected term (in years)

 

2.82

 

 

2.81

 

2.83

 

Expected volatility

 

24.15

%  

 

23.33

%  

25.29

%

Expected annual dividend(1)

 

 —

 

 

 —

 

 —

 

Risk-free rate

 

2.24

%  

 

1.60

%  

0.97

%


(1)

The fair value of the PSAs assumes reinvestment of dividends.