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Share-Based Payments

9 Months Ended

Sep. 30, 2020

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

11.Share-Based Payments

LTIP Units and Time-Based LTIP Units

During the nine months ended September 30, 2020, we granted 381,504 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $38.52

per unit that vest over four years, 25.0% per year, subject to continued employment. Compensation expense for these units is being recognized over a four-year period. The aggregate grant-date fair value of these Time-Based LTIP Units granted during the nine months ended September 30, 2020 was $14.7 million, valued using Monte Carlo simulations.

During the nine months ended September 30, 2020, we granted 90,094 fully vested LTIP Units, with a grant-date fair value of $40.13 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in 2020, related to 2019 service, as LTIP Units. Compensation expense totaling $3.6 million for these LTIP Units was recognized in 2019.

In April 2020, as part of their annual compensation, we granted a total of 54,607 fully vested LTIP Units to certain of our trustees with an aggregate grant-date fair value of $1.5 million.

The following is a summary of the significant assumptions used to value the LTIP Units and Time-Based LTIP Units:


Expected volatility		18.0% to 29.0%
Risk-free interest rate		0.3% to 1.5%
Post-grant restriction periods		2 to 3 years

Performance-Based LTIP Units

During the nine months ended September 30, 2020, we granted 593,100 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") to management and other employees with a weighted average grant-date fair value of $18.67 per unit. Our Performance-Based LTIP Units have a three-year performance period. 50% of any Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50% vest on the fourth anniversary of the date of grant, subject to continued employment. If, however, the Performance-Based LTIP Units do not achieve a positive absolute total shareholder return ("TSR") at the end of the three-year performance period, but satisfy the relative performance criteria thereof, 50% of the units that otherwise could have been earned will be forfeited, and the remaining 50% will be earned and vest if and when we achieve a positive TSR during the succeeding seven years, measured at the end of each quarter.

The aggregate grant-date fair value of the Performance-Based LTIP Units granted during the nine months ended September 30, 2020 was $11.1 million, valued using Monte Carlo simulations. Compensation expense for the Performance-Based LTIP Units is being recognized over a four-year period. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units:


Expected volatility		15.0%
Dividend yield		2.3%
Risk-free interest rate		1.3%

During the three months ended September 30, 2020, the three-year performance period ended for the Performance-Based LTIP Units granted on August 1, 2017. While our relative TSR over the three-year performance period would have allowed these grants to be fully earned, because our TSR over the three-year performance period was negative, 50% of the units (289,765 units) were forfeited, and the remaining 50% will be earned and vest if and when we achieve a positive TSR during the succeeding seven years.

ESPP

Pursuant to the ESPP, employees purchased 35,307 common shares for $887,000 during the nine months ended September 30, 2020. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:


Expected volatility		13.0%
Dividend yield		1.1%
Risk-free interest rate		1.7%
Expected life		6 months

Share-Based Compensation Expense

The following is a summary of share-based compensation expense:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

	(In thousands)
Time-Based LTIP Units	$	3,364	$	2,755	$	11,003	$	8,529
Performance-Based LTIP Units		3,999		2,016		14,207		6,205
LTIP Units		—		—		1,100		1,000
Other equity awards ⁽¹⁾		1,690		1,403		4,829		3,443
Share-based compensation expense - other		9,053		6,174		31,139		19,177
Formation Awards		875		1,227		3,473		4,116
OP Units ⁽²⁾		4,780		6,747		17,398		21,491
LTIP Units ⁽²⁾		95		117		310		340
Special Performance-Based LTIP Units ⁽³⁾		657		654		2,015		1,938
Special Time-Based LTIP Units ⁽³⁾		726		804		2,236		2,318
Share-based compensation related to Formation Transaction and special equity awards ⁽⁴⁾		7,133		9,549		25,432		30,203
Total share-based compensation expense		16,186		15,723		56,571		49,380
Less amount capitalized		(1,177)		(406)		(3,388)		(1,948)
Share-based compensation expense	$	15,009	$	15,317	$	53,183	$	47,432

(1)	Primarily comprising compensation expense for certain executives who have elected to receive all or a portion of any cash bonus that may be paid in the subsequent year related to past service in the form of fully vested LTIP Units and related to our ESPP.

(2)	Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations.

(3)	Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing.

(4)	Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying statements of operations.

As of September 30, 2020, we had $59.7 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 1.9 years.