Common Stock Incentive Plans

9 Months Ended

Sep. 30, 2012

Common Stock Incentive Plans

Common Stock Incentive Plans

17.     Common Stock Incentive Plans

In March 2012, our Board of Directors adopted, and in May 2012, stockholders approved, the Realty Income Corporation 2012 Incentive Award Plan, or the 2012 Plan, to enable us to attract and retain the services of directors, employees and consultants, considered essential to our long-term success. The 2012 Plan offers our directors, employees and consultants an opportunity to own stock in Realty Income and/or rights that will reflect our growth, development and financial success.  Under the terms of this plan, the aggregate number of shares of our common stock subject to options, stock purchase rights, or SPR, stock appreciation rights, or SAR, and other awards, will be no more than 3,985,734 shares. The maximum number of shares that may be subject to options, SPR, SAR and other awards granted under the plan to any individual in any calendar year may not exceed 3,200,000. The 2012 Plan replaced the 2003 Incentive Award Plan of Realty Income Corporation, or the 2003 Plan, which was set to expire in March 2013. No further awards will be granted under the 2003 Plan. The disclosures below incorporate activity for both the 2003 Plan and the 2012 Plan.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income was $2.2 million during the third quarter of 2012, was $1.8 million during the third quarter of 2011, was $7.8 million during the first nine months of 2012, and was $6.1 million during the first nine months of 2011.

The following table summarizes our common stock grant activity under our 2003 Plan and 2012 Plan, or the Incentive Award Plans.  Our common stock grants vest over periods ranging from immediately to 10 years.

	For the nine months ended September 30, 2012			For the year ended December 31, 2011
	Number of shares		Weighted average price (1)	Number of shares		Weighted average price (1)
Outstanding nonvested shares, beginning of year	925,526		$ 20.21	924,294		$ 19.69
Shares granted	261,411		35.05	247,214		33.94
Shares vested	(290,577	)	27.47	(245,487	)	25.26
Shares forfeited	(910	)	31.67	(495	)	31.37
Outstanding nonvested shares, end of each period	895,450		$ 22.40	925,526		$ 20.21

(1)Grant date fair value.

During the first nine months of 2012, we issued 261,411 shares of common stock under our Incentive Award Plans. These shares vest over the following service periods: 26,484 vested immediately, 68,600 vest over a service period of two years, 16,000 vest over a service period of three years and 150,327 vest over a service period of five years.

As of September 30, 2012, the remaining unamortized share-based compensation expense totaled $20.1 million, which is being amortized on a straight-line basis over the service period of each applicable award.

Due to a historically low turnover rate, we do not estimate a forfeiture rate for our nonvested shares. Accordingly, unexpected forfeitures will lower share-based compensation expense during the applicable period. Under the terms of our Incentive Award Plans, we pay non-refundable dividends to the holders of our non-vested shares. Applicable accounting guidance requires that the dividends paid to holders of these nonvested shares be charged as compensation expense to the extent that they relate to nonvested shares that do not or are not expected to vest. However, since we do not estimate forfeitures given our historical trends, we did not record any amount to compensation expense related to dividends paid in 2012 or 2011.