20. Common Stock Incentive Plan

In 2012, our Board of Directors adopted and stockholders approved the Realty Income Corporation 2012 Incentive Award Plan, or the 2012 Plan, to enable us to motivate, 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 or rights that will reflect our growth, development and financial success. Under the terms of the 2012 Plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 3,985,734 shares. The 2012 Plan has a term of 10 years from the date it was adopted by the Board of Directors.

The amount of share-based compensation costs recognized in general and administrative expense on our consolidated statements of income was $6.7 million during the third quarter of 2013, $2.2 million during the third quarter of 2012, $14.2 million during the first nine months of 2013, and $7.8 million during the first nine months of 2012.

The following table summarizes our common stock grant activity under the 2012 Plan and the previous 2003 Incentive Award Plan of Realty Income Corporation, or the 2003 Plan. Our common stock grants vest over periods ranging from immediately to five years.

	For the nine months ended				For the year ended
	September 30, 2013				December 31, 2012
			Weighted				Weighted
	Number of		average		Number of		average
	shares		price(1)		shares		price(1)
Outstanding nonvested shares, beginning of year	895,550		$	19.94	925,526		$	20.21
Shares granted	402,296		41.89		261,811		35.06
Shares vested	(541,774	)	29.43		(290,877	)	27.47
Shares forfeited	(2,646	)	37.35		(910	)	31.67
Outstanding nonvested shares, end of each period	753,426		$	27.04	895,550		$	19.94

(1) Grant date fair value.

During the first nine months of 2013, we issued 402,296 shares of common stock under the 2012 Plan. These shares vest over the following service periods: 25,662 vested immediately, 62,989 vest over a service period of one year, 12,000 vest over a service period of three years, 77,180 shares vest over a service period of four years, and 173,011 vest over a service period of five years. Additionally, 51,454 shares of performance-based common stock was granted, of which 12,864 shares may vest at the end of 2013, 2014, 2015 and 2016, if certain performance metrics are reached.

As of September 30, 2013, the remaining unamortized share-based compensation expense totaled $20.4 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 2012 and 2003 Plans, we pay non-refundable dividends to the holders of our nonvested 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 compensation expense related to dividends paid in the first nine months of 2013 or 2012.

The Compensation Committee of our Board of Directors approved, effective July 1, 2013, the accelerated vesting of each restricted stock award that had originally been granted with ten-year vesting to five years. On July 1, 2013, 212,827 restricted shares vested due to this acceleration, resulting in additional compensation expense of $3.7 million during the three and nine months ended September 30, 2013.

In connection with his appointment to Chief Executive Officer in September 2013, John Case was granted 77,180 shares of restricted common stock that vest over a service period of four years. Additionally, Mr. Case was granted a performance-based restricted stock award of 51,454 shares of our restricted common stock. A portion of this performance-based award will vest each year on December 31, 2013, 2014, 2015 and 2016, up to an aggregate of 12,864 shares of our common stock each year based on the achievement of seven annual performance metrics.