Stock-based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Vornado's 2019 Omnibus Share Plan (the “Plan") provides the Compensation Committee of Vornado's Board of Trustees (the "Committee") the ability to grant incentive and nonqualified Vornado stock options, restricted stock, restricted Operating Partnership units ("OP units"), out-performance plan awards ("OPPs"), appreciation-only long-term incentive plan units (“AO LTIP Units”) and performance conditioned appreciation-only long-term incentive plan units ("Performance Conditioned AO LTIP Units") to certain of our employees and officers. Awards may be granted up to a maximum 5,500,000 shares, if all awards granted are Full Value awards, as defined in the Plan, and up to 11,000,000 shares, if all of the awards granted are Not Full Value Awards, as defined in the Plan. Full Value Awards are awards of securities, such as restricted shares, that, if all vesting requirements are met, do not require the payment of an exercise price or strike price to acquire the securities. Not Full Value Awards are awards of securities, such as options, that do require the payment of an exercise price or strike price. As of December 31, 2021, Vornado has approximately 3,490,000 shares available for future grants under the Plan, if all awards granted are Full Value Awards, as defined.

We account for all equity-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. Below is a summary of our stock-based compensation expense, a component of "general and administrative" expense on our consolidated statements of income.


(Amounts in thousands)	For the Year Ended December 31,
	2021		2020		2019
OP Units	$	27,698	$	33,431	$	39,969
OPPs	8,629		9,579		1,944
AO LTIP Units	877		3,955		2,636
Vornado stock options	456		656		547
Vornado restricted stock	450		649		549
Performance Conditioned AO LTIP Units	219		407		8,263
	$	38,329	$	48,677	$	53,908

Below is a summary of unrecognized compensation expense for the year ended December 31, 2021.


(Amounts in thousands)	As of December 31, 2021		Weighted-Average Remaining Contractual Term
OP Units	$	13,460	1.3
OPPs	5,104		2.0
AO LTIP Units	565		1.2
Vornado stock options	489		1.4
Vornado restricted stock	483		1.4
Performance Conditioned AO LTIP Units	94		1.0
	$	20,195	1.5

OPPs

OPPs are multi-year, performance-based equity compensation plans under which participants have the opportunity to earn a class of units (“OPP units”) of the Operating Partnership if, and only if, Vornado outperforms a predetermined total shareholder return (“TSR”) and/or outperforms the market with respect to a relative TSR during the three-year or four-year performance period (the “Performance Period”) as described on the following page. OPP units, if earned, become convertible into Class A units of the Operating Partnership (and ultimately into Vornado common shares) following vesting.

2021 OPP

On January 12, 2021, the Committee approved the 2021 OPP, a multi-year, $30,000,000 performance-based equity compensation plan. Awards under the 2021 OPP may potentially be earned if Vornado (i) achieves a TSR greater than 28% over a four-year performance period (the “2021 OPP Absolute Component”), and /or (ii) achieves a TSR above a benchmark weighted index (the "Index"), comprised of 80% of the constituents of the SNL US Office REIT Index at the time awards were granted, and 20% of the constituents of the SNL US Retail Index at the time awards were granted, over the Performance Period (the “2021 OPP Relative Component”).

14. Stock-based Compensation – continued

2021 OPP - continued

The value of awards under the 2021 OPP Absolute Component and 2021 OPP Relative Component will be calculated separately and will each be subject to an aggregate $30,000,000 maximum award cap for all participants. The two components will be added together to determine the aggregate award size, which shall also be subject to the aggregate $30,000,000 maximum award cap for all participants. In the event awards are earned under the 2021 OPP Absolute Component, but Vornado underperforms the Index by more than 200 basis points per annum over the Performance Period (800 basis points over the four years), the amount earned under the 2021 OPP Absolute Component will be reduced based on the degree by which the Index exceeds Vornado’s TSR with the maximum payout being 50% under the 2021 OPP Absolute Component. In the event awards are earned under the 2021 OPP Relative Component, but Vornado fails to achieve a TSR of at least 2% per annum, awards earned under the 2021 OPP Relative Component will be reduced on a ratable sliding scale based on Vornado’s absolute TSR performance, with the maximum payout being 50% under the 2021 OPP Relative Component in the event Vornado’s TSR during the four-year measurement period is 0% or negative. If the designated performance objectives are achieved, awards earned under 2021 OPP will vest 50% in year four and 50% in year five. In addition, all of Vornado’s senior executives are required to hold any earned and vested awards for one year following each such vesting date. Dividends on awards granted under the 2021 OPP accrue during the four-year performance period and are paid to participants if awards are ultimately earned based on the achievement of the designated performance objectives.

Below is the summary of the OPP units granted during the years December 31, 2021, 2020 and 2018.


Plan Year	Total Plan Notional Amount		Percentage of Notional Amount Granted		Grant Date Fair Value(1)		OPP Units Earned
2021	$	30,000,000	99.1	%	$	9,950,000	To be determined in 2025
2020	35,000,000		94.0	%	11,700,000		To be determined in 2023
2018	35,000,000		78.2	%	10,300,000		Not earned

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(1) During the years ended December 31, 2021, 2020 and 2018, $6,140,000, $7,583,000 and $8,040,000, respectively, was immediately expensed on the respective grant date due to acceleration of vesting for employees who are retirement eligible (have reached age 65 or age 60 with at least 20 years of service).

Vornado Stock Options

Vornado stock options are granted at an exercise price equal to the average of the high and low market price of Vornado’s common shares on the NYSE on the date of grant, generally vest over four years and expire ten years from the date of grant. Compensation expense related to Vornado stock option awards is recognized on a straight-line basis over the vesting period.

Below is a summary of Vornado’s stock option activity for the year ended December 31, 2021.


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of December 31, 2020	765,637	$	64.79

Exercised	(598)	36.72
Forfeited	(3,008)	56.92
Expired	(570,098)	64.70
Outstanding as of December 31, 2021	191,933	$	65.27	5.75	$	152,920
Options exercisable as of December 31, 2021	124,805	$	70.13	4.71	$	37,820

There were no Vornado stock options granted during the year ended December 31, 2021. The fair value of each option grant is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions for grants in the years ended December 31, 2020 and 2019.


	As of December 31,
	2020	2019
Expected volatility	35% - 36%	35%
Expected life	5.0 years	5.0 years
Risk free interest rate	0.57% - 1.76%	2.50%
Expected dividend yield	3.2% - 3.4%	2.9%

The weighted average grant date fair value per share for options granted during the years ended December 31, 2020 and 2019 was $12.28 and $16.64, respectively. Cash received from option exercises for the years ended December 31, 2021, 2020 and 2019 was $22,000, $3,516,000 and $5,495,000, respectively. The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was $5,500, $859,000 and $18,954,000, respectively.

14. Stock-based Compensation – continued

Performance Conditioned AO LTIP Units

Performance Conditioned AO LTIP Units are AO LTIP Units that require the achievement of certain performance conditions by a specified date or they are forfeited. The performance-based condition is met if Vornado common shares trade at or above 110% of the grant price per share for any 20 consecutive days on or before the fourth anniversary following the date of grant. If the performance conditions are not met, the awards are forfeited. If the performance conditions are met, once vested, the awards may be converted into Class A Operating Partnership units in the same manner as AO LTIP Units until ten years from the date of grant.

Below is a summary of Performance Conditioned AO LTIP Units activity for the year ended December 31, 2021.


	Units		Weighted-Average Grant-Date Fair Value		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of December 31, 2020	496,792	(1)	$	62.62
Outstanding as of December 31, 2021	496,792	(1)	$	62.62	7.04	$	—
Options exercisable at December 31, 2021	322,313		$	62.62	7.04	$	—

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(1) Granted in 2019 at a grant price of $64.48 and a fair value of $8,983,000 at the date of grant.

The fair value of each Performance Conditioned AO LTIP Units granted is estimated on the date of grant using an option-pricing model with the following weighted average assumptions for grants in the year ended December 31, 2019.


Expected volatility			35%
Expected life			8.0 years
Risk free interest rate			2.76%
Expected dividend yield			3.1%

AO LTIP Units

AO LTIP Units are a class of partnership interests in the Operating Partnership that are intended to qualify as “profits interests” for federal income tax purposes and generally only allow the recipient to realize value to the extent the fair market value of a Vornado common share exceeds the threshold level set at the time the AO LTIP Units are granted, subject to any vesting conditions applicable to the award. The threshold level is intended to be equal to 100% of the then fair market value of a Vornado common share on the date of grant. The value of vested AO LTIP Units is realized through conversion of the AO LTIP Units into Class A Operating Partnership units. The number of Class A Units into which vested AO LTIP Units may be converted is determined based on the quotient of (i) the excess of the conversion value on the conversion date over the threshold value designated at the time the AO LTIP Unit was granted, divided by (ii) the conversion value on the conversion date. The “conversion value” is the value of a Vornado common share on the conversion date multiplied by the Conversion Factor as defined in the Partnership Agreement, which is currently one. AO LTIP Units have a term of ten years from the grant date. Each holder will generally receive special income allocations in respect of an AO LTIP Unit equal to 10% (or such other percentage specified in the applicable award agreement) of the income allocated in respect of a Class A Unit. Upon conversion of AO LTIP Units to Class A Units, holders will be entitled to receive in respect of each such AO LTIP Unit, on a per unit basis, a special distribution equal to 10% (or such other percentage specified in the applicable award agreement) of the distributions received by a holder of an equivalent number of Class A Units during the period from the grant date of the AO LTIP Units through the date of conversion.

Below is a summary of AO LTIP Units activity for the year ended December 31, 2021.


	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of December 31, 2020	717,581	$	59.71

Exercised	(16,669)	36.72
Forfeited	(60,927)	56.30
Expired	(72,246)	66.32
Outstanding as of December 31, 2021	567,739	$	59.91	7.29	$	640,711
Options exercisable as of December 31, 2021	327,535	$	61.83	7.06	$	279,164

14. Stock-based Compensation – continued

AO LTIP Units - continued

There were no AO LTIP Units granted during the year ended December 31, 2021. AO LTIP Units granted during the years ended December 31, 2020 and 2019 had a fair value of $4,319,000 and $3,429,000, respectively. The fair value of each AO LTIP Unit granted is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions for grants in the years ended December 31, 2020 and 2019.


	As of December 31,
	2020	2019
Expected volatility	35% - 36%	35%
Expected life	5.0 years	5.0 years
Risk free interest rate	0.57% - 1.76%	2.50%
Expected dividend yield	3.2% - 3.4%	2.90%

OP Units

OP Units are granted at the average of the high and low market price of Vornado’s common shares on the NYSE on the date of grant, vest ratably over four years and are subject to a taxable book-up event, as defined. Compensation expense related to OP Units is recognized ratably over the vesting period using a graded vesting attribution model. Distributions paid on unvested OP Units amounted to $2,634,000, $5,316,000 and $4,070,000 in the years ended December 31, 2021, 2020 and 2019, respectively.

Below is a summary of restricted OP unit activity for the year ended December 31, 2021.


Unvested Units	Units	Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2020	1,152,418	$	53.17
Granted	816,019	32.10
Vested	(867,747)	42.11
Forfeited	(17,603)	52.73

Unvested as of December 31, 2021	1,083,087	53.99

OP Units granted in 2021, 2020 and 2019 had a fair value of $26,194,000, $18,013,000 and $58,732,000, respectively. The fair value of OP Units that vested during the years ended December 31, 2021, 2020 and 2019 was $36,541,000, $24,373,000 and $27,821,000, respectively.

Vornado Restricted Stock

Vornado restricted stock awards are granted at the average of the high and low market price of Vornado’s common shares on the NYSE on the date of grant and generally vest over four years. Compensation expense related to Vornado’s restricted stock awards is recognized on a straight-line basis over the vesting period. Dividends paid on unvested Vornado restricted stock are charged directly to retained earnings and amounted to $35,000, $98,000 and $51,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

Below is a summary of Vornado’s restricted stock activity for the year ended December 31, 2021.


Unvested Shares	Shares	Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2020	25,315	$	60.06

Vested	(8,833)	64.17
Forfeited	(708)	58.56
Unvested as of December 31, 2021	15,774	57.82

There were no Vornado restricted stock awards granted during the year ended December 31, 2021. Vornado restricted stock awards granted in 2020 and 2019 had a fair value of $853,000 and $568,000, respectively. The fair value of restricted stock that vested during the years ended December 31, 2021, 2020, and 2019 was $567,000, $602,000 and $477,000, respectively.