Stock-based Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

We account for all equity-based compensation in accordance with ASC Topic 718, Compensation - Stock Compensation. Stock-based compensation expense, a component of "general and administrative" expense on our consolidated statements of income, was $11,868,000 and $5,846,000 for the three months ended June 30, 2023 and 2022, respectively, and $23,582,000 and $19,001,000 for the six months ended June 30, 2023 and 2022, respectively.

2023 Omnibus Share Plan

On May 18, 2023, our shareholders approved the 2023 Omnibus Share Plan (the “Plan”), which replaces the 2019 Omnibus Share Plan. Under the Plan, the Compensation Committee of Vornado’s Board of Trustees (the “Committee”) may grant incentive and non-qualified Vornado stock options, restricted Vornado common shares, restricted Operating Partnership units (“LTIP Units”), out-performance plan awards (“OPP Units”), appreciation-only long-term incentive plan units (“AO LTIP Units”), performance conditioned appreciation-only long-term incentive plan units (“Performance AO LTIP Units”), and long-term performance plan LTIP units (“LTPP Units”) to certain of our employees and officers. Awards may be granted up to a maximum of 10,800,000 shares, if all awards granted are Full Value awards, as defined in the Plan, and up to 21,600,000 shares, if all of the awards granted are Not Full Value Awards, as defined in the Plan. Full Value Awards are securities that have a value equivalent to the underlying Vornado common share or Class A unit of the Operating Partnership, such as restricted Vornado common shares or LTIP Units. Vornado stock options, AO LTIP Units and Performance AO LTIP Units are Not Full Value Awards; these securities require the payment of an exercise price.

LTIP Unit and Performance AO LTIP Grant

On June 29, 2023 (the “Grant Date”), the Committee granted equity awards (the “Awards”), comprised of (i) 2,394,801 LTIP Units, and (ii) 14,368,750 Performance AO LTIP Units, to a broad group of employees of the Company including its named executive officers (as identified in the Company’s proxy statement for its 2023 Annual Meeting of Shareholders). The purpose of the Awards is to further incentivize and align the award recipients with shareholder performance and to support retention of these employees.

The LTIP Units are a class of units of the Operating Partnership that, following the occurrence of certain events and upon vesting, are convertible by the holder into an equivalent number of Class A Units. Class A Units of the Operating Partnership are redeemable by the holder for cash or, at the Company’s election, common shares of the Company on a one-for-one basis.

The LTIP Units will vest in two equal installments on the 3rd and 4th anniversaries of the Grant Date, respectively, subject to the recipient’s continued employment with the Company as of such dates, with each vesting tranche subject to an additional one-year post-vesting transfer restriction. The LTIP Units are entitled to receive the same distributions as paid on Vornado’s common shares.

The Performance AO LTIP Units are a class of Operating Partnership units and each Performance AO LTIP Unit is potentially convertible into a number of Class A Units, determined by reference to the excess of the closing market price of Vornado common shares on the NYSE on the date of conversion over $16.87. The Performance AO LTIP Units can be converted until the 10th anniversary of the Grant Date, subject to satisfaction of the vesting and performance conditions described below.

The Performance AO LTIP Units will vest with respect to 20% on the 3rd anniversary of the Grant Date, and the remaining 80% will vest on the 4th anniversary of the Grant Date, subject to the recipient’s continued employment with the Company, and subject to the following performance conditions:

•No Performance AO LTIP Units are earned if the Applicable Price (defined below) is less than $21.0875 per share.

•At an Applicable Price of $21.0875 per share (a 25% increase above the Grant Date share price), 33% of the Performance AO LTIP Units are earned.

•At an Applicable Price of $25.3050 per share (a 50% increase above the Grant Date share price), 67% of the Performance AO LTIP Units are earned.

•At an Applicable Price of $29.5225 per share (a 75% increase above the Grant Date share price), 100% of the Performance AO LTIP Units are earned.

Linear interpolation applies for Applicable Prices between $21.0875 and $29.5225. “Applicable Price” means the highest average consecutive 20-trading day closing share price for Vornado’s common shares during the 10 years following the Grant Date.