Stock-based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based Compensation

Stock-based Compensation

Vornado’s 2023 Omnibus Share Plan provides the Compensation Committee of Vornado’s Board of Trustees (the “Compensation Committee”) the ability to 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 units (“LTPP Units”) to certain of our employees and officers. Vornado’s 2023 Omnibus Share Plan was approved on May 18, 2023, as discussed on the following page.

We account for forfeitures as they occur and any previously recognized compensation cost is reversed in the period that an award is forfeited. 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,
	2023		2022		2021
LTIP Units	$	22,179	$	21,086	$	27,698
Performance AO LTIP Units	11,426		94		219
LTPP Units	7,189		5,145		—
OPP Units	1,992		1,906		8,629
Vornado stock options	162		296		456
Vornado restricted stock	159		292		450
AO LTIP Units	94		430		877
	$	43,201	$	29,249	$	38,329

Below is a summary of unrecognized stock-based compensation expense as of December 31, 2023.

(Amounts in thousands)	As of December 31, 2023		Weighted-Average Remaining Amortization Period
Performance AO LTIP Units	$	37,284	2.1
LTIP Units	29,550		1.9
LTPP Units	5,004		1.6
OPP Units	1,206		1.3
	$	73,044	2.0

12.     Stock-based Compensation - continued

On May 18, 2023, our shareholders approved the 2023 Omnibus Share Plan (the “Plan”), which replaced the 2019 Omnibus Share Plan. Under the Plan, awards may be granted up to a maximum 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. As of December 31, 2023, Vornado has approximately 1,217,000 shares available for future grants under the Plan, if all awards granted are Full Value Awards, as defined.

LTPP Units

LTPP Units are multi-year, LTIP units-based performance equity compensation plans. On January 11, 2023, the Compensation Committee approved the 2023 Long-Term Performance Plan (“2023 LTPP”). Awards under the 2023 LTPP are bifurcated between operational performance (50%) and relative performance (50%) measurements and may be earned at specified threshold, target and maximum levels.

The operational component awards may be earned based on Vornado’s 2023 operational performance in the following categories:

•FFO, as adjusted per share (75% weighting); and

•ESG performance metrics consisting of greenhouse emissions reductions, GRESB score and Green Building Certification (LEED) achievements (aggregate 25% weighting).

Any LTPP award units tentatively earned based on Vornado’s 2023 operational performance are subject to an absolute return modifier pursuant to which such award units are subject to a potential reduction (but not increase) of up to 30% if Vornado’s three-year total shareholder return (“TSR”) is below specified levels.

Awards under relative components may be earned based on Vornado’s three-year TSR, measured against the Dow Jones U.S. Real Estate Office Index (50% weighting) and a Northeast peer group custom index (50% weighting). Awards earned under the relative component of the 2023 LTPP are subject to reductions of up to 30% if Vornado’s three-year TSR is below specified levels.

If the designated performance objectives are achieved, awards earned under 2023 LTPP will vest 50% in January 2026 and 50% in January 2027. In addition, the Chief Executive Officer is required to hold any earned and vested awards for three years following each such vesting date and all other award recipients are required to hold such awards for one year following each such vesting date. Dividends on awards granted under the 2023 LTPP accrue during the applicable performance period and are paid to participants if awards are ultimately earned based on the achievement of the designated performance objectives.

LTPP Units granted during the years ended December 31, 2023 and 2022 had grant date fair values of $9,491,000 and $7,847,000, respectively. During the years ended December 31, 2023 and 2022, $4,670,000 and $4,033,000, 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).

OPP Units

OPP Units are multi-year, performance-based equity compensation plans under which participants have the opportunity to earn a class of units of the Operating Partnership if, and only if, Vornado outperforms a predetermined TSR and/or outperforms the market with respect to a relative TSR during the four-year performance period. OPP units, if earned, become convertible into Class A units of the Operating Partnership (and ultimately into Vornado common shares) following vesting.

OPP units granted during the year ended December 31, 2021 had a total notional value of $30,000,000 and a fair value of $9,950,000, of which $6,140,000 was immediately expensed on the 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).

On March 30, 2023, the outstanding OPP Units issued in 2020 were forfeited as the requirements were not satisfied.

12.     Stock-based Compensation – continued

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, 2023.

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding as of December 31, 2022	176,705	$	65.35
Forfeited	(1,058)	52.30
Expired	(17,546)	64.56
Outstanding as of December 31, 2023	158,101	$	65.52	4.17
Options exercisable as of December 31, 2023	144,361	$	66.78	3.99

There were no Vornado stock options granted during the years ended December 31, 2023, 2022 and 2021.

There were no Vornado stock options exercised during the year ended December 31, 2023. Cash received from Vornado stock option exercises for the years ended December 31, 2022 and 2021 was $7,000 and $22,000, respectively. The total intrinsic value of Vornado stock options exercised during the years ended December 31, 2022 and 2021 was $842 and $5,500, respectively. As of December 31, 2023, the aggregate intrinsic value of outstanding and exercisable Vornado stock options was $0.

Performance AO LTIP Units

Performance AO LTIP Units are AO LTIP Units that require the achievement of certain performance conditions by a specified date or they 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.

On January 14, 2023, the outstanding Performance AO LTIP Units issued in 2019 expired as the performance conditions were not satisfied.

On June 29, 2023, the Committee granted 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). 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.

12.     Stock-based Compensation – continued

Performance AO LTIP Units - continued

Performance AO LTIP Units granted during the year ended December 31, 2023 had a fair value of $48,710,000. The fair value of each Performance 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 year ended December 31, 2023:

	As of December 31, 2023
Expected volatility	33%
Risk free interest rate	4%
Expected dividend yield	6%

Below is a summary of Performance AO LTIP Units activity for the year ended December 31, 2023.

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding as of December 31, 2022	496,762	$	62.62
Expired	(496,762)	62.62
Granted	14,368,750	16.87
Outstanding as of December 31, 2023	14,368,750	$	16.87	9.5
Options exercisable as of December 31, 2023	—	$	—	—

As of December 31, 2023, the aggregate intrinsic value of outstanding Performance AO LTIP Units was $153,748,000.

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. 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, 2023.

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term
Outstanding as of December 31, 2022	565,664	$	59.93
Forfeited	(3,797)	52.40
Expired	(20,053)	59.62
Outstanding as of December 31, 2023	541,814	$	59.99	5.24
Options exercisable as of December 31, 2023	499,882	$	60.63	5.16

There were no AO LTIP Units granted during the years ended December 31, 2023, 2022 and 2021. As of December 31, 2023, the aggregate intrinsic value of outstanding and exercisable AO LTIP Units was $0.

12.     Stock-based Compensation – continued

LTIP Units

LTIP 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, generally vest over a period of three to four years, and are subject to a taxable book-up event, as defined. Compensation expense related to LTIP Units is recognized ratably over the vesting period using a graded vesting attribution model. Distributions paid on unvested LTIP Units amounted to $1,302,000, $2,197,000 and $2,634,000 in the years ended December 31, 2023, 2022 and 2021, respectively.

On June 29, 2023, the Committee granted 2,394,801 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 LTIP Units 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 fair value of each LTIP Unit was based on the market value of Vornado’s common shares on the grant date less a discount for post-vesting transfer restrictions.

Below is a summary of restricted LTIP unit activity for the year ended December 31, 2023.

Unvested Units	Units	Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2022	985,916	$	49.41
Granted	3,110,000	14.62
Vested	(825,882)	45.04
Forfeited	(59,875)	27.15
Unvested as of December 31, 2023	3,210,159	17.24

LTIP Units granted in 2023, 2022 and 2021 had a fair value of $45,468,000, $15,446,000 and $26,194,000, respectively. The fair value of LTIP Units that vested during the years ended December 31, 2023, 2022 and 2021 was $37,198,000, $25,158,000 and $36,541,000, 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 $2,000, $18,000 and $35,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Below is a summary of Vornado’s restricted stock activity for the year ended December 31, 2023.

Unvested Shares	Shares	Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2022	8,379	$	55.64
Vested	(5,093)	57.17
Forfeited	(239)	53.31
Unvested as of December 31, 2023	3,047	53.26

There were no Vornado restricted stock awards granted during the years ended December 31, 2023, 2022 and 2021. The fair value of restricted stock that vested during the years ended December 31, 2023, 2022 and 2021 was $291,000, $428,000 and $567,000, respectively.