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Common Stock Incentive Plan | 9 Months Ended
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Sep. 30, 2015
Common Stock Incentive Plan |
Common Stock Incentive Plan | 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 and employees considered essential to our long-term success. The 2012 Plan offers our directors and employees 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 ten years from the date it was adopted by our Board of Directors. 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 2015, $2.2 million during the third quarter of 2014, $7.6 million during the first nine months of 2015 and $7.7 million during the first nine months of 2014. A. Restricted Stock The following table summarizes our common stock grant activity under our 2012 Plan. Our outstanding restricted stock vests over periods ranging from immediately to five years.
|  | For the nine months ended |  | For the year ended |
|  | September 30, 2015 |  | December 31, 2014 |
|  | Number of |  | Weighted |  | Number of |  | Weighted |
|  | shares |  | average price(1) |  | shares |  | average price(1) |
Outstanding nonvested shares, beginning of year |  | 527,176 |  | $ | 29.02 |  | 722,263 |  | $ | 23.37 |
Shares granted |  | 154,385 |  | $ | 50.88 |  | 262,655 |  | $ | 39.87 |
Shares vested |  | (165,199 | ) | $ | 36.71 |  | (440,348 | ) | $ | 36.88 |
Shares forfeited |  | (24,738 | ) | $ | 44.86 |  | (17,394 | ) | $ | 39.07 |
Outstanding nonvested shares, end of each period |  | 491,624 |  | $ | 32.07 |  | 527,176 |  | $ | 29.02 |
(1) Grant date fair value. |  |  |  |  |  |  |  |  |
During the first nine months of 2015, we issued 154,385 shares of common stock under the 2012 Plan. These shares vest over a five year service period, except for the annual grant of shares to our Board of Directors, totaling 28,000 shares, of which 12,000 shares vested immediately, 8,000 shares vest in one year following the grant (assuming continued service), and 8,000 shares vest over a three year service period. Not included in the table above are 10,269 restricted share units granted during the first nine months of 2015 that vest over a five year service period and have the same economic rights as shares of restricted stock. As of September 30, 2015, the remaining unamortized share-based compensation expense related to restricted stock totaled $15.8 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 Plan, 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 2015 or 2014. B. Performance Shares During the first nine months o f 2015, and the year ended December 31, 2014, we granted performance share awards, as well as dividend equivalent rights. The number of performance shares that vest is based on the achievement of the following performance goals:
2015 Performance Awards |  |  |
Metrics |  | Weighting |
Total shareholder return (“TSR”) relative to MSCI US REIT Index |  | 50% |
TSR relative to NAREIT Freestanding Index |  | 20% |
Dividend per share growth rate |  | 20% |
Debt-to-EBITDA ratio |  | 10% |
2014 Performance Awards |  |  |
Metrics |  | Weighting |
TSR relative to MSCI US REIT Index |  | 60% |
TSR relative to NAREIT Freestanding Index |  | 20% |
Debt-to-EBITDA ratio |  | 20% |
The performance shares are earned based on our performance, and vest 50% on the first and second January 1 after the end of the three year performance period, subject to continued service. The performance period for the 2014 performance awards began on January 1, 2014 and will end on December 31, 2016. The performance period for the 2015 performance awards began on January 1, 2015 and will end on December 31, 2017. The fair value of the performance shares was estimated on the date of grant using a Monte Carlo Simulation model. The following table summarizes our performance share grant activity:
|  | September 30, 2015 |  | December 31, 2014 |
|  | Number of |  | Weighted |  | Number of |  | Weighted |
|  | performance |  | average |  | performance |  | average |
|  | shares |  | price(1) |  | shares |  | price(1) |
Outstanding nonvested shares, beginning of year |  | 59,405 |  | $ | 41.46 |  | - |  | $ | - |
Shares granted |  | 55,716 |  | $ | 52.78 |  | 71,705 |  | $ | 41.46 |
Shares vested |  | - |  | $ | - |  | (4,067 | ) | $ | 41.46 |
Shares forfeited |  | - |  | $ | - |  | (8,233 | ) | $ | 41.46 |
Outstanding nonvested shares, end of each period |  | 115,121 |  | $ | 46.94 |  | 59,405 |  | $ | 41.46 |
(1) Grant date fair value. As of September 30, 2015, the remaining share-based compensation expense related to the performance shares totaled $3.8 million. The portion related to the market-based awards is being recognized on a straight-line basis over the service period, and the portion related to the performance-based awards is being recognized on a tranche-by-tranche basis over the service period.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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