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Equity-Based Compensation of the Company | 9 Months Ended
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Sep. 30, 2018
Tanger Factory Outlet Centers, Inc. [Member] |
Equity-Based Compensation of the Company | Equity-Based Compensation of the Company We have a shareholder approved equity-based compensation plan, the Incentive Award Plan of Tanger Factory Outlet Centers, Inc. and Tanger Properties Limited Partnership (as amended and restated on April 4, 2014, (the "Plan"), which covers our non-employee directors, officers, employees and consultants. For each common share issued by the Company, the Operating Partnership issues one corresponding unit of partnership interest to the Company's wholly-owned subsidiaries. Therefore, when the Company grants an equity-based award, the Operating Partnership treats each award as having been granted by the Operating Partnership. In the discussion below, the term "we" refers to the Company and the Operating Partnership together and the term "shares" is meant to also include corresponding units of the Operating Partnership. We recorded equity-based compensation expense in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Restricted common shares |  | $ | 2,275 |  |  | $ | 2,302 |  |  | $ | 7,359 |  |  | $ | 7,039 |
Notional unit performance awards |  | 1,040 |  |  | 939 |  |  | 3,141 |  |  | 2,870 |
Options |  | 92 |  |  | 77 |  |  | 314 |  |  | 205 |
Total equity-based compensation |  | $ | 3,407 |  |  | $ | 3,318 |  |  | $ | 10,814 |  |  | $ | 10,114 |
Equity-based compensation expense capitalized as a part of rental property and deferred lease costs were as follows (in thousands):
|  | Three months ended |  | Nine months ended
|  | September 30, |  | September 30,
|  | 2018 |  | 2017 |  | 2018 |  | 2017
Equity-based compensation expense capitalized |  | $ | 652 |  |  | $ | 267 |  |  | $ | 840 |  |  | $ | 777 |
Option Awards During February 2018, the Company granted 331,000 options to non-executive employees of the Company. The exercise price of the options granted during the first quarter of 2018 is $21.94 per share which equaled the closing market price of the Company's common shares on the day prior to the grant date. The options expire 10 years from the date of grant and 20% of the options become exercisable in each of the first five years commencing one year from the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which resulted in a weighted average grant date fair value per share of $3.62 and included the following weighted-average assumptions: expected dividend yield 6.24%; expected life of 7.1 years; expected volatility of 32.47%; a risk-free rate of 2.8%; and forfeiture rates of 3.0% to 10.0% dependent upon the employee's position within the Company. Restricted Common Share and Restricted Share Unit Awards During February 2018, the Company granted 407,156 in restricted common shares and restricted share units to the Company's non-employee directors and the Company's senior executive officers. The grant date fair value of the awards ranged from $18.65 to $21.94 per share. The non-employee directors' restricted common shares generally vest ratably over a three year period and the senior executive officers' restricted shares (other than our chief executive officer's) generally vest ratably over a three or five year period. Our chief executive officer’s restricted shares generally vest ratably over a two year period and his restricted share units generally vest on the third anniversary of the grant date. For the restricted shares and units issued to our chief executive officer, the award agreements generally require him to hold shares or units issued to him for a minimum of three years following vesting or the share issuance date, as applicable. Compensation expense related to the amortization of the deferred compensation is being recognized in accordance with the vesting schedule of the restricted shares. For certain shares that vest during the period, we withhold shares with value equivalent up to the employees' maximum statutory obligation (minimum obligation during 2017) for the applicable income and other employment taxes, and remit cash to the appropriate taxing authorities. The total number of shares withheld upon vesting was 89,437 and 69,886 for the nine months ended September 30, 2018 and 2017, respectively. No shares were withheld for the three months ended September 30, 2018 and 2017. The total number of shares withheld was based on the value of the restricted common shares on the vesting date as determined by our closing share price on the day prior to the vesting date. Total amounts paid for the employees' tax obligation to taxing authorities was $2.1 million for the nine months ended September 30, 2018 and was $2.4 million for the nine months ended September 30, 2017. These amounts are reflected as financing activities within the consolidated statements of cash flows. 2018 Outperformance Plan In February 2018, the Compensation Committee of Tanger Factory Outlet Centers, Inc. approved the terms of the Tanger Factory Outlet Centers, Inc. 2018 Outperformance Plan (the “2018 OPP"), a long-term incentive compensation plan. Recipients receive notional units which may convert, subject to the achievement of the goals described below, into common shares of the Company based on the Company’s absolute total shareholder return and its total shareholder return relative to its peer group over a three-year measurement period. For all recipients (other than our chief executive officer), any shares earned at the end of the three-year measurement period are issued immediately following such measurement period, but are restricted and remain subject to a time-based vesting schedule, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or (c) due to death or disability). For our chief executive officer, any shares earned at the end of the three-year measurement period remain subject to a time-based vesting schedule and are issued following vesting, with 50% of the shares vesting immediately following issuance, and the remaining 50% vesting one year thereafter, contingent upon continued employment with the Company through the vesting dates (unless terminated prior thereto (a) by the Company without cause, (b) by participant for good reason or due to retirement or (c) due to death or disability). The following table sets forth 2018 OPP performance targets and other relevant information about the 2018 OPP:
Performance targets (1) |  |
Absolute portion of award: |  |
Percent of total award |  | 33.3%
Absolute total shareholder return range |  | 19.1% - 29.5%
Percentage of units to be earned |  | 20%-100%
Relative portion of award: |  |
Percent of total award |  | 66.7%
Percentile rank of peer group range(2) |  | 30th - 80th
Percentage of units to be earned |  | 20%-100%
Maximum number of restricted common shares that may be earned |  | 409,972 |
Grant date fair value per share |  | $ | 12.42 |
(1) | The number of restricted common shares received under the 2018 OPP will be determined on a pro-rata basis by linear interpolation between total shareholder return thresholds, both for absolute total shareholder return and for relative total shareholder return amongst the Company's peer group.
(2) | The peer group is based on companies included in the FTSE NAREIT Retail Index.
The fair values of the 2018 OPP awards granted during the nine months ended September 30, 2018 were determined at the grant dates using a Monte Carlo simulation pricing model and the following assumptions:
Risk free interest rate (1) |  | 2.40 | %
Expected dividend yield (2) |  | 4.8 | %
Expected volatility (3) |  | 27 | %
(1) | Represents the interest rate as of the grant date on US treasury bonds having the same life as the estimated life of the restricted unit grants.
(2) | The dividend yield is calculated utilizing the dividends paid for the previous five-year period.
(3) | Based on a mix of historical and implied volatility for our common shares and the common shares of our peer index companies over the measurement 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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