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Share-Based Compensation and Other Compensation Matters | 12 Months Ended
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Dec. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation and Other Compensation Matters | Share-Based Compensation and Other Compensation Matters Share-Based Compensation Plans In May 2017, we adopted the 2017 Omnibus Equity and Incentive Plan following the approval of such plan by our common shareholders, and we amended the plan in November 2018 and May 2024. We may issue equity-based awards under this plan to officers, employees, non-employee trustees and any other key persons of us and our subsidiaries, as defined in the plan. The plan provides for a maximum of 6.9 million (increased from 3.4 million shares as a result of the amendment in May 2024) of our common shares to be issued in the form of options, share appreciation rights, restricted share unit awards, restricted share awards, unrestricted share awards, PIUs, dividend equivalent rights and other equity-based awards and for the granting of cash-based awards. This plan expires on May 11, 2027. Shares for the plan are issued under a registration statement on Form S-8 that became effective upon filing with the Securities and Exchange Commission. The table below sets forth our reporting for share based compensation cost (in thousands):
|  | For the Years Ended December 31,
|  | 2024 |  | 2023 |  | 2022
General, administrative, leasing and other expenses |  | $ | 9,031 |  |  | $ | 7,255 |  |  | $ | 7,643 |
Property operating expenses |  | 1,412 |  |  | 1,289 |  |  | 1,147 |
Capitalized to development activities |  | 525 |  |  | 576 |  |  | 847 |
Share-based compensation cost |  | $ | 10,968 |  |  | $ | 9,120 |  |  | $ | 9,637 |
The amounts included in our consolidated statements of operations for share-based compensation reflected an estimate of pre-vesting forfeitures of 0% for awards to our executives and non-employee Trustees and 8% to 9% for awards to all other employees. As of December 31, 2024, unrecognized compensation costs related to unvested awards included: >$5.5 million on restricted shares expected to be recognized over a weighted average period of approximately three years; >$4.7 million on PB-PIUs expected to be recognized over a weighted average performance period of approximately two years; >$3.4 million on TB-PIUs expected to be recognized over a weighted average period of approximately two years; and >$76,000 on deferred share awards expected to be recognized through May 2025. Restricted Shares The following table summarizes restricted shares activity under our share-based compensation plan for 2022, 2023 and 2024:
|  | Shares |  | Weighted Average Grant Date Fair Value
Unvested as of December 31, 2021 |  | 334,573 |  |  | $ | 26.22 |
Granted |  | 186,515 |  |  | $ | 26.50 |
Forfeited |  | (43,420) |  |  | $ | 26.47 |
Vested |  | (152,585) |  |  | $ | 26.39 |
Unvested as of December 31, 2022 |  | 325,083 |  |  | $ | 26.27 |
Granted |  | 220,336 |  |  | $ | 25.38 |
Forfeited |  | (39,474) |  |  | $ | 26.03 |
Vested |  | (152,490) |  |  | $ | 26.09 |
Unvested as of December 31, 2023 |  | 353,455 |  |  | $ | 25.82 |
Granted |  | 184,477 |  |  | $ | 25.58 |
Forfeited |  | (25,152) |  |  | $ | 26.20 |
Vested |  | (159,766) |  |  | $ | 25.85 |
Unvested as of December 31, 2024 |  | 353,014 |  |  | $ | 25.65 |
Unvested shares as of December 31, 2024 that are expected to vest |  | 315,582 |  |  | $ | 25.61 |
Restricted shares granted to employees generally vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employee remains employed by us. Restricted shares granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. The aggregate intrinsic value of restricted shares that vested was $4.0 million in 2024, $3.8 million in 2023 and $4.0 million in 2022. PIUs We granted two forms of PIUs: TB-PIUs; and PB-PIUs. TB-PIUs are subject to forfeiture restrictions until the end of the requisite service period, at which time the TB-PIUs automatically convert into vested PIUs. PB-PIUs are subject to a market condition in that the number of earned awards are determined at the end of the performance period (as described further below) and then settled in vested PIUs. Vested PIUs automatically convert into common units in CDPLP if, or when, a book-up event (as defined under federal income tax regulations) has occurred and carry substantially the same rights to distributions as common units. TB-PIUs TB-PIUs granted to senior management team members vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employee remains employed by us. TB-PIUs granted to non-employee Trustees vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. Prior to vesting, TB-PIUs carry substantially the same rights to distributions as common units but carry no redemption rights. The following table summarizes TB-PIUs activity under our share-based compensation plan for 2022, 2023 and 2024:
|  | Number of TB-PIUs |  | Weighted Average Grant Date Fair Value
Unvested as of December 31, 2021 |  | 163,073 |  |  | $ | 25.99 |
Granted |  | 101,966 |  |  | $ | 26.39 |
Vested |  | (77,709) |  |  | $ | 26.04 |
Unvested as of December 31, 2022 |  | 187,330 |  |  | $ | 26.19 |
Granted |  | 123,900 |  |  | $ | 25.40 |
Forfeited |  | (27,182) |  |  | $ | 26.46 |
Vested |  | (89,633) |  |  | $ | 25.95 |
Unvested as of December 31, 2023 |  | 194,415 |  |  | $ | 25.76 |
Granted |  | 127,795 |  |  | $ | 24.57 |
Vested |  | (98,271) |  |  | $ | 25.63 |
Unvested as of December 31, 2024 |  | 223,939 |  |  | $ | 25.14 |
Unvested TB-PIUs as of December 31, 2024 that are expected to vest |  | 222,554 |  |  | $ | 25.14 |
The aggregate intrinsic value of TB-PIUs that vested was $2.4 million in 2024, $2.3 million in 2023 and $2.0 million in 2022. PB-PIUs We made the following grants of PB-PIUs to senior management team members from 2020 through 2024 (dollars in thousands, except per share data):
Grant Date |  | Number of PB-PIUs Granted |  |  |  |  |  | Grant Date Fair Value |  | Number of PB-PIUs Outstanding as of December 31, 2024
1/1/2020 |  | 176,758 |  |  |  |  |  |  | $ | 2,891 |  |  | — |
1/1/2021 |  | 227,544 |  |  |  |  |  |  | $ | 3,417 |  |  | — |
1/1/2022 |  | 231,838 |  |  |  |  |  |  | $ | 3,810 |  |  | 192,996 |
1/1/2023 |  | 275,402 |  |  |  |  |  |  | $ | 4,343 |  |  | 225,590 |
1/1/2024 |  | 299,766 |  |  |  |  |  |  | $ | 5,405 |  |  | 299,766 |
The PB-PIUs each have a three-year performance period concluding on the earlier of the respective performance period end dates, or the date of: (1) termination by us without cause, death or disability of the employee or constructive discharge of the employee (collectively, “qualified termination”); or (2) a sale event. The number of earned awards following the end of the performance period will be determined based on the percentile rank of COPT Defense’s total shareholder return (“TSR”) relative to a peer group of companies, as set forth in the following schedule:
Percentile Rank |  | Earned Awards Payout %
75th or greater |  | 100% of PB-PIUs granted
50th (target) |  | 50% of PB-PIUs granted
25th |  | 25% of PB-PIUs granted
Below 25th |  | 0% of PB-PIUs granted
If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned awards will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles. In addition: >for PB-PIUs granted in 2024: >if COPT Defense’s TSR is negative when its TSR’s percentile rank exceeds the 50th percentile, then the earned PB-PIU payout percentage used to arrive at the earned awards would be reduced by 12.5 percentage points, but in no event to a payout percentage of less than 50% of PB-PIUs granted; however, the resulting reduction in earned awards would subsequently be deemed earned awards if COPT Defense’s TSR becomes positive on any date in the calendar year following the end of the performance period; and >regardless of COPT Defense’s TSR relative to the peer group, no less than 50% (target) of the PB-PIUs granted will be earned if COPT Defense’s TSR is at least 10% and no less than 25% of the PB-PIUs granted will be earned if COPT Defense’s TSR is at least 6%, with linear interpolation if COPT Defense’s TSR is between 6% and 10%; and >for PB-PIUs granted prior to 2024, if COPT Defense’s TSR is negative, the maximum number of earned awards will be limited to the target level payout percentage. During the performance period, PB-PIUs carry rights to distributions equal to 10% of the distribution rights of common units but carry no redemption rights. Following the end of the performance period, we settle the award by issuing vested PIUs equal to the number of earned awards and either: >for awards granted in 2024, 2023, 2022 and 2021, issuing additional vested PIUs equal to the excess, if any, of (1) the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date over (2) the aggregate distributions made on the PB-PIUs through the date of settlement, divided by the price of our common shares over a defined period of time; or >for awards granted in 2020, paying cash equal to the excess, if any, of: the aggregate distributions that would have been paid with respect to vested PIUs issued in settlement of the earned awards through the date of settlement had such vested PIUs been issued on the grant date; over the aggregate distributions made on the PB-PIUs during the performance period. If a performance period ends due to a sale event or qualified termination, the number of earned awards is prorated based on the portion of the three-year performance period that has elapsed. If employment is terminated by the employee or by us for cause, all PB-PIUs are forfeited. Based on COPT Defense’s TSR relative to its peer group of companies: >for the 2020 PB-PIUs issued to employees that vested on December 31, 2022, we issued 141,152 vested PIUs in settlement of the PB-PIUs on February 1, 2023; >for the 2021 PB-PIUs issued to employees that vested on December 31, 2023, we issued 211,845 vested PIUs in settlement of the PB-PIUs on February 1, 2024; and >for the 2022 PB-PIUs issued to employees that vested on December 31, 2024, we issued 212,831 vested PIUs in settlement of the PB-PIUs on February 1, 2025. We computed grant date fair values for PB-PIUs using Monte Carlo models and recognize these values over the respective performance periods. The grant date fair value and certain of the assumptions used in the Monte Carlo models for the PB-PIUs granted in 2022, 2023 and 2024 are set forth below:
Grant Date |  | Grant Date Fair Value Per PB-PIU at Target-Level Award |  | Baseline Common Share Value |  | Expected Volatility of Common Shares |  | Risk-free Interest Rate
1/1/2022 |  | $ | 32.87 |  |  | $ | 27.97 |  |  | 31.7 | % |  | 0.98 | %
1/1/2023 |  | $ | 31.54 |  |  | $ | 25.94 |  |  | 35.0 | % |  | 4.28 | %
1/1/2024 |  | $ | 36.06 |  |  | $ | 25.63 |  |  | 25.9 | % |  | 4.13 | %
In 2023, 126,890 PB-PIUs were forfeited due to an award recipient’s resignation. Deferred Share Awards We made the following grants of deferred share awards to non-employee Trustees in 2022, 2023 and 2024 (dollars in thousands, except per share data):
Year of Grant |  | Number of Deferred Share Awards Granted |  | Aggregate Grant Date Fair Value |  | Grant Date Fair Value Per Award
2022 |  | 6,771 |  |  | $ | 166 |  |  | $ | 24.50 |
2023 |  | 9,046 |  |  | $ | 215 |  |  | $ | 23.75 |
2024 |  | 8,796 |  |  | $ | 217 |  |  | $ | 24.66 |
Deferred share awards vest on the first anniversary of the grant date, provided that the Trustee remains in his or her position. We settle deferred share awards by issuing an equivalent number of common shares upon vesting of the awards or a later date elected by the Trustee (generally upon cessation of being a Trustee). We did not have any award settlements in 2022, 2023 or 2024.

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