Appraisal Economics Inc. has determined the fair value of an outperformance plan (OPP) granted to employees of a real estate investment trust (REIT). This OPP grants employees shares of the company’s publicly traded common stock based on the achievement of certain absolute and relative performance hurdles at the end of the performance period. These market-based performance conditions are intended to align the goals of the employee grantees with shareholders. In addition to the absolute and relative performance hurdles, which are based on the company’s and peer group companies’ total shareholder return (TSR) adjusted for dividends, the plan also has a complex acceleration feature. Under the acceleration feature, grantees can earn and receive shares of the company’s common stock on earlier dates (before the end of the performance period) if the company has already achieved the maximum absolute or relative TSR target. In addition to determining the fair value of outperformance plan grants, Appraisal Economics Inc. also performs quarterly computations to estimate the numbers of shares that will be awarded under the plan.
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