Stock Option and Incentive Plan

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock Option and Incentive Plan

16. Stock Option and Incentive Plan

On February 2, 2021, Boston Properties, Inc.’s Compensation Committee approved the 2021 MYLTIP awards under the Boston Properties, Inc. 2012 Stock Option and Incentive Plan (the “2012 Plan”) to certain officers and employees of Boston Properties, Inc. The 2021 MYLTIP awards consist of two, equally weighted (50% each) components that utilize Boston Properties, Inc.’s TSR over a three-year measurement period as the performance metric.

The first component of the 2021 MYLTIP, which represents one-half (50%) of the target grant-date value, retains the basic general structure of the 2020 MYLTIP awards with certain changes, including a change to the custom peer index against which Boston Properties, Inc.’s TSR is compared. The number of LTIP Units that can be earned under this component ranges from zero to 200% of the target number of LTIP Units, based on Boston Properties, Inc.’s annualized relative TSR performance compared to a custom index. Under this component, 100% of the target number of LTIP Units will be earned if Boston Properties, Inc.’s TSR equals the custom index TSR; for relative TSR performance between -1,000 basis points and +1,000 basis points, the number of LTIP Units earned will be determined using linear interpolation.

The second component represents the remaining one-half (50%) of the target grant-date value of the 2021 MYLTIP. The number of LTIP Units that can be earned under this component ranges from zero to 200% of the target number of LTIP Units, based on Boston Properties, Inc.’s cumulative absolute TSR during the performance period. Under this component, 100% of the target number of LTIP Units will be earned if Boston Properties, Inc.’s achieves an absolute TSR equal to +1,000 basis points; if Boston Properties, Inc.’s absolute TSR is greater than -4,000 basis points but less than +6,000 basis points, then the number of LTIP Units earned will be determined using linear interpolation.

Total earned awards under the 2021 MYLTIP, if any, will equal the sum of the number of LTIP Units earned under the first and second components and will range from zero to a maximum of 352,021 LTIP Units with a target of approximately 176,009 LTIP Units and linear interpolation between zero and maximum. Earned awards (if any) will vest 100% on February 1, 2024, but may not be converted, redeemed, sold or otherwise transferred for one additional year thereafter. Vesting will be accelerated in the event of a change in control, termination of employment by Boston Properties, Inc. without cause, or termination of employment by the award recipient for good reason, death, disability or retirement. If there is a change of control prior to February 1, 2024, earned awards will be calculated based on TSR performance up to the date of the change of control. The 2021 MYLTIP awards are in the form of LTIP Units issued on the grant date, and they are subject to forfeiture to the extent awards are not earned. Prior to the performance measurement date holders of the 2021 MYLTIP Units are only entitled to one-tenth (10%) of the regular quarterly distributions payable on common partnership units. Following the completion of the three-year performance period, Boston Properties, Inc. will also make a “catch-up” cash payment on the 2021 MYLTIP Units that are ultimately earned in an amount equal to the regular and special distributions, if any, declared during the performance period on Boston Properties, Inc.’s common stock, less the distributions actually paid to holders of 2021 MYLTIP Units during the performance period on all of the awarded 2021 MYLTIP Units. Under ASC 718 “Compensation - Stock Compensation,” the 2021 MYLTIP awards have an aggregate value of approximately $15.3 million, which amount will generally be amortized into earnings under the graded vesting method.

On February 5, 2021, the measurement period for the Company’s 2018 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 29.2% of target, or an aggregate of approximately $4.6 million (after giving effect to employee separations). As a result, an aggregate of 285,925 2018 MYLTIP Units that had been previously granted were automatically forfeited.

On February 6, 2020, the measurement period for the Company’s 2017 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 83.8% of target, or an aggregate of approximately $17.6 million (after giving effect to employee separations). As a result, an aggregate of 270,942 2017 MYLTIP Units that had been previously granted were automatically forfeited.

On February 9, 2019, the measurement period for the Company’s 2016 MYLTIP awards ended and, based on Boston Properties, Inc.’s relative TSR performance, the final awards were determined to be 69.5% of target, or an aggregate of approximately $13.6 million (after giving effect to employee separations). As a result, an aggregate of 364,980 2016 MYLTIP Units that had been previously granted were automatically forfeited.

At Boston Properties, Inc.’s 2021 annual meeting of stockholders held on May 20, 2021, its stockholders approved the Boston Properties, Inc. 2021 Stock Incentive Plan (the “2021 Plan”). The 2021 Plan replaces the 2012 Plan and no further awards will be granted under the 2012 Plan. The material features of the 2021 Plan include, among other things: (i) the maximum number of shares of common stock reserved and available for issuance under the 2021 Plan is 5,400,000 shares less one share for every one share that was granted between March 4, 2021 and May 19, 2021 under the 2012 Plan, (ii) shares of common stock underlying awards granted under the 2021 Plan or the 2012 Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2021 Plan and, with respect to “full-value” awards under the 2021 Plan or the 2012 Plan, shares tendered or held back for taxes and shares previously reserved for issuance pursuant to such an award to the extent that such shares are not issued and are no longer issuable pursuant to such an award (e.g., in the event that a full-value award that may be settled in cash or by issuance of shares of common stock is settled in cash) will be added back to the shares available for issuance under the 2021 Plan, (iii) the award of stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock units, restricted stock, unrestricted stock, dividend equivalent rights, cash-based awards and other equity-based awards (including LTIP Units) is permitted, (iv) stock options may not be repriced and “underwater” stock options may not be exchanged for another award or cash without stockholder approval; and (v) the term of the 2021 Plan is for ten years from the date of stockholder approval.

Boston Properties, Inc. issued 57,383, 29,630 and 26,503 shares of restricted common stock and Boston Properties Limited Partnership issued 281,640, 207,181 and 181,919 LTIP Units to employees and non-employee directors under the 2012 Plan and the 2021 Plan during the years ended December 31, 2021, 2020 and 2019, respectively. Boston Properties, Inc. did not issue any non-qualified stock options under the 2012 Plan during the years ended December 31, 2021, 2020 and 2019. Boston Properties Limited Partnership issued 352,021 2021 MYLTIP Units, 203,278 2020 MYLTIP Units and 220,734 2019 MYLTIP Units to employees under the 2012 Plan during the years ended December 31, 2021, 2020 and 2019, respectively. Employees and non-employee directors paid $0.01 per share of restricted common stock and $0.25 per LTIP Unit and MYLTIP Unit. When issued, LTIP Units are not economically equivalent in value to a share of Common Stock, but over time can increase in value to

one-for-one parity with Common Stock if there is sufficient appreciation in the value of the Company’s assets. The aggregate value of the LTIP Units is included in noncontrolling interests in the Consolidated Balance Sheets of Boston Properties, Inc. and Boston Properties Limited Partnership. A majority of the grants of restricted common stock and LTIP Units to employees vest in four equal annual installments. Restricted common stock is measured at fair value on the date of grant based on the number of shares granted and the closing price of Boston Properties, Inc.’s Common Stock on the date of grant as quoted on the New York Stock Exchange. Such value is recognized as an expense ratably over the corresponding employee service period. Because the 2012 OPP Units and 2013 - 2021 MYLTIP Units are subject to both a service condition and a market condition, the Company recognizes the related compensation expense under the graded vesting attribution method. Under the graded vesting attribution method, each portion of the award that vests at a different date is accounted for as a separate award and recognized over the period appropriate to that portion so that the compensation cost for each portion should be recognized in full by the time that portion vests. The Company recognizes forfeitures as they occur on its awards of stock-based compensation. Dividends paid on both vested and unvested shares of restricted stock are charged directly to Dividends in Excess of Earnings in Boston Properties, Inc.’s Consolidated Balance Sheets and Partners’ Capital in Boston Properties Limited Partnership’s Consolidated Balance Sheets. Aggregate stock-based compensation expense associated with restricted stock, LTIP Units and 2016 - 2021 MYLTIP Units was approximately $49.7 million, $43.0 million and $39.8 million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, there was (1) an aggregate of approximately $22.5 million of unrecognized compensation expense related to unvested restricted stock and LTIP Units and (2) an aggregate of approximately $7.4 million of unrecognized compensation expense related to unvested 2019 - 2021 MYLTIP Units that is expected to be recognized over a weighted-average period of approximately 2.0 years.

The shares of restricted stock were valued at approximately $5.8 million ($100.60 per share weighted-average), $4.0 million ($133.81 per share weighted-average) and $3.5 million ($131.27 per share weighted-average) for the years ended December 31, 2021, 2020 and 2019, respectively. 

LTIP Units were valued using a Monte Carlo simulation method model in accordance with the provisions of ASC 718. LTIP Units issued during the years ended December 31, 2021, 2020 and 2019 were valued at approximately $23.8 million, $26.3 million and $22.1 million, respectively. The weighted-average per unit fair value of LTIP Unit grants in 2021, 2020 and 2019 was $84.43, $127.14 and $121.50, respectively. The per unit fair value of each LTIP Unit granted in 2021, 2020 and 2019 was estimated on the date of grant using the following assumptions; an expected life of 5.7 years, 5.7 years and 5.7 years, a risk-free interest rate of 0.65%, 1.47% and 2.68% and an expected price volatility of 30.0%, 18.0% and 27.0%, respectively. 

There were no non-qualified stock options granted during the years ended December 31, 2021, 2020 and 2019.

A summary of the status of Boston Properties, Inc.’s stock options as of December 31, 2021, 2020 and 2019 and changes during the years then ended are presented below:

	Shares	Weighted-Average Exercise Price
Outstanding at December 31, 2018	540,441	$	96.35
Exercised	(145,088)	$	96.27
Outstanding at December 31, 2019	395,353	$	96.37
Exercised	(43,792)	$	91.60
Outstanding at December 31, 2020	351,561	$	96.97
Exercised	(247,920)	$	96.95
Outstanding at December 31, 2021	103,641	$	97.01

The following table summarizes information about Boston Properties, Inc.’s stock options outstanding at December 31, 2021: 

Options Outstanding				Options Exercisable
Number Outstanding at 12/31/21	Weighted-Average Remaining Contractual Life	Exercise Price		Number Exercisable at 12/31/21	Exercise Price
54,282	1.3 years	$	95.69	54,282	$	95.69
49,359	1.1 years	$	98.46	49,359	$	98.46

The total intrinsic value of the outstanding and exercisable stock options as of December 31, 2021 was approximately $1.9 million. In addition, Boston Properties, Inc. had 103,641 and 351,561 options exercisable at a weighted-average exercise price of $97.01 and $96.97 at December 31, 2021 and 2020, respectively.

Boston Properties, Inc. adopted the 1999 Non-Qualified Employee Stock Purchase Plan (the “Stock Purchase Plan”) to encourage the ownership of Common Stock by eligible employees. The Stock Purchase Plan became effective on January 1, 1999 with an aggregate maximum of 250,000 shares of Common Stock available for issuance. The Stock Purchase Plan provides for eligible employees to purchase on the business day immediately following the end of the biannual purchase periods (i.e., January 1-June 30 and July 1-December 31) shares of Common Stock at a purchase price equal to 85% of the average closing prices of the Common Stock during the last ten business days of the purchase period. Boston Properties, Inc. issued 9,846, 7,195 and 5,862 shares with the weighted-average purchase price equal to $89.73 per share, $90.53 per share and $104.11 per share under the Stock Purchase Plan during the years ended December 31, 2021, 2020 and 2019, respectively.