Summary
This 8-K filing from Prologis, Inc. (PLD) on August 16, 2016, announces the execution of the Prologis, Inc. 2016 Outperformance Plan (POP). This new plan replaces the previous Outperformance Plan and introduces significant changes to executive compensation related to performance and equity awards. The key update is the implementation of an additional performance hurdle and a mandatory lock-up period for equity received under the POP. While the core mechanism for forming a performance pool based on exceeding the Morgan Stanley Capital Index US REIT Index (RMS) remains, the distribution and vesting of awards have been modified to encourage long-term alignment with shareholder interests and robust performance.
Key Highlights
- 1Prologis, Inc. has launched the new 2016 Outperformance Plan (POP), replacing its prior executive incentive plan.
- 2The POP incentivizes executive performance by rewarding outperformance against the Morgan Stanley Capital Index US REIT Index (RMS).
- 3A performance pool is generated when Prologis's annualized total stockholder return (TSR) exceeds the RMS TSR by over 100 basis points.
- 4The performance pool is capped at the greater of $75 million or 0.5% of the company's common equity market capitalization.
- 5A new feature is an additional performance hurdle for the portion of the performance pool exceeding $75 million, requiring sustained outperformance over a three-year period following the initial performance period.
- 6A mandatory lock-up period of three years post-initial performance period is now imposed on all equity awards (initial and excess) received under the POP.
- 7Failure to meet performance criteria results in forfeiture of participation points and LTIP Units for the relevant performance period.
Frequently Asked Questions
The primary purpose of the POP is to align executive compensation with the company's long-term performance and shareholder returns. It incentivizes executives to outperform a relevant market index (Morgan Stanley Capital Index US REIT Index) and introduces stricter conditions for earning and retaining equity awards.
The POP creates a performance pool if Prologis's annualized total stockholder return (TSR) exceeds the annualized TSR of the Morgan Stanley Capital Index US REIT Index (RMS) by more than 100 basis points during a defined performance period. This pool is then distributed to participants, subject to further conditions.
The POP introduces two significant changes: an additional performance hurdle for earning excess award amounts (beyond the initial $75 million) which requires sustained outperformance in the years following the initial performance period, and a mandatory three-year lock-up requirement on all equity received, starting after the end of the initial performance period.
If the performance criteria are not met for a given performance period, participants will forfeit their participation points and any Prologis, L.P. LTIP Units allocated under the POP for that period. Additionally, certain positive TSR requirements must be met for any awards to be paid out.