DEF 14A of Essential Properties Realty Trust, Inc.
Filed Apr 2, 2024 · FY20230001193125-24-084746
Proposal No. 1—Election of Directors
Proposal No. 1—Election of Directors The number of directors that serve on the Board is currently set at seven and may be fixed from time to time by the Board in the manner provided in the Company’s bylaws, except that the total number of directors may never be fewer than one or, unless our Bylaws are amended, more than fifteen (15). In accordance with the Company’s bylaws and Maryland law, directors are elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualify or until their earlier removal, resignation or death. Mr. Estes, an independent member of our Board, serves as its non-executive Chair. Our Board has the following four standing committees, each of which is comprised entirely of independent directors: Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Investment Committee.
Director Nominees
Director Nominees
Director Nominees
| Name | Age | Positions Held with the Company | Director of the Company Since | Committee Memberships(1) | Other Public Company Boards | | Joyce DeLucca | 59 | Director, Compensation Committee Chair | 2018 | C, I | 0 | | Scott A. Estes | 53 | Director, Board Chair | 2018 | A, C | 2 | | Peter M. Mavoides | 57 | President, Chief Executive Officer, Director | 2018 | | 0 | | Lawrence J. Minich | 76 | Director | 2020 | A, NCG, I | 0 | | Heather L. Neary | 48 | Director | 2020 | NCG, C | 0 | | Stephen D. Sautel | 55 | Director, Nominating and Corporate Governance Committee Chair | 2018 | NCG | 0 | | Janaki Sivanesan | 52 | Director, Audit Committee Chair | 2020 | A, NCG, I | 1 |
Director Nominees
| (1) A = Audit Committee; C = Compensation Committee; NCG = Nominating and Corporate Governance Committee; I = Investment Committee |
Director Nominees
Each of the seven director nominees listed above currently serves as a director of the Company, and their biographies can be found below under “—Biographical Information Regarding the Board.” Each director was elected to our Board by our stockholders at our 2023 Annual Meeting of Stockholders. Each of the seven director nominees was recommended by the Nominating and Corporate Governance Committee and nominated by the Board to stand for election at the Annual Meeting. In selecting director nominees, the Board seeks to monitor the mix of experience, qualifications, attributes and skills of its members in order to ensure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. For more information about the qualifications and skills of each of the director nominees, see “—Background and Experience of Directors.” The affirmative vote of a plurality of all the votes cast at the Annual Meeting in the election of directors is required for the election of a nominee as a director. This means the seven nominees receiving the greatest number of votes will be elected. Stockholders of the Company are not permitted to cumulate their votes for the election of directors. Unless contrary instructions are given, shares represented by duly authorized proxies solicited by the Board will be voted FOR the election of each of the nominees named above. If any person named as a nominee should be unable or unwilling to stand for election at the time of the Annual Meeting, proxies will be voted for a replacement nominee designated by the Board or, in the event no such designation is made, proxies will be voted for a lesser number of nominees. At this time, the Board knows of no reason why any of the nominees listed above may not be able to serve as a director if elected. The Board unanimously recommends that you vote “FOR” the election of each of the nominees named above.
Board Refreshment and Key Board Characteristics
Board Refreshment and Key Board Characteristics Our Board is committed to periodic board refreshment, which we believe promotes effective board structure and composition. We seek to add directors who contribute to diversity of background, expertise, perspective, age, gender and ethnicity. Since January 2020, we have elected each of Lawrence J. Minich, Heather L. Neary and Janaki Sivanesan to our Board. These new directors add expertise, perspective, and age and gender diversity. With the addition of these new members, our Board has the following key characteristics: Diverse: 43% of our Board is female. Independent: Six of our seven directors (i.e., all of our directors other than our Chief Executive Officer), or 86%, are independent. Refreshed: Three directors were elected as recently as January 2020. Young: 86% of our directors are in their 50s or younger.
Biographical Information Regarding the Board
Biographical Information Regarding the Board Set forth below is biographical information for each director nominee, each of whom currently serves as a director of the Company. Joyce DeLucca. Ms. DeLucca has served as a director since 2018. Ms. DeLucca is a Partner of BD Capital Management LLC, a private investment firm focusing on performing and distressed commercial real estate. Until December 2020, Ms. DeLucca was Managing Director at Hayfin Capital Management, LLC, a private investment firm focusing on direct lending, special opportunities, high yield credit and securitized credit. Ms. DeLucca joined Hayfin in January 2018, when Hayfin acquired Kingsland Capital Management LLC. Kingsland was an investment manager specializing in collateralized loan obligations and leveraged credit that was founded by Ms. DeLucca in January 2005, and where she served as Managing Principal and Chief Investment Officer. Ms. DeLucca’s career spans 32 years in the debt capital markets, including management of high yield, leveraged loan, distressed and mezzanine assets. Prior to establishing Kingsland, Ms. DeLucca was a Managing Principal at Katonah Capital, an asset manager focusing on leveraged loans and high yield bonds, from 2000 to 2004. Previously, Ms. DeLucca was a Managing Director at Chase Manhattan Bank, where she co-founded Octagon Credit Investors, from 1995 until 1999. Ms. DeLucca was also a Portfolio Manager and Investment Advisor at Fisher Brothers from 1989 to 1995, where she focused on distressed and high yield investing. She began her career as a trader and analyst with Bernstein Macaulay’s high yield bond and mortgage-backed securities divisions, where she was employed from 1986 to 1989. Ms. DeLucca served on the Regulatory and Board Nominating Committees of the Loan Sales and Trading Association from 2006 to 2010. She received a B.S. in Finance from Ithaca College in 1986 and is a CFA charterholder. Scott A. Estes. Mr. Estes has served as a director since 2018, and as the Chair of our Board since January 2024. Mr. Estes served as Executive Vice President-Chief Financial Officer of Welltower Inc. (“Welltower”), a NYSE-listed, S&P 500 constituent REIT focused on healthcare infrastructure, from January 2009 to October 2017. Mr. Estes served as Senior Vice President and Chief Financial Officer of Welltower from March 2006 to January 2009 and as Vice President of Finance of Welltower from April 2003 to March 2006. From January 2000 to April 2003, Mr. Estes served as a Senior Equity Research Analyst and Vice President with Deutsche Bank Securities, a financial services firm, with primary coverage of the Healthcare REIT and Healthcare Services industry sub-sectors. Previously, Mr. Estes served as a Vice President of Bank of America Securities from January 1998 through December 1999 and as an Associate Analyst and Vice President at Morgan Stanley from March 1994 through December 1997. Mr. Estes is a member of the board of trustees of JBG Smith Properties, a NYSE-listed REIT that owns, operates, invests in and develops a mixed-use portfolio of office, multifamily and retail assets concentrated in leading urban infill submarkets in and around Washington, DC, where he serves as the chair of the Audit Committee. Since August 2022, Mr. Estes has served on the board of directors of American Healthcare REIT, Inc., a NYSE-listed REIT that owns and manages a portfolio of healthcare real estate assets, where he serves as Chair of the Audit Committee. Mr. Estes received his B.A. in Economics in 1993 from The College of William and Mary. Peter M. Mavoides. Mr. Mavoides has been our President and Chief Executive Officer since 2018, and he held similar positions since March 2016 at Essential Properties Realty Trust LLC (“EPRT LLC”), which became our operating partnership in connection with our June 2018 initial public offering. From September 2011 through February 2015, Mr. Mavoides was the President and Chief Operating Officer of Spirit Realty Capital, Inc. (“Spirit”), an NYSE-listed REIT that invests primarily in single-tenant, net leased real estate. While at Spirit, Mr. Mavoides was instrumental in transforming that company from a private enterprise, with approximately $3.2 billion of total assets and 37 employees at the time of its September 2012 initial public offering, to a public company with approximately $8.0 billion of total assets and over 70 employees at the time of his departure in February 2015. During his tenure at Spirit, Mr. Mavoides chaired the company’s investment committee and led the team that created the infrastructure that acquired over 150 separate investments with an aggregate purchase price of nearly $2.0 billion and an average investment per property of $2.6 million over a period of approximately three years. Mr. Mavoides previously worked for Sovereign, as its President and Chief Executive Officer, from May 2003 to January 2011. Sovereign is a private equity firm that focuses on investment opportunities relating to long-term, net-leased real estate. While at Sovereign, Mr. Mavoides developed and implemented a business plan pursuant to which Sovereign grew from a startup to a leading investor focused on single-tenant, net leased properties, and he implemented an investment strategy pursuant to which over $1.0 billion was invested in net lease transactions. During his tenure at Spirit and Sovereign, Mr. Mavoides was instrumental in structuring the investment of approximately $4.0 billion in net lease assets. Prior to joining Sovereign, Mr. Mavoides was employed by Eastdil Realty, a subsidiary of Wells Fargo Bank, and worked in the banking group at Citigroup, where he focused on the structuring of sale-leaseback transactions. Mr. Mavoides received a B.S. from the United States Military Academy and an M.B.A. from the University of Michigan. Lawrence J. Minich. Mr. Minich has served as a director since 2020. Mr. Minich retired in 2019 as an executive officer of Hotshine Holdings, Inc. (d/b/a Mister Car Wash), a private equity-backed company that went public on the NYSE in June 2021. Mister Car Wash is one of the largest car wash operators in the United States. Mr. Minich served as the company’s Chief Financial Officer from 1999-2013, at which time he relinquished that position as part of the company’s management succession plan, and from 2014-2019 he served as a Vice President of and Special Advisor to Mister Car Wash. During that later period, Mr. Minich continued to work with the company’s acquisition team in evaluating and negotiating acquisitions, including the sourcing and negotiation of sale-leaseback transactions. He also served on the company’s investment committee and as an advisor to senior management on strategic, operational and administrative matters. Prior to his affiliation with Mister Car Wash, Mr. Minich worked as a financial consultant from 1997-1999 and served as Senior Vice President & Treasurer of Blue Coral, Inc., a privately held manufacturing company in the automotive aftermarket, from 1981-1996, when the company was sold to Quaker State Oil. Earlier in his career, from 1970-1981, Mr. Minich worked in the audit department of Arthur Andersen & Co. Mr. Minich received his B.S. in Accounting from the University of Akron in 1970 and his CPA certificate in 1972.
Biographical Information Regarding the Board
Heather L. Neary. Ms. Neary has served as a director since 2020. Ms. Neary has served as the President and CEO of Taco John’s, a 400 unit quick service restaurant franchise operator, since March 2024. From March 2021 through January 2024, Ms. Neary served as Brand President/KBP Bells for KBP Brands, a large franchisor of Taco Bell, KFC and Arby’s operating properties. From November 2015 through January 2021, Ms. Neary was the President of Auntie Anne’s, a leading soft pretzel franchisor, with more than 1,800 locations in 48 states and over 25 countries. Ms. Neary joined Auntie Anne’s in 2005 and held positions of increasing responsibility, including Vice President, Global Marketing immediately prior to her promotion to President in 2015. During her tenure at Auntie Anne’s, Ms. Neary was responsible for various functions, including overseeing marketing, communications, operations, research and development, product innovation and the franchisee leadership team. Prior to joining Auntie Anne’s, Ms. Neary held roles in marketing and as a managing editor for a business magazine. In addition to her commercial activities, Ms. Neary serves on the Board of Directors for the National Restaurant Association and on the Board of Directors for Women’s Foodservice Forum. She also serves on the Board of Advisors for Penn State Harrisburg and the Advisory Board for Alex’s Lemonade Stand Foundation. Ms. Neary received a B.A. from Millersville University in 1999 and an M.B.A. from Penn State University in 2009. Stephen D. Sautel. Mr. Sautel has served as a director since 2018. Mr. Sautel is a private investor and serves on the board of several companies engaged in diverse businesses. From 2021 to 2023, Mr. Sautel served as a director of Horizon Acquisition Corporation II, a special-purpose acquisition company, and from 2017 to 2022, Mr. Sautel served as a director of CBAM Holdings, LLC, which was sold to affiliates of the Carlyle Group, Inc. in 2022. From 2014 to 2018, Mr. Sautel served as a director of Guggenheim Partners Investment Management Holdings, LLC, a diversified institutional investment management firm. From 2001 to 2014, Mr. Sautel was an investment professional at Guggenheim Capital, LLC, where he held the titles of Senior Managing Director and Chief Operating Officer of the Investments Business. While at Guggenheim, Mr. Sautel co-founded the firm’s credit investing business and later was responsible for supervising the firm’s investment management operations. Prior to Guggenheim, Mr. Sautel worked at J.H. Whitney & Co., First Chicago Capital Markets, and Arthur Andersen & Co. Mr. Sautel received a B.B.A. from the University of Kentucky in 1991 and an M.B.A. from the University of Michigan in 1996. Mr. Sautel is a CFA charterholder. Janaki Sivanesan. Ms. Sivanesan has served as a director since 2020. Ms. Sivanesan is a practicing attorney and private investor in early stage and middle market companies. She was also a founding principal of a private equity firm focused on middle market investments. Ms. Sivanesan has over 20 years of legal experience, including practicing as a partner at large international firms. As an independent sponsor-principal and as a legal advisor, Ms. Sivanesan has participated in a wide range of transactions, including mergers and acquisitions, complex corporate financings and restructurings. Ms. Sivanesan has structured and negotiated private equity and debt investments in a range of industries, including technology, healthcare, oil and gas, and real estate development. Ms. Sivanesan also has experience in cross-border transactions related to manufacturing and outsourcing, and is knowledgeable with respect to business operations in India. Ms. Sivanesan has been a member of the Board of Directors of Hurco Companies, Inc. (Nasdaq Global Select Market: HURC), an international industrial technology company, since 2008. Ms. Sivanesan received her Bachelors of Arts in Business Administration, finance, magna cum laude, from Kennesaw State University in 1991 and her Juris Doctor, cum laude, from Case Western Reserve University School of Law in 1995.
Director Compensation
Director Compensation
2023 Director Compensation Table
2023 Director Compensation Table The following table shows the compensation earned by our non-employee directors for services during 2023. Directors employed by us are not entitled to receive compensation for their services as a director. Mr. Mavoides, our President and Chief Executive Officer and a member of our Board, received no separate compensation for serving on our Board during 2023. Please see the “2023 Summary Compensation Table” for a summary of the compensation received by Mr. Mavoides with respect to 2023.
2023 Director Compensation Table
| Name | Fees Earned or Paid in Cash ($000s) | Stock Awards(1) ($000s) | Total ($000s) | | Paul T. Bossidy(2) | $188 | $202 | $390 | | Joyce DeLucca | $75 | $99 | $174 | | Scott A. Estes | $85 | $99 | $184 | | Lawrence J. Minich | $80 | $99 | $179 | | Heather L. Neary | $75 | $99 | $174 | | Stephen D. Sautel | $75 | $99 | $174 | | Janaki Sivanesan | $80 | $99 | $179 |
2023 Director Compensation Table
| (1) The stock award amounts in this column reflect the aggregate fair value on the grant date computed in accordance with FASB ASC Topic 718. That fair value was calculated based on the number of share units subject to the award multiplied by the average market price on the date of grant. In addition, in the case of Mr. Bossidy, this amount includes approximately $103,000, representing the incremental fair value associated with a modification to his unvested restricted stock units (“RSUs”) to provide for accelerated vesting upon his retirement from the Board on December 31, 2023. As of December 31, 2023, each of Messrs. Estes, Minich, and Sautel and Mses. DeLucca, Neary and Sivanesan had 3,988 unvested RSUs outstanding. |
2023 Director Compensation Table
| (2) Mr. Bossidy retired from our Board on December 31, 2023. Prior to his retirement, Mr. Bossidy served as Chair of our Board and as a member of the Compensation Committee. |
2023 Director Compensation Table
With respect to 2023, each of our non-employee directors received, as compensation for services as a director, an annual award of $100,000 of RSUs, with the actual grant date fair value determined by dividing $100,000 by our stock price on the grant date and rounding down to the nearest share, and an annual cash retainer of $60,000. The equity awards granted to our non-employee directors were made pursuant to our Essential Properties Realty Trust, Inc. 2023 Incentive Plan (the “2023 Incentive Plan”) and are scheduled to vest on the earlier to occur of (i) the first anniversary of the date of grant and (ii) the first annual meeting of the Company’s stockholders that occurs after the date of grant, subject to the director’s continued service on our Board. Our former Chair, Mr. Bossidy, received an additional annual cash retainer of $120,000. Directors who served on our Audit Committee, other than the chair of the committee, received an additional annual cash retainer of $12,500, and directors who served on each of our Compensation Committee and Nominating and Corporate Governance Committee, other than the chairs of such committees, received an additional annual cash retainer of $7,500. The director who served as chair of the Audit Committee received an additional annual cash retainer of $25,000, and the directors who served as chairs of the Compensation Committee and the Nominating and Corporate Governance Committee each received an additional annual cash retainer of $15,000. Directors receive pro-rated amounts of the annual cash retainer and annual RSU award for the portion of the first year in which they are appointed or elected to serve as a Board member or committee chair.
Business Highlights
most directly comparable financial measures calculated in accordance with GAAP. 2023 Total Stockholder Return. Our strategic objective is to create value for our stockholders over the long term by delivering strong operational performance, which we believe will result in appreciable total stockholder return (“TSR”), which considers both the change in the price per share of our common stock on the NYSE and the dividends paid per share of common stock during the relevant period. The following charts illustrate our TSR during 2023 and since our initial public offering in June 2018 through December 31, 2023, relative to the 2023 Compensation Peer Group (as defined below). As presented in the second chart below, from our initial public offering in June 2018 through December 31, 2023, we have the highest TSR relative to the 2023 Compensation Peer Group.
How We Responded
| Compensation Factor | Feedback and Analysis | Actions Taken for 2024 | | Performance-Based Equity Vesting | • Preference is for performance-based equity components to be based on objective performance criteria and not include any subjective assessments. | • Eliminated subjective determinations from the performance-based component of the long-term equity incentive compensation awarded in 2024 (relating to the three year performance period ending December 31, 2026). • Performance-based portion of these awards will be determined entirely based upon the Company’s TSR relative to the 2024 TSR peer group over the performance period. |
How We Responded
| | | • Added absolute TSR modifier; if we achieve a percentile rank based on relative TSR of at least the 50th percentile, but absolute TSR is negative, the award eligible to be earned will be reduced by 25% (but in no event will such reduction result in the eligibility to vest in an award of less than 100% of target.) | | Transparency | • More clarity is preferred including around performance goals used for RSUs granted to our CEO as part of his 2022 employment agreement. | • Enhanced disclosure throughout the CD&A. • Included additional detail around the vesting terms for the 2022 RSUs granted to our CEO. | | Alignment Between Management and Stockholders’ Interest | • Compensation program should provide for significant alignment between management’s interests and stockholders’ interests. | • As discussed above, 2024 performance-based RSUs were modified to only include TSR metrics (including adding an absolute TSR modifier). | | | | • Increased the beneficial ownership of shares of the Company’s common stock (including securities convertible into or exercisable or exchangeable for common stock) the Company’s CEO is required to hold from five to six times annual base salary. • Added a requirement whereby 50% of granted equity compensation must be retained (not sold or transferred) by an executive until the ownership guidelines are met. |
How We Determine Compensation
How We Determine Compensation Role of the Compensation Committee. The Compensation Committee, operating pursuant to authority delegated to it by the Board, oversees the design, development and implementation of our executive compensation program. The Compensation Committee also administers our compensation plans and awards for the Company’s directors and NEOs and is primarily responsible for reviewing and approving our compensation policies and the compensation paid to our NEOs. The Compensation Committee’s responsibilities are set forth in its written charter. Role of Management. Our President and Chief Executive Officer works closely with the Compensation Committee and its independent compensation consultant to analyze relevant peer data and to provide input into the compensation program design. Management assists the Compensation Committee’s independent compensation consultant in its review of executive compensation by providing historical compensation information. Management makes recommendations for the program design for the NEOs for consideration by the Compensation Committee, with all compensation decisions made by the Compensation Committee. Role of Independent Compensation Consultant. In 2023, the Compensation Committee engaged Ferguson Partners Consulting L.P. (“FPC”) as its independent compensation consultant to assist the Compensation Committee with the design of our executive compensation program. FPC provided the Compensation Committee with market data and made recommendations regarding the compensation mix and levels with respect to the 2023 executive compensation program described herein. The Compensation Committee has assessed the independence of FPC pursuant to the NYSE rules and the Company concluded that the work performed by FPC did not raise any conflict of interest. Competitive Market Analysis. In developing our executive compensation program, the Compensation Committee, with the assistance of FPC and management, gathers and reviews the compensation practices, salary levels and target incentive levels of a group of other publicly traded REITs considered by the Compensation Committee to be comparable to the Company in terms of size, business model and geography. As part of its annual review of executive compensation, the Compensation Committee, in consultation with FPC, reviews peer group composition and assesses whether any adjustments are appropriate. As described below, the Compensation Committee, with input from FPC, made an adjustment to remove three companies from and add two companies to the peer group used for consideration in determining 2023 compensation. Using the below methodology, the Compensation Committee, with input from FPC, approved the peer group for use in informing 2023 compensation decisions (the “2023 Compensation Peer Group”). In developing the 2023 Compensation Peer Group, the Compensation Committee considered various factors, including:
How We Determine Compensation
The companies selected for the 2023 Compensation Peer Group, per the methodology described above, are those the Compensation Committee believes are best suited to provide a meaningful review of current market practices. Changes to the peer group were intended to more accurately reflect our size, operational activity and geography. Changes to the 2023 Compensation Peer Group, as compared to the compensation peer group used to evaluate 2022 compensation decisions, are shown below.
How We Determine Compensation
Source: Bloomberg, data as of December 31, 2023. Note: When applicable, units in an operating partnership, representing non-controlling interests, are included in Market Capitalization and Total Capitalization (as applicable). In October 2023, the Compensation Committee, with input from FPC, approved the peer group for use in informing 2024 compensation decisions (the “2024 Compensation Peer Group”, and, collectively with the 2023 Compensation Peer Group, the “Compensation Peer Groups”). In developing the 2024 Compensation Peer Group, the Compensation Committee considered various factors, including:
How We Determine Compensation
| | 2024 Compensation Peer Group: | 2023 Compensation Peer Group: | | Peer Company | Reviewed in 2023 for Setting 2024 Compensation | Reviewed in 2022 for Setting 2023 Compensation | | Acadia Realty Trust (AKR) | ✓ | ✓ | | Agree Realty Corporation (ADC) | ✓ | ✓ | | Brandywine Realty Trust (BDN) | | ✓ | | Brixmor Property Group Inc. (BRX) | | ✓ | | Broadstone Net Lease, Inc. (BNL) | ✓ | ✓ | | EPR Properties (EPR) | ✓ | ✓ | | First Industrial Realty Trust, Inc. (FR) | ✓ | | | Four Corners Property Trust, Inc. (FCPT) | ✓ | ✓ | | LXP Industrial Trust (LXP) | ✓ | ✓ | | NNN REIT, Inc. (NNN) | ✓ | ✓ | | Physicians Realty Trust (DOC) | ✓ | ✓ | | RPT Realty (RPT) | | ✓ | | Spirit Realty Capital, Inc. (SRC) | ✓ | ✓ | | Urban Edge Properties (UE) | ✓ | ✓ | | Veris Residential, Inc. (VRE) | ✓ | |
How We Determine Compensation
In addition to reviewing the appropriateness of each peer company in the 2024 Compensation Peer Group, the Compensation Committee also reviewed the overall composition of the 2024 Compensation Peer Group and noted that the Company ranked at the 65th percentile in terms of Implied Equity Market Capitalization and 55th percentile in terms of Total Enterprise Value when the 2024 Compensation Peer Group was approved in October 2023. The Compensation Peer Groups are used by the Compensation Committee to evaluate pay level and overall compensation design. We use a different peer group to evaluate TSR, which, as described more fully below under “2023 Performance-Based Component”, is an element used in evaluating certain aspects of our performance-based compensation and includes companies that we believe are more similar to us in terms of business operations and industry focus and an appropriate measure of our relative performance. The Compensation Committee does not target compensation at a specific percentile of peer group data. Rather, the Compensation Committee seeks to develop an overall compensation program that is informed by peer group data, as well as other factors that the committee, in its collective judgment, believes to be relevant. Factors that the Compensation Committee considers include an executive’s experience and performance and internal pay equity among the Company’s senior management team (considering each executive’s respective scope of responsibilities and specific skills, and ability to impact business results) and other business events or conditions.
Elements of 2023 Compensation
| (2) We eliminated the subjective component of the performance-based LTIP compensation awarded in 2024 (relating to the three year performance period ending December 31, 2026). Accordingly, the performance-based portion of these awards will be determined entirely based upon our TSR relative to the 2024 TSR peer group over the performance period. Additionally, with respect to these awards, we added an absolute TSR modifier; in the event that we achieve a percentile rank based on relative TSR for the performance period of at least the 50th percentile, but our absolute TSR is negative for the performance period, the award eligible to be earned will be reduced by 25%, provided that in no event will the application of such reduction result in the eligibility to vest in an award of less than 100% of target. See “Executive Compensation - Stockholder Outreach” above. |
Elements of 2023 Compensation
| • | Our CEO’s base salary was significantly below the 25th percentile of the 2023 Compensation Peer Group and would continue to be below the 25th percentile even after such 2023 adjustment was made; and |
Elements of 2023 Compensation
| • | Our CFO’s base salary was also below the 25th percentile of the 2023 Compensation Peer Group and would continue to be below the 50th percentile even after such 2023 adjustment was made. |
Elements of 2023 Compensation
Short-Term Incentives. Payment opportunities for cash awards under the annual cash bonus program are expressed as a percentage of base salary and are designed to reflect each individual’s contributions to the Company and the market level of compensation for such position. We have designed our annual cash bonus program to motivate the Company’s executive officers to achieve performance goals established by the Compensation Committee that reinforce our annual business plan, to assist the Company in attracting and retaining qualified executives and to promote the alignment of the NEOs’ interests with those of the Company’s stockholders. The following tables show the key components of our short-term incentive plan during 2023, with 75% of our short-term incentive program determined based on pre-established performance goals and the remaining 25% determined based on the Compensation Committee’s qualitative assessment of an executive’s performance.
Elements of 2023 Compensation
Based on a review of the market data provided by FPC, and in consideration of strong Company and individual performance, the Compensation Committee determined that an increase to our CEO’s and CFO’s target cash bonus award opportunities, and to our CEO’s maximum cash bonus opportunity, was appropriate and warranted to maintain competitiveness with the 2023 Compensation Peer Group and to retain and incentivize our CEO and CFO. For 2023, the Compensation Committee approved the following threshold, target and maximum cash bonus award opportunities, expressed as a percentage of base salary, for each NEO:
Elements of 2023 Compensation
| | Payout Opportunities(1) (as a percentage of base salary) | | | | Name | Threshold | Target(2) | Maximum(2) | | Peter M. Mavoides | 50% | 150% | 250% | | Mark E. Patten | 50% | 125% | 175% |
Elements of 2023 Compensation
| (1) Straight line interpolation is used to determine payouts for results in between performance levels. |
Elements of 2023 Compensation
| | Allocation of Performance Metrics | | | Name | Corporate | Individual | | Peter M. Mavoides | 75% | 25% | | Mark E. Patten | 75% | 25% |
Elements of 2023 Compensation
| | Allocation of Performance Metrics | | | | | | | | Name | AFFO Per Share | Gross Investments | Recurring Cash G&A Expense | Same Store Rent Growth | Net Debt-to- Annualized Adjusted EBITDAre Ratio | ESG | Individual Performance | | Peter M. Mavoides | 25.00% | 15.00% | N/A | 15.00% | 15.00% | 5.00% | 25.00% | | Mark E. Patten | 25.00% | N/A | 15.00% | N/A | 25.00% | 10.00% | 25.00% |
Corporate Performance Metric #6: ESG
| Name | Actual Payout | % of Target Bonus Opportunity | | Peter M. Mavoides | $1,724 | 164% | | Mark E. Patten | $814 | 137% |
Corporate Performance Metric #6: ESG
| • | Enable us to deliver competitive compensation to our NEOs at levels deemed sufficient to attract, retain and motivate our NEOs to seek superior TSR and deliver positive long-term operational performance. |
Corporate Performance Metric #6: ESG
| • | Prevailing market practices based on market data provided by FPC with respect to our 2023 Compensation Peer Group. |
Corporate Performance Metric #6: ESG
| | 2023 Target Value of Equity Grant | | | | Name | Performance Based RSUs | Time-Based RSUs | Total Award Value | | Peter M. Mavoides | $2,100 | $1,400 | $3,500 | | Mark E. Patten | $420 | $280 | $700 |
2024 Compensation Decisions
| • | 100% Objective Metrics for PSUs: Eliminated any subjective determinations from the vesting determination of the performance-based component of the long-term equity incentive compensation awarded in 2024 (relating to the three year performance period ending December 31, 2026). Accordingly, the vesting of the performance-based portion of these awards will be determined entirely based upon our TSR relative to the 2024 TSR peer group over the performance period as well as the NEOs continued service. Additionally, with respect to these awards, the Compensation Committee added an absolute TSR modifier; in the event that we achieve a percentile rank based on relative TSR for the performance period of at least the 50th percentile, but our absolute TSR is negative for the performance period, the award eligible to be earned will be reduced by 25%, provided that in no event will the application of such reduction result in the eligibility to vest in an award of less than 100% of target; and |
Results of 2021 Performance-Based RSU Grants
Results of 2021 Performance-Based RSU Grants In 2021, Messrs. Mavoides and Patten each received awards of performance-based RSUs that covered a three-year performance period that ended on December 31, 2023, with (i) 75% of the award based on our TSR relative to the TSR of a peer group specified in the 2021 performance-based RSU grant agreements and identified below (the “2021 TSR Peer Group”) over the performance period, and (ii) the remaining 25% of the award based on the Compensation Committee’s subjective evaluation of the officer’s achievement of strategic objectives deemed relevant by the Compensation Committee during the performance period (the “2021 Performance RSUs”). Mr. Mavoides was awarded 83,369 and Mr. Patten was awarded 9,118, in each case at target, 2021 Performance RSUs. The 2021 TSR Peer Group included the following companies: Agree Realty Corporation, EPR Properties, Four Corners Property Trust, Inc., Getty Realty Corp., National Retail Properties, Inc., Realty Income Corporation, Seritage Growth Properties, Spirit Realty Capital, Inc., STAG Industrial, Inc., and STORE Capital Corporation. The specific requirements and corresponding award levels for the 75% of the 2021 Performance RSUs which vest based on relative TSR are contained in the table below:
Results of 2021 Performance-Based RSU Grants
| Performance Level | TSR Relative to 2020 TSR Peer Group Over Performance Period | RSUs Earned as a Percentage of Target | | Threshold | 30th Percentile | 50% | | Target | 50th Percentile | 100% | | Maximum | 75th Percentile | 250% |
Results of 2021 Performance-Based RSU Grants
The Company’s TSR during the performance period was 11.30% relative to a TSR of 6.70% at the 50th percentile and 8.60% at the 75th percentile for the 2021 TSR Peer Group. Accordingly, the Company achieved a TSR above the 75th percentile of the TSR Peer Group, resulting in the 2021 Performance RSUs being earned at 250% of Target. With respect to the 25% of the 2021 Performance RSUs which vest based on a subjective evaluation of the officer’s achievement of relevant strategic objectives, an officer may earn up to 250% of the target award, and the Compensation Committee considered the following factors with respect to Messrs. Mavoides and Patten:
Results of 2021 Performance-Based RSU Grants
| Subjective Performance Factors | | | Mr. Mavoides | Mr. Patten | | • Overall leadership of the Company (operating performance, gross investment activity, operating efficiency and financial flexibility); • Developing, growing and maintaining strong tenant relationships; • Overall leadership with respect to executive team (management, motivation, etc.); • Contributions to a collaborative work environment & promoting diversity; and • Response to extraordinary macro-economic challenges, including the impact on capital markets, and ability to execute alternative strategies to maintain the Company’s conservative leverage position and well-capitalized balance sheet. | • Excellence in oversight of the Company’s finance, capital markets, accounting, financial reporting, treasury, risk management, ESG and human resources functions; • Contributions to superior operating performance – particularly financial flexibility, balance sheet management, capital markets execution, and accounting/reporting/compliance efficiency and effectiveness; • Developing, growing and maintaining strong relationships with financial institutions, investors, auditors, tax advisors and other third-party service providers; • Leadership with respect to recruiting and developing departmental talent; and • Contributions to a collaborative and inclusive culture |
Results of 2021 Performance-Based RSU Grants
In evaluating the foregoing subjective matters, the Compensation Committee also considered:
Results of 2021 Performance-Based RSU Grants
| • | Gross investment activity of approximately $2.9 billion during the three years ended December 31, 2023 and the characteristics thereof; |
Results of 2021 Performance-Based RSU Grants
| • | Growing our common dividend from an annualized rate of $0.96 per share for the quarter ended December 31, 2020 to $1.14 per share for the quarter ended December 31, 2023; |
Results of 2021 Performance-Based RSU Grants
| • | Maintaining a consistent and conservative financial policy, including the Company’s leverage level, as measured by the Company’s net debt to annualized adjusted EBITDAre, which at December 31, 2023 was 4.4x (4.0x on a pro forma basis giving effect to the physical settlement for cash of the Company’s unsettled forward equity sales); and |
Results of 2021 Performance-Based RSU Grants
| • | Raising approximately $1.4 billion in common equity during the three years ended December 31, 2023. |
Results of 2021 Performance-Based RSU Grants
After careful consideration of the above factors, the Compensation Committee determined that each of Messrs. Mavoides and Patten performed at a level commensurate with a vesting level at 225% of target. 2021 Performance RSU Results. Based on the above, Messrs. Mavoides and Patten achieved the performance-based vesting of the 2021 Performance RSUs at 250% of Target for the 75% portion of the 2021 Performance RSUs based on relative TSR and at 225% of Target for the 25% portion of the 2021 Performance RSUs based on the Compensation Committee’s subjective evaluation of the officer’s achievement of strategic objectives deemed relevant by the Compensation Committee during the performance period. Accordingly, the number of shares earned based on performance with respect to the 2021 Performance RSUs were as follows, with one-half vesting on December 31, 2023 and the remaining half scheduled to vest on December 31, 2024:
Results of 2021 Performance-Based RSU Grants
| Name | Number of Target Shares | Number of Shares Earned(1) | | Peter M. Mavoides | 83,369 | 203,211 | | Mark E. Patten | 9,118 | 22,225 |
Results of 2021 Performance-Based RSU Grants
| (1) For Messrs. Mavoides and Patten, excludes 28,341 and 3,095 shares, respectively, with respect to cash dividends paid during the period the 2021 Performance RSUs were outstanding (75% of such shares allocated to the TSR based awards and the remaining 25% allocated to the subjective awards). |
Severance and Change in Control Arrangements
Severance and Change in Control Arrangements Our NEOs are eligible for severance payments and benefits in the event of an involuntary termination of employment without “cause” or for “good reason,” as well as certain benefits in connection with a change in control of the Company. Our NEOs are also eligible for “double trigger” severance payments and benefits in the event of an involuntary termination of employment without “cause” or a termination of employment with “good reason” in connection with a change in control of the Company. Our equity awards are also designed to be “double trigger,” so long as such awards are allowed to continue in effect following any change in control transaction on substantially equivalent terms and conditions to those applicable prior to such transaction. For detailed information on the estimated potential payments and benefits payable to the NEOs in the event of their termination of employment, including following a change in control of the Company, see the section titled “Potential Payments Upon Termination.”
Other Compensation Policies
Other Compensation Policies Clawback Policy. During 2023, the Company amended its existing clawback policy to comply with recently approved rules promulgated by the NYSE and SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the Company’s clawback policy, in the event of a material restatement of the Company’s financial results (other than a restatement caused by a change in applicable accounting rules or interpretations), the Compensation Committee will review the incentive compensation paid to the Company’s current and former executive officers to determine whether the amount of any incentive compensation actually paid or awarded to an executive officer (the “Awarded Compensation”) would have been lower if it had been calculated based on such restated financial statements (the “Actual Compensation”). If it determines that the Awarded Compensation was in excess of the Actual Compensation, then the Company shall recoup such excess compensation in accordance with NYSE listing rules. Process for Approving Long-Term Incentive Awards. The Compensation Committee approves long-term incentive awards (including time- and performance-based RSUs) on an annual basis at its meeting in February. As appropriate during the year, the Compensation Committee may approve long-term incentive awards to newly hired or promoted executives. The number of RSUs awarded to an individual is determined by a formula that divides the compensation value of the overall award by the closing market price of our common stock on the NYSE on the date prior to the date of grant.
Compensation Risk Assessment
| • | the Compensation Committee engages an independent, external compensation consultant to assist with developing the executive compensation program; |
Compensation Risk Assessment
| • | the Compensation Committee has elected to use time-based RSUs and performance-based RSUs that provide our NEOs with a significant interest in the Company’s long-term performance; |
Compensation Risk Assessment
| • | short-term cash incentive awards are based on a number of metrics related to Company financial and operational goals; |
2023 Summary Compensation Table
2023 Summary Compensation Table The following table presents compensation paid or awarded to our NEOs with respect to the years ended December 31, 2023, 2022 and 2021 (dollar amounts in thousands):
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary | Bonus | Stock Awards(1)(2) | Option Awards | Non-Equity Incentive Plan Compensation(3) | Nonqualified Deferred Compensation Earnings | All Other Compensation(4) | Total | | Peter M. Mavoides | 2023 | $700 | $— | $4,858 | $— | $1,724 | $— | $20 | $7,302 | | President and Chief | 2022 | $600 | $— | $8,019 | $— | $1,150 | $— | $17 | $9,786 | | Executive Officer (principal executive officer) | 2021 | $600 | $— | $3,953 | $— | $1,325 | $— | $15 | $5,893 | | Mark E. Patten | 2023 | $475 | $— | $822 | $— | $814 | $— | $26 | $2,137 | | Executive Vice | 2022 | $425 | $— | $645 | $— | $736 | $— | $26 | $1,832 | | President, Chief Financial Officer (principal financial officer), Treasurer and Secretary | 2021 | $350 | $— | $432 | $— | $602 | $— | $9 | $1,393 |
2023 Summary Compensation Table
| (1) Amounts reported in this column for 2021, 2022 and 2023 for time-based RSUs granted during the relevant year reflect the full grant date fair value computed in accordance with FASB ASC Topic 718. The grant date fair value of time-based RSUs was calculated based on the number of shares subject to the award multiplied by the average market price on the date of grant. Amounts reported in this column for 2021, 2022 and 2023 for performance-based RSUs granted during the relevant year reflect the grant date fair value of the 75% portion attributable to the relative TSR performance metric computed in accordance with FASB ASC Topic 718. Because the 25% subjective component is not viewed as granted under FASB ASC Topic 718 until the year in which the Compensation Committee determines achievement, there is no grant date fair value reported for such component until the year of Compensation Committee determination and a grant date fair value for such portion will be reported in the Summary Compensation Table in the year of such determination. Amounts reported in this column for 2022 and 2023 include the 25% subjective component of performance-based RSUs granted during 2019 and 2020, respectively, for which performance was determined in 2022 and 2023, respectively, and, therefore, are viewed as granted under FASB ASC Topic 718 in 2022 and 2023, respectively. The following table shows the 2023 grant date fair value of the time-based RSUs, the TSR portion of the performance-based RSUs based on the target achievement level, the TSR portion of the performance-based RSUs based on the highest level of performance conditions achieved and the subjective portion of performance-based RSUs granted during 2020 for which performance was determined in 2023 and therefore are viewed as granted under FASB ASC Topic 718 in 2023 (note that Mr. Patten was not eligible to receive 2020 performance-based RSUs as he joined the Company in August 2020): |
2023 Summary Compensation Table
| | Value of 2023 Grants at Grant Date | | | | | Name | Time- Based Vesting Awards | Expected Level of TSR Performance Conditions Achieved | Maximum Level of TSR Performance Conditions Achieved | Subjective Performance Vesting Awards | | Peter M. Mavoides | $1,448 | $2,659 | $6,647 | $751 | | Mark E. Patten | $290 | $532 | $1,329 | N/A |
2023 Summary Compensation Table
| (2) Amounts reported in this column for 2022 include the grant date fair value of special one-time retention AFFO CAGR performance-based RSUs granted to Mr. Mavoides, which was calculated based on the probable level of achievement of the underlying performance conditions as of the date of grant, multiplied by the average market |
2023 Summary Compensation Table
| price on the date of grant. The performance conditions associated with the AFFO CAGR performance-based RSUs represent a range of potential outcomes, with the highest performance level representing the achievement of an AFFO CAGR that would, if achieved, be a growth rate in the high single digits, which would be consistent with our objective of aligning executive compensation with meaningful returns and value for our stockholders relative to our peers. |
2023 Summary Compensation Table
| (3) The amounts reported in this column for 2023 represent the annual incentive compensation received by each NEO based on 2023 performance. |
2023 Summary Compensation Table
| (4) The amounts reported in this column represent matching contributions to our 401(k) plan. |
2023 Grant of Plan-Based Awards
2023 Grant of Plan-Based Awards
2023 Grant of Plan-Based Awards
| | | | | | | | | All Other Stock Awards: | Grant Date Fair Value of Stock and Option Awards ($000s)(4) | | | | Estimated Possible Payouts Under Non Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | Number of Shares of Stock or Units (#)(3) | | | Name | Grant Date | Threshold ($000s) | Target ($000s) | Maximum ($000s) | Threshold (#) | Target (#) | Maximum (#) | | | | Peter M. Mavoides | | $350 | $1,050 | $1,750 | | | | | | | | 2/14/2023 | | | | | | | 30,162 | $751 | | | 2/17/2023 | | | | 31,652 | 63,304 | 158,260 | | $2,659 | | | 2/17/2023 | | | | | | | 56,270 | $1,448 | | Mark E. Patten | | $238 | $594 | $831 | | | | | | | | 2/17/2023 | | | | 6,330 | 12,661 | 31,652 | | $532 | | | 2/17/2023 | | | | | | | 11,254 | $290 |
2023 Grant of Plan-Based Awards
| (1) Represents potential payouts under the short-term incentive program. Please see the “Non-Equity Incentive Plan Compensation” column in the 2023 Summary Compensation Table for the amount received by each NEO for 2023 and the CD&A for further information regarding the 2023 short-term incentive program. |
2023 Grant of Plan-Based Awards
| (2) Represents estimated payouts under the Essential Properties Realty Trust, Inc. 2018 Incentive Plan for the TSR portion of the performance-based RSUs awarded in February 2023 for the January 1, 2023 through December 31, 2025 performance period. The “threshold” number of RSUs represents 50% of the performance RSUs granted and is the number of RSUs that would vest based on achieving the minimum TSR goal during the performance period relative to that of the 2023 TSR Peer Group. The “target” number of RSUs represents 100% of the performance RSUs granted and is the number of RSUs that would vest based on achieving the target TSR goal during the performance period relative to that of the 2023 TSR Peer Group. The “maximum” number of RSUs shown is 250% of the performance RSUs granted and is the number of RSUs that would vest based on achieving the maximum TSR goal during the performance period relative to that of the 2023 TSR Peer Group. Because the subjective component is not viewed as granted for accounting purposes until the Compensation Committee determines the achievement level, these amounts only reflect the TSR component of the performance-based RSUs granted during 2023 and the subjective component will be reflected in this table in the year of determination. |
2023 Grant of Plan-Based Awards
| (3) Represents (i) the subjective portion of performance-based RSUs granted during 2020 for which performance was determined on February 14, 2023 and therefore are viewed as granted under FASB ASC Topic 718 in 2023, 50% of which vested on February 14, 2023 and 50% of which vested on December 31, 2023 and (ii) time-based RSUs granted on February 17, 2023 that vest in annual increments over a four-year period on each anniversary of January 18th, subject to the continued employment of the NEO through the applicable vesting date. |
2023 Grant of Plan-Based Awards
| (4) Amounts represent the grant date fair value of RSU awards reported in this table and granted during 2023, calculated in accordance with FASB ASC Topic 718. For a discussion of the assumptions used to calculate the value of all RSU awards made to NEOs, refer to Note 9 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. |
Outstanding Equity Awards at December 31, 2023
Outstanding Equity Awards at December 31, 2023 The following table provides information about the outstanding equity-based awards held by each of our NEOs as of December 31, 2023 (dollar amounts in thousands):
Outstanding Equity Awards at December 31, 2023
| Named Executive Officer | Number of Shares or Units of Stock That Have Not Vested(1) | Market Value of Shares or Units of Stock That Have Not Vested(2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) | | Peter M. Mavoides | 280,042 | $7,158 | 480,642 | $12,285 | | Mark E. Patten | 34,223 | $875 | 65,029 | $1,662 |
Outstanding Equity Awards at December 31, 2023
| (1) Amounts reported in this column represent (1) RSUs granted to our NEOs on January 8, 2020 (Mr. Mavoides, 15,352 RSU), February 22, 2021 (Mr. Mavoides, 55,579 RSUs; Mr. Patten, 6,079 RSUs), February 15, 2022 (Mr. Patten, 9,693 RSUs), March 4, 2022 (Mr. Mavoides, 55,577 RSUs), and February 17, 2023 (Mr. Mavoides, 56,270 RSUs; Mr. Patten, 11,254 RSUs) which vest in one-quarter annual increments on the first, second, third and fourth anniversaries of the date of grant (for the 2020 awards) or January 18, 2021 (for the 2021 awards), January 18, 2022 (for the 2022 awards), and January 18, 2023 (for the 2023 awards) subject to the NEO’s continued employment through such date, and (2) one-half of the performance RSUs, initially granted to Messrs. Mavoides and Patten on February 22, 2021, and certified for issuance by the Compensation Committee following the completion of the three-year performance period on December 31, 2023 (Mr. Mavoides, 115,776 RSUs; Mr. Patten, 12,660 RSUs), which vest on December 31, 2024, subject to the NEO’s continued employment through such date, and (3) with respect to Mr. Mavoides, 34,686 RSUs granted on January 5, 2022 which vest in one-half increments on the fourth and fifth anniversaries of the date of grant, subject to Mr. Mavoides’ continued employment through such date. |
Outstanding Equity Awards at December 31, 2023
| (2) Market value is based on our closing share price on December 29, 2023 of $25.56 per share. |
Outstanding Equity Awards at December 31, 2023
| (3) Amounts reported in this column represent (1) performance-based RSUs at their expected vesting level granted to our NEOs on February 15, 2022 (Mr. Patten, 14,539 Target RSUs) or March 4, 2022 (Mr. Mavoides, 83,366 Target RSUs) and February 17, 2023 (Mr. Mavoides, 84,405 Target RSUs; Mr. Patten, 16,881 Target RSUs) which vest in one-half increments on December 31, 2024 and 2025 and December 31, 2025 and 2026, respectively, subject to each such NEO’s continued employment through such date and (2) with respect to Mr. Mavoides, performance-based RSUs at their expected vesting level (69,372 Target RSUs) granted on January 5, 2022 which vest in one-half increments on the fourth and fifth anniversaries of the date of grant, subject to Mr. Mavoides’ continued employment through such date. With respect to each award, the number of shares that will actually vest is dependent upon our performance during the applicable performance period. |
2023 Options Exercised and Stock Vested
2023 Options Exercised and Stock Vested The following table sets forth certain information regarding the vesting of equity awards held by each NEO during 2023 (dollar amounts in thousands):
2023 Options Exercised and Stock Vested
| | Stock Awards | | | Name | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | | Peter M. Mavoides | 204,191 | $5,171 | | Mark E. Patten | 39,875 | $961 |
Pension Benefits and Nonqualified Deferred Compensation
Pension Benefits and Nonqualified Deferred Compensation We do not provide any retirement benefits other than the opportunity to participate in a 401(k) plan. We do not currently sponsor any qualified or non-qualified defined benefit plans, any non-qualified defined contribution plans or any deferred compensation plans.
Potential Payments upon Termination
Potential Payments upon Termination The following table shows the estimated potential payments that would have been payable to each of our NEOs if a termination without cause or resignation for good reason, or a change in control of the Company, as applicable, had occurred on December 31, 2023 (dollar amounts in thousands).
Potential Payments upon Termination
| Name | Benefit | Death or Disability ($) | Termination without Cause or Resignation for Good Reason ($) | Termination in Connection with a Change in Control ($) | | Peter M. Mavoides | Cash Severance | $1,724 | $5,108 | $7,272 | | | Accelerated Vesting of RSUs | 19,450 | 19,450 | 16,213 | | | Health Benefits | 34 | 52 | 52 | | | Total | $21,208 | $24,610 | $23,537 | | Mark E. Patten | Cash Severance | $814 | $1,289 | $— | | | Accelerated Vesting of RSUs | 2,538 | 2,538 | — | | | Health Benefits | 22 | 22 | — | | | Total | $3,374 | $3,849 | $— |
CEO Pay Ratio
CEO Pay Ratio As required by Section 953(b) of the Dodd-Frank Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the median annual total compensation of our employees (excluding Mr. Mavoides, our President and Chief Executive Officer) and the annual total compensation of Mr. Mavoides. The pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. For 2023, our last completed fiscal year:
CEO Pay Ratio
| • | the median of the annual total compensation as calculated in accordance with the Summary Compensation Table rules, of all employees of our Company (other than our President and Chief Executive Officer) was $147,000; and |
CEO Pay Ratio
| • | the annual total compensation of Mr. Mavoides, as reported above in the 2023 Summary Compensation Table, was $7,302,000. |
CEO Pay Ratio
Based on this information, for 2023, the ratio of the annual total compensation of Mr. Mavoides, our President and Chief Executive Officer, to the median of the annual total compensation of all employees was 50 to 1. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, we took the following steps:
CEO Pay Ratio
| • | We determined that, as of December 31, 2023, our employee population (excluding our Chief Executive Officer) consisted of 39 employees, all of whom were full-time employees located in the United States. We selected December 31, 2023 as the date upon which we would identify the “median employee” because it enabled us to make such identification in a reasonably efficient and economical manner. |
CEO Pay Ratio
| • | To identify the “median employee” from our employee population, we compared the amount of base salary of our employees as reflected in our payroll records and included as part of the total compensation reported to the Internal Revenue Service on Form W-2 and annual bonus, if any, for 2023. In making this determination, we annualized the compensation of 12 full-time employees who were hired after January 1, 2023 but did not work for us for the entire year. We identified our median employee using this compensation measure, which was consistently applied to all our employees included in the calculation. Since all of our employees are located in the United States, as is our Chief Executive Officer, we did not make any cost-of-living adjustments in identifying the “median employee.” |
CEO Pay Ratio
| • | Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2023 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in annual total compensation of $147,000. |
CEO Pay Ratio
Given the different methodologies that various public companies use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies.
Pay Versus Performance
Pay Versus Performance The following table provides historical total summary compensation and compensation actually paid (“ CAP ”) for our principal executive officer (“ PEO ”) and other NEOs as an average and provides historical information regarding our performance (dollar amounts in thousands):
Pay Versus Performance
| | | | | | Value of Initial Fixed $100 Investment Based on: (4) | | | | | Year (1) | Summary Compensation Table Total for PEO (2) | Compensation Actually Paid to PEO (3) | Average Summary Compensation Table Total for Non-PEO NEOs | Average Compensation Actually Paid to Non-PEO NEOs (3) | Total Shareholder Return | Peer Group Total Shareholder Return (5) | Net Income | AFFO Per Share (6) | | 2023 | $7,302 | $13,326 | $2,137 | $2,678 | $124.30 | $98.65 | $191,415 | $1.65 | | 2022 | $9,786 | $8,111 | $1,742 | $1,129 | $108.93 | $91.27 | $134,742 | $1.53 | | 2021 | $5,893 | $11,738 | $1,769 | $3,285 | $126.97 | $126.41 | $96,211 | $1.34 | | 2020 | $2,779 | $1,281 | $1,693 | $822 | $90.42 | $90.80 | $42,528 | $1.11 |
Pay Versus Performance
| (1) Mr. Mavoides has served as the PEO for the entirety of the years presented and our other NEOs for the applicable years were as follows: |
Pay Versus Performance
| • | 2023: Mark E. Patten. |
Pay Versus Performance
| • | 2022 and 2021: Gregg A. Seibert and Mark E. Patten. Mr. Seibert retired as our Executive Vice President and Chief Operating Officer in June 2022. |
Pay Versus Performance
| • | 2020: Gregg A. Seibert; Mark E. Patten; Anthony K. Dobkin (interim Chief Financial Officer through August 2020); and Hilary P. Hai (Chief Financial Officer through March 2020). |
Pay Versus Performance
| (2) Amounts reported in this column represent (i) the total compensation reported in the Summary Compensation Table for the applicable year in the case of Mr. Mavoides and (ii) the average of the total compensation reported in the Summary Compensation Table for the applicable year for our other NEOs reported for the applicable year other than the PEO for such years. |
Pay Versus Performance
| (3) To calculate CAP, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. A reconciliation of the adjustments for Mr. Mavoides and for the average of the other NEOs is set forth following the footnotes to this table. |
Pay Versus Performance
| (4) Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 31, 2019. Historic stock price performance is not necessarily indicative of future stock price performance. |
Pay Versus Performance
| (5) The TSR peer group consists of the companies in the FTSE NAREIT All Equity REITs index, an independently prepared index that includes U.S. equity REITs. |
Pay Versus Performance
| (6) As noted in the Compensation Discussion and Analysis section above titled “Corporate Metrics, Weightings and Results,” for 2023, the Compensation Committee determined that AFFO Per Share continues to be viewed as a core driver of the Company’s performance and stockholder value creation and, accordingly, was utilized as a key performance metric for the annual performance-based cash bonus awards. AFFO Per Share is a non-GAAP financial measure. See Annex A for a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP. |
Compensation Actually Paid Adjustments
Compensation Actually Paid Adjustments The following table provides a reconciliation of (A) total compensation from the summary compensation table in the applicable year for our PEO or average for our other NEOs to (B) total CAP to our PEO or average CAP to our other NEOs (dollar amounts in thousands):
Compensation Actually Paid Adjustments
| | | (MINUS) | PLUS | PLUS (MINUS) | PLUS | PLUS (MINUS) | (MINUS) | PLUS | EQUALS | | Year | Summary Compensation Table Total (1) | Grant Date Fair Value of Stock Awards Granted in Fiscal Year (2) | Fair Value at Fiscal Year-End of Outstanding and Unvested Stock Awards Granted in Fiscal Year (3) | Change in Fair Value of Outstanding and Unvested Stock Awards Granted in Prior Fiscal Years (4) | Fair Value at Vesting of Stock Awards Granted in Fiscal Year That Vested During Fiscal Year (5) | Change in Fair Value as of Vesting Date of Stock Awards Granted in Prior Years for Which Applicable Vesting Conditions were Satisfied During Fiscal Year (6) | Fair Value as of Prior Fiscal Year-End of Stock Awards Granted in Prior Fiscal Years That Failed to Meet Applicable Vesting Conditions During Fiscal Year (7) | Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation (8) | CAP | | Peter M. Mavoides (PEO) | | | | | | | | | | | 2023 | $7,302 | $(4,858) | $5,297 | $3,834 | $— | $1,574 | $— | $177 | $13,326 | | 2022 | $9,786 | $(8,019) | $8,022 | $(1,313) | $— | $(501) | $— | $136 | $8,111 | | 2021 | $5,893 | $(3,953) | $5,700 | $2,159 | $— | $1,827 | $— | $112 | $11,738 | | 2020 | $2,779 | $(1,765) | $1,801 | $(831) | $— | $(864) | $— | $161 | $1,281 | | Other NEOs (Average) (9) | | | | | | | | | | | 2023 | $2,137 | $(822) | $1,059 | $113 | $— | $150 | $— | $41 | $2,678 | | 2022 | $1,742 | $(907) | $689 | $(231) | $— | $(199) | $— | $35 | $1,129 | | 2021 | $1,769 | $(710) | $1,024 | $559 | $— | $581 | $— | $62 | $3,285 | | 2020 | $1,693 | $(1,246) | $1,176 | $(229) | $5 | $(638) | $— | $61 | $822 |
Compensation Actually Paid Adjustments
| (1) Represents Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year. With respect to the other NEOs, amounts shown represent averages. |
Compensation Actually Paid Adjustments
| (2) Represents the grant date fair value of the stock awards granted during the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes. |
Compensation Actually Paid Adjustments
| (3) Represents the fair value as of the indicated fiscal year-end of the outstanding and unvested stock awards granted during such fiscal year, computed in accordance with the methodology used for financial reporting purposes. |
Compensation Actually Paid Adjustments
| (4) Represents the change in fair value during the indicated fiscal year of each stock award that was granted in a prior fiscal year and that remained outstanding and unvested as of the last day of the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes and, for awards subject to performance-based vesting conditions, based on the probable outcome of such performance-based vesting conditions as of the last day of the fiscal year. |
Compensation Actually Paid Adjustments
| (5) Represents the fair value at vesting of the stock awards that were granted and vested during the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes. |
Compensation Actually Paid Adjustments
| (6) Represents the change in fair value, measured from the prior fiscal year-end to the vesting date, of each stock award that was granted in a prior fiscal year and which vested during the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes. |
Compensation Actually Paid Adjustments
| (7) Represents the fair value as of the last day of the prior fiscal year of the stock awards that were granted in a prior fiscal year and which failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with the methodology used for financial reporting purposes. |
Compensation Actually Paid Adjustments
| (8) Represents cash dividends paid with respect to time-based RSA and RSU awards. The number of shares subject to a performance-based RSU increases for dividends paid by the Company and are reflected in the other columns to this table. |
Compensation Actually Paid Adjustments
| (9) See footnote 1 in the Pay Versus Performance table above for the NEOs included in the average for each year. |