Appraisal Economics has determined the fair value of an employee stock purchase plan (ESPP), for financial reporting under ASC 718 for a publicly traded real estate investment trust (REIT). The purchase price under the Type B plan was established as a 15 percent discount to the lesser of the stock’s publicly traded price on the grant date and its publicly traded price at the end of the ESPP.  The award was economically analogous to a financial instrument known as a “look-back option.” We determined the fair value of the look-back option and, therefore, the ESPP using a synthetic option structure and the Black-Scholes-Merton Model. Our concluded value considered the six-month lock-up that participants were subject to after the end of the ESPP’s term.

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