Lineage Inc

(18)Stock-based compensation

Amended and Restated Lineage 2024 Incentive Award Plan

The Lineage 2024 Incentive Award Plan (“Pre-IPO Incentive Award Plan”) was adopted by the Company in April 2024. In July 2024, the Pre-IPO Incentive Award Plan was amended and restated, creating the Amended and Restated Lineage 2024 Incentive Award Plan (the “2024 Plan”). The 2024 Plan is administered by certain committees of the Board (the “Plan Administrator”) and provides for the award of RSUs, performance share awards, LTIP Units, stock options, stock appreciation rights, restricted stock, stock payments, dividend equivalents, and other incentive awards, each as defined in the 2024 Plan, to eligible employees, consultants, and members of the Board (collectively, “Plan participants”). The Pre-IPO Incentive Award Plan provided for the same types of awards as the 2024 Plan.

The maximum number of shares of common stock which could be issued under the Pre-IPO Incentive Award Plan was 1,000,000, which increased to 12,500,000 under the 2024 Plan. The maximum amount of shares that may be issued under the 2024 Plan is subject to an annual increase on the first day of each calendar year beginning January 1, 2025 and ending on and including January 1, 2034. The annual increase is equal to 1% of the sum of (i) the aggregate outstanding number of shares of Lineage, Inc. common stock, (ii) the aggregate number of partnership common units (other than partnership common units that are held by the Company and other than any partnership common units resulting from the conversion of LTIP Units), (iii) the aggregate number of OPEUs, and (iv) the aggregate number of Legacy OP Units, in each case, outstanding on the last day of the immediately preceding calendar year, or any smaller number of shares as determined by the Board. Each LTIP Unit counts as one share of common stock for the purpose of calculating the aggregate number of shares of common stock available for issuance under the 2024 Plan.

(a)Restricted stock units

Certain Plan participants were granted awards of RSUs covering shares of the Company’s common stock. Certain RSUs contain only a service vesting condition (“time-based RSUs”) and certain RSUs contain vesting conditions based on service, Company performance, and market performance (“performance-based RSUs”). Each RSU was granted in tandem with corresponding dividend equivalents. All such RSUs accrue dividend equivalents associated with the underlying stock as the Company declares dividends during the vesting period associated with the RSU. Dividend equivalents will generally be paid in cash to holders of RSUs upon the vesting of the associated RSU and will be forfeited if the RSU does not vest.

Time-based RSUs vest in equal annual installments over aone tothree-year time period provided that the recipient continues to provide services to the Company through the applicable vesting date, subject to acceleration of vesting in the event of the recipient’s termination of employment due to his or her death, disability, retirement, termination by the Company without cause, termination by the recipient for good reason, a non-renewal of the recipient’s employment agreement by the Company, or a family disability, (each as defined in the applicable RSU award agreement), as applicable (a “Qualifying Termination”). The Company measures time-based RSUs granted under the 2024 Plan at grant date fair value based on the closing market price of shares of Lineage, Inc. common stock. The Company measured time-based RSUs granted under the Pre-IPO Incentive Award Plan at grant date fair value based on the price of units issued to third-party investors in arms’ length transactions in connection with BGLH and Operating Partnership capital raising activities. The Company recognizes stock-based compensation expense for time-based RSUs over the applicable vesting term. Certain time-based RSUs were granted as replacements for unvested Management Profits Interests Class C units, and the stock-based compensation expense associated with these replacement awards includes the unrecognized stock-based compensation expense associated with the replaced awards.

Subject to the recipient’s continued status as a service provider throughout the performance period, performance-based RSUs vest based on the Company’s performance during an approximately three year performance period, commencing on January 1st of the grant year (or the date of the IPO for the Relative TSR metric discussed below) and ending on December 31st of the third year (or, if earlier, the date on which a change in control of the Company occurs, if applicable). The number of performance-based RSUs that vest will range from 0% to 200% of the total number of performance-based RSUs granted, based on the attainment of the following metrics over the applicable performance period:

–Adjusted Funds from Operations per Share (“AFFO per share”);

–Same Warehouse NOI Growth (“SS NOI Growth”); and

–The total shareholder return of Lineage, Inc. common stock (“TSR”) relative to the S&P 500 Index (“Relative TSR”).

All earned performance-based RSUs will vest in full upon completion of the performance period, subject to continued service, with the number of vested performance-based RSUs to be determined by the Plan Administrator within 60 days of the completion of the performance period. Recipients of performance-based RSUs who do not remain a service provider for the full performance period but incur a Qualifying Termination will be eligible to vest in a number of performance-based RSUs based on the proportion of the performance period for which they remained an active service provider.

The Company measures performance-based RSUs at grant date fair value utilizing a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied. The Company’s achievement of the market vesting condition is contingent on its Relative TSR over the performance period. For each simulated path, the TSR is calculated at the end of the performance period and determines the vesting percentage based on achievement of the performance target. The fair value of the performance-based RSUs is the average discounted payout across all simulation paths.

The Company forecasts the likelihood of achieving the predefined AFFO per share and SS NOI Growth targets for performance-based RSUs in order to calculate the expected performance-based RSUs that will become vested. The Company recognizes stock-based compensation expense based on either the forecasted performance-based RSUs that will become vested (during the performance period) or the actual performance-based RSUs that become vested (at the completion of the performance period).

The following represents a summary of these RSUs:

Stock-based compensation expense related to time-based RSUs for the year ended December 31, 2024 was $34 million. As of December 31, 2024, there was $92 million of unrecognized stock-based compensation expense related to unvested time-based RSUs that is expected to be recognized over a weighted-average period of 1.3 years.

Stock-based compensation expense related to performance-based RSUs for the year ended December 31, 2024 was $2 million. As of December 31, 2024, there was $10 million of unrecognized stock-based compensation expense related to unvested performance-based RSUs that is expected to be recognized over a weighted-average period of 2.0 years.

(b)LTIP Units

Certain Plan participants were granted interests in the Operating Partnership in the form of LTIP Units. LTIP Units are a class of partnership interests in the Operating Partnership which may be issued to eligible Plan participants for the performance of services to or for benefit of the Company and Operating Partnership. Certain LTIP Units contain only a service vesting condition (“time-based LTIP Units”) and certain LTIP Units contain vesting conditions based on service, Company performance, and market performance (“performance-based LTIP Units”). Further description of LTIP Units is available in Note 2, Capital structure and noncontrolling interests.

During their vesting period, time-based LTIP Units have full distribution rights to receive any distributions declared by the Operating Partnership in cash. During the performance period, holders of performance-based LTIP Units are entitled to receive 10% of all distributions declared by the Operating Partnership in cash. Performance-based LTIP Units are granted in tandem with certain distribution equivalent units which, to the extent that the applicable performance conditions are satisfied, will vest in an amount having a value equal to the excess of all distribution payments that would have been made by the Operating Partnership on such units during the performance period over the amount received in cash, adjusted by the rate of return on shares of Lineage, Inc. common stock as if the distribution payments were invested in Lineage, Inc. common stock between the distribution date and the completion of the performance period.

Time-based LTIP Units vest in equal annual installments over athree year period provided that the recipient continues to provide services to the Company through the applicable vesting date, subject to acceleration of vesting in the event the recipient incurs a Qualifying Termination. The Company measures these time-based LTIP Units at grant date fair value based on the closing market price of shares of Lineage, Inc. common stock on the grant date. The Company recognizes stock-based compensation expense for time-based LTIP Units over the applicable vesting term. Certain time-based LTIP Units were granted as replacements for unvested Management Profits Interests Class C units, and the stock-based compensation expense associated with these replacement awards includes the unrecognized stock-based compensation expense associated with the replaced awards.

Subject to the recipient’s continued status as a service provider throughout the performance period, performance-based LTIP Units vest based on the Company’s performance during an approximately three year performance period, commencing on January 1st of the grant year (or the date of the IPO for the Relative TSR metric) and ending on December 31st of the third year (or, if earlier, the date on which a change in control of the Company occurs, if applicable). The number of performance-based LTIP Units that vest will range from 0% to 100% of the total number of performance-based LTIP Units granted, based on the attainment of the following metrics, over the applicable performance period:

–AFFO per share;

–SS NOI Growth; and

–Relative TSR.

All earned performance-based LTIP Units will vest in full upon completion of the performance period, subject to continued service, with the number of vested performance-based LTIP Units to be determined by the Plan Administrator within 60 days of the completion of the performance period. Performance-based LTIP Units held by recipients who do not remain a service provider for the full performance period but incur a Qualifying Termination will remain outstanding and be eligible to vest upon the completion of the performance period.

The Company measures performance-based LTIP Units at grant date fair value utilizing a Monte Carlo simulation to estimate the probability of the market vesting condition being satisfied. The Company’s achievement of the market vesting condition is contingent on its Relative TSR over the performance period. For each simulated path, the TSR is calculated at the end of the performance period and determines the vesting percentage based on achievement of the performance target. The fair value of the performance-based LTIP Units is the average discounted payout across all simulation paths.

The Company forecasts the likelihood of achieving the predefined AFFO per share and SS NOI Growth targets for performance-based LTIP Units in order to calculate the expected performance-based LTIP Units that will become vested. The Company recognizes stock-based compensation expense based on either the forecasted performance-based LTIP Units that will become vested (during the performance period) or the actual performance-based LTIP Units that become vested (at the completion of the performance period).

The following represents a summary of these LTIP Units:

Stock-based compensation expense related to time-based LTIP Units for the year ended December 31, 2024 was $23 million. As of December 31, 2024, there was $84 million of unrecognized stock-based compensation cost related to unvested time-based LTIP Units that is expected to be recognized over a weighted-average period of 1.5 years.

Stock-based compensation expense related to performance-based LTIP Units for the year ended December 31, 2024 was $12 million. As of December 31, 2024, there was $68 million of unrecognized stock-based compensation cost related to unvested performance-based LTIP Units that is expected to be recognized over a weighted-average period of 2 years.

(c)Stock payment awards

Certain Plan participants have been granted interests in the Company in the form of stock payment awards. Stock payment awards are fully vested shares of Lineage, Inc. common stock issued to Plan participants in exchange for services provided to the Company, or in settlement of other Company liabilities.

The Company measures these stock payment awards at grant date fair value based on the closing market price of shares of Lineage, Inc. common stock. The Company recognizes stock-based compensation expense for stock payment awards as incurred. During the year ended December 31, 2024,1,516,314 shares of Lineage, Inc. common stock were issued pursuant to stock payment awards under the 2024 Plan.

Stock-based compensation expense related to stock payment awards for the year ended December 31, 2024 was $114 million. During the year ended December 31, 2024, the Company also issued stock payment awards totaling $15 million in settlement of awards that vested at IPO under the 2015 LVCP and 2021 LVCP, as described below.

Legacy Stock-Based Compensation Plans

The Legacy Stock-Based Compensation Plans were authorized prior to the Pre-IPO Incentive Award Plan. The Legacy Stock-Based Compensation Plans include BGLH Restricted Class B Units, Management Profits Interests Class C units, and LLH Value Creation Unit Plan units.

(d)BGLH Restricted Class B Units

Prior to the IPO, certain members of management and certain non-employee directors were granted interests in BGLH in the form of restricted Class B Units (“BGLH Restricted Units”). The Company fair valued these BGLH Restricted Units as of the grant date based on the price of substantially similar units issued to third-party investors in arms’ length transactions in connection with other BGLH capital raising activities. The Company recognized stock‑based compensation expense over the vesting term. In connection with the IPO and Formation Transactions, vesting for all outstanding unvested BGLH Restricted Units was accelerated and all previously unrecognized stock-based compensation expense was recognized at that time.

Stock-based compensation expense related to BGLH Restricted Units for the years ended December 31, 2024, 2023, and 2022 was $11 million, $14 million, and $9 million, respectively.

The following represents a summary of these units:

(e)Management Profits Interests Class C units

LLH MGMT and LLH MGMT II interests were issued to certain members of management in the form of Management Profits Interests Class C units. These profits interests generally vested over athree tofive year time period, with the number of units vested based partially on meeting certain financial targets of the Company or individual performance metrics. In connection with the IPO and Formation Transactions, all outstanding unvested Management Profits Interests Class C units were cancelled and replaced with time-based RSUs or time-based LTIP Units. All unrecognized stock- based compensation expense for the unvested Management Profits Interests Class C units will be recognized over the vesting term of the replacement awards, plus the incremental fair value of the replacement award.

The Company fair valued these interests as of the grant date using the Black-Scholes model which was adjusted for the restriction period through a possible liquidity event. The key inputs in the valuation included a volatility factor (which ranged from 32% to 62%) and a risk free rate (which ranged from 0.23% to 4.97%), with vesting terms of 0.75 years to 2.5 years as time to maturity in the model. The Company recognized stock-based compensation expense over the vesting term.

Stock-based compensation expense related to Management Profits Interests Class C units for the years ended December 31, 2024,2023, and 2022 was$4 million,$11 million, and $8 million, respectively.

The following represents a summary of these units:

As of December 31, 2023, there were 21,091,532 outstanding Management Profits Interests Class C units that were fully vested. Fully vested Management Profits Interests Class C units may have been redeemed in exchange for cash in connection with a tender redemption offer by Bay Grove Capital. LLH MGMT and LLH MGMT II also had the right to redeem the fully vested Management Profits Interests Class C units if the holder of the units terminated their employment with the Company for any reason.

(f)LLH Value Creation Unit Plan units

Certain employees were granted notional units under the LLH Value Creation Unit Plan (the “2015 LVCP”) in the form of appreciation rights that vested over a period offour years and upon the occurrence of a liquidity event. This plan covered awards from 2015 to 2020. A new LLH Value Creation Unit Plan was established in 2021 (the “2021 LVCP”) that generally provided for the grant of similar appreciation rights that were eligible to vest without the occurrence of a liquidity event if the Company achieved the target value as specified in the award agreements. Prior to the completion of the IPO, the Company considered the achievement of the vesting requirements for outstanding awards under the 2015 LVCP and 2021 LVCP to be improbable, and as such no compensation expense was recorded. Upon the completion of the IPO during the year ended December 31, 2024, certain outstanding awards under the 2015 LVCP and 2021 LVCP vested and the Company recognized compensation expense and a corresponding liability of $26 million. This liability was settled during the year ended December 31, 2024 by paying cash to certain holders of vested awards totaling $11 million and issuing stock payment awards to satisfy the Company’s remaining obligation, as described above.

Certain outstanding awards under the 2015 LVCP and 2021 LVCP that, at the IPO, were not vested or did not have value to the holders of the awards were cancelled and replaced with time-based RSUs. No awards under the 2015 LVCP or 2021 LVCP remain outstanding as of December 31, 2024.

Stock-Based Compensation Expense

The following table summarizes the Company’s stock-based compensation expense by line item in the consolidated statements of operations and comprehensive income (loss):

The table above includes stock-based compensation expense related to stock payment awards issued in settlement of awards under the 2015 and 2021 LVCP but excludes cash payments made in settlement thereof.