Stock option plan

3 Months Ended

Jan. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock option plan

Note 12 – Stock option plan:

On September 4, 2014, the Board approved the grant of a total of 246,000 non-qualified share options under FREIT’s Equity Incentive Plan to certain FREIT Executive Officers, the members of the Board and certain employees of Hekemian, FREIT’s managing agent. The options have an exercise price of $18.45 per share, will vest in equal annual installments over a 5-year period and will expire 10 years from the date of grant, which will be September 3, 2024.

On November 10, 2016, the Board approved the grant of a total of 38,000 non-qualified share options under the Equity Incentive Plan to two members of the Board who were appointed to the Board during Fiscal 2016. The options have an exercise price of $21.00 per share, will vest in equal annual installments over a 5-year period, and will expire 10 years from the date of grant, which will be November 9, 2026.

The following table summarizes stock option activity for the three-month period ended January 31, 2018:

	No. of Options		Weighted Average
	Outstanding		Exercise Price
Options outstanding beginning of period		267,780	$	18.81
Options granted during period		—		—
Options forfeited/cancelled during period		—		—
Options outstanding end of period		267,780	$	18.81
Options vested and expected to vest		262,280
Options exercisable at end of period		140,260

The estimated fair value of options granted during Fiscal 2017 was $3.54 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:

· Expected volatility – 30.30%

· Risk-free interest rate – 2.23%

· Imputed option life – 6.3 years

· Expected dividend yield – 4.66%

The expected volatility over the options’ expected life was based on the historical volatility of the weekly closing price of the Company’s stock over a five (5) year period. The risk-free interest rate was based on the annual yield on the grant date of a zero-coupon U.S. Treasury Bond the maturity of which equals the option’s expected life. The imputed option life was based on the simplified expected term calculation permitted by the SEC, which defines the expected life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. The expected dividend yield was based on the Company’s historical dividend yield, exclusive of capital gain dividends.

For the three-month periods ended January 31, 2018 and 2017, compensation expense related to stock options granted amounted to approximately $31,000 and $31,000, respectively. At January 31, 2018, there was approximately $249,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.1 years.

There was no aggregate intrinsic value of options vested and expected to vest and options exercisable at January 31, 2018 as the exercise price of the options was greater than the market or average share price.