Stock option plan

9 Months Ended

Jul. 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.

On May 3, 2018, 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 2018. The options have an exercise price of $15.50 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 May 2, 2028.

On April 5, 2018, FREIT shareholders approved an amendment to FREIT’s Equity Incentive Plan reserving an additional 300,000 shares for issuance under the Plan. As of July 31, 2018, 485,020 shares are available for issuance under the Plan after giving effect to the amendment.

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

	No. of Options		Weighted Average
	Outstanding		Exercise Price
Options outstanding beginning of period		267,780	$	18.81
Options granted during period		38,000		15.50
Options forfeited/cancelled during period		—		—
Options outstanding end of period		305,780	$	18.40
Options vested and expected to vest		299,140
Options exercisable at end of period		147,940

The estimated fair value of options granted during Fiscal 2018 was $2.09 per option. Such value was estimated on the grant date using a binomial lattice option pricing model using the following assumptions:

· Expected volatility – 27.6%

· Risk-free interest rate – 2.94%

· Imputed option life – 6.6 years

· Expected dividend yield – 4.7%

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 nine-month periods ended July 31, 2018 and 2017, compensation expense related to stock options granted amounted to approximately $95,000 and $92,000, respectively. For the three-month periods ended July 31, 2018 and 2017, compensation expense related to stock options granted amounted to approximately $34,000 and $31,000, respectively. At July 31, 2018, there was approximately $263,000 of unrecognized compensation cost relating to outstanding non-vested stock options to be recognized over the remaining weighted average vesting period of approximately 2.4 years.

The aggregate intrinsic value of options vested and expected to vest at July 31, 2018 was approximately $55,000. There was no aggregate intrinsic value of options exercisable at July 31, 2018 as the exercise price of the vested options was greater than the market or average share price.