SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 which allows for awards in the form of cash, unrestricted, and restricted common shares, stock options, stock appreciation rights, and restricted stock units (“RSUs”) up to an aggregate of 775,000 shares over the ten-year period in which the plan will be in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the program may vary from year to year. Through December 31, 2021, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options. We account for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures.

Year Ended December 31, 2021 LTIP Awards

Awards granted to employees on January 1, 2021, consist of an aggregate of 6,410 time-based RSU awards, 19,224 performance based RSUs based on total shareholder return (“TSR”), and 43,629 stock options. The time-based RSUs vest as to one-third of the shares on each of January 1, 2022, January 1, 2023, and January 1, 2024. The stock options vest as to 25% on each of January 1, 2022, January 1, 2023, January 1, 2024, and January 1, 2025 and expire 10 years after grant date. The fair value of stock options was $7.383 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


Exercise price	$	70.64
Risk-free rate	0.650		%
Expected term	6.25 years
Expected volatility	21.08		%
Dividend Yield	3.963		%

The TSR performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Apartment Index over a forward looking three-year period. The maximum number of RSUs eligible to be earned is 38,448 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. Compensation expense is recognized ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. The Company based the expected volatility on a weighted average of the historical volatility of the Company’s daily closing share price and a select peer average volatility, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the TSR performance RSUs were an expected volatility of 20.63%, a risk-free interest rate of 0.17%, and an expected life of 3 years. The share price at the grant date, January 1, 2021, was $70.64 per share.

Awards granted to trustees in May 2021 consisted of 6,061 RSUs with a one-year vesting period. All of these awards are classified as equity awards. We recognize compensation expense associated with the time-based awards ratably over the requisite service period. The fair value of share awards at grant date for non-employee trustees was approximately $425,000, $533,000, and $505,000 for the years ended December 31, 2021, 2020, and 2019, respectively.

Share-Based Compensation Expense

Total share-based compensation expense recognized in the consolidated financial statements for the years ended December 31, 2021, 2020, and 2019, for all share-based awards was as follows:


	(in thousands)
	Year Ended December 31,
	2021		2020		2019
Share based compensation expense	$	2,687	$	2,106	$	1,905

Restricted Share Awards

The total fair value of time-based share grants vested during the years ended December 31, 2020 and 2019 was $136,000 and $310,000, respectively.

The activity for the years ended December 31, 2020 and 2019, related to our restricted share awards was as follows:


	Awards with Service Conditions
		Wtd Avg Grant-
	Shares	Date Fair Value








Unvested at December 31, 2018	7,191
Granted	—
Vested	(4,999)	$	61.06
Forfeited	—
Unvested at December 31, 2019	2,192	59.20
Granted	—
Vested	(2,192)	$	59.20
Forfeited	—
Unvested at December 31, 2020	—

Restricted Stock Units

During the year ended December 31, 2021, we issued 7,416 time-based RSUs to employees and 6,277 to trustees. The RSUs to employees generally vest over a three-year period and the RSUs to trustees generally vest over a one-year period. The fair value of the time-based RSUs granted during the year ended December 31, 2021 was $980,000. The total compensation cost related to non-vested time-based RSUs not yet recognized is $491,000, which we expect to recognize over a weighted average period of 1.2 years.

The unamortized value of RSUs with market conditions as of December 31, 2021, 2020, and 2019, was approximately $1.1 million, $487,000, and $1.3 million, respectively.

The activity for the years ended December 31, 2021, 2020, and 2019, related to our RSUs was as follows:


	RSUs with Service Conditions			RSUs with Market Conditions
		Wtd Avg Grant-			Wtd Avg Grant-
	Shares	Date Fair Value		Shares	Date Fair Value




Unvested at December 31, 2018	18,260	$	55.13	25,319	$	62.84
Granted	16,084	$	59.76	12,978	$	79.49
Vested	(11,633)	$	55.35	—	—
Forfeited	(365)	$	51.73	(475)	$	57.70
Unvested at December 31, 2019	22,346	$	58.41	37,822	$	68.62
Granted	17,981	$	68.25	—	$	—
Vested	(14,991)	$	59.10	(13,357)	74.68
Change in awards(1)	—	$	—	4,436	$	—
Forfeited	(508)	$	62.99	(1,907)	$	63.92
Unvested at December 31, 2020	24,828	$	65.03	26,994	$	67.87
Granted	13,693	$	71.54	19,224	$	87.04
Vested	(17,065)	$	63.42	(35,920)	$	65.34
Change in awards(1)	—	—		8,926	—
Forfeited	(482)	$	70.44	—	$	—
Unvested at December 31, 2021	20,974	$	69.97	19,224	$	87.04

(1)Represents the change in the number of restricted stock units earned at the end of the measurement period.

Stock Options

During the year ended December 31, 2021, we issued 43,629 stock options to employees. The stock options vest over a four-year period. The fair value of the stock options granted during the year ended December 31, 2021 was $7.383 per share. The total compensation costs related to non-vested stock options not yet recognized is $387,000, which we expect to recognize over a weighted average period of 2.4 years.

The stock option activity for the years ended December 31, 2021 and 2020 was as follows:


	Number of Shares	Weighted Average Exercise Price
Outstanding at December 31, 2019	—	—
Granted	141,000	$	66.36
Exercised	—	—
Forfeited	(1,952)	$	66.36
Outstanding at December 31, 2020	139,048	$	66.36
Exercisable at December 31, 2020	—	—
Granted	43,629	70.64
Exercised	—	—
Forfeited	—	—
Outstanding at December 31, 2021	182,677	67.38
Exercisable at December 31, 2021	34,758	66.36

The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option. As of December 31, 2021, stock options outstanding had an aggregate intrinsic value of $8.0 million with a weighted average remaining contractual term of 8.54 years.