Share Incentive and Other Compensation

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Share Incentive and Other Compensation

13. Share Incentive and Other Compensation

Share Incentive Plan

In March and May of 2020, respectively, the Board and the Company’s shareholders, approved the 2020 Share Incentive Plan (the “2020 Plan”), which increased the number of Common Shares authorized for issuance by 2,650,000 shares to an aggregate of 2,829,953 shares. On March 22, 2023 and May 4, 2023, respectively, the Board and the Company’s shareholders approved the Amended and Restated 2020 Share Incentive Plan (the "Amended and Restated 2020 Plan") which further increased the number of Common Shares authorized for issuance by 3,100,000 to an aggregate of 3,883,564 shares (Note 16). In this report, references to issuances, compensation arrangements and expenses under the Amended and Restated 2020 Plan include issuances, compensation arrangements and expenses under the originally adopted 2020 Plan, as applicable. The 2020 Plan and the Amended and Restated 2020 Plan authorize the Company to issue options, Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees, and employees. At June 30, 2023 a total of 3,798,208 shares remained available to be issued under the Amended and Restated 2020 Plan.

Restricted Shares and LTIP Units - Employees

During the six months ended June 30, 2023, the Company issued 739,734 LTIP Units and 22,314 restricted share units (“Restricted Share Units”), to employees of the Company pursuant to the Amended and Restated 2020 Plan. These awards were measured at their fair value on the grant date, incorporating the following factors:

•A portion of these annual equity awards is granted in performance-based Restricted Share Units or LTIP Units that may be earned based on the Company’s attainment of specified relative total shareholder returns (“Relative TSR”) hurdles or specified same-property net operating income growth ("Absolute SSNOI Growth").

•In the event the Relative TSR percentile falls between the 25th percentile and the 50th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 50% and 100% and in the event that the Relative TSR percentile falls between the 50th percentile and 75th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 100% and 200%.

•Fifty percent (50%) of the performance-based LTIP Units will vest based on the Company’s total shareholder return (“TSR”) for the three-year forward-looking performance period relative to the constituents of the National Association of Real Estate Investment Trusts (“NAREIT”) Shopping Center Property Subsector and twenty five percent (25%) on the Company’s TSR for the three-year forward-looking performance period as compared to the constituents of the NAREIT Retail Property Sector (both on a non-weighted basis).

•Twenty five percent (25%) of the performance-based LTIP Units will vest based on the Company's same-property net operating income ("SSNOI") growth for the three-year forward-looking performance period. If the Company achieves annualized SSNOI growth between 2% and 3%, the Absolute SSNOI Growth vesting percentage is determined using a straight-line linear interpolation between 50% and 100% and in the event that the Company achieves annualized SSNOI growth between 3% and 4%, the Absolute SSNOI Growth vesting percentage is determined using a straight-line linear interpolation between 100% and 200%.

•If the Company’s performance fails to achieve the aforementioned hurdles at the culmination of the three-year performance period, all performance-based shares will be forfeited. Any earned performance-based shares vest 60% at the end of the performance period, with the remaining 40% of shares vesting ratably over the next two years.

For valuation of the 2023 and 2022 Performance Shares, a Monte Carlo simulation was used to estimate the fair values of the Relative TSR portion based on probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over the three-year performance periods. The assumptions include volatility (48.0% and 49.0%) and risk-free interest rates of (4.3% and 1.7%) for 2023 and 2022, respectively. The total fair value of the 2023 and 2022 Performance Shares will be expensed over the vesting period.

The total fair value of the above Restricted Share Units and LTIP Units as of the grant date was $11.5 million for the six months ended June 30, 2023 and $13.1 million for the year ended December 31, 2022. Total long-term incentive compensation expense, including the expense related to the Amended and Restated 2020 Plan, was $2.8 million and $2.2 million for the three months ended June 30, 2023 and 2022, respectively, and $5.7 million and $3.2 million for the six months ended June 30, 2023 and 2022, respectively, and is recorded in General and administrative in the consolidated statements of operations.

Restricted Shares and LTIP Units - Board of Trustees

In addition, members of the Board have been issued shares and units under the Amended and Restated 2020 Plan. During the six months ended June 30, 2023, the Company issued 40,459 LTIP Units and 45,882 Restricted Shares to Trustees of the Company in connection with Trustee fees.

Vesting with respect to 10,427 of the LTIP Units and 15,850 of the Restricted Shares will be on the first anniversary of the date of issuance and 30,032 of the LTIP Units and 30,032 of the Restricted Shares vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. Additionally, during the six months ended June 30, 2023, the Company issued 2,433 Restricted Shares as compensation to a new Trustee of the Company. These Restricted Shares vest over three years with 33% vesting May 9, 2023 and the remaining amount vesting ratably on May 9, 2024 and May 9, 2025. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Total trustee fee expense, including the expense related to the Amended and Restated 2020 Plan, was $1.1 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively, and $0.5 million and $0.4 million for the three months ended June 30, 2023 and 2022, respectively, and is recorded in General and administrative in the consolidated statements of operations.

Long-Term Investment Alignment Program

In 2009, the Company adopted the Long-Term Investment Alignment Program (the “Program”) pursuant to which the Company may grant awards to employees, entitling them to receive up to 25% of any potential future payments of Promote to the Operating Partnership from Funds III, IV and V. The Company has granted such awards to employees representing 25% of the potential Promote payments from Fund III to the Operating Partnership, 23.1% of the potential Promote payments from Fund IV to the Operating Partnership and 18.0% of the potential Promote payments from Fund V to the Operating Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board approval is granted.

As payments to other employees are not subject to further Board approval, compensation relating to these awards will be recorded based on the estimated fair value at each reporting period in accordance with ASC Topic 718, Compensation– Stock Compensation. The awards in connection with Fund IV were determined to have no intrinsic value as of June 30, 2023 or December 31, 2022.

The Company recognized $0.2 million of compensation expense related to the Program for the six months ended June 30, 2023 related to Funds III and V.

A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:

Unvested Restricted Shares and LTIP Units	Common Restricted Shares			Weighted Grant-Date Fair Value		LTIP Units			Weighted Grant-Date Fair Value
Unvested at December 31, 2021		89,746		$	16.87		1,415,195		$	20.85
Granted		45,813			20.98		637,818			21.04
Vested		(40,894	)		19.75		(309,283	)		22.86
Forfeited		(1,930	)		31.82		(278,332	)		31.16
Unvested at December 31, 2022		92,735			17.31		1,465,398			18.59
Granted		68,196			14.10		780,193			15.00
Vested		(41,268	)		19.09		(354,352	)		20.35
Forfeited		(2,050	)		33.24		(92,589	)		30.78
Unvested at June 30, 2023		117,613		$	14.54		1,798,650		$	16.03

The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the six months ended June 30, 2023 and the year ended December 31, 2022 were $14.92 and $21.04, respectively. As of June 30, 2023, there was $21.8 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Amended and Restated 2020 Plan. That cost is expected to be recognized over a weighted-average period of 1.6 years. The total fair value of Restricted Shares that vested during the six months ended June 30, 2023 and the year ended December 31, 2022, was $0.8 million and $0.8 million, respectively. The total fair value of LTIP Units that vested (LTIP units vest primarily during the first quarter) during the six months ended June 30, 2023 and the year ended December 31, 2022, was $7.2 million and $7.1 million, respectively.

Other Plans

On a combined basis, the Company incurred a total of $0.3 million of compensation expense related to the following employee benefit plans for each of the six months ended June 30, 2023 and 2022, respectively.

Employee Share Purchase Plan

The Acadia Realty Trust Employee Share Purchase Plan (the “Purchase Plan”), allows eligible employees of the Company to purchase Common Shares through payroll deductions for a maximum aggregate issuance of 200,000 Common Shares. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more than $25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with respect to the applicable quarter. A total of 8,114 and 3,674 Common Shares were purchased by employees under the Purchase Plan for the six months ended June 30, 2023 and 2022, respectively, and 180,529 shares remained available to be issued under the Purchase Plan.

Deferred Share Plan

The Company maintains a Trustee Deferral and Distribution Election program, under which the participating Trustees earn deferred compensation.

Employee 401(k) Plan

The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compensation, up to $22,500, for the year ending December 31, 2023.