Share Incentive Plans (Tables)
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12 Months Ended |
Dec. 31, 2022 |
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| Share Based Compensation Arrangement By Share Based Payment Award [Line Items] |
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| Summary of Terms of Awards Generally Granted to Employees |
The following table summarizes the terms of Awards generally granted to employees:
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Options |
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Restricted Shares |
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Restricted Units |
Overview |
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Options exercised after vesting result in issuance of new Common Shares. |
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Restricted shareholders generally have the same voting rights and receive quarterly dividend payments on their shares at the same rate and on the same date as any other Common Share holder (1). |
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When certain conditions are met, restricted units convert into an equal number of OP Units, which the holder may exchange for Common Shares on a one-for-one basis or at the option of the Company the cash value of such shares. Restricted unitholders receive quarterly distribution payments on their restricted units at the same rate and on the same date as any other OP Unit holder (1). |
Grant/Exercise
Price |
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Granted at the fair market value of Common Shares as of the grant date using the Black-Scholes model as described below. |
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Granted at the fair market value of Common Shares as of the grant date. |
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Granted at varying discount rates to the fair market value of Common Shares as of the grant date (2). |
Vesting Period |
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In three equal installments over a three-year period from the grant date. |
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Three years from the grant date. |
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Three years from the grant date. |
Expiration |
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Ten years from the grant date. |
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Not applicable. |
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Ten years from the grant date (2). |
Upon Employee
Termination |
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Unvested options are canceled. |
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Unvested restricted shares are canceled. |
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Unvested restricted units are canceled. |
(1)Dividends/distributions paid on unvested restricted shares and units are included as a component of retained earnings and Noncontrolling Interest – Operating Partnership/Limited Partners Capital, respectively, and have not been considered in reducing net income available to Common Shares/Units in a manner similar to the Company’s preferred share/preference unit dividends for the earnings per share/Unit calculation. (2)A restricted unit will automatically convert to an OP Unit when the capital account of each restricted unit increases (“books-up”) to a specified target. The probability of a book-up occurring within the ten-year contractual life along with the liquidity risk associated with various hold period restrictions are both reflected in the discount. If the capital target is not attained within ten years following the date of issuance, the restricted unit will automatically be canceled and no compensation will be payable to the holder of such canceled restricted unit. If the capital target is attained and the restricted unit is converted to an OP Unit, it will not expire.
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| Summary of Valuation Method of Share Options |
The fair value of the Option grants is recognized over the requisite service/vesting period of the Options. The fair value for the Company’s Options was estimated at the time the Options were granted using the Black-Scholes option pricing model with the primary grant in each year having the following weighted average assumptions:
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2022 |
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2021 |
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2020 |
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Expected volatility (1) |
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21.7 |
% |
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21.3 |
% |
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15.2 |
% |
Expected life (2) |
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5 years |
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5 years |
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5 years |
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Expected dividend yield (3) |
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3.26 |
% |
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3.23 |
% |
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3.04 |
% |
Risk-free interest rate (4) |
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1.66 |
% |
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0.50 |
% |
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1.32 |
% |
Exercise price per share (5) |
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$ |
91.59 |
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$ |
67.48 |
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$ |
83.08 |
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Option valuation per share |
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$ |
12.57 |
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$ |
7.96 |
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$ |
7.23 |
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(1)Expected volatility – Estimated based on the historical five-year volatility (the period matching the expected life) of EQR’s share price measured on a monthly basis. (2)Expected life – Approximates the actual weighted average life of all Options granted since the Company went public in 1993. (3)Expected dividend yield – Calculated by averaging the historical annual yield on EQR shares for a period matching the expected life of each grant, with the annual yield calculated by dividing actual regular dividends (excluding any special dividends) by the average price of EQR’s shares in a given year. (4)Risk-free interest rate – The most current U.S. Treasury rate available at the grant date for a period matching the expected life of each grant. (5)Exercise price per share – The closing share price of the Common Shares on the grant date.
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| Summary of Weighted Average Fair Value for Each Restricted Share/Unit |
The individual prices determined above are then weighted to arrive at the final values for each restricted share/unit as follows:
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2022 |
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2021 |
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2020 |
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Weighted average fair value per restricted share |
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$ |
96.84 |
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$ |
61.73 |
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$ |
75.89 |
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Weighted average fair value per restricted unit |
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$ |
93.32 |
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$ |
59.82 |
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$ |
72.69 |
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| Summary of Terms of Each Retirement Eligibility Category |
The following table summarizes the terms of each retirement eligibility category.
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Age 62 for Employees |
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Rule of 70 for Employees |
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Age 72 for Trustees |
Eligibility |
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For employees hired prior to January 1, 2009 and who were age 59 or older as of February 1, 2019. |
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All employees (1). |
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All non-employee Trustees. |
Effect on unvested restricted shares,
restricted units and Options |
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Awards immediately vest, Options continue to be exercisable for the balance of the applicable ten-year option period and restricted units are still subject to the book-up provisions. |
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Awards continue to vest per the original vesting schedule, subject to certain conditions, Options continue to be exercisable for the balance of the applicable ten-year option period and restricted units are still subject to the book-up provisions. |
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Awards immediately vest, Options continue to be exercisable for the balance of the applicable ten-year option period and restricted units are still subject to the book-up provisions. |
Effect on LTI Plan |
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Awards are prorated in proportion to the number of days worked in the first year of the three-year performance period and the individual does not receive any payout of shares or units until the final payout is determined at the end of the three-year performance period. |
(1)The Rule of 70 is met when an employee’s years of service with the Company (which must be at least 15 years) plus his or her age (which must be at least 55 years) on the date of termination equals or exceeds 70 years. In addition, the employee must give the Company at least six months’ advance written notice of his or her intention to retire along with agreeing to certain other conditions.
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| Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan |
The following tables summarize compensation information regarding the restricted shares, restricted units, Options and Employee Share Purchase Plan (“ESPP”) for the three years ended December 31, 2022, 2021 and 2020.
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Year Ended December 31, 2022 |
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Compensation
Expense |
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Compensation
Capitalized |
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Restricted Units/Options
In-Lieu of Bonus (1) |
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Compensation
Equity |
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Dividends
Incurred |
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Restricted shares (2) |
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$ |
10,419 |
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$ |
1,176 |
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$ |
— |
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$ |
11,595 |
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$ |
1,120 |
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Restricted units (2) |
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16,487 |
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|
87 |
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2,530 |
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19,104 |
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1,039 |
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Options |
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1,889 |
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169 |
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263 |
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2,321 |
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— |
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ESPP discount |
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718 |
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78 |
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— |
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796 |
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— |
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Total |
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$ |
29,513 |
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$ |
1,510 |
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$ |
2,793 |
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$ |
33,816 |
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$ |
2,159 |
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Year Ended December 31, 2021 |
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Compensation
Expense |
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Compensation
Capitalized |
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Restricted Units/Options
In-Lieu of Bonus (1) |
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Compensation
Equity |
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Dividends
Incurred |
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Restricted shares (2) |
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$ |
7,258 |
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$ |
1,131 |
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$ |
— |
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$ |
8,389 |
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$ |
761 |
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Restricted units (2) |
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16,689 |
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70 |
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1,038 |
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17,797 |
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1,254 |
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Options |
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2,980 |
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121 |
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— |
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3,101 |
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— |
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ESPP discount |
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883 |
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108 |
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— |
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991 |
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— |
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Total |
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$ |
27,810 |
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$ |
1,430 |
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$ |
1,038 |
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$ |
30,278 |
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$ |
2,015 |
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Year Ended December 31, 2020 |
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Compensation
Expense |
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Compensation
Capitalized |
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Restricted Units/Options
In-Lieu of Bonus (1) |
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Compensation
Equity |
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Dividends
Incurred |
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Restricted shares (2) |
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$ |
10,053 |
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$ |
1,172 |
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$ |
— |
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$ |
11,225 |
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$ |
1,172 |
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Restricted units (2) |
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10,103 |
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80 |
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1,743 |
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11,926 |
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1,855 |
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Options |
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2,156 |
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193 |
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— |
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2,349 |
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— |
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ESPP discount |
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|
862 |
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82 |
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— |
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944 |
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— |
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Total |
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$ |
23,174 |
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$ |
1,527 |
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$ |
1,743 |
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$ |
26,444 |
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$ |
3,027 |
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(1)The Company allows eligible officers the ability to receive immediately vested restricted units (subject to the book-up provisions described above and a two-year hold restriction) or immediately vested Options in-lieu of any percentage of their annual cash bonus. (2)Includes LTI plan awards granted under the executive compensation program.
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| Award Activity of the Share Incentive Plans |
The table below summarizes the Award activity of the Share Incentive Plans for the three years ended December 31, 2022, 2021 and 2020:
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Common
Shares Subject
to Options |
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Weighted
Average
Exercise Price
per Option |
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Restricted
Shares |
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Weighted
Average Fair
Value per
Restricted Share |
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Restricted
Units |
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Weighted
Average Fair
Value per
Restricted Unit |
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Balance at December 31, 2019 |
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5,567,544 |
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$ |
55.52 |
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306,706 |
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$ |
66.15 |
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858,284 |
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$ |
64.95 |
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Awards granted (1) |
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317,731 |
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$ |
76.26 |
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179,911 |
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$ |
77.44 |
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249,263 |
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$ |
72.00 |
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Awards exercised/vested |
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(239,695 |
) |
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$ |
50.31 |
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(131,792 |
) |
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$ |
66.32 |
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(227,747 |
) |
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$ |
68.47 |
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Awards forfeited |
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(1,344 |
) |
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$ |
72.69 |
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(1,191 |
) |
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$ |
73.45 |
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— |
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$ |
— |
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Awards expired |
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(1,484 |
) |
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$ |
47.18 |
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— |
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$ |
— |
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— |
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$ |
— |
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Balance at December 31, 2020 |
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5,642,752 |
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$ |
56.91 |
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353,634 |
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$ |
71.81 |
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879,800 |
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$ |
66.78 |
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Awards granted (1) |
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489,853 |
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$ |
67.58 |
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96,224 |
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$ |
70.46 |
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190,742 |
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$ |
60.71 |
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Awards exercised/vested |
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(1,710,692 |
) |
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$ |
50.09 |
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(133,351 |
) |
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$ |
62.89 |
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(181,531 |
) |
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$ |
62.01 |
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Awards forfeited |
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(23,317 |
) |
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$ |
73.33 |
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(6,631 |
) |
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$ |
74.31 |
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(35,580 |
) |
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$ |
59.82 |
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Awards expired |
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(10,763 |
) |
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$ |
68.00 |
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— |
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$ |
— |
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— |
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$ |
— |
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Balance at December 31, 2021 |
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4,387,833 |
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$ |
60.65 |
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309,876 |
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$ |
75.17 |
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853,431 |
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$ |
66.11 |
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Awards granted (1) |
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164,199 |
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$ |
88.22 |
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|
182,801 |
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$ |
80.52 |
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|
223,242 |
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$ |
86.47 |
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Awards exercised/vested |
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(468,021 |
) |
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$ |
52.87 |
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(194,533 |
) |
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$ |
70.91 |
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(122,999 |
) |
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$ |
66.10 |
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Awards forfeited |
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(12,968 |
) |
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$ |
77.29 |
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(8,226 |
) |
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$ |
82.02 |
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|
|
— |
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|
$ |
— |
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Awards expired |
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(9,683 |
) |
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$ |
60.02 |
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|
— |
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$ |
— |
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|
|
— |
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|
$ |
— |
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Balance at December 31, 2022 |
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4,061,360 |
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$ |
62.60 |
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|
289,918 |
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$ |
81.21 |
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|
953,674 |
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$ |
73.57 |
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(1)Includes LTI plan awards granted under the executive compensation program.
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Amounts in thousands except per share amounts |
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Year Ended December 31, |
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2022 |
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2021 |
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2020 |
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Weighted average grant date fair value per share for Options granted |
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$ |
12.45 |
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$ |
7.98 |
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$ |
6.74 |
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Aggregate intrinsic value of Options exercised (1) |
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$ |
14,511 |
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$ |
47,413 |
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$ |
7,569 |
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Fair value of restricted shares vested |
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$ |
17,353 |
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|
$ |
9,222 |
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|
$ |
10,559 |
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Fair value of restricted units vested |
|
$ |
10,662 |
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|
$ |
12,468 |
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|
$ |
18,711 |
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(1)These values were calculated as the difference between the strike price of the underlying awards and the per share price at which each respective award was exercised.
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| Information Regarding Options Outstanding and Exercisable |
he following table summarizes information regarding Options outstanding and exercisable at December 31, 2022 (aggregate intrinsic value is in thousands):
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Options |
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Weighted
Average
Remaining
Contractual Life
in Years |
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Weighted
Average
Exercise Price |
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Aggregate
Intrinsic
Value (1) |
|
Options Outstanding |
|
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4,061,360 |
|
|
|
4.85 |
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|
$ |
62.60 |
|
|
$ |
6,303 |
|
Options Exercisable |
|
|
3,549,325 |
|
|
|
4.36 |
|
|
$ |
60.80 |
|
|
$ |
6,303 |
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Vested and expected to vest |
|
|
506,883 |
|
|
|
8.26 |
|
|
$ |
75.07 |
|
|
$ |
— |
|
(1)The aggregate intrinsic values were calculated as the excess, if any, between the Company’s closing share price of $59.00 per share on December 31, 2022 and the strike price of the underlying awards.
|