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Share Incentive Plans (Tables)
 12 Months Ended
Dec. 31, 2020
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Summary of Terms of Awards Generally Granted to Employees

The following table summarizes the terms of Awards generally granted to employees:

 

 

 

Options

 

Restricted Shares

 

Restricted Units

Overview

 

Options exercised after vesting result in issuance of new Common Shares.

 

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).

 

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

 

Granted at the fair market value of Common Shares as of the grant date.

 

Granted at the fair market value of Common Shares as of the grant date.

 

Granted at varying discount rates to the fair market value of Common Shares as of the grant date (2).

Vesting Period

 

In three equal installments over a three-year period from the grant date.

 

Three years from the grant date.

 

Three years from the grant date.

Expiration

 

Ten years from the grant date.

 

Not applicable.

 

Ten years from the grant date (2).

Upon Employee

Termination

 

Unvested options are canceled.

 

Unvested restricted shares are canceled.

 

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.
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:

 

 

 

2020

 

 

2019

 

 

2018

 

Expected volatility (1)

 

 

15.2

%

 

 

16.3

%

 

 

14.8

%

Expected life (2)

 

5 years

 

 

5 years

 

 

5 years

 

Expected dividend yield (3)

 

 

3.04

%

 

 

3.10

%

 

 

3.09

%

Risk-free interest rate (4)

 

 

1.32

%

 

 

2.43

%

 

 

2.52

%

Option valuation per share

 

$

7.23

 

 

$

8.06

 

 

$

6.15

 

(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.
Summary of Terms of Each Retirement Eligibility Category The following table summarizes the terms of each retirement eligibility category.

 

 

 

Age 62 for Employees

 

Rule of 70 for Employees

 

Age 72 for Trustees

Eligibility

 

For employees hired prior to January 1, 2009 and who were age 59 or older as of February 1, 2019.

 

All employees (1).

 

All non-employee Trustees.

Effect on unvested restricted shares,

restricted units and Options

 

Awards immediately vest and Options continue to be exercisable for the balance of the applicable ten-year option period.

 

Awards continue to vest per the original vesting schedule, subject to certain conditions, and Options continue to be exercisable for the balance of the applicable ten-year option period.

 

Awards immediately vest and Options continue to be exercisable for the balance of the applicable ten-year option period.

Effect on LTI Plan

 

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.
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, 2020, 2019 and 2018.

 

 

Year Ended December 31, 2020

 

 

 

Compensation

Expense

 

 

Compensation

Capitalized

 

 

Restricted Units/Options

In-Lieu of Bonus (1)

 

 

Compensation

Equity

 

 

Dividends

Incurred

 

Restricted shares (2)

 

$

10,053

 

 

$

1,172

 

 

$

—

 

 

$

11,225

 

 

$

1,172

 

Restricted units (2)

 

 

10,103

 

 

 

80

 

 

 

1,743

 

 

 

11,926

 

 

 

1,855

 

Options

 

 

2,156

 

 

 

193

 

 

 

—

 

 

 

2,349

 

 

 

—

 

ESPP discount

 

 

862

 

 

 

82

 

 

 

—

 

 

 

944

 

 

 

—

 

Total

 

$

23,174

 

 

$

1,527

 

 

$

1,743

 

 

$

26,444

 

 

$

3,027

 

 

 

 

Year Ended December 31, 2019

 

 

 

Compensation

Expense

 

 

Compensation

Capitalized

 

 

Restricted Units/Options

In-Lieu of Bonus (1)

 

 

Compensation

Equity

 

 

Dividends

Incurred

 

Restricted shares (2)

 

$

11,522

 

 

$

916

 

 

$

—

 

 

$

12,438

 

 

$

979

 

Restricted units (2)

 

 

9,905

 

 

 

240

 

 

 

3,265

 

 

 

13,410

 

 

 

825

 

Options

 

 

2,420

 

 

 

254

 

 

 

1

 

 

 

2,675

 

 

 

—

 

ESPP discount

 

 

602

 

 

 

40

 

 

 

—

 

 

 

642

 

 

 

—

 

Total

 

$

24,449

 

 

$

1,450

 

 

$

3,266

 

 

$

29,165

 

 

$

1,804

 

 

 

 

Year Ended December 31, 2018

 

 

 

Compensation

Expense

 

 

Compensation

Capitalized

 

 

Restricted Units/Options

In-Lieu of Bonus (1)

 

 

Compensation

Equity

 

 

Dividends

Incurred

 

Restricted shares (2)

 

$

7,406

 

 

$

852

 

 

$

—

 

 

$

8,258

 

 

$

754

 

Restricted units (2)

 

 

12,310

 

 

 

36

 

 

 

1,663

 

 

 

14,009

 

 

 

963

 

Options

 

 

6,683

 

 

 

296

 

 

 

2,755

 

 

 

9,734

 

 

 

—

 

ESPP discount

 

 

733

 

 

 

34

 

 

 

—

 

 

 

767

 

 

 

—

 

Total

 

$

27,132

 

 

$

1,218

 

 

$

4,418

 

 

$

32,768

 

 

$

1,717

 

(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.
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, 2020, 2019 and 2018:

 

 

 

Common

Shares Subject

to Options

 

 

Weighted

Average

Exercise Price

per Option

 

 

Restricted

Shares

 

 

Weighted

Average Fair

Value per

Restricted Share

 

 

Restricted

Units

 

 

Weighted

Average Fair

Value per

Restricted Unit

 

Balance at December 31, 2017

 

 

6,483,832

 

 

$

46.46

 

 

 

369,741

 

 

$

73.67

 

 

 

901,260

 

 

$

77.61

 

Awards granted (1) (5)

 

 

1,730,942

 

 

$

60.40

 

 

 

129,303

 

 

$

62.25

 

 

 

267,074

 

 

$

61.60

 

Awards exercised/vested (2) (3) (4)

 

 

(1,056,388

)

 

$

29.05

 

 

 

(194,116

)

 

$

77.32

 

 

 

(28,486

)

 

$

55.50

 

Awards forfeited

 

 

(38,133

)

 

$

60.74

 

 

 

(5,503

)

 

$

65.77

 

 

 

—

 

 

$

—

 

Awards expired

 

 

(8,018

)

 

$

59.70

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

Balance at December 31, 2018

 

 

7,112,235

 

 

$

52.35

 

 

 

299,425

 

 

$

66.52

 

 

 

1,139,848

 

 

$

71.07

 

Awards granted (1) (5)

 

 

234,147

 

 

$

72.10

 

 

 

163,799

 

 

$

73.96

 

 

 

141,772

 

 

$

67.22

 

Awards exercised/vested (2) (3) (4)

 

 

(1,745,050

)

 

$

44.72

 

 

 

(151,321

)

 

$

75.41

 

 

 

(422,784

)

 

$

70.77

 

Awards forfeited

 

 

(30,489

)

 

$

61.92

 

 

 

(5,197

)

 

$

65.35

 

 

 

(552

)

 

$

69.43

 

Awards expired

 

 

(3,299

)

 

$

40.39

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

Balance at December 31, 2019

 

 

5,567,544

 

 

$

55.52

 

 

 

306,706

 

 

$

66.15

 

 

 

858,284

 

 

$

64.95

 

Awards granted (1) (5)

 

 

317,731

 

 

$

76.26

 

 

 

179,911

 

 

$

77.44

 

 

 

249,263

 

 

$

72.00

 

Awards exercised/vested (2) (3) (4)

 

 

(239,695

)

 

$

50.31

 

 

 

(131,792

)

 

$

66.32

 

 

 

(227,747

)

 

$

68.47

 

Awards forfeited

 

 

(1,344

)

 

$

72.69

 

 

 

(1,191

)

 

$

73.45

 

 

 

—

 

 

$

—

 

Awards expired

 

 

(1,484

)

 

$

47.18

 

 

 

—

 

 

$

—

 

 

 

—

 

 

$

—

 

Balance at December 31, 2020

 

 

5,642,752

 

 

$

56.91

 

 

 

353,634

 

 

$

71.81

 

 

 

879,800

 

 

$

66.78

 

(1)

The weighted average grant date fair value for Options granted during the years ended December 31, 2020, 2019 and 2018 was $6.74 per share, $8.05 per share and $6.17 per share, respectively.

(2)

The aggregate intrinsic value of Options exercised during the years ended December 31, 2020, 2019 and 2018 was $7.6 million, $58.1 million and $42.9 million, respectively.  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.

(3)

The fair value of restricted shares vested during the years ended December 31, 2020, 2019 and 2018 was $10.6 million, $11.1 million and $11.5 million, respectively.

(4)

The fair value of restricted units vested during the years ended December 31, 2020, 2019 and 2018 was $18.7 million, $29.1 million and $1.8 million, respectively.

(5)

Includes LTI plan awards granted under the executive compensation program.
Information Regarding Options Outstanding and Exercisable

The following table summarizes information regarding Options outstanding and exercisable at December 31, 2020 (aggregate intrinsic value is in thousands):

 

 

 

Options

 

 

Weighted

Average

Remaining

Contractual Life

in Years

 

 

Weighted

Average

Exercise Price

 

 

Aggregate

Intrinsic

Value (1)

 

Options Outstanding

 

 

5,642,752

 

 

 

4.64

 

 

$

56.91

 

 

$

26,881

 

Options Exercisable

 

 

4,985,668

 

 

 

4.16

 

 

$

55.12

 

 

$

26,804

 

Vested and expected to vest

 

 

648,552

 

 

 

8.32

 

 

$

70.40

 

 

$

77

 

(1)

The aggregate intrinsic values were calculated as the excess, if any, between the Company’s closing share price of $59.28 per share on December 31, 2020 and the strike price of the underlying awards.
LTI Awards [Member]  
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Summary of Weighted Average Fair Value for Each Restricted Share/Unit

The grant date fair value of the TSR portion of the LTI awards is estimated using a multifactor Monte Carlo model to determine share prices for an absolute award for which the payout of the award only depends on EQR’s TSR and a set of relative awards for which the payout of the award depends on the spread of EQR’s TSR to the TSR of two indices: (a) the FTSE Nareit Apartment Index; and (b) the FTSE Nareit Equity Index.  The grant date fair value of the Normalized FFO portion of the LTI awards is estimated using the closing price of EQR Common Shares on the grant date for the restricted shares and a discounted closing price of EQR Common Shares on the grant date for the restricted units to reflect the “book-up” and liquidity risk inherent in the units.  The individual prices determined above are then weighted to arrive at the final values for each restricted share/unit as follows:

 

 

2020

 

 

2019

 

 

2018

 

Weighted average fair value per restricted share

 

$

75.89

 

 

$

65.36

 

 

$

63.86

 

Weighted average fair value per restricted unit

 

$

72.69

 

 

$

63.12

 

 

$

62.20