Stock-Based Compensation Plans

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation Plans

9. Stock-Based Compensation Plans

Information with respect to stock options granted under the Company’s 1994 Stock Option and Incentive Plan (the “1994 Plan”) and under the AvalonBay Communities, Inc. 2009 Stock Option and Incentive Plan (the “2009 Plan”) are as follows (dollars in thousands, other than per share amounts):

	2009 Plan shares			Weighted average exercise price per share		1994 Plan shares			Weighted average exercise price per share
Options Outstanding, December 31, 2010		126,484		$	74.20		2,072,217		$	88.50
Exercised		(11,287	)		74.20		(586,149	)		86.79
Granted		144,827			115.83		—			—
Forfeited		—			—		(21,653	)		43.29
Options Outstanding, June 30, 2011		260,024		$	97.39		1,464,415		$	89.85
Options Exercisable June 30, 2011		33,338		$	74.20		1,357,452		$	93.10

The weighted average fair value of the options granted under the 2009 Plan during the six months ended June 30, 2011 is estimated at $ 29.40 per share on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: dividend yield of 4.0% over the expected life of the option, volatility of 35.00%, risk-free interest rate of 3.0% and an expected life of approximately seven years.

At June 30, 2011, the Company had 421,737 outstanding unvested shares granted under restricted stock awards including activity under the 2008 Plan discussed below. Restricted stock vesting during the six months ended June 30, 2011 totaled 305,396 shares and had fair values at the grant date ranging from $48.60 to $147.75 per share. The total grant date fair value of shares vested was $34,882,000 and $9,467,000 for the six months ended June 30, 2011 and 2010, respectively.

Total employee stock-based compensation cost recognized in income was $5,575,000 and $5,166,000 for the six months ended June 30, 2011 and 2010, respectively, and total capitalized stock-based compensation cost was $2,907,000 and $2,592,000 for the six months ended June 30, 2011 and 2010, respectively. At June 30, 2011, there was a total of $3,152,000 and $8,948,000 in unrecognized compensation cost for unvested stock options and unvested restricted stock, respectively, which does not include estimated forfeitures. The unrecognized compensation cost for unvested stock options and restricted stock is expected to be recognized over a weighted average period of 2.28 years and 2.76 years, respectively.

Deferred Stock Performance Plan

On June 1, 2011, the measurement period for the Company’s 2008 deferred stock performance plan (the “2008 Plan”) ended with the maximum award achieved thereunder. This resulted in the Company issuing 397,370 shares of restricted and unrestricted stock valued at $51,153,000. The total cost recognized in earnings in connection with the 2008 Plan was $742,000 and $853,000 for the six months ended June 30, 2011 and 2010, respectively, and total capitalized stock-based compensation cost was $416,000 and $466,000 for the six months ended June 30, 2011 and 2010, respectively.