Share-Based Compensation

We have a stock award and incentive program to attract and retain officers and independent directors. As of December 31, 2017, approximately 0.4 million shares were available for issuance under our 2015 Stock Award and Incentive Plan. The total number of shares available for issuance under this plan may be increased by an additional 0.7 million shares to the extent of any forfeiture, cancellation, exchange, surrender, termination or expiration of an award outstanding under our 2007 Stock Award and Incentive Plan. Awards under the 2015 plan may be in the form of incentive stock options, non-qualified stock options and restricted stock, or other types of awards as authorized under the plan.

Our plans are administered by the Compensation and Human Resources Committee of Aimco’s Board of Directors. In the case of stock options, the exercise price of the options granted may not be less than the fair market value of a share of Common Stock at the date of grant.

Total compensation cost recognized for stock based awards was $9.3 million, $8.6 million and $7.2 million for the years ended December 31, 2017, 2016 and 2015, respectively. Of these amounts, $1.4 million, $1.0 million and $0.5 million, respectively, were capitalized. At December 31, 2017, total unvested compensation cost not yet recognized was $11.8 million. We expect to recognize this compensation over a weighted average period of approximately 1.6 years.

We have granted five different types of awards that are outstanding as of December 31, 2017. We have granted stock options and restricted stock awards that are subject to time-based vesting and require continuous employment, typically over a period of four years from the grant date, and we refer to these awards as Time-Based Stock Options and Time-Based Restricted Stock, respectively. We have also granted stock options, restricted stock awards and long-term incentive partnership units, or LTIP units, that vest conditioned on Aimco’s total shareholder return, or TSR, relative to the NAREIT Apartment Index (60% weighting) and the MSCI US REIT Index (40% weighting) over a forward-looking performance period of three years. We refer to these awards as TSR Stock Options, TSR Restricted Stock and TSR LTIP units. Earned TSR-based awards, if any, will vest 50% on each of the third anniversary and fourth anniversary of the grant date, based on continued employment. The term of Time-Based Stock Options and TSR Stock Options is generally ten years from the date of grant.

We recognize compensation cost associated with Time-Based awards ratably over the requisite service periods, which are typically four years. We recognize compensation cost related to the TSR-based awards, which have graded vesting periods, over the requisite service period for each separate vesting tranche of the award, commencing on the grant date. The value of the TSR-based awards take into consideration the probability that the market condition will be achieved; therefore previously recorded compensation cost is not adjusted in the event that the market condition is not achieved and awards do not vest.

Stock Options

During the years ended December 31, 2017 and 2016, we granted TSR Stock Options, and during and prior to the year ended December 31, 2015, we granted Time-Based Stock Options.

The following table summarizes activity for our outstanding stock options, for the years ended December 31, 2017, 2016 and 2015 (numbers of options in thousands):



	2017				2016				2015
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding at beginning of year	675		$	29.55	1,394		$	30.85	1,640		$	28.91
Granted	184		44.07		216		38.73		239		39.05
Exercised	(211	)	9.90		(934	)	33.61		(484	)	28.33
Forfeited	—		—		(1	)	29.11		(1	)	25.78
Outstanding at end of year	648		$	40.08	675		$	29.55	1,394		$	30.85
Exercisable at end of year	128		$	37.59	280		$	16.38	1,155		$	29.16

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, 2017, options outstanding had an aggregate intrinsic value of $2.4 million and a weighted average remaining contractual term of 7.9 years. Options exercisable at December 31, 2017, had an aggregate intrinsic value of $0.8 million and a weighted average remaining contractual term of 6.7 years. The intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015, was $7.1 million, $11.1 million and $5.5 million, respectively.

The weighted average grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $11.39, $9.94 and $6.97 per option, respectively.

Time-Based Restricted Stock Awards

The following table summarizes activity for Time-Based Restricted Stock awards for the years ended December 31, 2017, 2016 and 2015 (numbers of shares in thousands):



	2017				2016				2015
	Number of Shares		Weighted Average Grant-Date Fair Value		Number of Shares		Weighted Average Grant-Date Fair Value		Number of Shares		Weighted Average Grant-Date Fair Value
Unvested at beginning of year	249		$	33.61	339		$	29.96	513		$	26.34
Granted	45		44.07		91		40.03		145		39.39
Vested	(134	)	32.35		(181	)	29.99		(259	)	27.54
Forfeited	—		—		—		—		(60	)	32.29
Unvested at end of year	160		$	37.63	249		$	33.61	339		$	29.96

The aggregate fair value of shares that vested during the years ended December 31, 2017, 2016 and 2015 was $6.0 million, $7.0 million and $10.4 million, respectively.

TSR Restricted Stock Awards

The following table summarizes activity for TSR Restricted Stock awards for the years ended December 31, 2017, 2016 and 2015 (numbers of shares in thousands):



	2017			2016			2015
	Number of Shares	Weighted Average Grant-Date Fair Value		Number of Shares	Weighted Average Grant-Date Fair Value		Number of Shares		Weighted Average Grant-Date Fair Value
Unvested at beginning of year	214	$	39.66	123	$	39.72	—		$	—
Granted	39	46.39		91	39.59		142		39.72
Forfeited	—	—		—	—		(19	)	39.72
Unvested at end of year	253	$	40.70	214	$	39.66	123		$	39.72

TSR LTIP Units

The following table summarizes activity for TSR LTIP units for the years ended December 31, 2017 (numbers of units in thousands):



	2017
	Number of Units	Weighted Average Grant-Date Fair Value
Unvested at beginning of year	—	$	—
Granted	45	46.21
Unvested at end of year	45	$	46.21

Determination of Grant-Date Fair Value of Awards

We estimated the fair value of TSR-based awards granted in 2017, 2016 and 2015 using a Monte Carlo model using the assumptions set forth in the table below.

The risk-free interest rate reflects the annualized yield of a zero coupon U.S. Treasury security with a term equal to the expected term of the option. The expected dividend yield reflects expectations regarding cash dividend amounts per share paid on Aimco’s Common Stock during the expected term of the option. Expected volatility reflects an average of the historical volatility of Aimco’s Common Stock during the historical period commensurate with the expected term of the options that ended on the date of grant, and the implied volatility is calculated from observed call option contracts closest to the expected term. The derived vesting period of TSR Restricted Stock and TSR LTIP units was determined based on the graded vesting terms. The expected term of the TSR-options was based on historical option exercises and post-vesting terminations. The midpoints of our valuation assumptions for the 2017, 2016 and 2015 grants were as follows:



	2017			2016			2015
Grant date market value of a common share	$	44.07		$	38.73		$	39.05
Risk-free interest rate	1.57		%	1.15		%	1.04		%
Dividend yield	3.27		%	3.41		%	2.87		%
Expected volatility	21.33		%	21.24		%	19.48		%
Derived vesting period of TSR Restricted Stock and TSR LTIP units	3.4 years			3.4 years			3.4 years
Weighted average expected term of TSR Stock Options	5.8 years			5.8 years			n/a

The grant date fair value for the Time-Based Restricted Stock awards reflects the closing price of a share of Aimco common stock on the grant date.