We consider stock options and RSUs “granted” and “outstanding” as the terms are used herein, when (i) the Company and the recipient reach a mutual understanding of the key terms of the award, (ii) the award has been authorized, and (iii) the recipient is affected by changes in the market price of our stock.

We amortize the grant-date fair value of awards, as compensation expense over the service period, which begins on the grant date and ends on the expected vesting date. For awards that are earned solely upon the passage of time and continued service, the entire cost of the award is amortized on a straight-line basis over the service period. For awards with performance conditions, the individual cost of each vesting is amortized separately over each individual service period (the “accelerated attribution” method).

We recorded share-based compensation expense associated with stock options and RSUs in the various expense categories in the Statement of Income as set forth in the following table. In addition, $0.8 million and $3.1 million share-based compensation cost was capitalized as real estate facilities for the three and nine months ended September 30, 2021, respectively.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

	(Amounts in thousands)

Self-storage cost of operations	$	4,506	$	3,488	$	16,272	$	10,550
Ancillary cost of operations	343		—		1,394		—
General and administrative	9,746		5,278		30,019		11,080
Total	$	14,595	$	8,766	$	47,685	$	21,630

In July 2020, we modified our share-based compensation plans to allow immediate vesting upon retirement (“Retirement Acceleration”), and to extend the exercisability of outstanding stock options up to a year after retirement, for currently outstanding and future grants. Prior to the modification, unvested awards were forfeited, and outstanding vested stock options were cancelled, upon retirement. Employees are eligible for Retirement Acceleration if they meet certain conditions including length of service, age, notice of intent to retire, and facilitation of succession for their role.

This modification results in accelerating amortization of compensation expense for each grant by changing the end of the service period from the original vesting date to the date an employee is expected to be eligible for Retirement Acceleration, if earlier. As a result, the Company recorded $4.8 million and $15.8 million in accelerated compensation expense during the three and nine months ended September 30, 2021, respectively, as compared to $2.6 million for each of the three and nine months ended September 30, 2020, respectively.

During the three months ended March 31, 2021, the Company depleted the available shares under the 2016 Equity and Performance-Based Incentive Compensation Plan resulting in $4.8 million of award expense classified as a liability as of March 31, 2021. On April 26, 2021, the Company’s Shareholders approved the 2021 Equity and Performance-Based Incentive Compensation Plan, which authorizes an additional three million shares available for future issuance. Consequently, awards previously classified as a liability were revalued as of April 26, 2021 and reclassified to equity.

In amortizing share-based compensation expense, we do not estimate future forfeitures. Instead, we reverse previously amortized share-based compensation expense with respect to grants that are forfeited in the period the employee terminates employment.

Stock options vest over 3 to 5 years, expire 10 years after the grant date, and have an exercise price equal to the closing trading price of our common shares on the grant date. Employees cannot require the Company to settle their award in cash. We use the Black-Scholes option valuation model to estimate the fair value of our performance-based and non-performance based stock options.

Outstanding stock option grants are included on a one-for-one basis in our diluted weighted average shares, to the extent dilutive, after applying the treasury stock method (based upon the average common share price during the period) to assumed exercise proceeds and measured but unrecognized compensation.

For the three and nine months ended September 30, 2021, we recorded share-based compensation expense for outstanding stock options of $5.5 million and $20.5 million, respectively, as compared to $0.8 million and $3.2 million for the same periods in 2020. The amounts for the three and nine months ended September 30, 2021 includes $0.4 million and $4.9 million, respectively, as compared to $0.1 million for each of the same periods in 2020, in connection with the Retirement Acceleration as discussed above.

During the nine months ended September 30, 2021, 385,000 stock options were awarded, 411,467 options were exercised and 10,000 options were forfeited. In addition, we expect an incremental 175,000 stock options to be paid out based on the estimated achievement of performance targets. A total of 3,099,700 stock options were outstanding at September 30, 2021, (2,961,167 at December 31, 2020) and have an average exercise price of $216.45.

During the nine months ended September 30, 2021, we incurred share-based compensation expense of $1.1 million in connection with the initial 15,000 stock option awards issued to each of the five trustees who joined our Board in January 2021.

During the nine months ended September 30, 2021, 245,000 stock options were awarded where vesting is dependent upon meeting certain performance targets with respect to 2021, 2022, and 2023. These awards contain a relative Total Shareholder Return modifier that will adjust the payout based on relative performance as compared to the market. As of September 30, 2021, these targets are expected to be met at 100% achievement. These options resulted in $5.7 million in related compensation expense during the nine months ended September 30, 2021.

During the nine months ended September 30, 2020, 770,000 stock options were awarded where vesting is dependent upon meeting certain performance targets with respect to 2020, 2021, and 2022. As of September 30, 2021, these targets are expected to be met at 125% achievement, an increase from 100% as of December 31, 2020, resulting in $9.6 million in related compensation expense during the nine months ended September 30, 2021.

RSUs generally vest over 5 to 8 years from the grant date. The grantee receives dividends for each outstanding RSU equal to the per-share dividends received by our common shareholders. We expense any dividends previously paid upon forfeiture of the related RSU. Upon vesting, the grantee receives common shares equal to the number of vested RSUs, less common shares withheld in exchange for tax deposits made by the Company to satisfy the grantee’s statutory tax liabilities arising from the vesting.

During the nine months ended September 30, 2021, 78,040 RSUs were granted, 26,414 RSUs were forfeited and 81,193 RSUs vested. In addition, we expect an incremental 9,250 RSUs to be paid out based on the estimated achievement of performance targets. The vesting resulted in the issuance of 54,914 common shares. In addition, tax deposits totaling $10.4 million ($9.7 million for the same period in 2020) were made on behalf of employees in exchange for 26,279 common shares withheld upon vesting. A total of 532,471 RSUs were outstanding at September 30, 2021 (552,788 at December 31, 2020). During the nine months ended September 30, 2021, 37,000 RSUs were awarded where vesting is dependent upon meeting certain performance targets for 2021. As of September 30, 2021, these targets are expected to be met at 125% achievement. These RSUs resulted in $4.6 million in related compensation expense during the nine months ended September 30, 2021.