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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation Under various share-based compensation plans and under terms established or modified by our Board or a committee thereof, we grant equity awards to trustees, officers, and key employees, including non-qualified options to purchase the Company’s common shares, RSUs, deferred share units (“DSUs”), and unrestricted common shares issued in lieu of trustee compensation. On April 26, 2021, the Company’s Shareholders approved the 2021 Equity and Performance-Based Incentive Compensation Plan (“2021 Plan”), which authorized an additional three million shares available for future issuance of equity-based awards. As of December 31, 2022, there were a total of 1,724,352 shares reserved for granting of future options and stock awards under the 2021 Plan. We recorded share-based compensation expense associated with our equity awards in the various expense categories in the Consolidated Statements of Income as set forth in the following table. In addition, $4.1 million and $3.9 million share-based compensation cost was capitalized as real estate facilities for the year ended December 31, 2022 and 2021, respectively (none in 2020).
|  |  |  |  | For Years Ended December 31,
|  |  |  |  | 2022 |  | 2021 |  | 2020
|  |  |  |  | (Amounts in thousands)
Self-storage cost of operations |  |  |  |  | $ | 17,950 |  |  | $ | 20,544 |  |  | $ | 14,904 |
Ancillary cost of operations |  |  |  |  | 888 |  |  | 1,561 |  |  | — |
General and administrative |  |  |  |  | 37,865 |  |  | 37,760 |  |  | 18,586 |
Total |  |  |  |  | $ | 56,703 |  |  | $ | 59,865 |  |  | $ | 33,490 |
Included in share-based compensation is $14.9 million, $15.9 million and $5.7 million for the years ended December 31, 2022, 2021, and 2020, respectively, of retirement acceleration as discussed in Note 2. Stock Options We have service-based and performance-based stock options outstanding. Performance-based stock options outstanding vest upon meeting certain performance conditions or market conditions. Stock options generally 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. New shares are issued for options exercised. Employees cannot require the Company to settle their award in cash. For the years ended December 31, 2022, 2021, and 2020, we incurred share-based compensation cost for outstanding stock options of $19.9 million, $25.1 million and $7.6 million, respectively. During 2022, we granted 65,000 stock options in connection with non-management trustee compensation. We also granted 77,683 stock options, of which vesting is dependent upon meeting certain market conditions over the three-year period from January 1, 2022 through December 31, 2024, with continued service-based vesting through the first quarter of 2027. These stock options require relative achievement of the Company’s total shareholder return as compared to the weighted average total shareholder return of specified peer groups and can result in grantees earning up to 200% of the target options originally granted. During 2021, 245,000 stock options were awarded where vesting is dependent upon meeting certain performance targets over the three-year period from January 1, 2021 through December 31, 2023, which are considered performance conditions, with continued service-based vesting through the first quarter of 2026. 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 December 31, 2022, these performance targets were expected to be met at 125% achievement, an increase from 100% as of December 31, 2021. During 2020, 770,000 stock options were awarded where vesting is dependent upon meeting certain performance targets over the three-year period from January 1, 2020 through December 31, 2022, which are considered performance conditions, with continued service-based vesting through the first quarter of 2025. These performance targets were met at 125% achievement at December 31, 2022. The stock options outstanding at December 31, 2022 have an aggregate intrinsic value (the excess, if any, of each option’s market value over the exercise price) of approximately $209.8 million and remaining average contractual lives of approximately five years. Total compensation cost related to nonvested stock options that has not yet been recognized is $21.2 million and is expected to be recognized as compensation cost over approximately three years on average. Exercisable stock options have an aggregate intrinsic value of approximately $128.9 million at December 31, 2022 and remaining average contractual lives of approximately three years. Additional information with respect to stock options during 2022, 2021, and 2020 is as follows:
| Service-Based |  | Performance-Based |  | Total
| Number of Options |  | Weighted Average Exercise Price per Share |  | Number of Options |  | Weighted Average Exercise Price per Share |  | Number of Options |  | Weighted Average Exercise Price per Share
Options outstanding January 1, 2020 | 2,339,667 |  |  | $ | 204.53 |  |  | — |  |  | $ | — |  |  | 2,339,667 |  |  | $ | 204.53 |
Granted | 70,000 |  |  | 200.61 |  |  | 770,000 |  |  | 228.94 |  |  | 840,000 |  |  | 226.58 |
Exercised | (71,500) |  |  | (175.16) |  |  | — |  |  | — |  |  | (71,500) |  |  | (175.16) |
Cancelled | (107,000) |  |  | (220.33) |  |  | (40,000) |  |  | (228.94) |  |  | (147,000) |  |  | (222.67) |
Options outstanding December 31, 2020 | 2,231,167 |  |  | $ | 204.60 |  |  | 730,000 |  |  | $ | 228.94 |  |  | 2,961,167 |  |  | $ | 210.59 |
Granted (a) | 140,000 |  |  | 248.54 |  |  | 420,000 |  |  | 229.53 |  |  | 560,000 |  |  | 234.29 |
Exercised | (471,216) |  |  | (203.30) |  |  | — |  |  | — |  |  | (471,216) |  |  | (203.30) |
Cancelled | — |  |  | — |  |  | (10,000) |  |  | (228.94) |  |  | (10,000) |  |  | (228.94) |
Options outstanding December 31, 2021 | 1,899,951 |  |  | $ | 208.16 |  |  | 1,140,000 |  |  | $ | 229.16 |  |  | 3,039,951 |  |  | $ | 216.04 |
Granted (b) | 65,000 |  |  | 398.97 |  |  | 138,933 |  |  | 299.88 |  |  | 203,933 |  |  | 331.46 |
Special dividend adjustment (c) | 62,512 |  |  | N/A |  | 41,836 |  |  | N/A |  | 104,348 |  |  | N/A
Exercised | (173,422) |  |  | (189.95) |  |  | (10,327) |  |  | (221.68) |  |  | (183,749) |  |  | (191.74) |
Cancelled | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Options outstanding December 31, 2022 (d) | 1,854,041 |  |  | $ | 209.53 |  |  | 1,310,442 |  |  | $ | 229.39 |  |  | 3,164,483 |  |  | $ | 217.75 |
Options exercisable at December 31, 2022 (d) | 1,617,555 |  |  | $ | 200.87 |  |  | 10,327 |  |  | $ | 221.68 |  |  | 1,627,882 |  |  | $ | 201.00 |
| 2022 |  | 2021 |  | 2020
Aggregate exercise date intrinsic value of options exercised during the year (in 000's) | $ | 27,210 |  | $ | 44,613 |  | $ | 3,433
Average assumptions used in valuing options with the Black-Scholes method: |  |  |  |  |
Expected life of options in years | 6 |  | 5 |  | 5
Risk-free interest rate | 2.9% |  | 0.8% |  | 0.4%
Expected volatility, based upon historical volatility | 22.9% |  | 24.1% |  | 21.6%
Expected dividend yield | 2.0% |  | 2.9% |  | 3.8%
Average assumptions used in valuing options with market conditions with the Monte-Carlo simulation method: |  |  |  |  |
Expected life of options in years | 7 |  | 5 |  |
Risk-free interest rate | 1.8% |  | 0.9% |  |
Expected volatility, based upon historical volatility | 22.6% |  | 26.5% |  |
Expected dividend yield | 2.3% |  | 2.9% |  |
Average estimated value of options granted during the year | $ | 87.57 |  | $ | 62.66 |  | $ | 17.79
(a) Amount granted for performance-based stock options includes performance adjustments above target for options granted in 2020. (b) Amount granted for performance-based stock options includes performance adjustments above target for options granted in 2021. (c) On August 4, 2022, we paid a Special Dividend of $13.15 per common share to shareholders of record as of August 1, 2022. Stock options that were outstanding at the time of the Special Dividend were adjusted pursuant to the anti-dilution provisions of the Company’s applicable equity and performance-based incentive compensation plans that provide for equitable adjustments in the event of an extraordinary cash dividend. The anti-dilution adjustments proportionately increased the number of outstanding stock options and reduced the exercise prices of outstanding stock options by a conversion rate of 1.03275, resulting in an increase of 104,348 stock options outstanding. The adjustments did not result in incremental share-based compensation expense. (d) The weighted average exercise price of options outstanding and options exercisable at December 31, 2022 reflect the adjusted exercise price post the anti-dilution adjustment on August 3, 2022. Restricted Share Units We have service-based and performance-based RSUs outstanding, which generally vest over 5 to 8 years from the grant date. Performance-based RSUs outstanding vest upon meeting certain performance conditions or market conditions. 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 new common shares equal to the number of vested RSUs, less common shares withheld to satisfy the grantee’s statutory tax liabilities arising from the vesting. The fair value of our RSUs is determined based upon the applicable closing trading price of our common shares. For the years ended December 31, 2022, 2021, and 2020, we incurred share-based compensation cost for RSUs of $39.9 million, $37.6 million, and $25.1 million, respectively. During 2022, 21,985 RSUs were awarded where vesting is dependent upon meeting certain market conditions over a three-year period from January 1, 2022 through December 31, 2024, with continued service-based vesting through the first quarter of 2027. The amount of these RSUs that are earned and vested, if any, will be based, in addition to continued employment requirements, on the Company's relative total shareholder return over the three-year period as compared to the weighted average total shareholder return of the specified peer groups and can result in grantees earning up to 200% of the target RSUs originally granted. During 2021, 37,000 RSUs were awarded where vesting is dependent upon meeting certain performance targets for 2021, which are considered performance conditions, with continued service-based vesting through the first quarter of 2026. As of December 31, 2021, these targets were met at 125% achievement. Remaining compensation cost related to RSUs outstanding at December 31, 2022 totals approximately $74.3 million and is expected to be recognized over the next two years on average. The following tables set forth relevant information with respect to restricted shares (dollar amounts in thousands):
| Service-Based |  | Performance-Based |  | Total
| Number of Restricted Share Units |  | Weighted-Average Grant-Date Fair Value |  | Number of Restricted Share Units |  | Weighted-Average Grant-Date Fair Value |  | Number of Restricted Share Units |  | Weighted-Average Grant-Date Fair Value
Restricted share units outstanding January 1, 2020 | 619,150 |  |  | $ | 213.29 |  |  | — |  |  | $ | — |  |  | 619,150 |  |  | $ | 213.29 |
Granted | 110,755 |  |  | 222.27 |  |  | — |  |  | — |  |  | 110,755 |  |  | 222.27 |
Vested | (140,089) |  |  | (200.88) |  |  | — |  |  | — |  |  | (140,089) |  |  | (200.88) |
Forfeited | (37,028) |  |  | (215.08) |  |  | — |  |  | — |  |  | (37,028) |  |  | (215.08) |
Restricted share units outstanding December 31, 2020 | 552,788 |  |  | $ | 218.11 |  |  | — |  |  | $ | — |  |  | 552,788 |  |  | $ | 218.11 |
Granted (a) | 143,068 |  |  | 336.06 |  |  | 46,250 |  |  | 275.12 |  |  | 189,318 |  |  | 321.17 |
Vested | (138,420) |  |  | (216.63) |  |  | — |  |  | — |  |  | (138,420) |  |  | (216.63) |
Forfeited | (32,864) |  |  | (221.32) |  |  | — |  |  | — |  |  | (32,864) |  |  | (221.32) |
Restricted share units outstanding December 31, 2021 | 524,572 |  |  | $ | 249.90 |  |  | 46,250 |  |  | $ | 275.12 |  |  | 570,822 |  |  | $ | 251.95 |
Granted | 51,575 |  |  | 293.43 |  |  | 21,985 |  |  | 465.11 |  |  | 73,560 |  |  | 344.74 |
Vested | (146,138) |  |  | (240.71) |  |  | — |  |  | — |  |  | (146,138) |  |  | (240.71) |
Forfeited | (22,197) |  |  | (256.50) |  |  | — |  |  | — |  |  | (22,197) |  |  | (256.50) |
Restricted share units outstanding December 31, 2022 | 407,812 |  |  | $ | 258.34 |  |  | 68,235 |  |  | $ | 336.33 |  |  | 476,047 |  |  | $ | 269.52 |
| 2022 |  | 2021 |  | 2020
Amounts for the year (in 000's, except number of shares): |  |  |  |  |
Fair value of vested shares on vesting date | $ | 47,244 |  |  | $ | 37,430 |  |  | $ | 31,076 |
Cash paid for taxes upon vesting in lieu of issuing common shares | $ | 16,827 |  |  | $ | 13,069 |  |  | $ | 10,518 |
Common shares issued upon vesting | 99,009 |  |  | 81,325 |  |  | 91,627 |
Average assumptions used in valuing restricted share units with market conditions with the Monte-Carlo simulation method: |  |  |  |  |
Time from the valuation date to the end of the performance period | 3 |  |  |  |
Risk-free interest rate | 1.6% |  |  |  |
Expected volatility, based upon historical volatility | 26.5% |  |  |  |
Expected dividend yield | 2.3% |  |  |  |
Average estimated value of restricted share units granted during the year | $ | 465.11 |  |  |  |  |
(a)Amount includes adjustments above target for performance-based RSUs granted in fiscal year 2021 based on achievement of performance criteria. Trustee Deferral Program Non-management trustees may elect to receive all or a portion of their cash retainers in cash, unrestricted common shares, or fully-vested DSUs to be settled at a specified future date. Shares of unrestricted stock and/or DSUs will be granted to the non-management trustee on the last day of each calendar quarter based on the cash retainer earned for that quarter and converted into a number of shares or units based on the applicable closing price of our common shares on such date. During 2022, we granted 2,425 DSUs and 432 unrestricted common shares.

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