Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

2021 Equity Incentive Plan

During the second quarter of 2021, the Company’s shareholders approved and the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan replaced the 2012 Equity Incentive Plan (the “2012 Plan”) and provides for the issuance of up to 9,544,095 Class A common shares (including shares that remained available for future awards under the 2012 Plan as of the effective date of the 2021 Plan and shares related to outstanding awards under the 2012 Plan that may become available after expiration, forfeiture or cancellation of such awards). The 2021 Plan provides for the issuance of Class A common shares through the grant of a variety of awards including stock options, stock appreciation rights, RSUs, unrestricted shares, dividend equivalent rights and performance-based awards. The 2021 Plan terminates in May 2031, unless terminated earlier by the Company’s board of trustees. When the Company issues Class A common shares under the 2021 Plan, the Operating Partnership issues an equivalent number of Class A units to AH4R.

During the years ended December 31, 2021, 2020 and 2019, the HCC Committee granted RSUs to employees that vest over a one- to four-year service period. RSUs granted to non-management trustees during the years ended December 31, 2021, 2020 and 2019 vest over a one-year service period, and stock options granted to non-management trustees during the year ended December 31, 2019 vest over a four-year service period. Options expire 10 years from the date of grant.

During the year ended December 31, 2021, the HCC Committee granted PSUs to certain executives that cliff vest at the end of a three-year service period. The performance conditions of the PSUs are measured over a three-year performance period beginning January 1, 2021 and ending December 31, 2023. A portion of the PSUs are based on (i) the achievement of relative total shareholder return compared to a specified peer group (the “TSR Awards”), and a portion are based on (ii) average annual growth in core funds from operations per share (the “Core FFO Awards”). The number of PSUs that may ultimately vest range from zero to 200% of the number of PSUs granted based on the level of achievement of these performance conditions. For the TSR Awards, grant date fair value was determined using a multifactor Monte Carlo model and the resulting compensation cost is amortized over the service period regardless of whether the performance condition is achieved. For the Core FFO Awards, fair value is based on the market value on the

date of grant and compensation cost is recognized based on the probable achievement of the performance condition at each reporting period.

The 2012 Plan and 2021 Plan allow for continued release of awards based on the original vesting schedule, rather than forfeiture, of unvested share-based grants upon termination of service for employees who meet certain retirement eligibility criteria, including age and years of service. Retirement eligible employees must also provide a notice of intent to retire at least six months prior to retirement date and the HCC Committee must approve the continued release of awards.

The following table summarizes stock option activity under the 2012 Plan and 2021 Plan for the years ended December 31, 2021, 2020 and 2019:


	Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1) (in thousands)
Options outstanding at December 31, 2018	2,252,275	$	16.92	6.1	$	7,713
Granted	20,000	20.48
Exercised	(730,125)	15.94			6,088
Forfeited	(12,350)	20.80
Options outstanding at December 31, 2019	1,529,800	$	17.40	5.3	$	13,479
Granted	—	—
Exercised	(426,150)	16.55			4,911
Forfeited	(13,350)	21.89
Options outstanding at December 31, 2020	1,090,300	$	17.68	4.5	$	13,436
Granted	—	—
Exercised	(266,000)	17.01			5,625
Forfeited	—	—
Options outstanding at December 31, 2021	824,300	$	17.89	3.7	$	21,200
Options exercisable at December 31, 2021	786,800	$	17.81	3.6	$	20,303

(1)Intrinsic value for activities other than exercises is defined as the difference between the grant price and the market value on the last trading day of the period for those stock options where the market value is greater than the grant price. For exercises, intrinsic value is defined as the difference between the grant price and the market value on the date of exercise.

The Company uses the Black-Scholes Option Pricing Model to calculate the fair value of stock options granted for Class A common shares. Because the Company’s stock has a limited trading history, the volatility assumption used in the model is based on the historical volatility of similar entities in our industry and the expected term assumption is based on the simplified method by using the average of the contractual term and vesting period. The weighted-average fair value of stock options for Class A common shares granted during the year ended December 31, 2019 was $2.85 based on the following inputs used in the Black-Scholes Option Pricing Model:


	2019
Expected term (years)		7.0
Dividend yield		3.0	%
Volatility		17.3	%
Risk-free interest rate		2.6	%

The following table summarizes RSU activity under the 2012 Plan and 2021 Plan for the years ended December 31, 2021, 2020 and 2019:


	Restricted Share Units	Weighted- Average Grant Date Fair Value
RSUs outstanding at December 31, 2018	372,375	$	20.00
Awarded	350,334	22.90
Vested	(111,000)	19.75
Forfeited	(12,600)	21.34
RSUs outstanding at December 31, 2019	599,109	$	21.71
Awarded	470,147	27.38
Vested	(316,186)	23.61
Forfeited	(101,533)	23.93
RSUs outstanding at December 31, 2020	651,537	$	24.53
Awarded	651,898	32.69
Vested	(209,824)	23.15
Forfeited	(43,012)	28.41
RSUs outstanding at December 31, 2021	1,050,599	$	29.71

The following table summarizes PSU activity under the 2012 Plan and 2021 Plan for the year ended December 31, 2021:


	Performance-Based Restricted Share Units	Weighted-Average Grant Date Fair Value
PSUs outstanding at December 31, 2020	—	$	—
Awarded	92,319	34.83
Vested	—	—
Forfeited	—	—
PSUs outstanding at December 31, 2021	92,319	$	34.83

2021 Employee Stock Purchase Plan

During the second quarter of 2021, the Company’s shareholders approved and the Company adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which provides for the issuance of 3,000,000 Class A common shares. The 2021 ESPP terminates in June 2031 or the date on which there are no longer any Class A common shares available for issuance. The 2021 ESPP allows employees to acquire the Company’s Class A common shares through payroll deductions, subject to maximum purchase limitations, during six-month purchase periods. The first purchase period commenced on July 1, 2021. The purchase price for Class A common shares may be set at a maximum discount equal to 85% of the lower of the closing price of the Company’s Class A common shares on the first day or the last day of the applicable purchase period. When the Company issues Class A common shares under the 2021 ESPP, the Operating Partnership issues an equivalent number of Class A units to AH4R.

Share-Based Compensation Expense

The Company’s noncash share-based compensation expense relating to corporate administrative employees is included in general and administrative expense and the noncash share-based compensation expense relating to centralized and field property management employees is included in property management expenses. Noncash share-based compensation expense relating to employees involved in the purchases of single-family properties, including newly constructed properties from third-party builders, the development of single-family properties, or the disposal of certain properties or portfolios of properties is included in acquisition and

other transaction costs. The following table summarizes the activity related to the Company’s noncash share-based compensation expense for the years ended December 31, 2021, 2020 and 2019 (in thousands):


	For the Years Ended December 31,
	2021		2020		2019
General and administrative expense	$	9,361	$	6,573	$	3,466
Property management expenses	3,004		1,745		1,342
Acquisition and other transaction costs	5,427		1,516		—
Total noncash share-based compensation expense	$	17,792	$	9,834	$	4,808

As of December 31, 2021, the unrecognized compensation expense for unvested RSUs and PSUs was $16.3 million and $1.4 million, respectively. The unrecognized compensation expense for unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.6 years and 2.1 years, respectively.