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SHARE-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2023

SHARE-BASED COMPENSATION PLANS

SHARE-BASED COMPENSATION PLANS

16. SHARE-BASED COMPENSATION PLANS

The Company has a share-based compensation plan (the “Plan”) which it utilizes to compensate certain employees and non-employee Trustees. The Plan was last amended and restated in 2016. The Plan provides for the grant of share options, share appreciation rights, restricted shares, performance units, which may be denominated in cash or shares, including restricted shares and restricted share units, and other share-based awards, including unrestricted common shares or awards denominated or payable in, or valued in whole or part by reference to, common shares. Share options granted under the Plan may be non-qualified share options or incentive share options.

Upon shareholder approval of the amendment and restatement of the Plan on June 1, 2016, 4,500,000 additional common shares were made available for award under the Plan. As a result, these 4,500,000 additional shares, together with the 991,117 shares that remained available for future awards under the Plan at the time of the shareholder approval, plus any common shares that are restored to availability upon expiration or forfeiture of outstanding options or restricted share awards, would constitute the “Aggregate Share Reserve”. As of December 31, 2023: (i) 1,332,836 common shares remained available for future awards under the Plan; (ii) 360,529 unvested restricted share awards were outstanding under the Plan; and (iii) 2,763,159 common shares were subject to outstanding options under the Plan.

The Plan is administered by the Compensation Committee of the Board (the “Compensation Committee”). The Compensation Committee interprets the Plan and, subject to its right to delegate authority to grant awards, determines the terms and provisions of option grants and share awards.

Under the Plan, the Compensation Committee determines the vesting schedule of each award, subject to a one-year minimum vesting requirement for share options, share appreciation rights, and certain restricted share and restricted share unit awards, but with permitted acceleration of vesting in the event of a participant’s death or disability, or in the event of a change in control or certain changes in our capital structure. Notwithstanding the foregoing one-year minimum vesting limitation, up to five percent of the shares subject to the Aggregate Share Reserve may be subject to awards that are not subject to such limitation. The exercise price for options is equivalent to the fair value of the underlying common shares at the grant date. The Compensation Committee also determines the term of each option, which shall not exceed 10 years from the grant date.

Share Options

The fair values for options granted in 2023, 2022 and 2021 were estimated at the time the options were granted using the Black-Scholes option-pricing model applying the following weighted average assumptions:

Assumptions:		2023			2022			2021
Risk-free interest rate			4.1	%		1.5	%		0.6	%
Expected dividend yield			4.1	%		3.7	%		3.8	%
Volatility ⁽¹⁾			26.00	%		25.00	%		25.00	%
Weighted average expected life of the options ⁽²⁾			6.0	years		6.0	years		6.0	years
Weighted average grant date fair value of options granted per share		$	7.90		$	8.83		$	4.62
Term			10.0	years		10.0	years		10.0	years

(1)

Expected volatility is based upon the Company’s historical daily share prices.

(2)

The expected life is based on the contractual term of the options as well as the weighted average vesting period.

In 2023, 2022 and 2021, the Company recognized compensation expense related to options issued to employees and executives of approximately $2.8 million, $2.5 million and $2.3 million, respectively, which is included in General and administrative expense within the Company’s consolidated statements of operations. The share options vest ratably over three years. As of December 31, 2023, the Company had approximately $3.0 million of unrecognized option compensation cost related to all grants that will be recognized over a weighted average period of 1.7 years.

The table below summarizes the option activity under the Plan for the year ended December 31, 2023:


		Options		Weighted Average Strike Price			Weighted Average Remaining Contractual Term (Years)
Balance at December 31, 2022		2,537,038		$	33.10		6.21
Options granted		408,650			40.25		9.00
Options canceled		(38,296)			44.17		8.44
Options exercised		(144,233)			18.83		1.66
Balance at December 31, 2023		2,763,159		$	34.75		5.95

Vested or expected to vest at December 31, 2023		2,763,159		$	34.75		5.95
Exercisable at December 31, 2023		1,972,708		$	31.40		5.02

As of December 31, 2023, the aggregate intrinsic value of options that were exercisable was approximately $30.6 million. As of that date, the aggregate intrinsic value of options that had vested or were expected to vest was approximately $35.3 million. The aggregate intrinsic value of options exercised was approximately $3.9 million, $1.0 million and $10.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Restricted Shares & Performance Units

During 2023, 2022 and 2021 the Company granted restricted shares to employees and Trustees and also granted performance units to certain executives.

The fair values for restricted share awards made under the Plan were valued at the grant date fair value, which is the market price of the underlying common shares. The shares vest over either a 3-year or 5-year period beginning with the first anniversary of the grant.

Performance units represent the right to earn common shares. The performance units were granted in the form of deferred share units with a market condition, entitling the holders thereof to receive common shares at a future date. The performance units are awarded based on the Company’s total return to shareholders with respect to a specified peer group consisting of publicly traded REITs over a three-year period. The performance units cliff vest upon the third anniversary of the effective date. The Company used a Monte Carlo simulation analysis to estimate the fair value of the awards, the key assumptions of which are as follows:


Assumptions:		2023			2022			2021
Risk-free interest rate			4.2	%		1.0	%		0.2	%
Volatility ⁽¹⁾			32.00	%		28.00	%		28.00	%

(1)

Expected volatility is based upon the Company’s historical daily share prices.

During the years ended December 31, 2023, 2022 and 2021, the Company recognized compensation expense related to restricted shares and performance units of approximately $7.3 million, $6.5 million and $5.8 million, respectively, which is included in General and administrative expense within the Company’s consolidated statements of operations. The following table presents non-vested restricted share and performance unit activity under the Plan for the year ended December 31, 2023:


		Number of Non-
		Vested Restricted
		Shares and Performance Units
Non-Vested at January 1, 2023		340,952
Granted		190,540
Vested		(155,468)
Forfeited		(15,495)
Non-Vested at December 31, 2023		360,529

The weighted average fair value of restricted shares and performance units granted during the years ended December 31, 2023, 2022 and 2021 was $46.94, $61.41 and $39.37, respectively. The total fair value of restricted shares and performance units vested during the years ended December 31, 2023, 2022 and 2021 was $6.1 million, $5.6 million and $4.8 million, respectively. As of December 31, 2023 the Company had approximately $8.5 million of remaining unrecognized restricted share and performance unit compensation costs that are expected to be recognized over a weighted average period of 2.1 years.