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Stock and Other Incentive Plans | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Stock and Other Incentive Plans | Stock and Other Incentive Plans Stock Incentive Plan The Company's Incentive Plan permits the grant of incentive awards to its employees and directors in any of the following forms: options, stock appreciation rights, restricted stock, restricted or deferred stock units, performance awards, dividend equivalents, or other stock-based awards, including units in the OP. The Incentive Plan replaced the Legacy HR Incentive Plan as of the merger date. Unvested awards under the Legacy HR Incentive Plan were assumed according to their existing terms by the Company in connection with the Merger. As of the Merger date, 9,647,839 share-based awards were available for grant under the Incentive Plan. As of December 31, 2023 and 2022, the Company had share-based awards available for grant under the Incentive Plan of 8,102,861 and 9,432,388 shares, respectively. Non-vested shares issued to employees under the Incentive Plan are generally subject to fixed vesting periods varying from three to eight years beginning on the date of issue. If a recipient voluntarily terminates his or her relationship with the Company or is terminated for cause before the end of the vesting period, the shares are forfeited, at no cost to the Company. Once the shares have been issued, the recipient has the right to receive dividends and the right to vote the shares through the vesting period. Compensation expense, included in general and administrative expense, recognized during the years ended December 31, 2023, 2022 and 2021 from the amortization of the value of shares over the vesting period issued to employees and directors was $14.6 million, $13.9 million and $10.4 million, respectively. The following table represents expected amortization of the Company's non-vested shares issued as of December 31, 2023:
Dollars in millions | FUTURE AMORTIZATION of non-vested shares
2024 | $ | 12.2 |
2025 | 9.7 |
2026 | 6.9 |
2027 | 2.1 |
2028 and thereafter | 0.5 |
Total | $ | 31.4 |
Executive Incentive Plan The Compensation Committee has adopted an executive incentive plan pursuant to the Incentive Plan (the "Executive Incentive Plan") to provide specific award criteria with respect to incentive awards made under the Incentive Plan subject to the discretion of the Compensation Committee. Under the terms of the Executive Incentive Plan, the Company's named executive officers and certain other members of senior management may earn incentive awards in the form of cash, non-vested stock, restricted stock units ("RSUs"), and units in the OP ("OP Units"). For 2023, 2022 and 2021, compensation expense, included in general and administrative expense, resulting from the amortization of the Executive Incentive Plan non-vested share, RSU, and OP Unit grants to officers was approximately $9.0 million, $9.8 million, and $6.6 million, respectively. Details of equity awards that have been issued under this plan are as follows: •On January 4, 2023, the Company granted non-vested stock awards to its named executive officers, senior vice presidents, and first vice presidents with a grant date fair value of $4.1 million, which consisted of an aggregate of 205,264 shares with a ratable five-year vesting period, which will result in an annual compensation expense of $0.8 million for 2024, 2025, 2026 and 2027. •On January 4, 2023, the Company granted 165,174 RSUs to certain of its non-executive senior officers. These award are subject to a three-year performance period and if the performance criteria is met, the awards are then subject to two additional years with ratable vesting of 50% in year four and 50% in year five. The expense will be recognized on the straight-line basis over the five-year vesting period. ◦Approximately 43% of the RSU awards are subject to two market performance conditions: relative and absolute total shareholder return ("TSR"). These components were valued using independent specialists utilizing a Monte Carlo simulation to calculate the weighted average grant date fair values of $24.23 for the absolute TSR component and $27.84 for the relative TSR component for the January 2023 grant using the following assumptions:
Volatility | 34.0 | %
Dividend Assumption | Accrued
Expected term in years | 3 years
Risk-free rate | 4.42 | %
Stock price (per share) | $20.21
◦The remaining 57% of the RSU awards are subject to certain operating performance conditions. With respect to the operating performance conditions of these awards, the grant date fair value was $20.21 based on the Company's share price on the date of grant. The Company records amortization expense based on the probability of achieving certain operating performance conditions, which is evaluated throughout the performance period. ◦The combined weighted average grant date fair value of the January 2023 RSUs was $22.55 per share. LTIP Series C Units In January 2023, the Company modified its incentive compensation structure to award LTIP Series C units ("LTIP-C units) in the OP to named executive officers in lieu of RSUs. The LTIP-C units were granted with three-year forward-looking performance targets, with a grant date fair value of $7.1 million, which consisted of an aggregate 627,547 LTIP-C units with a five-year vesting period. LTIP-C units are granted notionally at the maximum value of the award. •Approximately 43% of the LTIP-C units vest based on two market performance conditions. Relative and absolute TSR awards containing these market performance conditions were valued using independent specialists. The Company utilized a Monte Carlo simulation to calculate the weighted average grant date fair values of $12.24 for the absolute TSR component and $13.98 for the relative TSR component for the January 2023 grant using the following assumption:
Volatility |  |  | 34.0 | %
Dividend assumption |  |  | Accrued
Expected term |  |  | 3 years
Risk-free rate |  |  | 4.42 | %
Stock price (per share) |  |  | $20.21
•The remaining 57% of the LTIP-C units vest based upon certain operating performance conditions. With respect to the operating performance conditions of the January 4, 2023 grant, the grant date fair value was $20.21 based on the Company's share price on the date of grant. The Company records amortization expense based on the probability of achieving certain operating performance conditions, which is evaluated throughout the performance period. •The combined weighted average grant date fair value of the January LTIP-C units was $15.85 per share. For 2023, compensation expense resulting from the amortization of LTIP-C units awarded to officers was approximately $1.2 million. Officer Incentive Program In the first quarter of 2023 the Company granted a performance-based award to certain non-executive officers totaling approximately $0.7 million, which was granted in the form of 33,438 non-vested shares. The shares have vesting periods ranging from three to eight years with a weighted average vesting period of approximately five years. For 2023, 2022 and 2021, compensation expense resulting from the amortization of these non-vested share grants awarded to officers was approximately $0.6 million, $0.9 million, and $1.0 million, respectively. Salary Deferral Plan The Company's salary deferral plan allows certain of its officers to elect to defer up to 50% of their base salary in the form of non-vested shares subject to long-term vesting. The number of shares will be increased through a Company match depending on the length of the vesting period selected by the officer. The officer's vesting period choices are: three years for a 30% match; five years for a 50% match; and eight years for a 100% match. During 2023, 2022 and 2021, the Company issued 31,792 shares, 17,381 shares and 21,396 shares, respectively, to its officers through the salary deferral plan. For 2023, 2022 and 2021, compensation expense resulting from the amortization of non-vested share grants to officers was approximately $0.9 million for each year, respectively. Non-employee Directors Incentive Plan The Company grants non-vested share-based awards to its non-employee directors under the Incentive Plan. The directors’ awards typically have a one-year vesting period and are subject to forfeiture prior to such date upon termination of the director’s service, at no cost to the Company. For each of the years 2023, 2022 and 2021, compensation expense resulting from the amortization of non-vested share-based grants to directors was approximately $2.1 million, $1.5 million, and $1.2 million, respectively. •On June 5, 2023, the Company granted a non-vested stock award to six of its directors, with a grant date fair value of $0.7 million, which consisted of an aggregate of 42,768 non-vested shares, with a one-year vesting period. •On June 5, 2023, the Company also granted LTIP-D units in the OP to six of its directors, with a grant fair value of $1.1 million, which consisted of an aggregate of 57,868 non-vested units, with a one-year vesting period. The following table represents the summary of non-vested share-based awards (including restricted stock, RSUs, LTIP-C units and LTIP-D units) under the Incentive Plans and related information for the three years ended December 31, 2023:
| YEAR ENDED DECEMBER 31,
Dollars in thousands, except per share data | 2023 | 2022 | 2021
Share-based awards, beginning of year | 2,090,060 |  | 1,562,028 |  | 1,766,061 |
Granted 1 | 1,164,359 |  | 952,407 |  | 203,701 |
Vested | (403,266) |  | (418,949) |  | (404,777) |
Change in awards based on performance assessment 2 | (205,668) |  | — |  | — |
Forfeited | (29,923) |  | (5,426) |  | (2,957) |
Share-based awards, end of year | 2,615,562 |  | 2,090,060 |  | 1,562,028 |
Weighted-average grant date fair value of |  |  |
Share-based awards, beginning of year | $ | 30.35 |  | $ | 31.10 |  | $ | 30.51 |
Share-based awards granted during the year | $ | 18.70 |  | $ | 29.64 |  | $ | 30.86 |
Share-based awards vested during the year | $ | 28.38 |  | $ | 31.52 |  | $ | 28.38 |
Share-based awards change in performance assessment during the year | $ | 29.05 |  | $ | — |  | $ | — |
Stock-based awards forfeited during the year | $ | 31.16 |  | $ | 31.48 |  | $ | 33.04 |
Share-based awards, end of year | $ | 25.56 |  | $ | 30.35 |  | $ | 31.10 |
Grant date fair value of shares granted during the year | $ | 22,171 |  | $ | 28,225 |  | $ | 6,286 |
1 LTIP-C units are issued at the maximum possible value of the award and are reflected as such in this table until the performance period has been satisfied and the exact number of awards are determinable. 2 The Company's RSUs that are based on operating performance metrics are evaluated on the probability of those performance metrics being achieved. During 2023, the Company determined that the operating performance goals related to the RSUs issued in 2022 are not probable of being achieved and reversed all of the outstanding amortization expense for that grant. In addition, the Company lowered the probability of achieving the operating performance goals related to the RSUs issued in 2023. The vesting periods for the non-vested shares granted during 2023 ranged from one to eight years with a weighted-average amortization period remaining as of December 31, 2023 of approximately 4.8 years. During 2023, 2022 and 2021, the Company withheld 126,085 s hares, 137,892 shares and 129,987 shares, respectively, of common stock from its officers to pay estimated withholding taxes related to the vesting of shares. 401(k) Plan The Company maintains a 401(k) plan that allows eligible employees to defer salary, subject to certain limitations imposed by the Internal Revenue Code. The Company provides a matching contribution up to $2,800 per employee, subject to certain limitations. The Company’s matching contributions were approximately $1.5 million for the year ended December 31, 2023, $1.2 million for 2022 and $0.7 million for 2021. Employee Stock Purchase Plan The outstanding options relate only to the Legacy HR Employee Stock Purchase Plan, which was terminated in November 2022. No new options will be issued under the Legacy HR Employee Stock Purchase Plan and existing options will expire in March 2024. During the years ended December 31, 2022 and 2021, the Company recognized in general and administrative expenses approximately $0.4 million, and $0.4 million, respectively, of compensation expense related to the annual grant of options to its employees to purchase shares under the Legacy HR Employee Stock Purchase Plan. Cash received from employees upon exercising options under the Legacy HR Employee Stock Purchase Plan was approximately $0.2 million for the year ended December 31, 2023, $0.4 million for the year ended December 31, 2022, and $0.8 million for the year ended December 31, 2021. A summary of the Legacy HR Employee Stock Purchase Plan activity and related information for the three years ended December 31, 2023 is as follows:
| YEAR ENDED DECEMBER 31,
Dollars in thousands, except per share data | 2023 | 2022 | 2021
Options outstanding, beginning of year | 340,976 |  | 348,514 |  | 341,647 |
Granted | — |  | 255,960 |  | 253,200 |
Exercised | (8,627) |  | (20,246) |  | (30,281) |
Forfeited | (43,737) |  | (102,619) |  | (71,630) |
Expired | (132,999) |  | (140,633) |  | (144,422) |
Options outstanding and exercisable, end of year | 155,613 |  | 340,976 |  | 348,514 |
Weighted-average exercise price of |  |  |
Options outstanding, beginning of year | $ | 16.38 |  | $ | 25.38 |  | $ | 24.70 |
Options granted during the year | $ | — |  | $ | 26.89 |  | $ | 25.16 |
Options exercised during the year | $ | 15.07 |  | $ | 20.97 |  | $ | 25.03 |
Options forfeited during the year | $ | 15.50 |  | $ | 21.88 |  | $ | 25.45 |
Options expired during the year | $ | 16.43 |  | $ | 23.36 |  | $ | 24.17 |
Options outstanding, end of year | $ | 12.98 |  | $ | 16.38 |  | $ | 25.38 |
Weighted-average fair value of options granted during the year (calculated as of the grant date) | $ | — |  | $ | 9.91 |  | $ | 9.05 |
Intrinsic value of options exercised during the year | $ | 23 |  | $ | 75 |  | $ | 165 |
Intrinsic value of options outstanding and exercisable (calculated as of December 31) | $ | 401 |  | $ | 985 |  | $ | 1,997 |
Exercise prices of options outstanding (calculated as of December 31) | $ | 14.65 |  | $ | 16.38 |  | $ | 25.91 |
Weighted-average contractual life of outstanding options (calculated as of December 31, in years) | 0.3 | 0.8 | 0.8
The fair values for these options were estimated at the date of grant using a Black-Scholes options pricing model with the weighted-average assumptions for the options granted during the period noted in the following table. The risk- free interest rate was based on the U.S. Treasury constant maturity-nominal two-year rate whose maturity is nearest to the date of the expiration of the latest option outstanding and exercisable; the expected dividend yield was based on the expected dividends of the current year as a percentage of the average stock price of the prior year; the expected life of each option was estimated using the historical exercise behavior of employees; expected volatility was based on historical volatility of the Company’s common stock; and expected forfeitures were based on historical forfeiture rates within the look-back period.
| 2023 | 2022 | 2021
Risk-free interest rates | — | % | 0.73 | % | 0.13 | %
Expected dividend yields | — | % | 3.97 | % | 4.11 | %
Expected life (in years) | 0 | 1.44 | 1.43
Expected volatility | — | % | 49.0 | % | 48.2 | %
Expected forfeiture rates | — | % | 85 | % | 85 | %

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