SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Overview

The Company’s 2013 Equity Incentive Plan (the “Plan”), as amended and restated as of February 28, 2019, authorizes options to acquire common shares and other share-based compensation awards to be granted to employees and trustees for up to an additional 3,000,000 common share equivalents of the Company. The Company accounts for its share-based compensation in accordance with the fair value recognition provisions provided in ASC 718, Stock Compensation.

Total share-based compensation expense, net of amounts capitalized, included within “General, administrative and other” expenses in the accompanying consolidated statements of operations and comprehensive income for the years ended December 31, 2021, 2020, and 2019 was $7.2 million, $5.6 million, and $5.3 million, respectively. For the years ended December 31, 2021, 2020, and 2019, total share-based compensation cost capitalized for development activities was $1.0 million, $1.2 million, and $1.1 million, respectively. The Company recognizes forfeitures as they occur.

As of December 31, 2021, there were 1,277,380 shares and units available for grant under the Plan.

Share Options

Pursuant to the Plan, the Company may periodically grant options to purchase common shares at an exercise price equal to the grant date fair value of the Company’s common shares. Options granted typically vest over a five-year period and expire 10 years from the grant date. The Company issues new common shares upon the exercise of options.

The following table summarizes the option activity under the Plan as of December 31, 2021 and changes during the year then ended:


($ in thousands, except share and per share data)	Options	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2021	21,567	$	20.67
Granted	—	—
Exercised	(1,250)	15.56
Expired	(19,067)	21.04
Forfeited	—	—
Outstanding at December 31, 2021	1,250	$	20.20	$	2	0.33
Exercisable at December 31, 2021	1,250	$	20.20	$	2	0.33
Exercisable at December 31, 2020	21,567	$	20.67

There were no options granted in 2021, 2020 or 2019.

The aggregate intrinsic value of the 1,250, 2,500 and 33,375 options exercised during the years ended December 31, 2021, 2020, and 2019 was $6,550, $2,000 and $86,000, respectively.

Restricted Shares

In addition to share option grants, the Plan also authorizes the grant of share-based compensation awards in the form of restricted common shares. Under the terms of the Plan, these restricted shares, which are considered to be outstanding shares from the date of grant, typically vest over a period ranging from three to five years. The Company pays dividends on restricted shares and such dividends are charged directly to shareholders’ equity.

In connection with the Merger, we assumed the terms of award agreements governing 56,765 unvested restricted shares (as converted pursuant to the exchange ratio) granted prior to the Merger under RPAI’s equity incentive plan. Each assumed award is a time-vesting award that was issued with a three-year service period, unless accelerated pursuant to the original agreement or otherwise modified in connection with the Merger or the resulting integration.

The following table summarizes the restricted share activity to employees and non-employee members of the Board of Trustees as of December 31, 2021 and changes during the year then ended:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value per share
Restricted shares outstanding at January 1, 2021	321,591	$	14.42
Shares granted	137,646	19.32
Shares assumed in the Merger	56,765	21.13
Shares forfeited	(5,226)	17.47
Shares vested	(187,544)	13.34
Restricted shares outstanding at December 31, 2021	323,232	$	18.27

The following table summarizes the restricted share grants and vestings during the years ended December 31, 2021, 2020, and 2019:


($ in thousands, except share and per share data)	Number of Restricted Shares Granted	Weighted Average Grant Date Fair Value per share		Fair Value of Restricted Shares Vested
2021	194,411	$	19.85	$	3,763
2020	211,476	$	13.21	$	2,727
2019	154,440	$	15.84	$	2,270

As of December 31, 2021, there was $3.9 million of total unrecognized compensation cost related to restricted shares, which is expected to be recognized over a weighted average period of 0.90 years. We expect to incur $2.7 million of this expense in 2022, $1.0 million in 2023, and the remainder in 2024.

Performance Awards

In 2016, the Compensation Committee of the Company’s Board of Trustees established overall target values for incentive compensation for each executive officer, with 40% of the target value being granted in the form of time-based awards and the remaining 60% being granted in the form of performance awards.

In 2018, the Compensation Committee awarded each of the Company’s named executive officers a three-year performance award in the form of performance share units (“PSUs”) that ended on December 31, 2020. The performance criteria was based 60% on the relative Total Shareholder Return (“TSR”) achieved by the Company measured against a peer group over the three-year measurement period and 40% on the achievement of a defined funds available for distribution (“FAD”). The total number of PSUs issued to the executive officers was based upon a target value of $2.4 million, but could be earned in a range of 0% to 200% of the target. Additionally, any PSUs earned based on the achievement of the pre-established FAD goals were subject to adjustment (either up or down 25%) based on the Company’s absolute TSR over the three-year measurement period. Approximately 172,000 PSUs were earned based upon the Company’s performance on the relative TSR measurement. The PSUs were valued at an aggregate value of $2.2 million using a Monte Carlo simulation and are fully amortized.

Restricted Units

Time-based restricted unit awards were made on a discretionary basis in 2019, 2020, and 2021 based on a review of each prior year’s performance.

The following table summarizes the activity for time-based restricted unit awards for the year ended December 31, 2021:


	Number of Restricted Units	Weighted Average Grant Date Fair Value per unit
Restricted units outstanding at January 1, 2021	491,196	$	13.32
Restricted units granted	72,689	14.26
Restricted units vested	(149,444)	14.00
Restricted units outstanding at December 31, 2021	414,441	$	13.24

The following table summarizes the time-based restricted unit grants and vestings during the years ended December 31, 2021, 2020, and 2019:


($ in thousands, except unit and per unit data)	Number of Restricted Units Granted	Weighted Average Grant Date Fair Value per Unit		Fair Value of Restricted Units Vested
2021	72,689	$	14.26	$	2,956
2020	431,913	$	13.10	$	1,784
2019	84,987	$	14.11	$	749

As of December 31, 2021, there was $4.2 million of total unrecognized compensation cost related to restricted units granted under the Plan, which is expected to be recognized over a weighted average period of 1.79 years. We expect to incur $1.6 million of this expense in 2022, $1.1 million in 2023, $0.8 million in 2024, and the remainder in 2025.

AO LTIP Units

During the years ended December 31, 2019, 2020 and 2021, in connection with its annual review of executive compensation and as described in the table below, the Compensation Committee approved an aggregate grant of AO LTIP Units to the Company’s executive officers under the Plan.


	Number of AO LTIP Units			Participation Threshold per AO LTIP Unit
Executive	2019 Awards	2020 Awards	2021 Awards	2019 Awards		2020 Awards		2021 Awards
John A. Kite	1,490,683	1,729,729	477,612	$	15.79	$	17.76	$	16.69
Thomas A. McGowan	372,671	405,405	149,254	$	15.79	$	17.76	$	16.69
Heath R. Fear	253,416	275,675	119,403	$	15.79	$	17.76	$	16.69

The Company entered into award agreements with each executive officer with respect to his awards, which provide terms of vesting, conversion, distribution, and other terms. AO LTIP Units are designed to have economics similar to stock options and allow the recipient, subject to vesting requirements, to realize value above a threshold level set as of the grant date of the award (the “Participation Threshold”). The value of vested AO LTIP Units is realized through conversion into a number of vested Long-Term Incentive Plan (“LTIP”) Units in the Operating Partnership determined on the basis of how much the value of a common share of the Company has increased over the Participation Threshold.

The AO LTIP Units are only exercisable and convertible into vested LTIP Units of the Operating Partnership to the extent that they become vested AO LTIP Units. The awards of AO LTIP Units are subject to both time-based and stock price performance-based vesting requirements. Subject to the terms of the award agreements, the AO LTIP Units shall vest and become fully exercisable as of the date that both of the following requirements have been met: (i) the grantee remains in continuous service from the grant date through the third anniversary of the grant date; and (ii) at any time during the five-year period following the grant date for the 2019 awards and at any time during the period beginning in the second year and ending at the end of the fifth year following the grant date for the 2020 and 2021 awards, the reported closing price per common share of the Company appreciates at least 20% for the 2019 awards and at least 15% for the 2020 and 2021 awards over the applicable Participation Threshold per AO LTIP Unit (as set forth in the table above) for a minimum of 20 consecutive trading days. Any AO LTIP Units that do not become vested will be forfeited and become null and void as of the fifth anniversary of the grant date, but AO LTIP Units may also be forfeited earlier in connection with a corporate transaction or with the holder’s termination of service.

The AO LTIP Units were valued using a Monte Carlo simulation and the resulting compensation expense is being amortized over three years for the 2019 and 2021 awards and five years for the 2020 awards. For the awards granted in 2019, we recognized $1.0 million of compensation expense in 2019, $1.1 million of compensation expense in 2020 and 2021 and expect to recognize the remaining $0.2 million of this expense in 2022. Compensation expense for the awards granted in 2020 totaled $3.6 million, of which we recognized $0.6 million and $0.7 million of compensation expense in 2020 and 2021, respectively, and expect to annually incur $0.7 million of this expense in 2022 through 2024 and the remainder in 2025. Compensation expense for the awards granted in 2021 totaled $3.0 million, of which we recognized $0.9 million of compensation expense in 2021 and expect to annually incur $1.0 million of this expense in 2022 and 2023 and the remainder in 2024.