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SHARE BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
SHARE BASED COMPENSATION | SHARE-BASED COMPENSATION Share-based awards are provided to officers, non-officer employees, and trustees under the 2015 Incentive Plan approved by shareholders on September 15, 2015, as amended and restated on May 18, 2021 (the “2015 Incentive Plan”), which allows for awards in the form of cash, unrestricted and restricted common shares, stock options, stock appreciation rights, and restricted stock units (“RSUs”) up to an aggregate of 775,000 shares over the ten-year period in which the plan is in effect. Under the 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan (“LTIP”), which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year. Through December 31, 2023, awards under the 2015 Incentive Plan consisted of restricted and unrestricted common shares, RSUs, and stock options. The Company accounts for forfeitures of restricted and unrestricted common shares, RSUs, and stock options when they occur instead of estimating the forfeitures. Year Ended December 31, 2023 LTIP Awards Awards granted to employees on January 1, 2023 consisted of an aggregate of 14,256 time-based RSU awards, 20,497 performance RSUs based on total shareholder return (“TSR”), and 45,955 stock options. The time-based RSUs vest as to one-third of the shares on each of January 1, 2024, January 1, 2025, and January 1, 2026. The stock options vest as to 25% on each of January 1, 2024, January 1, 2025, January 1, 2026, and January 1, 2027 and expire 10 years after grant date. The fair value of stock options was $11.086 per share and was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:
| 2023
Exercise price | $ | 58.67 |
Risk-free rate | 3.97 | %
Expected term | 6.25 years
Expected volatility | 28.7 | %
Dividend yield | 4.977 | %
The performance RSUs are earned based on the Company’s TSR as compared to the FTSE Nareit Equity Index over a forward looking three-year period. The maximum number of RSUs eligible to be earned is 40,994 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. Compensation expense is recognized ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. The Company based the expected volatility on a weighted average of the historical volatility of the Company’s daily closing share price, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the TSR performance RSUs were an expected volatility of 37.20%, a risk-free interest rate of 4.22%, and an expected life of 3 years. The share price at the grant date, January 1, 2023, was $58.67 per share. On March 31, 2023, in connection with her appointment to President and Chief Executive Officer, Anne Olson received a one-time stock award of 5,492 RSUs, which will vest in full on March 31, 2026. On March 31, 2023, in connection with the change in executive management, Bhairav Patel, CFO, received a one-time stock award of 2,746 RSUs. One-third of the RSUs will vest on March 31, 2025 and the remaining two-thirds will vest on March 31, 2026. Share-Based Compensation Expense Total share-based compensation expense recognized in the Consolidated Financial Statements for the years ended December 31, 2023, 2022, and 2021 for all share-based awards was as follows:
|  | (in thousands)
|  | Year Ended December 31,
|  | 2023 | 2022 | 2021
Share-based compensation expense |  | $ | 3,295 |  | $ | 2,615 |  | $ | 2,689 |
On March 31, 2023, the Company accelerated the vesting of all unvested time-based RSUs and stock options in connection with the Separation Agreement with Mr. Decker. This resulted in the acceleration of share-based compensation expense for those awards resulting in an additional $737,000 in expense during the year ended December 31, 2023. Any performance-based RSUs were prorated, in accordance with the award agreement, and will vest at the end of performance period based on actual performance. The remaining performance-based RSUs were forfeited. Mr. Decker exercised stock options prior to their expiration on June 30, 2023 in a cashless exercise with a net 425 shares issued. Restricted Stock Units During the year ended December 31, 2023, the Company issued 22,799 time-based RSUs to employees and 9,200 to trustees. The RSUs to employees generally vest over a three-year period and the RSUs to trustees generally vest over a one-year period. The fair value of the time-based RSUs granted during the years ended December 31, 2023, 2022, and 2021 was $1.8 million, $1.5 million, and $1.0 million, respectively. The fair value of share awards at grant date for non-employee trustees was approximately $545,000, $618,000, and $425,000 for the years ended December 31, 2023, 2022, and 2021, respectively. All of these awards are classified as equity awards. We recognize compensation expense associated with the time-based awards ratably over the requisite service period. The total compensation cost related to non-vested time-based RSUs not yet recognized is $798,000, which the Company expects to recognize over a weighted average period of 1.6 years. The unamortized value of RSUs with market conditions as of December 31, 2023, 2022, and 2021 was approximately $1.0 million, $1.7 million, and $1.1 million, respectively. The activity for the years ended December 31, 2023, 2022, and 2021 related to RSUs was as follows:
|  | RSUs with Service Conditions |  | RSUs with Market Conditions
|  |  | Wtd Avg Grant- |  |  | Wtd Avg Grant-
|  | Shares | Date Fair Value |  | Shares | Date Fair Value
Unvested at December 31, 2020 |  | 24,828 |  | $ | 65.03 |  |  | 26,994 |  | $ | 67.87 |
Granted |  | 13,693 |  | 71.54 |  |  | 19,224 |  | 87.04 |
Vested |  | (17,065) |  | 63.42 |  |  | (35,920) |  | 65.34 |
Change in awards(1) |  | — |  | — |  |  | 8,926 |  | — |
Forfeited |  | (482) |  | 70.44 |  |  | — |  | — |
Unvested at December 31, 2021 |  | 20,974 |  | $ | 69.97 |  |  | 19,224 |  | $ | 87.04 |
Granted |  | 15,359 |  | 96.29 |  |  | 13,559 |  | 131.05 |
Vested |  | (13,357) |  | 69.24 |  |  | — |  | — |
Forfeited |  | (1,562) |  | 76.49 |  |  | (2,741) |  | 87.04 |
Unvested at December 31, 2022 |  | 21,414 |  | $ | 88.83 |  |  | 30,042 |  | $ | 106.90 |
Granted |  | 31,999 |  | 57.21 |  |  | 20,497 |  | 82.63 |
Vested |  | (22,036) |  | 78.74 |  |  | (13,820) |  | 87.04 |
Forfeited |  | (383) |  | 73.85 |  |  | (14,653) |  | 96.05 |
Unvested at December 31, 2023 |  | 30,994 |  | $ | 65.54 |  |  | 22,066 |  | $ | 104.01 |
(1)Represents the change in the number of restricted stock units earned at the end of the measurement period. Stock Options During the year ended December 31, 2023, Centerspace issued 45,955 stock options to employees. The stock options vest over a four-year period. The weighted average grant date fair value of the stock options granted during the year ended December 31, 2023 was $11.086 per share. The total compensation costs related to non-vested stock options not yet recognized is $203,000, which the Company expects to recognize over a weighted average period of 2.65 years. The stock option activity for the years ended December 31, 2023, 2022, and 2021 was as follows:
|  | Number of Shares | Weighted Average Exercise Price
Outstanding at December 31, 2020 |  | 139,048 |  | $ | 66.36 |
Exercisable at December 31, 2020 |  | — |  | — |
Granted |  | 43,629 |  | 70.64 |
Exercised |  | — |  | — |
Forfeited |  | — |  | — |
Outstanding at December 31, 2021 |  | 182,677 |  | $ | 67.38 |
Exercisable at December 31, 2021 |  | 34,758 |  | 66.36 |
Granted |  | 30,245 |  | 110.67 |
Exercised |  | — |  | — |
Forfeited |  | (16,299) |  | 67.59 |
Outstanding at December 31, 2022 |  | 196,623 |  | $ | 74.02 |
Exercisable at December 31, 2022 |  | 80,421 |  | 66.94 |
Granted |  | 45,955 |  | 58.67 |
Exercised |  | (20,061) |  | 58.67 |
Expired |  | (103,768) |  | 73.03 |
Forfeited |  | (1,739) |  | 80.66 |
Outstanding at December 31, 2023 |  | 117,010 |  | $ | 71.41 |
Exercisable at December 31, 2023 |  | 59,477 |  | 70.06 |
The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option. As of December 31, 2023, stock options outstanding had no aggregate intrinsic value with a weighted average remaining contractual term of 5.61 years.

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