Share Incentive and Other Compensation

Share Incentive Plan

At the 2016 annual shareholders' meeting, the shareholders' approved the Second Amended and Restated 2006 Incentive Plan (the "Second Amended 2006 Plan"). This plan replaced all previous share incentive plans and increased the authorization to issue options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and employees by 1,600,000 shares, for a total of 3,700,000 shares available to be issued.

Restricted Shares and LTIP Units

During 2016, the Company issued 319,244 LTIP Units and 11,092 Restricted Share Units to employees of the Company pursuant to the Share Incentive Plan. These awards were measured at their fair value on the grant date, which was established as the market price of the Company's Common Shares as of the close of trading on the day preceding the grant date. The total value of the above Restricted Share Units and LTIP Units as of the grant date was $10.1 million, of which $1.9 million was recognized as compensation expense in 2015, and $8.2 million will be recognized as compensation expense over the vesting period. Additionally, during the quarter ended September 30, 2016, in connection with the retirement of two executives, an additional 29,418 LTIP Units were issued. The value of these LTIP units was $1.1 million and was recognized as compensation expense during 2016. Also in connection with these retirements, the Company recognized $1.8 million as compensation expense relating to the acceleration of LTIP Units granted prior to 2016. Total long-term incentive compensation expense, including the expense related to the above mentioned plans, was $10.9 million, $6.8 million and $6.2 million for the years ended December 31, 2016, 2015 and 2014, respectively and is recorded in General and Administrative on the Consolidated Statements of Income.

In addition, members of the Board of Trustees (the "Board") have been issued units under the Share Incentive Plan. During 2016, the Company issued 13,491 Restricted Shares and 10,822 LTIP Units to Trustees of the Company in connection with Trustee fees. Vesting with respect to 4,674 of the Restricted Shares and 5,532 of the LTIP Units will be on the first anniversary of the date of issuance and 8,817 of the Restricted Shares and 5,290 of the LTIP Units vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Total trustee fee expense, included the expense related to the above-mentioned plans, was $1.1 million and $0.9 million during 2016 and 2015, respectively.

In 2009, the Company adopted the Long Term Investment Alignment Program (the "Program") pursuant to which the Company may grant awards to employees, entitling them to receive up to 25% of any potential future payments of Promote to the Operating Partnership from Funds III and IV. The Company has awarded units to employees representing 25% of the potential Promote payments from Fund III to the Operating Partnership and 9.3% of the potential Promote payments from Fund IV to the Operating Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board approval is granted.

As payments to other employees are not subject to further Board approval, compensation relating to these awards will be recorded based on the estimated fair value at each reporting period in accordance with ASC Topic 718, "Compensation– Stock Compensation."

During 2016, compensation expense of $5.0 million was recognized related to the Program in connection with Fund III.

The awards in connection with Fund IV were determined to have no intrinsic value as of December 31, 2016.

A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:



Unvested Restricted Shares and LTIP Units	Common Restricted Shares		Weighted Grant-Date Fair Value		LTIP Units		Weighted Grant-Date Fair Value
Unvested at January 1, 2014	63,737		$	23.34	884,334		$	21.62
Granted	28,563		27.18		441,946		26.24
Vested	(34,598	)	23.40		(263,556	)	20.23
Forfeited	(2,684	)	23.54		(800	)	24.66
Unvested at December 31, 2014	55,018		25.90		1,061,924		23.92
Granted	22,819		32.78		258,464		34.00
Vested	(24,744	)	25.44		(292,544	)	22.82
Forfeited	(3,194	)	26.25		(7,723	)	25.90
Unvested at December 31, 2015	49,899		25.90		1,020,121		23.92
Granted	24,583		33.35		359,484		34.40
Vested	(24,886	)	29.17		(522,680	)	26.08
Forfeited	(189	)	35.37		(48	)	35.37
Unvested at December 31, 2016	49,407		27.92		856,877		26.99

The weighted-average fair value for Restricted Shares and LTIP Units granted for the years ended December 31, 2016, 2015 and 2014 were $34.50, $33.90 and $26.30, respectively. As of December 31, 2016, there was $15.5 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under share incentive plans. That cost is expected to be recognized over a weighted-average period of 1.9 years. The total fair value of Restricted Shares that vested during the years ended December 31, 2016, 2015 and 2014 was $0.7 million, $0.6 million and $0.8 million, respectively. The total fair value of LTIP Units that vested during the years ended December 31, 2016, 2015 and 2014 was $13.6 million, $6.7 million and $5.3 million, respectively.

Stock Options

A summary of option activity under all option arrangements is presented below (dollars in thousands except exercise prices):



Options	Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding and exercisable at January 1, 2014	113,086		$	19.28	3.5	$	628
Granted	—		—		—	—
Exercised	(57,739	)	17.68		—	828
Forfeited or Expired	—		—		—	—
Outstanding and exercisable at December 31, 2014	55,347		$	20.93	1.1	$	614
Granted	—		—		—	—
Exercised	(49,098	)	20.76		—	608
Forfeited or Expired	(3,000	)	22.40		—	—
Outstanding and exercisable at December 31, 2015	3,249		$	20.93	0.3	35
Granted	—		—		—	—
Exercised	(3,000	)	22.40		—	—
Forfeited or Expired	(249	)	20.65		—	—
Outstanding and exercisable at December 31, 2016	—		$	—	—	$	—

The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was less than $0.1 million, $0.6 million and $0.8 million, respectively. At December 31, 2016 there were no outstanding options and there was no stock-based compensation expense related to options during the periods presented.

Employee Share Purchase Plan

The Acadia Realty Trust Employee Share Purchase Plan (the "Purchase Plan"), allows eligible employees of the Company to purchase Common Shares through payroll deductions. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more the $25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with respect to the applicable quarter. During the years ended December 31, 2016, 2015 and 2014, a total of 3,491, 3,761 and 4,668 Common Shares, respectively, were purchased by employees under the Purchase Plan. Associated compensation expense was insignificant for each of the years ended December 31, 2016, 2015 and 2014.

Deferred Share Plan

During May of 2006, the Company adopted a Trustee Deferral and Distribution Election ("Trustee Deferral Plan"), under which the participating Trustees have deferred compensation of $0.1 million for each of the three years ended December 31, 2016, 2015 and 2014.

Employee 401(k) Plan

The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compensation, up to $18,000, for the year ended December 31, 2016. The Company contributed $0.3 million for each of the years ended December 31, 2016, 2015 and 2014.