Stock Based Compensation Stock Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Stock Based Compensation

Stock-Based Compensation

The Company accounts for stock compensation under ASC 718 - Compensation - Stock Compensation, which requires the Company to expense the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. This expense is recognized ratably over the requisite service period following the date of grant. The fair value of the Company's time-based restricted stock awards is equivalent to the closing stock price on the day prior to grant. The Company utilizes a third party valuation firm to measure the fair value of performance-based restricted stock awards at grant date using the Monte Carlo model.

As of September 30, 2023, there was $5.6 million of total unrecognized compensation cost for restricted stock awards that will be recognized over the grants' remaining weighted average vesting period of 1.75 years. For the three and nine months ended September 30, 2023, the Company recognized $1.5 million and $7.2 million of compensation expense associated with these awards, compared to $1.3 million and $6.8 million for the three and nine months ended September 30, 2022, within general and administrative expenses on the condensed consolidated statements of income.

The following table contains information on restricted stock award activity for the nine months ended September 30, 2023:

	Number of Award Shares
Outstanding at December 31, 2022	247,051
Granted	243,291
Released	(190,221)
Outstanding at September 30, 2023	300,121

Performance-based restricted stock awards have a three-year cliff vesting with the amount of restricted shares vesting at the end of the three-year period determined based upon the Company’s performance as measured against its peers.  More specifically, the percentage of shares vesting at the end of the measurement period will be based on the Company’s three-year total shareholder return measured against the three-year total shareholder return of the companies included in the MSCI US REIT index and the Company's stock performance ranking among a group of triple-net REIT peer companies. The triple-net measurement group includes publicly traded REITs, which the Company believes derive at least 75% of revenues from triple-net leases. As of September 30, 2023, there was $19.9 million of total unrecognized compensation cost, which will be recognized over the performance-based restricted stock awards' remaining weighted average vesting period of 1.84 years.  For the three and nine months ended September 30, 2023, the Company recognized $3.7 million and $10.8 million of compensation expense associated with these awards within general and administrative expenses on the condensed consolidated statements of income compared to $3.1 million and $9.5 million for the corresponding periods in the prior year.

The following table contains information on performance-based restricted stock award activity for the nine months ended September 30, 2023:

	Number of  Performance-Based Award Shares
Outstanding at December 31, 2022	1,394,220
Granted	514,000
Released	(416,220)
Canceled	—
Outstanding at September 30, 2023	1,492,000