Note F - Stock-based Compensation

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note F — Stock-Based Compensation

On October 14, 2020, the Compensation Committee of the Board of Directors of the Company approved the award of non-restricted shares to the Company’s four independent directors and to the Company’s former chief financial officer, J. Kevin Bland. Total stock-compensation expense for the year ended December 31, 2020 was approximately $144,000. The non-restricted shares were issued by the Company on March 1, 2021 at a price of $11.75 per share. This price equals the net asset value of the Company, which was approved by the Board of Directors in January 2021. The shares awarded fully vested immediately upon issuance and these shares were not issued pursuant to the Company’s Long-Term Incentive Plan ("LTIP"). No share-based compensation awards were outstanding as of June 30, 2021.

On May 27, 2022, the Operating Partnership issued long-term incentive equity awards in the form of LTIP units of the Operating Partnership ("LTIP Units") to the Company's five independent directors in consideration for their accrued but unpaid director compensation fees. The LTIP Units will vest ratably in equal installments on each of the next three anniversaries of the grant date, subject to the director's continued employment, contractual or other service relationship with the Company or an affiliate of the Company on the vesting date. The grant date fair value was determined to be $15.47. Prior to the granting of the LTIP Units, the associated compensation was anticipated to be paid in cash, and as such, the expense was accrued as a liability in the condensed consolidated balance sheets. Upon vesting, the LTIP Units are redeemable in cash or shares, at the option of the holder. As a result, the LTIP Units are classified as a liability within accounts payable and accrued expenses in the condensed consolidated balance sheet as of June 30, 2022.

The following table sets forth unvested LTIPs from January 1, 2022 through June 30, 2022:

	As of June 30, 2022
	Number of Unvested Shares of LTIPs		Weighted Avg Grant FV Per Share
Balance - January 1, 2022		—	$	—
Granted		9,686		15.47
Vested		—		—
Forfeited		—		—
Total unvested LTIPs		9,686	$	15.47

On May 27, 2022, the Operating Partnership granted an aggregate of 1,500,000 Performance Units of the Operating Partnership (“PUs”) to the executive officers of the Company pursuant to performance unit award agreements entered into with respect to the PUs. The PUs vest, subject to the continued employment of the executive officers, upon the achievement of a 50% market condition and a 50% performance condition. The performance period for the market and performance conditions are May 27, 2022 through December 31, 2025 and May 27, 2022 through December 31, 2027, respectively, subject to the executive's continued performance of the services of the Company, the Operating Partnership or an affiliate. No PUs were vested as of June 30, 2022. Market condition PUs are recorded at fair value using a Monte Carlo simulation for the future stock prices of the Company and its corresponding peer group. A fair value of $8.95 was determined for the PUs subject to a market condition. The PUs subject to a performance condition will vest if the Company's adjusted funds from operations ("AFFO") per share of common stock is at least $1.25 for four consecutive quarters prior to the fourth quarter of 2025 and then for an additional four consecutive quarters prior to December 31, 2027. These PUs were deemed not probable of achievement as of June 30, 2022. The probability of achievement of the performance condition will continue to be monitored throughout the performance period.

PUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if the executive ceases to be an employee of the Company, the Operating Partnership or an affiliate prior to vesting of the award. Each vested PU is entitled to receive a dividend equivalent payment equal to the dividend paid on the number of shares of common units issued. Each unvested PU is entitled to receive 10% of the distributions payable on common units. The amortization of compensation costs for the awards of PUs are included in general and administrative expenses in the accompanying consolidated statements of operations and amount to $391,000 for the period ended June 30, 2022. The remaining unrecognized compensation cost of approximately $6.3 million for PUs is expected to be recognized over the derived service period of 1.57 years as of June 30, 2022.

The following table sets forth unvested PUs from January 1, 2022 through June 30, 2022:

	As of June 30, 2022
	Number of Unvested Shares of PUs		Weighted Avg Grant FV Per Share
Balance - January 1, 2022		—	$	—
Granted		1,500,000		12.21
Vested		—		—
Forfeited		—		—
Total unvested PUs		1,500,000	$	12.21

The weighted average grant date fair value per share of $8.95 is for 750,000 shares subject to the market condition. The weighted average grant date fair value per share of $15.47 is for 750,000 shares subject to the performance condition, which was deemed not probable of achievement as of June 30, 2022.