STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

EastGroup applies the provisions of ASC 718, Compensation - Stock Compensation, to account for its stock-based compensation awards. ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements and that the cost be measured on the fair value of the equity or liability instruments issued.

The Compensation Committee of the Company’s Board of Directors (the “Committee”) approves long-term and annual equity compensation awards for the Company’s executive officers. The long-term compensation awards include components based on the Company’s total shareholder return over the upcoming three-year period and the employee’s continued service as of the vesting dates. The total shareholder return component is subject to bright-line tests that compare the Company’s total shareholder return to the Nareit Equity Index and to the member companies of the Nareit industrial index. The Company

begins recognizing expense for these awards based on the grant date fair value of the awards which is determined using a simulation pricing model developed to specifically accommodate the unique features of the award. These market based awards are expensed on a straight-line basis over the requisite service period (75% vests at the end of the three-year performance period and 25% vests the following year). The long term awards subject only to continuing employment are expensed on a straight-line basis over the requisite service period. The annual equity compensation awards include components based on certain annual Company performance measures and individual annual performance goals over the upcoming year. The certain Company performance measures for 2021 are: (i) FFO per share, (ii) cash same property net operating income change, (iii) debt-to-EBITDAre ratio, and (iv) fixed charge coverage. The Company begins recognizing expense for its estimate of the shares that could be earned pursuant to these awards on the grant date; the expense is adjusted to estimated performance levels during the performance period and to actual upon the determination of the awards. The shares are expensed using the graded vesting attribution method which recognizes each separate vesting portion of the award as a separate award on a straight-line basis over the requisite service period. Any shares issued pursuant to the individual annual performance goals are determined by the Committee in its discretion following the performance period. The Company begins recognizing the expense for the shares on the grant date and will expense on a straight-line basis over the remaining service period. Equity compensation is also awarded to the Company’s non-executive officers and directors, which are subject to service only conditions and expensed on a straight-line basis over the required service period.

The Committee has adopted an Equity Award Retirement Policy (the “retirement policy”) which allows for accelerated vesting of unvested shares for retirement-eligible employees (defined as employees who meet certain age and years of service requirements). In order to qualify for accelerated vesting upon retirement, the eligible employees must provide required notification under the retirement policy and must retire from the Company. The Company has adjusted its stock-based compensation expense to accelerate the recognition of expense for retirement-eligible employees.

Stock-based compensation cost for employees was $2,458,000 and $6,791,000 for the three and nine months ended September 30, 2021, of which $632,000 and $1,661,000 were capitalized as part of the Company’s development costs. For the three and nine months ended September 30, 2020, stock-based compensation cost for employees was $1,945,000 and $5,617,000, of which $424,000 and $1,478,000 were capitalized as part of the Company’s development costs.

Stock-based compensation expense for directors was $3,000 and $710,000 for the three and nine months ended September 30, 2021, respectively, and $91,000 and $894,000 for the same periods in 2020.

Following is a summary of the total restricted shares granted, forfeited and delivered (vested) to participants with the related weighted average grant date fair value share prices. Of the shares that vested in the nine months ended September 30, 2021, the Company withheld 30,252 shares to satisfy the tax obligations for those participants who elected this option as permitted under the applicable equity plan. As of the grant dates, the fair value of shares that were granted during the nine months ended September 30, 2021 was $7,682,000. As of the vesting dates, the aggregate fair value of shares that vested during the nine months ended September 30, 2021 was $10,343,000.


	Three Months Ended			Nine Months Ended
Award Activity:	September 30, 2021			September 30, 2021
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Unvested at beginning of period	97,134	$	111.44	113,403	$	100.89
Granted (1) (2)	9,200	168.35		66,623	115.30
Forfeited	—	—		—	—
Vested	(122)	102.30		(73,814)	91.61
Unvested at end of period	106,212	$	116.38	106,212	$	116.38

(1) Includes shares granted in prior years for which performance conditions have been satisfied and the number of shares have been determined.

(2) Does not include the restricted shares that may be earned if the performance goals established in 2019 and 2020 for long-term performance and in 2021 for annual and long-term performance are achieved. Depending on the actual level of achievement of the goals at the end of the open performance periods, the number of shares earned could range from zero to 118,911.