Stock Option Plan

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

STOCK OPTION PLAN

Stock Based Employee Compensation, Deferred Compensation and Stock Plan for Directors

In 2004, the Company established a stock incentive plan (the "Plan"), as amended. Under the Plan, options were granted at an exercise price not less than the market value of the common stock on the date of grant and expire ten years from the date of grant. Officer options vest ratably over four years following the grant and are charged to expense using the straight-line method over the vesting period. Director options vest immediately and are charged to expense as of the date of grant.

The Company uses the fair value method to value and account for employee stock options. The fair value of options granted is determined at the time of each award using the Black-Scholes model, a widely used method for valuing stock-based employee compensation, and the following assumptions: (1) Expected Volatility determined using the most recent trading history of the Company’s common stock (month-end closing prices) corresponding to the average expected term of the options; (2) Average Expected Term of the options is based on prior exercise history, scheduled vesting and the expiration date; (3) Expected Dividend Yield determined by management after considering the Company’s current and historic dividend yield rates, the Company’s yield in relation to other retail REITs and the Company’s market yield at the grant date; and (4) a Risk-free Interest Rate based upon the market yields of US Treasury obligations with maturities corresponding to the average expected term of the options at the grant date. The Company amortizes the value of options granted ratably over the vesting period and includes the amounts as compensation expense in general and administrative expenses.

Pursuant to the Plan, the Compensation Committee established a Deferred Compensation Plan for Directors for the benefit of the Company’s directors and their beneficiaries, which replaced a previous Deferred Compensation and Stock Plan for Directors. Annually, directors are given the ability to make an election to defer all or part of their fees and have the option to have their fees paid in cash, in shares of common stock or in a combination of cash and shares of common stock upon separation from the Board. If a director elects to their have fees paid in stock, fees earned during a calendar quarter are aggregated and divided by the closing market price of the Company’s common stock on the first trading day of the following quarter to determine the number of shares to be credited to the director. During the twelve months ended December 31, 2019, 6,822 shares were credited to director's deferred fee accounts and 7,058 shares were issued. As of December 31, 2019, the director's deferred fee accounts comprise 114,408 shares.

The Compensation Committee has also approved an annual award of shares of the Company’s common stock as additional compensation to each director serving on the Board of Directors as of the record date for the Annual Meeting of Stockholders. The shares are awarded as of each Annual Meeting of Stockholders, and their issuance may not be deferred.

At the annual meeting of the Company’s stockholders in 2004, the stockholders approved the adoption of the 2004 stock plan for the purpose of attracting and retaining executive officers, directors and other key personnel. The 2004 stock plan was subsequently amended by the Company’s stockholders at the 2008 Annual Meeting, further amended at the 2013 Annual Meeting, and further amended at the 2019 Annual Meeting (the “Amended 2004 Plan”). The Amended 2004 Plan, which terminates in 2029, provides for grants of options to purchase up to 3,400,000 shares of common stock. The Amended 2004 Plan authorizes the Compensation Committee of the Board of Directors to grant options at an exercise price which may not be less than the market value of the common stock on the date the option is granted.

Effective May 5, 2017, the Compensation Committee granted options to purchase 232,500 shares (21,492 incentive stock options and 211,008 nonqualified stock options) to 20 Company officers and 11 Company Directors (the “2017 options”), which expire on May 4, 2027. The officers’ 2017 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2017 Options were immediately exercisable. The exercise price of $59.41 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2017 Options to be $1.4 million, of which $1.2 million and $165,600 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $165,600 was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 11, 2018, the Compensation Committee granted options to purchase 245,000 shares (25,914 incentive stock options and 219,086 nonqualified stock options) to 22 Company officers and 11 Company Directors (the “2018 options”), which expire on May 10, 2028. The officers’ 2018 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2018 Options were immediately exercisable. The exercise price of $49.46 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2018 Options to be $1.4 million, of which $1.2 million and $169,400 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $169,400 was expensed as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

Effective May 3, 2019, the Compensation Committee granted options to purchase 260,000 shares (34,651 incentive stock options and 225,349 nonqualified stock options) to 23 Company officers and 11 Company Directors (the “2019 options”), which expire on May 2, 2029. The officers’ 2019 Options vest 25% per year over four years and are subject to early expiration upon termination of employment. The directors’ 2018 Options were immediately exercisable. The exercise price of $55.71 per share was the closing market price of the Company’s common stock on the date of award. Using the Black-Scholes model, the Company determined the total fair value of the 2019 Options to be $1.9 million, of which $1.7 million and $226,600 were assigned to the officer options and director options, respectively. Because the directors’ options vested immediately, the entire $226,600 was expensed

as of the date of grant. The expense for the officers’ options is being recognized as compensation expense monthly during the four years the options vest.

The following table summarizes the assumptions used in the valuation of the 2017, 2018, and 2019 option grants. During the twelve months ended December 31, 2019, stock option expense totaling $1.6 million was included in general and administrative expense in the Consolidated Statements of Operations. As of December 31, 2019, the estimated future expense related to unvested stock options was $2.6 million.



	Directors									Officers
Grant date	May 5, 2017			May 11, 2018			May 3, 2019			May 5, 2017			May 11, 2018			May 3, 2019
Exercise price	$	59.41		$	49.46		$	55.71		$	59.41		$	49.46		$	55.71
Volatility	0.173			0.192			0.236			0.170			0.177			0.206
Expected life (years)	5.0			5.0			5.0			7.0			7.0			7.0
Assumed yield	3.45		%	3.70		%	3.75		%	3.50		%	3.75		%	3.80		%
Risk-free rate	1.89		%	2.84		%	2.33		%	2.17		%	2.94		%	2.43		%

The table below summarizes the option activity for the years 2019, 2018, and 2017:



	2019				2018				2017
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at January 1	1,114,169		$	52.40	913,320		$	52.80	833,630		$	49.92
Granted	260,000		55.71		245,000		49.46		232,500		59.41
Exercised	(57,055	)	44.53		(39,151	)	42.98		(149,060	)	46.97
Expired/Forfeited	(7,500	)	56.07		(5,000	)	54.78		(3,750	)	53.73
Outstanding December 31	1,309,614		53.38		1,114,169		52.40		913,320		52.80
Exercisable at December 31	763,614		52.43		600,919		50.93		430,945		48.94

The intrinsic value of options exercised in 2019, 2018, and 2017, was $0.6 million, $0.5 million and $2.2 million, respectively. The intrinsic value of options outstanding and exercisable at year end 2019 was $2.5 million and $2.0 million, respectively. The intrinsic value measures the difference between the options’ exercise price and the closing share price quoted by the New York Stock Exchange as of the date of measurement. The date of exercise was the measurement date for shares exercised during the period. At December 31, 2019, the final trading day of calendar 2019, the closing price of $52.78 per share was used for the calculation of aggregate intrinsic value of options outstanding and exercisable at that date. The weighted average remaining contractual life of the Company’s exercisable and outstanding options at December 31, 2019 are 5.9 and 7.0 years, respectively.