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SHARE-BASED COMPENSATION | 12 Months Ended
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Dec. 31, 2020
Share Based Compensation [Abstract] |
SHARE-BASED COMPENSATION | NOTE 18. SHARE-BASED COMPENSATION As of December 31, 2020, the Company has outstanding awards under the CBL & Associates Properties, Inc. 2012 Stock Incentive Plan ("the 2012 Plan"), which was approved by the Company's shareholders in May 2012. The 2012 Plan permits the Company to issue stock options and common stock to selected officers, employees and non-employee directors of the Company up to a total of 10,400,000 shares. As the primary operating subsidiary of the Company, the Operating Partnership participates in and bears the compensation expense associated with the Company's share-based compensation plan. The Compensation Committee of the Board of Directors (the “Committee”) administers the 2012 Plan. In accordance with the provisions of ASU 2016-09, which are designed to simplify the accounting for share-based payments transactions, the Company elected to account for forfeitures of share-based payments as they occur rather than continuing to estimate them in advance. Restricted Stock Awards Under the 2012 Plan, common stock may be awarded either alone, in addition to, or in tandem with other granted stock awards. The Committee has the authority to determine eligible persons to whom common stock will be awarded, the number of shares to be awarded and the duration of the vesting period, as defined. Generally, an award of common stock vests either immediately at grant or in equal installments over a period of five years. Stock awarded to independent directors is fully vested upon grant; however, the independent directors may not transfer such shares during their board term. The Committee may also provide for the issuance of common stock under the 2012 Plan on a deferred basis pursuant to deferred compensation arrangements. The fair value of common stock awarded under the 2012 Plan is determined based on the market price of CBL’s common stock on the grant date and the related compensation expense is recognized over the vesting period on a straight-line basis. The Company may make restricted stock awards to independent directors, officers and its employees under the 2012 Plan. These awards are generally granted based on the performance of the Company and its employees. None of these awards have performance requirements other than a service condition of continued employment, unless otherwise provided. Compensation expense is recognized on a straight-line basis over the requisite service period. The share-based compensation cost related to the restricted stock awards was $2,239, $3,396 and $3,744 for 2020, 2019 and 2018, respectively. Share-based compensation cost resulting from share-based awards is recorded at the Management Company, which is a taxable entity. Share-based compensation cost capitalized as part of real estate assets was $20, $66 and $287 in 2020, 2019 and 2018, respectively. A summary of the status of the Company’s nonvested restricted stock awards as of December 31, 2020, and changes during the year ended December 31, 2020, is presented below:
|  | Shares |  |  | Weighted- Average Grant-Date Fair Value |
Nonvested at January 1, 2020 |  |  | 971,846 |  |  | $ | 5.16 |
Granted |  |  | 1,628,397 |  |  | $ | 0.86 |
Vested |  |  | (1,052,161 | ) |  | $ | 2.86 |
Forfeited |  |  | (28,476 | ) |  | $ | 4.67 |
Nonvested at December 31, 2020 |  |  | 1,519,606 |  |  | $ | 2.15 |
The weighted-average grant-date fair value of shares granted during 2020, 2019 and 2018 was $0.86, $2.20 and $4.55, respectively. The total fair value of shares vested during 2020, 2019 and 2018 was $951, $3,869 and $2,189, respectively. As of December 31, 2020, there was $1,944 of total unrecognized compensation cost related to nonvested stock awards granted under the 2012 Plan, which is expected to be recognized over a weighted-average period of 2.2 years. Long-Term Incentive Program In 2015, the Company adopted a long-term incentive program ("LTIP") for its named executive officers, which consists of performance stock unit ("PSU") awards and annual restricted stock awards, that may be issued under the 2012 Plan. The number of shares related to the PSU awards that each named executive officer may receive upon the conclusion of a three-year performance period is determined based on the Company's achievement of specified levels of long-term total stockholder return ("TSR") performance relative to the National Association of Real Estate Investment Trusts ("NAREIT") Retail Index, provided that at least a "Threshold" level must be attained for any shares to be earned. Beginning with the 2018 PSUs, two-thirds of the quantitative portion of the award over the performance period is based on the achievement of TSR relative to the NAREIT Retail Index while the remaining one-third is based on the achievement of absolute TSR metrics for the Company. Beginning with the 2018 PSU grant, to maintain compliance with a 200,000 share annual equity grant limit (the “Section 162(m) Grant Limit”) that was included in the 2012 Plan to satisfy the “qualified performance-based compensation” exception to the deduction limits for certain executive compensation under Section 162(m) of the Code, to the extent that a grant of PSUs could result in the issuance of a number of shares of common stock at the conclusion of the performance period that, when coupled with the number of shares of time-vesting restricted stock granted in the same year the PSUs were granted, would exceed such limit, any such excess will be converted to a cash bonus award with a value equivalent to the number of shares of common stock constituting such excess times the average of the high and low trading prices reported for CBL's common stock on the date such shares would otherwise have been issuable. In conjunction with the February 2020 approval of the 2020 LTIP grants for the named executive officers, the 2012 Stock Incentive Plan was amended to remove the Section 162(m) Grant Limit, which no longer served its original purpose because the “qualified performance-based compensation” exception to the Section 162(m) deduction limits was repealed by the 2017 tax reform legislation. However, NYSE rules also include an annual equity grant limit which effectively limits the number of shares that can be subject to stock awards to any individual named executive officer, without additional shareholder approval, to one percent (1%) of the total number of outstanding shares of the Company’s Common Stock (the “NYSE Annual Grant Limit”). To maintain NYSE compliance following elimination of the Section 162(m) Grant Limit, the Company’s Compensation Committee revised PSU awards under the LTIP, beginning in 2020, to provide that if a grant of PSUs could result in the issuance of a number of shares to a named executive officer at the conclusion of the 3-year performance period that would exceed the NYSE Annual Grant Limit, when coupled with the number of shares subject to other stock awards (e.g., the time-vesting restricted stock component of the LTIP) issued in the same year that such PSUs were issued, any such excess will instead be converted to a cash bonus award, while remaining subject to vesting conditions as described below. In August 2020, in connection with the execution of the Original RSA that is described in Note 2, the 2020 PSUs were canceled. Based on the Company’s TSR relative to the NAREIT Retail Index for the three year performance period ended December 31, 2020, as well as the Company’s absolute TSR for such period, none of the 2018 PSUs were earned as of December 31, 2020. Any such portion of the value of the 2019 PSUs earned payable as a cash bonus will be subject to the same vesting provisions as the issuance of common stock pursuant to the PSUs. In addition, to the extent any cash is to be paid, the cash will be paid first relative to the vesting schedule, ahead of the issuance of shares of common stock with respect to the balance of PSUs earned. Annual Restricted Stock Awards Under the LTIP, annual restricted stock awards consist of shares of time-vested restricted stock awarded based on a qualitative evaluation of the performance of the Company and the named executive officer during the fiscal year. Annual restricted stock awards under the LTIP, which are included in the totals reflected in the preceding table, vest 20% on the date of grant with the remainder vesting in four equal annual installments. Outstanding restricted stock, and related grant/vesting/forfeiture activity during 2020 for awards made to named executive officers under the LTIP, is included in the information presented in the table above. Performance Stock Units The Company granted the following PSUs in the first quarter of the respective years. A summary of PSU activity as of December 31, 2020, and changes during the year ended December 31, 2020, is presented below:
|  | PSUs |  |  | Weighted-Average Grant Date Fair Value |
2018 PSUs granted |  |  | 741,977 |  |  | $ | 2.63 |
2019 PSUs granted (1) |  |  | 1,103,537 |  |  | $ | 2.40 |
Forfeited |  |  | (78,934 | ) |  | $ | 2.63 |
Outstanding at January 1, 2020 |  |  | 1,766,580 |  |  | $ | 2.96 |
2020 PSUs granted (2) |  |  | 3,408,083 |  |  | $ | 0.84 |
2018 PSUs canceled (3) |  |  | (663,043 | ) |  | $ | 2.63 |
2020 PSUs canceled |  |  | (3,408,083 | ) |  | $ | 0.84 |
Outstanding at December 31, 2020 (4) |  |  | 1,103,537 |  |  | $ | 3.16 |
| (1) | Includes 566,862 shares classified as a liability due to the potential cash component described above.
| (2) | Includes 1,247,098 shares classified as a liability due to the potential cash component described above.
| (3) | Based on the Company’s TSR relative to the NAREIT Retail Index for the three-year performance period ended December 31, 2020, none of the 2018 PSUs were earned as of December 31, 2020.
| (4) | None of the PSUs outstanding at December 31, 2020 were vested.
Shares earned pursuant to the PSU awards vest 60% at the conclusion of the performance period while the remaining 40% of the PSU award vests 20% on each of the first two anniversaries thereafter. Compensation cost is recognized on a tranche-by-tranche basis using the accelerated attribution method. The resulting expense is recorded regardless of whether any PSU awards are earned as long as the required service period is met. The fair value of the potential cash component related to the 2019 PSUs is measured each reporting period, using the same methodology as was used at the initial grant date, and classified as a liability on the consolidated balance sheet as of December 31, 2020 with an adjustment to compensation expense. If the performance criterion is not satisfied at the end of the performance period for the 2019 PSUs, previously recognized compensation expense related to the liability-classified awards would be reversed as there would be no value at the settlement date. Share-based compensation expense related to the PSUs was $3,185, $1,564 and $1,364 in 2020, 2019 and 2018, respectively. Share-based compensation expense in 2020 included $2,052 of expense related to the cancellation of the 2020 PSUs. Unrecognized compensation costs related to the PSUs was $567 as of December 31, 2020, which is expected to be recognized over a weighted-average period of 1.8 years. The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs:
|  | 2020 PSUs |  |  | 2019 PSUs |  |  | 2018 PSUs |
Grant date |  | February 10, 2020 (1) |  |  | February 11, 2019 |  |  | February 12, 2018 (2) |
Fair value per share on valuation date (3) |  | $ | 0.84 |  |  | $ | 4.74 |  |  | $ | 4.76 |
Risk-free interest rate (4) |  |  | 1.39 | % |  |  | 2.54 | % |  |  | 2.36 | %
Expected share price volatility (5) |  |  | 57.98 | % |  |  | 60.99 | % |  |  | 42.02 | %
(1) | The 2020 PSU awards were cancelled in August 2020.
(2) | Based on the Company’s TSR relative to the NAREIT Retail Index for the three-year performance period ended December 31, 2020, none of the 2018 PSUs were earned as of December 31, 2020.
(3) | The value of the PSU awards is estimated on the date of grant using a Monte Carlo simulation model. The valuation consists of computing the fair value using CBL's simulated stock price as well as TSR over a three-year performance period. The award is modeled as a contingent claim in that the expected return on the underlying shares is risk-free and the rate of discounting the payoff of the award is also risk-free. The weighted-average fair value per share related to the 2020 PSUs classified as equity consists of 2,131,245 shares at a fair value of $0.88 (which relate to relative TSR) and 1,065,463 shares at fair value of $0.75 per share (which relate to absolute TSR). The weighted-average fair value per share related to the 2019 PSUs classified as equity consists of 357,800 shares at a fair value of $2.45 per share (which relate to relative TSR) and 178,875 shares at a fair value of $2.29 per share (which relate to absolute TSR). The weighted-average fair value per share related to the 2018 PSUs classified as equity consists of 240,164 shares at a fair value of $3.13 per share (which relate to relative TSR) and 120,064 shares at a fair value of $1.63 per share (which relate to absolute TSR).
(4) | The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury securities in effect as of the valuation date, which is the respective grant date listed above.
(5) | The computation of expected volatility was based on a blend of the historical volatility of CBL's shares of common stock based on annualized daily total continuous returns over a five-year period for the 2020 PSUs and a three-year period for the 2019 and 2018 PSUs and implied volatility data based on the trailing month average of daily implied volatilities implied by stock call option contracts that were both closest to the terms shown and closest to the money.

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