EQUITY COMPENSATION

Equity Incentive Plan

In 2014, the Company adopted the Ares Management, L.P. 2014 Equity Incentive Plan (the "Equity Incentive Plan"). Based on a formula as defined in the Equity Incentive Plan, the total number of units available to be issued under the Equity Incentive Plan resets and may increase on January 1 each year. Accordingly, on January 1, 2017, the total number of units available for issuance under the Equity Incentive Plan increased to 30,397,280 units. During the three months ended March 31, 2017, a total of 6,245,249 options and restricted units, net of forfeitures and vesting, were issued, and as of March 31, 2017, 24,152,031 units remain available for issuance.

Generally, unvested phantom units, restricted units and options are forfeited upon termination of employment in accordance with the Equity Incentive Plan. The Company recognizes forfeitures as a reversal of previously recognized compensation expense in the period the forfeiture occurs.

Equity-based compensation expense, net of forfeitures is included in the following table:



	For the Three Months Ended March 31,
	2017		2016
Restricted units	$	11,219	$	4,761
Options	3,482		3,913
Phantom units	388		499
Equity-based compensation expense	$	15,089	$	9,173

Restricted Units

Each restricted unit represents an unfunded, unsecured right of the holder to receive a common unit on a specific date. The restricted units generally vest and are settled in common units either (i) at a rate of one‑third per year, beginning on the third anniversary of the grant date, (ii) in their entirety on the fifth anniversary of the grant date, or (iii) at a rate of one quarter per year, beginning on the first anniversary of the grant date. Compensation expense associated with restricted units is recognized on a straight-line basis over the requisite service period of the award.

The holders of restricted units generally have the right to receive as current compensation an amount in cash equal to (i) the amount of any distribution paid with respect to a common unit multiplied by (ii) the number of restricted units held at the time such distributions are declared (“Distribution Equivalent”). For the three months ended March 31, 2017, Distribution Equivalents were made to the holders of restricted units in the aggregate amount of $4.2 million, which are presented as distributions within the Condensed Consolidated Statement of Changes in Equity. If units are forfeited, the cumulative payments are reclassified to compensation and benefits expense in the Condensed Consolidated Statements of Operations.

The following table presents unvested restricted units’ activity during the three months ended March 31, 2017:



	Restricted Units		Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2017	8,058,372		$	16.38
Granted	7,865,027		18.61
Vested	(492,572	)	12.86
Forfeited	(359,956	)	18.50
Balance - March 31, 2017	15,070,871		$	17.88

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $213.4 million as of March 31, 2017 and is expected to be recognized over the remaining weighted average period of 3.76 years.

Options

A summary of options activity during the three months ended March 31, 2017 is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value
Balance - January 1, 2017	22,101,939		$	19.00	7.35
Granted	—		—		—
Vested	(313,875	)	19.00		0.35
Forfeited	(453,375	)	19.00		—
March 31, 2017	21,334,689		$	18.99	7.10	$	—
Exercisable at March 31, 2017	389,575		$	19.00	0.35	$	—

As of March 31, 2017, there was $34.7 million of total unrecognized compensation expense that is expected to be recognized over the remaining weighted average period of 2.08 years.

Phantom Units

A summary of unvested phantom unit activity during the three months ended March 31, 2017 is presented below:



	Phantom Units		Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2017	266,138		$	19.00
Vested	—		—
Forfeited	(1,099	)	19.00
Balance - March 31, 2017	265,039		$	19.00

The fair value of the phantom unit awards is remeasured at each reporting period and was $18.95 per unit as of March 31, 2017. Based on the fair value of the awards at March 31, 2017, $3.5 million of unrecognized compensation expense in connection with phantom units outstanding is expected to be recognized over a weighted average period of 2.09 years. During the three months ended March 31, 2017, the Company did not pay to settle any vested phantom units.