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 shares available to be issued under the Equity Incentive Plan resets and may increase on January 1 each year. Accordingly, on January 1, 2018, the total number of shares available for issuance under the Equity Incentive Plan increased to 31,853,504 shares, and as of March 31, 2018, 28,637,981 shares 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,
	2018		2017
Restricted units	$	18,030	$	11,219
Options	2,664		3,482
Phantom units	393		388
Equity-based compensation expense	$	21,087	$	15,089

Restricted Units

Each restricted unit represents an unfunded, unsecured right of the holder to receive a common share on a specific date. The restricted units generally vest and are settled in common shares 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 either the first or second 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 share multiplied by (ii) the number of restricted units held at the time such distributions are declared (“Dividend Equivalent”). For the three months ended March 31, 2018, Dividend Equivalents were made to the holders of restricted units in the aggregate amount of $6.6 million, which are presented as dividends within the Condensed Consolidated Statements of Changes in Equity. When restricted units are forfeited, the cumulative amount of dividend equivalents previously paid is 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, 2018:



	Restricted Units		Weighted Average Grant Date Fair Value Per Unit
Balance - January 1, 2018	13,751,888		$	17.58
Granted	3,635,419		23.61
Vested	(835,124	)	15.33
Forfeited	(199,637	)	19.83
Balance - March 31, 2018	16,352,546		$	18.98

The total compensation expense expected to be recognized in all future periods associated with the restricted units is approximately $233.3 million as of March 31, 2018 and is expected to be recognized over the remaining weighted average period of 3.70 years.

Options

A summary of options activity during the three months ended March 31, 2018 is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Life (in years)	Aggregate Intrinsic Value
Balance - January 1, 2018	20,495,025		$	18.99	6.09	$	20,611
Granted	—		—		—
Exercised	—		—		—
Expired	(219,034	)	19.00		—
Forfeited	(444,203	)	19.00		—
Balance - March 31, 2018	19,831,788		$	18.99	5.84	$	47,762
Exercisable at March 31, 2018	7,235,214		$	18.99	5.38	$	17,420

As of March 31, 2018, there was $16.6 million of total unrecognized compensation expense that is expected to be recognized over the remaining weighted average period of 1.11 years.

Phantom Units

A summary of unvested phantom unit activity during the three months ended March 31, 2018 is presented below:



	Phantom Units		Weighted Average Grant Date Fair Value Per Share
Balance - January 1, 2018	156,153		$	19.00
Vested	—
Forfeited	(9,362	)	19.00
Balance - March 31, 2018	146,791		$	19.00

The fair value of the phantom unit awards is remeasured at each reporting period and was $21.40 per unit as of March 31, 2018. Based on the fair value of the awards at March 31, 2018, $1.7 million of unrecognized compensation expense in connection with phantom units outstanding is expected to be recognized over a weighted average period of 1.09 years. During the three months ended March 31, 2018, the Company did not pay to settle any vested phantom units.