Stock Incentive Plans

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity Incentive Plan (the “2016 Plan”), of which we have issued or committed to issue 3,053,153 shares as of September 30, 2020.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a three-year period from the date of the grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the fair market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying consolidated statements of operations. A summary of our restricted stock awards from January 1, 2020 to September 30, 2020 is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2020	472,999	$	10.40
Granted	343,410	9.41
Vested	(229,664)	10.55
Forfeited	(13,683)	9.99
Unvested balance at September 30, 2020	573,062	$	9.76

The remaining share awards are expected to vest as follows: 8,202 shares during 2020, 247,019 shares during 2021, 141,836 during 2022 and 176,005 during 2023. As of September 30, 2020, the unrecognized compensation cost related to restricted stock awards was $4.0 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 25 months. We recorded $0.7 million and $0.6 million of compensation expense related to restricted stock awards for the three months ended September 30, 2020 and 2019, respectively. We recorded $2.0 million and $1.9 million of compensation expense related to restricted stock awards for the nine months ended September 30, 2020 and 2019, respectively.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). The actual number of shares of common stock issued to each executive officer is based on the Company's achievement of certain performance targets. Fifty percent of the PSUs are based on relative total stockholder return and 50% on hotel market share improvement. The achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of publicly-traded lodging REITs is measured over a three-year performance period. There is no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 75th percentile of the total stockholder returns of the peer group. The number of PSUs earned is limited to 100% of the PSU Target Award if the Company's total stockholder return is negative for the three-year performance period. The improvement in market share for each of our hotels is measured over a three-year performance period based on a report prepared for each hotel by STR Global, a well-recognized and universally accepted benchmarking service for the hospitality industry.

We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the three-year performance period and is included in corporate expenses in the accompanying consolidated statements of operations. The grant date fair value of the portion of the PSUs based on our relative total stockholder return is determined using a Monte Carlo simulation performed by a third-party valuation firm. The grant date fair value of the portion of the PSUs based on hotel market share improvement is the closing price of our common stock on the grant date.

On February 25, 2020, our board of directors granted 352,035 PSUs to our executive officers. The grant date fair value of the portion of the PSUs based on our relative total stockholder return was $8.52 using the assumptions of volatility of 21.4% and a risk-free rate of 1.16%. The grant date fair value of the portion of the PSUs based on hotel market share was $9.58, which was the closing stock price of our common stock on such date.

A summary of our PSUs from January 1, 2020 to September 30, 2020 is as follows:


	Number of Target Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2020	796,532	$	11.16
Granted	352,035	9.02
Additional units from dividends	9,556	10.42
Vested (1)	(245,937)	11.00

Unvested balance at September 30, 2020	912,186	$	9.63

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(1)The number of shares of common stock earned for the PSUs vested in 2020 was equal to 123.07% of the PSU Target Award.

The remaining unvested PSUs are expected to vest as follows: 290,927 units during 2021, 269,224 units during 2022 and 352,035 during 2023. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of September 30, 2020, the unrecognized compensation cost related to the PSUs was $4.1 million and is expected to be recognized on a straight-line basis over a weighted average period of 23 months. We recorded $0.7 million and $0.5 million of compensation expense related to the PSUs for the three months ended September 30, 2020 and 2019, respectively. We recorded $2.0 million and $1.8 million of compensation expense related to the PSUs for the nine months ended September 30, 2020 and 2019, respectively.

LTIP Units

LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under the 2016 Plan. At the time of award, LTIP units do not have full economic parity with common OP units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules.

On February 25, 2020, our board of directors granted 80,898 LTIP units to certain of our executive officers. Other executive officers of the Company elected to receive restricted stock in lieu of LTIP units. The grant date fair value of the LTIP unit was the closing price of our common stock on the grant date.

A summary of our LTIP units from January 1, 2020 to September 30, 2020 is as follows:


	Number of Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2020	244,366	$	10.65
Granted	80,898	9.58
Vested (1)	(81,455)	10.65

Unvested balance at September 30, 2020	243,809	$	10.29

______________________

(1)As of September 30, 2020, all vested LTIP units have been converted to common OP units.

The remaining unvested LTIP units are expected to vest as follows: 108,421 units during 2021, 108,422 units during 2022 and 26,966 units during 2023. As of September 30, 2020, of the 325,264 LTIP units granted, 81,455 LTIP units have vested.

As of September 30, 2020, the unrecognized compensation cost related to LTIP unit awards was $1.9 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 21 months. We recorded $0.3 million and $0.2 million of compensation expense related to LTIP unit awards for the three months ended September 30, 2020 and 2019, respectively. We recorded $0.8 million and $0.5 million of compensation expense related to LTIP unit awards for the nine months ended September 30, 2020 and 2019, respectively.