Equity Plan

6 Months Ended

Jun. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

10. Equity Plan

In January 2010, the Trust established the Chesapeake Lodging Trust Equity Plan (the “Plan”), which provides for the issuance of equity-based awards, including restricted shares, unrestricted shares, share options, share appreciation rights, and other awards based on the Trust’s common shares. Employees and trustees of the Trust and other persons that provide services to the Trust are eligible to participate in the Plan. The compensation committee of the board of trustees administers the Plan and determines the number of awards to be granted, the vesting period, and the exercise price, if any.

In June 2018, the Trust’s common shareholders approved an amendment to the Plan to, among other things, increase the number of shares available for issuance under the Plan by 1,250,000 shares and extend the term of the Plan to June 2028. Shares that are issued under the Plan to any person pursuant to an award are counted against the aggregate number of shares available for issuance under the Plan as one share for every one share granted. If any shares covered by an award are not purchased or are forfeited, if an award is settled in cash, or if an award otherwise terminates without delivery of any shares, then the number of common shares counted against the aggregate number of shares available under the Plan with respect to the award will, to the extent of any such forfeiture or termination, again be available for making awards under the Plan. As of June 30, 2019, subject to increases that may result in the case of any future forfeiture or termination of currently outstanding awards, 1,033,175 common shares were reserved and available for future issuances under the Plan.

The Trust will make appropriate adjustments to outstanding awards and the number of shares available for issuance under the Plan, including the individual limitations on awards, to reflect share dividends, share splits, spin-offs and other similar events. While the compensation committee can terminate or amend the Plan at any time, no amendment can adversely impair the rights of grantees with respect to outstanding awards. In addition, an amendment will be contingent on approval of the Trust’s common shareholders to the extent required by law or if the amendment would materially increase the benefits accruing to participants under the Plan, materially increase the aggregate number of shares that can be issued under the Plan, or materially modify the requirements as to eligibility for participation in the Plan. Unless terminated earlier, the Plan will terminate in June 2028, but will continue to govern unexpired awards.

For the six months ended June 30, 2019, the Trust granted 548,419 restricted common shares to certain employees and trustees, of which 135,920 shares were time-based awards and 412,499 shares were performance-based awards (the “2019 Performance-Based Awards”). The time-based awards are eligible to vest at the annual rate of one-third of the number of restricted shares granted commencing on the first anniversary of their issuance. The 2019 Performance-Based Awards are eligible to vest at December 31, 2021. Dividends on the 2019 Performance-Based Awards accrue, but are not paid unless the related shares vest. The fair value of the 2019 Performance-Based Awards was $9.49 per share and was determined using a Monte Carlo simulation with the following assumptions: volatility of 23.52%; an expected term equal to the requisite service period for the awards; and a risk-free interest rate of 2.57%.

The actual number of shares under the 2019 Performance-Based Awards that vest will be based on the Trust’s total shareholder return (“TSR”), as defined in the restricted share agreements, measured over a three-year performance period ending December 31, 2021, relative to the total return generated by a market-cap weighted index that includes seven lodging REITs (the "Performance Peer Group"). The payout schedule for the 2019 Performance-Based Awards is as follows, with linear interpolation for performance between 67% and 100%, and between 100% and 133% of the Performance Peer Group:



Trust TSR as % of Performance Peer Group Total Return		Payout (% of Maximum)
<67%		0%
67%		25%
100%		50%
≥133%		100%

If the Trust’s TSR is negative for the performance period, no shares under the 2019 Performance-Based Awards will vest. If the Trust’s TSR is positive for the performance period and the total return of the Performance Peer Group is negative, 100% of the shares subject to vesting under the 2019 Performance-Based Awards will vest.

As of June 30, 2019, there was approximately $10.9 million of unrecognized share-based compensation expense related to restricted common shares. The unrecognized share-based compensation expense is expected to be recognized over a weighted-average period of 2.0 years.

The following is a summary of the Trust’s restricted common share activity for the six months ended June 30, 2019:



	Number of Shares		Weighted-Average Grant-Date Fair Value
Restricted common shares as of December 31, 2018	953,429		$	15.39
Granted	548,419		$	13.12
Vested	(130,186	)	$	25.99
Forfeited	—		$	—
Restricted common shares as of June 30, 2019	1,371,662		$	13.48