18.	Incentive Compensation

Stock Based Compensation

In November 2014, we adopted our 2014 Equity Incentive Plan (the “Plan”), under which we expect to grant future cash and equity incentive awards to our executive officers, non-employee directors, eligible employees and other key persons in order to attract, motivate and retain the talent for which we compete. Under the Plan, awards may be granted up to a maximum of 17,142,857 shares, if all awards granted are “full value awards,” as defined, and up to 34,285,714 shares, if all of the awards granted are “not full value awards,” as defined. “Full value awards” are awards such as restricted stock or long-term incentive plan (“LTIP”) units that do not require the payment of an exercise price. “Not full value awards” are awards such as stock options or stock appreciation rights that require the payment of an exercise price. As of December 31, 2015, we have 14,384,791 shares available for future grants under the Plan, if all awards granted are full value awards, as defined in the 2014 Equity Incentive Plan.

We account for all stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Stock based compensation expense for the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014 was $7,000,000 and $391,000, respectively. The year ended December 31, 2015 includes $1,861,000 of expense related to the acceleration of vesting of the stock awards in connection with a separation agreement and release.

Stock Options

We grant certain of our executive officers and other employees stock options which vest over five years and expire 10 years from the date of grant. Compensation expense related to stock option awards is recognized on a straight-line basis over the vesting period. For the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014, we recognized $1,241,000 and $79,000, respectively, of compensation expense related to stock options. The year ended December 31, 2015 includes $294,000 of expense related to the acceleration of vesting of stock options in connection with a separation agreement and release. As of December 31, 2015, there was $4,159,000 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 4.0 years. Below is a summary of our stock option activity for year ended December 31, 2015.

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		1,489,500		$	17.50
Granted		200,000			19.08
Exercised		(200	)		17.50
Cancelled or expired		(64,850	)		17.50
Outstanding at December 31, 2015		1,624,450		$	17.69		8.9	$	854,670
Options vested and expected to vest at December 31, 2015		1,524,250		$	17.69		8.9	$	803,000
Options exercisable at December 31, 2015		368,250		$	17.50		8.9	$	221,000

The fair value of stock options granted in the years ended December 31, 2015 and December 31, 2014 was $4.44 and $3.39 per stock option, respectively. The fair value of the option is estimated on the date of grant using an option-pricing model with the following weighted-average assumptions for grants for the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014.

	December 31, 2015		December 31, 2014
Expected volatility		27.0%		23.0%
Expected life	6.5 years		6.5 years
Risk free interest rate		1.8%		2.1%
Expected dividend yield		2.0%		2.3%

LTIP Units

We grant our executive officers, non-employee directors and other employees LTIP units which vest over five years and are subject to a taxable book-up event, as defined. Compensation expense related to LTIP unit awards is recognized on a straight-line basis over the vesting period. For the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014, we recognized $4,507,000 and $296,000, respectively, of compensation expense related to LTIP units. The year ended December 31, 2015 includes $1,567,000 of expense related to the acceleration of vesting of LTIP unit awards in connection with a separation agreement and release. As of December 31, 2015, there was $10,486,000 of total unrecognized compensation cost related to unvested LTIP units, which is expected to be recognized over a weighted-average period of 3.8 years. Below is a summary of LTIP unit activity under the Plan for the year ended December 31, 2015.

	Units			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2014		885,713		$	16.60
Granted		116,095			17.93
Vested		(286,849	)		16.54
Cancelled or expired		-			-
Unvested at December 31, 2015		714,959		$	16.84

The fair value of LTIP units granted for the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014 was $2,081,000 and $14,700,000, respectively.

Restricted Stock

We grant shares of restricted stock to a non-employee director. The restricted stock vests at each annual meeting and is being recognized into expense on a straight-line basis over the vesting period. For the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014, we recognized $142,000 and $16,000, respectively, of compensation expense related to restricted stock. Below is a summary of restricted stock activity under the Plan for the year ended December 31, 2015.

	Units			Weighted-Average Grant-Date Fair Value
Unvested at December 31, 2014		5,714		$	17.50
Granted		5,219			19.16
Vested		(5,714	)		17.50
Cancelled or expired		-			-
Unvested at December 31, 2015		5,219		$	19.16

The fair value of shares of restricted stock granted for the year ended December 31, 2015 and for the period from November 24, 2014 to December 31, 2014 was $100,000 and $100,000, respectively.

2015 Performance Plan

On April 1, 2015, the compensation committee (the “Compensation Committee”) of the board of directors approved the Company’s 2015 Performance Plan (the “2015 Performance Plan”), a multi-year performance-based equity compensation program. The purpose of the 2015 Performance Plan is to further align the interests of the Company’s stockholders with that of management by encouraging the Company’s senior officers to create stockholder value in a “pay for performance” structure. Under the 2015 Performance Plan, participants may earn awards in the form of LTIP Units of the Operating Partnership based on the Company’s total return to stockholders (“TRS”) over a three-year performance measurement period beginning on April 1, 2015 and continuing through March 31, 2018, on both an absolute basis and relative basis. One-half of the award is earned if the Company outperforms a predetermined absolute TRS and the other half is earned if the Company outperforms a predetermined relative TRS. Specifically, participants begin to earn awards under the 2015 Performance Plan if the Company’s TRS for the performance measurement period equals or exceeds 21% on an absolute basis and exceeds the performance of the SNL Office REIT Index by 100 basis points on a relative basis, and awards will be fully earned if the Company’s TRS for the performance measurement period equals or exceeds 40% on an absolute basis and exceeds the performance of the SNL Office REIT Index by 700 basis points on a relative basis. Participants will not earn any awards under the 2015 Performance Plan if the Company’s TRS during the performance measurement period does not meet these minimum thresholds. The number of LTIP Units that are earned if performance is above the minimum thresholds, but below the maximum thresholds, will be determined based on linear interpolation between the percentages earned at the minimum and maximum thresholds. During the performance measurement period, participants will receive per unit distribution equal to one-tenth of the per share dividends otherwise payable to the Company’s common stockholders with respect to their LTIP Units. If the LTIP Units are ultimately earned based on the achievement of the designated performance objectives, participants will receive cash or additional LTIP Units based on the amount the participants would have received if per unit distributions during the performance measurement period for the earned LTIP Units had equaled per share dividends paid to the Company’s common stockholders less the amount of distributions participants actually received during the performance measurement period.

If the designated performance objectives are achieved, awards earned under the 2015 Performance Plan will also be subject to vesting based on continued employment with the Company through April 1, 2020, with 50% of each award vesting following the conclusion of the performance period, and 25% vesting on each of April 1, 2019 and April 1, 2020. The fair value of awards granted under the 2015 Performance Plan on the date of grant was $7,930,000 and is being amortized into expense over the five-year vesting period using a graded vesting attribution method.

In the year ended December 31, 2015, we recognized $1,110,000 of compensation expense related to the 2015 Performance Plan.

Deferred Compensation

In connection with the Formation Transactions, we assumed a deferred compensation plan (the “1993 Plan”) from our Predecessor. The 1993 Plan permits certain management employees to defer certain percentages of their compensation, as defined. The assets of the 1993 Plan remain the sole property of the Company and are subject to the claims of its general creditors. The assets of the 1993 Plan are included in “marketable securities” and “restricted cash,” with an offsetting liability included in “other liabilities” on our consolidated balance sheets. Income from the mark-to-market of investments in our deferred compensation plan is included in “interest and other income” and this amount is entirely offset by expense from the mark-to-market of plan liabilities, which is included as a component of “general and administrative” expenses on our consolidated statements of income. The 1993 Plan had a balance of $28,947,000 and $28,148,000 as of December 31, 2015 and December 31, 2014, respectively.