19.Incentive Compensation

Stock-Based Compensation

Our 2014 Equity Incentive Plan (the “Plan”), provides for grants of 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, 2017, we have 10,376,577 shares available for future grants under the Plan, if all awards granted are full value awards, as defined in the Plan.

We account for all stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation. Below are the components of stock-based compensation expense for the years ended December 31, 2017, 2016 and 2015.


	For the Year Ended December 31,
(Amounts in thousands)	2017		2016		2015
Stock options	$	2,214	$	1,590	$	1,241
LTIP units		6,572		5,617		4,507
Restricted stock		715		391		142
Performance programs		6,421		3,680		1,110
Total stock-based compensation expense	$	15,922	$	11,278	$	7,000

Stock Options

We grant certain of our executive officers and other employees stock options which vest over periods ranging from three to five years and expire 10 years from the date of grant. The stock options granted in the years ended December 31, 2017, 2016 and 2015 had grant date fair values of $4.02, $3.40 and $4.44 per stock option, respectively, which are being amortized into expense on a straight-line basis over the vesting period. The fair value of the option is estimated using an option-pricing model with the following weighted-average assumptions for grants in the years ended December 31, 2017, 2016 and 2015.


	For the Year Ended December 31,
	2017	2016	2015
Expected volatility	29.0%	29.0%	27.0%
Expected life	5.9 years	5.9 years	6.5 years
Risk free interest rate	2.2%	1.5%	1.8%
Expected dividend yield	2.3%	2.3%	2.0%

As of December 31, 2017, there was $3,324,000 of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a weighted-average period of 1.6 years. Below is a summary of our stock option activity for year ended December 31, 2017.

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2016		1,844,121		$	17.34
Granted		627,722			16.81
Exercised		-			-
Cancelled or expired		(23,100	)		17.50
Outstanding as of December 31, 2017		2,448,743		$	17.20		7.6	$	217,464
Options vested and expected to vest as of December 31, 2017		2,363,524		$	17.20		7.6	$	208,330
Options exercisable as of December 31, 2017		1,185,738		$	17.48		7.0	$	86,985

LTIP Units

We grant our executive officers, non-employee directors and other employees LTIP units which vest over a period of three to five years and are subject to a taxable book-up event, as defined. The LTIP units granted in the years ended December 31, 2017, 2016, and 2015 had grant date fair values of $7,467,000, $10,106,000, and $2,081,000, respectively, which are being amortized into expense on a straight-line basis over the vesting period. As of December 31, 2017, there was $12,545,000 of total unrecognized compensation cost related to unvested LTIP units, which is expected to be recognized over a weighted-average period of 2.3 years. Below is a summary of our LTIP unit activity for the year ended December 31, 2017.

	Units			Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2016		1,092,855		$	15.68
Granted		473,724			15.76
Vested		(469,918	)		15.71
Cancelled or expired		(5,897	)		15.10
Unvested as of December 31, 2017		1,090,764		$	15.70

Restricted Stock

We grant shares of restricted stock to a non-employee director and certain other employees which vest over four years. The shares of restricted stock granted in the years ended December 31, 2017, 2016 and 2015 had grant date fair values of $1,309,000, $1,600,000 and $100,000, respectively, which are being amortized into expense on a straight-line basis over the vesting period. As of December 31, 2017, there was $1,657,000 of total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted-average period of 2.6 years. Below is a summary of restricted stock activity for the year ended December 31, 2017.

	Shares			Weighted-Average Grant-Date Fair Value
Unvested as of December 31, 2016		94,823		$	15.90
Granted		78,417			16.70
Vested		(27,971	)		15.88
Cancelled or expired		(16,264	)		16.36
Unvested as of December 31, 2017		129,005		$	16.33

2017 Performance Program

On January 30, 2017, the Compensation Committee approved the 2017 Performance Program, a multiyear performance-based long-term equity (“LTE”) compensation program. The purpose of the 2017 Performance Program is to further align the interests of our stockholders with that of management by encouraging our senior officers to create stockholder value in a “pay for performance” structure. Under the 2017 Performance Program, participants may earn awards in the form of Long Term Incentive Plan (“LTIP”) units of our Operating Partnership based on our Total Shareholder Return (“TSR”) over a three-year performance measurement period beginning on January 1, 2017 and continuing through December 31, 2019, on both an absolute basis and relative basis. 25.0% of the award is earned if we outperform a predetermined absolute TSR and the remaining 75.0% is earned if we outperform a predetermined relative TSR. Specifically, participants begin to earn awards under the 2017 Performance Program if our TSR for the performance measurement period equals or exceeds 18.0% on an absolute basis and is in the 30th percentile of the performance of the SNL Office REIT Index constituents on a relative basis, and awards will be fully earned if our TSR for the performance measurement period equals or exceeds 30.0% on an absolute basis and exceeds the 80th percentile of the performance of the SNL Office REIT Index constituents on a relative basis. Participants will not earn any awards under the 2017 Performance Program if our TSR during the performance measurement period does not meet either of 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 distributions equal to one-tenth of the per share dividends otherwise payable to our 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 additional amount the participants would have received if per unit distributions during the performance measurement periods for the earned LTIP units had equaled per share dividends paid to our 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 2017 Performance Program will also be subject to vesting based on continued employment with us through December 31, 2020, with 50.0% of each award vesting following the conclusion of the performance measurement period, and the remaining 50.0% vesting on December 31, 2020. Our named executive officers, as defined, are required to hold earned awards for an additional one-year following vesting. The fair value of the awards granted under the 2017 Performance Program on the date of the grant was $10,520,000 and is being amortized into expense over the four-year vesting period using a graded vesting attribution method.