Effective immediately prior to the closing of the IPO, the Company adopted the Equity Incentive Plan, which provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, performance awards and LTIP units. Officers, employees, non-employee directors, consultants, independent contractors and agents who provide services to the Company or to any subsidiary of the Company are eligible to receive such awards. A maximum of 3,550,000 shares may be issued under the Equity Incentive Plan, subject to certain conditions. On June 22, 2018, the Company registered 3,550,000 shares of common stock, reserved for issuance under the Equity Incentive Plan, pursuant to a registration statement on Form S-8 (File No. 333-225837), filed with the SEC under the Securities Act.

On June 25, 2018, an aggregate of 691,290 shares of unvested restricted common stock were issued to the Company’s directors, executive officers and other employees under the Equity Incentive Plan. Of these awards, 15,484 shares of restricted common stock vest on the first anniversary of the date of grant and 675,806 shares of restricted stock vest ratably on the first, second and third anniversaries of the date of grant, subject to the individual recipient’s continued provision of service to the Company through the applicable vesting dates.

In January 2019, an aggregate of 46,368 shares of unvested restricted common stock were issued to the Company’s executive officers, other employees and an external consultant under the Equity Incentive Plan. These awards vest over periods ranging from one to four years from the date of grant, subject to the individual recipient’s continued provision of service to the Company through the applicable vesting dates.

The Company estimates the grant date fair value of the unvested restricted common stock awards granted under the Equity Incentive Plan using the average market price of the Company’s common stock on the date of grant. Dividends declared on unvested restricted common stock are charged directly to distributions in excess of cumulative earnings on the Company’s consolidated balance sheets and amounted to $0.2 million for the three months ended March 31, 2019.

As of March 31, 2019, there was $7.5 million of total unrecognized compensation cost related to unvested restricted common stock. This unrecognized compensation expense is expected to be recognized over a weighted average period of 2.3 years from March 31, 2019.

In January 2019, the Compensation Committee of the Company’s board of directors approved target grants of 119,085 performance-based RSUs to the Company’s executive officers under the Equity Incentive Plan.

Of these awards, 75% are nonvested share awards for which vesting percentages and the ultimate number of units vesting will be calculated based on the total shareholder return (“TSR”) of the Company's common stock as compared to the TSR of 11 peer companies. The payout schedule can produce vesting percentages ranging from 0% to 250%. TSR will be calculated based upon the average closing price for the 20-trading day period ending December 31, 2021, divided by the average closing price for the 20-trading day period ended January 1, 2019. The target number of units is based on achieving a TSR equal to the 50th percentile of the peer group. The Company recorded expense on these TSR RSUs based on achieving the target.

The grant date fair value of the TSR RSUs was measured using a Monte Carlo simulation model based on the following assumptions:

As of March 31, 2019, there was $1.9 million of total unrecognized compensation cost related to these TSR RSUs. This unrecognized compensation expense is expected to be recognized over a weighted average period of 3.3 years from March 31, 2019.

The remaining 25% of these performance-based RSUs vest based on the Compensation Committee’s subjective evaluation of the individual recipient’s achievement of certain strategic objectives. As of March 31, 2019, the Compensation Committee had not identified specific performance targets relating to the individual recipients’ achievement of strategic objectives. As such, these awards do not have either a service inception or a grant date for GAAP accounting purposes and the Company recorded no compensation cost with respect to this portion of the performance-based RSUs during the three months ended March 31, 2019.

The following table presents information about Equity Incentive Plan activity during the three months ended March 31, 2019:

	Restricted Stock Awards				Restricted Stock Units
	Shares		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
Unvested restricted common stock outstanding, January 1, 2019		691,290	$	13.68		—	$	—
Granted		46,368		14.12		89,314	23.07
Vested		—		—		—		—
Forfeited		—		—		—		—
Unvested restricted common stock outstanding, March 31, 2019		737,658	$	13.71		89,314	$	23.07

During the three months ended March 31, 2019, the Company recorded $1.0 million of compensation expense related to its outstanding restricted stock awards and TSR RSUs as a component of general and administrative expense in its consolidated statements of operations and comprehensive income.

On January 31, 2017, EPRT LLC approved the issuance of Class B and Class D units and issued 8,050 unvested Class B units to members of EPRT Management and a member of EPRT LLC’s board of managers and issued 3,000 unvested Class D units to members of EPRT LLC’s board of managers and external unitholders. The Class B and Class D units vest in five equal installments that began on March 30, 2017 and will continue on each anniversary thereof through March 30, 2021. The holders of vested Class B units can put the Class B units beginning on March 30, 2024.

On December 31, 2017, in the EPRT LLC Reorganization, the holders of Class B and Class D units contributed all of their interests in EPRT LLC to EPRT Holdings in exchange for interests in EPRT Holdings with the same rights as the interests they held in EPRT LLC. The EPRT LLC units were exchanged on a one-for-one basis for equivalent units in EPRT Holdings with the same vesting conditions, distribution rights, priority and income allocation rights, among others. Additionally, EPRT Holdings issued a new grant of 500 unvested Class B units to a member of EPRT Management on the same date. The Class B units granted on December 31, 2017 vest in five equal installments that began on May 1, 2018 and will continue on each anniversary thereof through May 1, 2022 and have similar put rights as the Class B units granted on January 31, 2017.

Following the completion of the Formation Transactions, the Class B and Class D unitholders continue to hold vested and unvested interests in EPRT Holdings and, indirectly, the OP Units held by EPRT Holdings.

The following table presents information about the unvested Class B and Class D units during the three months ended March 31, 2019 and 2018:

	Class B Units			Class D Units			Total
Unvested units outstanding, January 1, 2018		6,940			2,400			9,340
Granted		—			—			—
Vested		(1,610	)		(600	)		(2,210	)
Forfeited		—			—			—
Unvested units outstanding, March 31, 2018		5,330			1,800			7,130

Unvested units outstanding, January 1, 2019		5,230			1,800			7,030
Granted		—			—			—
Vested		(1,610	)		(600	)		(2,210	)
Forfeited		—			—			—
Unvested units outstanding, March 31, 2019		3,620			1,200			4,820

The Company estimated the grant date fair value of the unvested Class B and Class D awards granted to employees on January 31, 2017 and the fair value of the Class D awards granted to non-employees as of March 31, 2018 and July 1, 2018 using a Black-Scholes valuation model. Effective July 1, 2018, the Company adopted ASU 2018-07 (see Note 2 – Summary of Significant Accounting Policies) and will not subsequently remeasure the value of the unvested Class D awards granted to non-employees after this date. The Company's assumptions for expected volatility were based on daily historical volatility data related to market trading of publicly traded companies that invest in similar types of real estate as the Company, plus an adjustment to account for differences in the Company’s leverage compared to the publicly traded companies. The risk-free interest rate assumptions were determined by using U.S. treasury rates of the same period as the expected vesting term of each award. The marketability discounts were calculated using a Finnerty Model.

The Company determined that the grant date per unit fair value of the unvested Class B and Class D units granted on January 31, 2017 was $323.65 and $152.16, respectively. As of March 31, 2018, the Company determined that the per unit fair value of the Class D units granted to non-employees on January 31, 2017 was $425.40.

The total fair value of Class B and Class D units that vested during the three months ended March 31, 2019 was $0.5 million and $0.1 million, respectively. During the three months ended March 31, 2019 and 2018, the Company recorded $0.2 million of compensation expense as a component of general and administrative expense related to the Class B and Class D units in the Company’s consolidated statements of operations and comprehensive income.

As of March 31, 2019, there was $1.7 million and $0.2 million of total unrecognized compensation cost related to the Class B and Class D units, respectively. As of December 31, 2018, there was $1.9 million and $0.2 million of total unrecognized compensation cost related to the Class B and Class D units, respectively. The unrecognized compensation expense for Class B and Class D units is expected to be recognized over a weighted average period of 2.1 and 2 years from March 31, 2019.

The per unit fair value of unvested Class D units was estimated using the following assumptions as of March 31, 2018: