NOTE 12 – STOCK-BASED COMPENSATION

Restricted Stock Units

During the year ended December 31, 2016, we granted 75,500 Restricted Stock Units (“RSUs”) to certain employees. The RSUs vest and settle over two years, subject to each employee’s continued employment. The weighted average fair market value at grant date for these shares was approximately $0.4 million, and we incurred approximately $0.3 million RSU expense for these shares for the year ended December 31, 2016, of which $0.2 million was capitalized in real estate under development for the year ended December 31, 2016.

During the year ended December 31, 2016, we granted 1,214,169 RSUs to our President and Chief Executive Officer (the “CEO”), pursuant to his employment agreement. The RSUs have vesting periods ranging over five years, subject to the CEO’s continued employment, and settle in shares ranging over an eight-year period. Until shares are issued with respect to the RSUs, the CEO will not have any rights as a shareholder and will not receive dividends or be able to vote the shares represented by the RSUs. We use the fair-market value of our common stock on the date an award is granted to value the grant. The weighted average fair market value at grant date for these shares was approximately $7.4 million, and we incurred approximately $4.5 million of RSU expense for these shares during the year ended December 31, 2016, of which $3.1 million was capitalized in real estate under development for the year ended December 31, 2016.

In April, 2015, we issued 238,095 shares of common stock to the CEO to settle vested RSUs from previous RSU grants. In connection with that transaction, we repurchased/withheld (from the 238,095 shares issued) 132,904 shares to provide for the CEO’s withholding tax liability. In accordance with ASC Topic 718, Compensation-Stock Compensation, the repurchase or withholding of immature shares (i.e. shares held for less than six months) by us upon the vesting of a restricted share would ordinarily result in liability accounting. ASC 718 provides an exception, if the fair value of the shares repurchased or withheld is equal or less than the employer’s minimum statutory withholding requirements. The aggregate fair value of the shares repurchased/withheld (valued at the then current fair value of $8.00 per share) was in excess of the minimum statutory tax withholding requirements and as such we are required to account for the restricted stock awards as a liability. At each reporting period in fiscal 2015, we re-measured the liability, until settled, with changes in the fair value recorded as stock compensation expense in the statement of operations. As of January 1, 2016, we elected to early adopt ASU 2016-09 (see Note 2 – Summary of Significant Accounting Policies - Recent Accounting Pronouncements) and the adoption resulted in a reduction in real estate, net, of $0.5 million, a reduction in liability related to stock-based compensation of $5.1 million, an increase in additional paid-in capital of $4.4 million and an increase in retained earnings of $0.2 million as of the date of adoption.

Stock-based compensation expense recognized in the consolidated statement of operations during the year ended December 31, 2016 and the period ended December 31, 2015 totaled $2.8 million and $1.4 million, respectively, which is net of $5.0 million and $3.3 million, respectively, capitalized as part of real estate under development. Our RSU activity is as follows:

	Year Ended				Period from March 1, 2015 through December
	December 31, 2016				31, 2015
			Weighted				Weighted
			Average Fair				Average Fair
	Number of Shares		Value at Grant Date		Number of Shares		Value at Grant Date

Non-vested at beginning of period		1,220,097	$	6.65		1,244,463	$	6.48
Granted		1,289,669	$	6.02		393,095	$	7.02
Vested		(888,531)	$	6.23		(417,461)	$	6.47
Non-vested at end of period		1,621,235	$	6.38		1,220,097	$	6.65

Stock Incentive Plan

During October 2015, we instituted the Trinity Place Holdings Inc. 2015 Stock Incentive Plan (the “SIP”). The SIP, which has a ten year term, authorizes (i) the grant of stock options that do not qualify as incentive stock options under Section 422 of the Code, or NQSOs, (ii) the grant of stock appreciation rights, (iii) grants of shares of restricted and unrestricted common stock, and (iv) restricted stock units. The exercise price of stock options will be determined by the compensation committee, but may not be less than 100% of the fair market value of the shares of common stock on the date of grant. At December 31, 2016, approximately 644,500 shares of common stock were reserved for issuance under the SIP.

During the 2016 year, there were 75,500 RSU grants under the SIP for employees, with a weighted average fair value of $0.4 million at grant date, and none of these grants had vested as of December 31, 2016. During the 2016 year, there were 50,000 units of stock in the aggregate under the SIP that were granted to the Board of Directors with a weighted average fair value of $0.5 million at grant date and which vested immediately.

During the period ending December 31, 2015, there were 30,000 RSU grants under the SIP for one employee, with a weighted average fair value of $6.70 at grant date, and none of these grants had vested as of December 31, 2015.

Director Deferral Plan

Under our Non-Employee Director's Deferral Program, which commenced November 2016, our non-employee directors may elect to defer 100% of their annual stock grant. Compensation deferred under the program shall be credited in the form of a number of phantom stock units equal to the number of shares that would have been received absent a deferral election. (The number of shares to be received by a director is generally determined by applying the closing price of our common stock on the business day prior to the respective grant date to the amount of director compensation being paid in shares.) The program provides that a director's phantom stock units generally will be settled in an equal number of shares of common stock within 10 days after the participant ceases to be a director. In the event that the Company distributes dividends, each participant shall receive a number of additional phantom stock units (including fractional phantom stock units) equal to the quotient of (i) the aggregate amount of the dividend that the participant would have received had all outstanding stock units been shares of common stock divided by (ii) the closing price of a share of common stock on the date the dividend was issued.

During the year ended December 31, 2016, no phantom stock units were earned and no shares of common stock were issued to our board of directors under this plan. As of December 31, 2016, there were no phantom stock units outstanding pursuant to our Non-Employee Director's Deferral Program.