Share-based Compensation Plans

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

As of June 30, 2020, we have two share-based compensation plans in effect: 1) the 2019 Omnibus Long-Term Incentive Plan (“2019 LTIP”) and 2) the Inducement Incentive Plan (“Inducement Plan”). On April 29, 2019, our shareholders approved the 2019 LTIP, which replaced the 2012 Omnibus Long-Term Incentive Plan (“2012 LTIP”). The 2019 LTIP is administered by the compensation committee of the Board (the “Compensation Committee”). The 2019 LTIP provides for the award to our trustees, officers, employees and other service providers of restricted shares, restricted share units, options to purchase shares, share appreciation rights, unrestricted shares, and other awards to acquire up to an aggregate of 3.5 million common shares of beneficial interest plus any shares that become available under the 2012 LTIP as a result of the forfeiture, expiration or cancellation of outstanding awards or any award settled in cash in lieu of shares under such plan. As of June 30, 2020, there were 2.5 million shares of beneficial interest available for issuance under the 2019 LTIP. The Inducement Plan was approved by the Board in April 2018 and under such plan the Compensation Committee may grant, subject to any Company performance conditions as specified by the Compensation Committee, restricted shares, restricted share units, options and other awards to individuals who were not previously employees or members of the Board as an inducement to the individual's entry into employment with the Company. The Inducement Plan allows us to issue up to 6.0 million common shares of beneficial interest, of which 5.0 million remained available for issuance as of June 30, 2020; however, we do not intend to make further awards under the Inducement Plan following adoption of the 2019 LTIP.

As of June 30, 2020, we had 588,002 unvested service-based share awards outstanding under the 2019 LTIP, 78,705 unvested service-based share awards outstanding under the Inducement Plan, and 149,514 unvested service-based share awards outstanding under the 2012 LTIP. These awards have various expiration dates through June 2025.

During the six months ended June 30, 2020, we granted the following awards:

•211,769 shares of service-based restricted stock. The service-based awards were valued based on our closing stock price as of the grant date. The service-based restricted share awards to employees vest over three years and the compensation expense is recognized on a graded vesting basis. The service-based restricted share awards to trustees vest over one year;

•286,944 shares of service-based restricted stock were granted in connection with the extension of the employment agreements of our Chief Executive Officer and Chief Financial Officer, which vest in full on June 30, 2025 and June 30, 2024, respectively. The service-based awards were valued based on our closing stock price as of the grant date;

•32,069 shares of service-based restricted stock were granted as part of the salary exchange program pursuant to which certains members of the Company's senior leadership team voluntarily reduced their 2020 annual base salary in exchange for restricted common shares. These shares will vest on January 2, 2021, subject to continued employment through such date. The service-based awards were valued based on our closing stock price as of the grant date; and

•Performance-based equity awards that are earned subject to a future performance measurement based on a three-year shareholder return peer comparison (“TSR Grants”).

We recognized expense related to service-based restricted share grants of $1.0 million and $1.0 million for three months ended June 30, 2020 and June 30, 2019, respectively, and expense of $1.8 million and $2.0 million for the six months ended June 30, 2020 and June 30, 2019, respectively.

Pursuant to ASC 718 – Stock Compensation, we determine the grant date fair value of TSR Grants that will be settled in cash, and any subsequent re-measurements, based upon a Monte Carlo simulation model. We will recognize the compensation expense ratably over the requisite service period. We are required to re-value the cash awards at the end of each quarter using the same methodology as was used at the initial grant date and adjust the compensation expense accordingly. If at the end of the three-year measurement period the performance criterion is not met, compensation expense related to the cash awards previously recognized would be reversed. Compensation expense (benefit) related to the cash awards was $0.1 million and $0.2 million for the three months ended June 30, 2020 and June 30, 2019, respectively, and an expense (benefit) of $(0.2) million and $(0.1) million, for the six months ended June 30, 2020 and June 30, 2019, respectively. The weighted average assumptions used in the Monte Carlo simulation models are summarized in the following table:


	June 30, 2020		December 31, 2019
Closing share price	$6.96		$15.04
Expected dividend rate	0.0	%	5.9	%
Expected stock price volatility	67.4	%	22.6	%
Risk-free interest rate	0.2	%	1.6	%
Expected life (years)	1.50		2.00

The Company also determines the grant date fair value of the TSR Grants that will be settled in equity based upon a Monte Carlo simulation model and recognizes the compensation expense ratably over the requisite service period. These equity awards are not re-valued at the end of each quarter. The compensation cost will be recognized regardless of whether the performance criterion are met, provided the requisite service has been provided. Compensation expense related to the equity awards was $0.6 million and $0.4 million for the three months ended June 30, 2020 and June 30, 2019, respectively, and an expense of $1.2 million and $0.9 million for the six months ended June 30, 2020 and June 30, 2019, respectively. The fair value of each grant for the reported periods is estimated on the date of grant using the Monte Carlo simulation model using the weighted average assumptions noted in the following table:


	Six Months Ended June 30,
	2020		2019
Closing share price	$13.09		$12.05
Expected dividend rate	6.7	%	7.3	%
Expected stock price volatility	23.3	%	22.9	%
Risk-free interest rate	0.9	%	2.5	%
Expected life (years)	2.85		2.85

We recognized total share-based compensation expense of $1.7 million and $1.6 million for the three months ended June 30, 2020 and June 30, 2019, respectively, and $2.8 million for both the six months ended June 30, 2020 and June 30, 2019, respectively.

As of June 30, 2020, we had $9.4 million of total unrecognized compensation expense related to unvested restricted shares and performance based equity and cash awards. This expense is expected to be recognized over a weighted-average period of 2.6 years.