Equity-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Fair Value Measurements, Recurring and Nonrecurring, Valuation Techniques

The Company relies on the third party pricing exception with respect to the requirement to provide quantitative disclosures about significant Level 3 inputs being used to determine fair value measurements for CRE debt securities, except for N-Star CDO bonds, and prior to May 2018, loans receivable and bonds payable issued by a consolidated securitization trust held by a previously consolidated N-Star CDO. The Company believes that the pricing service or broker quotations for these instruments may be based on market transactions of comparable securities, inputs including forecasted market rates, contractual terms, observable discount rates for similar securities and credit, such as credit support and delinquency rates.

Quantitative information about recurring Level 3 fair value measurements, for which information about unobservable inputs is reasonably available to the Company, are as follows.

Valuation Technique

Key Unobservable Inputs

Input Value

Effect on Fair Value from Increase in Input Value ⁽¹⁾

Financial Instrument

Fair Value

(In thousands)

Weighted Average

(Range)

December 31, 2018

Level 3 Assets

Equity method investments—third party private equity funds

5,908

Transaction price and NAV⁽²⁾

Not applicable

Equity method investments—other

21,831

Discounted cash flows

Discount rate

17.5%
(9.1% - 18.4%)

Decrease

Equity method investments—other

25,000

Multiple

Revenue multiple

5.8x

Increase

Equity method investments—other

28,346

Transaction price⁽³⁾

Not applicable

N-Star CDO bonds

64,127

Discounted cash flows

Discount rate

21.6%
(13.6% - 56.5%)

Decrease

Level 3 Liabilities

Other liabilities—contingent consideration for THL Hotel Portfolio

8,903

Discounted cash flows

Discount rate

20.0%

Decrease

December 31, 2017

Level 3 Assets

Equity method investments—third party private equity funds

204,774

Discounted cash flows

Discount rate

14.6%
(11.0% - 20.0%)

Decrease

Equity method investments—other

26,408

Discounted cash flows

Discount rate

14.2%
(8.8% - 14.8%)

Decrease

Equity method investments—other

132,719

Transaction price⁽³⁾

Not applicable

N-Star CDO bonds

90,933

Discounted cash flows

Discount rate

24.0%
(10.8% - 87.4%)

Decrease

Level 3 Liabilities

Due to affiliates—contingent consideration for Internalization

20,650

Monte Carlo simulation

Benchmark FFO volatility

11.8%

Increase

Equity volatility

18.7%

Increase

Correlation ⁽⁴⁾

80.0%

Increase

Other liabilities—contingent consideration for THL Hotel Portfolio

7,419

Discounted cash flows

Discount rate

20.0%

Decrease

__________


⁽¹⁾	Represents the directional change in fair value that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the reverse effect. Significant increases or decreases in these inputs in isolation could result in significantly higher or lower fair value measures.


⁽²⁾	Fair value was estimated based on a combination of inputs, namely indicative prices of investments sold by the Company as well as underlying NAV of the respective funds on a quarter lag.


⁽³⁾	Valued based upon transaction price of investments recently acquired or offer prices on investments pending sales.


⁽⁴⁾	Represents assumed correlation between Benchmark FFO and the Company's class A common stock price.

Fair value of PSUs, including dividend equivalent rights, was determined using a Monte Carlo simulation under a risk-neutral premise, with the following assumptions:



	2018 PSU Grant
Expected volatility of the Company's class A common stock⁽¹⁾	38	%
Expected annual dividend yield⁽²⁾	7.6	%
Risk-free rate (per annum)⁽³⁾	2.44	%

__________


⁽¹⁾	Based on a combination of implied volatilities on actively traded stock options and historical volatilities, on the stock of the Company and the specified peer group.


⁽²⁾	Based on an average of the Company's current and historical dividend yields.


⁽³⁾	Based on the prevailing 3-year zero coupon US Treasury yield on grant date.

Components of Share-Based Compensation

Equity-based compensation expense is included in the following line items in the consolidated statements of operations:



	Year Ended December 31,
(In thousands)	2018		2017		2016
Compensation expense (including $270, $0 and $0 amortization of fair value of dividend equivalent right)	$	41,876	$	149,820	$	13,638
Earnings from investments in unconsolidated ventures	—		61		—
Investment and servicing expense	—		4,070		—
	$	41,876	$	153,951	$	13,638

Nonvested Shares Under Director Stock Plan and Equity Incentive Plan

Changes in the Company’s unvested equity awards are summarized below:



											Weighted Average Grant Date Fair Value
	Restricted Stock		LTIP Units		DSUs		PSUs ⁽¹⁾		Total		PSUs		All Other Awards
Unvested shares and units at December 31, 2017	9,149,516		3,506,387		78,267		—		12,734,170		$	—	$	14.53
Granted	3,605,137		—		263,506		2,138,858		6,007,501		5.09		6.19
Vested	(7,121,545	)	(3,506,387	)	(158,639	)	—		(10,786,571	)	—		14.27
Forfeited	(211,018	)	—		—		(94,909	)	(305,927	)	5.09		11.42
Unvested shares and units at December 31, 2018	5,422,090		—		183,134		2,043,949		7,649,173		$	5.09	$	9.39

__________


⁽¹⁾	Represents the number of PSUs granted which does not reflect potential increases or decreases that could result from the final outcome of the total shareholder return at the end of the performance period. No PSUs were granted during 2017 and 2016.