Stock Incentive Plans

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity Incentive Plan (the “2016 Plan”), of which we have issued or committed to issue 4,409,225 shares as of September 30, 2021. In addition to these shares, additional shares of common stock may be issued from time to time in connection with the performance stock unit awards as further described below.

Restricted Stock Awards

Restricted stock awards issued to our officers and employees generally vest over a three-year period from the date of the grant based on continued employment. We measure compensation expense for the restricted stock awards based upon the fair

market value of our common stock at the date of grant. Compensation expense is recognized on a straight-line basis over the vesting period and is included in corporate expenses in the accompanying consolidated statements of operations. A summary of our restricted stock awards from January 1, 2021 to September 30, 2021 is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	557,273	$	9.83
Granted	1,177,537	9.32
Vested	(236,288)	9.93
Forfeited	(47,025)	9.21
Unvested balance at September 30, 2021	1,451,497	$	9.46

In March 2021, our board of directors granted 691,490 restricted shares of common stock as special retention awards (the “Special Retention Awards”) for certain executives, including our named executive officers. The Special Retention Awards generally vest over a five-year period from the date of their grant based on continued employment. Vesting occurs on the following schedule:

•0% for the first three years,

•25% on the third anniversary of the grant,

•25% on the fourth anniversary of the grant, and

•50% on the fifth anniversary of the grant.

The total unvested share awards as of September 30, 2021 are expected to vest as follows: 8,202 shares during 2021, 268,882 shares during 2022, 306,183 shares during 2023, 381,527 shares during 2024, 162,234 shares during 2025 and 324,469 shares during 2026. As of September 30, 2021, the unrecognized compensation cost related to restricted stock awards was $11.0 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 39 months. We recorded $1.0 million and $0.7 million of compensation expense related to restricted stock awards for the three months ended September 30, 2021 and 2020, respectively. We recorded $2.8 million and $2.0 million of compensation expense related to restricted stock awards for the nine months ended September 30, 2021 and 2020, respectively.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three years from the date of grant. Each executive officer is granted a target number of PSUs (the “PSU Target Award”). The actual number of shares of common stock issued to each executive officer is based on the Company's achievement of certain performance targets. Under this framework, 50% of the PSUs are based on relative total stockholder return and 50% on hotel market share improvement. The achievement of certain levels of total stockholder return relative to the total stockholder return of a peer group of publicly-traded lodging REITs is measured over a three-year performance period. There is no payout of shares of our common stock if our total stockholder return falls below the 30th percentile of the total stockholder returns of the peer group. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if our total stockholder return is equal to or greater than the 75th percentile of the total stockholder returns of the peer group. The number of PSUs earned is limited to 100% of the PSU Target Award if the Company's total stockholder return is negative for the three-year performance period. The improvement in market share for each of our hotels is measured over a three-year performance period based on a report prepared for each hotel by STR Global, a well-recognized benchmarking service for the hospitality industry. There is no payout of shares of our common stock if the percentage of our hotels with market share improvements is less than 30%. The maximum number of shares of common stock issued to an executive officer is equal to 150% of the PSU Target Award and is earned if the percentage of our hotels with market share improvements is greater than or equal to 75%. For the PSUs granted on March 2, 2021, the improvement in market share for each of our hotels will be measured over a two-year performance period starting on January 1, 2022, which is when we anticipate most major hotels will be open within our competitive sets.

We measure compensation expense for the PSUs based upon the fair market value of the award at the grant date. Compensation expense is recognized on a straight-line basis over the three-year performance period and is included in corporate expenses in the accompanying consolidated statements of operations. The grant date fair value of the portion of the PSUs based on our relative total stockholder return is determined using a Monte Carlo simulation performed by a third-party valuation firm.

The grant date fair value of the portion of the PSUs based on hotel market share improvement is the closing price of our common stock on the grant date.

On March 2, 2021, our board of directors granted 347,981 PSUs to our executive officers. The grant date fair value of the portion of the PSUs based on our relative total stockholder return was $9.28 using the assumptions of volatility of 68.8% and a risk-free rate of 0.26%. The grant date fair value of the portion of the PSUs based on hotel market share was $9.40, which was the closing stock price of our common stock on such date.

A summary of our PSUs from January 1, 2021 to September 30, 2021 is as follows:


	Number of Target Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	912,186	$	9.63
Granted	347,981	9.34

Vested (1)	(290,927)	9.90

Unvested balance at September 30, 2021	969,240	$	9.45

______________________

(1)The number of shares of common stock earned for the PSUs vested in 2021 was equal to 100.0% of the PSU Target Award.

The total unvested PSUs as of September 30, 2021 are expected to vest as follows: 269,224 units during 2022, 352,035 units during 2023 and 347,981 units during 2024. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of September 30, 2021, the unrecognized compensation cost related to the PSUs was $4.5 million and is expected to be recognized on a straight-line basis over a weighted average period of 23 months. We recorded $0.8 million and $0.7 million of compensation expense related to the PSUs for the three months ended September 30, 2021 and 2020, respectively. We recorded $2.2 million and $2.0 million of compensation expense related to the PSUs for the nine months ended September 30, 2021 and 2020, respectively.

LTIP Units

LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while allowing them to enjoy a more favorable income tax treatment. Each LTIP unit awarded is deemed equivalent to an award of one share of common stock reserved under the 2016 Plan. At the time of award, LTIP units do not have full economic parity with common OP units, but can achieve such parity over time upon the occurrence of specified events in accordance with partnership tax rules.

A summary of our LTIP units from January 1, 2021 to September 30, 2021 is as follows:


	Number of Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2021	243,809	$	10.29

Vested (1)	(108,421)	10.38

Unvested balance at September 30, 2021	135,388	$	10.22

______________________

(1)As of September 30, 2021, all vested LTIP units have achieved economic parity with common OP units and have been converted to common OP units.

The total unvested LTIP units as of September 30, 2021 are expected to vest as follows: 108,422 units during 2022 and 26,966 units during 2023. As of September 30, 2021, of the 325,264 LTIP units granted, 189,876 LTIP units have vested.

As of September 30, 2021, the unrecognized compensation cost related to LTIP unit awards was $0.7 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 14 months. We recorded $0.3 million of compensation expense related to LTIP unit awards for each of the three months ended September 30, 2021 and 2020, respectively. We recorded $0.8 million of compensation expense related to LTIP unit awards for each of the nine months ended September 30, 2021 and 2020.