Stock Incentive Plans

9 Months Ended

Sep. 30, 2022

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 5,135,195 shares as of September 30, 2022. 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 vest over a three to five year period from the date of 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, 2022 to September 30, 2022 is as follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2022	1,443,295	$	9.46
Granted	438,070	9.55
Vested	(265,965)	9.54
Forfeited	(250,261)	9.43
Unvested balance at September 30, 2022	1,365,139	$	9.48

The total unvested share awards as of September 30, 2022 are expected to vest as follows: 8,202 shares during 2022, 382,822 shares during 2023, 443,492 shares during 2024, 259,345 shares during 2025, and 271,278 shares during 2026. As of September 30, 2022, the unrecognized compensation cost related to restricted stock awards was $8.6 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 30 months. We recorded $1.1 million and $1.0 million of compensation expense related to restricted stock awards for each of the three months ended September 30, 2022 and 2021, respectively. We recorded $3.2 million and $2.8 million of compensation expense related to restricted stock awards for each of the nine months ended September 30, 2022 and 2021, respectively. The compensation expense recorded for the nine months ended September 30, 2022 includes the reversal of $0.2 million of previously recognized compensation expense in connection with the resignation of our former Executive Vice President, Asset Management and Chief Operating Officer, as well as certain other employees.

Performance Stock Units

Performance stock units (“PSUs”) are restricted stock units that vest three or five 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 or five-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 or five-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%.

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 vesting 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.

In the nine months ended September 30, 2022, our board of directors granted 407,570 PSUs to our executive officers. The determination of the grant-date fair values of outstanding awards included the following assumptions:


Award Grant Date	Volatility		Risk-Free Rate		Total Stockholder Return PSUs		Hotel Market Share PSUs
February 22, 2022	71.4	%	1.74	%	$	9.84	$	9.56
August 9, 2022	73.3	%	3.20	%	$	9.65	$	9.32

A summary of our PSUs from January 1, 2022 to September 30, 2022 is as follows:


	Number of Target Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2022	969,240	$	9.45
Granted	407,570	9.66

Vested (1)	(269,224)	10.14
Forfeited	(160,533)	9.34
Unvested balance at September 30, 2022	947,053	$	9.36

______________________

(1)The number of shares of common stock earned for the PSUs vested in 2022 was equal to 100.0% of the PSU Target Award.

The total unvested PSUs as of September 30, 2022 are expected to vest as follows: 296,596 units during 2023, 294,445 units during 2024, 321,078 units during 2025 and 34,934 units during 2027. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of September 30, 2022, 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 28 months. We recorded $0.7 million and $0.8 million of compensation expense related to the PSUs for the three months ended September 30, 2022 and 2021, respectively. We recorded $1.6 million and $2.2 million of compensation expense related to the PSUs for the nine months ended September 30, 2022 and 2021, respectively. The compensation expense recorded for the nine months ended September 30, 2022 includes the reversal of $0.5 million of previously recognized compensation expense in connection with the resignation of our former Executive Vice President, Asset Management and Chief Operating Officer.

LTIP Units

LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while potentially 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, 2022 to September 30, 2022 is as follows:


	Number of Units	Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2022	135,388	$	10.22
Granted	71,084	9.32
Vested (1)	(108,422)	10.38

Unvested balance at September 30, 2022	98,050	$	9.39

______________________

(1)As of September 30, 2022, 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, 2022 are expected to vest as follows: 41,183 during 2023, 14,217 during 2024, 2025, and 2026, respectively, and 14,216 during 2027.

As of September 30, 2022, 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 50 months. We recorded $0.1 million and $0.3 million of compensation expense related to LTIP unit awards for the three months ended September 30, 2022 and 2021, respectively. We recorded $0.4 million and $0.8 million of compensation expense related to LTIP unit awards for the nine months ended September 30, 2022 and 2021, respectively.