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Equity Incentive Plans | 3 Months Ended
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Mar. 31, 2024
Share-Based Payment Arrangement [Abstract] |
Equity Incentive Plans | Equity Incentive Plans We are authorized to issue up to 6,082,664 shares of our common stock under our 2016 Equity Incentive Plan (as amended, the “2016 Plan”), which we have fully committed as of March 31, 2024 and December 31, 2023. On February 27, 2024, our board of directors adopted the 2024 Equity Incentive Plan (the “2024 Plan”). The 2024 Plan was approved by our stockholders on May 1, 2024. The 2024 Plan replaces the 2016 Plan and share grants will no longer be made under the 2016 Plan; however, shares underlying awards already granted under the 2016 Plan will still be issued under the 2016 Plan if the awards vest. Under the 2024 Plan, we are authorized to issue up to 7,900,000 shares of our common stock. Except for the shares and deferred stock units that are expected to be granted to our officers, employ ees and non-employee directors shortly after our annual meeting of stockholders, which represent the Company's annual equity grants to officers, employees and non-employee directors, no other shares have been issued or committed to be issued under the 20 24 Plan. Restricted Stock Awards Restricted stock awards issued to our officers and employees generally 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 and comprehensive income. A summary of our restricted stock awards from January 1, 2024 to March 31, 2024 is as follows:
| Number of Shares |  | Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2024 | 1,200,693 |  |  | $ | 9.33 |
Vested | (484,777) |  |  | 9.37 |
Unvested balance at March 31, 2024 | 715,916 |  |  | $ | 9.30 |
The total unvested restricted stock awards as of March 31, 2024 are expected to vest as follows: 39,806 shares during 2024, 317,771 shares during 2025, 344,918 shares during 2026, 6,712 shares during 2027, and 6,709 shares during 2028. As of March 31, 2024, the unrecognized compensation cost related to restricted stock awards was $4.3 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 22 months. We recorded $1.0 million and $1.1 million of compensation expense related to restricted stock awards for each of the three months ended March 31, 2024 and 2023, respectively. We did not grant any restricted stock awards during the three months ended March 31, 2024. 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 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 performance period. The improvement in market share for each of our hotels is generally 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%. 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 and comprehensive income. 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. The determination of the grant-date fair values of outstanding awards based on our relative stockholder return included the following assumptions:
Award Grant Date |  | Volatility |  | Risk-Free Rate |  | Total Stockholder Return PSUs |  | Hotel Market Share PSUs
March 2, 2021 |  | 68.8% |  | 0.26% |  | $9.28 |  | $9.40
February 22, 2022 |  | 71.4% |  | 1.74% |  | $9.84 |  | $9.56
August 9, 2022 |  | 73.3% |  | 3.20% |  | $9.65 |  | $9.32
February 23, 2023 |  | 74.5% |  | 4.40% |  | $9.22 |  | $8.94
A summary of our PSUs from January 1, 2024 to March 31, 2024 is as follows:
| Number of Target Units |  | Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2024 | 1,032,296 |  |  | $ | 9.34 |
Additional units from dividends | 3,277 |  |  | 9.45 |
Vested (1) | (301,861) |  |  | 9.32 |
Unvested balance at March 31, 2024 | 733,712 |  |  | $ | 9.35 |
______________________ (1)The number of shares of common stock earned for the PSUs vested in 2024 was equal to 95.6% of the PSU Target Award. The total unvested PSUs as of March 31, 2024 are expected to vest as follows: 329,163 units during 2025, 368,736 units during 2026, and 35,813 units during 2027. The number of shares earned upon vesting is subject to the attainment of the performance goals described above. As of March 31, 2024, the unrecognized compensation cost related to the PSUs was $3.1 million and is expected to be recognized on a straight-line basis over a weighted average period of 23 months. We recorded $0.9 million and $0.7 million of compensation expense related to the PSUs for the three months ended March 31, 2024 and 2023, respectively. We did not grant any PSUs during the three months ended March 31, 2024. LTIP Units LTIP units are designed to offer executives a long-term incentive comparable to restricted stock, while potentially allowing them 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 or 2024 Plan, as applicable. 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, 2024 to March 31, 2024 is as follows:
| Number of Units |  | Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2024 | 314,137 |  |  | $ | 9.01 |
Vested (1) | (85,757) |  |  | 8.94 |
Unvested balance at March 31, 2024 | 228,380 |  |  | $ | 9.03 |
______________________ (1)As of March 31, 2024, 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 March 31, 2024 are expected to vest as follows: 38,452 during 2024, 87,856 during both 2025 and 2026, and 14,216 during 2027. As of March 31, 2024, the unrecognized compensation cost related to LTIP unit awards was $1.7 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 27 months. We recorded $0.4 million and $0.1 million of compensation expense related to LTIP unit awards for the three months ended March 31, 2024 and 2023, respectively. We did not grant any LTIP units during the three months ended March 31, 2024.

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