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Equity Incentive Plans | 9 Months Ended
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Sep. 30, 2024
Share-Based Payment Arrangement [Abstract] |
Equity Incentive Plans | Equity Incentive Plans 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 Equity Incentive Plan (as amended, 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, of which we have issued or committed to issue 1,076,916 share s as of September 30, 2024. Shares underlying awards that are granted under the 2024 Plan that are forfeited, cancelled, reacquired prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than be exercise), including shares tendered or held back upon settlement of an award, other than a stock option or stock appreciation right, to cover the tax withholding will be added back to the shares available for issuance under the 2024 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 September 30, 2024 is as follows:
| Number of Shares |  | Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2024 | 1,200,693 |  |  | $ | 9.33 |
Granted | 361,920 |  |  | 8.66 |
Vested | (941,018) |  |  | 9.35 |
Unvested balance at September 30, 2024 | 621,595 |  |  | $ | 8.90 |
The total unvested restricted stock awards as of September 30, 2024 are expected to vest as follows: 253,430 shares during 2025, 244,845 shares during 2026, 114,087 shares during 2027, 7,970 shares during 2028, and 1,261 shares during 2029. As of September 30, 2024, the unrecognized compensation cost related to restricted stock awards was $4.0 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 26 months. We recorded $0.6 million and $1.0 million of compensation expense related to restricted stock awards for the three months ended September 30, 2024 and 2023, respectively. We recorded $4.5 million and $3.1 million of compensation expense related to restricted stock awards for the nine months ended September 30, 2024 and 2023, respectively, which included $2.0 million of accelerated compensation expense for the nine months ended September 30, 2024, related to restricted stock awards for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income. 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. There are limitations on the number of PSUs earned 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
May 7, 2024 |  | 36.5% |  | 4.64% |  | $8.03 |  | $8.72
A summary of our PSUs from January 1, 2024 to September 30, 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 |
Granted | 364,799 |  |  | 8.36 |
Additional units from dividends | 9,615 |  |  | 8.95 |
Vested (1) | (301,861) |  |  | 9.32 |
Unvested balance at September 30, 2024 | 1,104,849 |  |  | $ | 9.02 |
______________________ (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 September 30, 2024 are expected to vest as follows: 331,417 units during 2025, 371,260 units during 2026, and 402,172 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, 2024, the unrecognized compensation cost related to the PSUs was $3.2 million and is expected to be recognized on a straight-line basis over a weighted average period of 27 months. We recorded $0.4 million and $0.8 million of compensation expense related to the PSUs for the three months ended September 30, 2024 and 2023, respectively. We recorded $3.8 million and $2.3 million of compensation expense related to the PSUs for the nine months ended September 30, 2024 and 2023, respectively, which included $1.8 million of accelerated compensation expense for the nine months ended September 30, 2024, related to PSUs for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income. These awards will vest at 100% of the PSU Target Award based on their original vesting schedule. 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 year, executives have the option to elect to receive their annual grant of share-based compensation as either LTIP units or restricted stock awards. 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 September 30, 2024 is as follows:
| Number of Units |  | Weighted- Average Grant Date Fair Value
Unvested balance at January 1, 2024 | 314,137 |  |  | $ | 9.01 |
Granted | 97,477 |  |  | 8.72 |
Vested (1) | (271,487) |  |  | 8.94 |
Unvested balance at September 30, 2024 | 140,127 |  |  | $ | 8.9 |
______________________ (1)As of September 30, 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 September 30, 2024 are expected to vest as follows: 46,709 during each of 2025, 2026, and 2027. As of September 30, 2024, the unrecognized compensation cost related to LTIP unit awards was $1.1 million and the weighted-average period over which the unrecognized compensation expense will be recorded is approximately 31 months. We recorded $0.1 million and $0.2 million of compensation expense related to LTIP unit awards for the three months ended September 30, 2024 and 2023, respectively. We recorded $1.9 million and $0.6 million of compensation expense related to LTIP unit awards for the nine months ended September 30, 2024 and 2023, respectively, which included $1.2 million of accelerated compensation expense for the nine months ended September 30, 2024, related to LTIPs for the departures of our former Chief Executive Officer and Chief Investment Officer. The accelerated compensation expense is recorded as severance costs in corporate expenses within the consolidated statements of operations and comprehensive income. Nonemployee director awards The Company issues each nonemployee director either (i) fully vested, unrestricted shares of common stock or (ii) Deferred Stock Units (as defined in the 2024 Plan) granting a number of immediately vested but deferred stock units (together, the “nonemployee director awards”). We measure compensation expense for the nonemployee director awards based upon the fair market value of our common stock at the date of grant. Compensation expense is recognized in the period the nonemployee director awards are granted and is included in corporate expenses in the accompanying consolidated statements of operations and comprehensive income. There were no nonemployee director awards granted during the three months ended September 30, 2024 and 2023, and thus no compensation expense was recognized during these periods. During the nine months ended September 30, 2024, we granted a total of 88,305 nonemployee director awards at a grant date fair value of $8.72. We recorded $0.8 million and $0.7 million of compensation expense related to nonemployee director awards for the nine months ended September 30, 2024 and 2023, respectively.

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