Equity-based Compensation

Equity Plan

The General Partner has adopted an equity plan (the “Equity Plan”), which provides for the grant of stock options, stock appreciation rights, restricted shares of Common Stock (“Restricted Shares”), restricted stock units (“Restricted Stock Units”), dividend equivalent rights and other stock-based awards to the General Partner’s and its affiliates’ non-executive directors, officers and other employees and advisors or consultants who are providing services to the General Partner or its affiliates. To date, the General Partner has granted fully vested shares of Common Stock, Restricted Shares, Restricted Stock Units and Deferred Stock Units (defined below) under the Equity Plan. Restricted Shares provide for rights identical to those of Common Stock. Restricted Stock Units do not provide for any rights of a common stockholder prior to the vesting of such Restricted Stock Units. In accordance with U.S. GAAP, Restricted Shares are considered issued and outstanding. As is the case when fully vested shares of Common Stock are issued from the Equity Plan, for each Restricted Share awarded under the Equity Plan, the Operating Partnership issues a General Partner OP Unit to the General Partner with identical terms. Upon vesting of Restricted Stock Units, the Operating Partnership issues a General Partner OP Unit to the General Partner for each share of Common Stock issued as a result of such vesting.

The General Partner has authorized and reserved a total number of shares equal to 10.0% of the total number of issued and outstanding shares of Common Stock (on a fully diluted basis assuming the redemption of all OP Units for shares of Common Stock) to be issued at any time under the Equity Plan for equity incentive awards. As of September 30, 2016, the General Partner had cumulatively awarded under its Equity Plan approximately 4.1 million Restricted Shares, net of the forfeiture of 3.6 million Restricted Shares through that date, 3.4 million Restricted Stock Units, net of the forfeiture of 0.5 million Restricted Stock Units through that date, and 0.2 million Deferred Stock Units, collectively representing approximately 7.7 million shares of Common Stock. Accordingly, as of such date, approximately 92.1 million additional shares were available for future issuance.

Restricted Shares

The Company has issued Restricted Shares to certain employees and non-executive directors beginning in 2011. In addition, the Company issued Restricted Shares to employees of affiliates of the Former Manager prior to 2015. The fair value of the Restricted Shares granted to employees under the Equity Plan is generally determined using the closing stock price on the grant date and is expensed over the requisite service period on a straight-line basis. The fair value of Restricted Shares granted to non-executive directors and employees of affiliates of the Former Manager under the Equity Plan was measured based upon the fair value of goods or services received or the equity instruments granted, whichever was more reliably determinable, and was expensed in full at the date of grant.

During the three and nine months ended September 30, 2016, the Company recorded $0.4 million and $1.3 million, respectively, of compensation expense related to the Restricted Shares, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

The following table details the activity of the Restricted Shares during the nine months ended September 30, 2016:



	Restricted Shares		Weighted-Average Grant Date Fair Value
Unvested shares, December 31, 2015	1,239,662		$	13.86
Vested	(434,004	)	$	14.19
Forfeited	(89,955	)	$	14.08
Unvested shares, September 30, 2016	715,703		$	13.64

Time-Based Restricted Stock Units

Under the Equity Plan, the Company may award Restricted Stock Units to employees that will vest if the recipient maintains his/her employment over the requisite service period (the “Time-Based Restricted Stock Units”). The fair value of the Time-Based Restricted Stock Units granted to employees under the Equity Plan is generally determined using the closing stock price on the grant date and is expensed over the requisite service period on a straight-line basis, which is generally three years. During the three and nine months ended September 30, 2016, the Company recorded $0.9 million and $2.5 million, respectively, of compensation expense related to the Time-Based Restricted Stock Units, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Deferred Stock Units

The Company may award Deferred Stock Units to non-executive directors under the Equity Plan (the “Deferred Stock Units”). Each Deferred Stock Unit represents the right to receive one share of Common Stock. The Deferred Stock Units provide for immediate vesting on the grant date and will be settled with Common Stock either on the earlier of the date on which the respective director separates from the Company or the third anniversary of the grant date, or if granted pursuant to the director’s voluntary election to participate in the director’s deferred compensation program, on the date the director separates from the Company. The fair value of the Deferred Stock Units is determined using the closing stock price on the grant date and is expensed over the requisite service period or on the grant date for awards with no requisite service period. During the three and nine months ended September 30, 2016, the Company recorded $34,000 and $0.7 million of expense related to Deferred Stock Units, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

The following table details the activity of the Time-Based Restricted Stock Units and Deferred Stock Units during the nine months ended September 30, 2016.



	Time-Based Restricted Stock Units		Weighted-Average Grant Date Fair Value		Deferred Stock Units		Weighted-Average Grant Date Fair Value
Unvested units, December 31, 2015	589,138		$	9.61	—		$	—
Granted	736,427		7.82		79,208		9.18
Vested	(184,455	)	9.70		(79,208	)	9.18
Forfeited	(35,377	)	8.71		—		—
Unvested units, September 30, 2016	1,105,733		$	8.43	—		$	—

Market-Based Restricted Stock Units

During the year ended December 31, 2015, the General Partner awarded Restricted Stock Units to certain employees under the Equity Plan that were contingent upon the Common Stock reaching a certain market price (the “Market-Based Restricted Stock Units”). The Market-Based Restricted Stock Units were contingent upon the closing price of the Common Stock equaling or exceeding $10 per share for 20 consecutive trading days (the “Market Condition”) and the grantee’s continued employment as of such date on which the Market Condition was met. On July 28, 2016, 610,839 Market-Based Restricted Stock Units vested, of which 199,858 shares were withheld to cover grantees’ tax withholding obligations, resulting in 410,981 shares being issued.

The fair value and derived service period of the Market-Based Restricted Stock Units as of their grant date was determined using a Monte Carlo simulation, which took into account multiple input variables that determine the probability of satisfying the Market Condition. The method required the input of assumptions, including the future dividend yield and expected volatility of the Common Stock. Compensation expense was recognized on a straight-line basis over the derived service period regardless of whether the Market Condition was satisfied, provided that the requisite service condition had been achieved. The Market-Based Restricted Stock Units were fully expensed during the year ended December 31, 2015, however the Company recorded contra-expense due to the forfeiture of such awards. During the three and nine months ended September 30, 2016, the Company recorded contra-expense of $0.1 million and $0.8 million, respectively, related to forfeitures of the Market-Based Restricted Stock Units which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

Long-Term Incentive Awards

The General Partner may award long-term incentive-based Restricted Stock Units (the “LTI Target Awards”) to employees under the Equity Plan. Vesting of the LTI Target Awards is based upon the General Partner’s level of achievement of total stockholder return (“TSR”), including both share price appreciation and Common Stock dividends, as measured equally against a market index and against a peer group generally over a three year period.

The fair value and derived service period of the LTI Target Awards as of their grant date is determined using a Monte Carlo simulation which takes into account multiple input variables that determine the probability of satisfying the required TSR, as outlined in the award agreements. This method requires the input of assumptions, including the future dividend yield, the expected volatility of the Common Stock and the expected volatility of the market index constituents and the peer group. Compensation expense is recognized on a straight-line basis over the derived service period regardless of whether the necessary TSR is attained, provided that the requisite service condition has been achieved. During the three and nine months ended September 30, 2016, the Company recorded $1.3 million and $3.3 million, respectively, of expense related to the LTI Target Awards, which is recorded in general and administrative expense in the accompanying consolidated statements of operations.

The following table details the activity of the unvested Market-Based Restricted Stock Units and the LTI Target Awards during the nine months ended September 30, 2016.



	Market-Based Restricted Stock Units		Weighted-Average Grant Date Fair Value		LTI Target Awards		Weighted-Average Grant Date Fair Value
Unvested units, December 31, 2015	704,804		$	8.58	731,448		$	11.38
Granted	—		—		855,471		7.14
Vested	(610,839	)	8.58		(3,362	)	11.77
Forfeited	(93,965	)	8.58		(52,109	)	11.24
Unvested units, September 30, 2016	—		$	—	1,531,448		$	9.01