Share-Based Compensation

3 Months Ended

Mar. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

SHARE-BASED COMPENSATION

The Company may grant equity incentive awards to employees, consultants and non-employee directors under the Five Point Holdings, LLC 2016 Incentive Award Plan (the “Incentive Award Plan”). The Incentive Award Plan provides for the grant of share options, restricted shares, restricted share units, performance awards (which include, but are not limited to, cash bonuses), distribution equivalent awards, deferred share awards, share payment awards, share appreciation rights, other incentive awards (which include, but are not limited to, LTIP Unit awards (as defined in the Incentive Award Plan) and performance share awards. The Incentive Award Plan authorized the issuance of up to 8,500,822 Class A common shares of the Holding Company. As of March 31, 2019, there were 1,795,170 remaining Class A common shares available for future issuance under the Incentive Award Plan.

Under the Incentive Award Plan, the Company has granted restricted share units (“RSUs”) and restricted share awards either fully vested, with service conditions or with service and market performance conditions based on the market price of the Company’s Class A common shares. Awards with a service condition generally vest over a three-year period or in the case of non-employee directors over one year. Awards with a service and market performance condition generally vest at the end of a three-year period. Restricted share awards entitle the holders to non-forfeitable distributions and to vote the underlying Class A common share during the restricted period.

The Company estimates the fair value of restricted share awards with a service condition based on the closing market price of the Company’s Class A common shares on the award’s grant date. Prior to the Company’s IPO, the Company measured the fair value of RSUs and restricted share awards based on the estimated fair value of the Company’s underlying Class A common shares determined using a discounted cash flow analysis. The inputs utilized in the Company’s estimate were selected by the Company based on information available to the Company, including relevant information obtained after the measurement date, as to the assumptions that market participants

would make at the measurement date. The grant date fair value of awards with a market condition are determined using a Monte-Carlo approach.

In January 2019, the Company reacquired 242,990 vested RSUs for $1.8 million and 296,391 restricted Class A common shares for $2.3 million for the purpose of settling tax withholding obligations of employees. The reacquisition cost is based on the fair value of the Company’s Class A common shares on the date the tax obligation is incurred.

During the three months ended March 31, 2019, the Company granted $2.3 million equity incentive awards to employees and non-employee directors. The awards were comprised of restricted share awards with a service condition and restricted share awards or RSU awards with a market condition contingent on the Company’s Class A common shares satisfying certain price targets.

The following table summarizes share-based equity compensation activity for the three months ended March 31, 2019:



	Share-Based Awards (in thousands)		Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2019	1,893		$	15.27
Granted (1)	1,899		$	5.09
Forfeited	(4	)	$	14.83
Vested	(717	)	$	15.20
Nonvested at March 31, 2019	3,071		$	9.00

(1) Quantity granted does not include 388 RSUs that vest upon achievement of maximum performance criteria.

Share-based compensation expense was $3.3 million and $3.4 million for the three months ended March 31, 2019 and 2018, respectively. Share-based compensation expense is included in selling, general, and administrative expenses in the accompanying condensed consolidated statements of operations. Approximately $24.5 million of total unrecognized compensation cost related to non-vested awards is expected to be recognized over a weighted–average period of 2.1 years from March 31, 2019. The estimated fair value at vesting of share-based awards that vested during the three months ended March 31, 2019 was $5.4 million.