Note 10—Share-Based Compensation

INVH RSAs and RSUs

Prior to completion of the IPO, our board of directors adopted, and our stockholders approved, the Invitation Homes Inc. 2017 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) to provide a means through which to attract and retain key personnel and to provide a means whereby our directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in us, or be paid incentive compensation, including incentive compensation measured by reference to the value of our common stock, and to align their interests with those of our stockholders. Under the Omnibus Incentive Plan, we may issue up to 16,000,000 shares, and as of September 30, 2018, we have awarded 5,617,345 RSUs thereunder. Time-vesting RSUs are participating securities for earnings per share (“EPS”) purposes, and performance or market based vesting RSUs are not. We refer to RSUs with performance or market based vesting conditions as “PRSUs.” Additionally, in connection with the IPO, we granted 62,529 restricted shares of common stock of INVH (“RSAs”) in conversion of the Class B Units. These RSAs are all time-vesting awards, and they are not part of the Omnibus Incentive Plan. For detailed discussion of RSUs and RSAs issued prior to January 1, 2018, refer to our Annual Report on Form 10-K for the year ended December 31, 2017.

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2018 Annual Long Term Incentive (“LTIP”) Awards: During the nine months ended September 30, 2018, we granted 631,429 RSUs pursuant to LTIP awards. Each award is divided into three tranches, portions of which vest based on time-vesting conditions, market based vesting conditions, and performance based vesting conditions. The time-vesting RSUs vest in three equal annual installments based on an anniversary date of March 1, 2018, subject to continued employment through the applicable vesting date.

The PRSUs may be earned based on the achievement of certain measures over a three-year performance period. The number of PRSUs earned will be determined based on performance achieved during the performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. In general, the LTIP PRSUs are earned on the date after the end of the performance period on which the performance results are certified (a “Certification Date”) by our compensation and management development committee (the “Compensation Committee”). The 2018 LTIP PRSUs are eligible to vest on the related Certification Date subject to continued employment through such date.

All of the LTIP Awards are subject to certain change in control and retirement eligibility provisions that may impact these vesting schedules.

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Other Awards: During the nine months ended September 30, 2018, we granted 136,941 RSUs to employees (the “2018 Bonus Awards”) and 48,882 RSUs to members of our board of directors. Each of the 2018 Bonus Awards is a time-vesting award which vests in three equal annual installments based on an anniversary date of March 1, 2018, subject to continued employment through the applicable vesting date. Each director award will fully vest on the date scheduled for INVH’s 2019 annual stockholders meeting, subject to continued service on the board of directors through such date.

During the nine months ended September 30, 2018, the grant date was established for 168,184 PRSUs issued in connection with the Mergers. These Merger-related PRSUs may be earned based on the achievement of certain measures over a three-year performance period that began on the Merger Date. The number of Merger-related PRSUs earned will be determined based on performance achieved during the performance period for each measure at certain threshold, target, or maximum levels and corresponding payout ranges. In general, the Merger-related LTIP PRSUs are earned and will vest on the related Certification Date subject to continued employment through such date.

During the nine months ended September 30, 2018, certain PRSUs vested and achieved performance in excess of the target level, resulting in the issuance of an additional 39,871 shares of common stock. Such awards are reflected as an increase in the number of awards granted and vested in the table below.

The following table summarizes the status of non-vested time-vesting RSUs (including RSAs) and PRSUs as of September 30, 2018 and changes during the nine months ended September 30, 2018:



	Time-Vesting Awards					PRSUs					Total Share-Based Awards
	Number		Weighted Average Grant Date Fair Value (Actual $)			Number		Weighted Average Grant Date Fair Value (Actual $)			Number		Weighted Average Grant Date Fair Value (Actual $)
Balance, December 31, 2017	2,695,902		$	21.51		408,102		$	22.25		3,104,004		$	20.79
Granted	381,002		21.94			644,305		22.21			1,025,307		22.11
Vested⁽¹⁾	(1,240,162	)	(21.25		)	(123,331	)	(23.17		)	(1,363,493	)	(21.43		)
Forfeited	(125,662	)	(22.70		)	(29,931	)	(22.16		)	(155,593	)	(22.60		)
Balance, September 30, 2018	1,711,080		$	21.71		899,145		$	22.10		2,610,225		$	21.85


(1)	All vested RSUs, RSAs and PRSUs are included in basic EPS for the period during which they are outstanding.

During the nine months ended September 30, 2018, 1,240,162 time-vesting RSUs and 123,331 PRSUs with an estimated fair value of $30,328 fully vested. As of September 30, 2018, there were 899,145 PRSUs outstanding. The grant-date fair values of the RSAs, time-vesting RSUs, and PRSUs with performance condition vesting criteria are generally based on the closing price of our common stock on the grant date. However, for the awards granted in connection with the IPO, the grant-date fair value is the opening offering price per common share, and the grant-date fair values for PRSUs with market condition vesting criteria are based on Monte-Carlo option pricing models. The following table summarizes the significant inputs utilized in these models at the grant date for awards issued during the nine months ended September 30, 2018:



		March 1, 2018
Expected volatility⁽¹⁾		14.5%-17.3%
Risk-free rate		2.38%
Expected holding period (years)		2.71-2.84


(1)	Expected volatility is estimated based on the historical volatility of realized returns of the Company and the applicable index.

Summary of Total Share-Based Compensation Expense

During the three months ended September 30, 2018 and 2017, we recognized $6,068, and $12,004 respectively, of share-based compensation expense. During the nine months ended September 30, 2018 and 2017, we recognized $23,582, and $64,464 respectively, of share-based compensation expense, comprised of the following:



	Share-Based Compensation Expense for the Three Months Ended September 30,				Share-Based Compensation Expense for the Nine Months Ended September 30,
	2018		2017		2018		2017
General and administrative	$	4,901	$	9,309	$	19,229	$	56,460
Property management expense	1,167		2,695		4,353		8,004
Total	$	6,068	$	12,004	$	23,582	$	64,464

As of September 30, 2018, there is $24,509 of unrecognized share-based compensation expense related to non-vested RSUs which is expected to be recognized over a weighted average period of 1.74 years.