Stock-Based Compensation |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Text Block] |
Note 7 Stock-Based Compensation 2016 Equity Incentive Plan
The 2016 Equity Incentive Plan (the “Plan”) is intended to assist the Company and its affiliates in recruiting and retaining employees, members of the Board and other individuals who provide services to the Company, the Manager, the Operating Partnership or an Affiliate of the Company, the Manager or the Operating Partnership. This Plan is intended to permit the grant of both options qualifying and non-qualified options, and the grant of stock appreciation rights, restricted stock, unrestricted stock, awards of restricted stock units, performance awards and other equity-based awards (including LTIP units) for up to an aggregate of 1,232 shares of common stock, subject to increase under certain provisions of the plan. The Company’s executive officers, employees, employees of its Advisor and its affiliates, consultants and non-employee directors are eligible to participate in the Plan. Based on the grants outstanding as of December 31, 2017, there are 614 shares that remain available to be granted under the Plan. Shares subject to awards under the Plan that are forfeited, cancelled, lapsed, settled in cash or otherwise expired (excluding shares withheld to satisfy exercise prices or tax withholding obligations) are available for grant. Time-Based Grants The time-based vesting LTIP units granted under the Plan during the years ended December 31, 2016 and 2017are as follows:
Of these 436 LTIP units that were outstanding as of December 31, 2017, 267 are vested and 169 are unvested. Of the unvested LTIP units, 153 units were granted to employees of the Advisor and its affiliates deemed to be non-employees in accordance with ASC Topic 505 and vest over periods of 24 months to 53 months, from the grant date, as well as 16 units granted to the Company’s independent directors on May 18, 2017 (who were treated as employees in accordance with ASC Topic 718), and vest over a period of 12 months from the grant date. The Company expenses the fair value of all LTIP unit awards in accordance with the fair value recognition requirements of ASC Topic 718, Compensation-Stock Compensation, for “employees,” and ASC Topic 505, Equity, for “non-employees.” For the time-based LTIP units granted to non-employees, in accordance with the provisions of ASC Topic 505, the grant date fair value is utilized for expense recognition; however, the accounting after the measurement date requires a fair value re-measurement each reporting period until the awards vest. Performance Based Awards2017 Program During 2017, the Board approved the 2017 annual performance-based equity incentive award targets in the form of LTIP units (the “Annual Awards”) and long-term performance-based LTIP awards (the “Long-Term Awards”) to the executive officers of the Company and other employees of the Company’s external manager who perform services for the Company (together the “2017 Program”). None of the LTIP units awarded under the 2017 Program had been earned by the participants as of December 31, 2017. The LTIP unit awards under the 2017 Program and subsequent activity during the year ended December 31, 2017, are as follows:
The number of target LTIP units comprising each Annual Award was based on the closing price of the Company’s common stock reported on the New York Stock Exchange (“NYSE”) on the dates of grant and the number of target LTIP units comprising each Long-Term Award was based on the fair value of the Long-Term Awards as determined by an independent valuation consultant, in each case rounded to the next whole LTIP unit in order to eliminate fractional units.
Annual Awards. The Annual Awards are subject to the terms and conditions of LTIP Annual Award Agreements (“LTIP Annual Award Agreements”) between the Company and each grantee.
The Company’s Compensation Committee established various operating performance goals for calendar year 2017, as set forth in Exhibit A to the LTIP Annual Award Agreements (the “Performance Goals”), that will be used to determine the actual number of LTIP units earned by each grantee under each LTIP Annual Award Agreement. As of December 31, 2017, management estimated that the Performance Goals would be met at a 55% level, and accordingly, applied 55% to the net target Annual Awards to estimate the Annual Awards expected to be earned at the end of the performance period. Cumulative stock based compensation expense during the year ended December 31, 2017 reflects management’s estimate that 55% of these awards will vest. As soon as reasonably practicable during the first quarter of 2018, the Compensation Committee will determine the extent to which the Company has achieved the Performance Goals and, based on such determination, will calculate the number of LTIP units that each grantee is entitled to receive under the grantee’s Annual Award based on the performance percentages described in the grantee’s LTIP Annual Award Agreement. Any target LTIP units that are not earned will be forfeited and cancelled. As the Annual Awards were granted to non-employees, in accordance with the provisions of ASC Topic 505, the Annual Awards utilize the grant date fair value for expense recognition; however, the accounting after the measurement date requires a fair value re-measurement each reporting period until the awards vest. Since these are performance based awards with no market condition, the closing price on the valuation date and revaluation date will be used for expense recognition purposes.
Long-Term Awards. The Long-Term Awards are subject to the terms and conditions of LTIP Long-Term Award Agreements (“LTIP Long-Term Award Agreements”) between the Company and each grantee. The number of LTIP units that each grantee is entitled to earn under the LTIP Long-Term Award Agreements will be determined following the conclusion of a three-year performance period based on the Company’s total shareholder return, which is determined based on a combination of appreciation in stock price and dividends paid during the performance period (“TSR”). Each grantee may earn up to 200% of the number of target LTIP units covered by the grantee’s Long-Term Award. Any target LTIP units that are not earned will be forfeited and cancelled. The number of LTIP units earned under the Long-Term Awards will be determined as soon as reasonably practicable following the end of the three-year performance period based on the Company’s TSR on an absolute basis (as to 75% of the Long-Term Award) and relative to the SNL Healthcare REIT Index (as to 25% of the Long-Term Award).
As the Long-Term Awards were granted to non-employees and involved market-based performance conditions, in accordance with the provisions of ASC Topic 505, the Long-Term Awards utilize a Monte Carlo simulation to provide a grant date fair value for expense recognition; however, the accounting after the measurement date requires a fair value re-measurement each reporting period until the awards vest. The fair value re-measurement will be performed by calculating a Monte Carlo produced fair value at the conclusion of each reporting period until vesting. The Monte Carlo simulation is a generally accepted statistical technique used, in this instance, to simulate a range of possible future stock prices for the Company and the members of the SNL Healthcare REIT Index (the “Index”) over the Performance Period (February 28, 2017 to February 27, 2020; May 8, 2017 to May 7, 2020; and August 23, 2017 to August 22, 2020, respectively). The purpose of this modeling is to use a probabilistic approach for estimating the fair value of the performance share award for purposes of accounting under ASC Topic 718. ASC Topic 505 does not provide guidance on how to derive a fair value, so the valuation defaults to that described in ASC Topic 718. The assumptions used in the Monte Carlo simulation include beginning average stock price, valuation date stock price, expected volatilities, correlation coefficients, risk-free rate of interest, and expected dividend yield. The beginning average stock price is the beginning average stock price for the Company and each member of the Index for the five trading days leading up to the grant date. The valuation date stock price is the closing stock price of the Company and each of the peer companies in the Index on the grant date for the grant date fair value, and the closing stock price on December 31, 2017 for revaluation. The expected volatilities are modeled using the historical volatilities for the Company and the members of the Index. The correlation coefficients are calculated using the same data as the historical volatilities. The risk-free rate of interest is taken from the U.S. Treasury website, and relates to the expected life of the remaining performance period on valuation or revaluation. Lastly, the dividend yield assumption is 0.0%, which is mathematically equivalent to reinvesting dividends in the issuing entity, which is part of the Company’s award agreement assumptions.
Vesting. LTIP units that are earned as of the end of the applicable performance period will be subject to forfeiture restrictions that will lapse (“vesting”), subject to continued employment through each vesting date, in two installments as follows: 50% of the earned LTIP units will vest upon being earned as of the end of the applicable performance period and the remaining 50% will vest on the first anniversary of the date on which such LTIP units are earned.
Distributions. Pursuant to both the LTIP Annual Award Agreements and LTIP Long-Term Award Agreements, distributions equal to the dividends declared and paid by the Company will accrue during the applicable performance period on the maximum number of LTIP units that the grantee could earn and will be paid with respect to all of the earned LTIP units at the conclusion of the applicable performance period, in cash or by the issuance of additional LTIP units at the discretion of the Compensation Committee.
Stock Compensation Expense The Company incurred stock compensation expense of $1,796 and $1,685 for the years ended December 31, 2017 and 2016, respectively, related to the grants awarded under the Plan. Compensation expense is included within “General and Administrative” expense in the Company’s Consolidated Statements of Operations. A detail of compensation expense recognized during the years ended December 31, 2017 and 2016, is as follows:
Total unamortized compensation expense related to these awards of approximately $1.5 million is expected to be recognized subsequent to December 31, 2017 over a weighted average remaining period of 2.13 years. |
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