RLJ Lodging TrustRLJ
RLJ Lodging Trust Stock Compensation Disclosure
Equity Incentive Plan
As of December 31, 2025, there were 743,631 common shares available for future grant under the 2021 Plan, which includes potential common shares that may convert from performance units if certain target criterion is met.
Pursuant to the terms of the 2021 Plan, the Company may issue share-based awards to officers, employees, non-employee trustees and other eligible persons under the 2021 Plan. The 2021 Plan provides for a maximum of 6,828,527 common shares to be issued in the form of share options, share appreciation rights, restricted share awards, unrestricted share awards, share units, dividend equivalent rights, long-term incentive units, other equity-based awards and cash bonus awards.
Share Awards
From time to time, the Company may award unvested restricted shares under the 2021 Plan as compensation to officers, employees and non-employee trustees. The issued shares vest over a period of time as determined by the board of trustees at the date of grant. The Company recognizes compensation expense for time-based unvested restricted shares on a straight-line basis over the vesting period based upon the fair market value of the shares on the date of issuance, adjusted for forfeitures.
Non-employee trustees may also elect to receive unrestricted shares under the 2021 Plan as compensation that would otherwise be paid in cash for their services. The shares issued to non-employee trustees in lieu of cash compensation are unrestricted and include no vesting conditions. The Company recognizes compensation expense for the unrestricted shares issued in lieu of cash compensation on the date of issuance based upon the fair market value of the shares on that date.
A summary of the unvested restricted shares is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Number of Shares | Weighted-Average Grant Date Fair Value | Number of Shares | Weighted-Average Grant Date Fair Value | Number of Shares | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||||||||||
| Unvested at January 1, | 1,589,289 | $ | 11.74 | 2,305,303 | $ | 13.52 | 2,267,870 | $ | 15.32 | ||||||||||||||||||||||||||
| Granted | 1,384,062 | 8.37 | 925,731 | 11.57 | 991,453 | 10.84 | |||||||||||||||||||||||||||||
| Vested | (872,836) | 11.64 | (1,610,821) | 14.20 | (928,192) | 15.07 | |||||||||||||||||||||||||||||
| Forfeited | (128,776) | 10.43 | (30,924) | 11.00 | (25,828) | 13.13 | |||||||||||||||||||||||||||||
| Unvested at December 31, | 1,971,739 | $ | 9.51 | 1,589,289 | $ | 11.74 | 2,305,303 | $ | 13.52 | ||||||||||||||||||||||||||
For the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $8.5 million, $11.7 million and $15.4 million, respectively, of share-based compensation expense related to restricted share awards.
As of December 31, 2025, there was $11.4 million of total unrecognized compensation costs related to unvested restricted share awards and these costs are expected to be recognized over a weighted-average period of 1.8 years. The total fair value of the shares vested (calculated as the number of shares multiplied by the vesting date share price) during the years ended December 31, 2025, 2024 and 2023 was approximately $7.8 million, $17.8 million and $9.9 million, respectively.
Performance Units
The Company aligns its executive officers with its long-term investors by awarding a significant percentage of their equity compensation in the form of multi-year performance unit awards that use both absolute and relative total shareholder return as the primary metrics. The performance units vest at the end of a three year period (the “performance units measurement period”).
The performance units granted in 2024 and 2025 may convert into restricted shares at a range of 0% to 200% of the number of performance units granted contingent upon the Company achieving a relative shareholder return over the measurement period at specified percentiles of the peer group, as defined by the awards. These performance units are subject to modification based on the Company's absolute total shareholder return performance as follows: (1) if at the end of the measurement period the relative total shareholder return performance exceeds target and absolute total shareholder return is less than zero, payouts will be reduced by 25%, but not below target and (2) if the absolute total shareholder return is down more
than 15% during the entire measurement period, the maximum payout will be capped at 115% of target. The performance units granted prior to 2024 may convert into restricted shares at a range of 0% to 200% of the number of performance units granted contingent upon the Company achieving an absolute total shareholder return (25% of award) and a relative shareholder return (75% of award) over the measurement period at specified percentiles of the peer group, as defined by the awards.
At the end of the performance units measurement period, if the target criterion is met, 100% of the performance units that are earned will vest immediately. The fair value of the performance units was determined using a Monte Carlo simulation. The Company estimates the compensation expense for the performance units on a straight-line basis using a calculation that recognizes 100% of the grant date fair value over three years.
A summary of the performance unit awards is as follows:
| Date of Award | Number of Units Granted | Grant Date Fair Value | Conversion Range | Risk Free Interest Rate | Volatility | |||||||||||||||||||||||||||
| February 2022 (1) | 407,024 | $21.96 | 0% to 200% | 1.70% | 70.15% | |||||||||||||||||||||||||||
| February 2023 | 574,846 | $16.90 | 0% to 200% | 4.33% | 66.70% | |||||||||||||||||||||||||||
| February 2024 | 703,325 | $15.13 | 0% to 200% | 4.43% | 35.60% | |||||||||||||||||||||||||||
| March 2025 | 832,322 | $11.45 | 0% to 200% | 4.01% | 31.10% | |||||||||||||||||||||||||||
(1) In February 2025, following the end of the measurement period, the Company met certain threshold criterion and the performance units converted into approximately 240,000 restricted shares, all of which vested immediately. The total fair value of the vested shares related to the conversion of the performance units (calculated as the number of vested shares multiplied by the vesting date share price) during the year ended December 31, 2025 was approximately $2.1 million.
For the years ended December 31, 2025, 2024 and 2023, the Company recognized approximately $6.8 million, $9.1 million and $8.9 million, respectively, of share-based compensation expense related to the performance unit awards. The year ended December 31, 2025 included a benefit of $1.6 million as a result of the forfeitures of approximately 217,000 performance units related to the departure of Company executives.
As of December 31, 2025, there was $10.3 million of total unrecognized compensation costs related to the performance unit awards and these costs are expected to be recognized over a weighted-average period of 1.8 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.