National Storage Affiliates Trust Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

EQUITY-BASED AWARDS

EQUITY-BASED AWARDS

12 Months Ended

Dec. 31, 2016

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

The Company grants awards in the form of LTIP units and restricted common shares to provide equity based incentive compensation to members of its senior management team, independent trustees, advisers, consultants, other personnel, and as consideration for self storage property acquisitions.

As discussed further in Note 3, LTIP units were first granted under the 2013 Long-Term Incentive Plan (the "2013 Plan"), which authorized up to 2.5 million LTIP units for issuance. In connection with the Company's initial public offering, the Company terminated the 2013 Plan but the awards granted thereunder remained outstanding after its termination. Restricted common shares were first granted under the 2015 National Storage Affiliates Trust Equity Incentive Plan (the "2015 Plan"), which authorizes the Company's compensation, nominating, and corporate governance committee to grant share options, restricted common shares, phantom shares, dividend equivalent rights, LTIP units and other restricted limited partnership units issued by its operating partnership and other equity-based awards up to an aggregate of 5% of the common shares issued and outstanding from time to time on a fully diluted basis (assuming, if applicable, the exercise of all outstanding options and the conversion of all warrants and convertible securities, including OP units and LTIP units, into common shares).

As of December 31, 2016, the Company did not have outstanding under its equity compensation plan, any options, warrants or rights to purchase the Company's common shares.

LTIP Units

Through December 31, 2016, an aggregate of 2,474,710 LTIP units have been issued under the 2013 Plan, 177,546 LTIP units have been issued under the 2015 Plan, and 312,809 LTIP units have been issued under the LP Agreement. Some of the granted LTIP units vested immediately or upon completion of the Company's initial public offering. Others vest upon the contribution of self storage properties or along a schedule at certain times through January 1, 2019.

Compensatory Grants

The following table summarizes activity for compensatory LTIP units for the years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
	2016				2015				2014
	Number of LTIP units		Weighted Average Grant-Date Fair Value		Number of LTIP units		Weighted Average Grant-Date Fair Value		Number of LTIP units		Weighted Average Grant-Date Fair Value
Outstanding unvested at beginning of year	236,265		$	10.41	509,166		$	10.07	287,600		$	9.28
Granted	177,546		17.59		6,000		13.00		378,550		10.37
Vested	(119,282	)	10.41		(278,901	)	9.84		(156,984	)	9.35
Unvested at end of year	294,529		$	14.74	236,265		$	10.41	509,166		$	10.07

The aggregate fair value of compensatory LTIP units that vested during the years ended December 31, 2016, 2015 and 2014 was $1.2 million, $2.7 million and $1.5 million, respectively. Total compensation cost recognized for compensatory LTIP units was $2.5 million, $3.0 million and $1.5 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December 31, 2016, total unvested compensation cost not yet recognized was $2.9 million. The Company expects to recognize this compensation cost over a period of approximately 2.0 years.

If the grantee has a termination of service for any reason during the vesting period, the unvested LTIP units will be forfeited. Compensation expense related to LTIP units granted to members of the Company's senior management team, the Company's independent trustees, advisers, consultants and other personnel is included in general and administrative expense in the accompanying statements of operations.

Acquisition Consideration Grants

On December 31, 2013, the Company granted 1,683,560 LTIP units under the 2013 Plan to PROs, including NSA Predecessor, as part of the consideration for their respective self storage property acquisitions and contributions. The following table presents the number of units vested and forfeited for acquisition grants during the years ended December 31, 2016, 2015 and 2014:



	Total LTIP units
Total unvested units, December 31, 2013	1,262,070
Units vested upon issuance in 2014 related to:
Properties contributed or sourced by PROs	(379,970	)
Contributions by NSA Predecessor⁽¹⁾	(359,200	)
Total unvested units, December 31, 2014	522,900
Units vested in 2015 related to properties contributed or sourced by PROs	(99,100	)
Total unvested units, December 31, 2015	423,800
Units vested in 2016 related to properties contributed or sourced by PROs	(45,100	)
Units forfeited	(118,300	)
Total unvested units, December 31, 2016⁽²⁾	260,400


⁽¹⁾	^{The contribution of self storage properties by NSA Predecessor was accounted for as a reorganization of entities under common control and, accordingly, no value was recognized in the Company's consolidated financial statements for these LTIP units.}


⁽²⁾	^{As of}^{December 31, 2016}^{, the remaining unvested LTIP units will vest as additional self storage properties are contributed or sourced by the PROs. The fair value of such LTIP units will be recorded as additional acquisition consideration based on the fair value in the period such acquisitions are completed.}

The aggregate fair value of purchase consideration recognized during the years ended December 31, 2016, 2015 and 2014 was $0.8 million, $1.4 million and $3.7 million, respectively.

LP Agreement Grants to Consultants

Pursuant to the LP Agreement, during the years ended December 31, 2016, 2015 and 2014, the Company issued 2,758, 88,981 and 221,070 LTIP units, respectively, that were immediately vested to consultants that provided acquisition services that are included in acquisition costs in the accompanying statements of operations. The aggregate fair value of the LTIP units was $0.1 million, $1.0 million and $2.1 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Restricted Common Shares

Through December 31, 2016, an aggregate of 25,300 restricted common shares have been issued under the 2015 Plan. These restricted common shares vest over a weighted average period of approximately 2.7 years.

The following table summarizes activity for restricted common shares for the years ended December 31, 2016 and 2015:



	Year Ended December 31,
	2016				2015
	Number of Restricted Common Shares		Weighted Average Grant-Date Fair Value		Number of Restricted Common Shares		Weighted Average Grant-Date Fair Value
Outstanding at beginning of year	11,000		$	12.40	—		$	—
Granted	8,090		17.19		17,210		12.40
Vested	(5,500	)	12.40		(6,000	)	12.40
Forfeited	—		—		(210	)	12.40
Unvested at end of year	13,590		$	12.40	11,000		$	12.40

The aggregate fair value and total compensation cost of restricted common shares that vested during the years ended December 31, 2016 and 2015 was $0.1 million and $0.1 million, respectively. At December 31, 2016, total unvested compensation cost not yet recognized was $0.2 million. The Company expects to recognize this compensation cost over a period of approximately 2.0 years. If the grantee has a termination of service for any reason during the vesting period, the unvested restricted common shares will be forfeited. Compensation expense related to restricted common shares is included in general and administrative expense in the accompanying statements of operations.