Equity

Shares and Units

An operating partnership unit ("OP Unit") and a share of our common stock have essentially the same economic characteristics as they receive the same per unit profit distributions of our operating partnership. An OP Unit may be tendered for redemption for cash, however, we have sole and absolute discretion and the authorized common stock to exchange for shares of common stock on a one-for-one basis.

Long-term incentive plan ("LTIP") units are a special class of partnership interests in our operating partnership. Each LTIP unit awarded will be deemed equivalent to an award of one share of stock under the 2013 Equity Incentive Plan ("2013 Plan"), reducing the availability for other equity awards on a one-for-one basis. The vesting period for LTIP units, if any, will be determined at the time of issuance. Cash distributions on each LTIP unit, whether vested or not, will be the same as those made on the OP Units. Under the terms of the LTIP units, our operating partnership will revalue for tax purposes its assets upon the occurrence of certain specified events, and any increase in valuation from the time of grant until such event will be allocated first to the holders of LTIP units to equalize the capital accounts of such holders with the capital accounts of OP unitholders. Subject to any agreed upon exceptions, once vested and having achieved parity with OP unitholders, LTIP units are convertible into OP Units in our operating partnership on a one-for-one basis.

The following is net income attributable to common stockholders and the issuance of our class A shares in exchange for the conversion of OP units into common stock (amounts in thousands):



	Year ended December 31, 2014		Period from October 7, 2013 through December 31, 2013
Net income attributable to common stockholders	$	26,667	$	75,245
Increase in additional paid-in capital for the conversion of OP units into common stock	40,611		—
Change from net income attributable to common stockholders and transfers from noncontrolling interests	$	67,278	$	75,245

As of December 31, 2014, there were approximately 267.1 million OP Units outstanding, of which approximately 107.2 million, or 40.1%, were owned by us and approximately 159.9 million, or 59.9%, were owned by other partners, including certain directors, officers and other members of executive management.

Private Perpetual Preferred Units

During August 2014, we completed an exchange offer whereby we issued 1,560,360 new Private Perpetual Preferred Units ("Preferred Units") in exchange for OP Units on a one-for-one basis, in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. The exchange offer was made only to then current holders of OP Units and was not made or offered to the public or holders of our common stock or any other security. The Preferred Units have a liquidation preference of $16.62 per unit and are entitled to receive cumulative preferential annual cash distributions of $0.60 per unit payable in arrears on a quarterly basis. The Preferred Units are not redeemable at the option of the holders and are redeemable at our option only in the case of specific defined events. In connection with this exchange offer, we incurred $1.4 million of costs, which were expensed as incurred and included in marketing, general, and administrative expenses.

Dividends and Distributions

The following table summarizes the dividends declared and paid on our Class A common stock and Class B common stock for the year ended December 31, 2014 and the period from October 7, 2013 to December 31, 2013:



Declaration Date	Record Date	Payment Date	Amount per Share
December 1, 2014	December 15, 2014	December 31, 2014	$0.0850
September 2, 2014	September 15, 2014	September 30, 2014	$0.0850
May 22, 2014	June 13, 2014	June 30, 2014	$0.0850
February 21, 2014	March 14, 2014	March 31, 2014	$0.0850

December 5, 2013	December 16, 2013	December 30, 2013	$0.0795 ⁽¹⁾

(1) Represents a pro-ration of a full quarter distribution of $0.085 per share.

The following table summarizes the dividends declared and paid on our Preferred Units for the year ended December 31, 2014:



Declaration Date	Record Date	Payment Date	Amount per Preferred Unit
December 1, 2014	December 15, 2014	December 31, 2014	$0.1500
September 2, 2014	September 15, 2014	September 30, 2014	$0.1500

Total dividends paid to common securityholders during 2014 and 2013 were $33.6 million and $7.6 million, respectively. Total distributions paid to OP unitholders, excluding inter-company distributions, during 2014 and 2013 totaled $53.6 million and $11.9 million, respectively. Total distributions paid to Preferred unitholders during 2014 was $0.5 million.

Earnings and profits, which determine the tax treatment of distributions to securityholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes, including, but not limited to, treatment of loss on extinguishment of debt, revenue recognition, compensation expense, and basis of depreciable assets and estimated useful lives used to compute depreciation. The 2014 dividends of $0.34 per share and 2013 dividends of $0.0795 per share are classified for income tax purposes as 100.0% taxable ordinary dividend.

Incentive and Share-Based Compensation

The 2013 Plan provides for grants to our directors, employees and consultants consisting of stock options, restricted stock, dividend equivalents, stock payments, performance shares, LTIP units, stock appreciation rights and other incentive awards. An aggregate of approximately 12.2 million shares of our common stock are authorized for issuance under awards granted pursuant to the 2013 Plan, and as of December 31, 2014, approximately 10.7 million shares of common stock remain available for future issuance.

In October 2014, we made grants of restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 1,571 shares of restricted stock that are subject to time-based vesting and 1,571 shares of restricted stock that are subject to performance-based vesting, with fair market values of $0.02 million for the time-based vesting awards and $0.01 million for the performance -based vesting awards. The awards subject to time-based vesting vest ratably over four years from the date of the grant, subject generally to the grantee's continued employment. The first installment will vest on October 28, 2015 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three-year performance period, commencing on October 28, 2014. Following the completion of the three-year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on October 28, 2017 and the second installment vesting on October 28, 2018, subject generally to the grantee's continued employment on those dates.

In June 2014, we made grants of LTIP units to our non-employee directors under the 2013 Plan. At such time, we granted a total of 32,196 LTIP units that are subject to time-based vesting, with fair market values of $0.5 million. The awards vest ratably over three years from the date of the grant, subject generally to the director's continued service on our Board of Directors.

In April 2014, we made a grant of LTIP units to an employee under the 2013 Plan. We granted a total of 48,923 LTIP units with a fair market value of $0.7 million. The award is subject to time-based vesting of 30% after three years (April 2017), 30% after four years (April 2018), and 40% after five years (April 2019), subject to the grantee's continued employment.

In January 2014, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted a total of 180,260 LTIP units that are subject to time-based vesting and 180,263 LTIP units that are subject to performance-based vesting, with fair market values of $2.5 million for the time-based vesting awards and $0.9 million for the performance-based vesting awards. The awards subject to time-based vesting vest ratably over four years from the date of the grant, subject generally to the grantee's continued employment. The first installment vests on January 1, 2015 and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three-year performance period, commencing on January 1, 2014. Following the completion of the three-year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP unit award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on January 1, 2017 and the second installment vesting on the January 1, 2018, subject generally to the grantee's continued employment on those dates.

In January and April 2014, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 23,487 LTIP units and 7,061 shares of restricted stock that are subject to time-based vesting and 23,484 LTIP units and 7,059 shares of restricted stock that are subject to performance-based vesting, with fair market values of $0.4 million for the time-based vesting awards and $0.2 million for the performance-based vesting awards. These shares are subject to time-based and performance-based vesting, with the terms described above.

Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units to executive officers under the 2013 Plan. At such time, we granted a total of 440,192 LTIP units that are subject to time-based vesting and 146,730 LTIP units that are subject to performance-based vesting, with fair market values of $5.4 million for the time-based vesting awards and $0.9 million for the performance-based vesting awards. The awards subject to time-based vesting vest in four substantially equal installments, subject to the grantee's continued employment. The first installment vests on the first anniversary of the grant date and the remainder will vest thereafter in three equal annual installments. The vesting of the LTIP units subject to performance-based vesting is based on the achievement of absolute and relative total stockholder return hurdles over a three-year performance period, commencing on October 2, 2013. Following the completion of the three-year performance period, our compensation committee will determine the number of shares to which the grantee is entitled based on our performance relative to the performance hurdles set forth in the LTIP units award agreements the grantee entered into in connection with the initial award grant. These units then vest in two substantially equal installments, with the first installment vesting on the third anniversary of the grant date and the second installment vesting on the fourth anniversary of the grant date, subject to the grantee's continued employment on those dates.

Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units and restricted stock to certain other employees under the 2013 Plan. At such time, we granted a total of 193,059 LTIP units and 119,146 shares of restricted stock that are subject to time-based vesting and 64,352 LTIP units and 39,706 shares of restricted stock that are subject to performance-based vesting, with fair market values of $3.9 million for the time-based vesting awards and $0.6 million for the performance-based vesting awards. These shares are subject to time-based and performance-based vesting, with the terms described above.

Concurrently with the closing of the Offering and the adoption of the 2013 Plan, we made grants of LTIP units to our non-employee directors under the 2013 Plan. At such time, we granted a total of 69,228 LTIP units that are subject to time-based vesting, with fair market values of $0.9 million. The awards vest in three substantially equal installments, subject to the director's continued service on our Board of Directors. The first installment vests on the first anniversary of the grant date and the remainder will vest thereafter in two equal annual installments.

For the performance-based LTIP units and restricted stock awards, the fair value of the awards was estimated using a Monte Carlo Simulation model. Our stock price, along with the prices of the comparative indexes, is assumed to follow the Geometric Brownian Motion Process. Geometric Brownian motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on our stock price and the comparative indexes were estimated based on implied volatilities and historical volatilities using a six-year look-back period. The expected growth rate of the stock prices over the performance period is determined with consideration of the risk free rate as of the grant date. For LTIP units and restricted stock grants that are time-vesting, we estimate the stock compensation expense based on the fair value of the stock at the grant date.

LTIP units and restricted stock issued during the year ended December 31, 2014 and 2013 were valued at $5.4 million and $11.7 million, respectively. The weighted-average per unit or share fair value was $10.65 and $10.89 for grants in 2014 and 2013, respectively. The per unit or share granted in 2014 was estimated on the date of grant using the following assumptions: an expected life of 3 years, a dividend rate of 2.60% a risk-free interest rate of 0.8%, and an expected price volatility of 26.0%. The per unit or share granted in 2013 was estimated on the date of grant using the following assumptions: an expected life of 3.0 years, a dividend rate of 2.60%, a risk-free interest rate of 0.66%, and an expected price volatility of 28.0%.

No other stock options, dividend equivalents, or stock appreciation rights were issued or outstanding in 2014 and 2013.

The following is a summary of restricted stock and LTIP unit activity for the years ended December 31, 2014 and 2013:



	Restricted Stock		LTIP Units		Weighted Average Grant Price
Granted	158,852		913,561		$	13.00
Vested	(12,607	)	—		13.00
Forfeited	(1,874	)	—		13.00
Unvested balance at December 31, 2013	144,371		913,561		$	13.00
Vested	(37,458	)	(191,043	)	13.01
Granted	17,262		488,613		15.04
Forfeited	(21,879	)	(16,471	)	13.60
Unvested balance at December 31, 2014	102,296		1,194,660		$	13.78

The total fair value of LTIP units and restricted stock that vested during 2014 was $3.0 million.

The LTIP unit and restricted stock award agreements will immediately vest when a grantee attains the (i) age of 60 and (ii) the date on which grantee has first completed ten years of continuous service with our company or its affiliates. For award agreements that qualify, we recognize noncash compensation expense on the grant date for the time-based awards and ratably over the vesting period for the performance-based awards, and accordingly we recognized $0.2 million and $2.3 million for the year ended December 31, 2014 and the period October 7, 2013 through December 31, 2013, respectively. Unrecognized compensation expense was $0.2 million at December 31, 2014, which will be recognized over a weighted average period of 1.8 years.

For the remainder of the LTIP unit and restricted stock awards, we recognize noncash compensation expense ratably over the vesting period, and accordingly, we recognized $3.5 million and $0.7 million in noncash compensation expense for the year ended December 31, 2014 and the period October 7, 2013 through December 31, 2013, respectively. Unrecognized compensation expense was $9.6 million at December 31, 2014, which will be recognized over a weighted average period of 2.8 years.

Earnings Per Share

Earnings per share for the year ended December 31, 2014 and for the period October 7, 2013 through December 31, 2013 is computed as follows (amounts in thousands, except per share amounts):



	Year ended December 31, 2014			Period from October 7, 2013 through December 31, 2013
Numerator - Basic:
Net income	$	70,210		$	193,431
Preferred unit distributions	(476		)	—
Net income attributable to non-controlling interests	(43,067		)	(118,186		)
Earnings allocated to unvested shares	(33		)	(84		)
Net income attributable to common stockholders - basic	$	26,634		$	75,161

Numerator - Diluted:
Net income	$	70,210		$	193,431
Preferred unit distributions	(476		)	—
Earnings allocated to unvested shares and LTIP units	(482		)	(804		)
Net income attributable to common stockholders - diluted	$	69,252		$	192,627

Denominator:
Weighted average shares outstanding - basic	97,941			95,463
Operating partnership units	156,565			148,957
Weighted average shares outstanding - diluted	254,506			244,420

Earnings per share - basic and diluted	$	0.27		$	0.79

There were 631,251 antidilutive shares and LTIP units for the year ended December 31, 2014. There were 500,828 antidilutive shares and LTIP units for the period from October 7, 2013 through December 31, 2013.