Stock Compensation

We award stock-based compensation to certain employees, executives and members of our Board of Directors under the American Residential Properties, Inc. 2012 Equity Incentive Plan, or our 2012 Equity Incentive Plan. Under our 2012 Equity Incentive Plan, the Compensation Committee of our Board of Directors has the ability to grant nonqualified stock options, incentive stock options, restricted shares of our common stock, restricted stock units, dividend equivalents, stock appreciation rights and other awards to our officers, employees, directors and other persons providing services to our Operating Partnership and its subsidiaries. The number of shares of our common stock available for grant under our 2012 Equity Incentive Plan is subject to an aggregate limit of 1,500,000 shares. Our 2012 Equity Incentive Plan expires on May 11, 2022, except as to any grants which are then outstanding. As of March 31, 2014, there were 504,212 shares of our common stock available for grant under our 2012 Equity Incentive Plan.

In March 2014, the Compensation Committee of our Board of Directors awarded an aggregate of 78,272 LTIP units to our executive management team, half of which will be issued pursuant to award agreements providing for service-based vesting and half of which will be issued pursuant to award agreements providing for performance-based vesting.

We recorded stock-based compensation cost of approximately $0.7 million as part of general, administrative and other expense in the condensed consolidated statement of operations and comprehensive loss during each of the three months ended March 31, 2014 and 2013.

LTIP Units

Under our 2012 Equity Incentive Plan, we may grant LTIP units. LTIP units are a special class of partnership interests in our Operating Partnership with certain restrictions, which are convertible into Operating Partnership units, or OP units, subject to satisfying vesting and other conditions. LTIP unit holders are entitled to receive the same distributions as holders of our OP units (only if we pay such distributions) on the unvested portion of their LTIP units. The vesting of LTIP units is determined at the time of the grant and may be based on performance criteria. Any unvested LTIP units are forfeited, except in limited circumstances, as determined by the Compensation Committee of our Board of Directors, when the recipient is no longer employed by us or when a director leaves our Board of Directors for any reason. LTIP units may be subject to full or partial accelerated vesting under certain circumstances, as described in the applicable award agreement.

Service-Based LTIP Units

Service-based LTIP units are valued at fair value on the date of grant and compensation expense is recognized over the vesting period, which approximates a straight-line basis. These shares generally vest over three years based on continued service or employment. We valued the service-based LTIP units at a per-unit value equivalent to the per-share offering price of our common stock sold in our private and public offerings less a discount for lack of marketability estimated with the assistance of a third-party consultant for grants issued prior to our IPO. Subsequent to our IPO, we valued the service-based LTIP units at the per-share market close trading price of our common stock on the date of grant less a discount for lack of marketability estimated with the assistance of a third-party consultant.

The following table summarizes information about the service-based LTIP units outstanding as of March 31, 2014:



	Total Vested Units	Total Unvested Units	Total Outstanding Units	Weighted-Average Grant Date Fair Value (Per Unit)
Balance, December 31, 2013	349,941	174,242	524,183	$	16.98
Granted	—	8,994	8,994	$	14.63
Vested	—	—	—	$	—
Converted	—	—	—	$	—
Canceled	—	—	—	$	—
Balance, March 31, 2014	349,941	183,236	533,177	$	16.94

Total unrecognized compensation cost related to unvested service-based LTIP units totaled approximately $1.8 million as of March 31, 2014, and is expected to be recognized in general, administrative and other expense over a weighted-average period of approximately 1.4 years, subject to the stated vesting conditions.

Market-Based LTIP Units

In November 2013, we issued 338,094 LTIP units, of which up to 50% will vest based on the percentage increase of the Company’s total stockholder return, or TSR, beginning on May 14, 2013 (the date of the closing of our initial public offering), and up to 50% will vest based on the relative outperformance of our TSR as compared to the percentage change of the SNL US REIT Equity Index, or the Index, over the same period. The market-based LTIP awards were valued on the date of grant using a Monte Carlo simulation method. The aggregate grant date fair value of the market-based LTIP units was $1.9 million.

The following table summarizes information about the market-based LTIP units outstanding as of March 31, 2014:



	Total Vested Units	Total Unvested Units	Total Outstanding Units	Weighted-Average Grant Date Fair Value (Per Unit)
Balance, December 31, 2013	—	338,094	338,094	$	5.58
Granted	—	—	—	$	—
Vested	—	—	—	$	—
Converted	—	—	—	$	—
Forfeited	—	—	—	$	—
Balance, March 31, 2014	—	338,094	338,094	$	5.58

Total unrecognized compensation cost related to unvested market-based LTIP units totaled approximately $1.6 million as of March 31, 2014, and is expected to be recognized in general, administrative and other expense over a weighted-average period of approximately 4.1 years, subject to stated vesting conditions.

Restricted Stock

Under our 2012 Equity Incentive Plan, we may grant restricted shares of our common stock. Restricted shares of our common stock are valued at fair value on the date of grant and compensation expense is recognized over the vesting period, which approximates a straight-line basis. These shares generally vest over three years based on continued service or employment. We valued the restricted shares of our common stock based on the closing price of our commons stock on the grant date.

The following table summarizes information about the shares of restricted common stock outstanding as of March 31, 2014:



	Number of Shares	Weighted-Average Grant Date Fair Value (Per Share)
Unvested at December 31, 2013	40,369	$	21.00
Granted	—	$	—
Vested	—	$	—
Canceled	—	$	—
Unvested at March 31, 2014	40,369	$	21.00

Total unrecognized compensation cost related to unvested shares of restricted common stock totaled approximately $0.6 million as of March 31, 2014, and is expected to be recognized in general, administrative and other expense over a weighted-average period of approximately 2 years, subject to stated vesting conditions.