Shareholders' equity

3 Months Ended

Mar. 31, 2015

Shareholders' equity.

Shareholders' equity

Note 8. Shareholders’ equity

Participating Preferred Shares

As of March 31, 2015, the initial liquidation preference on the Company’s participating preferred shares, as adjusted by an amount equal to 50% of the cumulative change in value of an index based on the purchase prices of single-family properties located in our top 20 markets, for all of the Company’s outstanding 5.0% Series A participating preferred shares, 5.0% Series B participating preferred shares and 5.5% Series C participating preferred shares was $442.4 million.

Distributions

Our board of trustees declared distributions that totaled $0.05 per share on our Class A and Class B common shares during the quarters ended March 31, 2015 and 2014. Distributions declared on our 5.0% Series A participating preferred shares, 5.0% Series B participating preferred shares and 5.5% Series C participating preferred shares during the quarter ended March 31, 2015, totaled $0.3125 per share, $0.3125 per share and $0.34375 per share, respectively. Distributions declared on our 5.0% Series A participating preferred shares and 5.0% Series B participating preferred shares during the quarter ended March 31, 2014, totaled $0.3125 per share and $0.3500 per share, respectively. Our board of trustees declared distributions that totaled $0.15113 per share on our Series C convertible units during the quarters ended March 31, 2015 and 2014.

Noncontrolling Interest

Noncontrolling interest as reflected in the Company’s condensed consolidated balance sheets primarily consists of the interest held by AH LLC in units in the Company’s Operating Partnership. AH LLC owned 14,440,670, or approximately 6.4% of the total 225,927,834 and 225,914,576 Class A units in the Operating Partnership as of March 31, 2015, and December 31, 2014, respectively. Additionally, AH LLC owned all 31,085,974 Series C convertible units and all 4,375,000 Series D convertible units in the Operating Partnership as of March 31, 2015, and December 31, 2014. Also included in noncontrolling interest are outside ownership interests in certain consolidated subsidiaries of the Company.

Noncontrolling interest as reflected in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2015, primarily consisted of $4.7 million of preferred income allocated to Series C convertible units, $0.8 million of net loss allocated to Class A units and $0.1 million of net income allocated to noncontrolling interests in certain of the Company’s consolidated subsidiaries. Noncontrolling interest for the three months ended March 31, 2014, primarily consisted of $4.5 million of preferred income allocated to Series C convertible units, $0.8 million of net loss allocated to Class A units and $0.1 million of net loss allocated to noncontrolling interests in certain of the Company’s consolidated subsidiaries.

2012 Equity Incentive Plan

During the three months ended March 31, 2015 and 2014, the Company granted stock options for 553,500 and 970,000 Class A common shares, respectively, and 42,000 and 92,000 restricted stock units, respectively, to certain employees of the Company under the 2012 Equity Incentive Plan. The options and restricted stock units granted during the three months ended March 31, 2015 and 2014, vest over four years and expire 10 years from the date of grant.

The following table summarizes stock option activity under the plan for the three months ended March 31, 2015 and 2014:

	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (1) (in thousands)
Options outstanding at January 1, 2014	1,190,000		$	15.48	9.3	$	862
Granted	970,000		16.63
Exercised	—		—
Forfeited	(41,250	)	16.18
Options outstanding at March 31, 2014	2,118,750		$	15.99	9.4	$	1,532
Options exercisable at March 31, 2014	160,000		$	15.00	8.5	$	274
Options outstanding at January 1, 2015	2,165,000		$	16.17	8.8	$	1,890
Granted	553,500		16.48
Exercised	—		—
Forfeited	(110,500	)	16.57
Options outstanding at March 31, 2015	2,608,000		$	16.22	8.7	$	1,064
Options exercisable at March 31, 2015	597,500		$	15.80	7.8	$	466

(1) Intrinsic value for activities other than exercises is defined as the difference between the grant price and the market value on the last trading day of the period for those stock options where the market value is greater than the exercise price. For exercises, intrinsic value is defined as the difference between the grant price and the market value on the date of exercise.

The following table summarizes the Black-Scholes Option Pricing Model inputs used for valuation of the stock options for Class A common shares issued during the three months ended March 31, 2015 and 2014:

	2015			2014
Weighted-average fair value	$	4.57		$	5.01
Expected term (years)	7.0			7.0
Dividend yield	3.0		%	3.0		%
Volatility	36.0		%	38.5		%
Risk-free interest rate	1.9		%	2.2		%

The following table summarizes the activity that relates to the Company’s restricted stock units under the Plan for the three months ended March 31, 2015 and 2014:

	2015		2014
Restricted stock units at beginning of period	85,000		—
Units awarded	42,000		92,000
Units vested	(21,250	)	—
Units forfeited	(6,000	)	(2,000	)
Restricted stock units at end of the period	99,750		90,000

Total non-cash share-based compensation expense related to stock options and restricted stock units was $0.7 million and $0.5 million for the three months ended March 31, 2015 and 2014, respectively.